Large security for costs upheld in Alberta multi-defendant copyright action

In Geophysical Service Incorporated v Encana Corporation, Justice Strekaf of the Court of Queen’s Bench of Alberta heard an appeal by GSI relating to 26 orders for security for costs granted to various defendants. GSI had been ordered by Master Laycock to pay a combined amount of over $1.9 million as security for costs (see the decision here).

GSI’s business involved collecting and licensing seismic data, which it provided to various government boards pursuant to federal regulatory schemes. In the underlying action, certain seismic data was released by those boards to various oil and gas companies. GSI then started 17 actions in Alberta against the federal government, boards and oil and gas companies alleging, among other things, copyright infringement. GSI also started actions in the Federal Court, Texas and in other provinces advancing similar claims (see our previous discussion one defendant’s summary judgment motion here).

Several applications seeking security for costs from GSI were filed in the Alberta court and were heard by the Master. He applied the test set out in s. 254 of the Business Corporations Act which requires the defendant to establish that the plaintiff will be unable to pay the costs of a successful defendant, in which case the court has discretion to require security for costs to be posted on terms the court thinks fit.

The Master had concluded that there was significant danger that GSI would not be able to pay the costs of the successful defendants in the actions as a whole. On an individual basis, GSI likely would be able to pay the costs of early successful defendants but not of later successful defendants. He concluded that, on a balance of probabilities, GSI would be unable to pay the costs awards to all applicants. Security for costs in excess of $1.9 million was granted to numerous defendants in the actions and most were calculated on double column 5. GSI paid the total security into its solicitors trust account and appealed the Master’s Order.

GSI’s appeal

GSI submitted that a proper interpretation would not allow the Court to pool the estimated collective costs of all of the defendants in multiple actions when considering whether security for costs should be awarded in a particular action. Justice Strekaf held that s. 254 need not be read in such a narrow fashion. Section 254 is a discretionary remedial provision that should be interpreted in a broad, purposive fashion, consistent with s. 8 of the Judicature Act and is broad enough to permit the Court to consider the overall impact of costs awards to successful defendants in other actions. As long as a defendant in one action can establish that either it, a co-defendant in that action or a defendant in another action brought by the plaintiff will be unable to recover its costs if successful, the Court has discretion to award security for costs. Justice Strekaf agreed with the Master and allowed the approach of considering several actions collectively when determining whether security for costs should be awarded.

Justice Strekaf agreed that the defendants have established that they are entitled to security for costs. In considering the quantum of security ordered, double costs under column 5 was appropriate for all defendants except two. The appeal was allowed to the extent of varying the Master’s Order to reduce the amount of security for costs required to be posted by GSI in some respects (now to over $1.4 million).

A copy Justice Strekaf’s Memorandum of Decision may be found here.