4.22: Considerations for security for costs order

Case Summary

The Plaintiff in this builders’ lien Action applied for Judgment, or alternatively, to have the matter set for Trial. The Defendant cross-applied for Security for Costs.  The Statement of Claim was filed in January 2016, and the parties had exchanged Affidavits of Records and participated in Questioning. The shareholders of the Plaintiff had moved to British Columbia in June of 2017.

The Plaintiff asserted that the Defendant breached its disclosure obligations set out in Part 5 of the Rules by failing to disclose all relevant and material records, and that the produced documents do not support their defence. The Plaintiff asserted that these deficiencies entitled the Plaintiff to Judgment. Kenny J. held that the matter should be set for Trial, and that the consequences of inadequate and late disclosure should be left up to the Trial Judge.

In its Application for Security for Costs, the Defendant requested that $48,000 be posted as security, which included Costs for steps which had been taken prior to the date of the Application, and estimated Costs for expert fees. The Defendant acknowledged that it had not contacted an expert nor received any quotes. Kenny J. first assessed the quantum of potential Security for Costs, and then addressed whether such security was warranted pursuant to the factors set out in Rule 4.22. Kenny J. disallowed any Costs for steps already taken or disbursements already paid, noting that such items are not generally allowed in an Order requiring Security for Costs. Kenny J. also disallowed any Costs associated with an expert as the need for one had not been demonstrated, nor had an estimate of the likely Costs. Kenny J. also noted that the matter was a builders’ lien Action, which are to be conducted in a summary fashion and expeditiously, which warranted a lesser security amount. Justice Kenny also considered the Defendant’s delays in disclosure as relevant to awarding a lesser security amount. Kenny J. determined $10,200 would be the appropriate quantum if security was warranted.

Applying the factors for Security for Costs set out by Rule 4.22, Kenny J. noted that the Plaintiff had a bank account but no other assets in Alberta which weighed in favour of an award for Security for Costs. Justice Kenny found that the merits of the Action could not be assessed and as such were a neutral factor. She also noted that the prejudicial effect of requiring Security for Costs was a neutral factor as the Defendant had waited two years after the Statement of Claim was filed to bring the Application and the Plaintiff had incurred substantial Costs to date, however, the quantum of the security would not prejudice the Plaintiff’s ability to continue the Action. Kenny J. found that factors which weighed against the requirement of posting Security for Costs were the fact that the Defendant failed to demonstrate that the Plaintiff would be unable to pay a Costs award, and the fact that the Defendant delayed bringing the Application for so long, while simultaneously delaying the matter by providing a “sparse” Affidavit of Records. Kenny J. determined that Security for Costs was not appropriate in the circumstances and dismissed the Application.

The Application for Judgment was dismissed, the Application to set the matter for Trial was granted, and the cross-Application for Security for Costs was dismissed.

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