DATE: 20040419
DOCKET: M31024 (C41396)

COURT OF APPEAL FOR ONTARIO

LABROSSE J.A. (in chambers)

LABROSSE J.A.:

[1] This is a motion by the Bank of Nova Scotia (the"Bank") for security for costs of this appeal.

[2] The appellants had commenced a prior action against numerous defendants and they later attempted to add the Bank as a party defendant. The statement of claim in that action was struck against the Bank by Crane J. on July 15, 2003 on the basis that the Bank had not been properly added as a defendant and that there was no case made out against the Bank. The Bank was awarded costs in the amount of $5,000.00. The order of Crane J. was not appealed and the costs order has not been satisfied.

[3] The statement of claim in the present action was issued before the order of Crane J., but its existence was not disclosed to the Bank or to the court at the hearing of the motion to strike the prior claim. It was not served on the Bank until October 27, 2003. The statement of claim is almost identical to the statement of claim in the prior action except for a few facts and new causes of action that have been added. In their factum filed in this appeal, the appellants state:

The Appellants' claim against The Bank of Nova Scotia in the prior action was based upon negligence. The Appellant commenced a separate action against The Bank of Nova Scotia and Anna Paula Duarte. Although the second action followed much the same format as the previous action the Statement of Claim was subsequently amended to add new information and claims. The Appellants' claim against The Bank of Nova Scotia in this proceeding is based upon conspiracy, fraud, misappropriation, willful blindness and negligence.

The statement of claim was struck by Festeryga J. on January 13, 2004 on the basis of res judicata. The costs of that motion were fixed at $3,500.00. The plaintiffs have appealed that order and the Bank has moved for security for costs.

[4] The relevant rules for the purpose of this motion are rules 61.06, 56.01(1)(c) and 56.03 (1) of the Rules of Civil Procedure. These rules provide as follows:

61.06 (1) In an appeal where it appears that,

(a) there is good reason to believe that the appeal is frivolous and vexatious and that the appellant has insufficient assets in Ontario to pay the costs of the appeal;

(b) an order for security for costs could be made against the appellant under rule 56.01; or

(c) for other good reason, security for costs should be ordered,

a judge of the appellate court, on motion by the respondent, may make such order for security for costs of the proceeding and of the appeal as is just. O. Reg. 465/93, s. 6.

(1.1) If an order is made under subrule (1), rules 56.04, 56.05, 56.07 and 56.08 apply, with necessary modifications. O. Reg. 288/99, s. 21.

(2) If an appellant fails to comply with an order under subrule (1), a judge of the appellate court on motion may dismiss the appeal.

56.01 (1) The court, on motion by the defendant or respondent in a proceeding, may make such order for security for costs as is just where it appears that,

…

(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;

…

56.03 (1) In an action, a motion for security for costs may be made only after the defendant has delivered a defence and shall be made on notice to the plaintiff and every other defendant who has delivered a defence or notice of intent to defend.

…

[5] With respect to rule 61.06(1)(a), the appellants dispute the allegation that the appeal is frivolous and vexatious. More importantly, although it has been admitted on the cross-examination of Andrew Mantzios that the corporate appellant has no assets, there is no evidence that Mantzios has insufficient assets in Ontario to pay the costs of the appeal. Security for costs cannot be ordered against Mantzios, who is the sole director and shareholder of the corporate appellant. Assuming that security for costs could not be posted by the company, there would be no benefit to the Bank in having the appeal of the company dismissed while the appeal of Mantzios is allowed to proceed.

[6] Rule 61.06(1)(b) provides that an order for security for costs can be made where it appears that such an order could be made against the appellant under rule 56.01. The appellants argue that no order for security for costs is possible under this rule because the Bank has not filed a statement of defence as required pursuant to rule 56.03(1).

[7] In my view, it is not necessary to resolve this motion on the basis of rule 61.06(1)(a) or (b). The Bank is entitled to the relief claimed pursuant to rule 61.06(1)(c).

[8] The appellants have ignored the July 15, 2003 costs order while pursuing this appeal of the order of Festeryga J. The statement of claim in this action is almost identical to the statement of claim in the prior action, which has been dismissed against the Bank. The statement of claim was issued before the order of July 15, 2003, but was not disclosed to the Bank or to the court at the time the order was made. No explanation had been offered as to why the appellants failed to disclose the present action. The appellants do not appear to have been candid with the court.

[9] It is arguable that in this case the appellants have used the litigation process to harass the Bank where there is no reasonable cause of action. There is therefore good reason for security for costs to be ordered.

[10] An order will issue for payment into court, within 30 days of the release of these reasons, of the amount of $8,500.00 as security for costs of the appeal. The costs of this motion, fixed at $2,500.00, are to be in the cause of the appeal.

Released: APR 19 2004

Signed: "Labrosse J.A."