Federal appeal | Civil Practice and Procedure
Costs
Security For Costs
Company demonstrated it was impecunious
In action for patent infringement defendant brought motion for order requiring plaintiff company to post security for costs. Judge found that company and individual plaintiff, majority shareholder of company, did not have assets that could be used to post security for costs, but that minority shareholder was employed, had some assets and was able to post security for costs. Company was ordered to post security for costs of $195,785.70. Plaintiffs appealed. Appeal allowed. Company did not have sufficient assets in Canada available to pay defendant’s costs if ordered to do so. Company, on its own, was impecunious, and majority shareholder was not able to provide financial assistance to company. In deciding whether company was impecunious it was appropriate to distinguish between shareholders who were manipulating company and those who were not. If company was controlled by one person or group of persons, then it was appropriate to consider financial resources of that person or group in determining whether company was impecunious. If person was minority shareholder and was not part of group controlling company, then circumstances related to that shareholder should be examined to consider whether it was appropriate to take into account his or her financial resources in determining whether company was impecunious. Important factor was percentage of shares held by person, and smaller percentage of shares held, less likely it was that financial resources should be considered in determining whether company was impecunious. Minority shareholder here owned 10 percent of shares, she never had been involved in business and was unwilling to post security for costs. Judge erred in law in considering whether minority shareholder could be sole source of amount that company would be required to post as security for costs. Company demonstrated it was impecunious for purpose of Rule 417 of Federal Court Rules.
Swist v. Meg Energy Corp. (2016), 2016 CarswellNat 6184, 2016 FCA 283, Wyman W. Webb J.A., D.G. Near J.A., and Donald J. Rennie J.A. (F.C.A.).
