Thursday, August 2, 2012

Using security for costs to get early disclosure of the plaintiff's case and finances - a tactical motion

Rule 56.01 allows for an order for security for costs where:

(e) there is good reason to believe that the action or application is frivolous and vexatious and that the plaintiff or applicant has insufficient assets in Ontario to pay the costs of the defendant or respondent.

A defendant may bring a motion for security for costs after delivering a defence (Rule 56.03).

So, what if a defendant moves after delivering a defence but in circumstances where the claim is meritorious?

Presumably, in fact inevitably, the plaintiff will respond by delivering an affidavit outlining the case and how the plaintiff is not without funds.  If the plaintiff does not file an affidavit the motion may succeed.

Once the affidavit is filed the defendant, at the very start of the case, can conduct a cross-examination as to the merits of the case and the financial strength of the plaintiff.  The only downside is the cost award which will inevitably follow when the motion fails (and an offer to settle following the examination might cap that).

An argument about abuse of process might succeed in stopping cross-examination but if the defendant sets up the motion properly the prima facie right to cross-examine will probably govern and allow the cross-examination.  Just about the only certain way out for the plaintiff is to concede the issue and post security. 

See Heck v. Royal, 11 C.P.C. (2d) 109 for a discussion of the issues.

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