A very recent decision helps clarify our thinking about inability to pay as a test for security for costs.
On an application to make a plaintiff or appellant post security for costs, often one or both parties argue about assets of the plaintiff or appellant. The result is often frustrating or baffling, with an apparent Catch-22. The applicant seeking security says that the respondent has no assets, so any costs order against the respondent cannot be enforced. Hence security is needed. The respondent says that he or she has no assets and so cannot put up security. So security would unfairly bar the suit or appeal. The ground for granting security seems to become the ground to deny security. (Speaking very generally, the latter seems to me illogical.)
But even if inability to post security were sometimes a logical defence if, properly framed, there is not a complete contradiction. The two opposing “inability” questions are somewhat different. Here are three substantive differences:
a. The applicant for security need only show that execution (enforcement) of any costs award in his or her favor would likely fail. Or that it would force the costs recipient to try to enforce the costs award in another jurisdiction. Complete absence of assets or income need not be shown.
b. “Inability” to post security requires looking broadly at ability. Is there any way that the person asked for security could obtain any kind of security? Could friends or associates give or lend security? Who is funding the litigation? Ability to fund a suit or appeal and inability to post security are inconsistent with each other. Security can take many forms, such as a company’s shareholders agreeing to be personally liable for any later costs award against the company.
c. The relevant times are different. Ability to post security is about posting security now. At the time of the application for security, the lawsuit itself, or other circumstances, may tie up the plaintiff or appellant’s assets. But inability to enforce a later costs award is about ways of later enforcing collection, often after the suit or appeal is over. At that later time, the assets may not be tied up any more. Or the person seeking costs (and security) may be able to enforce payment by some kind of set-off. Or that party owed costs or the court may then control sufficient assets. This latter circumstance about timing is relied on in Hicks v. Gazley 2020 ABCA 239, Edm 2003 0084 AC (one JA Jun 16) (¶ 13).
Though the facts in the Hicks case may be narrow, it helps one see the real issues more clearly.
– Hon. J.E. Côté
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Justice Côté recently retired from the Court of Appeal of Alberta and currently acts as an arbitrator, mediator, or referee under Rules 6.44 and 6.45 of the Alberta Rules of Court.
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