Epiq Systems, Inc.

Lerners LLP: Paul Brooks

Security for costs in employment cases

A motion for security for costs has potential to cause trouble for an employee, and can offer many benefits to a defendant, in the right circumstances. It can result in the employee having to post security for the defendant’s costs, and can deter frivolous and vexatious claims, as well as some meritorious but modest claims from continuing.

On the other hand, the recent case of Lafantaisie v Elgin Motor Freight Inc., illustrates that security for costs motions can waste time and money for an employer when brought in the wrong circumstances.

In Lafantaisie, the employer sought an order requiring the employee to post security for costs in the amount of $35,000.00 in order to continue her modest constructive dismissal action.

The Honourable, Mr. Justice George of the Ontario Superior Court of Justice noted that Rule 56.01 of the Rules of Civil Procedure governs the circumstances where a defendant can bring such a motion. In this case, Mr. Justice George was asked to order security for costs on the basis that there was good reason to believe the employee’s action was frivolous and vexatious and that the plaintiff had insufficient assets in Ontario to pay the costs of the defendant.

The employer, relying upon the pleadings; the evidence filed on the motion; and, selected excerpts from the cross-examinations, contended that there was no evidence to support a claim of constructive dismissal such that it was a frivolous and vexatious claim.

Mr. Justice George noted that the plaintiff’s statement of claim (the pleadings), and her evidence on the motion could support a finding of constructive dismissal such that it was not a frivolous and vexatious claim. Further, on the evidence, he held that he was unable to conclude there was good reason to believe the plaintiff had insufficient assets to pay the defendant’s costs. Consequently, Mr. Justice George dismissed the employer’s motion.

Costs

In deciding that the employee should receive her costs of the motion in the amount of $20,000.00, Mr. Justice George noted among other things, that the motion had been unnecessary and had little chance of success.

The Lafantaisie decision shows that while a security for costs motion can offer many benefits to a defendant in the right circumstances, employers should be wary of the risks and carefully consider the chance of success before beginning such a motion.

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