Ms. Joan Gadsby, sole shareholder of Seaview Villa Estates Ltd., provided a covenant in respect of a mortgage. Joan Gadsby defaulted under the mortgage and foreclosure proceedings were commenced against Ms. Joan Gadsby and her company. She never honoured the required payments and an order nisi of approximately $1,000,000 was granted and the property sold. (Gadsby v. British Columbia (Attorney General),2018 BCSC 81)
The fact that a plaintiff who is a natural person is not sufficiently wealthy to be able to pay a costs award if he or she loses the case does not justify the granting of an order for security for costs because such an order would likely preclude access to the courts. However, it was clear on the evidence the applicants would be unable to recover their costs in the event of a successful defence against Ms. Gadsby.
Ms. Gadsby did not own any real property and she had unpaid judgments against her and her company in excess of $700,000. Ms. Gadsby was ordered to post security for costs in the sum of $15,000 and her claim was stayed pending the posting of security.
As the judge stated:
[32] The seminal authority outlining the principles that govern an order in this context is: Kropp v. Swaneset Bay Golf Course Ltd. (1997), 29 B.C.L.R. (3d) 252 (C.A.) at para. 17:
1. The court has a complete discretion whether to order security, and will act in light of all the relevant circumstances;
2. The possibility or probability that the plaintiff company will be deterred from pursuing its claim is not without more sufficient reason for not ordering security;
3. The court must attempt to balance injustices arising from use of security as an instrument of oppression to stifle a legitimate claim on the one hand, and use of impecuniosity as a means of putting unfair pressure on a defendant on the other;
4. The court may have regard to the merits of the action, but should avoid going into detail on the merits unless success or failure appears obvious;
5. The court can order any amount of security up to the full amount claimed, as long as the amount is more than nominal;
6. Before the court refuses to order security on the ground that it would unfairly stifle a valid claim, the court must be satisfied that, in all the circumstances, it is probable that the claim would be stifled; and
7. The lateness of the application for security is a circumstance which can properly be taken into account.