Posts Tagged ‘civil litigation’

Alisha Parmar
Friday, February 5th, 2016    Posted by Alisha Parmar (posts) and Dan Parlow (posts)
Alisha Parmar
Alisha joined Kornfeld LLP as an associate in 2015 after completing her articles with the firm.
Dan Parlow
Dan is a partner at the firm of Kornfeld LLP. He helps resolve commercial disputes for clients including investors, brokerage houses and financial institutions in the realization of claims by creditors and over disputed investments; entrepreneurs in claims over business assets, shareholder and partnership interests and commercial property; estates, trusts and beneficiaries over disputed wills, trusts and related claims; clients of realtors, lawyers, accountants, brokers and investment advisors; and businesses in the telecom, oil & gas and high-tech industries.

Defending a legal action can be an expensive process, even where a defendant is ultimately successful in having the claims against it dismissed. Normally, legal costs are “in the event”, so that a successful defendant will have some of its legal costs awarded to it. However, there may be serious difficulty recovering legal costs depending on the circumstances of the plaintiff – the plaintiff may have no assets, for example.

As a result, in certain cases, it will be appropriate to seek an order for “security for costs”, so that the plaintiff is required to pay a sum of money into court or into a trust account prior to trial of the action and the defendant can have quick recourse for its legal costs against those funds if it succeeds. An order for security can be an important defendant’s tool since a plaintiff who is ordered to, but does not post, security for costs will be precluded from pursuing its claims.

Interestingly, courts apply a different test in deciding whether to order security for costs depending on whether the plaintiff is a corporation or an individual. Where the plaintiff is an individual, the underlying concern is that poverty should not be a bar to the litigation proceeding.[1] Thus, the “fact that the plaintiff resides outside the jurisdiction, has no assets within the jurisdiction, or is impecunious, is not sufficient in itself” to order security for costs.[2] A defendant must show that special circumstances exist for the order, which “could arise if an impecunious plaintiff also has a weak claim, or has failed to pay costs before, or refused to follow a court order for payment of maintenance”.[3]

In contrast, once a defendant can demonstrate that a corporate plaintiff will not likely be able to pay costs if the defendant is successful, security for costs is generally ordered unless the court is satisfied there is no arguable defence to the plaintiff’s claim.[4] The likelihood that a corporate plaintiff will be barred from proceeding with a claim is an insufficient reason, without more, to refuse to order security for costs.[5]

However, a corporate plaintiff may be wholly or substantially controlled by an individual who is also a plaintiff in the proceeding – in this scenario, an order requiring the corporate plaintiff to post security will likely affect the individual plaintiff as well. The question arises whether in such a situation the court should be less inclined to compel a corporate plaintiff to post security?

The British Columbia Court of Appeal recently considered this question and answered in the negative – the test remains the same against a corporate plaintiff even if there is a single shareholder who is also a plaintiff in the action.

In Ocean Pastures Corporation v. Old Masset Economic Development Corporation, 2016 BCCA 12 (“Ocean Pastures”), the two plaintiffs (a corporation and its sole shareholder) sued several defendants, including two corporations and three individuals. Early on, these defendants argued that the plaintiffs would not be able to pay costs if the action was dismissed because neither plaintiff appeared to have assets. The judge first hearing the application ordered security for costs for the actions against the three individual defendants, as the claims against them were weak, but refused to order security for costs for the claims against the corporate defendants.

Despite finding that security for costs would have been warranted if the corporate plaintiff’s claim had been considered in isolation from its shareholder’s claim, the chambers judge denied security, reasoning that (a) any security posted by the corporate plaintiff would have to be supplied by the individual plaintiff; and (b) there were no “special circumstances” which would have justified granting security against the individual plaintiff.

The corporate defendants appealed the decision, arguing that the chambers judge erred in law by applying the “special circumstances” test to the corporate plaintiff. In agreeing with the defendants, the Court of Appeal relied on an older English decision, for the principle that the existence of an individual plaintiff should not shield a corporate plaintiff from an order for security for costs, and that a stricter test for security for costs against corporations is appropriate to prevent individuals from using companies (with the benefit of limited liability) to abuse the litigation process.[6]

Since an order requiring a plaintiff to post security for costs can be a decisive factor early in the litigation process, this decision of our Court of Appeal has both legal and practical implications. Notably, in Ocean Pastures, as the plaintiffs had failed to post security for costs for the actions against the individual defendants, those claims were dismissed.[7] The Court of Appeal decision threatened to have the same result on the balance of the plaintiffs’ claims.

[1]Ocean Pastures v. Old Masset Economic Development Corporation, 2016 BCCA 12 at para. 19

[2]Ibid at para. 20, citing Han v. Cho, 2008 BCSC 1229

[3]Ibid

[4]Ibid at para. 18, citing Fat Mel’s Restaurant Ltd. v. Canadian Northern Shield Insurance Co., (1993), 76 BCLR (2d) 231 (CA)

[5]Ibid at para. 17, citing Kropp v. Swaneset Bay Golf Course Ltd. (1997), 29 BCLR (3d) 252 (C.A.)

[6]Ibid at paras. 24 to 25, citing Pearson v. Naydler, [1977] 3 ER 531 (Ch. D)

[7]Ibid at para. 10

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Posted by Alisha Parmar (posts) and Dan Parlow (posts) | Filed under Litigation and ADR | ....
Shafik Bhalloo
Wednesday, March 7th, 2012    Posted by Shafik Bhalloo (posts)
Shafik Bhalloo
Shafik Bhalloo has been a partner of Kornfeld LLP since 2000. His practice is focused on labour and employment law, and on commercial and civil litigation. He is also an Adjudicator on the Employment Standards Tribunal and an Adjunct Professor in the Faculty of Business Administration at Simon Fraser University.

Courts and law have often been criticized for being slow moving and not keeping up with new technologies, however, Canadian courts, in the recent past, have shown a resolve to keep up with, or at least not fall too far behind, technology particularly in the area of serving legal process. While the rules of court in all Canadian provinces, including British Columbia, normally require personal service of legal process on the other party, in some cases that cannot be achieved for a variety of reasons including inability to find the party or repeated and deliberate attempts by a party to evade service. In such cases, there is available, in the rules of court of all Canadian provinces, a process for an alternative method to serve a party referred to as  “substitutional service”.  A party must apply to court for an order to serve another substitutionally. In such an application, the party seeking a substitutional service order must file an affidavit showing what attempts were made to serve the other party. The affidavit must contain evidence of the steps a party took to serve another; if a process server was hired; what is the last known address of the party sought to be served; any information of the whereabouts of the party sought to be served; any attempts by the party sought to be served to avoid service and the like.    The court will need to be convinced that the applicant made a diligent effort to serve the party before it will grant an order for alternative service.

Some of the traditional methods of serving legal process substitutionally ordered by courts have included publication in the local newspaper; leaving documents at the party’s most usual residence with an adult person; taping the documents on the door of the last known residence of the party; faxing the documents at the last known fax number of the party; leaving it with a family member or a friend of the party who could bring the documents to the attention of the party; and the like.

However, with the commercialization of internet in the mid-1990s and the creation of social networking sites such as facebook, twitter, Linkedin and MySpace, it was a matter of time before courts adapted to technology and took notice of the internet medium and social networking sites as an alternate source for one to serve a party, otherwise difficult to find, with legal process.  In this regard, Australia can be credited with being one of the pioneers in embracing service by facebook with the decision of the Australian Capital Territory Supreme Court in MKM Capital Property Limited v Corbo and Poyser (No. SC 608 of 2008). In this case, a mortgage lender, MKM, obtained a default judgment against two defendants and after failing to serve the defendants personally with the default judgment sought an order to serve them substitutionally by facebook. Counsel for MKM was able to show personally identifiable information on the defendants’ facebook profiles including their birthdates, friends and email addresses and that the defendants were friends on facebook. The Court, satisfied that the facebook profiles or accounts belonged to the defendants, ordered substituted service of the default judgment by a private email message through computer to the defendants’ respective facebook pages.

The Canadian, New Zealand[1] and English[2] courts shortly followed suit. In the case of Canada, in Knott v. Sutherland[3], the Alberta Court of Queen’s Bench ordered subtitutional service of an amended statement of claim by sending it to the profile of the defendant on facebook together with a publication of a notice of the action in a local daily newspaper and a copy of the action sent to the human resources department of the defendant’s last known employer. Unfortunately, in the brief reported decision, the Court did not give reasons explaining the order.

In British Columbia, in 101 West Hastings Residential Limited Partnership v. Ursula Maria Schweighofer[4], Counsel for the Plaintiff, Mr. Gareth Carline of our firm, Kornfeld Mackoff Silber LLP, represented the Plaintiff who was suing for repayment of monies it had been required to pay to Revenue Canada on the Defendant’s behalf.  The Defendant’s former counsel advised that the Defendant was a non-resident and did not give her contact information. A diligent search for the Defendant’s residential address and telephone listing within the province returned no leads. However, the Plaintiff’s counsel who had the email address of the defendant and had been corresponding with the husband via email sought to find out from the husband whether the Defendant would accept service via email at his email address and the husband responded in the negative. At such point, counsel conducted an internet search of the defendant’s name and discovered profiles of the defendant on two social network sites, namely, on Linkedin and on facebook. Both profiles had the defendant’s name and the same geographical location, Nigeria.  On an application to serve the defendant substitutionally, the Court allowed the Plaintiff to serve the defendant substitutionally via her husband’s email and the former counsel’s office, as well as by sending a message to her of the claim via her Linkedin or facebook profile (although service via the latter mode was not specifically sought).

While courts are embracing technology in ordering substitutional service, there are some concerns with substitutional service using social networking sites. As with traditional alternatives to personal service, there is no guarantee that the party sought to be served will be served. In the case of social networking sites, a person registering for a social networking profile may not be who he or she claims to be. It is possible that the registrant on the site may be impersonating another person or may have a name identical to the party you are intending to serve. Another concern is that the party holding the social media accounts maybe an infrequent user of the accounts and may not receive notice of legal process in a timely fashion.  Whether in the ethernet world or in the bricks and mortar world, courts must consider  and weigh all available evidence in determining the probability or likelihood of achieving service of legal process on a party using whatever  alternative method of service an applicant is proposing the court to order.


[1] Axe Market Gardens v Craig Axe (CIV: 2008-485-267)

[2] Blaney v. Persons Unknown (unreported)

[3] [2009] A.J. No. 1539

[4] Vancouver Registry No. M114652

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Posted by Shafik Bhalloo (posts) | Filed under Litigation and ADR | ....