Security for costs: an increasingly practical tool for class action defendants in Ontario

Rule 56.01 of Ontario’s Rules of Civil Procedure[1] permits a defendant to move against the plaintiff (or applicant) for security for costs. Such a motion is a valuable strategic tool that defendants may forget is available in Ontario for class proceedings.[2] The order has the practical benefit of reallocating the financial risk associated with defending a class proceeding and, as Justice E.B. Fitzpatrick’s recent decision, Endean et al, Lind et al v. St. Joseph’s General Hospital,[3] illustrates, it may also have ancillary strategic benefits, such as providing an opportunity for a well-prepared defendant to undermine a claim it perceives to be frivolous.

 

Rule 56.01

An order for costs is discretionary and fact-driven.[4] Rule 56.01 provides that the Court “may” make an order for security for costs “as is just” where it appears that:

(a)  the plaintiff or applicant is ordinarily resident outside Ontario;

(b)  the plaintiff or applicant has another proceeding for the same relief pending in Ontario or elsewhere;

(c)  the defendant or respondent has an order against the plaintiff or applicant for costs in the same or another proceeding that remain unpaid in whole or in part;

(d)  the plaintiff or applicant is a corporation or a nominal plaintiff or applicant, and there is good reason to believe that the plaintiff or applicant has insufficient assets in Ontario to pay the costs of the defendant or respondent;

(e)  there is good reason to believe that the action or application is frivolous and vexatious and that the plaintiff or applicant has insufficient assets in Ontario to pay the costs of the defendant or respondent; or

(f)  a statute entitles the defendant or respondent to security for costs. R.R.O. 1990, Reg. 194, r. 56.01 (1).

In deciding whether to exercise its discretion to make an order for security for costs, the Court may take into account considerations such as the merits of the claim, any delay in bringing the motion, access to justice concerns and the public importance of the litigation.[5]

 

Endean et al. 

In Endean, two sets of class action plaintiffs filed a motion seeking to reopen a trial (which they lost, appealed, and ultimately lost again) to introduce new evidence. A costs award from the trial remained outstanding. The defendant, St. Joseph’s General Hospital, moved for an order for security for costs in response.

Justice Fitzpatrick ruled in favour of the defendant and ordered both sets of plaintiffs to pay security for costs.

A central consideration for Justice Fitzpatrick in deciding whether to order security for costs  was his determination that the plaintiffs’ motion to reopen the trial did not have any good chance of success:

… in the immediate case, the material before me on this motion fails to demonstrate that the Plaintiffs’ motion has a good chance for success. The motion materials put forward by these plaintiffs has the tone of an attempt at a “do over” of a type that is not to be encouraged under the Rules of Civil Procedure.  A “do over” is different than a reopening of a trial with fresh evidence. It is an attempt to re-argue the same points under the guise of something new which in fact is not new at all.

[…]

In my view, the TMJ Plaintiffs are now seeking to place a large mountain of paper before the court, all of which has no relevant connection to the matters that were at issue at trial, to try and reargue points that have already been dismissed.[6]

Although Justice Fitzpatrick’s comments about the merits of the plaintiffs’ impending motion are not binding, they provide valuable insight into the Court's views which may (along with the added financial burden) discourage the plaintiffs from pursuing their motion on its merits. 

 

Key takeaways

Although Rule 56.01 motions are rare in the class proceedings context, Endean is a reminder that, in the right circumstances, Rule 56.01 can be a valuable, practical and strategic tool for class action defendants.

Notably, the decision in Endean arrives shortly after the coming into force of amendments to Ontario’s Class Proceedings Act, 1992,[7] which established a direct right of action for defendants in class proceedings to recover costs – and seek security for those costs – directly from a third-party litigation funder.[8] These amendments may increase the availability and utility of an order for security for costs.[9]

Class action defendants should seriously consider taking full advantage of these amendments by bringing motions for security for costs in appropriate cases.

 

 

 

[1] RRO 1990, Reg. 194.

[2] We note that the class action legislation in some other provinces do not allow costs to be ordered, so this tool is not available across Canada.

[3] 2021 ONSC 2523 [Endean]

[4] Endean at ¶18.

[5] Endean at ¶5.

[6] Endean at ¶38 & 42.

[7] These significant changes to the CPA were proposed late last year after extensive review of the legislation by the Law Commission of Ontario. For an overview of the key changes, see our previous blog post here.

[8] Class Proceedings Act, 1992, SO 1992, c 6, ss. 11-12. Security for costs is available directly from a litigation funder where the litigation funder is ordinarily resident outside of Ontario, the defendant has an order against the funder for costs that is not yet paid in full, or there is good reason to believe that the funder has insufficient assets in Ontario to pay the costs.

[9] Class Proceedings Act, 1992, SO 1992, c 6, s. 12.

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