Executive Summary: Key Legal and Evidentiary Issues

• The court considered whether to grant security for costs under Rule 4.22 of the Alberta Rules of Court against a self-represented plaintiff with a lengthy history of unpaid cost awards.
   
• Evidentiary gaps in the plaintiff's financial disclosure limited the weight given to her claims of impecuniosity and inability to continue the litigation.
   
• Justice Marion assessed the merits of the underlying professional negligence claim against the law firm and its lawyers, finding the claim relatively weak.
   
• Advanced costs relief under the Okanagan framework was denied because the plaintiff failed to establish impecuniosity, merit, or special public-interest circumstances.
   
• Records production requests targeting the defendant law firm and a non-party insurer were rejected as procedurally non-compliant and speculative.
   
• Fictitious case citations included in the plaintiff's sworn affidavit further undermined the reliability of her evidence.
   

Facts of the case

Liliana Kostic, representing herself, filed a statement of claim on May 9, 2019 against Scott Venturo Rudakoff LLP (SVR) and three of its lawyers, Domenic Venturo [also spelled "Dominic Venturo" elsewhere in the decision], Dan Horner, and Katrina Edgerton-McCutchan (also known as Katrina Edgerton-McGhan). The claim alleges negligence, breach of professional obligations, and breach of fiduciary duty connected to SVR's brief involvement in defending Kostic in a separate proceeding referred to as the 0601 Action. AIG Insurance Company of Canada retained SVR on January 20, 2017, SVR became counsel of record on March 16, 2017, and it withdrew from the retainer on May 26, 2017 after advising on May 12, 2017 that it was no longer acting for her. The claim seeks an unquantified amount for income loss along with general, punitive, and exemplary damages, interest, and costs.

The action forms part of a larger group of related "Case Managed Actions" involving Kostic and has proceeded slowly over nearly seven years, marked by extensive procedural disputes, multiple case management judges, and appeals to the Alberta Court of Appeal and the Supreme Court of Canada. Cost awards against Kostic arising from that procedural history remain largely unpaid, currently totalling at least $29,360. Justice Marion became case management justice of the group of actions in December 2024.

Three matters came before Justice Marion in this decision: SVR's application for security for costs, filed June 8, 2021 and supported by an affidavit of Katrina Edgerton-McCutchan (KEM Affidavit); two applications by Kostic, the Cross-Application filed September 14, 2021 and the 2025 PICA Application filed January 31, 2025, both seeking an advanced or interim costs award; and a December 19, 2025 fiat request seeking permission to file an application for production of records from AIG and SVR.

Policy and legislative provisions at issue

Rule 4.22 of the Alberta Rules of Court governs security for costs and directs the court to consider whether the applicant is likely to be able to enforce a costs order, the respondent's ability to pay a costs award, the merits of the underlying action, whether an order would unduly prejudice the respondent's ability to continue the action, and any other appropriate matter. The court applies a two-step process, weighing these factors before determining whether granting security is just and reasonable overall.

A term of SVR's proposed retainer agreement, stating that SVR would discharge its obligations to Kostic while respecting "the right of AIG to control Ms. Kostic's defence," was central to one of Kostic's core allegations that SVR improperly altered her insurance policy terms.

For the advanced costs applications, the court applied the framework from British Columbia (Minister of Forests) v Okanagan Indian Band, 2003 SCC 71, which recognizes courts' equitable jurisdiction to order interim costs where a claimant is impecunious, has a prima facie meritorious case, and where special circumstances justify the extraordinary exercise of that power; a further three-part test applies specifically to public-interest litigation.

The proposed records application against SVR and AIG engaged the standards for document production, including Rule 5.13 governing production from non-parties, which requires the applicant to show the record exists, is under the non-party's control, is relevant and material, might be required at trial, cannot be obtained from a party, and that ordering production is appropriate.

Reasoning and analysis

On the ability to enforce a future costs award, Justice Marion found it unlikely SVR could recover if successful at trial, citing SVR's inability to collect at least $29,360 in already-ordered costs, evidence that Kostic owed roughly $150,000 in judgments as of 2021 (up from $114,510.86 in 2020), her grant of security over proceeds in another related action, a prior 2020 Court of Appeal security-for-costs order made on similar grounds, the absence of evidence of exigible assets in Alberta, and her past contempt finding for failing to properly complete a Form 13 disclosure of assets.

On ability to pay, the court found SVR's proposed security of roughly $150,000 to $245,000 was not presently payable by Kostic, pointing to her non-payment of existing costs, her effective admission of impecuniosity (treated with some caution given its strategic relevance), and the absence of evidence of material Alberta assets.

Reviewing the merits of the underlying claim allegation by allegation — including the alleged alteration of the insurance policy, an undisclosed conflict of interest, errors in pursuing appeals, failures to disclose information, an alleged attempt to force disclosure of privileged material, failure to correct a proof of claim, failure to follow instructions to extract Kostic from the 0601 Action, alleged favouring of AIG's interests, failure to advance claims against other parties, failure to recommend independent legal advice, and failure to return file contents — Justice Marion agreed with an earlier finding of Associate Chief Justice Rooke that the claim against SVR is relatively weak, given the short time SVR was involved and the lack of clear evidence connecting its conduct to Kostic's alleged damages.

On undue prejudice, the court found Kostic had not shown, on a balance of probabilities, that a tailored security order would prevent her from continuing the action. Her financial evidence consisted largely of bald or conclusory assertions given little weight, and she had previously managed to post a $15,000 security order in a related proceeding.

Addressing other factors, the court rejected Kostic's argument that the application was premature, noting that the cases she cited for that proposition — including purported decisions styled "Fitzerald v The Co-operators General Insurance Company" [cited elsewhere in the decision's footnotes as "Fitzgerald"], "Glenmore v Western Canadian Properties," and "Renaud v The Mutual Fire Insurance Co of British Columbia" [also spelled "Renauld" in the decision's footnotes] — do not exist as cited, which the court said further undermined the reliability of her affidavit evidence generally. The court also rejected arguments that SVR's insurance coverage precluded security for costs, found no basis to conclude SVR caused Kostic's financial hardship, and found the dispute to be a purely private one lacking the public importance needed to weigh against security. Kostic's litigation conduct, including a Federal Court finding that she is a vexatious litigant under section 40 of the Federal Courts Act, was treated as a factor favouring security, given the pattern of relitigating settled matters and disregarding court directions.

On the advanced costs applications, the court found Kostic had not discharged her onus under the Okanagan framework: her impecuniosity evidence remained unsubstantiated, she had not shown the action would be forfeited without advanced funding given the earlier finding on undue prejudice, her claim did not meet the required merit threshold, and the dispute — private litigation between a client and her former lawyers — lacked the public importance needed to justify the extraordinary remedy.

The remaining relief sought in the Cross-Application, including striking SVR's statement of defence, striking or staying the security for costs application, entering judgment, amending the claim, and imposing sanctions for an alleged sealing order breach, was dismissed, denied, or adjourned indefinitely as either unsupported, moot, or not properly before the court.

On the proposed records application, the court found the request directed at SVR non-compliant for lack of a required fiat letter, and, in any event, too broad and speculative, since Kostic had not identified specific undisclosed records or questioned SVR on its affidavit of records. The portion directed at AIG was treated as a request for non-party production under Rule 5.13, which Kostic could not satisfy without first exhausting her request against SVR as the actual party to the action. The request was also moot in light of the stay imposed by the new security for costs order.

Ruling and overall outcome

Justice Marion granted SVR's application for security for costs in part, ordering a staged process rather than the lump sum SVR sought: Kostic must advise within two weeks whether she intends to proceed with her outstanding 2021 summary judgment application, and if so, post $20,000 in security within two months or have that application struck; if the summary judgment application is struck or later dismissed, Kostic must then post a further $30,000 within two months to allow the action to proceed to the discovery stage, failing which the action itself will be struck. The court declined to include past unpaid costs in the security order and rejected SVR's requested lump sum as an unreasonable barrier to the litigation. Kostic's Cross-Application and 2025 PICA Application, both seeking advanced or interim costs, were dismissed in their entirety, as was the December 2025 Fiat Request to file the Proposed Kostic-SVR Records Application. No damages were awarded to either party in this decision; the amounts addressed were the separate staged security-for-costs sums of $20,000 and $30,000, contingent on Kostic's procedural choices, rather than a fixed damages or combined costs award. The parties were directed to attempt to resolve costs of the applications themselves, failing which each will file written costs submissions on a set schedule, and the court indicated it is considering whether a penalty under Rule 10.49 should be imposed on Kostic for pursuing relief that had already been struck.