Court of Appeal Decision of the Week

Putting Your Money Where Your Mouth Is: Security for Costs in the Court of Appeal

Case: Stallan v. Palleson, 2015 BCCA 462 (CanLII) 

Keywords: Application for Security for Costs; Res judicata; Section 24(1) of the Court of Appeal Act, RSBC 1996, c 77

Synopsis:

Mr. Andrew Stallan is Ms. Josephine Palleson’s former son-in-law. Mr. Stallan and Ms. Palleson’s daughter are divorced June 21, 2015. They had previously owned and operated a yoga-wear manufacturing retail clothing and apparel business (“Lotuswear Design Ltd.”).

Mr. Stallan seeks to appeal the order of Mr. Justice Kent (in the Supreme Court of British Columbia) dismissing his action on grounds of res judicata. In the court below, Mr. Justice Kent finds there is a common issue underlying claims made by Mr. Stallan – namely whether Ms. Lisa Palleson (his former spouse) wrongfully seized control of certain assets and transferred them to her mother to start and operate a new business. For Mr. Justice Kent, the question in issue had already been answered.

The present matter is an application by Ms. Palleson and 0979690 B.C. Ltd. The applicants argue Mr. Stallan’s appeal has no merit and seek the following:

1) security for costs of the appeal in the amount of $10,000.00; and

2) that Mr. Stallan’s appeal be stayed until such security is posted.

Bennett J.A., writing for the Court of Appeal, finds Mr. Stallan’s appeal has some merit – if required to post security for costs, he would be unable to proceed with the appeal. In these circumstances, the application for security for costs is dismissed.

Importance:

Security for Costs of the Appeal: Test & Authority

Section 24(1) of the Court of Appeal Act, RSBC 1996, c 77 provides as follows:

A justice may order that an appellant pay to or deposit with the registrar security for costs in an amount and in a form determined by the justice.

For the Court of Appeal (citing Lu v. Mao, 2006 BCCA 560), the ultimate question is whether such an order would be “in the interests of justice”.

To answer this question, the Court of Appeal referred to the following relevant considerations:

1) the appellant’s financial means;

2) the merits of the appeal;

3) the timeliness of the application; and

4) whether the costs will be readily recoverable (see Ferguson v. Ferstay, 2000 BCCA 592).

Who Bears the Onus?

Following Creative Salmon Company Ltd. v. Staniford, 2007 BCCA 285), the Court of Appeal confirms that the appellant against whom an order is sought (in this case, Mr. Stallan) bears the onus of showing why security should not be required.

For the Court of Appeal, security for costs will not be ordered where doing so prevents the appellant from bringing a “meritorious appeal” (see, for example, Milina v. Bartsch (1985), 5 C.P.C. (2d) 124 at 125-126 (B.C.C.A.)).

Application of the Test

First, with respect to Mr. Stallan’s financial means, the Court of Appeal concluded he simply lacked adequate means to post security in the amount requested by Ms. Palleson ($10,000.00).

Evidence before the Court included the fact Mr. Stallan had previously (and successfully) applied for “indigent status” in the trial for his Family Action, that he does not currently have a job, and that he is receiving unemployment insurance with three children.

Next, to the merits of the appeal, Mr. Stallan argued the trial judge’s ruling had been based on a “simple misunderstanding” caused by an absence of consideration for certain excerpts of a trial transcripts in the Family Action below. The Court of Appeal agreed that this was an arguable ground of appeal.

On the issue of whether costs would be readily recoverable, Ms. Palleson argued the likelihood of recovering costs would be “very low if nonexistent” (see para. 21).

Despite these concerns, the Court of Appeal considered the merit of Mr. Stallan’s appeal. Since posting security for costs would preclude his ability to proceed, the Court dismissed the application.

Strategic Value of Seeking Costs

It is critical to note that the usual form of security for costs includes some provision that the appeal itself be stated pending the deposit of security. Authority for this proposition stems from the case of Austin v. Goerz, 2007 BCCA 151 and s. 10(2)(b) of the Court of Appeal Act.

In practice, this is an effective method to call a bluff in complex litigation – asking an opposing party to “put their money where their mouth is” separates the wheat from the chaff and forces one to pick one’s battles strategically.

Counsel for the Appellant: Andrew Stallan (in person)

Counsel for the Respondents: J. MacDonnell

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Posted: Wednesday, November 25, 2015