COURT
    OF APPEAL FOR BRITISH COLUMBIA

Citation:

Williams
          v. College Pension Board; Williams v. Bradshaw,

2007
          BCCA 19

Date: 20070111

Dockets: CA033080 & CA033100

Docket: CA033080

Between:

Anthony Williams, Ashley Dermer, Michael Griffin and
    Richard Scott

Plaintiffs

(Respondents)

And

College
    Pension Board of Trustees, John Cook, Dan Bradford,

Paul
    Martin, Jack Bradshaw, Marilyn Duggan, Andy Jani, Bruce Kennedy,

Tom
    Kozar, Cliff Neufeld, Valerie Mitchell, Bonnie Pearson,

Roseanne Moran, Dominique Roelants and John Wilson

Defendants

(Appellants)

And

College
    Institute Educators Association of British Columbia,

Post
    Secondary Employers Association, and

Her Majesty
    the Queen in Right of British Columbia

Intervenors

-  and  -

Docket: CA033100

Between:

Anthony Williams, Ashley Dermer, Michael Griffin and
    Richard Scott

Plaintiffs

(Respondents)

And

College
    Pension Board of Trustees, John Cook, Dan Bradford,

Paul Martin,
    Marilyn Duggan, Andy Jani, Bruce Kennedy,

Tom Kozar,
    Cliff Neufeld, Valerie Mitchell, Bonnie Pearson,

Roseanne Moran, Dominique Roelants and John Wilson

Defendants

(Appellants)

And

Jack Bradshaw

Defendant

(Appellant)

And

College
    Institute Educators Association of British Columbia,

Post Secondary
    Employers Association, and

Her Majesty the Queen in
    Right of British Columbia

Intervenors

Before:

The
          Honourable Madam Justice Prowse

The
          Honourable Mr. Justice Donald

The
          Honourable Mr. Justice Hall

C.
          Ferris, L. Chamzuk

Counsel for the Appellant Board of Trustees

J.
          Elwick, G. Pun

D.
          Klein, M. Zigler

Counsel for the Appellant Bradshaw

Counsel for the Respondents

Place
          and Date of Hearing:

Vancouver
,
British Columbia

4 December 2006

Place
          and Date of Judgment:

Vancouver
,
British Columbia

11 January 2007

Written
          Reasons by
:

The
          Honourable Mr. Justice Hall

Concurred
          in by:

The
          Honourable Madam Justice Prowse

The
          Honourable Mr. Justice Donald

Reasons for Judgment of the Honourable Mr. Justice Hall:

[1]

The appellants appeal from an order of Mr. Justice Sigurdson certifying
    the respondents action as a class proceeding.  The reasons for judgment in
    that decision can be found at 254 D.L.R. (4th) 536, 2005 BCSC 788.

[2]

The certification was ordered pursuant to the
Class Proceedings
    Act
, R.S.B.C. 1996, c. 50, s. 4 of which provides, in part, as follows:

4
(1)
    The court must certify a proceeding as a class proceeding on an application
    under section 2 or 3 if all of the following requirements are met:

(a)  the pleadings disclose a cause of action;

[3]

The appellants submit on this appeal that the respondents have failed
    to make out a cause of action.  If this submission is accepted, then the respondents
    would not have satisfied a key requirement of the
Class Proceedings
    Act
and the certification order should be set aside.

[4]

The respondents maintain that they have a valid cause of action for
    damages, including punitive damages, against the appellants arising out of
    an allegation of breach of fiduciary duty.  Specifically, they allege that
    the appellants administration of a pension plan, under which the respondents
    are beneficiaries, breached the duty of impartiality and even-handedness of
    the defendants to administer the fund in the best interests of all Plan members
    and for the sole benefit of Plan members.

Background and Legislative Provisions

[5]

The respondent plaintiffs are retired members of the College Pension
    Plan (the Plan), which is constituted under the
Public Sector Pension
    Plans Act
, S.B.C. 1999, c. 44 (the
PSPPA
).  The Plan
    was designed to provide benefits to instructors, librarians and senior administrative
    staff of colleges designated under the
College and Institute Act
,
    R.S.B.C. 1996, c. 52.  Covered by the Plan are three categories of beneficiaries:
    active members, deferred vested members and retired members.

[6]

Schedule A of the
PSPPA
establishes the appellant Board
    of Trustees (the Board) as being responsible for the administration of the
    Plan and for the management of the Pension Fund.  The Pension Fund is a trust
    fund continued under the
PSPPA
to fund the benefits provided
    for in the Plan.

[7]

In April 2000, the Board promulgated the
College Pension Plan
    Regulation
, B.C. Reg. 95/2000, which set out rules governing the Plan.
    Section 13 of Schedule A of the
PSPPA
authorizes the Board to
    adopt such regulations.

[8]

Section 15 of Schedule A authorizes and, under some circumstances,
    requires the Board to make amendments to the rules governing the Plan.  The
    relevant provisions read as follows:

15
(2) The partners may direct the board to amend the pension plan rules
    and the board must amend the rules if

(a) the partners have first received and considered the advice of
    the board respecting both the cost and the administrative impact of implementing
    the proposed amendment, and

(b) the proposed amendment is not inconsistent with subsection (1)
    or the trustees' fiduciary responsibilities.

[9]

The term partners is defined in s. 1 of Schedule A as the government,
    the Post Secondary Employers' Association, the College Institute Educators'
    Association and the British Columbia Government and Service Employees' Union.

[10]

The dispute in this case arises from amendments made pursuant to s.
    15.  These amendments resulted from a directive dated April 12, 2001 from
    the partners to the Board to amend the Plan.  This directive is termed the
    Partners Agreement.

[11]

The rationale behind the Partners Agreement was based on an actuarial
    valuation of the Plan showing an actuarial surplus of $120,000,000 in the
    Plan as of August 31, 2000.  The partners wished to allocate the actuarial
    surplus as follows:

(a)
    $75,000,000 retained in the Plan to protect all plan members against potential
    future adverse actuarial experience;

(b)
    $20,000,000 retained in the Plan and allocated to insulate active contributing
    members from a contribution increase for five years between January 1, 2002
    and December 31, 2006;

(c)
    $20,000,000 retained in the Plan and allocated to insulate the college and
    institute employers from contribution and rate increases over the same period;
    and

(d)
    $5,000,000 to provide enhancements for retired members (about one-half by
    way of cash payments to retired members and one-half to enhance post-retirement
    group benefit packages).

[12]

In late 2001, the Board enacted two amending regulations implementing
    the terms of the Partners Agreement: B.C. Reg. 266/2001 and B.C. Reg. 314/2001.
    The former authorized the Board to make a one-time lump sum payment to each
    person who was a retired member of the Plan as of December 31, 2001.  The
    latter authorized the benefit improvements and contribution reductions set
    out in the Partners Agreement.

[13]

In the present proceeding, the respondents have alleged that this allocation
    of the actuarial surplus denied them an allocation of benefits proportionate
    to benefits granted to active members and employers.  The respondents submitted
    that in passing the amending Regulations the appellants had breached their
    fiduciary duties toward the respondents because they had failed to treat all
    parties in an even-handed fashion.  Damages, both general and punitive, are
    sought as a remedy for the alleged breach of duty.

[14]

It should be noted that a subsequent actuarial valuation of the Pension
    Fund, performed as of August 31, 2003, indicated an actuarial deficit, also
    called an unfunded liability, of $50,000,000.  In response to this situation
    the Board adopted a later amendment, B.C. Reg. 445/2004, cancelling the temporary
    contribution rate reduction and holiday and increasing the contribution rates
    for the Plans active members and employers.  Both the former surplus valuation
    and the later deficit valuation demonstrate the notional or transitory nature
    of periodic actuarial valuations and demonstrate that pension plan values
    can and do fluctuate, sometimes quite dramatically.

The Positions of the Parties

[15]

The appellants argue that the present action cannot succeed because
    there exists no proper basis for any claim for damages by the respondents.
    They submit that s. 15(2)(b) of Schedule A sets out as a precondition to the
    enactment of any amendment that such amendment must be consonant with the
    Boards fiduciary responsibilities.  If an amendment is adopted in breach
    of the Boards fiduciary duties, such breach will have the effect of nullifying
    the amendment, as a requisite precondition for enactment will not have been
    met.  It is submitted that any such amending regulation would be void for
    lack of jurisdiction.  That being the case, according to the appellants, the
    impugned changes to the Plan should be set aside, and matters would revert
    to the status quo prior to the amendment and the respondents would be unable
    to advance any successful claim for damages.

[16]

The appellants further submit that the pleadings do not assert sufficient
    facts to support any claim for punitive damages.  They contend that, in any
    case, an action in punitive damages cannot stand alone and the punitive damages
    claim should be struck out.  The appellants submit that if the respondents
    have any legal remedy available to them, it would be an order declaring the
    amending regulations invalid, not an award in damages.  The respondents have
    expressly disclaimed any intention to seek such a remedy.

[17]

The respondents assert that their pleadings disclose actions against
    the Board in breach of statutory and general fiduciary duties.  They attack
    not the regulations but, rather, the appellants alleged failure to effect
    an even-handed distribution of the actuarial surplus.  In other words, the
    respondents do not wish to undo the effect of the amending regulations or
    to take away benefits that were granted thereunder; they contend here and
    contended before Sigurdson J. that the Board breached its fiduciary duties
    in failing to take proper steps to ensure that retired Plan members received
    benefits correlative to those received by other Plan participants and seek
    a remedy in damages.

Analysis

[18]

The respondents submit that it is not plain and obvious that their
    damages claims cannot succeed.  They submit that when the Board, in allocating
    the $120,000,000 surplus in the Plan in 2001, only allocated about $5,000,000
    in immediate cash and other benefits to retirees and utilized $40,000,000
    to grant contribution holidays and other benefits to the employers and active
    members, they failed to fulfil their fiduciary responsibility to act in an
    even-handed fashion.  They submit that damages, both general and punitive,
    are a fit remedy for this failure of the appellants to provide them with benefits
    commensurate with benefits provided to the other parties to the Plan.  It
    was submitted in argument by the respondents that the Board could have awarded
    additional benefits to the respondents to balance the benefits provided to
    the employer and active members by the amending Regulations.  This failure,
    they submit, provides a valid foundation for the present action.

[19]

The appellants take issue with the decision of the Chambers judge finding
    a validly pleaded cause of action and the order certifying the action under
    the
Class Proceedings Act
.  I note that the argument advanced
    in this Court seems to be focussed in a slightly different fashion from the
    attack mounted by the appellants, aside from Mr. Bradshaw, before the Chambers
    judge.  Before the Chambers judge it was submitted that the only remedy properly
    open to the respondents was to attack the Regulations by way of judicial review.

[20]

Sigurdson J.  thus described the argument at para. 53 of his reasons:

The intervenors and defendants say that if judicial review
    is available to attack the regulation it is the only way, and not merely the
    preferable, way of proceeding.  Indeed they go one step further.  Not only
    must the proceeding be brought by judicial review, they submit, but the action
    has a fatal flaw in that it violates the collateral attack rule.  The action,
    the defendants say, cannot be brought while the trustees decision is outstanding
    and has not been quashed because the regulation implementing the Partners
    Agreement amounts to a binding determination that the amendment was not in
    breach of fiduciary duty.  The regulation operating as a bar to the attack
    by the plaintiff, they say, is a species of
res judicata
, and the plaintiffs
    action for collateral or consequential relief based upon that conduct is a
    collateral attack and bound to fail.  Thus, there can be no action for compensatory
    damages because the Board acted lawfully (pursuant to the unattacked regulation).

[21]

The judge answered that submission as follows in his reasons: (paras.57-62)

Does it follow that where there is a breach of a private
    duty alleged and the underlying conduct may be the subject of judicial review
    (and there is as well a claim for damages), the challenge must be brought
    by judicial review?

The question, at this stage, is not what is the preferable
    procedure, but whether it is plain and obvious that there is no cause of action
    because there is a decision that must be first set aside before a damage claim
    can be advanced.  The defendants and intervenors have not provided me with
    any authority stating that where there is a private law claim for damages
    that might also be characterized as conduct reviewable by judicial review,
    that the proceeding must first be brought by way of judicial review.  Although
    the defendants rely on the decision of
Berscheid v. Ensign
,
    [1999] B.C.J. No. 1172 (S.C.), that decision merely says that judicial review
    must be brought by way of petition; it does not decide the point here.

I have concluded that it is not plain and obvious that
    there is no reasonable cause of action disclosed in the plaintiffs statement
    of claim.

Accepting that the decision of the trustees implementing
    the agreement might be characterized as an exercise of a statutory power and
    that it may be possible to attack the decision under judicial review, I nevertheless
    do not think that it is plain and obvious that the claim must fail if that
    regulation is not first successfully attacked.  It is at least arguable that
    the relevant legislation required only that the arrangement not be in breach
    of fiduciary duty, and that the adoption of such an agreement does not constitute
    a binding determination that the arrangement is not in breach of fiduciary
    duty.

The plaintiffs say that the claim for damages for breach
    of fiduciary duty may exist even in light of the unchallenged regulation and
    even if the regulation might be said to amount to an implicit determination
    that there was no breach of fiduciary duty.  The plaintiffs submission receives
    some support, if only by analogy, from the decision of the Supreme Court of
    Canada in
Wells v. Newfoundland
, [1993] 3 S.C.R. 199
.

Although
Wells
may not be directly on point,
    there are parallels relevant to the issue of whether there is a cause of action
    disclosed.

[22]

His Lordship observed, I am not persuaded that, even if the conduct
    complained of is subject to judicial review, it is necessarily incapable of
    sustaining a claim for breach of fiduciary duty (at para.64).  After considering
    several other objections to certification advanced before him by the appellants,
    Sigurdson J. certified the action as a class proceeding.

[23]

In this Court the appellants advance an argument based on statutory
    construction.  They submit that s.15(2)(b) of Schedule A, properly construed,
    is a complete answer to the claims of the respondents.  That is so, it is
    submitted, because a precondition to the enactment of the amending Regulation
    adopted by the Board in 2001 is that any such amendments must not be inconsistent
    with the fiduciary responsibilities of the Board.  The argument is that if
    the amendments amounted to a breach of the fiduciary duty or responsibilities
    of the Board, then the amendments are and were of no force or effect and any
    claim of the respondents for damages based on the effect of their passage
    must fail.

[24]

The appellants submit that the Chambers judge fell into error when
    he placed any reliance upon the case of
Wells v. Newfoundland
,
    [1999] 3 S.C.R. 199, 177 D.L.R. (4th) 73.  In that case the plaintiff Wells
    sued for wrongful dismissal from the Public Utilities Board of the
Province
of Newfoundland.
    Wells had been employed as a commissioner by the Province under a contractual
    arrangement.  When the Crown restructured the Board, eliminating the position
    of Wells, he was found to be entitled to damages for wrongful termination
    of his contract.  The Supreme Court of Canada held that although the Province
    possessed the authority to enact legislation denying an individual a remedy
    for termination of employment, the legislature had not plainly done so in
    the case of Wells and therefore a suit lay for damages.  The Supreme Court
    observed at para. 55 of the judgment:

The
    Crown had a contractual obligation to the respondent, which it breached by
    eliminating his position.  As his right to seek damages for that breach was
    not taken from him by legislation, he is entitled to compensation.

[25]

In my opinion,
Wells
is not an authority that supports
    the arguments of the respondents in the present case.  It seems to me that
    the Chambers judge fell into error in relying upon that authority which dealt
    with a wholly different factual circumstance than what is at issue in the
    case at bar.  Here, the requirement that the Board members must act in accordance
    with their fiduciary responsibilities to beneficiaries of the Plan is a precondition
    of the validity of the Regulations complained of by the respondents.  That
    is a very different issue from the Wells case where what was at issue was
    whether the legislation eliminating his position plainly took away any claim
    for damages for breach of contract.

[26]

I am in agreement with the submission of the appellants that if a court
    were to find that the amending Regulations 266/2001 and 314/2001 were passed
    in breach of the fiduciary duty of the Board, then such amendments were void
    from their inception.  The core allegation of the respondents is just that,
    namely that the Board breached its fiduciary duty to the respondent plaintiffs.
    Although the respondents have disclaimed any wish to strike down the Regulations
    in these proceedings, the striking down of the Regulations would be an inescapable
    corollary of a successful allegation of a breach of fiduciary duty or responsibility
    by the Board.  They are thus met with the insuperable objection on the part
    of the appellants that if their allegations should be ultimately successful,
    no action is maintainable because the foundation for them, the amending Regulations,
    are swept away.  Because of this impossible conundrum at the heart of the
    case advanced by the respondents, I consider the Chambers judge ought to have
    held that there was no valid cause of action pleaded by the respondents and
    his failure to so find was in error.  In light of the terms of s.15(2)(b),
    I consider the respondents are not able to advance any successful claim for
    general damages against the Board  for the reasons set forth above.  Thus
    their pleading fails to disclose any valid cause of action that could result
    in an award of damages.

[27]

Concerning the claim for punitive damages, while there may arise a
    situation where a claim for punitive damages could be advanced in the absence
    of a valid claim for general damages, such a result seems to me impossible
    on the facts of this case.  The same conduct relied upon for an award of general
    damages, breach of fiduciary duty, appears to be the underpinning sought for
    an award of punitive damages.  The respondents face the same problem in advancing
    this claim as they do in advancing a claim for general damages.  If, as I
    have held, the claim for general damages cannot succeed because of the terms
    of s.15(2)(b), a similar result must follow concerning the claim advanced
    for punitive damages arising from the questioned acts of the Board.  In the
    circumstances of this case, it is plain and obvious that the punitive damages
    claims cannot succeed and so no valid cause of action exists in that regard.

[28]

Since the pleadings of the respondents fail to disclose any valid cause
    of action that would result in an award of either general or punitive damages,
    the order certifying this proceeding as a class proceeding is not sustainable.
    I would therefore allow the appeals from the certification order, but without
    costs, in accord with the judgment of this Court in
Samos Investments
    Inc. v. Pattison
(2002), 5 B.C.L.R. (4th) 21, 2002 BCCA 442.

The Honourable Mr. Justice Hall

I agree:

The Honourable Madam Justice Prowse

I agree:

The Honourable Mr. Justice Donald


COURT
    OF APPEAL FOR BRITISH COLUMBIA

Citation:

Dong
          v. Au,

2007
          BCCA 37

Date: 200701212

Docket: CA033629

Between:

Sheng
    Yun Dong also known as Dong, Sheng Yun

Respondent

(
Plaintiff
)

And

Brandon
    Au and S.A.H. Consultant Ltd.

Appellants

(
Defendants
)

Before:

The
          Honourable Chief Justice Finch

The
          Honourable Mr. Justice Donald

The
          Honourable Mr. Justice Chiasson

Oral Reasons for Judgment

G.A.
          Cuttler

Counsel for the Appellant

J.A.
          Henshall

Counsel for the Respondent

Place
          and Date:

Vancouver
,
British Columbia

12 January 2007

[1]

CHIASSON, J.A.
: This is an appeal from the dismissal of
    an application by two defendants for an order for security for costs on the
    basis that the Chambers Judge was not able to conclude that the defence
    is
bona fide
.

[2]

Leave to appeal was granted by Mr. Justice Donald on 29 March 2006.

[3]

The respondent, who lives in China, alleges that he was induced to
    pay $300,000 to the appellant company in order to qualify for a Provincial
    fast-track immigration policy.  He asserts that it was understood that the
    money would be refunded to him if he were to fail to qualify.  He paid the
    money, signed a distributorship agree with the appellant company, was rejected
    under the policy and sought unsuccessfully to obtain the return of his money,
    for which he now sues.

[4]

The action was brought against,
inter alia
, the appellants,
    Ms. Gu and Golion International Investments Ltd. (Golion).  The latter two
    defendants, who did not bring an application for security for costs, were
    engaged by the respondent to arrange for his dealing in British Columbia with
    the immigration officials and with the appellants.

[5]

The respondent asserts that Ms. Gu and Golion misrepresented his ability
    to qualify under the policy and that it was a fundamental term of the distribution
    agreement that if the respondent were not to qualify under the policy, his
    $300,000 investment would be returned. The statement of claim alleges forged
    documentation, fraud, breach of fiduciary duty and negligence.  It is the
    respondents position that the appellants acted in consort with the defendants
    Ms. Gu and Golion.

[6]

The appellants deny the respondents claim generally and specifically
    deny fraud.  They rely on the wording of the distribution agreement, which
    states that the $300,000 payment was non-refundable.

[7]

Affidavits were filed by the respondents wife and others, including
    the appellant Mr. Au.  In many respects they were contradictory either directly
    or inferentially.

[8]

The learned Chambers judge began her analysis by referring to comments
    of Lambert J.A. in
Shiell v. Coach House Hotel Ltd.
,

[1982]
    B.C.J. No. 666, 37 B.C.L.R. 254.  That case confirmed that security for costs
    will not be ordered against an individual simply because he or she does not
    reside or have assets in the jurisdiction.  In reasons concurring with Seaton
    and Taggart JJA., Mr. Justice Lambert emphasized the discretionary nature
    of the jurisdiction to order security for costs in paras. 39 and 42 of the
    reasons:

¶39
     the inherent jurisdiction to order security for costs survives the making
    of the new Rules.  That inherent jurisdiction is a discretionary jurisdiction.
    As such, the law requires that it be exercised judicially.  But the law does
    not require any particular outcome.  Previous decisions in which the discretion
    was exercised in particular ways, and the reasons for those decisions, constitute
    guidelines which should be considered by a judge in the interests of uniformity
    and in response to perceptions of public policy.  But they do not constitute
    binding principles of law.  Otherwise the discretion would be at an end.

¶42 The discretion must be exercised judicially.  It must be based on
    a fair assessment of the interests of all parties.  In my opinion the discretion
    is, in all other respects, unfettered.  I would not propose to put forward
    any more detailed guidelines unless a need for such guidelines was demonstrated,
    perhaps by conflicting decisions on indistinguishable facts.

[9]

The Chambers judge also referred to
Kropp v. Swaneset Bay Golf
    Course Ltd.
(1997), 29 B.C.L.R. (3d) 252, a decision of this Court.
     Although the case dealt specifically with the ability of a corporate plaintiff
    to continue with litigation if security for costs were ordered and the principles
    that apply to the exercise of the discretionary power to order security for
    costs under the then s. 229 of the
Company Act
, the approach
    overall is instructive and applicable generally to a consideration of an application
    for security for costs.

[10]

Of particular significance in the case at bar is the fourth consideration
    stated by the Court in the
Kropp
case:

The court may have regard to the merits of the action, but should avoid
    going into detail on the merits unless success or failure appears obvious.

[11]

Leggatt J. in
de Bonth v. Rampart Capital Corp
Nederland
B.V. (Trustee
    of)
, [1997] B.C.J.
    No. 2292 addressed the matter further as quoted by the Chambers judge in para.
    9 of her reasons:

In
de Bonth v. Rampart Capital Corp
Nederland
B.V. (Trustee
    of)
, [1997] B.C.J.
    No. 2292 (S.C.) Leggatt J. discussed the evidentiary burden applicable
    to an application for security for costs.  At ¶ 4 he stated:

At this stage, of course, the Court cannot make any detailed assessment
    of the merits of the case.  To quote Mr. Justice Spencer in Ruko of Canada
    Ltd. v. C.I.B.C (1991), 49 C.P.C. (2d) 105 (B.C.S.C.):

All
    that is required now is that I should be satisfied that the defence is bona
    fide and has an arguable case to present, not that it should win in any event.
    The strength or weakness of the defendant's case is a factor to be considered
    in ordering security, to be balanced with the factors of financial strength,
    delay, prejudice to the plaintiff and whether the plaintiff may be prevented
    by the financial burden of posting security from presenting its case at all.

[12]

The decision of Mr. Justice Spencer was endorsed specifically by Mr.
    Justice Lambert sitting in Chambers in this Court in
Daiwood Construction
    Co. v. Wright Schuchart Construction Ltd.
, [1993] B.C.J. No. 290.

[13]

The Chambers judge held in para. 10 of her Reasons for Judgment that
    favouring granting an order for security for costs, in this case, are the
    facts that the respondent resides out of the jurisdiction, China is not a
    reciprocating state with British Columbia and the respondent owns no exigible
    assets in the Province.  The only issue for resolution was consideration of
    the merits of the case.

[14]

At the hearing of this appeal, the respondent asserted that, in fact,
    he does have exigible assets in the province.  Counsel pointed to the $300,000
    paid by the respondent to the appellants and to his right to sell product
    from a location in Delta, British Columbia.

[15]

If the respondent were to lose his case the appellants would be entitled
    to keep the $300,000.  The right to sell product would have value only if
    he were to do so.

[16]

In any event, the respondent took no issue in his factum to the conclusions
    of the Chambers judge in para. 10 of her Reasons for Judgment that the respondent
    does not have exigible assets in the jurisdiction.

[17]

The Chambers judge set-out the framework of her task in para. 11:

Althoughit is not appropriate to scrutinize the merits in great detail,
    it is necessary to examine the evidence in order to determine if the evidence
    meets the low threshold of an arguable claim or
bona fide
defence.

She then referred generally to the evidence in para.
    12.

The affidavit evidence contains many directly conflicting accounts of
    events and conversations.  There are allegations that the defendants and others
    have fraudulently prepared some documents and fraudulently altered other documents.
    The defendant, Mr. Au, disputes the authenticity of some documents.
    Most of the allegations of fraud are directed at the defendants Ms. Gu
    and Golion International. But in a careful analysis of the documents and evidence
    produced so far, Ms. MacDonald argued that Mr. Au is implicated
    in the alleged fraudulent dealings of Ms. Gu and her company Golion International.

[18]

The Chambers judge reviewed the affidavit evidence in some detail noting
    particularly factual allegations that appeared not to be answered by Mr. Au.
    She stated, I have highlighted only a few portions of the evidence. I have
    considered all of the evidence and in particular the evidence of Mr. Au.

[19]

The conclusions of the learned Chambers judge were stated in para.
    21 of her Reasons for Judgment:

On the present state of the evidence  I am not able to conclude that
    the defence is
bona fide
.  I emphasize that all the evidence is probably
    not before the court and in the final analysis a court may reach the conclusion
    that the plaintiffs claim ought not to succeed. But as the evidence now stands,
    I do not think it would be a fair exercise of my discretion to compel the
    plaintiff to pay security for costs.

[20]

It is with reluctance that I disagree with this conclusion because
    I am mindful of the considerable deference that should be shown to the courts
    exercise of discretion in this matter.

[21]

The allegations in this case are serious and hotly contested, involving
    as they do fraud and assertions of forged documents.  Paragraph 12 of the
    Chambers judges reasons quoted above is illustrative of that fact.

[22]

It is not possible to resolve the conflicts in the evidence on an application
    such as this and no attempt should be made to do so.

[23]

I agree with the submissions of the appellant that on an application
    for security for costs parties are not obliged to meet all the allegations
    of fact of each other.  The parties are obliged to show that they have an
    arguable case and that it is
bona fide
.
Bona fide
must be considered
    objectively, not on the basis that a trial court might or even would be likely
    to reject the defence on the merits.  In my opinion, where there is an arguable
    case, to conclude on conflicting evidence that it is not
bona fide
would require clear and compelling evidence.

[24]

The appellants note that they rely on the terms of the written agreement
    with the respondent.  It provides
inter alia
that there are no external
    representations and warranties and that the $300,000 payment was non-refundable.

[25]

Affidavits were delivered by each side which contained contradictory
    factual assertions.

[26]

The respondents wife exhibited documents to support the respondents
    case that the appellants were implicated in a fraudulent scheme, the authenticity
    of some of which were denied directly by Mr. Au and on the face of which appear
    not to be authentic.

[27]

These include:

Exhibit C  an invoice on the letterhead
    of the corporate appellant, but using the address of the defendant Golion;
    Mr. Au stated that no one in the corporate appellants organization authorized
    the document and that he did not recognize the signature on it; he said he
    was not aware of the document before he saw the respondents wifes affidavit;

Exhibit J  a letter that purports to acknowledge
    receipt by the corporate appellant of the respondents $300,000; the address
    on the letter is not that of the corporate appellant; Mr. Au denied that the
    letter was authorized by the appellants; he also stated that he did not know
    the person who purported to sign the letter as the corporate appellants manager
    and that no such person had ever worked for the corporate appellant; he said
    that he was unaware of the letter before it was produced in the litigation
    by the respondent;

Exhibit K  a letter that purported to confirm
    that the respondents $300,000 would be returned in he were to be rejected
    for immigration under the policy; Mr. Au denied the authority of the author
    of the letter to write the letter and stated that he was not aware of it until
    it was produced in the litigation by the respondent.

Exhibit G  a letter from a Mr. Chan confirming submittal and approval
    of the respondents application; Mr. Chan denies signing the letter and states
    he does not know who created the document.

[28]

Although the Chambers judge made a point of the existence of two iterations
    of the distribution agreement, Mr. Au deposed that he was aware of only one
    authentic document.

[29]

I stress that as the litigation progresses, the authenticity of these
    documents may be established, but they illustrate that on the present state
    of the evidence it is not possible to tip the scales to the extent of concluding
    that the appellants do not have an arguable or
bona fide
defence.

[30]

In my view, the learned Chambers judge embarked on an inappropriate
    examination of the merits of the defence and preferred the contested position
    of one side over the other.  Objectively, each side advanced positions that
    depended on credibility and the consideration of documents in the context
    of evidence.  It will be for another proceeding to determine which of these
    positions should prevail. It cannot be said at this stage of the case that
    either position is not arguable or not
bona fide
.

[31]

I would allow this appeal.

[32]

The appellant sought the following order:

(a)        This appeal be allowed;

(b)
    The Order of the Honourable Madam Justice Garson pronounced November 24, 2005
    be set aside;

(c)
    The Plaintiff be ordered to deposit within 30 days from the date of this Honourable
    Courts Reasons for Judgment, or alternatively, within such other period as
    this Court may decide, the sum of $56,337.74, or alternatively, such amount
    as this Court may decide, in the Supreme Court of British Columbia, such money
    to be held for the benefit of these Appellants (Defendants) as security for
    costs in this action;

(d)
    The Plaintiff be stayed from taking any steps in this action that would cause
    these Defendants to incur costs until such security has been deposited;

(e)
    Where the Plaintiff has posted security for costs in accordance with the Order
    of this Court, that these Defendants be at liberty to apply for an order requiring
    the Plaintiff to deposit further security for costs if the cost of this action
    appear likely to exceed the amount of security already posted by the Plaintiff;

(f)
    Where the Plaintiff has posted security for costs pursuant to this Order,
    that such security cannot be paid out without the consent of all parties or
    a further court order; and

(g)        The Appellants be awarded costs of this appeal.

[33]

The quantum of the requested security is not contested.

[34]

I would make the requested order modifying paragraph (c) as follows:

The plaintiff be ordered to deposit within 30 days security to the satisfaction
    of the Registrar for the sum of $56,337.74 to be held for the benefit of the
    appellants as security for costs in this action.

[35]

FINCH, C.J.B.C.
: I agree.

[36]

DONALD, J.A.
: I agree.

[37]

FINCH, C.J.B.C.: There will be an order in the terms described by Mr.
    Justice Chiasson.  The appeal is allowed.

The Honourable Mr. Justice Chiasson: