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Tag: Security for Costs

Want Your Day In Court? Mortgage Your Property First!

In a very rare display of the BC Supreme Court’s powers pursuant to its inherent jurisdiction, and a strong reminder of the potentially high financial consequences of BC’s loser pays legal system, Mr. Justice Burnyeat released reasons for judgement ordering a Plaintiff to mortgage her properties to the amount of $100,000 as security for costs prior to allowing her claim to proceed to trial.
In today’s decision (IJ v. JAM) the Plaintiff sued the Defendants alleging sexual harassment   The Plaintiff had other costs orders made against her and the Court found she had “a pattern of ignoring orders for costs that have been made“:  The current Defendants applied for an order requiring $100,000 to be paid into court as security for costs.  Mr. Justice Burnyeat agreed security was appropriate and provided the following reasons:
[18]         I am satisfied that “very special circumstances” are present so that an order for security for costs should be made.
[19]         First, the Plaintiff has a pattern of ignoring orders for costs that have been made:  in the Petition for judicial review of the British Columbia Human Rights Tribunal decision where costs were awarded in favour of J.A.M. and, in these proceedings where an order for costs was made against the Plaintiff arising out of the dismissal of the civil claim against the G.S. and J.S.
[20]         Second, I take into account the merits of the claim of the Plaintiff.  As I will be the trial judge for the lengthy trial that is scheduled for June 2013, I do not express any final opinion about the merits of the claim other than to observe that, as presently drafted, the claim against J.A.M. and J.M. is expressed in an often confusing, emotional and vitriolic manner, with many allegations not relating directly to the very serious claim that the Plaintiff makes against J.A.M.  and J.M.  It is not appropriate at this stage to make a fine assessment of the relative merits of the claim of the Plaintiff but only to observe that the claims are not so weak that they are bound to fail.  However, regarding the claim, I take into account the agreement that was executed by the Plaintiff releasing the Company and officers, including J.A.M. for previous acts which occurred.  It is a fair assessment at this point that the case of the Plaintiff has many problems…
[25]         The Defendants request the payment into Court of the sum of $100,000.  It is clearly the case that such a sum is not available and that to require that sum to be paid would effectively deny the Plaintiff access to the Court.  However, the affidavit of the Plaintiff is that the two Whistler properties have a value of approximately $729,000 and have charges against them of approximately $550,000 so that her equity is in the neighbourhood of $279,000.  The Plaintiff also states that her property in Ontario has an approximate value of $560,000 with a mortgage of approximately $164,000 against it so that the approximate equity is $396,000.
[26]         Taking into account all of the circumstances surrounding the claim of the Plaintiff, I am satisfied that there is good reason and very special circumstances why an order for security for costs should be made.  Accordingly, a mortgage in the amount of $100,000 without interest will be granted by the Plaintiff against her two properties in Whistler with the mortgagee being the Registrar of the Supreme Court of British Columbia.  The mortgage is not to be discharged or enforced without the further order of the Court.
[27]         The Plaintiff will be required to sign that mortgage within ten days of it being tendered on her for her signature.

Access to Justice and Security for Costs

As discussed many times, the BC Supreme Court operates on a “loser pays” system generally requiring a losing litigant to pay the winner’s costs and disbursements.  These costs awards can quickly add up to tens of thousands of dollars and can easily exceed a litigant’s ability to pay.
Although the BC Supreme Court has the ability to require a Plaintiff to pay security for costs ahead of trial, for the obvious reason of ensuring access to justice this discretion is rarely exercised.  This was demonstrated in reasons for judgement released this week by the BC Supreme Court, Vancouver Registry.
In this week’s case (Hughes v. Hughes) the Plaintiff sued her parents for various harm she claims she suffered due to their actions many years ago.  The Defendant brought a motion to dismiss the lawsuit arguing that it was an abuse of process.  The Court dismissed this motion finding that while the allegations may have been somewhat unique they “essentially amount to battery, breach of trust and fraud, all of which are well-recognized causes of action“.
The Defendant further argued that the case was bound to fail due to limitation issues and requested Security for Costs.  The Court agreed that while the case may be limitation barred that was an issue for trial.  In dismissing the application for costs security Mr. Justice Smith provided the following reasons:

[18] The defendants seek, in the alternative, an order that the plaintiff post security for costs. They say she has no history of steady employment and would not likely be able to pay costs if the action is dismissed. The plaintiff says in an affidavit that she is employed as a pre-school teacher, but gives no particulars of that employment.

[19] The law governing security for costs was summarized by Goepel J. in Bronson v. Hewitt, 2007 BCSC 1751. Although the court has inherent jurisdiction to order an individual resident in the jurisdiction to post security for costs, that jurisdiction should be exercised cautiously, sparingly and only under very special or egregious circumstances.

[41] …For good reason, individual and corporate plaintiffs have always been treated differently. Absent special circumstances, corporate shareholders are entitled to avail themselves of the protection of a limited liability company to avoid personal exposure for costs: P.G. Restaurant Ltd.  v. Northern Interior Regional Health Board et al., 2006 BCSC 1680. An order for security for costs prevents the principals of a corporate plaintiff from hiding behind the corporate veil and, as noted by McGarry V.C. in Pearson, protects “the community against litigious abuses by artificial persons manipulated by natural persons.”

[42]  With individuals, the fundamental concern has always been access to the courts. Access to justice is as important today as it was in 1885 when Lord Bowen declared in Cowell that “the general rule is that poverty is no bar to a litigant”. Individuals, no matter how poor, have always been granted access to our courts regardless of their ability to pay a successful defendant’s costs. Only in egregious circumstances have individuals been ordered to post security for costs.

[20] Examples of such special or egregious circumstances include situations where the plaintiff is or has been a party in multiple other actions (Louie v. Louie, [1998] B.C.J. No. 2097), or where the plaintiff has been unable to produce any evidence in support of his claim many years after commencing the action (Rotvold v. Rocky Mountain Diesel Ltd., [1997] B.C.J. No. 1758). No comparable special circumstances have been shown to exist here and the evidence as to the plaintiff’s alleged impecuniosity is entirely speculative.

[21] The application for security for costs must therefore be dismissed.

[22] The plaintiff seeks an order striking out the statement of defence because the defendants failed to attend an examination for discovery. At the time, the defendants were requesting production of certain documents. Those documents had not been received and, until shortly before the scheduled examination for discovery, counsel for the defendants understood that the former counsel for the plaintiff was still assembling them.