December 4, 2017

You Cannot Pierce The Corporate Veil Prematurely In Responding To A Motion Or Security For Costs

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The Plaintiff brought a motion for summary judgment to enforce a foreign default judgment against the judgment creditor, the officers, directors and alleged affiliated entities of the judgment debtor. The Defendants brought a cross-motion for security for costs arising out of enforcement proceedings in relation to that order.

The motion for summary judgment was not contested. The motion for security for costs was contested by the Plaintiff on the basis that it would be unjust to make such an order.

In considering whether an order for security for costs is just, the existence of a foreign judgment against one of the defendants is an important factor to be considered. In this case, the defendants argued, the foreign judgment was only against one of the Defendants. While there was some evidence of interrelationships between the defendants, they submitted that in asking the court to deny security for costs the Plaintiff was, in fact, asking the court to pierce the corporate veil before liability was established. The mere existence of a corporate relationship, the defendants argued, did not ground liability.

The Defendants further argued that even if the foreign judgment against one Defendant affected the ability of that Defendant to successfully defend the Ontario action, the remaining Defendants intended to vigorously defend the claims made against them. They argued that if they were successful, they would presumably be entitled to costs and, without an order for security for costs, the Plaintiff would be put in a more advantageous position than the defendants with respect to the costs exposure arising out of the Ontario action.

The Court agreed with the Defendants that by accepting the Plaintiff’s submissions the Court would be required to pierce the corporate veil in order to disallow the motion for security for costs. Given that doing so would be wrong in law, the Court granted the Defendants’ motion for security for costs.

Read the CAMS ATLAS, LLC v. STANG, 2017 ONSC 6170 case here.

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