CPC Networks Corp. v Miller, 2023 SKCA 89

Court of Appeal for Saskatchewan Docket: CACV4046 Citation: CPC Networks Corp. v Miller , 2023 SKCA 89 Date: 2023-08-10 Between: CPC Networks Corp. Appellant (Plaintiff) And Ronald Miller, Clayton Barry, Scott Spencer, McDougall Gauley LLP and Robertson Stromberg LLP Respondents (Defendants) Before: Richards C.J.S., Tholl and Kalmakoff JJ.A. Disposition: Appeal dismissed Written reasons by: The Honourable Chief Justice Richards In concurrence: The Honourable Mr. Justice Tholl The Honourable Mr.

Justice Kalmakoff On appeal from: QBG 1535 of 2017 (Sask QB), Saskatoon Appeal heard: February 16, 2023 Counsel: Larry Ayers and Jack Adams for the Appellant Randall Sandbeck, K.C., and Ramses Miki-Hanson for the Respondents Richards C.J.S. [ 1 ] The appellant, CPC Networks Corp., sued the respondent lawyers and law firms in the Court of Queen’s Bench. They had acted for CPC Networks in earlier legal proceedings. [ 2 ] The respondents applied in Chambers for an order providing for security for costs.

A Chambers judge granted that order and directed that CPC Networks pay into court a total of $95,000 in three separate instalments. [ 3 ] Rule 4-23 of The Queen’s Bench Rules provides that a party may apply for an order for security for costs. Rule 4-24 lists factors to be considered by a judge in deciding whether to make such an order.

In relevant part, those two rules read as follows: 4-23(1) A party may apply for an order for security for costs against another party at any time. … 4-24 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 Saskatchewan; (

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. [ 4 ] Given the wording of the Rules, it is apparent that a decision concerning security for costs is discretionary in nature. As a result, the decision under appeal attracts a deferential standard of review. See: Kot v Kot , 2021 SKCA 4 , 63 ETR (4th) 161. [ 5 ] CPC Networks argues that this Court should overturn the Chambers judge’s decision for two main reasons.

First, it says her analysis under Rule 4-24(c) – the merits of the action – was faulty because she did no more than describe the claim as being “novel” and observe that there is a live issue as to whether it is statute-barred.

CPC Networks says the Chambers judge failed to examine the respondents’ statement of defence which, according to it, has no merit. [ 6 ] The Chambers judge might have explained her analysis of CPC Networks’ claim in more detail but, nonetheless, I can see no error in her overall assessment of its apparent merit, i.e., in her conclusion that, as I take it, the claim is certainly not strong or compelling. [ 7 ] The statement of claim is not clearly drafted.

Its central thesis is that the respondents owed a fiduciary duty to CPC Networks and are thereby liable for things done when acting for it in defence of actions commenced by Larry Ayers and Jack Adams, the two individuals now in control of CPC Networks, and others. The key allegation, in effect, is that the respondents should have looked behind their instructions and determined whether what they were being asked to do by CPC Networks was in its best interests. This, to use the words of the Chambers judge, is a novel line of argument and, in my view, not one that is self-evidently meritorious.

It would appear that there is also a very live limitation of actions issue at play here in that the acts of the respondents that are said to found the claim against them took place in 2010 to 2013, as I read the pleadings, but the statement of claim was not issued until 2018. [ 8 ] So, at the end of the day, I am not persuaded that the Chambers judge’s assessment of “the merits” of CPC Networks’ action, as per Rule 4-24(c), involves any sort of reviewable error.

[9] CPC Networks also takes issue with the Chambers judge’s treatment of Rule 4-24(d), the question of whether an order forsecurity for costs would likely prejudice a plaintiff’s ability to continue the action. In this regard, all sides accept that the only asset heldby CPC Networks is $10,000 in cash.

The Chambers judge noted this fact but said there was no evidence that CPC Networks could notraise the additional money necessary to provide security. [10] I acknowledge that there is case law to the effect that an impecunious plaintiff with a viable claim should not be barred fromcourt because of an inability to pay security for costs. However, that notion does not take CPC Networks very far in this case. First, themerits of CPC Networks’ claim appears, on the face of things, to be somewhat dubious. Second, and highly unusually, CPC Networks isbeing used as a vehicle by Mr. Ayers and Mr.

Adams, its only shareholders, to sue its former lawyers. Without an order for security forcosts, Mr. Ayers and Mr.

Adams, at least insofar as costs are concerned, will be able to enjoy “limited risk” litigation in the sense that theywill be able to recover full costs if CPC Networks is successful but will have a maximum exposure of $10,000 if it is not successful.Third, as the Chambers judge pointed out, CPC Networks has not provided any evidence to suggest that it cannot borrow the funds toprovide security for costs. [11] The decision of the Alberta Court of Appeal in Sprung Enviroponics Ltd. v Calgary (City), 1990 ABCA 23 , [1990] 3WWR 521 (Alta CA), is instructive on this front.

There, in upholding an order for security for costs in circumstances broadly similar tothose at issue here, the Court observed as follows: [30] The short answer is that there is no evidence whatever that the plaintiff corporation could not post security. It apparently lacksfunds and is out of business, but that does not mean it lacks all access to assets anywhere, nor that it lacks every way to raise funds. Theowners of a limited liability company with few assets other than a cause of action, are in a very fortunate position. They can make thecompany sue; if it wins, they take the proceeds as shareholders.

If it loses, they can walk away from the company and the suit. That iswhy the Legislatures passed these sections in Business Corporations Acts. See Smith Bus Lines v. Bank of Montreal (1987) (ON SC), 61 O.R. (2d) 688, 705; Holly Homes v. Euchner (1985) (NWT SC), 13 C.P.C. (2d) 84, 88 (N.W.T.).

See also: 2238649 Alberta Ltd. v Nbjv, 2022 SKQB 190 at para 23. [12] All things considered, I see no reviewable error in the Chambers judge’s handling of Rule 4-24(d). [13] I also see no merit in CPC Networks’ argument that costs should not be an issue for the respondents because they are insured.To begin, CPC Networks cites no authority for this proposition.

Secondly, even if the respondents are not personally exposed to theburden of the expenses of the litigation, their insurers are so exposed and that fact cannot simply be ignored. [14] In the end, I am not persuaded that the Chambers judge erred in making the order for security for costs. I would dismiss CPCNetworks’ appeal with one set of costs determined in the usual way. “Richards C.J.S.” Richards C.J.S.I concur. “Tholl J.A.” Tholl J.A.I concur. “Kalmakoff J.A.” Kalmakoff J.A.