Canada: KDS v. Aamazing Technologies Inc.: Leave Not Required When Order Extends Beyond Costs Consequences

Section 133(b) of Ontario's Courts of Justice Act states that leave to appeal is required "where the appeal is only as to costs that are in the discretion of the court that made the order for costs." The Ontario Court of Appeal's September 25, 2014 decision in KDS v. Aamazing Technologies Inc. confirms that leave is not required to appeal if  the order appealed from also affects substantive rights of a party. In doing so, the Court also gave helpful guidance regarding when appeals should be heard together, and when security for costs should be ordered on an appeal.

The case emerged from complicated litigation, a different aspect of which has previously been discussed on this blog, and which has spanned across Taiwan, Hong Kong, California and Ontario.

Christina Chiang, one of the defendants in the underlying Ontario actions and one of the respondents in this appeal, had become indebted to KDS, one of the plaintiffs in the actions and one of the appellants on this appeal, after the Ontario Superior Court ordered the enforcement of a California judgment against her. In another action in Ontario where KDS was unsuccessful, KDS was ordered to pay Christina Chiang's costs. The trial judge refused to order that the costs award be set off against the amount that Christina Chiang owed KDS. The Court then analyzed how KDS, which had  also filed a notice of appeal from the trial judgment dismissing its claim but had not perfected the appeal, could appeal the costs order:

Is leave required to appeal the costs order?

[13]      Christina Chiang and the Trustee argue that leave is required for all appeals as to costs, pursuant to s. 133(b) of the Courts of Justice Act.

[14]      KDS argues that the order goes beyond the usual "quantum and entitlement" determination with respect to costs; the order alters legal rights not related to the costs of the fraudulent conveyance action.

[15]       The costs order provides that:

  1. Christina Chiang is entitled to her costs fixed in the amount of $665,990.96;
  2. to the extent that the costs are paid by the Estate, the Trustee is entitled to seek recovery from KDS;
  3. counsel for Christina Chiang is entitled to a solicitor's lien on the costs, which shall have priority over the claims of the Estate's unsecured creditors;
  4. all of KDS's reasonable costs  arising from KDS's efforts to sell the Chiang's house at 10 Cortina Court, and an outstanding costs order for $15,000 made against Christina Chiang, have been satisfied from surplus funds realized from the sale of the house;
  5. outstanding costs orders made against Jay and Christina Chiang are to be satisfied out of funds received by the Trustee from Winner International Group Ltd. after the trial decision.

Is the order more than a costs order?


[17]      Here, the trial judge's decision not to allow set-off has a substantive effect on the legal rights of KDS. The decision effectively eliminates the ability of KDS to set-off this debt against the much larger judgment debt owed to it by Christina Chiang. [emphasis added]

[18]      In our view, the order is not a straightforward determination of who should pay the costs and how much those costs should be. The order determines rights that extend beyond the entitlement to and quantum of the costs. As such, the appeal is not "only as to costs". Thus, leave is not required under s. 133(b) of the Courts of Justice Act. However, if leave were required, we would have granted leave.

Should the costs appeal be separated from the main appeal?

[19]      The complexity of the issues involved and the commonality of the history make it necessary to have the costs appeal heard with the enforcement appeal.  In addition, the claim for set-off can only be fully evaluated in the context of the past judgments and costs orders issued against Jay and Christina Chiang. The appeals will be heard together.

[20]      KDS will have 45 days to perfect the appeals.

Security for Costs

[21]      Christina Chiang asks that KDS be required to pay the costs order, as well as security for costs of the appeal, into this court. She contends that KDS has no assets in Canada.

[22]      The appeal is not frivolous or devoid of merit. In addition, it is Ms. Chiang who has been found in contempt of court and who has failed to pay costs ordered against her. This would not be an appropriate case for security for costs.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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