Executive Summary: Key Legal and Evidentiary Issues

• Defendants appealed an Applications Judge's decision denying their application for security for costs under r 4.22 of the Alberta Rules of Court.

• Plaintiff, residing and employed in the United States, was found to have no exigible assets in Alberta against which a costs award could be enforced.

• An evidentiary burden shift required the Plaintiff to demonstrate why security should not be ordered, yet her claim of ability to pay was deemed wholly unsubstantiated.

• The Applications Judge's primary reliance on the Plaintiff's unproven assertion that she could satisfy a costs award was identified as a reversible error.

• Ordering the full $100,000.00 in security sought by the Defendants was found to unduly prejudice the Plaintiff's ability to continue her action.

• Stepped security of $20,000.00 was ordered as a proportional measure, with a 90-day deadline and automatic dismissal for non-compliance.

Background and employment dispute

Jessica Hultink filed a Statement of Claim in 2022 before the Court of King's Bench of Alberta against Trafigura Canada Limited, Trafigura Canada General Partnership, and Trafigura Trading LLC. Her claim sought damages for wrongful dismissal, negligence, and the intentional infliction of mental suffering, in addition to aggravated and punitive damages of over $1.5 million. The Defendants responded by filing a Statement of Defence. In 2023, the parties exchanged their Affidavits of Records, although Part 5 questioning had not yet commenced.

The Defendants' application for security for costs

The Defendants brought an application seeking an order that Hultink provide security in the amount of approximately $100,000.00, or such other sum as the court may order. In support, they filed the Affidavit of Iain Singer. Mr. Singer deposed that Hultink was employed in the United States, owned property there, and did not possess any exigible assets in Alberta. Mr. Singer deposed that the Defendants had a strong defence on the merits, that there was a low probability the Plaintiff would obtain judgment, and that absent such an order, the Plaintiff could avoid paying a potential costs award, estimated to exceed $100,000.00 as per Column 5 of Schedule C of the Rules of Court, in the event she was unsuccessful.

The Plaintiff's financial position and response

In her responding Affidavit filed in November 2023, Hultink deposed that it was premature for the Defendants to assert the relative strength of their defence, and that she possessed sufficient financial resources to satisfy a costs award. She pointed to an annual base salary (exclusive of other compensation and benefits) of $175,000.00 USD, a Canadian RRSP account valued at approximately $160,000.00, a Canadian chequing account with a balance fluctuating between $5,000.00 and $15,000.00, and assets which her husband owns in Alberta, including an apartment in Calgary. She argued that requiring security would force her to withdraw RRSP funds, which would cause her to incur tax penalties and would reduce her retirement savings. She maintained that the amount of security sought by the Defendants was excessive, particularly given the early stage of proceedings and their inclusion of costs for steps already completed. She deposed that her lawsuit, which alleges the Defendants' systemic harassment and misconduct, is of public importance and should be allowed to proceed.

During cross-examination, Hultink confirmed she had been employed in the United States since 2022, that her income is paid into a US bank account, that she pays taxes in the US, and that she does not earn any income from Canadian sources. She conceded that she does not possess any other assets in Canada. She believed her husband's apartment, which is fully paid, could potentially be used to satisfy a costs award. She agreed that her RRSP assets are her only available source of Canadian funds to pay a security for costs award. A further Affidavit filed in December 2024 confirmed that she began a new employment position in the US in March 2024 with a base salary of $175,000.00 USD plus an initial signing bonus of $30,000.00, profit sharing, benefits, employer-matched 401K contributions, and a bonus plan. The reviewing court did not consider this to be materially new evidence, as it essentially confirms her salary situation at the time the Applications Judge heard the application.

The Applications Judge's original decision

Applications Judge J.T. Prowse examined the factors enumerated in r 4.22 of the Alberta Rules of Court. He concluded that the Plaintiff had not proven an entitlement to her husband's Calgary apartment, and that it was not likely the Defendants could enforce a costs award against her remaining assets in Alberta. He noted that the funds in her Canadian bank account were small and could be depleted at any time, and that her RRSP assets were exempt from enforcement. He determined that the Plaintiff has a "very good paying job" and that she can pay a costs award notwithstanding that it arises from foreign-sourced income. Both parties agreed it was too early to assess the relative strength of each other's legal positions, making the merits factor neutral. Ultimately, the Applications Judge gave the most weight to the ability of the Plaintiff to pay a costs award and on that basis declined to grant security for costs. He noted that had he decided to grant security, he would have awarded it in the range of $20,000.00 to $25,000.00 for the steps leading up to trial, not including trial costs.

The appeal and the court's analysis

The Defendants appealed, arguing the Applications Judge erred in three respects: (1) accepting the Plaintiff's evidence that she could pay a costs award without requiring her to discharge her evidentiary burden of proving she could do so; (2) determining that a costs award could be "easily enforceable" against the Plaintiff's US income; and (3) declining to order security despite the Plaintiff having no exigible assets in Alberta. The appeal proceeded as a de novo hearing before Justice O.P. Malik, with the standard of review being whether the Applications Judge was correct based on the record before him.

Justice Malik agreed with several of the Applications Judge's findings — that a plaintiff's ability to provide security can reasonably include assets located outside Canada, that it is unlikely the Defendants could enforce a costs award against any assets located in Alberta given the absence of an obligation for the Plaintiff to maintain a minimum balance in her Canadian bank account, the inaccessibility of RRSP assets for enforcement purposes, and the lack of any established ownership interest in her husband's apartment. The reviewing judge also agreed that it was too early in the proceedings to weigh the relative strengths of the parties' legal arguments, and accepted that ordering the Plaintiff to provide security in the amount of $100,000.00 would unfairly prejudice her ability to continue with her action.

However, the reviewing judge found that the Applications Judge made an error by accepting the Plaintiff's unsubstantiated claim that she can pay a costs award, a consideration relevant under r 4.22(b). The court found the Plaintiff's evidence in her 2023 and 2024 Affidavits to be wholly unsubstantiated — her assertion was baldly made without any financial disclosure as to what other liabilities or obligations she has, whether she has any additional sources of income other than that which she earns from her full-time employment, and whether, upon paying her current liabilities, there is anything left over from her income that might be applied towards paying a costs award. Citing Toronto-Dominion Bank v Suitel Canada Executive Suites, 2011 ABQB 519, the court held that once a defendant has brought itself within r 4.22, the evidentiary burden shifts to the plaintiff to show that the court should not require security — a burden Hultink failed to discharge.

Ruling and outcome

The Defendants' appeal was granted. Justice Malik ordered the Plaintiff to provide stepped security for costs in the sum of $20,000.00 to cover litigation costs up to trial. The court considered the complexity of the case, which extends beyond a simple claim in constructive dismissal to involve broader allegations regarding the Defendants' permissive workplace culture that enabled harassment and bullying. Had the action been a simple constructive dismissal claim, the court noted it would have ordered security in the $7,500.00 to $15,000.00 range. The Plaintiff was given 90 days from the date of the Order to comply, with security to be provided either by paying the amount into court or by posting a bond. All other applications and proceedings were stayed, except for assessments of costs relating to the parties' other proceedings. Should the Plaintiff fail to provide security as directed within the specified period, her action is automatically dismissed without further order, pursuant to r 4.23(d). The Defendants, as the successful party, were entitled to their costs, to be set down for an assessment pursuant to r 10.34, along with the parties' cost assessments arising from their other proceedings.