Executive Summary: Key Legal and Evidentiary Issues

• Defendants sought $70,000 in security for costs against corporate plaintiffs alleged to be unable to satisfy a future costs award under s. 236 of the Business Corporation Act

• Plaintiffs' own pleadings admitted that transferred assets destroyed Timeless' value and rendered it unable to continue operating as a going concern

• Unaudited financial statements contained significant discrepancies, including inconsistent fiscal year-end dates, unsigned documents, and unexplained variances in cash-on-hand figures

• Intercorporate loans of over $3.5 million owed to a company controlled by the majority shareholder were not addressed in the majority shareholder's affidavit, raising a question as to Timeless' insolvency

• Legal fees of over $1.5 million paid between February 2025 and January 2026 indicated a high cash burn rate that could exhaust available funds before trial

• Court declined the alternative request for a personal undertaking from the majority shareholder due to unresolved procedural mechanics and absence of his personal representation

The parties and the underlying dispute

Timeless Pictures Inc., along with its wholly owned subsidiaries Bam Writers Ltd. and Bam Writers 2 Ltd., are corporations involved in Canadian movie production operations. Timeless has three shareholders: Mr. Silverman, the majority shareholder, and Mr. Coscas and Mr. Goldstein, referred to as the Minority Shareholders. The defendants, Doran Chandler and Chandler Fogden Lyman Law Corporation, were previously retained as solicitors for the plaintiffs, providing legal services associated with the corporate structure and incorporating approximately 44 single-purpose corporate vehicles, each wholly owned by Timeless, for individual film projects. The plaintiffs allege that around mid-2024, the relationship between Mr. Silverman and the Minority Shareholders deteriorated, and during that time the defendants accepted instructions from the Minority Shareholders to incorporate new companies that directly competed with Timeless and facilitated the stripping of assets from the plaintiffs into those new companies, all without disclosing certain alleged conflicts of interest. The discovery of these actions resulted in a termination of the solicitor-client relationship and ultimately led to two separate proceedings: a shareholder arbitration scheduled for June 2026 and this solicitor's negligence action, commenced by notice of civil claim filed May 20, 2025, with a 16-day trial set for October 13, 2026.

The application for security for costs

The defendants brought an application seeking an order that the plaintiffs post $70,000 as security for costs within 60 days, or alternatively, that the majority shareholder of Timeless Pictures Inc. give an undertaking to pay any costs award. The application was grounded in s. 236 of the Business Corporation Act, S.B.C. 2002, c. 57, which permits the court to require a corporate plaintiff to post security for costs where it appears the corporation will be unable to pay the defendant's costs if the defence is successful. The court applied the established two-stage legal test: first, whether the defendants established a prima facie case that the plaintiffs would be unable to pay the defendants' costs if the plaintiffs' claim failed, and second, whether the onus shifted to the plaintiffs to show sufficient and exigible assets, that the order would stifle the action, or that there was no arguable defence.

The evidence on financial capacity

The defendants relied on negative results from Land Title and Personal Property Registry searches showing no obvious exigible assets in the names of the plaintiffs, as well as the plaintiffs' own pleadings, which stated that the loss of transferred assets had destroyed Timeless' value and rendered it unable to continue operating as a going concern. In response, Mr. Silverman swore an affidavit in which he deposed that as of December 2, 2025, Timeless "and its subsidiaries" held approximately $1.39 million CDN and $162,000 USD in their commercial bank accounts. He also noted anticipated revenues of approximately $750,000 expected through SPV amalgamations over the next two years, a further $750,000 in receivables from Canadian broadcaster licensing fees over the same period, and an additional $350,000 from French Canadian rights. However, Associate Judge Robertson found the unaudited financial statements exhibited to Mr. Silverman's affidavit to be "perplexing in many respects," noting that the fiscal year-end for each statement was different — December 31, 2023, May 21, 2024, and January 31, 2025 — and that except for one, they were unsigned. A further inconsistency appeared between pages of the financial statement: one balance sheet page was dated December 31, 2025, despite every other page referencing a year-end of January 31, 2025, and despite the affidavit having been sworn on December 4, 2025. That same page showed cash on hand of only $22,953, with no explanation for the discrepancy with the bank account figures. Mr. Silverman also deposed that Timeless and its subsidiaries did not have any significant upcoming liabilities or debts, referencing only a credit card balance of approximately $34,000, loans of approximately $255,000, and taxes owing of approximately $120,000. However, Timeless' liabilities as disclosed in the financial statements were significantly higher — close to $4.5 million — with intercorporate loans of over $3.5 million to a company called 1258462 BC Ltd., of which Mr. Silverman was the sole director and president. The debt to that company made up approximately 80% of Timeless' total debt, and the absence of any explanation or particulars as to that obligation was noted as significant by the court. Additionally, Mr. Goldstein, one of the Minority Shareholders, exhibited a statement from Timeless' accountant showing the payment of legal fees of over $1.5 million from February 2025 to January 2026, with approximately $800,000 spent in the last two months alone, from December 1, 2025 to January 22, 2026.

The court's analysis and balancing of interests

The court found that a prima facie case for the inability to meet a costs obligation had been established by the defendants, largely on the pleadings themselves and statements that there was no ongoing business, such that the onus shifted to the plaintiffs. Associate Judge Robertson determined that Timeless had not met that onus, finding the financial picture unclear given the discrepancies in the financial statements. The court noted the cash burn rate — including management fees of $584,079 during one fiscal period and significant ongoing legal fees — could exhaust the cash on hand, and that there was uncertainty as to whether all necessary steps would be taken to realize receivables from the SPVs at some future date. The defendants also raised the possibility that assets could be diverted or dissipated, including through a wind-up or repayment of the approximately $3.5 million intercorporate debt, though the court acknowledged that this argument was speculative. The court noted that given the stated liabilities in the most recent financial statement, there was a question as to Timeless' insolvency, particularly given the debt to 1258462 BC Ltd., which, if valid, would entitle that company to the majority of any recovery in a pro rata creditor realization process. Regarding the alternative request for Mr. Silverman's personal undertaking, the court was not satisfied it was appropriate to make such an order without further clarification as to how it ought to be implemented, noting also that Mr. Silverman was not personally represented at the application. The court also found no sufficient delay in the timing of the application to affect the analysis, noting it was brought within five months of the original pleadings being closed and weeks after the amended response was filed.

The ruling and the overall outcome

Associate Judge Robertson ordered the plaintiffs to post security for costs in the amount of $60,000, reducing the defendants' requested amount by a total of $10,000 after finding the proposed bill of costs — with most discretionary tariff ranges at the high end and disbursements on the high end — to be higher than what was at that preliminary stage anticipated to be reasonable and necessary. The court specifically reduced tariff items by 51 units (approximately $6,000 with taxes) and disbursements by a further $5,000. The security was ordered to be posted by May 3, 2026, held in an interest-bearing account in plaintiffs' counsel's trust account. The court declined to stagger the payment, finding the plaintiffs' suggestion of hardship inconsistent with their own argument about the availability of cash. The plaintiffs' action was stayed pending either the posting of cash security or agreement on alternative security arrangements, and if security was not posted by the deadline, the defendants were granted liberty to seek dismissal of the action. The order also preserved the defendants' right to seek additional security in the future. Costs of the application were ordered in the cause, with the defendants being the successful party on the application and the plaintiffs required to post the $60,000 in security for costs in favor of the defendants.