"Hamouth says that he is personally funding Corsaire's litigation by way of unsecured shareholders' loans."
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Corsaire Snowboard Inc. et al. v. First Capital Invest Corporation et al. [Supreme Court of British Columbia 1999; Docket No. C981182]
Loo J.
"The law relating to the posting of security for costs in the case of a corporate plaintiff is summarized in Kropp v. Swaneset Bay Golf Course Ltd. (1997), 29 B.C.L.R. (3d) 252 (B.C.C.A.) at p. 260-261, 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.
The plaintiffs concede that the defendants have arguable defences to their claims, and it is agreed that there has been no delay by the defendants in bringing this application.
A defendant must establish a prima facie case that if the defence is successful, the corporate plaintiff will be unable to pay costs. The plaintiff must then show that it has exigible assets of sufficient value to satisfy costs, or that there is no arguable defence. (Kropp at p. 262; Fat Melþs Restaurant Ltd. v. Canadian Northern Shield Insurance Co. (1993), 76 B.C.L.R. (2d) 231 (B.C.C.A.) at 235).
The defendants say that Corsaire will be unable to pay the costs of this action if they are successful, and has no exigible assets which could satisfy an order for costs.
Corsaire is a company incorporated in the State of Delaware, United States of America. The State of Delaware is not a reciprocating state under the Court Order Enforcement Act, R.S.B.C. 1996, c. 78. Corsaire is not and has never been registered extra-provincially in British Columbia, although in its last report filed with the Securities and Exchange Commission for the quarter ending September 30, 1996 it states that it maintains an office and a bank account in Vancouver. The amended statement of claim shows that both the principal place of business of Corsaire, and the residence of Hamouth is a 530 Thetford Place, West Vancouver. According to the latest financial report filed with the Securities and Exchange Commission, Corsaire's principal business purpose is identifying and evaluating prospective merger and acquisition opportunities. The report signed by the plaintiff Hamouth on February 27, 1997 states that Corsaire is an inactive company and has limited operations. It shows a net loss for the year ended 1995 of over $2.2 million (U.S.), and a net loss of close to $200,000 for the nine months ended September 30, 1996. The disclosed assets are $178 in the bank and a refundable deposit receivable of $5,000."
"Hamouth says that he is personally funding Corsaire's litigation by way of unsecured shareholders' loans. He also says that he will be able to pay the defendants' costs if they are successful because he has personally earned in excess of $360,000 annually in the past three years, and he expects the same level of income in the coming years."
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