Security For Costs Applications

Security For Costs Applications

Parmar v. Timothy Hunstsman Law Corp. 2018 BCSC 1151 involved a successful application by the defendant that the plaintiff post security for costs for the court action brought by the plaintiff, who lived in Illinois and had no assets in the province of British Columbia.

The defendant prepared a bill of costs, allowing for a five-day trial, full day examinations for discovery, instructing experts, mediation and significant disbursements totaling $35,000.

The court ordered that the plaintiff post security for costs in the amount of $20,000 within 60 days of the court order, or if not paid, the action would be dismissed.

The plaintiff had brought court action against the defendant law firm alleging breach of contract and professional negligence.

The legal principles relating to the jurisdiction of the court to order security for costs by a non-corporate plaintiff arises from the inherent jurisdiction of the court. The order is a discretionary on that must be exercised judicially and in all interests of the parties–Sheill v Coach House Motel Ltd (1982) 37 BCLR 254 ( CA) at 264.

Security for cost applications are typically brought where there are concerns that the plaintiff will not satisfy a costs award made against it because the plaintiff resides outside the jurisdiction and has no assets within it. Those circumstances on their own are not determinative.

The law is clear that poverty should not be a bar to access the court. Access to the court should not be hampered by financial issues, except in special or egregious circumstances–Han v Cho 2008 BCSC 1229 at para 14.

The onus is on the applicant. In a situation where the plaintiff is a corporation, if the defendant can show that it will not likely be able to cover costs if the claimant fails, security is generally granted.

However, security for costs where the plaintiff is an individual requires a different balancing giving the access to justice concerns. The overall balancing is the risk that a successful defendant will be unable to recover costs of security is not granted against the risk that a legitimate claim could be stifled by an order. If the latter is in play, it will override the concerns of the defendant will not recover costs of successful.

The threshold issue is whether the applicant has established, on a prima face the basis that it will be unable to recover costs in the event of success- Equstek Solutions Inc v Jack 2013 BCSC 2135 at para 26-27.

The factors that courts hearing such applications have considered in the exercise of its discretion were listed in I. J. v J.A.M.- BCSC 270 at para 14:

1) the merits of the plaintiff’s claim;
2) whether the plaintiff is bankrupt or insolvent
3) whether the plaintiff has demonstrated an intention not to comply with previous orders relating to costs payable;
4) whether there is a risk the plaintiff is not findable;
5) whether there is evidence suggesting that a false description of residence or a false name has been given to the court or use generally.

The courts often cautiously approach the issue of the merits of the case in applications for security for costs, and typically should avoid going into detail in the success or failure appears obvious.-Wang v BC Medical Association 2011 BCSC 1659.

The courts in this decision did however rely heavily on the fact that the plaintiff’s state of residence is a non-reciprocating jurisdiction and that the plaintiff had no assets in British Columbia.

The plaintiff’s lawyer conceded that the plaintiff had the means to pay security for costs without impeding his ability to pursue the claim.