WestJet v ELS Marketing Inc, 2016 ABQB 172

Court of Queen’s Bench of Alberta Citation: WestJet v ELS Marketing Inc, 2016 ABQB 172 Date: 20160324 Docket: 1001 00525 Registry: Calgary Between: WestJet Applicant - and - ELS Marketing Inc., Core Logistics International Inc., Core Logistics International Inc. c.o.b.a. ELS Marketing Limited Partnership and ELS Marketing Limited Partnership Respondents _______________________________________________________ Memorandum of Decision of the Honourable Mr. Justice J.T.

McCarthy _______________________________________________________ Introduction [ 1 ] WestJet brought an action against the Respondents in contract, and the Respondents counterclaimed. WestJet obtained judgment of $2,233.632.20 and costs of $55,447.85 in the main action following a

summary trial and appeal. The counterclaim remains to be determined. On this application, WestJet seeks an Order requiring the Respondents to post security for its judgment and costs, as well as security for costs in the amount of $25,000 for the trial of the counterclaim, together with other related relief.

Factual Background [ 2 ] WestJet is a partnership established pursuant to the laws of Alberta. It provides air transportation services and operates aircraft to carry freight, cargo and mail, among other things, between points in Canada and points outside of Canada. [ 3 ] ELS Marketing Inc. and Core Logistics International Inc. are Ontario and federal corporations, respectively. ELS Marketing Limited Partnership is registered as a limited partnership in Ontario, with Core Logistics International Inc. identified as the general partner.

ELS Marketing Inc., Core Logistics International Inc. and ELS Marketing Limited Partnership (collectively “ELS”) acted as a general sales agent for WestJet to provide freight, cargo and mail services. ELS states it does not have offices outside Ontario. [ 4 ] WestJet and ELS entered into an agreement on or about October 5, 2005 for ELS to provide sales and handling services for freight, cargo and mail, and WestJet would carry such freight, cargo and mail on behalf of ELS (the “Agreement”).

Pursuant to the Agreement, ELS used WestJet’s services and airplane cargo space to generate revenue, and was required to pay WestJet for its carriage services. [ 5 ] WestJet commenced this Action against ELS on January 13, 2010, and ELS defended and counterclaimed. [ 6 ] WestJet was granted judgment against ELS on November 13, 2013 in the amount of $2,233,632.30, plus costs later assessed at $55,447.85 (the “Judgment”) following a

summary trial. The contractual counterclaim brought by ELS was dismissed. The trial decision is reported at WestJet v ELS Marketing Inc , 2013 ABQB 666 . On appeal, the Court of Appeal upheld the Judgment in the main action and set aside the dismissal of the counterclaim, ordering that the whole counterclaim was to proceed to trial: 2014 ABCA 299 ; leave to appeal to SCC denied 36157 (March 26, 2015).

In its decision, the Court of Appeal also denied ELS’ request for a stay of the Judgment pending trial of the counterclaim, and later denied ELS’ request that the Court reconsider whether a stay should be granted: 2014 ABCA 372 . All avenues of appeal have been exhausted. [ 7 ] In its brief Counterclaim, ELS seeks set off, relying on certain paragraphs of the Statement of Defence. In its Statement of Defence, ELS alleges that WestJet improperly terminated an agreement between the parties, resulting in a loss it estimates to be millions of dollars.

The particulars of the damages and causes of action are not specified, although in response to a Request for Particulars, ELS approximated its damages to be $7 million. [ 8 ] WestJet has taken steps to enforce the Judgment, but as of the date of this Application, says it has yet to receive any significant payment towards it. It complains that ELS has had the benefit of millions of dollars for approximately six years, making WestJet an unwilling creditor.

WestJet notes that its ongoing collections activities appear to have attached to the equivalent of approximately 1% of the Judgment, but as of July 2015, WestJet had yet to receive any funds. ELS says this is a misleading statement of the findings at trial, and points to excerpts from the Judgment for what it says is a more accurate statement of the findings. ELS refers to paragraphs 66 and 80, where the trial judge concluded: ...WestJet’s

interpretation of [s.5.2 of the Agreement] was not challenged by ELS and ELS acknowledged having withheld funds that were owing to WestJet. Neither did ELS challenge WestJet’s calculation of the amounts owing pursuant to its

interpretation. ... ... In the result, I find that WestJet has proved its claim for breach of the Agreement and I grant judgment in its favour. ... I do not see that WestJet’s statement is misleading as to the findings at trial; rather, it is WestJet’s perspective about the impact of ELS’ breach of the Agreement that ELS has had the benefit of funds ordered to be paid to WestJet at trial for years prior to trial. [ 9 ] WestJet points to examples of delay and attempts to delay by ELS throughout the course of this action. For example, WestJet submits that ELS: (

a) Cancelled discoveries on four occasions and attempted to cancel the fifth; (

b) Did not serve affidavits or briefs within the timelines set out by the Court; (

c) Refused to sign Orders and a Judgment Roll on the basis that they did not reflect the Court’s ruling, and then maintained that refusal in the face of transcript evidence and reasons for judgment to the contrary; (

d) Counsel relied on a doctor’s note from his client in another action in support of an adjournment request due to physical injury; and (

e) Counsel agreed to personally pay a $5,000 cost award and then refused to pay for nearly 5 months. [ 10 ] ELS objects to some of these allegations, submitting in oral argument with respect to (

a) and (

b) above that neither counsel has filed all documents strictly within the required timelines. ELS states that with respect to (

c) above, it subsequently did sign the Order for the Judgment. With respect to (

d) and (

e) above, ELS notes these items relate to conduct of counsel, not ELS. First, counsel obtained a doctor’s note from a different client which is not improper. Second, counsel was establishing a new firm and did not have $5,000 on hand; when he did, he paid. Counsel for ELS has demanded an apology in respect of (

d) and (e). While I do not give any weight to these items as a basis to impute an intention to delay, WestJet is understandably frustrated and I see no need for an apology to follow. [ 11 ] In further explaining WestJet’s frustration with ELS’ conduct of the main action and Counterclaim, WestJet points to numerous unsuccessful appeals and attempts to stay enforcement of the Judgment, including appealing, attempting to reargue an appeal, and seeking leave to appeal the Judgment to the Supreme Court of Canada, largely in an effort to have the Counterclaim and the main

action finally determined together so that any awards could be set off. Both parties go into some detail about the procedural and filing history in this matter that I do not review in these written reasons.

Suffice it to say that there have been attempts throughout the litigation by ELS to appeal orders and the Judgment, obtain a stay and reargue an appeal in an effort to avoid a judgment in the main action or delay enforcement of the Judgment, pending a determination of the Counterclaim. [ 12 ] WestJet references a letter from ELS’ counsel, attached to WestJet’s affidavit as an exhibit, where counsel states that ELS has no assets in Alberta, although ELS provided no evidence or documentation to support that statement.

ELS includes in its materials a copy of a sworn affidavit filed on behalf of ELS in the Court of Appeal in support of its Application for a Stay, where Frank Esposito, Partner of ELS Marketing Inc., deposes that “[a]ll of ELS’ exigible assets are located in the Province of Ontario”. ELS argues that sworn statements in an affidavit are evidence, and that it is not required to lead evidence in WestJet’s application. [ 13 ] While ELS is not required to lead evidence as a respondent, it is required to prove any facts upon which it seeks to rely. In that regard, although Mr.

Esposito’s sworn statements are evidence, it would assist the Court in determining the weight and assessing the veracity of that evidence if there were financial statements or other documentation provided in support of his statements about ELS’ assets or financial circumstances. If ELS relies on the assertion that it has no assets in Alberta or would be unable to proceed with the Counterclaim in the event it is ordered to provide security for judgment, it must provide evidence sufficient to satisfy this Court of that fact on a balance of probabilities.

In argument, ELS reiterated that it has no assets in Alberta, but otherwise did not make any submissions on its financial circumstances or the potential effects of an order granting security for judgment. [ 14 ] WestJet has obtained limited financial disclosure from ELS, including a 2013 Profit and Loss Statement and unaudited Financial Statements from 2011 for ELS Marketing Limited Partnership, that it filed as exhibits to its affidavit in support of this Application. As well, WestJet has provided corporate searches for a number of entities as evidence in this Application.

WestJet argues that these documents and the relationship among entities establish that ELS is diverting assets. ELS argues there is no evidence to establish that assets are being sheltered. [ 15 ] WestJet submits that an unaudited Profit and Loss Statement produced by ELS for 2013 demonstrates that ELS may be diverting assets. WestJet says it shows $607,500 was transferred to third parties in 2013, when the general revenue was only $241,837.11.

According to WestJet, the transfers include a $37,500 “investment” in a golf course, $250,000 invested in Airco (which appears to be a related entity), and $320,000 in dividends distributed. ELS notes these are entries in a balance sheet so show only what the balances were as at December 31, 2013, and not amounts that were necessarily transferred in 2013. For example, the $37,500 “investment” in a golf course shows up as an asset, not an expense. [ 16 ] A review of the 2013 Profit and Loss Statement filed on this Application reveals both a “Profit and Loss Statement” and a “Balance Sheet”.

ELS is correct in noting that the golf course investment, the investment in Airco and the dividends distributed are balance sheet items, not expenses, and there is no indication of when they accrued.

The 2013 Profit and Loss Statement is not conclusive as to whether ELS transferred those funds in 2013, or if they were an asset acquired previously (in the case of the golf course), a liability previously paid (as in the case of the investment in Airco), and dividends previously distributed. [ 17 ] Corporate searches included in evidence on this Application show that the principals of ELS, Brian Gomes and/or Frank Esposito, are also the officers of a number of related entities, including Airline Associates Group Inc. (“AAG”), Core Travel Inc., 1628554 Ontario Ltd., 1628553 Ontario Ltd., Priority Air Cargo Inc., 1351430 Ontario Ltd. and Airco Transportation Services Inc. (the “Known ELS Related Entities”).

WestJet alleges that the available information appears to indicate ELS is sheltering its assets from collections through the use of a complex web of corporate entities, including the Known ELS Related Entities, and through family trusts. [ 18 ] The 2011 unaudited Financial Statements of ELS Marketing Limited Partnership are more instructive as to ELS’ financial position than the 2013 Profit and Loss Statement. In the Statement of Partners’ Capital for the year ended December 31, 2011, family trusts, ELS Marketing Inc. and Core Logistics International Inc. are all listed with their capital interests.

In the Notes to Financial Statements, related party transactions are listed, as are amounts due from and to related parties. The Known ELS Related Entities are all identified in these Notes with amounts due from or to them, and/or in the Notes disclosing related party transactions. Further, their relationships as related parties to ELS Marketing Limited Partnership are explained.

While it is not clear from these related party Notes that assets are being sheltered, it is clear that, in the aggregate, millions of dollars have been moved between ELS and the Known ELS Related Entities and that a significant amount of money is due on demand to ELS from them. [ 19 ] Debts are identified in the Notes to Financial Statements from Known ELS Related Entities that are due on demand, including one for $4.217 million and another for $1.45 million as of 2011.

WestJet argues that the evidence suggests the Known ELS Related Entities would be able to pay these debts if called upon, citing as an example that AAG owns a large commercial space in Mississauga, Ontario. In response to Notices of Garnishment, the Known ELS Related Entities have responded: “While the garnishee corporation is related to the Debtor, no money is due to the debtor”.

There is no indication of whether demand has been made for any debts due on demand, and no explanation from ELS as to why these demand debts could not be called upon to satisfy the Judgment or as a source for security. [ 20 ] WestJet argues that ELS has assets to post the security requested, but those sources are protected from enforcement through corporate veils and family trusts. Before the Court of Appeal in 2014, WestJet notes that ELS admitted it was about to receive a payment in excess of $1 million from Canada Post.

WestJet could not garnish those funds due to the Garnishment, Attachment and Pension Diversion Act , RSC 1985, c G-2, s 5, which excludes garnishment payments to corporations from Canada Post. There was no evidence before me that any portion of the $1 million received from Canada Post was paid to WestJet to satisfy part of the Judgment. [ 21 ] WestJet has taken steps to collect financial information from ELS using Alberta’s enforcement mechanisms.

However, ELS had not, as of the date of this Application, completed a Financial Statement of Debtor statutory declaration and has refused to attend for Questioning in Aid of Enforcement in accordance with the Alberta Civil Enforcement Act , RSA 2000, c C-15. [ 22 ] ELS alleges it has no exigible assets in Alberta, and its counsel has advised WestJet to enforce the Judgment in Ontario. WestJet registered the Judgment in Ontario on April 9, 2015. WestJet contends it was effectively prevented from enforcing the Judgment

from the date it was issued to the date the Supreme Court of Canada denied ELS leave to appeal because of Ontario’s provision automatically staying enforcement pending appeal. Further, counsel for ELS in Ontario has taken the position that the version of the Judgment registered there is flawed, as it does not reflect that the Counterclaim is permitted to proceed as a result of the decision of the Alberta Court of Appeal. WestJet argues that this only serves to increase the expense and delay associated with enforcing the Judgment in Ontario, providing no tangible benefit to ELS.

Issues [ 23 ] The issues to be determined are: 1. Should ELS be required to pay security for costs prior to proceeding with the trial of its Counterclaim? WestJet seeks security for costs in the Counterclaim in the amount of $25,000. ELS has agreed to provide the requested $25,000 as security for costs of the trial of the Counterclaim. 2. Should ELS be required to pay security for judgment prior to proceeding with the trial of its Counterclaim? WestJet seeks security for its Judgment in the amount of $2,233,632.30 for the damages awarded, in addition to costs of $55,447.85. ELS disputes this request.

Analysis and Decision A. Security for Costs [ 24 ] WestJet seeks an order for security for costs of defending the Counterclaim in the amount of $25,000. ELS has agreed to post the requested security by payment into its lawyer’s trust account. [ 25 ] Security for costs is discretionary. Rule 4.22 of the Alberta Rules of Court , AReg 124/2010 (the “ Rules ”) establishes a two- step process for determining whether security for costs should be ordered. First, the court must consider the following factors set out in Rule 4.22: (

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. [ 26 ] Second, the court should ask itself whether it is just and reasonable to grant security for costs: r 4.22; Attila Dogan Construction and Installation Co Inc v AMEC Americas Limited , 2011 ABQB 175 at paras 24-25 . [ 27 ]

Section 254 of the Alberta Business Corporations Act , RSA 2000, c B-9 (“ BCA ”), also permits the Court to grant security for costs as follows: 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. [ 28 ] This Court has considered whether the test set out in Rule 4.22 and discussed in Attila Dogan applies, or whether

section 254 of the BCA is applicable in Provalcid Inc v Graff , 2014 ABQB 453 . There, the Court concluded that “[i]f the respondent is a body corporate, the specific provision, viz , BCA s 254 applies. In all other cases not subject to other statutory enactments, Rules r 4.22 applies”: para

Section 254 applies to the two Respondents on this Application that are corporations, while Rule 4.22 applies to the limited partnership. The Court’s considerations under each of

section 254 and Rule 4.22 are slightly different, although it is not necessary to further delve into a discussion of the considerations here. A positive finding under either the Rules or the BCA would result in one or more of the Respondents being required to post security for costs. [ 29 ] It is clear that this Court has the discretion to grant security for costs. Given the parties’ agreement on this issue, I find it appropriate to order security for costs in the amount of $25,000 in respect of the trial of the Counterclaim to be paid into ELS’ counsel’s trust account pending determination of the Counterclaim or further order of this Court. B. Security for Judgment

[ 30 ] In addition to seeking security for costs for defending the Counterclaim, WestJet applies for security for the Judgment, including costs, in the main action. ELS opposes that request. [ 31 ] ELS argues this Application is an abuse of process, as it is extreme and unnecessary. ELS says WestJet has other means to enforce its Judgment that are working, and that this Application is therefore frivolous. ELS relies on the Court’s inherent right to prevent the use of its processes for oppressive purposes. [ 32 ] ELS submits that the Application is an abuse of process on the following grounds: (

a) The remedy sought is unavailable in law; (

b) WestJet has a multitude of other means for enforcing the Judgment; (

c) Those means appear to be working; (

d) The Application is an attempt to circumvent those means; and (

e) WestJet says it is concerned with delay, but is causing delay by bringing the Application. [ 33 ] ELS argues this abuse of process “is further aggravated by the attempt to use irrelevant, misleading, incorrect, and improper allegations and aspersions to justify it”. [ 34 ] Given the efforts taken to date by WestJet to obtain Judgment and enforce it in Alberta and Ontario, I am not satisfied that the “other means for enforcing the Judgment” appear to be working, or that WestJet is seeking to circumvent those means. I reject ELS’ argument that this Application is an abuse of process.

I have addressed ELS’ main objections to WestJet’s allegations in my review of the facts above. [ 35 ] I now turn to the two questions that must be answered in order to determine this application: Can the Court grant security for judgment? If so, should the Court do so? Can the Court grant Security for Judgment? [ 36 ] ELS argues that security for judgment is unavailable to WestJet in law. This is so because the Judgment is final, this Court is functus officio and does not have jurisdiction to award security for judgment.

This argument does not consider that the Counterclaim remains before the Court for determination, and it is in the context of the Counterclaim where WestJet seeks payment of security for judgment in the main action. In response, ELS submits that the Counterclaim is a separate action from the Judgment obtained by WestJet. The characterization of the Counterclaim for the purpose of granting security for judgment is considered below. [ 37 ] This Court may grant security for judgment pursuant to its general authority to impose terms, conditions and time limits, and to stay all or part of an action: Rules , r 1.4(2)(

e) and (h); 1400467 Alberta Ltd v Adderley , 2014 ABQB 439 (“ 1400467 ”) at para 48. In 1400467 , Veit J. explained that a court “will order security for judgment only sparingly and in exceptional circumstances”: para 49 [citations omitted]. Exceptions to this rule apply where, for example, security or an injunction is required for the preservation of assets or to protect the processes of the Court: para 49. [ 38 ] ELS submits that WestJet’s request for security for judgment in this case is distinguishable from decisions where such security was granted. ELS argues that security for judgment has been granted where: (

a) 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 (

b) 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. [ 39 ] In both these situations, security for judgment is sought in the same action while either the judgment or an appeal is pending, not as here, where the Judgment is final and enforcement action may be taken. [ 40 ] ELS argues that in this case, the Counterclaim is a separate action from the main action in which the Judgment was granted, relying on Rule 3.58, which specifies: “A counterclaim is an independent action”.

This differs from the position ELS took before the trial judge, who summarized ELS’ previous position in the Judgment: Further, ELS argues that it would be inappropriate for this Court to adjudicate WestJet’s claim without also determining ELS’ counterclaim as the Agreement and the Renewal Agreement are parts of the same contractual relationship and the two claims are therefore intertwined.

ELS asserts that equity does not permit a claim and a counterclaim for equitable set off to be heard separately when the claim and the cross-claim are closely intertwined and cites the following decisions: ... [citations omitted]: para 57. [ 41 ] In their annotation of the Rules , Stevenson and Côté explain that Rule 3.58 impacts on when a main action and counterclaim will be tried together, noting that although a counterclaim is an “independent action” under the Rules , it may still be related to a main action: The previous Rules contemplated that the counterclaim would be tried with the claim, unless they were severed.

The criteria for doing that are not technical, but practical and somewhat flexible. If the two claims are linked, as where the defendant claims set-off, the counterclaim should not be tried separately. The position is less clear now that a counterclaim is an “independent action”. If a set-off is claimed under R. 3.59 it will still often be convenient to try them together if they are related: WA Stevenson & JE Côté, Alberta Civil Procedure Handbook , vol 1 (Edmonton: Juriliber, 2015) at 3-86 [footnotes omitted].

[42] Rule 3.58 has been considered in the context of an application to dismiss an action for long delay. In Omega Developments Incv Canada Safeway Ltd, 2012 ABQB 564, the Court considered whether, on an application to dismiss an action for long delay, steps takenin the counterclaim could be considered to materially advance the main action. The Court did not determine that issue, but distinguishedbetween an independent action and a separate action: Rule 3.58 states that a counterclaim is an independent action.

However, in practice although not reflected expressly in the Rules of Court,they are tied together more closely than two separate actions.

Where there is a claim and counterclaim the parties hold concurrentquestioning (formerly discoveries) and set the matter down for trial concurrently, without the necessity of an order which would berequired for two entirely separate actions: at para 6. [43] ELS also notes that the previous Rules of Court permitted an order for security for costs against a respondent on the groundthat the respondent had another judgment given against it in another action, but only if the first action was “for the same cause” as thesecond action.

This ground is left out in the current Rules as a basis for granting security for costs. ELS argues this means an unpaidjudgment in another action cannot be a ground for any other type of security, not just for security for costs. I am not persuaded by thisargument for two reasons: first, the enumerated grounds for granting security for costs are not a comprehensive list. Second and in anyevent, there is an arguable issue about whether Rule 4.22 applies to security for judgment: 1400467 at para 48.

While grounds forgranting security for costs are enumerated in the Rules, grounds for granting security for judgment are not. [44] In the present case, the Counterclaim seeks set off, relying on certain paragraphs in the Statement of Defence. The main actionand the Counterclaim arise out of a contractual relationship among the parties. Judgment was granted and part of the Counterclaim wasdismissed following a

summary trial. The dismissal of part of the Counterclaim was reversed on appeal, with the Court of Appealcommenting: There was perhaps some lack of clarity on the proposed scope of the

summary trial. The application for a

summary trial and the ordersaid the “main claim” would be tried. The appellants [ELS] resisted the severance of the claim and counterclaim that would make thatpossible, but were unsuccessful. It was not, however, unreasonable for the appellants to conclude that, in any event, the counterclaimbased on early termination was not to be summarily tried. The trial judge dismissed this claim because there was no evidence ofdamages, without deciding the live issue of whether there was an early termination.

The absence of evidence of damages is easilyexplained by the appellants’ reasonable belief that the counterclaim was not to be tried: Appeal decision at para 3. [45] Key to ELS’ position on this Application is a finding that the main action and the Counterclaim are two entirely separateactions. I conclude they are not. ELS seeks a set off, alleging that WestJet has breached the very contract that was in issue in the mainaction. The main action and the Counterclaim are related in substance, and have a common procedural history.

The Counterclaim is stillpending as a result of the Court of Appeal’s determination that it was not unreasonable for ELS to believe that the counterclaim was notto be tried. I find it is within this Court’s general authority to grant security for judgment in this case if the circumstances are appropriate.I now turn to those circumstances.

Should the Court grant Security for Judgment? [46] While an order for security for judgment is not routine, a court may make such an order where it is fair and just to do so,considering all surrounding circumstances: 1400467 at para 50. [47] Circumstances for granting security for judgment were discussed in two Court of Appeal decisions in Vaccaro v Twin CitiesPower-Canada, ULC, 2013 ABCA 252 (“Vaccaro 2013”) and Vaccaro v Twin Cities Power, LLC, 2014 ABCA 146 (“Vaccaro 2014”)(collectively “Vaccaro”).

The action was brought against Twin Cities Power-Canada U.L.C. (“Twin Cities Canada”) and a number ofAmerican defendants, including the parent company of Twin Cities Canada and other alleged affiliates (“Twin Cities USA”) forwrongful dismissal and payment of bonuses owing.

The plaintiff had an existing judgment against Twin Cities Canada for $1,376,726 inrespect of bonuses owing, and his further claims for a higher percentage bonus and damages for wrongful dismissal were to be assessedat trial. [48] Twin Cities Canada and Twin Cities USA appealed the judgment, and the plaintiff sought security for costs of the appeal, aswell as security for the unpaid judgment: Vacarro 2013. Security for costs was awarded against all of the appellants, and Twin CitiesCanada was ordered to post security for judgment.

In Vacarro 2013, O’Ferrall J.A. outlined factors to consider in deciding whether toorder security for judgment including: -where there was no dispute the defendant had enjoyed the benefits of what the plaintiff was seeking compensation for, security wasrequired in order to be able to continue to defend a claim: para 10, citing Aero Aviation Inc v Dac Aviation International Ltée, 2010ABQB 577 (Master) (“Aero Aviation”) ; - where the appellant had no assets in the jurisdiction and the appeal was questionable, security for judgment at trial, costs of the trialand costs of the appeal were required in order to continue with an appeal: para 11, citing Richland Construction Inc v ManningwaDevelopments Inc, 1996 CarswellBC 1767 (CA); and - to encourage respect for the judicial process or avoiding abuse of process, security was required for the entire amount of the claim inorder to continue with a defence of a claim: para 12, citing Hamza v Hamza, 1997 ABCA 263. [49] Justice O’Ferrall relied on Hamza in Vacarro 2013 at para 13: In Hamza, our Court of Appeal cited with approval the following comments of Madam Justice Huddart of the Supreme Court of BritishColumbia in Mooney v.

Orr (1994), (BC SC), 100 B.C.L.R. (2d) 335 (B.C. S.C.), at 351 : A litigant cannot be permitted to use the court to his advantage while effectively disavowing in advance any judgment against him ....(the ordering of the security is) not to enhance the claimants [sic] rights, but to ensure that those reasonable people who pay for the

administration of justice in this province are not affronted by the impotence of the court in the face of those who choose to order their affairs so as to keep all their options for themselves. [ 50 ] While Mooney dealt with a mid-trial Mareva injunction, our Court of Appeal has noted that a Mareva injunction can be a type of security: Hamza at para 25 .

Madam Justice Huddart’s comments above apply equally where security for judgment is sought, and in my view, aptly apply to the present situation between WestJet and ELS. [ 51 ] In 2014, the plaintiff, Vacarro, sought security for costs and for judgment against Twin Cities as a condition of their continued defence, as well as other relief, before a Chambers judge: 2014 ABQB 56 (the “Chambers Decision”). He sought security against Twin Cities Canada on the basis that, having failed to pay the judgment in his favour, they ought not to be permitted continued access to the court process.

He also sought security against Twin Cities USA on the basis that it was responsible for Twin Cities Canada’s obligations to him: Chambers Decision at para 127. The Chambers judge ordered all defendants to post security for costs and for judgment in the amount of the existing judgment: Chambers Decision at paras 154-155. [ 52 ] In Vaccaro 2014 , Rowbotham J.A. dismissed an application by Twin Cities USA to stay the Chambers Decision where security for judgment was ordered.

By this time, the judgment for unpaid bonuses against Twin Cities Canada was final as it failed to post security for judgment and its appeal was dismissed: para 3. In applying the test for a stay, Rowbotham J.A. concluded there was an arguable issue on appeal and commented that “[t]he remedy of securing the entire amount of the earlier judgment is somewhat novel, given the alternative options available to a judge for pre-judgment relief...”: para 7. She found irreparable harm was not established, as Twin Cities USA had “ample cash available to it”: para 8.

Further, the balance of convenience did not favour granting a stay as “[t]he Twin Cities group of entities has shown a willingness to play “catch me if you can” regarding the payment of the earlier judgment”: para 10. [ 53 ] There are similarities between this case and the circumstances in Vaccaro , including that the Judgment and associated costs remain outstanding, and that ELS has no exigible assets in Alberta. Further, ELS’ actions in this case also demonstrate a willingness to play “catch me if you can” as WestJet attempts to enforce the Judgment in Alberta and Ontario.

There is an unfairness in permitting ELS to pursue its Counterclaim and avail itself of every right of appeal and request for re-argument at each step in this action, but not fulfil the obligations imposed by the Judgment ordered by this Court. [ 54 ] ELS earned revenue through WestJet’s services.

Like in Aero Aviation , another consideration in deciding whether to grant security for judgment is that ELS benefitted from services it had not paid for: at para 23. [ 55 ] A final consideration in determining whether to grant security for judgment is whether, in doing so, a litigant may be precluded from advancing a meritorious claim or defence. In Vacarro , the failure to post security for judgment resulted in the dismissal of Twin Cities Canada’s appeal: Vacarro 2013 at para 3. The test is whether ELS has the ability to raise funds for the litigation: Dagher v Thompson , 2011 ABQB 499 at para 50 .

There, this Court held: Indeed the Master correctly identified the test as being whether or not Dagher has the ability to raise funds for the litigation. She found Dagher failed to give evidence that he cannot raise the money to pay a security for costs order and failed to provide evidence who is financing the litigation nor how it is being financed.

In respect to the possibility whether Dagher would suffer undue prejudice to be able to continue the action, the Master found the evidence in that area to be insufficient: para 50. [ 56 ] In this case, ELS did not argue before me that it would not be able to raise funds to satisfy an order for security for judgment, or that it is impecunious. ELS has not satisfied me that it would not be able to post security and pursue the Counterclaim if security is ordered.

Indeed, I am satisfied that there were demand debts owed to ELS from the Known ELS Related Entities as of 2011 that would be sufficient to satisfy the Judgment. [ 57 ] In all of the circumstances, I find this an appropriate case to grant security for the Judgment as a condition for ELS to continue with its Counterclaim. Conclusion [ 58 ] WestJet’s application is granted, and the following relief is ordered: (

a) The Respondents are directed to post security for: (

i) WestJet’s unpaid Judgment in this action in the amount of $2,233,632.30, less any amounts collected, to be paid into Court; (ii) WestJet’s unpaid Bill of Costs in this action in the amount of $55,447.85 to be paid into Court; and (iii) Security for costs of the Trial of the Respondents’ Counterclaim in the amount of $25,000 to be paid into ELS’ counsel’s trust account as agreed (collectively, the “Security”) within thirty days of the date of this Order. (

b) The Security is to be held until either the parties agree in writing otherwise or on further order of this Court. (

c) Until the Security is paid, all proceedings in the action are stayed, with the exception of collections proceedings being pursued by WestJet. (

d) If the Security is not paid within the time period provided for by this Order, the Respondents’ Counterclaim shall be dismissed without further order.

[ 59 ] The balance of the relief sought by WestJet is dismissed. [ 60 ] If the parties are unable to agree, costs may be spoken to within 60 days of the date of this decision. Heard on the 22 nd day of October, 2015. Dated at the City of Calgary, Alberta this 24 th day of March, 2016. J.T. McCarthy J.C.Q.B.A. Appearances: Don Dear, Q.C. and Blake Hafso McLennan Ross LLP for the Applicant Robert B. White, Q.C. McKay White Robert B. White, Q.C. & Company for the Respondents