McLennan Ross was recently successful in obtaining a Security for Judgment Order to protect the interests of a client involved in lengthy litigation.
It is not uncommon for one party which has breached a contract with another to keep the funds that are owed and force the victim party to sue for recovery. The irony is that the longer the litigation progresses the more of the defendant’s funds (and arguably the plaintiff’s funds) are consumed by the litigation.
It can also be frustrating for a plaintiff to litigate against a party who seeks to rely on the many and varied procedural steps available in the Rules of Court, yet refuses to follow Court Orders and Judgments. One lesser known, yet effective, remedy for these situations is Security for Judgment.
An Order for Security for Judgment can require a defendant to post the full value of a plaintiff’s judgment as security with the Court, failing which that defendant will not be permitted to proceed further in the litigation. Traditionally, Security for Judgment has been ordered in circumstances where:
- a plaintiff applies before trial to require a defendant to post security for the amount claimed as a condition for defending against the claim; or
- a respondent on an appeal applies to require an appellant to post security for the judgment granted by the lower court as a condition for proceeding with the appeal.
WestJet v ELS Marketing Inc.
In the recent decision of WestJet v ELS Marketing Inc,, the Court of Queen’s Bench of Alberta confirmed that list is not closed. Rather, the Court retains a general authority to order Security for Judgment in circumstances where it is fair and just to do so considering all surrounding circumstances.
This decision followed years of litigation involving cross claims between the parties. The Plaintiff airline initiated the claim after the Defendant cargo company took the benefit of the airline’s services and then kept the airlines’s share of the revenues. The cargo company also brought a counterclaim alleging breach of contract and a breach of the Competition Act. After years of delays in the litigation the airline successfully obtained judgment against the cargo company following a summary trial in an amount in excess of $2 million. Following that judgment the cargo company brought a number of appeals and made numerous attempts to stay enforcement of the judgment. Ultimately the judgment was upheld and the efforts to stay the judgment were all unsuccessful.
The cargo company failed to pay the judgment and took steps which had the effect of frustrating the airline’s efforts to collect. As a result, the airline brought an application seeking to require the cargo company to post security for the full judgment amount, prior to their being able to proceed with the counterclaim.
In granting the application the Court noted that, while an order for Security for Judgment is not routine, it can be ordered in situations where a litigant seeks to use the court to their advantage, yet refuses to comply with that same court’s judgment, for example:
• where a litigant avails themselves of every right of appeal and request for re-argument in the litigation, yet inexplicably fails to fulfil the obligations imposed by a judgment in that same litigation;
• where there is no dispute the defendant had enjoyed the benefits of what the plaintiff was seeking compensation for, yet refuses to pay;
• where an appellant has no assets in the jurisdiction and their appeal is questionable; or
• where Security for Judgment is needed to encourage respect for the judicial process or prevent abuse of process.
This case reiterates that Security for Judgment is a useful option to consider when faced with a litigant who is seeking to frustrate or delay judgment and collections on a claim.