Orders for security for costs on appeals seek to ensure that a respondent is not forced to successfully respond to an appeal, only to be unable to recover costs from the unsuccessful appellant. This concern is amplified when the appellant does not have sufficient assets in jurisdiction to satisfy a costs award. At the same time, orders for security for costs can effectively stop a proceeding, and courts are reticent to order security for costs against a foreign-resident defendant (though not a plaintiff), who is brought into a foreign jurisdiction and forced to defend himself. In the Ontario Court of Appeal’s June 17, 2014 decision in Bouzari v. Bahremani, Justice Juriansz of the Ontario Court of Appeal grappled with these competing principles.

The case involved unusual facts. The Plaintiffs filed a claim in Ontario seeking compensation for torture suffered in Iran in the early 1990s. One of the defendants (“Rafsanjani”) unsuccessfully brought a forum non conveniens motion. Rafsanjani sought to appeal the judgment dismissing his motion. The respondents (plaintiffs) brought a motion for security for costs of the appeal. This was originally adjourned by Hoy A.C.J.O.

When the motion came back before Juriansz J.A., he allowed counsel for Rafsanjani to be removed from the record due to failure to obtain any instructions. He nonetheless refused to order security for costs, despite the Defendant having no assets in Ontario. The relevant Rules of Civil Procedure are as follows:

61.06  (1)  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,

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.

Juriansz J.A. concluded that the appeal had plausible merit and refused to order security for costs under Rule 61.06(1)(a). He also noted that it is established that Rule 61.06(1)(b) (which imports rules for ordering security for costs outside the appellate context) cannot be used against defendants as “the policy rationale behind this line of jurisprudence is not to impose security for costs upon foreign or impecunious defendants who are forced into court by others to defend themselves” (para. 7).

He then considered whether the order for security for costs should be granted under Rule 61.06(1)(c). In doing so, he comprehensively considered this section’s purpose:

[8]       To rely on rule 61.06(1)(c), the respondents must establish there is some good reason to order security for costs “other than” those already encompassed in the other parts of the rule. They cannot rely on the unpaid costs order from below, the appellant’s lack of any assets in Ontario, and the submission the appeal lacks merit.

[9]       Justice Laskin also discussed s. 61.06(1)(c) in Combined Air Mechanical Services Inc. v. Flesch, 2010 ONCA 633. He observed that while the list of reasons justifying security under the residual category is open ended, the “other good reason” must be fairly compelling, as the moving party cannot meet the requirements of either of the first two categories. Security for costs awards under s. 61.06(1)(c) are not to be made routinely.

[10]     The “other good reason” must also be related to the purpose for ordering security: that a respondent is entitled to a measure of protection for the costs that will be incurred on the appeal. In such an analysis, the potential merit of the appeal is a relevant factor: Maeder v. 2811472 Canada Inc., [2012] O.J. No. 3908 (C.A.).

[11]     Before the motion judge, Mr. Rafsanjani filed evidence that he resides in England and has temporarily returned to Iran to clear his name in legal proceedings there. He was arrested when he returned to Iran and had been released on bail by the time of the motion.

[12]     The respondents’ motion came before the court on March 28, 2014. Counsel for Mr. Rafsanjani filed an affidavit from his Iranian lawyer stating that if he provided substantive instructions to his Ontario counsel regarding the motion or the appeal, his bail could be revoked and he could be returned to prison. The affidavit claims that prosecuting authorities in Iran have interpreted certain audio recordings, purportedly of Mr. Rafsanjani, as statements against national security. It suggests that these same audio recordings were potential evidence in the Ontario action, and that Mr. Bouzari was involved in releasing them. Therefore, Iranian prosecutors might construe participation in the Ontario action as an attempt to interfere with evidence or witnesses involved in Mr. Rafsanjani’s prosecution, contrary to Iran’s Criminal Code of Procedure. On this basis, Hoy A.C.J.O. adjourned the motion until May 28, 2014 and vacated the pending appeal date of June 18, 2014.

[13]     When the matter returned before me, counsel for Mr. Rafsanjani were removed from the record because of their inability to obtain any instructions, and the respondents’ motion for security proceeded unopposed.

[14]     Unless there is a change in circumstances, the appeal will likely be dismissed as abandoned. The respondents will needlessly have incurred further costs in preparing responding materials for the appeal and will have no prospect of collecting any costs awarded against Mr. Rafsanjani. This, counsel for the respondents submits, constitutes “other good reason” why security for costs should be ordered. I am not persuaded.

[15]     In exercising my discretion to refuse an order for costs, I have considered the following:

  1.                  There has been little change in the circumstances that prompted Hoy A.C.J.O. to adjourn the respondents’ motion and vacate the hearing date for the appeal;
  2.                 The appeal could involve the application of novel and important issues of public importance to domestic and international jurisprudence;
  3.               The appellant is a foreign defendant brought into the jurisdiction by the respondents. As noted above, it is not the practice of this court to impose security for costs upon foreign or impecunious defendants forced into court by others to defend themselves;
  4.               The appeal has plausible merit; and
  5.               At this time it is uncertain when the hearing of the appeal will be scheduled and whether circumstances may change before then. An order for security for costs granted at this time could effectively terminate the appeal. In my view it is preferable to allow the appeal the greatest prospects of being determined on the merits.

[Emphases added]

The motion for security for costs was accordingly dismissed.