Edited by Amanda Kostek
Last week’s Court Rulings from the Alberta Court of King’s Bench, Court of Appeal and SCC.
Embedia Technologies v Blumell, 2024 ABKB 735
Security for Costs against a Corporation
An application for security for costs against a corporate entity was sought under both section 254 of the Business Corporations Act and Rule 4.22 of the Alberta Rules of Court. At issue was whether the test was different under each. The Court concluded that there was no material difference in the test for security for costs between rule 4.22 and Section 254 of the Business Corporations Act. Under either, the onus of proof rests with the applicant to establish, on a balance of probabilities, that the corporation will be unable to satisfy a costs award. Once that is established, the burden of proof shifts to the corporation to establish why a security for costs award is not appropriate:
[10] This observation is reflected in the reasons of Nielsen J. (as he then was) in Commercial Construction Supply Ltd. v. Ghost Riders Farm Inc., 2016 ABQB 166, 2016 CarswellAlta 495, where (upon concluding that s. 254 applied rather than r. 4.22 as the case dealt with a corporate plaintiff) at para 22 he made the following observation:
Whether an application is brought pursuant to s. 254 of the BCA or pursuant to Rule 4.22, the onus of proof does not change. The applicant seeking security for costs bears the initial onus to establish, on a balance of probabilities, that the respondent will be unable to pay its costs if the defence is successful. If the applicant satisfies this onus, the evidentiary burden shifts to the respondent to show why the Court should not exercise its discretion to make such an Order against it … [emphasis added]
Factors a Court will consider include fairness, merits of the action, and whether it would unfairly prejudice the corporation’s ability to continue an action under both rule 4.22 and section 254:
[13] Rule r. 4.22 lists a threshold test (the justness and reasonableness of awarding security for costs) and a number of considerations (the ability of the respondent to pay a costs award, the merits of the action, and whether an order to give security for payment of a costs award would unduly prejudice the respondent’s ability to continue the action). These factors are not listed in s. 254.
[14] Again, this difference does not seem material. The specific factors listed in r. 4.22 are factors one would expect the court to consider in exercising its discretion (“may order”) under s. 254.
The Applicant sought in excess of $300,000 for security for costs. The Court ordered $126,000 payable in two parts. If payment was not made, the action would be stayed. Interestingly, $26,000 of the award was for expert assistance in questioning, disbursements for transcripts and GST.
- $100,000 for taxable fees
- $10,000 for expert assistance in part 5 questioning
- $10,000 for disbursements for part 5 transcripts
- $6,000 GST on the foregoing