If an out-of-province or foreign entity with no assets in Ontario sues your business, you can protect yourself by filing a motion for “Security for Costs.” This forces the plaintiff to pay a substantial sum of money into the court to ensure your legal fees are covered in case you win the lawsuit.
Defending a commercial lawsuit in Ontario is incredibly expensive. It becomes especially frustrating when your local business in Toronto, Ottawa, or Waterloo is sued by a plaintiff based in the United States, Europe, or another Canadian province. If this foreign company loses the case, trying to collect your awarded legal costs across international or provincial borders is nearly impossible and financially draining. 📋
Fortunately, as of May 2026, the Ontario Rules of Civil Procedure provide a powerful shield against frivolous lawsuits from non-residents. Rule 56 allows your corporation to demand that the plaintiff post a financial deposit before they are allowed to proceed with their litigation. This levels the playing field and ensures you aren’t left holding the bag for their baseless legal adventure. 🚨
Step-by-Step Process to Obtain Security for Costs
You cannot simply write a letter demanding money because you feel the lawsuit is unfair. Bringing a motion for Security for Costs is a highly strategic legal maneuver in the Superior Court of Justice. It is best handled by an experienced Ontario commercial litigation lawyer who understands exactly how to draft the necessary cost estimates. 📝
Step 1: Identify the Plaintiff’s Lack of Local Assets
Under Rule 56.01, the primary ground for this motion is proving that the plaintiff is “ordinarily resident outside Ontario.” Furthermore, your lawyer must demonstrate that the plaintiff does not hold sufficient assets (like real estate or bank accounts) within Ontario to satisfy a future costs award. Doing a corporate search on the suing entity is the first critical step. 👤
Step 2: Draft a Draft Bill of Costs
The court will not just guess a random number for the security deposit. Your law firm must prepare a detailed “Draft Bill of Costs.” This document outlines every single legal step your lawyers will take to defend the case to trial, calculating the estimated hourly fees and disbursements (like expert witnesses). This justifies the specific dollar amount you are asking the court to secure. 💰
Step 3: Send a Demand Letter First
Before rushing to court, it is standard practice to send the plaintiff’s lawyer a formal demand letter outlining your intention to seek security. Sometimes, a foreign plaintiff will agree to voluntarily pay the funds into trust, saving both sides the time and expense of a contested motion. If they refuse or ignore the request, you proceed to step four. 📬
Step 4: File the Motion and Attend the Hearing
Your lawyer will file the Notice of Motion and supporting Affidavits with the Superior Court. During the hearing, the judge will evaluate the plaintiff’s location, their assets, and whether their lawsuit seems to lack merit. If the judge agrees with you, they will order the plaintiff to pay the funds to the Accountant of the Superior Court of Justice. The lawsuit is completely paused (stayed) until the money is deposited. 🔒
How Much Does it Cost in Ontario?
Using a Security for Costs motion is an upfront investment designed to protect you from massive losses down the road. 💵
- Court Filing Fees: Filing a motion record in the Superior Court costs roughly $339 CAD.
- Security Deposit Amount: The amount ordered varies wildly based on case complexity. It can range from $15,000 CAD for a simple contract dispute to over $150,000+ CAD for complex, multi-year corporate litigation.
- Your Legal Fees: Having an Ontario law firm investigate the plaintiff, draft the Bill of Costs, and argue the motion generally costs between $3,500 and $8,000 CAD. (If you win the motion, the judge will usually order the plaintiff to reimburse you for a portion of this specific cost).
How Long Does the Process Take?
You should instruct your lawyer to demand security at the very early stages of the lawsuit—ideally right after delivering your Statement of Defence. If the plaintiff refuses your demand, securing a date for a motion hearing in Ontario can take 2 to 4 months. Once the judge makes the order, the plaintiff is typically given 30 to 60 days to deposit the funds into the court’s account. 🕑
Frequently Asked Questions (FAQ)
What happens if the plaintiff cannot afford to pay the security?
If the plaintiff fails to deposit the funds by the court’s deadline, your lawyer can file a subsequent motion to have their entire lawsuit dismissed permanently. The case cannot proceed while the security remains unpaid.
Can an Ontario resident be ordered to pay security?
Yes, but it is much harder. Under Rule 56, an Ontario resident might be forced to post security if they are a “nominal plaintiff” (suing on behalf of someone else) and have no assets, or if they have a history of starting frivolous and vexatious lawsuits.
Who holds the money during the lawsuit?
The money is not paid directly to you. It is paid into court and held by the Accountant of the Superior Court of Justice. It sits in a secure trust account until the trial concludes or the parties reach a settlement.
Do I get all the security money if I win?
If you win at trial and the judge orders the plaintiff to pay your legal costs, the court will release the trust funds to you to satisfy that award. If the security deposit is larger than your awarded costs, the remainder is returned to the plaintiff.
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