LEE v. TORONTO HOUSING COMPANY INC., 2011 ONSC 4461

CITATION: LEE v. TORONTO HOUSING COMPANY INC., 2011 ONSC 4461 COURT FILE NO.: CV-11-419790 MOTION HEARD: July 6, 2011 SUPERIOR COURT OF JUSTICE - ONTARIO RE: Wenty Lee, Haleen Campbell Lee, Andrew Campbell, Ashley Lee, a minor by her Litigation Guardian, Haleen Campbell Lee and Amanda Lee, a minor by her Litigation Guardian, Haleen Campbell Lee v. Toronto Housing Company Inc. (formerly known as The Metropolitan Toronto Housing Company Limited BEFORE: MASTER R.A.

MUIR COUNSEL: Heather Paterson for the Moving Party/Defendant Raj Napal for the Responding Parties/Plaintiffs REASONS FOR DECISION [ 1 ] This motion is brought by the defendant for an order requiring the plaintiffs to post security for costs pursuant to Rule 56.01(1) of the Rules of Civil Procedure , R.R.O. 1990, Reg. 194 (the “Rules”). [ 2 ] The defendant argues that security for costs should be ordered for two reasons. First, it states that the plaintiffs have failed to pay certain costs awards made in favour of the defendant in other proceedings.

Second, the defendant argues that there is good reason to believe that the plaintiffs’ action is frivolous and vexatious and that they have insufficient assets in Ontario to pay the costs of the defendant. The defendant also argues that the court has the discretion to grant security for costs as a condition of granting other relief in accordance with Rule 56.09. BACKGROUND FACTS AND NATURE OF THE ACTION [ 3 ] The plaintiffs are former tenants of the defendant pursuant to a lease agreement entered into between the plaintiffs Wenty Lee and Haleen Campbell Lee dated July 19, 1995.

The remaining plaintiffs are their children. The defendant is in the business of providing subsidized housing within the City of Toronto. [ 4 ] The plaintiffs allege that they have suffered damages as a result of exposure to mould and condensation in their rental unit. They allege that this exposure was a result of the negligence and breach of contract on the part of the defendant.

The defendant takes the position that the mould build-up in the plaintiffs’ rental unit was caused by the plaintiffs’ lifestyle and has obtained an expert report in support of that position. [ 5 ] In July, 1999 the defendant brought an application before the Ontario Rental Housing Tribunal (“ORHT”) seeking an order terminating the plaintiffs’ tenancy because the plaintiffs had misrepresented their income at the time of their application for subsidized housing.

On October 8, 1999, the ORHT issued a review order which found that the plaintiffs had misrepresented their income and, as a result, did not qualify for subsidized housing. This finding allowed the defendant to charge market rent for the rental unit and the ORHT ordered that the plaintiffs Wenty Lee and Haleen Campbell Lee pay the defendant $10,000.00 as compensation for misrepresentation and $120.00 in costs. The order also provided for interest at the rate of 6% per year from October 18, 1999.

[6] The plaintiffs appealed this order to the Divisional Court. Their appeal was dismissed by the Divisional Court on September 21,2001 with costs fixed at $1,000.00. [7] None of these amounts have been paid by the plaintiffs although they have offered to pay the $1,120.00 in costs ordered by theORHT and the Divisional Court. [8] The plaintiffs commenced this action in Newmarket on November 27, 2001. It was ordered to be transferred to Toronto onDecember 17, 2010. The parties have exchanged productions and conducted examinations for discovery.

The action was set down fortrial when it was still in Newmarket but no pre-trial or trial dates have been obtained since it was transferred to Toronto. Obviously, thisaction has suffered from long periods of delay and the plaintiffs have not pursued their claim in an expeditious fashion. ANALYSIS [9] The defendant seeks an order requiring the plaintiffs to post security for costs pursuant to Rules 56.01(1)(

c) and (e), whichprovide as follows: 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 justwhere 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 remainunpaid in whole or in part; . . . (

e) there is good reason to believe that the action or application is frivolous and vexatious and that the plaintiff or applicant hasinsufficient assets in Ontario to pay the costs of the defendant or respondent. [10] Rule 56.09 provides as follows: 56.09 Despite rules 56.01 and 56.02, any party to a proceeding may be ordered to give security for costs where, under rule 1.05 orotherwise, the court has a discretion to impose terms as a condition of granting relief and, where such an order is made, rules 56.04 to56.08 apply with necessary modifications. [11] The analysis the court is to engage in when determining a motion for security for costs is summarized in Cigar500.com Inc. v.Ashton Distributors Inc., (ON SC), [2009] O.J.

No. 3680 (S.C.J.). At paragraphs 20-22 of that decision Justice Codemakes the following observations: 20 The application of Rule 56.01 involves some procedural complexity as there is a shifting onus between the two parties and thestandard of proof also changes as the onus shifts. 21 Doherty J., as he then was, explained this point in Hallum v. Canadian Memorial Chiropractic College (1989), (ON SC), 70 O.R. (2d) 119 (H.C.J.): Rule 56.01 which empowers a court to order security for costs establishes a two step inquiry. First, the defendant must showthat it "appears" that one of the six factors set out in cls. (

a) through (

f) of rule 56.01 exists. Secondly, if the defendant can clear the firsthurdle, the court may make any order as to security for costs "as is just". I take this second stage to require an inquiry into all factorswhich may assist in determining the justice of the case. ... ... [In assessing whether the Defendant had met its onus at the first stage] the learned judge below proceeded on anerroneous principle. The College only had to show that it appeared that there was good reason to believe that the action was frivolous orvexatious. It was not required to show that the action was in fact frivolous.

By placing this heavier onus on the College, the court belowfell into the error described in Warren Industrial Feldspar Co. Ltd. v. Union Carbide Canada Ltd., supra. ... A litigant who falls within one of the categories created by rule 56.01(

a) to (f), and who relies on his impecuniosity to avoidan order requiring that he post security, must do more than adduce some evidence of impecuniosity. The onus rests on him to satisfy thecourt that he is impecunious: City Paving Co. Ltd. v. Corporation of Port Colborne (City) (1985), 3 C.P.C. (2d) 316 (Ont. Master's Ch.).The onus rests on the party relying on impecuniosity, not by virtue of the language of rule 56.01, but because his financial capabilities

are within his knowledge and are not known to his opponent; and because he asserts his impecuniosity as a shield against an order as tosecurity for costs: Sopinka and Lederman, The Law of Evidence in Civil Cases (1974), at p. 395. 22 Although the first step under Rule 56.01 does not require the Defendant to prove to a certainty that the Plaintiff falls within one ofthe enumerated categories, it is nevertheless a real onus that must be satisfied before moving to the second step of the analysis. [12] Where impecuniosity is shown, the plaintiffs need only to demonstrate that their claim is not plainly devoid of merit.

Whereimpecuniosity has not been shown, a legitimate factor in deciding whether or not it would be just to require security for costs is whetherthe claim has a good chance of success. See Zeitoun v. Economical Insurance Group, (ON SCDC), [2008] O.J. No.1771 (Div. Ct.) at paragraphs 49 and 50; affirmed, [2009] ONCA 415 (C.A.). Ultimately it is the role of the court on a motion such asthis to make the order that is just in the circumstances. [13] Having applied the analysis set out above, I have come to the conclusion that security for costs should not be ordered pursuant toRule 56.01(1).

At the first stage of the analysis under Rule 56.01(1), the onus is on the defendant to demonstrate that one or more of thefactors under Rule 56.01(1) have been met. I am satisfied that the defendant has, in part, met this onus under Rule 56.01(1)(

c) but notunder Rule 56.01(1)(e). It is clear that the defendant has outstanding costs orders against the plaintiffs Wenty Lee and Haleen CampbellLee. However, these costs orders only amount to $1,120.00, plus interest. In my view, the $10,000.00 compensation order issued by theORHT is not a costs order as contemplated by Rule 56.01(1)(c).

It should also be noted that these outstanding orders only apply to theplaintiffs Wenty Lee and Haleen Campbell Lee and not to the other plaintiffs. [14] With respect to Rule 56.01(1)(e), I am not satisfied that the defendant has established that there is good reason to believe that theplaintiffs’ claims are frivolous and vexatious. The defendant has produced evidence which suggests that the mould and condensationproblems were caused by the plaintiffs’ activities in the rental unit.

However, there is also evidence from the defendant’s examinationfor discovery that tenants in other rental units in the same building complained of similar problems. This evidence suggests thepossibility that the plaintiffs’ complaints may not be unique and that the problem may have been more widespread. While I am unable todetermine on the limited evidence before me which party has the better case, I am certainly not satisfied that there is good reason tobelieve that the plaintiffs’ claims are frivolous and vexatious.

The defendant has not satisfied the requirements of Rule 56.01(1)(e). [15] As a result of my finding that the defendant has satisfied Rule 56.01(1)(c), the analysis now moves to the second stage, anassessment by the court of what order is just in the circumstances of this case. The plaintiffs seek to avoid posting security for costs, inpart, on the basis of their impecuniosity. I am not satisfied that the plaintiff Wenty Lee has met this test. Wenty Lee has not made anydisclosure whatsoever of his personal financial situation as is required on motions of this nature.

The disclosure provided by HaleenCampbell Lee is much more robust and I am satisfied that her financial situation would preclude her from making any significantpayment as security for the defendant’s costs. She appears to be spending more money each month than she brings in and her assetswould appear to have little in the way of equity. In my view, an order for security for costs against Haleen Campbell Lee in the amountrequested by the defendant, or for any significant amount, would bring an end to her claims.

I have concluded that Haleen Campbell Leehas established her impecuniosity. [16] More importantly, however, the total of the unpaid costs orders in favour of the defendant is only $1,120.00. Because of theseunpaid costs orders, the defendant seeks security for costs in an amount in excess of $20,000.00. In my view, it is simply not just to makean order of that magnitude when the unpaid costs orders are so small. Moreover, the plaintiffs have previously offered to pay these costs.In my view, this is the most important factor on this motion.

Assuming these costs are paid, the defendant would not be in a position toeven meet its initial onus under Rule 56.01(1). [17] I would also note that the defendant did not bring this motion until nearly ten years after the commencement of this action despiteknowing about the unpaid costs orders all along. The plaintiffs have expended time and money pursuing this action. They should not befaced with a security for costs motion after having done so when the basis for the requested security for costs was known to thedefendant from the outset. This kind of delay weighs against the granting of security for costs.

See 423322 Ontario Ltd. v. Bank ofMontreal, (ON SC), [1988] O.J. No. 1486 (H.C.J.) at paragraph 18. [18] Finally, I see no application for Rule 56.09 on the facts before me on this motion. In my view, Rule 56.09 simply allows the courtto order security for costs as a term of granting other relief. An example would be where an order is made setting aside a defaultjudgment and the court is of the view that it would be just that a defendant post security for costs as a term of the granting of such anindulgence. Here, the plaintiffs seek no relief whatsoever other than a dismissal of this motion.

CONCLUSION [19] I have therefore concluded that it is just in the circumstance of this action that there be no order for security for costs. Thedefendant’s motion is therefore dismissed. If the parties are unable to agree on an appropriate costs disposition, they may make writtensubmissions by no later than August 5, 2011. __________________________

Master R.A. Muir DATE: July 20, 2011