We previously wrote about the Court of Appeal for Ontario's decision in Yaiguaje v. Chevron Corporation to order the Ecuadorian plaintiffs to post nearly $1,000,000 as security for costs. Since that post, the plaintiffs brought a motion to vary the decision ordering security for costs to a panel of the Court of Appeal. The Court of Appeal varied the decision of the motion's judge.

This decision provides appellate authority on the suitability of security for costs orders, and a caution against using such orders as a litigation tactic where the justness of the case demands that it be heard on its merits.

The Court released its reasons for decision on October 31, 2017. In its reasons, the Court first established that the standard of review applicable to the motion judge's decision was one of deference, as orders for security for costs are discretionary in nature. However, notwithstanding this deferential standard of review, the Court acknowledged that interference with a discretionary decision would be warranted if the motion judge erred in principle. In the circumstances of the case, the question was whether the motion judge erred in principle in determining the justness of the order for security for costs.

The Court considered what the justness of the order means on such motions. The Court pointed to the fact that the Rules of Civil Procedure expressly provide that an order for security for costs should only be made where the justness of the case demands it, and noted that the courts must be vigilant to ensure that an order for security for costs is not used as a litigation tactic to prevent a case from being heard on its merits, even where the test for security for costs is otherwise satisfied.

In canvassing the factors to be considered in determining the justness of an order for security for costs, the court referenced such considerations as the merits of the claim, access to justice concerns, and the public importance of the litigation. However, the Court also acknowledged that each case must be considered on its own facts, and that the proper approach is to consider the justness of the order in light of all of the circumstances of the case.

The Court concluded that in the case of the Ecuadorian plaintiffs, the interests of justice required that no order for security for costs could be made. The Court considered the following factors, among others, in coming to their conclusion:

(i) that the litigation was in the public interest;

(ii) that the profitability of the Chevron defendants indicated they did not require protection for costs awards; and

(iii) that the appeal was not wholly devoid of merit, even though the Ecuadorian plaintiffs were advancing untested legal arguments.

In the result, the Court set aside the order for security for costs, and awarded the plaintiffs their costs of the security for costs motion and the set aside motion in the amount of $11,500.

This case provides clarification on the appropriateness of security for costs orders even in circumstances where the criteria for such orders are satisfied. Prior to bringing such motions, litigants should turn their minds to the above-referenced criteria, and consider or if the interests of justice otherwise mitigate against the imposition of an order for security for costs. As a result of this case, litigants should be especially wary of bringing such motions as a strategy to end litigation where there are public interest concerns and the moving party is an a substantially better financial position than the respondent.