The Case Behind the Warning
At its core, Reddy involved a long-running business dispute and an appeal of 32 contempt findings for failing to provide adequate responses to undertakings. While the Court ultimately reduced the number of valid contempt findings to 18, it was the way the appellant’s initial factum was prepared that has drawn the most attention.
The appellant’s factum, drafted with the assistance of a third-party contractor, cited seven cases that did not exist, including six that were said to have been decided by the Alberta Court of Appeal itself. Opposing counsel flagged the issue, explaining that after substantial time spent searching authoritative legal databases, the cited authorities simply could not be found.
Appellant’s counsel ultimately acknowledged that the contractor may have used an LLM despite assurances to the contrary, and that he had not verified the sources before filing due to time pressures, illness, and the holiday season. The Court allowed a corrected factum to be filed, but not without comment, and not without consequences still under consideration.

What the ABCA Actually Said About AI
The Court of Appeal’s analysis of AI use is found at paragraphs 73 – 87 of the decision, where several core principles emerge:
1. Lawyers must understand both the benefits and risks of generative AI (paragraphs 80 – 82)
Relying on the Law Society of Alberta’s Code of Conduct (Rule 3.1-2) and its Generative AI Playbook, the Court of Appeal emphasized that competence now includes technological competence, which includes an understanding of how generative AI works, where it fails, and how to use it responsibly.
The Court referenced the Law Society’s warning that LLMs will confidently “fill gaps” with invented cases, facts, or citations, and may even fabricate entire opinions if prompted. This phenomenon is referred to as ‘AI hallucination’ and it has become a known and foreseeable risk with the ever-increasing use of generative AI in society.

2. Verification is not optional (paragraphs 81 – 83)
The Court of Appeal reiterated the Alberta Courts’ October 2023 Notice on Ensuring the Integrity of Court Submissions When Using Large Language Models, which requires:
• a “human in the loop” for all AI-generated materials,
• exclusive reliance on authoritative sources (CanLII, official court websites, commercial databases), and
• meaningful, point-by-point verification of every citation.
The Court of Appeal went further, expressing that the excuses of ‘I was busy’ or ‘the holidays made things difficult’ do not serve as justification to neglect verification:
“The time needed to verify and cross-reference cited case authorities generated by a large language model must be planned for as part of a lawyer’s practice management responsibilities.” (paragraph 83)

3. Counsel bears ultimate responsibility (paragraph 83)
The Court held that the lawyer whose name appears on the filed document is responsible for its content, regardless of who or what helped produce it. This is true even if:
• the drafting was outsourced,
• AI use was concealed from the lawyer, or
• AI was only used at an early stage.

4. Consequences for AI misuse will escalate (paragraph 84)
The Court of Appeal cautioned that:
• counsel “should not expect leniency” for violating the 2023 Notice;
• sanctions may include striking submissions or awarding costs against counsel personally;
• more serious remedies, like contempt proceedings or referrals to the Law Society, may be appropriate where the conduct amounts to an abuse of process.
In Reddy, the Court expressly invited submissions on whether appellant’s lead counsel should personally pay enhanced costs for the improper use of AI-generated materials (paragraph 87). Those costs could be significant.

Why This Matters: The Dangers of Over-Reliance on AI
The weaponization of hallucinated case law is no longer hypothetical. Reddy shows what can happen when AI is used without safeguards:
AI confidently produces false legal authorities.
Even the most advanced LLMs can output convincing but entirely fabricated case names, citations, quotes, or statutory sections.
Real and unnecessary costs are imposed on opposing counsel and the courts
In Reddy, respondent’s counsel spent significant time searching through commercial databases and court archives for non-existent cases.
The integrity of the judicial process is undermined when verification is lacking
As the Court put it, unverified AI-generated submissions “can bring the administration of justice into disrepute” (para 80).
Clients may ultimately pay the price, or their lawyers may be ordered to
The Court’s invitation to consider costs against counsel personally (paras 85 – 87) signals a strong willingness to deter future misuse.
AI cannot account for context, legal nuance, or ethical obligations
AI tools can assist, but they cannot replace legal judgment, professional responsibility, or the obligations of an officer of the court.
Tying back to the case of Clearview AI Inc v Alberta (Information and Privacy Commissioner), 2025 ABKB 28, discussed in our previous article found here: ALBERTA’S COURT OF KING’S BENCH DECLARES PRIVACY PROVISIONS UNCONSTITUTIONAL , Alberta courts are increasingly willing to engage directly with the realities of emerging technologies, and to impose meaningful boundaries when necessary.

Looking Ahead: Responsible AI Adoption in the Legal Sector
AI is reshaping nearly every area of practice, from document review to trial preparation to client management. The Law Society of Alberta is encouraging lawyers to embrace the technology responsibly and Courts, too, recognize the efficiencies AI can offer.
However, Reddy confirms that in litigation, accuracy is king. As Alberta courts adapt to the realities of generative AI, practitioners must be prepared for:
• sharper judicial scrutiny of legal authorities,
• stricter expectations around verification,
• increasing willingness to impose costs or sanctions, and
• the incorporation of AI-competence into the definition of a ‘competent lawyer.’
In that sense, Reddy is not just a warning, it is a roadmap for modern legal practice. Generative AI will continue to evolve, and so will the law. For now, Reddy stands as a reminder that while technology can enhance legal practice, it can never replace the lawyer’s critical role in ensuring accuracy, integrity, and respect for the administration of justice.
Note: This article provides general commentary and is in no way intended to replace the need to consult with a legal professional concerning the specific circumstances of your situation. This article should not be construed or relied upon as legal advice.

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carrying out an activity or interacting with someone carrying out an activity directly related to the operation of a business associated with the provision of professional services by the Regulated Member.
Sanctions for Expressive Conduct
A regulatory body or appeal body must not impose a sanction on a Regulated Member for expressive conduct that occurs outside the practice of the regulated profession.
There are a number of narrow exceptions to the general prohibition on sanctions including where the “expressive conduct” contains threats of physical violence, inappropriate pushing of professional boundaries, or sexual misconduct towards clients, students, or minors.
In defining “expressive conduct,” the Alberta government mimics the seminal Supreme Court of Canada case Irwin Toy Ltd. v. Quebec (Attorney General). There, the Court developed the legal test for determining whether freedom of expression as guaranteed by section 2(b) of the Charter of Rights and Freedoms has been violated, stating
“If the activity conveys or attempts to convey a meaning, it has expressive content and prima facie falls within the scope of the guarantee [of freedom of expression] .
It is almost assured that regulatory proceedings and subsequent judicial reviews arising from the Bill and impugned “expressive conduct” will follow the jurisprudence stemming from the Irwin Toy Ltd. decision closely as to whether a Regulated Member engaged in “expressive conduct” and is thus protected from sanctions by the Regulator.
The strict classification of “practice of the regulated profession” appears to be confined to actively practicing (such as a physician examining a patient or a lawyer meeting with opposing counsel) or managing the business associated with the practice. When paired with the broad definition of “expressive conduct” (being anything conveying or attempting to convey meaning – save for the noted exceptions), Regulated Members will have substantial freedom to express themselves when they are “off the clock.”
However, the proposed Bill is not without criticism. Legal scholars have expressed concerns about the potential spread of “misinformation”, particularly when that information is coming from an accredited professional. Critics are also concerned the Bill will inhibit the Regulatory Body’s ability to protect the public , which our Courts have consistently stated is the ultimate objective of professional regulation .
The Bill must pass several more debate and review stages in the Alberta Legislature before being proclaimed into law.

Note: This article provides general commentary and is in no way intended to replace the need to consult with a legal professional concerning the specific circumstances of your situation. This article should not be construed or relied upon as legal advice.

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Note: This article provides general commentary and is in no way intended to replace the need to consult with a legal professional concerning the specific circumstances of your situation. This article should not be construed or relied upon as legal advice.

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Note: This article provides general commentary and is in no way intended to replace the need to consult with a legal professional concerning the specific circumstances of your situation. This article should not be construed or relied upon as legal advice.

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Definition of Wills & Estates

Wills and Estates refer to the legal process of planning for the distribution of a person’s assets and property after their death. It is necessary to receive the proper legal aid to create a Will, which is important because it allows an individual to dictate how their assets will be distributed, rather than having the state make these decisions for them. This article aims to provide an overview of the basics of Wills and Estates, including the definition of a Will, the importance of estate planning, and the probate process. The purpose of the article is to educate individuals on the significance of having a Will and the various tools and processes involved in estate planning. At Stillman LLP, our priority is the best interests of our clients. Get in touch with us today and get the legal aid you need.

What is a Will?

A Will is a legal document that outlines how an individual’s assets and property will be distributed upon their death. It is a crucial tool for estate planning, as it ensures that a person’s wishes are carried out after they pass away. The components of a Will include the appointment of an executor, who is responsible for carrying out the terms of the Will. The Will also designates beneficiaries, who will receive the individual’s assets and property. Additionally, the Will outlines the distribution of assets, including real estate, personal property, and financial accounts. If the individual has minor children, they may also name a guardian to care for the children in the event of their death.

There are several types of Wills, including simple Wills, testamentary trust Wills, and living Wills. A simple Will is a straightforward document that outlines the distribution of assets and the appointment of an executor. A testamentary trust Will allows for the creation of a trust to manage the distribution of assets. A living Will, also known as an advance directive, outlines the individual’s wishes for their medical treatment if they are unable to make decisions for themselves. A Will is a crucial tool for estate planning, as it ensures that a person’s wishes are carried out after they pass away. It is important for individuals to understand the various components and types of Wills, and to have a plan in place for the distribution of their assets and property.

Estate Planning

Estate planning is the process of planning for the distribution of an individual’s assets and property after their death. It is important because it allows a person to dictate how their assets will be distributed, rather than having the state make these decisions for them. Estate planning also helps to minimize the tax implications and other expenses associated with the distribution of assets. There are several estate planning tools that individuals can use, including Wills, trusts, powers of attorney, and health care directives.

A Will is a legal document that outlines how an individual’s assets and property will be distributed upon their death. Trusts allow for the management of assets during a person’s lifetime and after their death. Powers of attorney grant someone else the authority to make decisions on behalf of an individual, while health care directives outline the individual’s wishes for their medical treatment if they are unable to make decisions for themselves. Estate planning is an important process that allows individuals to control the distribution of their assets and property after their death.

Probate

Probate is the legal process of distributing a person’s assets and property after their death, as outlined in their Will. The purpose of probate is to ensure that a person’s assets are distributed in accordance with their wishes, as outlined in their Will. The probate process begins with the filing of the Will in court. The court will appoint an executor, who is responsible for carrying out the terms of the Will. The executor must then perform an inventory of the deceased person’s assets, including real estate, personal property, and financial accounts. Next, the executor must pay any outstanding debts and taxes, and distribute the remaining assets to the designated beneficiaries. The entire probate process involves: filing of the Will in court, appointing an executor, an inventory of assets, the payment of debts and taxes, and the distribution of assets.

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Family law is complex because it involves a wide range of legal issues that are often emotionally charged and personal in nature. These issues can include divorce, child custody and support, domestic violence, and adoption, among others. Each case can be unique and may involve a variety of legal, financial, and personal factors that must be taken into consideration. Additionally, family law can also vary from province to province, making it even more complex.

Divorce

If you’re going through a divorce that involves family law, there are several important points to keep in mind. Make sure you understand the jurisdiction and residency requirements for filing for divorce in your province. It’s important to be familiar with the grounds for divorce in your province, which can range from irreconcilable differences to fault-based grounds such as adultery or abuse. You should also know how property is divided in your province, as it can be either a community property province or an equitable distribution province.

When it comes to child custody and support, it’s important to be aware of how it is determined in your province, which is usually based on the best interests of the child. Spousal support issues can also be a factor, such as the length of the marriage, each spouse’s earning capacity, and any contributions to the marriage. Consider alternative dispute resolution methods such as mediation as it can be quicker and less expensive than going to court. Finally, consider hiring a family law attorney to represent you, as divorce can be a complex and emotional process and having a knowledgeable advocate can help protect your rights and interests.

Child custody and support

When dealing with child custody and support in a family law case, there are several important points to keep in mind. Child custody and support decisions are made based on the best interests of the child, which takes into consideration factors such as the child’s relationship with each parent, the child’s safety and welfare, and the child’s educational and emotional needs. It’s important to be familiar with the different types of custody, including physical custody, legal custody, and joint custody. Child support is typically calculated based on factors such as the income of each parent, the number of children, and the amount of time each parent spends with the children. If a parent who is ordered to pay child support does not do so, there are enforcement mechanisms available, such as wage garnishment or seizure of assets.

Child support orders can also be modified if there is a significant change in circumstances. Consider developing a parenting plan that outlines how custody, support, and other issues will be handled, as it can help reduce conflict and promote cooperation between parents. It’s important to consider hiring a family law attorney to represent you, as child custody and support can be complex and emotionally charged, and having a knowledgeable advocate can help protect your rights and interests. It’s important to research and understand the specific requirements in your province as child custody and support laws and procedures can vary from province to province.

Adoption

When dealing with adoption in a family law case, there are several important points to keep in mind. Familiarize yourself with the different types of adoption, such as stepparent adoption, agency adoption, and international adoption. Be aware of the eligibility requirements for adoption, which can vary based on factors such as age, marital status, and income. Prepare for a home study, which is an evaluation of your family and home environment, and know that the consent of the biological parents is usually required for adoption. Be prepared for background checks and be aware of the costs associated with adoption, which can include legal fees, agency fees, and court costs. Understanding the adoption process, which can include filing a petition, appearing in court, and finalizing the adoption, is also crucial.

Consider hiring a family law attorney to represent you, as adoption can be a complex process and having a knowledgeable advocate can help protect your rights and interests. Adoption laws and procedures can vary from province to province, so it’s essential to research and understand the specific requirements in your province. Additionally, be prepared for a long and emotional process as adoptions can take several months or even years to complete.

Domestic violence

When dealing with domestic violence in a family law case, it’s important to be familiar with the legal remedies available to protect yourself and your children. This may include obtaining a restraining order, also known as a protective order, which can prohibit the abuser from having contact with you and your children. Additionally, you may be able to seek exclusive use and occupancy of your shared home, temporary custody of your children, and support for yourself and your children. It’s also important to know that domestic violence can have a significant impact on child custody and support decisions, as the court will take the safety and welfare of the children into consideration. In some cases, a finding of domestic violence can result in a parent losing custody or being restricted to supervised visitation with the children.

If you are a victim of domestic violence, consider reaching out to a local domestic violence organization for support and resources, as well as hiring a family law attorney to represent you in court. Additionally, be aware that domestic violence laws can vary from province to province, so it’s essential to research and understand the specific requirements in your province.

Paternity

In family law cases involving paternity, determining the legal father of a child is a crucial step in determining child custody, support, and visitation rights. Paternity can be established through marriage, which assumes that the husband is the legal father of any children born during the marriage. If the parents are not married, paternity can be established through voluntary acknowledgment or through genetic testing. Once paternity has been established, the father has the legal obligation to support the child and may be entitled to custody or visitation rights.

In some cases, a paternity dispute may arise, and a court may need to determine paternity through genetic testing or other evidence. If you are involved in a paternity case, it’s important to understand your rights and obligations as a legal parent, and to consider hiring a family law attorney to represent you in court. Additionally, be aware that paternity laws can vary from province to province, so it’s essential to research and understand the specific requirements in your province.

Guardianship

In family law cases involving guardianship, a guardian is appointed by a court to make decisions and provide care for a minor child or for an incapacitated adult. Guardianship can be full or limited, depending on the extent of the decision-making authority granted by the court. When a minor child’s parents are unable or unwilling to care for their child, a guardianship may be established to provide a stable home environment. In the case of an incapacitated adult, a guardianship may be necessary to make decisions regarding their health, finances, and other aspects of their life.

The appointment of a guardian is a serious matter and is subject to court oversight and review. If you are seeking to become a guardian or are involved in a guardianship case, it’s important to understand your rights and responsibilities as a guardian and to consider hiring a family law attorney to represent you in court. Additionally, be aware that guardianship laws can vary from province to province, so it’s essential to research and understand the specific requirements in your province.

Juvenile law

Family law cases involving juvenile law pertain to minors who are accused of committing a crime or are in need of protection and care. Juvenile cases are heard in juvenile court, which operates differently than adult criminal court. The primary focus of juvenile court is rehabilitation and reintegration rather than punishment. In cases where a minor is accused of a crime, the court will determine if they should be adjudicated as a juvenile delinquent. If the minor is found to be delinquent, the court may impose sanctions such as probation, community service, or placement in a juvenile detention center. In cases where a minor is in need of protection and care, the court may remove the minor from their home and place them in the care of a relative or in a foster home.

If you are involved in a juvenile law case, it’s important to understand the unique procedures and objectives of the juvenile court system and to consider hiring a family law attorney to represent you in court. Additionally, be aware that juvenile law can vary from province to province, so it’s essential to research and understand the specific requirements in your province.

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In Alberta, Canada, the laws concerning real estate are primarily governed by the Real Estate Act, the Residential Tenancies Act, and the Landlord and Tenant Act. These laws regulate the practices of real estate brokers, agents, and property management companies, as well as the rights and responsibilities of landlords and tenants in the rental of residential properties. The Real Estate Council of Alberta is responsible for enforcing these laws and protecting consumers in the real estate industry.

The cost of real estate law services can vary greatly depending on the type and complexity of the transaction or issue involved. Simple real estate transactions, such as the purchase or sale of a home, may cost a few thousand dollars, while more complex transactions or disputes can cost tens of thousands of dollars. Legal fees for real estate law services are typically billed by the hour. In addition to legal fees, other costs may include filing fees, title search fees, and appraisal fees. It is important to discuss the estimated costs with a real estate attorney before beginning any legal proceedings.

Real estate acquisitions and sales

In a real estate transaction, the laws and regulations surrounding acquisitions and sales play a significant role in determining the outcome. These laws cover a range of areas including:

• Contract Law: outlines the terms and conditions of the agreement between the buyer and seller

• Property Law: governs the transfer of ownership and associated rights and obligations

• Zoning and Land Use Law: regulates the use of land and buildings

• Environmental Law: protects the environment and affects property use and development

• Tax Law: impacts the calculation of taxes such as property taxes and capital gains taxes.

An experienced real estate attorney can assist in ensuring that the transaction is conducted in compliance with all applicable laws and regulations, and help to protect the rights and interests of the parties involved.

Real estate law for transactions on real estate development and construction

Real estate law for transactions on real estate development and construction involves a complex set of rules and regulations that govern the sale, transfer, and development of real property. This includes laws related to zoning, building codes, contracts, and property rights, as well as environmental regulations and financial requirements. The purpose of these laws is to ensure that real estate transactions are fair, transparent, and in compliance with local and national regulations. Developers and construction companies must be familiar with the applicable laws in order to successfully navigate the process of acquiring and developing real estate property. They may also need to consult with real estate lawyers or other experts to ensure compliance and avoid any legal disputes.

Real estate law for transactions on landlord and tenant disputes

The real estate laws for transactions on landlord and tenant disputes vary by jurisdiction but generally, they include provisions that govern the relationship between landlords and tenants. These laws often cover topics such as rent and security deposit amounts, payment due dates, and grace periods. Another one would be a landlord’s right to access the rental property, maintenance and repairs of the property, termination of the tenancy, and eviction procedures. Disclosures by the landlord to the tenant would be included under these laws as well, including discrimination in housing, security deposits and their return, and habitability of the rental property. It is important to note that real estate laws can change frequently, so it’s a good idea to check for updates and to consult with a local attorney if you have any questions or concerns.

Real estate law for transactions on easements, rights of way and restrictive covenants and other interests in land

In Canada, real estate law relating to transactions involving easements, rights of way, restrictive covenants, and other interests in land is governed by both provincial and federal legislation. The specific laws that apply to a particular transaction can depend on the location of the property in question, as well as the type of interest involved. For example, the Land Titles Act governs the registration and transfer of interests in land in some provinces, while others may have separate legislation regulating these matters. In addition, restrictive covenants and other similar interests in land are often created through private agreements between the parties involved, and these agreements may be enforceable through contract law.

Real estate law for transactions on condominium projects and disputes

Are you thinking about buying a condominium in Alberta? Are you wondering what the legal obligations and restrictions on such a purchase might be? Are you aware of the potential for dispute resolution when something goes wrong with a condominium transaction in Alberta? Stillman LLP has the experienced team to help you navigate through the real estate law around transactions for condominiums, whether it be for projects or disputes. The real estate industry in Alberta is regulated under the Real Estate Act, which provides detailed guidance for parties involved in transactions on projects involving condominiums. The law also serves to protect purchasers from inappropriate practices or misstatements from agents, brokers, or developers, and gives rights of recourse when disputes arise around condominium transactions. Alberta real estate law provides comprehensive guidance to ensure that buyers have a clear understanding of their obligations and know their rights if a dispute related to purchasing a condo arises.

Real estate law for commercial and industrial transactions

Are you considering a commercial or industrial real estate transaction in Alberta? If so, it is essential that you become familiar with the laws governing such transactions. Real estate is a complicated field and understanding the legal options available to you when purchasing or selling a property can be daunting. In Alberta, all commercial and industrial transactions must follow stringent provincial regulations. Alberta’s real estate laws are designed to provide protection to both buyers and sellers of commercial and industrial properties.

It is important to consult with a qualified legal professional when dealing with transactions involving interests in land, as the laws can be complex and the consequences of not following them can be severe. At Stillman LLP, we assist corporations with all of their commercial real estate needs, including acquisitions and sales, development, leasing, and lending. Our goal is to complete your project or transaction in an efficient, practical, and cost-effective way. If you have any questions, do not hesitate to contact us

.

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What happened in Clearview AI Inc v Alberta (Information and Privacy Commissioner), 2025 ABKB 287?

Clearview AI is a U.S.-based company whose technology scrapes billions of publicly accessible images from across the internet, including social media platforms, and uses them to build a facial recognition database. This database was marketed to law enforcement agencies, including several in Canada.

In 2021, Alberta’s Information and Privacy Commissioner (OIPC), along with counterparts in BC, Quebec, and at the federal level, issued a joint report concluding that Clearview’s collection, use, and disclosure of biometric data violated various privacy laws. Alberta’s OIPC then ordered Clearview to cease operations in the province and delete data collected from Albertans.

Clearview sought judicial review of the order, arguing that it was unconstitutional and that the OIPC had adopted an unreasonable interpretation of the Personal Information Protection Act (PIPA) and its regulations.

The Decision

The Court found a “real and substantial connection” between Clearview and Alberta (at paras 44 & 63). Since Clearview had marketed its services to Alberta police and scraped data from Albertans, Alberta’s privacy laws could validly apply, even to a U.S.-based company (at para 54).

The OIPC’s interpretation of the term “publicly available” under PIPA was held to be reasonable. The Court accepted that social media content, despite being viewable online, does not automatically qualify for the consent exemption unless it fits the prescribed regulatory criteria. While the term “publication” in section 7(e) of the PIPA Regulation might on its face appear to include online posts, the Court accepted the Commissioner’s view that the Regulation was intended to apply only to formal, curated publications such as newspapers and magazines, not to user-generated social media content (at paras 72 & 83)

However, the Court agreed with Clearview that this interpretation raised constitutional concerns. The requirement to obtain consent, even for publicly accessible online information, was found to infringe Clearview’s freedom of expression under section 2(b) of the Charter (at para 104). The Court noted that the consent requirement, when applied to vast amounts of internet-based data, created a blanket restriction on expression that could not be practically complied with (at paras 132-135). This amounted to a complete prohibition on certain expressive activity, particularly for organizations that rely on publicly available data to develop search tools, AI models, or similar technologies.

As a remedy, the Court struck down the words “including, but not limited to, magazines, books, and newspapers” from section 7(e) of the Regulation, allowing the term “publication” to take on its ordinary meaning, i.e., any material intentionally made public (para 148).

However, Clearview ultimately failed in its application to quash the Commissioner’s order. The Court upheld the Commissioner’s finding that Clearview’s purpose for collecting and using the data, namely mass surveillance for commercial gain, was not “reasonable” under sections 11, 16, and 19 of PIPA (at paras 150, 154, & 163-164). The Court emphasized that purpose matters. Even though search engines like Google also collect similar information, their purposes differ significantly. The Court declined to extend its Charter finding to shield Clearview’s specific business model (paras 132–146).

Takeaways

1. Even with the unconstitutionality of the “publicly available” exception, organizations must still ensure that their purpose for collecting data is reasonable.
2. The Court acknowledged that bot-driven internet activities, like those used by search engines, can be expressive and should not be unduly burdened by impractical consent requirements.
3. Alberta’s government will likely revisit PIPA and its regulations in light of the Court’s findings. The decision may also influence future amendments to federal and BC privacy laws.
4. While the Court struck down the law’s overbreadth, it reaffirmed that organizations can still be prohibited from using personal information for purposes deemed unreasonable, particularly where serious privacy harms are at stake.

Looking Ahead

This decision marks a turning point in Canadian privacy law in the new age of AI technology. It acknowledges the realities of modern digital communication while reasserting the fundamental importance of individual privacy. The ruling will likely prompt legislative reform in Alberta and may inspire constitutional challenges elsewhere.

But Clearview’s loss is a cautionary tale. Courts are increasingly willing to protect freedom of expression in the digital realm, but they are equally willing to scrutinize how that freedom is exercised. Businesses building AI-driven tools or relying on web scraping would be wise to re-examine both the sources of their data and the reasons they use it.

Note: This article provides general commentary and is in no way intended to replace the need to consult with a legal professional concerning the specific circumstances of your situation. This article should not be construed or relied upon as legal advice.

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Understanding Security for Costs

Security for costs applications are a procedural tool designed to protect defendants from financial loss in cases where the plaintiff cannot pay a costs award. These orders are particularly important in situations involving plaintiffs with limited assets or uncertain financial stability.

Rule 4.22: A Broad Approach

Rule 4.22 applies to all plaintiffs, whether individuals or corporations, and provides a general framework for security for costs applications. Under this rule, the court considers several factors:

1. The plaintiff’s ability to pay a potential costs award.
2. The merits of the action—whether the claim has a reasonable likelihood of success.
3. Prejudice to the plaintiff—whether an order would prevent them from pursuing their claim.
4. Any other relevant factors the court deems appropriate.

This rule emphasizes fairness and judicial discretion. For instance, courts may be reluctant to grant security for costs if doing so would unduly limit access to justice, especially for individuals with valid but under-resourced claims.

Section 254 (ABCA): A Specific Standard for Corporate Plaintiffs

Section 254 introduces a more stringent standard for corporate plaintiffs, requiring defendants to demonstrate that the corporation will be unable to pay the costs of a successful defendant.¹ This provision reflects the heightened financial risks defendants face when dealing with corporate entities that may have limited assets or no presence in Alberta.

Although Section 254 sets a clear financial threshold, courts still exercise discretion. Relevant factors include:

1. Location and Value of Assets: If the corporation lacks eligible assets in Alberta, this increases the likelihood of a security for costs order.
2. Timing: Applications made early in proceedings carry more weight.
3. Merits of the Claim: A weak claim can bolster the defendant’s argument for security.
4. Prejudice: Courts may deny security if it would effectively bar the plaintiff from continuing their claim.

Key Differences Between Rule 4.22 and Section 254

Case Law Insights

Arraf v Royal View Surgical Centre Ltd., 2024 ABKB 262

Dr. John Arraf and his professional corporation sued Royal View, alleging wrongful and constructive dismissal after his departure from the surgical center. The defendants sought security for costs, arguing that Dr. Arraf’s assets in the U.S.A. could complicate enforcement of a potential costs award. Initially, the request was dismissed, but on appeal, the decision was overturned. The Court ordered security for costs, citing errors in the lower court’s analysis, including insufficient consideration of corporate plaintiffs under Section 254 of the ABCA and the absence of clear evidence of enforceable assets in Montana. Balancing factors like the corporate plaintiff’s inability to pay and Dr. Arraf’s income, the Court found security for costs just and reasonable.

The Court emphasized that applications for security for costs under Rule 4.22 and Section 254 of the ABCA are discretionary and involve balancing access to justice with economic security.² This highlights the need for a nuanced, evidence-based approach when considering security for costs.

Blazer Mechanical Plumbing & Heating LTD v Delnor Construction 2012 LTD, 2024 ABKB 183

Blazer claimed unpaid compensation for work performed for Delnor, while Delnor argued the work was to fix Blazer’s errors and thus not compensable. Security for costs was granted in favour of Delnor. Blazer appealed, contending that its insurance policy should cover potential cost awards, eliminating the need for security, and argued the order would cause undue prejudice. The Court dismissed the appeal, finding the insurance policy insufficient to guarantee payment of costs and highlighting Blazer’s lack of other assets or financial means to satisfy a potential award. The Court upheld the security for costs as just and reasonable.

This case stated that when applied to corporate parties, security for costs can be granted under Rule 4.22 or Section 254.³ Rule 4.22 was applied to assess the balance between protecting the applicant’s ability to recover costs and avoiding undue prejudice to the respondent. The Court determined that an insurance policy proposed by the respondent did not adequately address concerns regarding cost recovery, especially since it did not guarantee coverage. The decision underscored the importance of substantive evidence when seeking to counter an application for security for costs.

Vizor v 383501 Alberta Ltd (Val Brig Equipment Sales), 2022 ABQB 5

The Court addressed a security for costs application against Mr. Vizor and his corporation, DJH. Val Brig Equipment Sales (VBES) argued for security for costs under both Rule 4.22 and Section 254 of the, asserting that both Mr. Vizor and DJH lacked sufficient assets in Alberta to satisfy potential cost awards. The Court considered factors under Rule 4.22, such as enforceability of judgments, the respondents’ ability to pay, and undue prejudice. Under Section 254, the court noted DJH’s status as an impecunious shell corporation. Evidence of Mr. Vizor’s limited personal assets and DJH’s lack of operational capacity favoured the application. Additionally, the Court highlighted the corporation’s inability to fund litigation independently, aligning with established precedents emphasizing corporate shareholders’ responsibility to fund claims. Concluding that VBES’s application was timely, the claims lacked merit, and there was no undue prejudice to the respondents, the Court granted an order for security for costs.

Rule 4.22 was used for individual plaintiffs, while Section 254 addressed the corporate respondent’s inability to pay.⁴ The Court found that the respondents failed to demonstrate undue prejudice and had no meaningful assets in Alberta. The decision emphasized that corporate shareholders bear responsibility for funding litigation, especially when corporations lack the means to pay costs.

Together, these recent cases illustrate the dual application of Rule 4.22 and Section 254 in Alberta. Rule 4.22 provides a flexible framework for individuals and corporations, considering fairness and undue prejudice, while Section 254 applies a stricter standard for corporations unable to pay costs. Across all three cases, courts have emphasized the necessity of concrete evidence to justify or resist security for costs orders, balancing the interests of justice against the risk of unrecoverable costs. The decisions collectively reinforce that security for costs aims to prevent abuse of litigation while safeguarding access to justice.

Conclusion

Security for costs applications are an essential mechanism to manage financial risks in litigation. By understanding the distinctions between Rule 4.22 and Section 254, litigants can better navigate Alberta’s legal landscape. Whether you are defending against a claim or pursuing one, consulting experienced legal counsel is key to achieving the best outcome.

¹ Arraf v Royal View Surgical Centre Ltd., 2024 ABKB 262, at para 29
² Arraf v Royal View Surgical Centre Ltd., 2024 ABKB 262, at para 30
³ Blazer Mechanical Plumbing & Heating LTD v Delnor Construction 2012 LTD, 2024 ABKB 183, at para 7
⁴ Vizor v 383501 Alberta Ltd (Val Brig Equipment Sales), 2022 ABQB 5, at para 163

Note: This article provides general commentary and is in no way intended to replace the need to consult with a legal professional concerning the specific circumstances of your situation. This article should not be construed or relied upon as legal advice.

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