



COURT OF APPEAL FOR ONTARIO

CITATION: Tsai v. Dugal, 2021 ONCA 170

DATE: 20210317

DOCKET: M52234 (C68741)

van
    Rensburg J.A. (Motions Judge)

BETWEEN

Wen-Chi
    Tsai

Applicant

(Appellant/Responding Party)

and

Lucien Dugal by his Estate Trustees,

Johanne Dugal Roussee and Luc Dugal

Respondent

(Respondent in Appeal/Moving Party)

Alexandra Carr, for the moving party

Michael S. Deverett, for the responding
    party

Heard: March 9, 2021 by video conference

REASONS
    FOR DECISION

[1]

The appellant is appealing a judgment after trial dismissing her claim for
    a constructive trust in a property that was owned by her common law spouse,
    Lucien Dugal. The two had lived together at the property for approximately nine
    years. The appellant commenced proceedings against Mr. Dugal following their
    separation in 2014. Mr. Dugal died in 2017 and the proceedings were continued against
    the estate.

[2]

The appellant had registered a certificate of pending litigation (CPL)
    against the property. Before the action was tried, the CPL was discharged to
    permit the sale of the property in exchange for $500,000 of the net proceeds of
    sale being retained in the real estate lawyers trust account. There is a court
    order providing for the retention of the funds until further order of the
    court or signed written agreement of the parties.

[3]

The respondent estate moves for an order for security for costs of the
    appeal and in the court below in the sum of $110,000 and for an order
    permitting the release of the funds from the lawyers trust account.

The motion for security for costs

[4]

The motion for security for costs is brought under r. 61.06(1)(a) and
    (c) of the
Rules of Civil Procedure
, R.R.O. 1990,
    Reg. 194. The test under (a) is conjunctive. The moving party must establish
    that the appeal is frivolous and vexatious, and that the appellant has
    insufficient assets in Ontario to pay the costs of the appeal. Rule 61.06(1)(c)
    provides that an order for security for costs may be ordered for other good
    reason. An order for security for costs is discretionary. The court must first
    consider the specific provisions of the Rules governing such motions and then
    consider the justness of the order sought in all the circumstances of the case:
Yaiguaje v. Chevron Corporation
, 2017 ONCA
    827, 138 O.R. (3d) 1, at para. 22.

[5]

Dealing first with r. 61.06(1)(a), the estate contends that the appeal
    is frivolous based on the notice of appeal which lists 36 grounds of appeal,
    the vast majority of which are alleged errors of fact, and vexatious based on
    the appellants pattern of conduct throughout the litigation. The estate also
    submits that there is no evidence that the appellant has sufficient equity in
    any property in Ontario such that she would be able to pay the costs of the appeal
    (estimated at $25,000) and the costs awarded in the court below ($85,000).

[6]

The appellant contends that her appeal is meritorious: the trial judge
    failed to consider certain evidence that supported her claim, and erred in
    focusing on whether there were direct contributions to the property rather than
    on the overall view of the parties relationship and whether there was a joint
    family venture.

[7]

On the second branch of the test under r. 61.06(1)(a), the appellant has
    provided evidence of her equity in a condominium unit (the York St. Property)
    to demonstrate that she has sufficient assets to pay costs of the appeal. The York
    St. Property had an assessed value of $646,000 as of January 1, 2016 (prior to
    its purchase). The appellant deposes that a similar condominium sold for
    $890,000 on July 8, 2020. As of February 24, 2021, the balance outstanding on a
    first mortgage to a commercial lender is $339,323.98 with additional credit
    available of $27,926.02. There is a second mortgage in favour of the appellants
    lawyer in the amount of $226,000, which was registered on August 24, 2020. The
    appellant states that, if this court were to award security for costs, she
    proposes to sign a direction to her lawyer to use the second mortgage as
    security for costs, and that she would be prejudiced if she were forced to sell
    the York St. Property in order to pay funds into court as security for costs.
    There was no cross-examination on the appellants affidavit.

[8]

Based on this record, the estate does not meet the test for security for
    costs under r. 61.06(1)(a).

[9]

The trial judge provided comprehensive reasons for judgment that appear
    to have addressed the appellants arguments and evidence. That said, I am
    unable to conclude that the appeal is frivolous, that is, that it is obviously
    devoid of merit, or that it is vexatious in the sense that it is brought only
    to annoy or harass the estate. I would however say that the prospects of
    success in the appeal are slim, which is a factor that I will return to when I
    consider whether security for costs should be granted under r. 61.06(1)(c).

[10]

As
    for the second requirement of r. 61.06(1)(a), I am satisfied that the appellant
    has equity of at least $50,000 in the York St. Property, and probably more. The
    estate estimates the costs of the appeal to be $25,000. On the evidence before
    the court the appellant has sufficient assets in Ontario to pay the costs of
    the appeal.

[11]

Accordingly,
    the estate is not entitled to security for costs under r. 61.06(1)(a).

[12]

I
    turn to r. 61.06(1)(c), whether there is other good reason to award security
    for costs. Here I am guided by the words of Laskin J.A. in
Combined Air Mechanical Services Inc. v. Flesch
, 2010
    ONCA 633, 268 O.A.C. 172, at para. 8, that, while the list of reasons
    justifying security under this rule is open-ended, the other good reason should
    be compelling. It must also be related to the purpose of ordering security:
    that a respondent is entitled to a measure of protection for costs in the
    proceeding under appeal. Security for costs has been awarded under this
    provision where an appeal has a low prospect of success and although the appellant
    has the ability to pay, it would be nearly impossible to collect costs: see
Perron v. Perron
, 2011 ONCA 776, 286 O.A.C. 178, at
    para. 23;
Henderson v. Wright
, 2016 ONCA 89,
    345 O.A.C. 231, at para. 27.

[13]

Apart
    from again relying on the contention that the appeal is without merit, the estate
    points to the fact that the appellant did not respond to repeated requests before
    the motion was brought that she provide evidence of her ability to pay costs,
    as well as the paucity of financial information that she provided in response
    to the motion. Although the estate provided evidence that the appellant sold a
    second condominium unit in September 2020, the appellant did not disclose what
    happened to the net proceeds. While the appellant was not obliged to provide
    disclosure of
all
of her assets and income in response to the motion, the
    fact that she provided information about only one asset  the York St. Property
     and her assertion that she would have to sell that asset if she were required
    to post security, suggests that the estate may have considerable difficulty
    recovering costs if the appellant loses the appeal. The estate also points to
    the appellants pattern of conduct over six years of litigation, including unpaid
    costs awards and her pursuit of various unmeritorious claims.

[14]

I
    am satisfied that in all the circumstances this is an appropriate case to award
    security for costs under r. 61.06(1)(c). In view of the low prospect of success
    in the appeal, the appellants pattern of conduct in the litigation, the very
    limited information she has provided about her ability to pay costs, the fact
    that she has recently encumbered the York St. Property as security for her own
    legal costs, and the assertion that she would need to sell the York St.
    Property to pay security for costs, there is a very real risk that the estate
    would be prevented from collecting its costs of the appeal from the appellant
    in the event of an unsuccessful appeal.

[15]

As
    for the amount of security for costs, the estate seeks security for the costs
    awarded by the trial judge, in addition to security for costs of the appeal.
    Such orders are not granted routinely: some justification must be offered by
    the moving party when the amount of security sought under r. 61.06 includes
    security for the costs awarded in the court below:
Foodinvest
    Limited v. Royal Bank of Canada
, 2020 ONCA 387. The estate did not
    provide any reasonable basis for requiring the appellant to post security for
    costs of the proceedings below. Accordingly, the estate is entitled to security
    for costs of the appeal, but not of the trial.

[16]

In
    the circumstances, I order that the appellant provide on or before March 31,
    2021, security for costs in the sum of $25,000. At the appellants option she
    may pay that amount into court, or alternatively provide to the estate trustees
    a mortgage of her interest in the York St. Property, with priority over her
    lawyers mortgage to be provided by way of a postponement of that mortgage. The
    required documents shall be prepared and registered at the appellants expense.
    In the event of the appellants non-compliance with this order, the appeal
    shall be dismissed.

The motion for the release of funds

[17]

The
    estate seeks an order for the release of the sum of $500,000, which has been
    held in trust since April 2019 from the net proceeds of sale of the property in
    which the appellant claims a constructive trust.

[18]

The
    funds were put in trust as a condition of the discharge of the appellants CPL
    as a result of a motion brought by the estate. Akbarali J. determined that $500,000
    was sufficient to cover the value of the interest in the property the appellant
    was then seeking and her costs. Akbarali J.s order of April 4, 2019, states:
    the respondents estate trustees shall execute an irrevocable direction to the
    estates real estate lawyer directing him or her to hold $500,000 in trust in
    order to satisfy the applicants potential claim against the estate and
    potential costs awarded to the applicant, until further order of the court or
    signed written agreement of the parties.

[19]

The
    estate contends that, although there was no request specifically for an order
    dealing with the funds in trust, the trial judges conclusion at para. 69 of
    her reasons for judgment that the estate trustees are at liberty to distribute
    the assets of the Estate in accordance with the provisions of [the deceaseds]
    will would permit the distribution of the funds held in trust. After filing
    her notice of appeal however, the appellant wrote to the real estate lawyer to
    ensure that the funds would not be released pending court order or agreement
    between the parties until after she had completed her appeals, including any
    appeal to the Supreme Court of Canada.

[20]

According
    to the affidavit of Luc Dugal, filed in support of this motion, the concern is
    that the funds in trust are earning a very low rate of interest, while the
    appellant is pursuing a meritless appeal with impunity. Mr. Dugal deposes that
    the estate trustees wish to distribute the estate, including the $500,000 which
    remains in trust, to the beneficiaries. He proposes that the estate trustees
    keep $110,000 in a joint investment account to be available in the event that
    the appellant is successful in her appeal.

[21]

At
    the hearing of this motion, however, the estates lawyer indicated that the
    estate trustees intend only to invest the funds, and not to distribute them.

[22]

I
    am not prepared to make the order requested. The order sought in the estates
    notice of motion is inconsistent with the intention of the order of Akbarali J.
    that the funds in trust stand in place of the CPL which was registered against
    the property to which the appellant asserted a claim. The appellant has an
    appeal as of right. The fact that the appeal appears at this stage to be weak
    is not sufficient reason to permit the funds to be released to the estate
    trustees for distribution at this time. Nor am I persuaded that the alternative
    form of order, raised in argument  that the estate trustees be permitted to hold
    and invest the funds at a higher rate of return  is necessary or advisable on
    this record.

Disposition

[23]

For
    these reasons the estate is entitled to an order for security for costs of the
    appeal in the terms indicated. The balance of the motion is dismissed. Costs of
    this motion are reserved to the panel hearing the appeal.

K.
    van Rensburg J.A.


