Sued for $650,000 by a Company With Nothing to Lose

The situation

Rivka had spent years building up a small stake in an independent pharmacy in Vaughan, the kind of business where the owner still works the counter most days. In early 2025, a physiotherapist named Priya approached her with an idea: combine their two practices under one roof, a wellness clinic where a physiotherapy practice and a pharmacy counter could refer patients back and forth. They met several times, exchanged some rough financial projections by email, and talked loosely about splitting costs for a lease neither of them had found yet.

Nothing was signed. There was no partnership agreement, no lease, no shared bank account, no business registered in both their names. By the summer, Priya had gone quiet, and Rivka assumed the idea had simply run its course, the way most early-stage conversations between two busy professionals do.

She was wrong. In late 2025, Rivka was personally served with a civil claim filed in the Superior Court of Justice. The plaintiff was not Priya personally — it was a numbered company, incorporated only two months before the claim was issued, that Rivka had never heard of. The claim alleged that Rivka had breached an oral partnership agreement to open the joint clinic, and it sought roughly $650,000 in damages: lost profits the clinic supposedly would have earned, plus money the plaintiff said it had already spent on planning, consulting and a deposit toward a location that, as far as Rivka knew, had never been rented.

The legal problem

On its face, this looked like a straightforward contract dispute: did a binding partnership agreement exist, and if so, who breached it. Ontario law does recognize agreements formed without a signed document, provided the parties' words and conduct show they intended to be bound and agreed on the essential terms. So the claim was not automatically doomed just because nothing was in writing — Rivka would still need to show the court that the conversations with Priya never crossed the line from exploratory talk into a binding deal.

But a second issue sat underneath the merits, and it mattered more in the short term. The plaintiff suing Rivka was not Priya — it was a corporation formed shortly before the lawsuit was filed, with no operating history, no known assets, no employees, and no property in Ontario that anyone could identify. If Rivka won the case outright, she would ordinarily be entitled to have her legal costs paid by the losing side. But a costs award is only worth what the losing party can actually pay, and a freshly incorporated shell with nothing in it can lose a case and still leave the winner holding an unpaid bill. Meanwhile, Rivka — a real person with a real income and a real pharmacy — would spend months, possibly years, and a significant sum defending a claim from an opponent who had, functionally, nothing at stake.

That imbalance is exactly what Ontario's civil procedure rules are designed to address through a motion for security for costs. A defendant can ask the court to order a plaintiff — particularly a corporate plaintiff with no substantial assets in Ontario — to post money with the court as security before the litigation goes further. If the plaintiff cannot or will not post it, the claim is typically dismissed for failure to comply. The tool does not decide who is right on the merits. It tests whether the plaintiff is prepared to put something real behind the claim, rather than using litigation as a cost-free way to pressure a defendant into a settlement.

The wrinkle in Rivka's case was that the underlying dispute, if it existed at all, was really between two individuals who had talked about going into business together. Routing the claim through a brand-new numbered company looked less like a genuine corporate venture and more like a structure that shielded the real party in interest — whoever stood behind the company — from ever having to personally answer for a costs award if the claim failed.

What we did

1. Filed a defence denying that any binding agreement existed. Before anything else, Rivka needed to be formally on the record: the email exchanges and meetings were preliminary discussions, no material terms had been agreed, and no partnership was ever formed. This protected her position on the merits while the procedural strategy was developed in parallel.
2. Requested corporate records and financial disclosure from the plaintiff. We asked, through formal steps in the litigation, for basic information about the numbered company — its incorporation date, its financial statements, and any assets held in Ontario. The corporate search named a single officer and director, Vikram, a business associate of Priya's whom Rivka had never dealt with directly. That, combined with the company's incorporation date only weeks before the claim and its inability to point to any bank account, lease or asset of substance, became the foundation for what came next.
3. Brought a motion for security for costs. With that record in hand, we moved before a judge for an order requiring the plaintiff company to post a sum of money with the court to secure Rivka's anticipated legal costs, on the basis that the plaintiff had no meaningful assets in Ontario and no history that would give a future costs award any real value.
4. Argued the connection to the individual behind the company. Part of the motion focused on the fact that the company appeared to exist for the purpose of this lawsuit, formed shortly before it was filed and controlled by Vikram, a business associate of the same person — Priya — who had personally discussed the clinic idea with Rivka. That connection and the timing together supported the case that the corporate structure was not a genuine operating business but a vehicle created around the litigation itself.
5. Advised Rivka on the realistic paths forward at each stage. Throughout, we walked Rivka through what each outcome of the motion would mean in practical terms — how much security might be ordered, what would happen if the plaintiff paid it, and what would happen if it did not — so she could weigh the cost of continuing to defend against the value of forcing the other side to show its hand.

The outcome

The court granted the motion, ordering the plaintiff company to post security for costs within a set period or have its claim dismissed. Faced with putting real money behind a claim it had filed through a shell with nothing in it, the plaintiff did not pay. Some months later, the claim was dismissed for failure to comply with the order, and Rivka was awarded her costs of the motion and the proceeding.

That should have been the end of the financial story, but it was not quite. As anticipated from the outset, the numbered company had no assets to collect from, and the individual behind it was never personally named as a party who could be pursued for the costs award. Rivka recovered a modest amount toward her legal costs, but the bulk of what she had spent defending herself over several months — legal fees in the range of several tens of thousands of dollars — was never repaid. The $650,000 exposure never had to be paid, and that was the real point of the exercise: the security for costs motion ended the case months earlier and far more cheaply than fighting the underlying merits to trial would have, even though it did not make Rivka whole on what she had already spent.

For Rivka, the outcome was a contained loss rather than a clean win. The catastrophic number — $650,000 — never became real. But the unrecoverable legal spend was a genuine cost of having been targeted by a claim that, in hindsight, was never built to be tested on its merits so much as used as leverage against an individual with real assets and something to protect.

What you can learn from this