



COURT OF APPEAL FOR ONTARIO

CITATION: Chinese Publications for Canadian Libraries Ltd. v.

Markham (City), 2017 ONCA 968

DATE: 20171207

DOCKET: M48350, M48375 (C64066)

van Rensburg J.A. (In Chambers)

BETWEEN

Chinese Publications for Canadian Libraries Ltd.

Plaintiff

(Appellant)

and

City of Markham and Markham Public Library

Defendants

(Respondents)

Qiang Li Cao, in person for the appellant

David Boghosian and Maggie Fish, for the respondents

Heard: November 15, 2017

ENDORSEMENT

[1]

There were two motions before the court  a
    motion by the appellant (CPCL) for an order setting aside the Registrars
    order dismissing its appeal for delay, and a motion by the respondents (the City)
    for security for costs. At the hearing of the motions, the City consented to
    the order setting aside the Registrars dismissal, which was irregular, but
    sought an order requiring the appellant to provide security for costs as a term
    of the order setting aside the dismissal.

[2]

The appellants action arose from the
    termination of a contract for the supply of Chinese-language materials to the
    Markham Public Library. The appellant was the successful bidder and entered
    into a contract with the City. It commenced an action alleging that the City
    improperly terminated the contract and sought specific performance of the
    contract and damages. The City defended and asserted a counterclaim.

[3]

The action was dismissed by Kristjanson J. on a
    summary judgment motion. She awarded costs of $50,000 to the City for the
    motion and action. The counterclaim was withdrawn during the course of the
    hearing of the summary judgment motion. CPCL appeals the dismissal of its
    action and the costs award.

[4]

Rule 61.06(1) provides for a judge of this court
    to order security for costs 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.
    The court may make such order for security for costs of the proceeding and of
    the appeal as is just.

[5]

Here, the City seeks security for costs in the
    amount of costs already awarded in its favour ($50,000) as well as $20,000 in
    security for costs of the appeal. The City argues that the appeal is frivolous
    and vexatious and that the appellant has insufficient assets in Ontario to pay
    the costs of the appeal. The City also relies on r. 56.01(d), that the
    appellant is a corporation without sufficient assets in Ontario to pay costs.

[6]

The appellant contends that it has no money and
    no ability to post security for costs, and that any such order will effectively
    mean the end of its appeal because it is impecunious. It asserts that the
    appeal is not frivolous and vexatious, has merit, and should be permitted to
    continue.

[7]

As the point of departure, there is no question
    that the appellant has insufficient assets in Ontario to pay the costs of the
    appeal. Its sole source of income was the terminated contract. The financial
    statements of the corporation for the past three years were produced, and no
    issue is taken that they reflect the fact that CPCL has significant liabilities
    and no assets, and is accordingly judgment-proof.

[8]

The first question is whether the appeal is
    frivolous and vexatious. Here, in addition to its arguments about the weakness
    of the appeal (going to whether the appeal is frivolous), the City points to
    communications between the principal of CPCL, Mr. Cao, and the mayor and others
    at the City, to say the appeal is vexatious. The City says that Mr. Cao is
    attempting to use methods other than litigation to achieve his goal of
    reinstating the contract, and that his emails contain unfounded allegations of
    misconduct by City employees.

[9]

To find that an appeal is "frivolous and
    vexatious" there must be 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:
York University
    v. Markicevic
, 2017
    ONCA 651 (in chambers), at paras. 19, 32 and 36;
Pickard v. London Police
    Services Board
, 2010 ONCA 643 (in chambers), at para. 19; and
Henderson
    v. Wright
, 2016 ONCA 89 (in chambers), at para. 20.
Having
    heard Mr. Caos arguments, and considered his notice of appeal and factum, I am
    satisfied that he has been pursuing the appeal with diligence and in the sincere
    belief that there was no justification for the termination of the contract. While
    he may be adopting other methods that are harassing to the City to achieve his
    overall objective, this conduct alone does not make his
appeal
vexatious.
    The City does not meet the test for security for costs under r. 61.06(1)(a).

[10]

The next question is whether security for costs of
    the appeal should be ordered on the basis that the appellant is a corporation
    without assets in Ontario sufficient to pay costs.

[11]

The City contends that security for costs should
    be ordered unless the appellant establishes that it is truly impecunious
    (without access to assets or funds), and that its appeal has some merit. If the
    appellant is not impecunious, security for costs should be ordered unless the
    appeal has a good chance of success, see:
Zeitoun v. Economical Insurance
    Group
(2008), 91 O.R. (3d) 131 (Div. Ct.), at para. 50, affd on other
    grounds at 2009 ONCA 415, 96 O.R. (3d) 639.

[12]

The City argues that Mr. Cao has failed to
    demonstrate that he is personally incapable of funding the appeal, or borrowing
    money. The City relies on
Crudo Creative Inc. v. Marin et al
. (2007),
    90 O.R. (3d) 213 (Div. Ct.) at paras. 31-33, as authority that, where a
    corporate plaintiff (or appellant as in this case) has no assets and claims
    impecuniosity, the corporation must show that it cannot raise money through its
    shareholders or affiliates. The City says that there is a high onus on a party
    claiming impecuniosity to make full financial disclosure:
Marvello
    Construction v. Santos et al.
, 2017 ONSC 3913 (Master), at para. 10.

[13]

The City also refers to
Yaiguage v. Chevron
    Corp
., 2017 ONCA 741 (in chambers), where these principles were accepted
    and applied by a judge of this court: at paras. 25 and 26. The City
    acknowledges that a panel of this court reversed the decision (reported at 2017
    ONCA 827), but contends that the basic principles that apply here were
    unaffected.

[14]

In my view, the City underemphasizes the impact
    of the panels decision in
Chevron
. It clearly signals that, while
    factors such as impecuniosity and merit continue to be relevant in determining
    whether security for the costs of an appeal should be granted, each case turns
    on its own facts, guided by the overriding interests of justice. The court
    stated at para. 25:

[E]ach 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.

[15]

First, I consider the Citys arguments about the
    appellants impecuniosity. The City contends that Mr. Caos financial disclosure
    is insufficient to conclude that, as CPCLs shareholder, he is unable to
    personally fund or to raise money to fund the appeal. I disagree. The evidence indicates
    that Mr. Caos sole source of income was the contract that was terminated, and
    that he has ongoing financial problems. Although he is the registered co-owner
    of a house with his son, his interest is 30% and the house is heavily mortgaged.

[16]

The City also contends that CPCL has not
    established impecuniosity unless it proves that it or Mr. Cao is unable to
    borrow money from a CPCL affiliate or from family and friends. It points to CPCLs
    reference in its materials to an entity called Beijing Publications and
    Distributions Group (BPDG) as a source for that funding as well as Mr. Caos
    friends and family. I disagree. There is no evidence that BPDG is a related
    company, or that it could be expected to fund the appeal. Mr. Cao provided
    evidence of CPCLs impecuniosity as well as his own. CPCL (with the Citys
    consent) has been represented by Mr. Cao, and not by legal counsel, so there is
    no necessary inference that someone is funding the litigation. The City did not
    cross-examine Mr. Cao on his finances or the ability of CPCL to raise money. And
    it is unreasonable to suggest, as the City does here, that Mr. Cao was obliged
    to provide evidence that no friend or family member could lend him money to
    fund an order for security for costs in CPCLs appeal.

[17]

I am satisfied on a balance of probabilities
    that the appellant is impecunious. I turn now to consider the merits of the
    appeal.

[18]

In granting summary judgment, the motion judge
    concluded that the City was entitled to terminate the contract on 30 days
    notice without cause (or, as described in the contract for convenience), and
    that this was the basis on which the City gave notice of termination. The motion
    judge also found that there had been a number of breaches of the contract which
    would have justified termination for cause, such that the City was acting in
    good faith when it terminated the contract.

[19]

The appeal challenges the motion judges factual
    findings and interpretation of a contract, both of which attract a deferential
    standard of review. The appellant points to evidence that he says reveals an
    improper motive for the Citys termination of the contract, and he takes issue
    with the alleged breaches. The appellant also asserts that he was denied
    procedural fairness because his first language is Mandarin and there were parts
    of the proceeding before the motion judge that he did not understand. As in
    this court Mr. Cao had the assistance of an interpreter at the summary judgment
    motion, and he filed a lengthy factum which the motion judge had clearly read
    and considered. The appeal appears to have little chance of success.

[20]

I turn to other considerations. In my view, the
    City is overreaching in this case when it seeks to include in an order for security
    for costs in this court, the costs it was awarded in the Superior Court. The City
    contends that the appellant is in default of the $50,000 costs order, however
    the automatic stay under r. 63.01(1) means that CPCL is not in default of the
    costs order while its appeal is pending. Moreover, the City did not obtain an
    order for security for costs in the court below, and absent an order for
    security for costs in this court, would not be able to look beyond CPCL for
    satisfaction of that costs award.

[21]

I am also satisfied that the order for security
    for costs sought by the City, even if its costs in the Superior Court were not
    included, would effectively bring an end to the appeal and that this, as well
    as the attempt to recover the costs already awarded in its favour, is the Citys
    motivation in seeking the order. The panel noted in
Chevron
that [c]ourts
    must be vigilant to ensure an order that is designed to be protective in nature
    is not used as a litigation tactic to prevent a case from being heard on its
    merits (at para. 23).

[22]

In these circumstances, I am not satisfied that it
    would be just to make an order for security for costs against CPCL. Accordingly,
    the Citys motion is dismissed. The order of the Registrar is set aside. The
    appellant shall have until December 22, 2017 to perfect its appeal.

[23]

There will be no costs of these motions.


