McMorran v Hockett, 2016 ABQB 279

Court of Queen ’ s Bench of Alberta Citation: McMorran v Hockett, 2016 ABQB 279 Date: 20160516 Docket: 1501 13062 Registry: Calgary Between: Craig McMorran and Marcer Ranching Limited Plaintiffs - and - Dennis Hockett and 977230 Alberta Ltd. Defendants _______________________________________________________ Memorandum of Decision of A. R. Robertson , Q.C., Master in Chambers _______________________________________________________ Introduction [ 1 ] The defendants apply to strike the claim under rule 3.68 of the Alberta Rules of Court.

They say the plaintiffs’ description of the facts do not disclose a cause of action notwithstanding the delivery of the replies to two separate requests for particulars and an amended statement of claim that was filed just before the application was heard. [ 2 ] In the alternative, they argue that significant security should be posted for costs.

[ 3 ] The plaintiffs argue that their claims are clear, properly pled, and the facts disclose that the defendant Mr. McMorran, who is the principal of the corporate defendant, has assets sufficient to satisfy a costs award. [ 4 ] I have concluded that the claim of defamation must be struck for want of particulars, that the balance of the claim is not struck, and that security for costs should be posted in staged amounts.

Facts [ 5 ] The corporate defendant 977230 Alberta Ltd. (“977”) holds a mortgage on a large real estate development project in British Columbia on Lake Koocanusa, known as the “Sweetwater Project”. The balance owing under that mortgage is in excess of $15,880,000. There is also another mortgage on the project, for a debt in excess of $2 million. An order nisi of foreclosure was granted in the proceedings in British Columbia on June 18, 2015 setting a redemption period expiring December 5, 2015.

This action was commenced by the plaintiffs on November 2, 2015. [ 6 ] In this action, the claims advanced in the original statement of claim were: (

a) unlawful interference with economic interests; (

b) breach of duty of good faith; (

c) breach of duty of care/negligence; (

d) unjust enrichment; and (

e) defamation. [ 7 ] The plaintiffs’ over-arching allegation is that the defendants have deliberately taken steps to interfere with the development of the Sweetwater Project to take advantage of them. [ 8 ] Rather than filing a counterclaim in the British Columbia foreclosure proceedings, the plaintiffs chose to sue in Alberta. Issues [ 9 ] The issues are: (

a) whether causes of action have been set forth in the amended statement of claim such that the application to strike must fail, and (

b) if so, whether security for costs should be required for the plaintiffs to prosecute their claims, and if so then in what amount. Procedural History [ 10 ] The defendants did not initially bring an application to compel particulars. Rather, as is the proper practice, they first served a request for particulars. [ 11 ] No reply was immediately forthcoming to the first request for particulars, served November 27, and the defendants did not wait long to receive an answer. On December 1, 2015, they filed an application to compel particulars, scheduled to be heard December 8.

That was adjourned by consent to December 22, and then to January 4, 2016. The reply to request for particulars was served January 2, 2016. [ 12 ] On January 4, 2016, the plaintiffs apparently agreed that their reply was not sufficient and agreed to a consent order directing further particulars regarding the allegations of interference, discriminatory statements, breach of the duty of good faith, breach of the duty of care, defamation and the economic loss or damage claimed to have been suffered by the plaintiffs.

They served this reply to request for particulars on January 18. [ 13 ] The second reply to request for particulars conflicted with the initial reply to request for particulars in respect of the claim for defamation, as discussed below.

In short, the further reply did not merely expand on the first reply; it changed the allegations significantly as to date, persons hearing the allegations, and apparently location. [ 14 ] The defendants argue that the plaintiffs had, by that point, three opportunities to plead the case by way of the original statement of claim and then the two replies to requests for particulars - and that the plaintiffs still had not pled any cause of action. [ 15 ] This matter first came before this Court for hearing in morning chambers on February 1, 2016.

It was combined with an application by the plaintiffs to compel the defendant Mr. Hockett to answer undertakings. The application to compel answers to undertakings was adjourned sine die , but the application to strike the statement of claim and for security for costs was adjourned to be heard as an (early) special on March 29, 2016.

In order to ensure readiness for the application, the deadlines for briefs set out in Alberta Civil Practice Note 2 were abridged. [ 16 ] The defendants’ brief was filed February 29 and the brief of the plaintiffs’ reply brief was filed March 16, 2016. [ 17 ] In light of their position that no cause of action had been set out, the defendants had not defended the claim. Since no statement of defence had been filed, rule 3.62(

a) of the Alberta Rules of Court allows the plaintiffs to amend their claim without leave of the defendants or the court. [ 18 ] The plaintiffs took advantage of that. The morning of the day the special application was to be heard, the plaintiffs filed an amended statement of claim and served it upon counsel for the defendants - less than an hour before the application was scheduled to be

heard. [ 19 ] The defendants argue that the plaintiffs have now had four opportunities to plead the case. The Amended Statement of Claim Details of the Facts Alleged [ 20 ] The claim for unjust enrichment was abandoned in the amended statement of claim. It is useful to summarize, with some detail, the allegations in the amended statement of claim for the remaining claims (other than defamation, which I will address separately). [ 21 ] The plaintiffs allege that Mr. McMorran met with Mr. Hockett in July 2013 to discuss an extension of the loan agreement was coming due on August 3, 2013, that Mr.

Hockett advised Mr. McMorran that 977230 Alberta Ltd. (“977”) would agree to extend for a further two years, and that Marcer Ranching thereafter continued interest payments. [ 22 ] However, earlier in July Mr. Hockett had offered to purchase the Sweetwater Resort and they had discussed the potential sale. Since mid-September 2013, when it became apparent that no deal would be concluded, Mr.

Hockett “began a course of conduct intended to undermine Marcer’s economic and financial interests and to cause it to be in default of the Loan Agreement.” [ 23 ] The plaintiffs allege that between May 2013 and October 2013, Mr. McMorran negotiated with a potential lender for a $5 million credit facility for construction financing which would have allowed Marcer to construct many prefabricated homes, increased revenues, and that the additional income generated from the home sales would partially repay 977.

They assert that the proposal for this new loan was to be a second mortgage that would not affect security already held by 977. [ 24 ] However, in August 2013, 977 registered its mortgage against those lots which were to provide security for the new lender, meaning that the new loan could not proceed unless 977 agreed to postpone its mortgage against those lots. (It seems to be suggested that it was wrong of 997 to register against this land, but the land must have been included as being subject to the mortgage.) [ 25 ] They further allege that Mr.

Hockett represented that he supported the new proposed construction financing loan, but then in September 2013 withdrew his support, and refused to agree to the postponement. Marcer was then required to pay the proposed new lender a “break fee” of $90,262.50. [ 26 ] The plaintiffs claim that Mr.

Hockett’s representations were false and that “Hockett knew or ought to have known that the defendants had no intention to support the new construction financing.” [ 27 ] Marcer attempted to negotiate a second proposed loan with the same new lender to deal with the construction of additional power infrastructure required by the regional District of East Kootenay which was to cost approximately $2,300,000. Unless that work was completed, no sales could take place. They allege that Mr.

Hockett understood this and initially represented that he supported this second proposed loan, but then wanted to “do the loan through 977”. Once again, the plaintiffs claim that Mr.

Hockett’s representations were material misrepresentations, leading to another “break fee” of $90,262.50. [ 28 ] The plaintiffs allege that in November 2013, 977 issued a Notice of Intention to Enforce Security, then a few days later issued its proposed terms to finance the additional power infrastructure for $3 million – while still alleging its first mortgage was in default. [ 29 ] The plaintiffs allege that during the summer of 2014 Mr.

Hockett resided at the Resort (he owns a lot there), he hosted social gatherings, he was regarded as a person involved in the development of the project and he was therefore in a position of influence; that he advised potential purchasers that he had a mortgage in the project, that he was foreclosing and taking over the property, and that everyone would lose their investment. They allege that Mr.

Hockett “interfered with potential purchasers in an effort to impair Marcer’s ability to both maintain cash flow to advance the project and to facilitate refinancing of the debt owed to 977.” [ 30 ] Also in the spring of 2014 they allege that Mr.

Hockett advised potential investors to the same effect, and that he advised existing investors to pursue judgments against Marcer. [ 31 ] They further allege (in paragraph 40) that the defendants have since the spring of 2014, actively and aggressively opposed the development of the Sweetwater Resort by the plaintiffs; and provided inaccurate and misleading information to governmental bodies involved in developmental decisions regarding the Sweetwater Resort, in particular the Regional District of East Kootenay, the British Columbia Ministry of Transportation and BC Hydro and County, including but not limited to, inaccurate and misleading representations that the development of the Sweetwater Resort was deficient, incomplete or unlawful. [ 32 ] They further assert that in the summer of 2014 and 2015 Mr.

Hockett “repeatedly uttered statements to residents, visitors, potential purchasers and potential investors intended to discriminate on the basis of national or ethnic origin, colour, sexual orientation and religion.” They allege that this was done to dissuade certain persons from purchasing a lot in, or visiting, the Sweetwater Resort. [ 33 ] They claim that in light of the position of control, trust, influence and advantage held by the defendants, the plaintiffs were vulnerable and the defendants knew they could unilaterally affect the plaintiffs’ development.

In particular, the defendants could materially affect the plaintiffs’ position as it related to government and regulatory authorities. It is in this context that the plaintiffs allege that the defendants owed a duty of good faith. Furthermore, the plaintiffs claim that the defendants knew or ought to have known that the plaintiffs were relying on them to use reasonable care, diligence and skill such that the defendants owed the plaintiffs duties of care.

[ 34 ] I turn now to the various causes of action said to have been attempted to have been pled, and the defendants’ criticisms of them. [ 35 ] It is often said that a plaintiff must plead facts, not law, which I understand to mean that the plaintiff must plead sufficient facts so as to demonstrate a cause of action and that a statement of claim is not the place for legal argument.

Although it is common (and helpful) to identify claims by way of recognized causes of action, it is not necessary to do so. [ 36 ] There are inconsistencies in the prior responses to the requests for particulars and the amended statement of claim. While this may well lead to questions during the questioning phase, presumably the plaintiffs now rely on the amended statement of claim as setting out the facts on which they base their claim. It is appropriate to review that pleading to determine whether each cause of action has been established. Unlawful Interference with Economic Interests [ 37 ] The

summary of the plaintiffs’ claim on this point is that (

a) Mr. Hockett deliberately misled them as to his willingness to compromise his company’s priority to facilitate continued development, because it was in his company’s own interest to do so, and only showed his true intentions after over $180,000 was incurred in break fees; (

b) Mr. Hockett was in a position of influence because of his investment, because he resided at the resort in 2014, and he used this position of influence to discourage purchasers and investors by broadcasting concerns about the economic underpinnings of the resort, although the previous fall he had offered to invest more money in the resort - while simultaneously demanding payment on his first mortgage; (

c) he intentionally misled governmental and regulatory agencies and as a result the plaintiffs have suffered damages; (

d) he acted in violation of human rights principles, if not law, to dissuade purchasers, while holding a “position of control, trust, influence an advantage”; and (

e) in light of this alleged position, the defendants owed a duty of good faith, and that they knew that the plaintiffs “were relying on the defendants to use reasonable care, diligence and skill such that the defendants owed duties of care to the Plaintiffs.” [ 38 ] They further allege that the actions of the defendants were premeditated, malicious and vindictive or were carried out with recklessness in their disregard for the damages that would reasonably be expected to because, and that it did cause those damages. [ 39 ] On this point, as mentioned the defendants rely on the Supreme Court of Canada’s decision in Bram Enterprises Ltd v A I Enterprises Ltd , supra . [ 40 ] In that case Cromwell J reviewed the unsettled law relating to the tort variously referred to as “unlawful interference with economic relations”, “interference with the trade or business by unlawful means”, “intentional interference with economic relations”, or “causing loss by unlawful means”.

He referred to it simply as the “unlawful means” tort. [ 41 ] The Court concluded that the “unlawful means tort” is committed when there was an intention to cause damage to the plaintiff by conduct that would be actionable by a third party, or would have been actionable if a third party had suffered loss as a result of it. He concluded that the scope of the tort should be restricted. He described this approach as adopting the “liability stretching rationale” because the tort extended civil liability only where there was already an actionable wrong in place.

He favoured this approach because, “it provides a rational explanation for the expansion of tort liability which rests on pre-existing causes of action.” He described this as involving “a narrow definition of ‘unlawful means’”.

Some kinds of criminal activity would constitute the “unlawful means” because those acts also give rise to civil action, not because they are criminal. [ 42 ] However he noted (starting at paragraph 67) that the Supreme Court of Canada has previously clearly taken a different approach in the context of unlawful means conspiracy and intimidation. [ 43 ] It is clear from this decision that a businessperson who specifically attempts to harm the business of his competitor, but does so without doing anything to give rise to a cause of action that might be advanced by a third party, and of course without doing anything to give rise to a cause of action to the plaintiff itself, is not liable.

That is simply the commercial world acting aggressively in competition. Competition Act principles are for the legislators, not the courts, to decide. [ 44 ] In the facts before the Court in Bram , the allegations were that one family member in a family business specifically took actions to thwart a sale of a family-owned apartment building.

However, the actions taken were lawful, although perhaps inappropriate, assertions of rights: by not accepting an offer within a prescribed time; misusing an arbitration provision of a syndication agreement to stall the sale; issuing a notice of first right of refusal; filing a certificate of pending litigation; and denying entry to prospective buyers. [ 45 ] However, in the facts of this case the allegations are that Mr.

Hockett deliberately misled the plaintiffs, committed a fraud on the government and regulatory agencies, and may have violated human rights legislation, all for the purposes of creating a default under the mortgage that his company holds for the purposes of taking advantage of the plaintiffs, presumably to force them to sell the Sweetwater Resort to his company at a discount or to obtain it by foreclosure. [ 46 ] In regards to the government and regulatory agencies, if they were lied to and as a result took different steps than they

otherwise would have to their disadvantage (it seems a reasonable presumption that the development of the resort would be to theadvantage of the province and municipality if it were done lawfully) then the government and regulatory agencies could bring a claim intort for fraud. While it is extremely unlikely that they would bother to do so, that is not the test under Bram.

Also, it is not necessary thatthe government or the regulatory agencies be shown to have suffered any damage, nor is it necessary to show that they contemplatedbringing such claims. [47] The discriminating behaviour that is alleged would arguably be a violation of provincial human rights law, giving personshearing the behaviour the grounds to file a complaint with the applicable Human Rights Commission. As it has been pled, the actions ofMr.

Hockett seem to be alleged to have created the potential for a complaint being filed as against Marcer Ranching Limited because thedefendants are said to have “assumed and held the position of control, trust, influence and advantage”, and that the defendants “knewthey could unilaterally affect the Plaintiffs’ development of the Sweetwater Resort.” A human rights claim could lead to a monetaryaward or other relief against the respondent, and although a violation of human rights law is not a common law tort, it is clearlyanalogous to it.

A human rights violation is “actionable” within the context of human rights legislation. [48] I acknowledge that this is a somewhat generous reading of paragraph 45 of the amended statement of claim. However, if thebehaviour gives rise to a claim by a third party (a visitor or prospective buyer), then the requirements of Bram for “unlawful means” mayhave been met. This is an application to strike for failing to disclose a cause of action. The Court cannot decide the merits of such apossible claim at this stage.

Breach of Duty of Good Faith [49] As mentioned above, the defendants argue that there is no “duty of good faith” at large. However, the relationship of 977 toMarcer Ranching Limited is not merely as members of the same community; there is a mortgage contract binding them together. InBhasin v Hrynew, 2014 SCC 71, [2014] 2 S.C.R. 494, the Supreme Court stated at paragraph 93 as follows: A

summary of the principles is in order:

(1) There is a general organizing principle of good faith that underlies many facets of contract law.

(2) In general, the particular implications of the broad principle for particular cases are determined by resorting to the body ofdoctrine that has developed which gives effect to aspects of that principle in particular types of situations and relationships.

(3) It is appropriate to recognize a new common law duty that applies to all contracts as a manifestation of the general organizingprinciple of good faith: a duty of honest performance, which requires the parties to be honest with each other in relation to theperformance of their contractual obligations. [50] The Supreme Court of Canada was clear that this approach applies to all contracts.

If 977 is Marcer Ranching’s securedcreditor, and intentionally misled its borrower to its disadvantage, although not specifically in connection with the negotiation of theexisting mortgage but nonetheless to gain an advantage by causing defaults under its mortgage, it is difficult to understand why the dutyof good faith recognized in Bhasin would so clearly not apply as to lead to the conclusion that there is no possible claim. [51] I decline to strike this portion of the pleading.

Breach of Duty of Care/Negligence [52] The plaintiffs assert that the defendants made material representations about possible new financing, causing damagesbecause the defendants knew the representations were not true.

They also assert that the defendants knew that the plaintiffs were relyingon them to use reasonable care, diligence and skill as the parties responsible for assisting in and funding the development of theSweetwater Resort, and their actions were “premeditated, malicious and vindictive” or were done “with recklessness in their disregardfor the injury and damage such actions would reasonably be expected to cause”. [53] These allegations address the “unlawful means” tort discussed above. [54] The brief filed by the defendants addresses other assertions of duties of care that do not appear in the amended statement ofclaim – as mentioned, the amended statement of claim was filed long after the defendants’ brief was filed.

There appears to be no furtheranalysis required on this part of the defendants’ argument, given the amendment of the statement of claim. Defamation [55] The defendants refer to rules 13.6 and 13.7 to argue that there are not enough particulars to sustain a claim in defamation. Rule 13.6 is the general rule about the contents of pleadings, but rule 13.7(

f) specifically states that particulars must be provided for aclaim in defamation, and the case law is clear as to how specific the particulars must be. [56] Master Hanebury dealt with a plea of defamation in Abrams v Johnson, 2009 ABQB 575, 2009 CarswellAlta 1569, where shesaid, at paragraph 34: The tort of defamation has three elements. There must be a statement that is defamatory; a reference to the plaintiff; and the publicationto at least one other party.

The courts have considered on many occasions the particularity with which these elements must be pled tosuccessfully avert an application to strike the claim. In Olsen v St. Martin (1981), (AB KB), 32 A.R. 51 (Alta.Q.B.) Master Funduk found that the plaintiff in a defamationaction “must have some facts on which to base his claim and should not commence proceedings without some knowledge of the factsrequired to establish his claim, and hope to obtain the necessary factual information subsequently by engaging in what might be referredto as a ‘fishing’ expedition.”

Fruman J. considered a similar issue in Rosen v Alberta Motor Assn Insurance Co (1993), (AB KB), 13 Alta. L.R.(3d) 356 (Alta.Q.B.). She relied on Master Funduk’s comments in Olsen v. St.

Martin that “defamation actions are one of the few formsof action where strictness in pleading is still insisted on.” She concluded, after reviewing the pleadings, that the case was “in fact afishing expedition.” She said that “the policy reasons behind the requirement for specificity in defamation pleadings [are] sound [and][i]t would be a sad day if an individual who felt another person had said something unflattering about him could issue a statement ofclaim and thereby commence a fishing expedition, placing the onus upon the defendant to disgorge all that might have been said.” Master Laycock considered the issue in Worth v.

Stettler Congregation of Jehovah’s Witness, 2001 ABQB 626 (Alta. Master). He foundthat proof of the publication of the defamatory statements is an essential element of a defamation action. He held that where thedefendant has demanded particulars of defamation and the reply to the demand for particulars still fails to support a cause of action, thepleadings should be struck. In Cooper v. Hennan, 2005 ABQB 709 (Alta. Q.B.), Rawlins J. confirmed that the defamation pleadings must contain a concisestatement of the material facts, but not the evidence by which they are to be proved.

The material facts in a defamation suit “must includethe publication made by each defendant, the words published by that defendant, which plaintiff was defamed by the publication, the timeand place of the publication, the manner of the publication, and to whom the publication was made”. [57] In the replies to requests for particulars, the plaintiffs gave inconsistent information about the alleged defamatory statementsby Mr. Hockett. In the amended pleading, little detail is given. In paragraph 49, it is asserted that Mr.

Hockett “repeatedly made certaindefamatory statements regarding McMorran to residents, visitors, potential purchasers and potential investors wherein McMorran wascharacterized as a ‘criminal’ and a ‘fraud’”. However, there is no detail given as to dates or approximate dates, circumstances, or whoheard the statements. In the result, instead of particularizing their claim of defamation, they have obscured it. [58] In the first reply to request for particulars the plaintiffs had asserted that defamatory statements were made at the SweetwaterProject in August 2013 and again in July and August 2104.

It named two people who allegedly heard the defamatory statements. Thenin the further reply, the allegations were significantly changed as to dates (now it was said to be October 2012), people who heard it(only one of two persons previously identified was now named and several others were identified), and two locations (admittedly, both atthe Sweetwater Project) were given. [59] It may be appropriate that in a case of slander, being oral defamation, that the sort of detail that Rawlins J referred to inCooper may not be required.

It is sometimes difficult for those present who have actually heard defamatory statements to recite preciselywhat words were used, and it may be difficult for them to recall exactly when the statements were made.

This is to be contrasted with acase of libel, where the words are written and can therefore be quoted exactly as they were published and typically exactly the date ofpublication can be pled. [60] But here we have a changing story, neither version of which is incorporated into the amended statement of claim, leavingsome real confusion as to what the plaintiffs’ allegations actually are. [61] If proper particulars had been provided in an unfiled reply to request for particulars (there appears to be no requirement thatsuch document be filed and they were not filed here) it would be over-reaching to bring an application to strike based on a lack ofparticulars in the pleading itself.

However, here we have conflicting particulars, and then an opportunity to clarify what the claim is inthe amended statement of claim filed after these applications were brought – and the particulars were not incorporated. [62] No application was made for further amendment, even in oral argument, which might properly lead to an opportunity to fixthe deficiency before a claim is struck: see the cases cited in Stevenson & Côté, Alberta Civil Procedure Handbook 2016, in thediscussion on this topic under rule 3.68(1)(b), “B.

Procedure”. [63] The law simply does not call upon someone to defend their words in a defamation action without knowing precisely what itwas they said, to whom, and when, at least with some level of particularity, that was perceived as defamatory. [64] In the circumstances, the plaintiffs cannot rely on conflicting particulars, where the plaintiffs had an opportunity to clarifytheir position and chose not to take it. [65] The claim of defamation here does not provide sufficient particulars and must be struck.

Security for Costs [66] In regards to the request for an order for security for costs, the defendants argue that the corporate plaintiff does not carry onbusiness in Alberta; neither the corporate plaintiff nor Mr. McMorran have exigible assets in Alberta; they are both significantly indebtedto the corporate defendant, as shown by the BC foreclosure proceedings; there is a writ of enforcement as against Mr.

McMorran byCanada Revenue Agency; it appears that both of them will be unable to pay the costs awarded to the defendants at the conclusion of thisaction; and they are not prejudiced by an order for security for costs. [67] In reply, the plaintiffs say that Mr. McMorran is a 50% shareholder of 0938534 B.C. Ltd., which is a corporation owning awater utility at the Sweetwater Project, and he is also a 50% owner of the shares of 0938522 B.C. Ltd., which is a corporation that ownsa sewer system at the Sweetwater Project. An answer to an undertaking given by Mr.

Hockett in questioning discloses that the financialstatements for 0938522 B.C. Ltd. show a net income for the year ended December 31, 2014 of $163,684.46, and the financial statementsfor 0938534 BC Ltd. show a net income of $237,066.71. [68] However, the financial statements of 0938522 B.C. Ltd. disclose that of its assets totaling $138,232 there is a debt due from0938534 B.C.

Ltd. in the amount of $50,000, almost twice the amount owing the year before, and that it is unsecured and non-interest-bearing with no specific terms of repayment. [69] Both of these companies are intimately involved in the value of the Sweetwater Resort as a whole, and they are British

Columbia companies. There is no indication of the value of the shares of either of these companies put before the Court. [ 70 ] The plaintiffs also point to a 2011 appraisal, or at least an unsigned preliminary draft of one. [ 71 ] The plaintiffs suggest it might be appropriate to a place a further mortgage (this would be a third mortgage) to secure potential costs awarded to the defendants. [ 72 ] An appraisal from five years ago is of no value today, and of course the property subject to the appraisal is only partly completed, it is in British Columbia, and it is currently in foreclosure proceedings.

A third mortgage on property already in foreclosure would appear to be very weak security. [ 73 ] The evidence overall as to the plaintiffs’ financial standing demonstrates clearly that they would very likely not be able to pay an award of costs. Apart from the foreclosure proceedings brought by the corporate defendant, there are other claims, and a writ against Mr. McMorran personally. The assertions of assets described above are not helpful. The two other companies in which Mr.

McMorran has an interest are integrally tied to the success of the Sweetwater Resort itself, and it is in foreclosure, but more importantly the financial statements do not show the sort of value that is suggested. [ 74 ] In the circumstances, it is appropriate to award security for costs, but on a staged basis. Reflecting on the current approach to

summary judgment, the courts have recognized that trials are the exception. The general rule is not to require all costs that might be awarded up to and including trial before the parties have even delivered affidavits of records, let alone conducted questioning or prepared for trial. [ 75 ] The defendants ask for security for costs of $406,850 using three times Column 5 under

Schedule C, and alternatively $279,300 using two times Column 5. In my view, this is excessive regardless of what multiple of Column 5 is used. [ 76 ] Firstly, it includes GST and on the assumption that the defendants fees are being paid by the corporate defendant, there is no GST entitlement.

The defendant is entitled to an input tax credit from Canada Revenue Agency and an award of GST on costs would be an award for something for which it had been reimbursed: see. e.g. , V.A.H. v Lynch , 1998 ABQB 10120 at para. 75 ; Madge v Miller , 2000 ABQB 156 at para. 6 ; Blaze Energy Ltd v Imperial Oil Resources , 2014 ABQB 509 at para. 95 ; rule 10.48(2) of the Alberta Rules of Court ; and the warranty required in Form 44. [ 77 ] Secondly, the estimates of questioning and trial time are, at this stage, generous. The defendants estimate eight days of questioning and 20 days of trial.

They also anticipate two contested morning applications plus 3 contested special applications requiring briefs. In my view this is an unrealistic forecast. At least one of the applications included in the contested applications requiring briefs is this one, for which I expect there to be a costs award. It should not be doubled up in the security for costs, and I cannot forecast another two pre-trial special applications requiring briefs. I assume perhaps one might occur. [ 78 ] However, I do accept that it is appropriate to use a double award for costs based on column 5.

The claim is for damages of $25 million, well beyond the $1.5 million threshold for Column 5. [ 79 ] Having re-done the math and making my own assumptions, in my view the plaintiffs should be required to post costs for steps preceding preparation for trial of $66,500, reflecting a rough estimate of anticipated costs, assuming that the plaintiffs are unsuccessful in two morning chambers applications and one special application, and assuming a lump sum of $5,000 for disbursements and other charges.

That must be posted within three months of the date these reasons are released. [ 80 ] In addition, costs for trial, if the matter proceeds to trial, must be posted of an additional $96,000, including an estimate of 10 days of trial. This includes my own (reduced) estimate for disbursements and other charges, for which I have used a lump sum figure of $5,000. These costs must be posted no later than six weeks prior to the scheduled trial date. [ 81 ] The security must be provided by payment into court unless the parties agree on another form of security.

Conclusion [ 82 ] The application to strike under rule 3.68 is allowed with respect to the claim for defamation (paragraphs 49 to 55 inclusive of the amended statement of claim) but dismissed otherwise. [ 83 ] The plaintiffs are required to post security for costs as set out above.

If they fail to do so within the specified times, then the claim is deemed to have been struck without further order upon the filing and service of an affidavit from a representative of the defendants stating that the security for costs required has not been provided. [ 84 ] The action is stayed until the first tranche of security for costs has been provided. [ 85 ] Both plaintiffs and defendants have leave to apply for reduced or increased security for costs as the claim progresses and more accurate information as to steps taken and expected is available. [ 86 ] If the parties cannot agree on costs, they may contact the masters’ clerk to arrange to approach the Court.

Heard on the 29 th day of March, 2016.

Dated at the City of Calgary, Alberta this 16 th day of May, 2016. A. R. Robertson, Q.C. M.C.C.Q.B.A. Appearances: Munaf Mohamed and Ciara J. Mackey Bennett Jones LLP for the Applicants (Defendants) Alexander M. Kooiman DLBH Law for the Respondents (Plaintiffs)