What is the current state of the law regarding disclosure on a shareholder’s affidavit on a security for costs motion?

Ontario, Canada


The following excerpt is from Premium Host Inc. v. Paramount Franchise Group Inc., 2021 ONSC 1430 (CanLII):

For example, more onerous obligations have been imposed on principals or sole shareholders who stand to benefit most from successful litigation and therefore should bear the most risk. There also appears to be more scrutiny placed on shareholders who are funding the litigation given that it is fair to consider the source of litigation funding as a potential source of security. While the focus should generally be on a shareholder’s current ability to post security, there may be cases where an individual has received substantial funds some time before the security for costs motion where fairness dictates that they should disclose the source and/or use of the funds (Lipson v. Lipson, 2020 ONSC 1324 at paras. 34-36). In other cases, historical financial information going back several months will be irrelevant. This is dependent on the amount, how close to the security for costs motion it was received and if there are any other transactions or disclosure issues to consider. At the same time, a cross-examination on a shareholder’s affidavit is not an examination in aid of execution or a forensic accounting exercise.

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