The Plaintiff appealed an Order for Security for Costs under Rule 6.14. Justice Silver dismissed the Appeal and upheld the Order for Security for Costs.

Rule 6.14 allows for the Appeal of an Order by an Applications Judge to a Justice. Such an Appeal is de novo, and no deference is owed to the Applications Judge’s Decision. The standard of review is correctness. 

In finding that the Order for Security for Costs was reasonable in the circumstances, Silver J. outlined the test for Security for Costs. She mentioned that Security for Costs can be granted under both Rule 4.22 and section 254 of the Business Corporations Act, RSA 2000 c B-9 While the burden under either is the same, the Plaintiff relied on the test under Rule 4.22 for the Appeal. Rule 4.22 allows the Court to grant Security for Costs if it considers that it is just and reasonable to do so in the circumstances. Five factors are weighed, and the Court’s discretion is balanced against the purpose and intention of Rule 1.2(1), which is to solve claims in a fair and just manner that is timely and cost effective.

The first factor under Rule 4.22 asks whether the Defendant will be able to enforce the Order against the Plaintiff’s assets in Alberta. The second factor asks whether the Plaintiff can pay the Costs Award. The third factor requires the Court to look at the merits of the Plaintiff’s Action. The fourth factor asks whether the Security for Costs Order would unduly prejudice the Plaintiff’s ability to continue the Action. Lastly, the Court may review any other matter it considers relevant.

In analyzing the second factor, the Court found that it was insufficient for the Plaintiff to offer as a substitute for the Security of Costs Order a legal expense insurance policy. The insurance policy limited the aggregated coverage amount for legal costs, applied only to legal costs agreed to by the insurer, could not be enforced by the Defendant, and could be cancelled by the insurer on 15 days’ notice. There was further concern that the insurance policy was funding the litigation rather than providing safety net for the Defendant. Similarly, undertakings by the Plaintiff’s solicitor to “allay any concerns with the coverage” in the insurance policy would be inadequate. The undertakings would not “fill the shortfalls, gaps and inadequacies of the policy”, and would fail to promote the purpose and intention under Rule 1.2 by requiring a disproportionate use of Court resources.

In reviewing the third factor, Silver J. found that based on the submissions, evidence, and pleadings, the Defendant had a meritorious defence to the claim. However, it was difficult at this stage to determine the merits of the Action, and the Court found that this factor was of limited use in light of the claim and defence.

With respect to the fourth factor, Silver J. found that the Security for Costs Order did not unduly prejudice the Plaintiff’s ability to continue the Action. The Plaintiff was an impecunious corporation without assets and with a “corporate director who is unwilling to provide any resources towards this claim from which he will personally benefit”.