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Security For Costs

Costs Of The Defendant

Security For Costs

 

In British Columbia and Ontario, there is something used in the courts called “security for costs.” Others call it a motion for security. Please note that this is different than cost orders.

Security for costs is often used by someone being sued. It means that they file a motion or application with the courts. The defendant, or defendant by counterclaim, asks for a deposit from the plaintiff. The deposit is held by the courts in case the plaintiff loses their case. That money could then be used to compensate the defendant for their legal costs spent to defend the litigation.

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A business lawyer can help with:

  • providing legal advice about the rules of civil procedure
  • working to make the other side pay the costs of the litigation
  • helping an organization or person pursue its claim
  • work towards getting a costs award
  • filing a motion for security
  • dealing with a resident outside the jurisdiction
  • getting an order requiring something to happen in your favor

    Costs Of The Defendant

Defendant Granted Security

The reason why the courts might allow this is to encourage people not to file lawsuits that have no legal basis. It can also encourage some to not file a lawsuit, and try settlement instead. If the plaintiff is ordered to pay the “cost deposit” and they do not, the claim might be dismissed.

It is used by the defendant to reduce their risk in the lawsuit. If the defendant was sued for no good reason and had to pay $10,000 defending the lawsuit, they should be able to get that money back.

The main factors in if a court should allow the security for costs application are:

  • How strong the plaintiffs claim is
  • How much the legal fees of the defendant might be
  • Does the plaintiff have the capital or assets to pay for the defendant’s legal fees (if the defendant wins)

Circumstances Of The Case

The security of costs offers peace of mind for the defendant. It requires the plaintiff to pay into court an amount of money. It is done in a way that the judge orders. Security can often be a bank guarantee or a deposit. To get the order, the plaintiff often must be a corporation. This can be used if a corporation is suing an individual. It will have to be shown the corporation is having financially hard times. Also, it could be shown that the corporation doesn’t have a fixed address or assets.

This kind of order can also be used if the corporation is not set up in Canada. If a Chinese company was suing someone in Canada, and the Canadian won, it would be hard for them to get their costs paid. If the company is located in a country where the Court Order Enforcement Act applies, then there is likely no problem.

The courts will also look into if the defendant was the reason why the plaintiff was having hard times. If it was the defendants fault, it doesn’t make sense for the plaintiff to have to post security.

Security For Costs Against Defendant

If you are the plaintiff you will want to show to the courts that you would have no problem paying a cost order. If you can show that, the motion for security will likely be denied.

An order for security for costs is discretionary and, as will be discussed, the law has developed different applications when dealing with corporate plaintiffs as opposed to individual plaintiffs.

The defendant might be able to show that the plaintiff cannot pay for cost orders by showing:

  • That the business is not in operation (or has little business)
  • The corporation doesn’t have assets
  • There is a history of bankruptcy

In conclusion, you can see our videos on Youtube to learn more about Canadian law.