Court of Appeal Affirms Security for Judgment Alive and Well

Security for judgment is an exceptional remedy only granted in exceptional circumstances. The court prefers to leave debt collection under the auspices of the Civil Enforcement Act. Nevertheless, exceptional circumstances do exist, like misrepresenting your assets in an attempt to avoid collection. The Alberta Court of Appeal has confirmed that security for judgment is alive and well in its recent decision of Vaillancourt v Carter, 2017 ABCA 282 [Vaillancourt].

Background

Ms. Anne Marie Vaillancourt sued Mr. Kenneth R. Carter to enforce her ownership interest in a series of Jenny Craig franchises. The litigation lasted 12 years, but a judgment was finally rendered against both Carter and his company Encott Enterprises Corp. Vaillancourt was awarded $1,097,234 plus interest and costs. Perhaps unsurprisingly, Carter was in no hurry to satisfy the judgment. Vaillancourt commenced civil enforcement proceedings, which included the swearing of a Form 13 Financial Statement of Debtor by Carter. Carter appealed the trial decision and Vaillancourt applied for both security for costs and security for judgment.

Decision of the Honourable Mr. Justice Brian O'Ferrall

Justice O'Ferrall heard the application for security for costs and security for judgment and granted both.

Before granting security for judgment, Justice O'Ferrall emphasized the exceptional nature of the remedy. He emphasized that "[h]istorically courts have been reluctant to grant security for judgment, holding that such an exceptional remedy may preclude appellants with a lack of financial resources from pursuing their appeals." He further emphasized as well "courts have held that recovery of judgment is more appropriately dealt with through enforcement proceedings" and that "[l]itigants cannot view this court as an agency for the collection of trial costs or as a way to circumvent the ordinary enforcement process."

However, Justice O'Ferrall canvassed the case law and listed some notable exceptions to the general rule against security for judgment:

  1. where there are no assets in the jurisdiction against which to enforce a judgment and the appeal has little merit;
  2. to preserve assets that would otherwise be destroyed, disposed of, or dissipated prior to the resolution of the dispute; and
  3. to encourage respect for the judicial process and avoid abuse of process [Citations omitted].

In the case before him, Justice O'Ferrall was most concerned with encouraging respect for the judicial process and avoiding an abuse of process. Also at play, though of less significance to Justice O'Ferrall, was avoiding the disposition of assets prior to ultimate resolution.

What followed was a scathing indictment of the respondent's conduct. O'Ferrall wrote:

Mr. Carter has gone to elaborate lengths to shield his investments and arrange his affairs to appear as though he does not have the financial means to satisfy the judgment against him or comply with a security for judgment order… those who deliberately make themselves judgment-proof may be required to post security which others would not have to post.

Furthermore, Justice O'Ferrall commented on the respondent's conduct before the court, taking exception to the "grossly inaccurate" Form 13 sworn by Carter. He wrote:

By attempting to rely on inaccuracies in Form 13 to defeat Ms. Vaillancourt's application for security for judgment, Mr. Carter has clearly misled the court with regards to his financial position and shown a willingness to risk prosecution for perjury in order to do so.

In the end, Carter's attempt to make himself judgment proof combined with his inaccurate statutory declaration constituted exceptional circumstances to warrant security for judgment.

Practice Points

While Vaillancourt will likely not open the flood gates to more security for judgment applications in an appellate setting, it serves as a valuable reminder that exceptional circumstances do exist. While the court may be hesitant to act as a collection agency, encouraging respect for the judicial process and avoiding abuse of process for those who seek to make themselves judgment proof may constitute exceptional circumstances for this exceptional application.