4.22: Considerations for security for costs order

Case Summary

The Defendant applied for Security for Costs against a foreign corporation with no assets or business operations in Alberta. The Court’s discussion of Rule 4.22 began by referring to comments from Ritter v Hoag (2003), 25 Alta LR (4th) 267 (QB), regarding what constituted “just and reasonable” under the old Rules for Security for Costs.

McMahon J. addressed Rule 4.22(b) and noted that the Court need not determine that the Plaintiff would be unable to pay the Security in order to grant such an Application; rather, the Court’s mandate, when determining what is just and reasonable, is merely to consider the ability of the Plaintiff to pay. Under Rule 4.22(c), McMahon J. determined that a balanced consideration of the merits of the entire Action is required, rather than a focus merely on the merits of the defence as under the old Rules. McMahon J. explained that “an order for security for costs is discretionary”.  Under Rule 4.22(d), McMahon J. referred to case law that makes a distinction between an impecunious individual Plaintiff, who may be shut out of the Court process with the granting of an Order for Security for Costs, versus a limited liability corporation as Plaintiff - an impecunious company with a cause of action which is a one-way valve, in which money can flow from the company to its shareholders but not in the opposite direction. Security for Costs is more likely to be granted in the latter situation.

McMahon J. granted an Order for Security for Costs because of the unchallenged description of the Plaintiff’s net asset position and the absence of evidence from the Plaintiff that it could not raise significant Security.

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