Walsh v. Unum Provident

Walsh v. Unum Provident Court Court of Appeal Date 2013-07-03 Citation 2013 NSCA 82 Docket CA 405527 Judge/Registrar/Adjudicator Oland, Linda L. (Honourable Justice) Document Type Decision Decision Content Nova Scotia Court of Appeal Citation: Walsh v. Unum Provident, 2013 NSCA 82 Date: 20130703 Docket: CA 405527 Registry: Halifax Between: Douglas Walsh Appellant v. Unum Provident, a body corporate Respondent Judge: The Honourable Justice Linda Lee Oland Motion Heard: June 13, 2013, in Halifax, Nova Scotia, In Chambers Held: Motion for security for costs dismissed Counsel: Colin D. Bryson, Q.C., for the Appellant Michelle Awad, Q.C., for the Respondent Reasons for judgment: [1] RBC Life Insurance Company, formerly Unum Provident (the “Insurer”) brings a motion pursuant to Civil Procedure Rule 90.42 for an order requiring the appellant, Douglas Walsh, to post security for costs. Mr. Walsh has appealed an order issued by Justice Arthur W. D. Pickup (the “Pickup Order”). His appeal is scheduled to be heard on October 15, 2013. [2] The appellant asserts that if he is required to post security for costs, he will not be able to continue this appeal. Each party filed affidavits and briefs in support of their position. The Insurer cross-examined the appellant. Background [3] I will summarize the background facts, as acknowledged by the parties and found in the judge’s decision, the record and the cross-examination of the appellant. [4] In 2000 Mr. Walsh claimed long term disability benefits from the Insurer pursuant to a disability insurance policy issued in 1993. After he had received payments for some 20 months, his benefits were terminated. Because of this cancellation, the appellant brought an action against the Insurer in 2003. In the years following, there were discovery examinations, amendments of pleadings, retention of experts, the filing of a Notice of Trial, a date assignment conference, and a judicial settlement conference. The trial was originally scheduled for January 2010. However, it was adjourned in December 2009 as a result of the withdrawal of Mr. Walsh’s counsel. [5] In March 2010 the Insurer brought motions, among other things, for throwaway costs for the late adjournment of the trial and for security for costs. On March 15, 2010 Kennedy, C.J. ordered Mr. Walsh to pay throwaway costs of $7,500 to the Insurer within six months. He dismissed the motion for security for costs. The throwaway costs were paid in accordance with his Order dated May 12, 2010. [6] The trial was heard over nine days in November and December of 2011. In a decision released February 29, 2012 (2012 NSSC 86), Justice Pickup found that the policy was void ab initio because Mr. Walsh had made material misrepresentations in his application for insurance. He also found that the appellant had not met his burden of proving that he had been totally disabled during the time in which he claimed and received disability benefits. The appellant was ordered to repay benefits received between 2000 and 2002, and his claim for further benefits was dismissed. In a decision released June 25, 2012 (2012 NSSC 237), the judge awarded the Insurer costs. [7] The Pickup Order dated July 6, 2012 required Mr. Walsh to pay the Insurer: (a) damages of $125,119.20; (b) prejudgment interest of $48,483.69 (September 2000 to February 29, 2012); (c) daily interest of $17.14 from March 1, 2012 to the date of the Order; (d) costs of $125,000; and (e) disbursements of $43,056.34. Nothing has been paid towards those amounts. [8] On August 2, 2012, Mr. Walsh filed his Notice of Appeal. As amended, it contains ten grounds of appeal. The Appeal Book was filed that November and the facta of both parties before the end of March 2013. The hearing of his appeal which was originally set down for April 17, 2013 was rescheduled to May 16, 2013 and finally to October 15, 2013. In the interim, there were further amendments of the pleadings. Security for Costs [9] Civil Procedure Rule 90.42 reads: 90.42 (1) A judge of the Court of Appeal may, on motion of a party to an appeal, at any time order security for the costs of the appeal to be given as the judge considers just. (2) A judge of the Court of Appeal may, on motion of a party to an appeal, dismiss or allow the appeal if an appellant or a respondent fails to give security for costs when ordered. [10] The same interpretive principles apply to Rule 90.42 as to former Rule 62.13: Sable Mary Seismic Inc. v. Geophysical Services Inc., 2011 NSCA 40 at ¶ 2. It has long been established that security for costs on appeal is ordered only where the applicant can show “special circumstances”: Frost v. Herman (1977), 18 N.S.R. (2d) 167 (C.A.) at p. 168 [11] In Geophysical, Beveridge, J.A. addressed what constitutes special circumstances and whether, if they are found to exist, there remains a residual discretion to decline to order security for costs: Special Circumstances [6] There are a variety of scenarios that may constitute “special circumstances”. There is no need to list them. All bear on the issue of the degree of risk that if the appellant is unsuccessful the respondent will be unable to collect his costs on the appeal. In Williams Lake Conservation Co. v. Kimberley-Lloyd Development Ltd., 2005 NSCA 44, Fichaud J.A. emphasized, merely a risk, without more, that an appellant may be unable to afford a costs award is insufficient to constitute “special circumstances”. He wrote: [11] Generally, a risk, without more, that the appellant may be unable to afford a costs award is insufficient to establish “special circumstances.” It is usually necessary that there be evidence that, in the past, “the appellant has acted in an insolvent manner toward the respondent” which gives the respondent an objective basis to be concerned about his recovery of prospective appeal costs. The example which most often has appeared and supported an order for security is a past and continuing failure by the appellant to pay a costs award or to satisfy a money judgment: Frost v. Herman, at ¶ 9-10; MacDonnell v. Campbell, 2001 NSCA 123, at ¶ 4-5; Leddicote, at ¶ 15-16; White at ¶ 4-7; Monette v. Jordan (1997), 163 N.S.R. (2d) 75, at ¶ 7; Smith v. Heron, at ¶ 15-17; Jessome v. Walsh at ¶ 16-19. See also Branch Tree Nursery & Landscaping Ltd. v. J & P Reid Developments Ltd., 2006 NSCA 131. [7] However, the demonstration of special circumstances does not equate to an automatic order of security for costs. It is a necessary condition that must be satisfied, but the court maintains a discretion not to make such an order, if the order would prevent a good faith appellant who is truly without resources from being able to prosecute an arguable appeal. This has sometimes been expressed as a need to be cautious before granting such an order lest a party be effectively denied their right to appeal merely as a result of impecuniosity (2301072 Nova Scotia Ltd. v. Lienaux, 2007 NSCA 28, at para. 6; Smith v. Michelin North America (Canada) Inc., 2008 NSCA 52). Analysis [12] The Insurer raised a preliminary issue: is its motion for security for costs barred by res judicata because of the security for costs order motion heard and dismissed by Kennedy, C.J. prior to trial? The appellant acknowledged that it was not. Consequently, I did not need to, and do not, decide that question. [13] I turn then to the main issue on this motion for security for costs: should Mr. Walsh be required to post security for costs on the appeal? The essence of the Insurer’s argument is that there are special circumstances in this case which support an order for security for costs, and no circumstances which would preclude such an order. [14] The Insurer relies on the evidence of the appellant to make its case. In opposing the Insurer’s motion for security for costs, Mr. Walsh swore and filed an affidavit. In it, he deposed in part: 2. I made an assignment in bankruptcy on April 11, 2001, and was given a conditional discharge by Order of Supreme Court in Bankruptcy on March 4, 2002 … 3. I have no assets of any kind, save for household furnishings. I do not own land and have no savings. I am unable to work due to my bipolar disorder. My sole source of income is a Canada Pension Disability, which I have received since 2009, and which in 2012 paid me $9,331.56. 4. This litigation was funded entirely by the assets of my wife, Mary Lee Walsh, until September 2009, when she made an assignment in bankruptcy, from which she was discharged in June 2010. Thereafter, this litigation, including this appeal, has been funded through loans from my family. My wife, Mary Lee Walsh, is unemployed and has no assets of any kind, save for household furnishings. 5. I have asked my family members for further loans to cover the security for costs requested by the Respondent and I have been refused. Consequently, should I be required to post security for costs, I will not be able to continue to advance this appeal unless my family has a change of heart. To date, the cost of furthering this appeal has been approximately $40,000.00. Had I known last year that additional security for costs would have been required, I would have attempted to raise the required funding at that point, and if that was not possible, would not have been able to pursue the appeal. Mr. Walsh also deposed that information pertaining to his bankruptcy as found in the affidavit filed by the Insurer, and as argued in its brief, was incorrect or incomplete. [15] Under cross-examination, Mr. Walsh explained how his litigation against the Insurer has been funded. He testified that the fiancé of one of his daughters had paid the $7,500 throwaway costs ordered by Kennedy, C.J. after his then lawyer asked that daughter to approach her fiancé for assistance. According to the appellant, family members including his wife, his children and his brothers, had paid the fees of his experts. Family members had paid the legal fees of the four lawyers he had retained in turn during the course of the litigation to the end of trial. As to the $40,000 incurred for his appeal to the May 16, 2013 date of his affidavit, his evidence was that family, including his daughter’s fiancé, had paid some of that amount, and some remained outstanding. Mr. Walsh stated that he has three children: a daughter who is a lawyer, a second daughter who was a student when the trial was held, and a son who works as a union organizer. [16] The appellant testified that when the security for costs motion was brought, he went directly to everyone who had been involved in the past and asked them if they’d help pay. His evidence was that until the security for costs motion was pending, he had never personally asked his family for money. He confirmed that he had never asked anyone for money for the Pickup Order and that, while he had discussed the fact that it exists with his family, he had not asked any of them to provide him with funds to pay it. [17] The Insurer argues that Mr. Walsh’s evidence discloses a pattern: payment will be made of expenses and orders that must be paid before the litigation can proceed, and will not be made in any other instance. It points out that the throwaway costs ordered by Kennedy, C.J., the fees for experts, the fees for lawyers over several years for the preparation and conduct of a nine-day trial, and partial fees for the lawyer for the appeal, have all been paid. It emphasizes that the entirety of the Pickup Order remains unpaid, and the appellant has never asked for financial assistance to pay any of those amounts. Indeed, he did not make any request of his family until the security for costs motion which, if successful, could halt the appeal. According to the Insurer, this has all been a very “convenient situation” for Mr. Walsh – he has effectively made himself judgment proof because the Insurer cannot enforce payment of the Pickup Order against his family. [18] His failure and continuing failure to pay anything of the Pickup Order means that the appellant has acted in an insolvent manner towards the Insurer. This is not a situation where there is only a risk, without more, that he may be unable to satisfy costs awarded against him on the appeal, if his appeal against the Insurer should fail. The Insurer has demonstrated special circumstances which would support an order for security for costs. [19] Even if special circumstances are established, security for costs might not be ordered if “the order would prevent a good faith appellant who is truly without resources from being able to prosecute an arguable appeal”: Geophysical at ¶ 7. Mr. Walsh argues that he is impecunious, he has been prejudiced by the Insurer’s delay in bringing its motion for security for costs, and an order would stifle his appeal. The Insurer contends that the history of this litigation shows that there is a source for funds, the merits of his appeal ought to be taken into account, and there is no reason why an order for security for costs should not be granted. [20] The burden falls upon the party from whom security for costs is sought to establish not only that he is truly impecunious, but also that he has no resort to resources to post security for costs: Geophysical at ¶ 17. Mr. Walsh’s claim of impecuniosity is supported by his affidavit evidence as to his bankruptcy, his lack of assets, inability to work because of his health, and minimal income. Those uncontradicted details make it clear that he has no assets of value which could be sold, and no assets and insufficient income to obtain and secure a loan to pay security for costs from a private or commercial lender. [21] According to the appellant’s evidence, the only source of funding that enabled this litigation for several years has been his family. Mr. Walsh cannot, and does not, deny that there has been a lengthy history of family members stepping forward at various times to help pay a substantial portion of the costs associated with his action against the Insurer, other than the Pickup Order which issued in 2012. According to his affidavit, it was his wife who entirely funded the litigation until the fall of 2009 and her resources are now depleted. The Insurer strongly suggests that he should look again to his family, such as his children and a fiancé of one of them, to pay security for costs, and that their past generosity indicates that Mr. Walsh would be able to raise the necessary amounts from that source. [22] This Court has ordered security for costs where the appellant had acted in an insolvent manner and where the circumstances suggested that it would be able to raise the requisite monies if it was serious about pursing the appeal. In Smith v. Michelin North America (Canada) Inc., 2008 NSCA 52, the appellant represented a group of some 575 members, each of whom had made an initial contribution of $300 and agreed to make additional contributions as needed, to support proceedings for an interpretation of the Michelin Pension Plan. Cromwell, J.A. (as he then was) was not satisfied from his review of the evidence that the association had exhausted its ability to raise funds or that an order for security for costs would stifle the appeal. He ordered security for costs of $50,000 (less than $100 per member of the association). [23] Here, however, Mr. Walsh’s evidence is that he has approached family, his former contributors, to cover security for costs to ensure that his appeal could proceed. Family other than his wife had paid the amounts related to the throwaway costs, the trial and some portion pertaining to the appeal. But he was rejected. In short, Mr. Walsh’s position is that he is without resources to pay anything himself and the sole source of funds, the small well composed of his family, has run dry. [24] Mr. Walsh also argues that the fact that the Insurer filed its motion for security for costs late in the proceeding should be a consideration. To this the Insurer responds that Rule 90.42 provides that “A judge of the Court of Appeal may, on motion of a party to an appeal, at any time order security for the costs . . .” (emphasis added). The Insurer is correct in that a judge has a very broad discretion to consider such a motion at any point in the proceedings. However, that does not end the matter. The question of whether and how the timing of the motion ought to be taken into account, if at all, remains. [25] Here’s a quick overview of the chronology. The decision on the merits was released at the end of February 2012. The Pickup Order which included the costs decision issued some four months later, on July 6, 2012. Mr. Walsh filed his Notice of Appeal the next month, the Appeal Book that November, and his factum on January 23, 2013. During a telephone conference with the Chambers judge on March 6, 2013 to reschedule the hearing of the appeal, the Insurer gave verbal notice that it would be filing a motion for security for costs. The Insurer filed its factum on March 18, 2013 and its motion for security for costs on April 18, 2013. [26] Mr. Walsh points out that the Insurer has been concerned about his ability to respond to costs for some time. It had sought security for costs previously, before Kennedy, C.J., in the proceedings leading to the trial. Yet, it did not raise the matter of a motion for security for costs until after he had filed both the Appeal Book and his factum. He argues that the timing of the motion means that funds expended for the purposes of the appeal could now be lost if he is required to post security for costs. He adds that the Insurer has not offered any explanation for the delay in bringing this motion. [27] In support of his argument, the appellant relies on Pelz v. Anderson, [2006] O.J. No. 4726 and Ellph.com Solutions Inc. v. Aliant Inc., 2011 N.S.S.C. 316. In Pelz, a physician brought a motion for security for costs against a patient who had alleged that he had been negligent in treating her. The Master reviewed the Ontario cases on the effect of a delay in bringing a motion for security for costs pursuant to the Ontario Rule. In dismissing the motion, he held that the defendant had delayed, the plaintiff had not shown prejudice and the defendant’s failure to explain the delay was fatal. [28] In Ellph.com Solutions, the plaintiffs were closely held, insolvent companies which alleged unlawful termination of a contract. The defendants sought an order requiring them to post guarantees from their shareholders, who had personally financed the plaintiffs’ litigation. Although his decision dismissing the motion did not turn on the question of the delay, Moir, J. of the Nova Scotia Supreme Court did acknowledge that delay can be a relevant factor: [34] It seems to me that timing is relevant to the fairness of ordering security for costs in two ways. First, a defendant may be at fault for a long delay and be less deserving of a remedy. Second, the timing may prejudice a plaintiff. Master Graham puts the prejudice plainly in Pelz v. Anderson, [2006] O.J. 4726 (S.C.J., Master) at para. 23: “having to post security for costs after having incurred considerable expense in advancing the lawsuit”. [35] Again we see in some decisions a tendency to make rules out of mere relevancies. Respectfully, Pelz does that. I think it is more faithful to the broad discretion and to the need for a circumstantial assessment of fairness to say that delay by the defendant is relevant, and prejudice to the plaintiff is relevant, and leave it at that. See also 6048668 Canada Inc. v. Chaston, 2007 NSSC 91 at ¶ 9. [29] This Court has also considered delay in motions for security for costs. In Spence Aggregates Contracting Ltd. v. Provincial Contracting, [1999] N.S.J. No. 286 the appellants had not paid costs ordered at trial and the respondents were concerned that they did not have sufficient assets within Nova Scotia to satisfy a judgment, if the respondents were successful. Bateman, J.A. dismissed their application for security for costs for several reasons, including the fact that there were no particulars supporting the assertion of insufficient assets and there was evidence to show that some of the trial costs had been paid. While delay was not determinative, it was one factor that she considered in deciding that special circumstances did not exist that would warrant an order for security for costs: 9 Nor, in my view, has the application for security been made on a timely basis. The respondent has offered no explanation for the delay between the commencement of this appeal and the initiation of this application, save to say that the time was required to investigate the appellants' financial situation. [30] See also Geophysical where the appellants argued that the respondents had delayed in bringing a motion for security for costs and the delay was highly prejudicial. Beveridge, J.A. did not accept this argument, writing at ¶ 31 that “I see no inordinate delay, nor prejudice to the appellants.” While delay was not considered to be a relevant factor in that case, he did not indicate that delay or the timing of a motion could never be a proper consideration. [31] I also observe that appellate courts in other jurisdictions have treated delay as a relevant factor. See, for example, Interclaim Holdings Ltd. v. Down, 2000 BCCA 617. However, the wording their Rules of court pertaining to security for costs may not be identical to our Rule 90.42. [32] From my review of Rule 90.42 and these authorities, particularly Spence Aggregates and Geophysical, I am of the view that while a party may bring a motion for security for costs on appeal at any time, the Chambers judge has discretion in determining such a motion, and delay in bringing the motion may be a relevant factor to consider. However, delay, in and of itself, is not determinative. As indicated in Geophysical at ¶ 31, it will not be considered unless the delay tends towards the inordinate or prejudice is demonstrated. [33] I then turn to a factor which the Insurer says favours an order for security for costs in this case, namely the merits of the appeal. The Insurer emphasizes that, in finding that Mr. Walsh had made material misrepresentations in his insurance application, the trial judge had made findings of credibility against the appellant. It pointed out that findings of credibility are entitled to a high degree of deference by an appellate court. As well, the Insurer submits that Mr. Walsh has already had benefit of a trial, relying on Lienaux v. Norbridge Management Ltd., 2013 NSCA 3: [26] This jurisprudence shows that litigants will not be denied access to the courts – even to the Court of Appeal – simply because they cannot post security for costs. However, the authorities do suggest that the “access to courts” argument is weaker in appeal settings because the appellant has already been heard at trial. Nevertheless, security for costs has been refused where an impecunious appellant risks losing his day in the Court of Appeal. But the loss of one’s day in court is not usually determinative. The Court’s exercise of discretion is not so one-dimensionally constrained. All the circumstances should be taken into account, including the interests of the respondent on appeal, (2001 NSCA 122, at 35). I would not dismiss the motion simply because it may prevent Mr. Lienaux from pursuing his appeal. I elaborate on this further under “conclusion”. [34] For his part, Mr. Walsh argues that in Lienaux at ¶ 30, Bryson, J.A. specified that the merits of an appeal can be decisive “[i]n the rare clear case”. He says that while Lienaux was such a case, his appeal is far from being one of those clear cases and that his appeal is much more than an appeal on the facts or credibility. According to the appellant, the judge’s findings of credibility against him flow from errors in his analysis of the application documents which he described as ambiguous and errors with regard to the expert evidence. [35] I accept that Mr. Walsh is impecunious, and that he has no resort to resources to post security for costs. He does not simply claim impecuniosity but has backed it with affidavit evidence detailing his financial situation. Nothing in his demeanor or responses gives me reason to question his testimony, including his evidence in that document and under cross-examination that he had asked his family for financial assistance to pay the security for costs and has been rejected. While I appreciate that to date he has managed to keep the litigation moving forward because of family support, and that history may give one pause, there is no evidence that any funds would likely be forthcoming and there is evidence that they will not be. [36] The Insurer could have brought the motion for security for costs earlier. However, there has been no inordinate delay. The Insurer did not proceed on the eve of, or so close to, trial as to severely disadvantage the appellant. Its motion seeks security for costs of $15,000. There remain several months before the hearing of the appeal during which period, if security for costs in that or a lesser amount were found to be appropriate, there would be time for the appellant to try to raise funds. Mr. Walsh deposed that had he known “last year” that costs in addition to the amount already expended would be required, he would have attempted to raise those funds then and, if unsuccessful, would not have been able to pursue the appeal. While this could indicate some prejudice, the statement does not accord with the history, as recounted by the appellant under cross-examination of him not actively or personally seeking monies to pay costs related to this litigation. In the circumstances overall, I do not consider delay a significant factor in this motion. [37] Nor is it necessary to rely on the merits of the appeal to determine this motion for security for costs. Having reviewed the amended Notice of Appeal and considered the arguments of the parties, I am of the view that the appellant has raised arguable grounds. Extensive argument is properly reserved for the hearing of the appeal on the merits. Disposition [38] While the appellant has acted in an insolvent manner towards the Insurer, I would exercise my discretion not to order security for costs. In my view, the appellant is impecunious and without resort to resources to post such security, and such an order would effectively deny his right to appeal. I would dismiss the motion for security for costs, and order the Insurer to pay the appellant $1,000 inclusive of costs. Oland, J.A.