Executive Summary: Key Legal and Evidentiary Issues

• Motion sought an extension of time to appeal security for costs and related cost orders in a high-stakes environmental litigation.

• Plaintiffs alleged misfeasance, negligence, and conspiracy against the City of Hamilton and others regarding contaminated land.

• The Court found the plaintiffs not impecunious and noted attempts to shield assets from potential cost recovery.

• Repeated delays, lack of diligence, and shifting explanations undermined the credibility of the motion.

• The motion judge had properly applied Rule 56 and the interests of justice test from Yaiguaje v. Chevron.

• Motion was dismissed and $20,000 in costs awarded to the respondents due to procedural delays and weak justification.

Facts of the case
The plaintiffs—Waterdown Garden Supplies Ltd., 2593860 Ontario Inc., and Gary McHale—brought a lawsuit against the City of Hamilton and two of its officials over alleged environmental contamination of a property. They claimed tens of millions of dollars in damages for alleged negligence, misfeasance in public office, and conspiracy. The City of Hamilton and its employees responded with motions for security for costs under Rule 56 of Ontario’s Rules of Civil Procedure, arguing the plaintiffs were at risk of being unable to pay a costs award if unsuccessful.

The plaintiffs initially opposed the motions without asserting impecuniosity but later reversed course and claimed they were unable to pay. The motion judge rejected this assertion, finding based on the evidence that the plaintiffs were not impecunious and had in fact structured their affairs to shield assets from collection. He further noted that the plaintiffs were pursuing a coordinated set of litigations and appeared to be running a litigation-driven business enterprise. As a result, the Court ordered the plaintiffs to pay $252,560 in security to the City and $124,416 to one of the individual defendants, Craig Saunders. The plaintiffs did not pay the required amounts, resulting in a stay of proceedings.

The motion for extension of time
The plaintiffs filed a notice of motion for leave to appeal the security for costs orders approximately two weeks late. However, they failed to promptly follow up with a motion to formally seek an extension of time. Despite eventually acknowledging the delay, their subsequent conduct showed inconsistent efforts to proceed. A case conference held in June 2024 further highlighted procedural issues, including filings in the wrong court region and delays in serving a motion record.

The plaintiffs offered various explanations for the delay, including counsel’s initial miscalculation of deadlines and Mr. McHale’s alleged health issues. However, these explanations were contradicted by email communications showing the delay was instead linked to travel and poor planning. The final motion materials were not filed until October 2024—eight months after the missed deadline—long after the plaintiffs had been notified of the need for an extension.

Court’s analysis and decision
Justice Matheson of the Divisional Court applied the well-established test from Paulsson v. University of Illinois, which considers the applicant’s intent to appeal, the length and explanation of the delay, prejudice to the responding parties, and the overarching justice of the case. The Court found that while the plaintiffs claimed they intended to appeal, they had not treated the matter with urgency. The explanation for delay was found to be inconsistent and weak.

On the question of prejudice, the Court accepted the City’s submission that it was harmed by the ongoing public nature of serious allegations while the litigation remained unresolved. Regarding the justice of the case, the Court acknowledged the plaintiffs’ environmental claims but noted that they still had access to the courts if they complied with the security orders. The Court concluded that the plaintiffs' pattern of delay and procedural disarray undermined the justice of granting an extension.

Outcome
The Court dismissed the motion for an extension of time to appeal both the security for costs orders and the related costs orders. The moving parties were ordered to pay a total of $20,000 in costs to the respondents. The decision reaffirms the importance of procedural diligence in civil litigation, particularly in high-value, high-impact claims involving public authorities.