The defendant brought a motion under Rule 56.01 of the Rules of Civil Procedure seeking security for costs against a corporate plaintiff with insufficient assets in Ontario.
The plaintiff conceded it lacked assets but argued that both the corporation and its sole shareholder were impecunious and that ordering security would stifle a meritorious claim for breach of contract and lost profits.
The court reviewed the jurisprudence governing corporate impecuniosity and the evidentiary burden on shareholders to show they cannot raise funds to post security.
Despite limited financial disclosure, the court accepted sworn evidence that both the corporation and its shareholder lacked the ability to provide security and found that denying the plaintiff the ability to proceed would result in injustice.
The motion for security for costs was therefore dismissed, though the successful plaintiff was denied costs due to inadequate disclosure during the motion.
