



COURT OF APPEAL FOR ONTARIO

CITATION: Health Genetic Center Corp.
    (Health Genetic Center) v. New Scientist Magazine, 2019 ONCA 576

DATE: 20190705

DOCKET: M50445 (C66385)

Brown
    J.A. (Motions Judge)

BETWEEN

Health Genetic Center Corp. o/a Health
    Genetic Center

and Yuri Melekhovets

Plaintiffs

(Appellants/Responding
    Parties)

and

New Scientist Magazine,
Peter Aldhous
and
Reed Business

Information Ltd.

Defendants

(
Respondents/Moving Parties
)

Sandra Barton, for the moving
    parties/respondents

Karen Zvulony, for the responding
    parties/appellants

Heard: June 25, 2019

REASONS
    FOR DECISION

I.        OVERVIEW

[1]

The appellants, Health Genetic Center Corp. o/a
    Health Genetic Center and Yuri Melekhovets, brought a defamation action against
    the respondents, Peter Aldhous and Reed Business Information Ltd. The
    appellants alleged that an article in the New Scientist Magazine that
    questioned the reliability of a blood paternity test they marketed defamed them.
    After a 13-day hybrid trial, the trial judge dismissed their action: 2018 ONSC
    7224. The trial judge awarded the respondents costs of the action in the amount
    of $1,478,766.64: 2019 ONSC 575.

[2]

The appellants appeal the dismissal of their
    action and the award of costs. The appellants have perfected their appeal.

[3]

Prior to trial, the appellants paid into court
    $300,000 as security for costs. The respondents now move for an order requiring
    the appellants to pay more: (i) $85,000 as security for the costs of the
    appeal; and (ii) $1,178,766.64 as security for the costs awarded at trial.
    Alternatively, the respondents seek an order lifting the automatic stay of the
    cost award pursuant to r. 63.01(5) of the
Rules of Civil Procedure
.

[4]

The appellants oppose the motion.

[5]

The respondents contend security for costs
    should be ordered for two main reasons: (i) the appeal is frivolous and
    vexatious; and (ii) the appellants have insufficient assets to pay the costs of
    the appeal and the trial. The respondents rely upon a combination of rr.
    61.06(1)(a), (b) and (c), r. 56.01, including rr. 56.01(1)(d) and (f), and s.
    12 of the
Libel and Slander Act
, R.S.O. 1990,
    c. L.12. Under the latter provision, the respondents contend that it is not
    necessary to demonstrate that the appeal is vexatious.

[6]

I will start my analysis by considering the respondents
    claim under r. 61.06(1)(a), which provides that: 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  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.

[7]

I will then consider the respondents claim
    under r. 61.06(1)(b), which deals with the situation where an order for
    security for costs could be made against the appellant under rule 56.01. The
    respondents rely on r. 56.01(1)(f)  namely, where statute entitles the
    defendant or respondent to security for costs. The statute the respondents
    rely on is s. 12 of the
Libel and Slander Act
.
    Next, I will deal with the respondents claim under r. 61.06(1)(c). Finally, I
    will consider their alternative request to lift the automatic stay of the trial
    costs award.

II.
CLAIM FOR
    SECURITY OF COSTS UNDER R. 61.06(1)(a)

Governing principles

[8]

An order for security of costs on appeal under
    r. 61.06(1) is not a routine order:
Schmidt v. Toronto Dominion Bank
(1995), 24 O.R. (3d) 1 (C.A.), at p. 5. The principles governing a
    motion for security for costs on appeal are summarized in
Yaiguaje
    v. Chevron Corporation
, 2017 ONCA 827, 138 O.R. (3d) 1, at paras. 18, 19,
    22, 24 and 25:

Rule 61.06 is permissive, not mandatory. In an appeal, there is
    no entitlement as of right to an order for security for costs. Even where the
    requirements of the rule have been met, a motion judge has discretion to refuse
    to make the order:
Pickard v. London Police Services Board
, 2010 ONCA
643,

268 O.A.C. 153,

at para. 17.

In determining whether an order should be made
    for security for costs, the 
overarching principle to be applied to all
    the circumstances is the justness of the order sought:
Pickard
, at
    para. 17 and
Ravenda Homes Ltd. v. 1372708 Ontario Inc.
, 2017 ONCA
556,

at para. 4.



In deciding motions for security for costs
    judges are obliged to first consider the specific provisions of the Rules
    governing those motions and
then effectively to take a
    step back and consider the justness of the order sought in all the circumstances
    of the case, with the interests of justice at the forefront.
While the
    motion judge concluded that an order for security for costs would be just, with
    respect, she failed to undertake the second part of that analysis. The failure
    to consider all the circumstances of the case and conduct a holistic analysis
    of the critical overarching principle on the motion before her constitutes an
    error in principle. It therefore falls to this panel to conduct the necessary
    analysis of the justness of the order sought.



Courts in Ontario have attempted to articulate
    the factors to be considered in determining the justness of security for costs
    orders. They have identified such factors as the merits of the claim, delay in
    bringing the motion, the impact of actionable conduct by the defendants on the
    available assets of the plaintiffs, access to justice concerns, and the public
    importance of the litigation. See:
Hallum v. Canadian Memorial
    Chiropractic College
(1989), 70 O.R. (2d) 119 (H.C.);
Morton
    v. Canada (Attorney General)
(2005), 75 O.R. (3d) 63
    (S.C.);
Cigar500.com Inc. v. Ashton Distributors Inc.
(2009), 99 O.R. (3d) 55 (S.C.);
Wang v. Li
,

2011 ONSC 4477 (CanLII)
    (S.C.); and
Brown v. Hudsons Bay Co.,
2014
    ONSC 1065, 318 O.A.C. 12 (Div. Ct.).

While this case law is of some assistance,
    each case must be considered on its own facts. It is neither helpful nor just
    to compose a static list of factors to be used in all cases in determining the
    justness of a security for costs order. There is no utility in imposing rigid
    criteria on top of the criteria already provided for in the Rules. The correct
    approach is for the court to consider the justness of the order holistically,
    examining all the circumstances of the case and guided by the overriding
    interests of justice to determine whether it is just that the order be made.

Good reason to believe the appeal is
    frivolous and vexatious

[9]

In ascertaining whether there is good reason to
    believe that the appeal is frivolous and vexatious, the court need not reach a
    definitive conclusion. Rather, the language suggests a tentative conclusion of
    absence of merit:
York University v. Markicevic
, 2017 ONCA 651, at para. 24.

[10]

The case law indicates that in order to satisfy
    the frivolous and vexatious element of r. 61.06(1)(a), the moving party must
    demonstrate two matters. First, the moving party must show that there is good
    reason to believe that the appeal appears to be devoid of merit:
Schmidt
, at p. 5. In this regard, the cases emphasize that the moving party
    need not go so far as demonstrating that the appeal is, in fact, devoid of
    merit, only that there is good reason to believe that it appears to be devoid
    of merit. A fine distinction, perhaps, but one repeated in the jurisprudence.

[11]

Second, the moving party must demonstrate that
    there is something that supports the conclusion that the appeal is vexatious
    in the sense that it is taken to annoy or embarrass the respondent or has been
    conducted in a vexatious manner:
Chinese Publications for Canadian
    Libraries Ltd. v. Markham (City)
, 2017 ONCA 968, at para.
    9. The
Schmidt
case talks in terms of the
    presence or absence of an oblique motive for the launching of the appeal: at p.
    6.

Application of the principles

[12]

On the record before me, I have no hesitation in
    concluding that the appeal is not vexatious. The appellants engaged the process
    of the court to seek a remedy for what they considered to be untruthful and
    damaging statements about their reputation. They lost at trial. Nevertheless,
    they enjoy a statutory right of appeal. They are availing themselves of it. Mr.
    Melekhovets deposed that the driving factor for bringing the appeal is to
    vindicate my reputation and the reputation of HGC. That is not an improper
    purpose or oblique purpose. The appellants have pursued their appeal in an
    appropriate litigation manner and have perfected it. I see nothing that
    suggests the appellants have appealed in order to annoy or embarrass the
    respondents or that their appeal had been conducted in a vexatious manner.

[13]

As to the merits of the appeal, in their initial
    notices of appeal the appellants advanced numerous grounds of appeal alleging
    errors of fact and law by the trial judge in giving effect to the respondents
    defences of justification, qualified privilege, fair comment, and responsible
    communication and in his treatment of the expert evidence. The appellants have
    replaced those notices of appeal with a second supplementary notice that
    advances one basic ground of appeal: they did not receive a fair trial. They
    contend that the trial judges conduct gave rise to a reasonable apprehension
    of bias, on the basis of which a new trial should be ordered.

[14]

Their appeal factum identifies roughly twenty
    instances of conduct by the trial judge that, they contend, exhibit biased
    conduct. The appellants group those instances into five categories: (i)
    disruptions to the fair presentation of evidence; (ii) the judge was not open
    to hearing plaintiffs counsel at times; (iii) the judge appeared to favour
    defence counsel; (iv) helping defence counsel; and (v) the trial judge accepted
    candies from defence counsel. The appellants submit that taken together, these
    instances of conduct by the trial judge give rise to a reasonable apprehension
    of bias.

[15]

The respondents argue that each alleged instance
    of bias is demonstrably false or wrenched from its context. However, my task on
    this interlocutory motion is not to inquire into and determine the merits of each
    alleged instance of bias. My task is to ascertain whether there is good reason
    to believe that the appeal is devoid of merit so as to support, in part, a
    conclusion that the appeal is frivolous and vexatious.

[16]

Judges benefit from a presumption of integrity,
    which acknowledges that they are bound by their judicial oaths and will carry
    out their duties in accordance with their legal responsibilities. The
    presumption can be rebutted by a judges comments or conduct
, but
    the strong presumption of judicial impartiality is not easily displaced. A
    reasonable apprehension of bias requires a real likelihood or probability of
    bias. The test is an objective one, viewed from the perspective of an informed
    and reasonable observer. It is a high burden. In assessing whether a
    judges presumption of impartiality has been displaced, his or her individual
    comments or conduct during the hearing of a matter should not be considered in
    isolation but within the context of the entire proceedings:
Stuart
    Budd & Sons Limited v. IFS Vehicle Distributors ULC
,
    2016 ONCA 60, 129 O.R. (3d) 37, at paras. 45-50;
Chippewas of
    Mnjikaning First Nation v. Chiefs of Ontario
, 2010 ONCA
    47, 265 O.A.C. 247, leave to appeal refused [2010] S.C.C.A. No. 91, at paras.
    230-243.

[17]

I am not persuaded that there is good reason to
    believe that the appeal is devoid of merit.

[18]

One group of allegations of bias advanced on
    appeal involves the degree to which the trial judge questioned various
    witnesses during their examinations-in-chief and cross-examinations. There was
    a context in which that questioning occurred. This was a hybrid trial that
    required the trial judge to read large volumes of written evidence in advance
    of trial which, no doubt, raised questions in the trial judges mind about the
    meaning or significance of pieces of evidence. As well, the parties had entered
    into a pre-trial agreement about the ability of the trial judge to ask
    questions on the written evidence. Whether the trial judges questioning
    crossed any line in this hybrid trial will require an inquiry by the panel into
    the record. At this stage, on the materials before me, I cannot conclude that
    there is good reason to believe that that ground of appeal is frivolous within
    the meaning of the test for security for costs.

[19]

Accordingly, for these reasons, I conclude that
    the respondents have not demonstrated that there is good reason to believe that
    the appeal is frivolous and vexatious.

Good reason to believe the appellants have
    insufficient assets

[20]

Given the conjunctive nature of the elements of
    r. 61.06(1)(a), that finding is sufficient to dispose of the respondents claim
    for relief under that rule. However, I will go on to consider whether there is
    good reason to believe that the appellants have insufficient assets in Ontario
    to pay the costs of the appeal.

[21]

The first question to ask is: what is a
    reasonable estimate of the respondents costs of this appeal?

[22]

The respondents submit a bill of costs that estimates
    anticipated fees for the appeal at about $130,000 on a substantial indemnity
    basis or $86,100 on a partial indemnity basis. I am not persuaded that those estimates
    of costs are either fair or reasonable for purposes of this motion.

[23]

First, the bill contemplates three lawyers
    working on this file. The respondents can ask their lawyers to assign as many
    timekeepers or billers to this file as they wish. However, when assessing the
    reasonableness of costs for the purposes of security for costs, an objective review
    of the estimate is made. I regard this as a two lawyer file - one senior and
    one junior  and not a three-lawyer file.

[24]

Second, the bill of costs includes approximately
    $18,000 for post-hearing costs. That is over-reach. In my view, given the
    narrowness of the issues now at play on this appeal and the familiarity of
    respondents appeal counsel with the record  after all, they were counsel at
    trial  a fair and reasonable amount of partial indemnity appeal costs for
    purposes of this motion would be $30,000. My analysis will proceed on that
    basis.

[25]

The second question to ask is whether there is
    good reason to believe that the appellants have insufficient assets in Ontario
    to pay the estimated costs of the appeal. My review of the record reveals that
    the appellants clearly have sufficient assets in Ontario to pay costs of the
    appeal in the amount of $30,000.

[26]

Mr. Melekhovets, the individual appellant and a
    principal of the corporate appellant, filed an affidavit on this motion
    detailing his personal assets and the financial circumstances of the corporate
    appellant. The respondents contend that Mr. Melekhovets should have provided
    further details about aspects of his personal finances, as well as transfers
    between the corporate appellant and a related company, HealthGene Corp. Yet,
    the respondents did not cross-examine Mr. Melekhovets on the adequacy of the
    financial disclosure in his affidavit. In those circumstances, I give no effect
    to their argument about inadequate financial disclosure.

[27]

Mr. Melekhovets has lived and worked in Ontario
    since 1991. His evidence discloses that he has net equity in real property
    assets located in Ontario of slightly more than $500,000.

[28]

The corporate appellant operates out of premises
    in Ontario. Unaudited financial statements for the corporate appellant were
    filed covering the financial years 2015 through 2018, the last period for which
    statements have been prepared. The statements show that over the period the companys
    annual revenue rose from $670,000 to just over $1 million and retained earnings
    increased from $18,274 to $136,386. During that period, net earnings were modest
    but rising, save for the year ended January 31, 2018 when the company
    experienced a small net loss.

[29]

Given that evidence, I am satisfied that there
    is good reason to believe that the appellants have sufficient assets in Ontario
    to pay the estimated costs of appeal of $30,000.

Conclusion

[30]

For these reasons, I conclude that the
    respondents have not established the elements set out in r. 61.06(1)(a).
    Accordingly, I need not take a step back and consider the justness of the
    order sought in all the circumstances of the case, with the interests of
    justice at the forefront, at least with respect to the claim under r.
    61.06(1)(a).

III.      CLAIM FOR
    SECURITY OF COSTS UNDER R. 61.06(1)(b)

[31]

The respondents also base their claim on r.
    61.06(1)(b), which gives this court the power to order security for costs where
    it appears that an order for security for costs could be made against the
    appellant under r. 56.01. The respondents rely on two aspects of r. 56.01.

[32]

First, the respondents, relying on r.
    56.01(1)(d), argue that it appears the corporate appellant has insufficient
    assets in Ontario to pay the costs of the appeal. I have found to the contrary
    above.

[33]

Second, the respondents point out that r.
    56.01(1)(f) grants the discretion to order security for costs where it appears
    that a statute entitles the defendant or respondent to security for costs.
    The respondents contend that s. 12(1) of the
Libel and Slander Act
entitles them to security for costs. That section provides:

12
(1) In an action
    for a libel in a newspaper or in a broadcast, the defendant may, at any time
    after the delivery of the statement of claim or the expiry of the time within
    which it should have been delivered, apply to the court for security for costs,
    upon notice and an affidavit by the defendant or the defendants agent showing
    the nature of the action and of the defence, that
the
    plaintiff is not possessed of property sufficient to answer the costs of the
    action in case judgment is given in favour of the defendant
, that the defendant has a good defence on the merits and that the
    statements complained of were made in good faith, or that
the grounds of action are trivial or frivolous
, and the court may make an order for the plaintiff to give security
    for costs, which shall be given in accordance with the practice in cases where
    a plaintiff resides out of Ontario, and the order is a stay of proceedings until
    the security is given. [Emphasis added.]

[34]

On its face, s. 12(1) deals with security for costs
    in an action, not on an appeal. Whether the language of r. 61.06(1)(b) is
    sufficient to make s. 12(1) applicable to an appeal is not a matter on which I
    need make any definitive pronouncement for the simple reason that I regard that
    statutory language as functionally equivalent to r. 61.06(1)(a)s use of the
    terms frivolous and insufficient assets. I have found that the respondents
    have not met those requirements of r. 61.06(1)(a). That finding applies equally
    to their claim based on s. 12 of the
Libel and Slander Act

through r. 61.06(1)(b).

IV.     CLAIM FOR SECURITY OF COSTS UNDER R.
    61.06(1)(c)

[35]

Finally, the respondents submit that security
    for costs should be ordered for other good reason pursuant to r. 61.06(1)(c).
    Pointing to the decision of this court in
Henderson v. Wright
, 2016 ONCA 89, 345 O.A.C. 231, at para. 27, the respondents submit
    that in the present case security should be ordered because the appeal has a
    low prospect of success and it would be nearly impossible to collect costs from
    the appellants.

[36]

I see no resemblance between this case and the
    facts in
Henderson
. Here, the individual
    appellant has disclosed the location and value of his residential realty in
    Ontario. He has filed copies of notices of assessment for his personal tax
    returns  a far cry from the all cash appellant in
Henderson
. The financial statements of the corporate appellant have been
    filed. It is a going concern in Ontario and has been for many years. The
    appellants have paid all costs ordered in this proceeding, save for the award
    of trial costs in respect of which they seek leave to appeal. And the
    appellants already have posted $300,000 by way of security for costs. In those
    circumstances, I see no other good reason to order security for the costs of
    the appeal.

V.      CONCLUSION ON RULE 61.06 MOTION

[37]

For those reasons, I am not satisfied that the
    respondents have established the elements required to order security for costs
    under any of rr. 61.06(1)(a), (b), or (c). As a result, I need not consider
    whether under those rules any order for security for costs should also include
    security for the costs awarded at trial.

VI.     LIFTING THE AUTOMATIC STAY

[38]

I will consider the respondents request
    regarding trial costs under their alternative request to lift the automatic
    stay under r. 63.01(5) in respect of the trial costs award. Although the
    respondents advanced this relief in their notice of motion, the argument was
    not developed in their factum.

[39]

In
SFC Litigation Trust v. Chan
, 2018 ONCA 710, I summarized the principles governing a request to
    lift the automatic stay of enforcement pursuant to r. 63.01(5), at paras. 9
    through 12:

Rule 63.01(5) authorizes the lifting of the
    stay pending appeal on such terms as are just. Accordingly, a court should
    consider the general circumstances of the case:
Hall-Chem Inc.
, at para. 6;
Antunes
, at para. 13.
    The court must be flexible and treat each case on its facts:
Stein
    v. Sandwich West (Township)
(1994), 16 O.R. (3d) 321
    (C.A.), at p. 323. A court must be satisfied that, taking all circumstances
    into account, it would be in the interests of justice to lift the stay.

Recent jurisprudence indicates that a court
    should have regard to three principal factors: (i) the financial hardship to
    the respondent if the stay is not lifted; (ii) the ability of the respondent to
    repay or provide security for the amount paid; and (iii) the merits of the
    appeal:
SA Horeca Financial Services v. Light,
2014 ONCA 811, 123 O.R. (3d) 542 at para. 13;
Antunes
at para. 14.

While the first factor goes to the
    respondents need, the latter two reduce the risk that a successful appellant
    will be forced to bear the loss, rendering the appeal moot. The court may
    impose this risk on an appellant in an appropriate case, but there is no reason
    to do so absent evidence of significant prejudice to the respondent from the
    stay:
Stein
at p. 323;
Ryan
at pp. 711-712. Whether the hardship faced by the respondent
    outweighs any risk to the appellant must be determined within the context of
    the case, including: the grounds of appeal, the parties' positions at trial,
    the trial judges reasons and the probable delay before the appeal can be
    heard:
Antunes
at para. 13;
SA
    Horeca Financial Services
at para. 17.

The stay has been lifted where a plaintiff is
    suffering financial hardship, particularly in personal injury and family law
    cases, or has a well-founded fear that the appellant is dissipating or
    divesting assets to avoid payment:
Stein
;
Antunes;
    Peper v. Peper

(1990), 1 O.R. (3d) 145 (C.A.);
Babbitt
    v. Paladin Inc.
(1993)
,
20
    C.P.C. (3d) 399 (Ont. C.A.). However, even where such factors are present, the
    plaintiff must satisfy the court that the prejudice of maintaining the stay
    outweighs the risk of subjecting the appellant to the uncertainties of recovery
    if the appeal is successful:
Antunes,
at para.
    11;
Ryan,
at pp. 711-712;
Stein,
at p. 323.

[40]

I am not prepared to lift the automatic stay in
    respect of the trial judges award of $1,478,766.64 in costs.

[41]

First, the respondents have not provided
    evidence that they would suffer financial hardship in the event the automatic
    stay is not granted. The respondents filed three affidavits from two of their lawyers;
    none contained evidence of any financial hardship to the respondents in the
    event the stay is not lifted.

[42]

Second, I have found that the respondents have
    not established the conditions set out in rr. 61.06(a), (b) or (c) for
    entitlement to an order for security of costs. Had they met those conditions
    and further demonstrated that the justice of the case supported ordering
    security for costs, the respondents could then submit that security for costs
    should cover not only the costs of the appeal, but also the costs of the
    proceeding: r. 61.06(1). Since they have not met those conditions under r.
    61.06(1), I strongly question whether it remains open to them to seek security
    for the costs of the proceeding by asking the court to allow them to execute
    on the costs judgment that is the subject of an appeal. In other words, I am
    not prepared to grant them relief via an indirect route when they did not
    satisfy the conditions of the direct route.

VII.    DISPOSITION

[43]

For the reasons set out above, I dismiss the
    respondents motion.

[44]

The appellants are entitled to their costs of
    the motion on a partial indemnity scale, fixed in the amount of $20,000,
    inclusive of disbursements and applicable taxes, payable within 15 days of the
    date of this order.

David
    Brown J.A.


