The Defendants applied for Security for Costs under Rule 4.22 and section 254 of the Business Corporations Act, RSA 2000, c B-9 (ABCA), arguing that the Plaintiffs were unlikely to pay costs or satisfy judgments on account of unpaid costs, financial difficulties and failure to comply with undertakings. The Plaintiffs opposed, arguing that they were entitled to costs on account of the discontinuance of the Defendant’s counterclaim. The Plaintiffs claimed they had evidence to support their allegations, but they failed to file materials or provide specific evidence.

Notwithstanding a previous Order that directed the corporate Plaintiff to be represented by counsel, Justice Johnston exercised discretion under Rule 2.23(4) to allow the Plaintiff, Ms. Abou Shaaban to respond to the Application for Security for Costs on behalf of both Plaintiffs.

The Court considered the factors set out under Rule 4.22 to determine if the Plaintiffs should be required to provide Security for Costs. The factors include considering the likelihood of enforcing a judgment in Alberta, the respondent’s ability to pay costs, the merits of the Action, potential prejudice to the Respondent, and any other relevant circumstances. Section 254 of the ABCA applied only to the corporate Plaintiff, which requires an Applicant to show that “the body corporate will be unable to pay the costs of a successful party.” Johnston J. acknowledged that an award of Security for Costs is discretionary and that the burden of proof rests with the Applicants on a balance of probabilities.

Justice Johnston found that the Applicants would be unlikely to be able to enforce a judgment against the Plaintiffs due to the Plaintiffs’ failure to disclose financial information, pay outstanding cost orders, and the lack of evidence of assets in Alberta. The Plaintiffs also had an outstanding judgment against them and were previously ordered to post security for costs in another proceeding. Further, the Plaintiffs’ claims appeared weak and unsupported by evidence and there was no evidence before the Court that requiring Security for Costs would cause undue prejudice to the Plaintiffs.

The Court determined that the corporate Plaintiff would be unable to pay a costs award in accordance with section 254, and that it was just to award Security for Costs under Rule 4.22. Johnston J. declined to award Costs for past steps but found it appropriate to award Security for Costs for all prospective steps up to and including Trial. The Court ordered the Plaintiffs to post $30,000 as Security for Costs within 45 days of this Decision.