1400467 ALBERTA LTD v ADDERLEY, 2014 ABQB 439


1.3: General authority of the Court to provide remedies
1.4: Procedural orders
4.22: Considerations for security for costs order

Case Summary

Upon the Defendants selling their business to the Plaintiffs, the parties executed non-compete, Alberta choice of law and choice of forum agreements and employment contracts as a part of the transaction. The Plaintiffs commenced an action against the Defendants, who resided in Saskatchewan, alleging that the Defendants had breached the non-compete agreements. The Defendants counterclaimed that the Plaintiffs breached the purchase and sale agreement by failing to pay the purchase price. The Plaintiffs applied for a Security for Costs Order and a Security for Judgment Order as against the Defendants, citing Rule 4.22 and 1.4(2)(e). The Plaintiffs argued that one of the corporate Defendants had incurred other significant secured obligations since the commencement of the litigation which would make it more difficult for the Plaintiffs to enforce a Judgment. Justice Veit noted that Rule 4.22 clearly allowed the Court to order Security for Costs against the Defendant; this is so even where the Defendant failed to satisfy the specific factors mentioned in the Rule. However, such an Order was “far from automatic”. The general rule is:

… [A] plaintiff cannot call upon the defendant, even one resident out of the jurisdiction, to provide security for the plaintiff’s costs.

Justice Veit commented that the language in Rule 4.22 and the prior Rule did not create a departure from the approach of the Canadian Courts for Security for Costs. The revision to the Rules was only required in order to explicitly accommodate situations in which a plaintiff or a defendant within the Province could properly be ordered to post Security for Costs. Using the factors in Rule 4.22, Her Ladyship concluded that it was not fair and just in the circumstances for the Defendants to pay Security for Costs. The Application for Security for Costs was dismissed.

Justice Veit also considered whether the Defendants were required to pay Security for Judgment, observing that prior Alberta case law had questioned whether Rule 4.22 properly applies in motions for Security for Judgment. Her Ladyship stated that it seemed clear that Rule 4.22 is limited to Security for Costs, but it was not necessary to decide the issue since the Plaintiffs had also applied under Rules 1.3 and 1.4. Justice Veit stated that Rule 1.4(2)(e) provided the Court with the authority to impose terms and conditions on parties who come before the Court, and authorizes the Court to order the payment of Security for Judgment. Her Ladyship noted that Security for Judgment is only ordered sparingly and in exceptional circumstances. Veit J. held that a Court can issue pre-Judgment preservation Orders including Orders requiring Defendants to post Security for Judgment where it is fair and just to do so. The Court must consider all surrounding circumstances when determining whether it is appropriate to make an Order for Security for Judgment. Justice Veit concluded that it was not fair and just in the circumstances to require the Defendant to post Security for Judgment and dismissed the Application.

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