Legal Blog

Costs Security

In the Rules of Civil Procedure there is a provision by which a defendant can move to force a plaintiff, who is impecunious, to pay money into court as security for costs. That money will be used if the plaintiff is unsuccessful in its action and is ordered to pay some or all of the costs of the action that the successful defendant incurs. The question is whether that tactical motion can be used in a Construction Lien Act action. This issue was dealt with in ICI Construction Ltd. v. Altavista Properties Inc., a 2007 decision of a Master of the Ontario Superior Court of Justice.

Problem

A lien action differs from an ordinary action because, under the Construction Lien Act, a motion cannot be brought in a lien action unless (a) the motion is necessary, or (b) it would expedite the resolution of the issues in dispute.

Circumstances

A general liened a project after the owner failed to pay any portion of the money due under a certificate for payment and, of course, had also failed to pay for the work that the general had performed after the period for which the certificate had been issued.

The general had also been involved in a second project, during and after the first project. In the second project, judgment had been obtained against the general and its main shareholder for approximately $200,000. The general blamed the owner of the first p

roject for all of its financial woes because the general’s cash flow was halted due to the owner’s refusal to pay what it owed.

As a result of an interim order in the lien action, the owner had paid $487,000 to the general’s subs, about $80,000 less than the amount certified and far less than the amount that the general claimed against the owner.

The owner brought a motion for security for costs, claiming that the general was impecunious. The general opposed the motion, asserting that the owner had not proven that the motion was necessary or would expedite the resolution of the issues.

Playing Field

In a previous case, Biotechnik Inc. v. O’Shanter Development Co., a Master had allowed a defendant to bring a security for costs motion in a lien action. In Biotechnik, the defendant had posted security to vacate the lien from the premises. The Master decided that the motion for security for costs was “necessary” to do procedural justice between the parties. It was necessary to level the playing field such that both of the parties would have posted security. The Master in ICI noted that the facts in the case before him were different. In ICI, the owner had not posted security to vacate the lien and, accordingly, there was no playing field to level.

However, the Master went further. In his opinion, the decision in Biotechnik was incorrect. The word “necessary” did not mean procedurally fair. It had to mean more. Otherwise, in every lien action, a defendant who stopped the money flow, and therefore made a lien claimant impecunious, could bring a motion for security for costs and, by virtue of the lien claimant’s inability to pay that security, stop a lien action in its tracks.

Accordingly, the Master held that the owner’s motion was not “necessary” and would not expedite a resolution of the issues. The Master therefore dismissed the owner’s motion.