COAST AUTOMOTIVE GROUP INC (RE)

Coast Automotive Group Inc. (“Coast”) and related entities were undergoing Companies’   Creditors Arrangement Act (“CCAA”) proceedings. The Applicants, Coast and related non-CCAA parties sought permission to appeal a Chambers decision that, among other things, ordered them to post $100,000 in security for costs. The Application for Leave to Appeal was dismissed.

The Security for Costs Order arose in the context of ongoing CCAA proceedings, where the Applicants were pursuing broad cross‑applications relating to the conduct of the Court‑appointed Monitor, the continuation of the restructuring proceedings, and a separate Action against the Bank of Montreal known as the Founder’s Claim. The Court of Appeal considered whether leave to appeal should be granted in relation to the Security for Costs Order and the underlying exercise of discretion under Rule 4.22.

The CCAA proceedings had reached an advanced stage. The Chambers Judge found that the debtor companies’ assets had been realized, remaining liquidity was limited, and there was little evidence that the Applicants held meaningful assets in Alberta. The Bank of Montreal was funding the ongoing restructuring proceedings and opposed Applications that would further consume the remaining funds.

Feehan J.A. held that the Chambers Judge properly applied Rule 4.22. The Chambers Judge considered the enforceability of a future costs award, the parties’ ability to satisfy such an award, the merits of the proposed litigation, and whether security would cause undue prejudice. The Chambers Judge found that enforceability concerns and the parties’ apparent inability to pay weighed in favour of security, while the merits factor was neutral. The Security for Costs Order did not unduly prejudice the Applicants ability to pursue their claims, and the Bank of Montreal’s financing of the CCAA proceedings justified the protection of its economic interests. Feehan J.A. concluded that the Chamber Judge’s reasons demonstrated a reasonable exercise of discretion and reflected the balancing required by Rule 4.22.

The Court refused permission to appeal. It found that the proposed Appeal did not raise an issue of significance to the practice or the Action, particularly because security had already been posted and the underlying Applications would proceed as scheduled.