Alberta Court Of Appeal Orders Trustee To Post Security For Costs

On January 29, 2020, the Alberta Court of Appeal (the “Alberta CA”) released its decision in PricewaterhouseCoopers Inc. v Perpetual Energy Inc.1 (“Perpetual Energy”), granting applications requiring a trustee in bankruptcy (the “Trustee”) to post security for costs on appeals brought by the Trustee. Before the Alberta Court of Queen's Bench (the “ABQB”), the Trustee had sought to set aside a transaction for public policy reasons and as a transfer at undervalue under section 96 of the Bankruptcy and Insolvency Act2 (the “BIA”) and had also alleged, among other things, oppression and breach of fiduciary duty by a director of the bankrupt and by two corporations and a trust previously related to the bankrupt (collectively, the “Defendants”). When the ABQB struck all the Trustee's claims other than its transfer at undervalue claim in a January 13, 2020 decision,3 the Trustee appealed and the Defendants brought applications before a single judge of the ABCA for security for costs.

The Defendants made their applications pursuant to rule 14.67(1) of the Alberta Rules of Court (the “Alberta Rules”),4 which make rule 4.22 of the Alberta Rules governing security for costs in ABQB proceedings also applicable in Alberta CA proceedings. Rule 4.22 reads:

“4.22 The Court may order a party to provide security for payment of a costs award if the Court considers it just and reasonable to do so, taking into account all of the following:

(a) whether it is likely the applicant for the order will be able to enforce an order or judgment against assets in Alberta;

(b) the ability of the respondent to the application to pay the costs award;

(c) the merits of the action in which the application is filed;

(d) whether an order to give security for payment of a costs award would unduly prejudice the respondent's ability to continue the action;

(e) any other matter the Court considers appropriate.”

The Defendants also applied under section 254 of the Alberta Business Corporation Act5 (the “ABCA”), which reads:

“254 In any action or other legal proceeding in which the plaintiff is a body corporate, if it appears to the court on the application of a defendant that the body corporate will be unable to pay the costs of a successful defendant, the court may order the body corporate to furnish security for costs on any terms it thinks fit.”

Justice Veldhuis noted that the Alberta case law was split on whether the Alberta CA could grant security for costs under either the...