Court Orders $1.2 Million Posted as Security for Costs

On September 6, 2000, a decision of Nordheimer, J. of the Ontario Superior Court of Justice was released in which a motion by the defendants in Aviaco International Leasing et al. v. Boeing Canada Inc. et al., for the posting of security for costs by the plaintiffs was granted, resulting in an order for security for costs in the amount of $1,198,614.00. The main action, which is ongoing, involves a claim by the plaintiffs arising out of an alleged scheme of bribery involving the defendants, regarding the purchase of five Dash-8 commuter aircraft. The plaintiffs allege that the scheme led to the termination of contracts relating to the aircraft, to which they were parties, and in turn, to the destruction of their businesses. They claim damages in excess of $400 million and punitive damages of $50 million.

The impact of the decision on the motion lies not only in the staggering amount of security for costs ordered, but in its significance for corporate law generally and in particular, for corporate shareholders. Nordheimer, J. establishes in the decision that the merits of a plaintiff’s case will only be considered as a relevant factor in determining whether security for costs should be posted where a corporate plaintiff has insufficient assets to post the security. More notably, the ability of the corporation’s shareholders to post funds will also be subject to scrutiny. In this case, the order for security for costs was granted because the plaintiffs’ predominant shareholder had the necessary resources to abide by the order.

The decision also addresses the question of whether the amount of security for costs posted should be reduced where the defendants’ conduct has caused the plaintiffs to be impecunious. On this point, Nordheimer, J. determined that this factor will only be relevant where there is evidence that the plaintiffs can not raise all of the funds necessary to fulfill the order for security for costs.

Counsel for the plaintiffs in the action are Warren H.O. Mueller, Q.C. and Glenn Grenier of Goodman and Carr LLP. Defendants Boeing Canada Inc., Boeing of Canada Ltd. and The Boeing Company are represented by Glenn Hainey, Lynn Mahoney and John Ormston of Smith Lyons. Representing the defendant Normar Acuna are John Rook and Andrea Laing of Osler Hoskin & Harcourt LLP. Acting for the defendants Sovereign Aircraft Ltd. and Duncan Ernest Wilfred Rapier is Nancy J. Spies of Stockwood, Spies. The Defendant Darrell E. Rolle is represented by Shan K. Jain, Q.C., while acting for the defendants Bahamasair Holdings Ltd. and David Livingston Johnson are a team from Blaney McMurtry LLP, composed of William R. McMurtry, Q.C., Roderick Winsor and Giovanna Asaro.