Suing an Ontario Defendant & Security for Costs
Ontario courts order security for costs to protect local defendants from foreign litigants who launch frivolous or vexatious claims and do not have the money to cover a potential cost award against them. Foreign plaintiffs may have assets outside of Ontario and possibly defeat a security for costs motion if his assets are accessible to satisfy a judgment because of reciprocal enforcement legislation.
Tal lives in Tel Aviv. He invests $500,000 with Allen for a business venture located in Toronto Canada. An additional $1,500,000.00 is borrowed and then Allen ignores Tal’s calls and refuses to report about the business. Upon investigation Tal finds out there was no business. Allen refuses to give Tal his money back and a law suit is launched. The first hurdle Tal will face is a motion brought by Allen for security for costs.
In Ontario the loser of the law suit is often ordered to pay a portion of the winner’s legal costs. Allen argues that if Tal loses his law suit there is a concern that any cost order against him would be unenforceable. In cases like this the Ontario Rules of Civil Procedure provides a mechanism for the Ontario defendant to ask the court to order Tal to provide security for costs (FN1).
Allen will argue that Tal is ordinarily resident outside Ontario, that there is good reason to believe that the law suit is frivolous and vexatious and/or that Tal has insufficient assets in Ontario to pay the costs of the defendant.
Tal might respond that the reason he has no assets in Ontario is because Allen took it all for an apparently bogus business deal. Tal will argue that his claim has merit and that Israel has a statute (FN2) that provides for reciprocal enforcement of judgments so the risk of an unpaid cost order is minimized. Further, Tal has a home in Israel which is worth more than enough to satisfy any Ontario court cost order.
Under Ontario law a foreign plaintiff can possibly defeat an order for security by establishing that he has assets that can be used to satisfy a cost order in a reciprocating jurisdiction. However, Allen will argue that under Israeli law (FN3) there are restrictions on the ability to take someone’s home away to pay a debt so Tal should pay the security for costs. What would the court say?
There is a very interesting case relevant to our scenario that was heard by the Superior Court of Justice in Ontario called Uribe v. Sanchez (FN 4). In that case a Florida plaintiff claimed he had no money to pay security for costs and that Florida had legislation permitting the enforcement of foreign money judgments that would include a judgment for costs made in Ontario. So – argued the plaintiff, there was no risk to the defendant. The judge disagreed.
The problem with the Florida plaintiff’s argument was that Florida law exempts a person’s primary place of residence from such a judgment. In this case the court ruled that this does not meet the test as to sufficiency and quality of assets in the reciprocating jurisdiction. Despite the merits of the plaintiff’s claim, the judge was not satisfied that the plaintiff could not post security or that the plaintiff would be prevented from pursuing a meritorious claim if he were required to do so. Would an Ontario Judge see the Israeli legislation called the “Execution Law” the same way? It provides that a property that is the family home is not to be sold unless the Execution Office is convinced that the family has reasonable alternate accommodation.
This short review of the case law should not be taken as legal advice. Based on my experience in dealing with these cases, they often turn on the specific facts. If you have a legal question relating to something similar, you are best advised to seek out competent legal counsel to determine your best course of action.
(FN1) See Rule 56 Security for Costs Rules of Civil Procedure - R.R.O. 1990, Reg. 194
(FN2) See Foreign Judgments Enforcement Law - 1958
(FN3) See the Israeli statute called the ‘Execution Law’, which says that a property that is the family home is not to be sold unless the Execution Office is convinced that the family has reasonable alternate accommodation.
(FN4) Uribe v. Sanchez 2006 CanLii 19498 (ON S.C.)
ABOUT THE AUTHOR: Charles B. Wagner
Charles B. Wagner is a partner at Wagner Sidlofsky LLP. This Toronto office is a boutique litigation law firm whose practice is focused on estate, commercial and tax litigation.
Copyright Wagner Sidlofsky LLP
More information about Wagner Sidlofsky LLP
Disclaimer: While every effort has been made to ensure the accuracy of this publication, it is not intended to provide legal advice as individual situations will differ and should be discussed with an expert and/or lawyer. For specific technical or legal advice on the information provided and related topics, please contact the author.