In a hefty security for costs award in favour of multiple defendants, the Alberta Court of Queen’s Bench recently held that the Court may consider the global effect of the costs of multiple proceedings by a single corporate plaintiff in deciding whether security for costs is appropriate.
In Geophysical Service Incorporated v Encana Corporation, 2016 ABQB 49, the plaintiff appealed 26 orders for security for costs granted in 17 actions commenced by Geophysical Services Incorporated (GSI) amounting to a combined total of $1,910,550.24. The Court applied section 254 of the Alberta Business Corporations Act, RSA 2000, c B-9 as “the sole standard applicable in a security for costs action against a corporate plaintiff.” The test under section 254 has two parts:
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The defendant must establish on a balance of probabilities that a corporate plaintiff likely will be unable to pay the costs of a successful defendant; then
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The court will consider discretionary factors to determine if it would be unfair to require security for costs to be paid.
GSI argued that the test under section 254 did not allow the Court to consider the estimated collective costs of all the defendants in the multiple actions. The Court disagreed, and held that section 254:
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although typically applied in the context of a single action, does not require such a narrow reading;
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is a “remedial provision that should be read in a broad, purposive fashion”;
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“is broad enough to permit the Court to consider the overall impact of costs awards to successful defendants in other actions that have been brought by a corporate plaintiff.”
If a “defendant in one action can establish that either it, a co-defendant in that action, or a defendant in another action brought by the plaintiff will be unable to recover its costs if successful”, the Court may award security for costs. The award may include costs for past steps. However, costs for interlocutory applications should be excluded as such costs are generally payable forthwith. If more than one defendant chooses to be represented by the same law firm, security for costs will be a single award for all of those parties, though will reflect an increased scope of work.
The Court also advocated for a practical approach to evidence in a security for costs application. GSI argued that evidence from one application should not be considered in the appeal of another application. The Court disagreed, and held that the goals of fair and timely justice, as well as a lack of prejudice to GSI, meant that the Court could consider evidence from all of the applications on appeal. Ultimately, the Court upheld the Chambers decision with a modest reduction to a total amount of security of $1,434,164.50.
