Date: 20100413
Docket: T-1475-09
Citation: 2010
FC 401
Vancouver, British
Columbia,
April 13, 2010
PRESENT: Roger R. Lafrenière, Esquire
Prothonotary
BETWEEN:
HIGHLAND PRODUCE LTD.
Applicant
and
EGG FARMERS OF CANADA (formerly known as the
CANADIAN EGG
MARKETING AGENCY)
Respondent
REASONS FOR ORDER AND ORDER
[1]
The
Applicant was required by Order dated January 25, 2010 to post security in the
amount of $50,000.00 for the Respondent’s costs no later than February 25, 2010,
failing which the Respondent would be at liberty to apply to dismiss the
proceeding. The Applicant attempted to comply with the Order by tendering a
letter of credit on February 19, 2010. Directions were issued on February 26,
2010 rejecting the Applicant’s document on the grounds that a time-limited
letter of
credit did
not constitute proper security for the Respondent’s costs. On March 1, 2010,
counsel for the Applicant wrote to the Court requesting an opportunity to post
alternate security.
[2]
The
Applicant subsequently moved for an order approving a proposed form of security
as set forth in Schedule “A” to its Notice of Motion. The Respondent
concurrently brought a motion to dismiss the proceeding on the grounds that the
Applicant failed to satisfy the clear terms of the Order dated January 25,
2010.
[3]
There
is no dispute that the letter of credit originally tendered by the Applicant
was unsatisfactory since it expired after one year if notice was given by the
Toronto-Dominion Bank. Moreover, the Applicant had not sought prior approval of
the Court to post security in a form other than cash. It remains, however, that
the Applicant sought to comply with the Order dated January 25, 2010 prior
to the expiration of the deadline, and moved promptly upon being notified that
the time-limited letter of credit had been rejected. In the absence of any
apparent prejudice to the Respondent, I consider it in the interests of justice
to grant the Applicant an extension of time to post proper security.
[4]
Rule
418 of the Federal Courts Rules provides that money or a bond are the
only two forms of acceptable security. As the Applicant seeks leave to post
security in the form of a letter of credit, it is necessary to consider whether
there are any practical differences between a bond and a letter of credit that
are relevant in the circumstances of the present case.
[5]
The
difference between a bond and a letter of credit is discussed at length in
chapter 12 of K.P. McGuinness, The Law of Guarantee: A Treatise on
Guarantee, Indemnity and the Standby Letter of Credit, 2d ed. (Toronto:
Carswell, 1996). Although a distinguishing characteristic is that a bond is
made under seal, letters of credit and bonds are closely analogous, as
acknowledged by the Respondent. In fact, letters of credit are said to have a
number of advantages: see The Law of Guarantee, p. 838:
From the perspective of the creditor in a
given transaction, a letter of credit will usually
be found to provide a form of protection that is simpler from an administrative
point of view than is a surety bond, and it is
likely this simplicity that has led to the popularity of stand-by letters of credit. There are several aspects to
the relative simplicity of stand-by letters of credit.
For instance, sureties are entitled to a broad range of defences that arise
from dealings between the creditor and principal and from dealings by the
creditor with collateral securities. These
defences are not available to the issuers of letters of
credit. While the defences to which a surety is entitled may be
excluded by contract, there is no need to rely upon the skillful drafting of a
guarantee contract where a stand-by letter of credit
can be used as a substitute for a surety bond.
A further aspect of the simplicity of letters of credit
is that they provide for payment of a liquidated sum, rather than for payment
of a loss or damage. As a result, payment under a letter
of credit is not dependent upon actual proof of damage, and thus there
is no inherent element of dispute between the issuer and the creditor as to the
amount owing under the letter of credit.
[6]
The
purpose of security for costs is to protect the defendant where there might be
reason to believe that the claimant could not meet any cost order against it. If properly
drafted, a letter of credit is as secure as if cash were deposited with the
court.
[7]
The
form of security proposed by the Applicant is an irrevocable Letter of Credit
issued by TD Canada Trust in the amount of $50,000.00. The form of Letter of
Credit provides that it can be cashed and the funds paid into Court in the
event the Letter of Credit is not renewed and the judicial review application
has not been determined on the merits. In my view, the proposed Letter of
Credit
from a
reputable financial institution provides adequate protection for the
Respondent’s costs in the event the application is dismissed. The Applicant
shall therefore be granted leave to post the form of security for costs as
proposed, without prejudice to the Respondent’s right to move for better
security in the event circumstances so warrant.
ORDER
THIS COURT ORDERS that:
1. The Applicant is granted leave to give security for
costs, in satisfaction of the Order of January 25, 2010, in the form of a
letter of credit deposited with the Registry in the form as set forth
in Schedule “A” to its Notice of Motion.
2. The
Letter of Credit shall be posted forthwith and no later than April 21, 2010.
3. The
Respondent’s motion is dismissed.
4. There
shall be no order as to costs of the parties’ motions.
“Roger R. Lafrenière”
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