Date: 20250514

Docket: T-205-25

Citation: 2025 FC 880

Ottawa, Ontario, May 14, 2025

PRESENT: The Honourable Mr. Justice Duchesne

BETWEEN:

UNION SQUARE HOSPITALITY GROUP, LLC. AND USHG IP, LLC.

Plaintiffs/Responding Parties

and

AQUILINI RESTAURANTS LIMITED PARTNERSHIP

Defendant/Moving Party

ORDER AND REASONS

[1] The Defendant and Moving Party has brought a motion in writing for an Order for security for costs to be made against the Plaintiffs and Responding Parties pursuant to Rules 369 and 416(a) and (g) of the Federal Courts Rules, SOR/98-106 (the Rules). The Defendant asks this Court to order the Plaintiffs to post security for the Defendant’s estimated costs of this proceeding, up to and including for a 3-day trial, in the amount of $ 175,000.

[2] The Plaintiffs respond that the Defendant’s motion should be denied because the amount sought is unjustified and is not supported by the evidence led on the motion. That being said, the Plaintiffs do not dispute that they are foreign plaintiffs and that they may be required to give security for costs pursuant to Rule 416(1)(a) of the Rules. They have not led any evidence as to any assets they may have in Canada or whether those assets may satisfy a costs award. The Plaintiffs have also not pleaded that they are impecunious within the meaning of Rule 417 of the Rules.

[3] If security for costs is to be ordered, they argue, the amount of security to be given should be paid into Court in stages and calculated in accordance with Column III of Tariff B, the default cost calculation tool pursuant to Rule 407.

[4] The Defendant defends its request for an elevated amount of security for costs in its reply submissions while focusing on the frivolity and vexatiousness of the underlying action due to the Plaintiffs having neither a Canadian trademark nor any pleaded goodwill in Canada, and due to the increased use of lump sum costs awards by this Court in intellectual property litigation.

[5] The issues to be decided on this motion are:

a) Should the Court exercise its discretion to order that security for costs be posted; and,

b) If so, what is the amount of the security to be posted and should it be posted in stages as permitted by Rule 416(2).

[6] For the reasons that follow, the Defendant’s motion will be granted and the Plaintiffs will be ordered to pay security for costs in the amount of $ 20,000 in stages as set out in the terms of the Order at the end of these reasons.

I. The Applicable Law

[7] The rules applicable to a motion for security for costs find their source in the Rules and the underlying policy applicable to the costs of a proceeding. The Court has discretion pursuant to Rule 400 of the Rules as to an award costs, the amount of costs, as well as by whom to whom they are to be paid. It is usual for the successful party to be awarded costs if it requests them. By awarding and fixing costs payable, the Court strives to meet the three-fold objective of costs generally, that is, the objective of providing compensation to the successful party, promoting settlement, and deterring abusive behaviour (Air Canada v Thibodeau, 2007 FCA 115 (CanLII), at para 24).

[8] A costs award, regardless of its amount, may fail to meet this objective when any one of the situations contemplated by Rule 416(1) is made out on a motion for security for costs. Aside from the statutory right to security for costs contemplated by Rule 416(1)(h), each situation described in Rule 416(1) represents a situation where the successful respondent or defendant may ask the Court to require the applicant or plaintiff to post security for costs as a condition of moving their proceeding forward because their right or ability to recover costs from the unsuccessful applicant or plaintiff may be jeopardized without security for costs being made available. The ability to recover costs may be jeopardized because, among others, the applicant or plaintiff does not operate within Canada and is outside of the Court’s territorial jurisdiction and the applicant or plaintiff’s assets upon which a costs award may be enforced and realized are located outside of the Court’s jurisdiction such that additional litigation may be required to recover the costs award in that foreign jurisdiction. Security for costs seeks to mitigate this potential jeopardy. It is notionally intended to make meaningful or sufficient applicant-held or plaintiff-held assets readily available to ensure that the costs objective is met in a procedurally fair manner.

[9] Security for costs in this Court is provided for by Rules 416 to 418, as well as by Rules 400, 407 and Tariff B. The salient portions of Rules 416, 417 and 418 for the purposes of this motion read as follow:

 

[10] The salient portions of Rules 400 and 407 read as follow:

 

[11] Subject to the Court’s discretion, a defendant is prima facie entitled to an order for security of costs if he establishes that any of the requirements set out in Rule 416(1) are met. If the moving party has demonstrated that it is entitled to an award of security, unless there is some other reason why security should not be granted, the onus shifts to the responding party to demonstrate under Rule 417 that it is impecunious and that it has a meritorious case. (Highland Produce Ltd. v Egg Farmers of Canada, 2010 FC 84, at para 17; Sauve v Canada, 2012 FCA 287, at para 6; Sauve v Canada, 2014 FC 119 at para 16).

[12] Rule 416(1)(a) sets out that an order for security for costs may be made where it appears to the Court that the plaintiff is “ordinarily resident outside of Canada.” This portion of the Rule has been interpreted as requiring the moving party to establish on the balance of probabilities that the applicant’s ordinary residence is located outside of the territorial jurisdiction of this Court. An “ordinary residence” is the place where the applicant’s customary mode of life unfolds and is contrasted with a person’s occasional or casual residence (Fraser v Janes Family Foods Ltd., 2012 FCA 99 (CanLII), at paras 9 and 10).

[13] Rule 416(1)(g) sets out that an order for security for costs may be made where “[…] there is reason to believe that the action is frivolous and vexatious, and the applicant would have insufficient assets in Canada available to pay the respondent, if ordered to so do so.” The applicable jurisprudence pertaining to this subrule holds that the “reason to believe” standard is a standard of proof that “while falling short of a balance of probabilities nonetheless connotes a bona fide belief in a serious possibility based on credible evidence” that the proceeding is frivolous and vexatious (Chiau v. Canada (Minister of Citizenship and Immigration) (T.D.), 1998 CanLII 9042 (FC), at para , [1998] 2 FC 642 at page 658, para 27; Ramirez v. Canada (Minister of Employment and Immigration), 1992 CanLII 8540 (FCA), [1992] 2 F.C. 306 (C.A.); Sivakumar v. Canada (Minister of Employment and Immigration), 1993 CanLII 3012 (FCA), [1994] 1 F.C. 433 (C.A.); Camp v. Buffalo Point First Nation, 2024 CanLII 1704 (FC) at para 46). I need not find and am not required to determine on this motion whether the underlying action is actually frivolous or vexatious in order to hold that the Defendant has met its burden for an order for security for costs pursuant to Rule 416(1)(g); that determination is to be made on a separate motion and not on a motion for security for costs.

[14] For a defendant to meet its burden pursuant to Rule 416(1)(g), it must persuade the Court on the basis of credible evidence led on the motion that the action is so devoid of merit as to give reason to believe that it is frivolous and vexatious without being satisfied that the Application is actually totally devoid of merit (Maheu v IMS Health Canada, 2003 FCT 1 (CanLII), at para 54 to 56).

[15] The manner of determining the quantum of security for costs to be ordered on a motion for security for costs was explained by Justice de Montigny (as he then was) in Bodum USA, Inc v Trudeau Corporation (1889) Inc., 2012 FC 240, at para 19 as follows:

It is well established that the amount of security for costs must correspond to the probable costs to which the defendant would be entitled, should it be successful in defending the action brought against it. While security for costs is an indemnity and ought not be illusory, it must also not be oppressive so as to prevent a plaintiff from bringing a lawsuit. The amount of security is at the discretion of the Court, bearing in mind the draft bill of costs while also taking into account any reductions that might be made on a taxation. The appropriate factors to be taken into account in fixing the security for costs were aptly summarized by Prothonotary Hargrave in Tough Traveler (Tough Traveler, Inc. v Taymor Industries, Ltd, (1994) 1994 CanLII 19551 (FC), 59 C.P.R.(3d) 186, 90 F.T.R. 70), at p. 190:

In deciding on appropriate security for costs there are also other points that I have kept in mind including that “an allowance will have to be made for the unquenchable fire of human optimism and the likelihood that the figure of taxed costs put forward would not emerge unscathed after taxation” (Procon Ltd., supra, at p. 571); that every case, this included, will not necessarily be fought through to a finish and therefore security for costs might be somewhat less; that security for costs ought not to be illusory, but at the same time ought not to be oppressive so as to hamper the plaintiff in bringing a legitimate lawsuit; and that if the security proves inadequate, the defendant can always apply for additional security at a later date.

II. The Parties’ Positions

a) The Defendant’s Position

[16] The Defendant argues that the Court should exercise its discretion to make an order requiring the Plaintiffs to post security for costs because the Plaintiffs are ordinarily resident outside of Canada and have not led evidence of their assets in Canada that could be realized upon to satisfy an eventual costs award as the jurisprudence would require of them in order to be dispensed with the requirement to post security (Apotex Inc. v. H. Lundbeck A/S, 2010 FC 807, at para 18).

[17] The Defendant has produced a draft Bill of Costs for the Court’s consideration. That Bill of Costs is not attached as an Exhibit to any affidavit evidence. It is in essence a free floating estimate based on the procedure to claim costs in Ontario pursuant to Rule 57.01(5) and Form 57A of the Rules of Civil Procedure, RRO 1990, O.Reg. 194 (the Ontario Rules), based on the notions of “substantial indemnity costs” and “partial indemnity costs” contained in Rule 1 of the Ontario Rules but which are alien to the Rules. The draft Bill of Costs explicitly states that it’s submitted in accordance with the applicable Court of Appeal for Ontario and Superior Court of Justice authorities referred to in the draft Bill of Costs itself.

[18] As to the issue of the amount of security to be posted, the Defendant argues that the amount being sought represents approximately 30% of its estimated costs through to and including trial plus disbursements. It argues that its figure of $ 175,000 is a number which is based fairly upon the available caselaw where evidence of lump sum cost awards have been “increasingly favoured by courts in many matters, ranging from the simple to the very complex.” It argues that lump sum awards are broadly accepted and used in intellectual property cases, particularly when dealing with sophisticated commercial litigants, such as the Plaintiffs and Defendant in this proceeding (Travel Leaders Group, LLC v. 2042923 Ontario Inc. (Travel Leaders), 2023 FC 613, at paras 18 and 30 (Travel Leaders Group). The Defendant also argues that the jurisprudence shows that for a moderately complex trademark proceeding that does not involve the same complexity of certain patent cases but remains reasonably complicated, a lump sum cost award of the lower levels of the 25% to 50% range of costs actually incurred are appropriate (Travel Leaders Group, at paras 20 and 26).

[19] The Defendant also pleads that the jurisprudence shows that courts have awarded lump sum awards and awarded enhanced costs where litigants have relied on unsupported and unmeritorious suspicions and allegations of bad faith, even where they have not outright pled dishonesty and misfeasance (Travel Leaders Group, at para 32).

[20] Finally, the Defendant argues that this type of behaviour has been fully displayed by the Plaintiffs in this case through their extensive comments in their Statement of Claim whereby they accuse the Defendant of embarking on a calculated plan to exploit the Plaintiffs’ unproven reputation and intentionally misappropriate their non-existent goodwill in Canada by purposefully sewing confusion in the minds of consumers with products that deliberately mimic the Plaintiffs’ American trademark. The Defendant argues that these suggestions of bad faith have no merit whatsoever and remain completely unsupported by any evidence.

[21] The Defendant asks that the Plaintiffs be ordered to pay security into Court within 14 days of the disposition of this motion and that this proceeding be stayed pursuant to Rule 416(3) of the Rules until such time as security is paid into Court.

b) The Plaintiffs’ Position

[22] The Plaintiffs do not dispute that they may be ordered to post security for costs as plaintiffs that are ordinarily residence outside of Canada. They have led no evidence that they hold any assets in Canada that could be realized upon to satisfy an eventual costs award in favour of the Defendant.

[23] The Plaintiffs’ arguments attack the amount of security for costs sought by the Defendant more forcefully than whether this Court should order security to be posted.

[24] The Plaintiffs argue that the Defendant has not led any evidence in support of its fee estimates in the draft Bill of Cost included in its motion record. The Plaintiffs have produced their own estimated Bill of Costs of the Defendant as an exhibit to the affidavit evidence they submitted on the motion. The Plaintiffs’ draft Bill of Costs reflects assessable Tariff B steps that would normally be completed in litigation as well as the corresponding cost calculation pursuant with Rule 407 and its direction that costs are to be assessed in accordance with column III of Tariff B.

[25] The Plaintiffs argue that the Defendant’s draft Bill of Costs is excessive, unsupported, and contains cost items that may be object of a costs award pursuant to the Ontario Rules but are not included in Tariff B with the result that they are not recoverable in this Court.

[26] The Plaintiffs argue that the Defendant wrongfully assumes it would recover a lump sum costs award at the end of this proceeding and that such lump sum would be represent approximately 30% of their actual costs. The Plaintiffs rely on Travel Leaders Group and point out that in that decision, Madam Justice Walker (as she then was) recognized at paragraph 15 of her reasons that costs are typically fixed by applying Rule 407 of the Rules or, in appropriate circumstances, by the award of a lump sum that is consistent with the principles of consistency and predictability in costs awards that permit counsel to properly advise their client, the litigant, about litigation costs risks (Nova Chemicals Corporation v Dow Chemical Company, 2017 FCA 25 at para 19).

[27] The Plaintiffs argue that security should be posted in stages pursuant to Rule 416(2) because staging recognizes the reality that many cases are resolved prior to trial, and, that requiring a plaintiff to pay significant sums into court for litigation steps that might never be completed is potentially unfair (Lavigne v Canada Post Corporation, 2009 FC 756, at para 67 (Lavigne); Matthews v “Tiare Taporo” (Ex “Zebroid”) (The), 2014 FC 588, at para 43 (Matthews).

[28] Ultimately, the Plaintiffs argue that if security for costs is to be ordered, it should be ordered in two staged amounts of $ 10,000 each, the first stage following the disposition of this motion and the second stage being shortly before the commencement of oral examinations for discovery. If additional security for costs is required for later stages in the litigation, then the Defendant may seek an additional amount of security as is contemplated by Rule 416(6).

c) The Defendant’s Reply

[29] The Defendant’s Reply to the Plaintiffs is focussed on its opinion that the Plaintiffs’ claim is frivolous and vexatious, and that the Plaintiffs have not provided any evidence whatsoever beyond the allegations in their pleadings that they have goodwill of any kind in Canada. The Defendant reiterates its argument that it believes that an eventual lump sum costs award is in litigation is fully supported by the jurisprudence and that its draft Bill of Costs is appropriate in the circumstances because it contemplates numerous litigation steps.

III. Analysis

[30] The Plaintiffs’ concession that there are not ordinarily resident in Canada make it so that the Defendant has met its burden of proof pursuant to Rule 416(1)(a) and is, subject to the Court’s discretion, prima facie entitled to obtain an order for security of costs subject to the Plaintiffs pleading impecuniosity pursuant to Rule 417, or otherwise demonstrating that they have sufficient assets in Canada to satisfy a costs award such that the Defendant is in no real jeopardy to recover its costs (Highland Produce Ltd. v Egg Farmers of Canada, 2010 FC 84, at para 17; Sauve v Canada, 2012 FCA 287, at para 6; Sauve v Canada, 2014 FC 119 at para 16; Pembina County Water Resource District v. Manitoba, 2005 FC 1226, at para 14).

[31] As the Plaintiffs have not pleaded pursuant to Rule 417, have not led any evidence that they have assets in Canada that could satisfy a costs award in the Defendant’s favour, and have not led any evidence that the Defendant would not be in jeopardy of recovering its costs from them as foreign costs debtors in the event that the Defendant was successful in the action and is awarded costs, I find it appropriate to order the Plaintiffs to post security for costs in this proceeding.

[32] As commented upon above, the Defendant’s draft Bill of Costs is problematic on two levels.

[33] Firstly, it is not properly led in evidence before this Court pursuant to Rule 80(3) of the Rules as it is not an exhibit to an affidavit filed in support of the Defendant’s motion, and is not otherwise a document that has been filed with the Court as contemplated by Rule 364(2)(f). It is therefore not admissible as evidence before the Court on this motion. I must therefore disregard it and give it no weight.

[34] Secondly, the Defendant’s draft Bill of Costs is entirely based on a costs regime that does not apply in this Court. As Justice Stratas wrote in Le-Vel Brands, LLC v. Canada (Attorney General), 2023 FCA 66, at para 14 with respect to the Rules contained in the Rules, they are not a practice advisory but part of a binding regulation that is law on the books to be followed. There is no reason for this Court to make any determination as the amount of costs to be ordered as security for costs pursuant to the Rules on the basis of materials prepared pursuant to and purportedly in accordance with the law of costs in Ontario. There are costs rules in the Rules. Those are the rules to be considered and followed on motions for security for costs and for costs awards in this Court.

[35] The Plaintiffs have properly led a draft Bill of Costs as evidence on this motion. The Plaintiffs’ draft Bill of Costs is based on the Rules and more particularly on Rule 407 and Tariff B. It contemplates the costs that may be assessed pursuant to Tariff B and Rule 407 for the early to mid stages of this proceeding. The litigation steps contemplated and included are the preparation and filing of a defence, the preparation of an affidavit of documents, the inspection of delivered affidavits of documents, the preparation for examinations for discovery both as the examining party and the party being examined, as well as the preparation of and attendance to argue motions to compel arising from the examinations for discovery. The Plaintiffs’ draft Bill of Costs presents its staged costs calculation in accordance with the middle column of Tariff B as directed by Rule 407 of the Rules. Based on the Plaintiffs’ evidence, an appropriate amount of security for costs to be posted, including disbursements, would be $ 17,560 up to and including motions to compel from examinations for discovery.

[36] The Court’s decisions in Lavigne and Matthews are persuasive with respect to the issue of staging the posting of security for costs as costs are incurred pursuant to Rule 416(2) as a means of balancing the parties’ respective legitimate interests in advancing this litigation on the one hand and reasonably guarding against potentially unfair difficulties in the recovery of costs from foreign plaintiffs on the other.

[37] The posting of security for costs in stages will therefore be ordered. In addition, following the Plaintiffs’ suggestion in their argument, the amount of security to be posted at this time will be a total of $ 20,000 rather than the $ 17,560 amount included in their draft Bill of Costs.

[38] I have not given any weight to the Defendant’s argument with respect to the frivolousness or vexatiousness of the Plaintiffs’ claims or with respect to Plaintiffs’ alleged failure to provide the Defendant with evidence to substantiate its claims as factors in determining the amount of costs to be posted at this early stage of the proceeding.

[39] Without doubting the sincerity of the affidavit evidence led by the Defendant on this motion, I do not accept that bald belief evidence from the Defendant’s internal Chief Legal Officer that they have reason to believe from their review of the pleading that the Plaintiffs’ claims are frivolous and vexatious as set out in paragraph 9 of their affidavit constitutes “credible evidence” as is required by the jurisprudence for the Court to find that the Plaintiffs’ claims are frivolous and vexatious within the meaning of Rule 416(1)(g) for the purposes of security for costs.

[40] Similarly, the Defendant’s complaint that the Plaintiffs have not provided it with any evidence of their claims must be disregarded on this motion. The record reflects that the parties remain at the pleadings phase of this proceeding. They are in the allegations phase, the phase where they allege material facts in their respective pleadings, and they have yet to the reach the phase of the action where they disclose potential evidence that would substantiate their pleaded allegations. It is not unusual for a defendant to be without potential “evidence” that could substantiate the plaintiffs’ allegations at this phase of the litigation because that stage of action has not yet been reached.

[41] An order for security for costs and the determination of the amount of costs to be posted as security is not necessarily indicative of the potential costs award that could follow the trial of the proceeding and a successful defence by the Defendant. It may very well be that the trial judge could find it appropriate to make an elevated Tariff B based costs award or a lump sum costs award that takes unsubstantiated bad faith allegations into account. That is a future and uncertain event that should not in my view be a factor in determining the amount of security for costs to be posted at this time in this proceeding. What is important at this point in the proceeding is that security for costs be determined on the evidence before the Court as considered in light of the costs Rules that apply, and not be illusory to the Defendant or oppressive so as to thwart the Plaintiffs in commencing and continuing a legitimate action.

[42] The Defendant can always seek additional security at a later date should it be required. It may be that the parties could perhaps agree on such additional security if they discussed the issue before initiating a future motion for additional security.

IV. Costs of this motion

[43] The Court strongly encourages the parties to confer and attempt to agree on the costs of this motion prior to May 29, 2025. If the parties agree on costs by then, they may deliver a letter on consent to the registry in Ottawa to my attention that sets out their agreement as to costs and, if the costs are appropriate, a subsequent Order as to costs consistent with their agreement as to costs will issue.

[44] In the event that the parties do not agree on the costs of this motion, then the Plaintiffs shall have until May 30, 2025, to serve and file costs submissions that do not exceed three pages, double-spaced, exclusive of schedules, appendices and authorities. The Defendant will then have until June 10, 2025, to serve and file its costs submissions, also limited to three pages, double-spaced, exclusive of schedules, appendices and authorities.

[45] If no agreement as to costs is filed by May 29, 2025, and no costs submissions are served and filed by May 30, 2025, then no costs will be awarded on this motion.

 

ORDER in T-205-25

THIS COURT ORDERS that:

1. The Defendant’s motion for security for costs is granted.

2. The Plaintiffs shall post security for costs in this proceeding in accordance with Rules 418 and 149 of the Rules, in accordance with the following schedule:

a) $ 10,000, to be posted by June 15, 2025; and,

b) $ 10,000 to be posted within 15 days of their receipt of the Defendant’s affidavit of documents.

3. Subject to their right to appeal this Order, in accordance with Rule 416(3), the Plaintiffs may not take any further step in this proceeding other than paying security into Court in accordance with Rule 418 of the Rules until the security required by paragraph 2 a) of the Order is paid into Court.

4. The costs of this motion are reserved to be determined in accordance with the directions given above.

“Benoit M. Duchesne”

FEDERAL COURT

SOLICITORS OF RECORD

DOCKET:	T-205-25
STYLE OF CAUSE:	UNION SQUARE HOSPITALITY GROUP, LLC et AL. v. AQUILINI RESTAURANTS LIMITED PARTNERSHIP
ORDER AND REASONS:	duchesne, j.
DATED:	may 14, 2025

MOTION IN WRITING CONSIDERED IN OTTAWA, ONTARIO PURSUANT TO RULE 369 OF THE FEDERAL COURTS RULES.

WRITTEN SUBMISSIONS BY:

Joshua W. Spicer Christie Bates	For The PLAINTIFFS
Gerald (Jay) Kerr-Wilson Novera Khan Kiera Boyd	For The DEFENDANt

SOLICITORS OF RECORD:

Smart & Biggar LLP Toronto, Ontario	For The plaintiffs
Fasken Martineau DuMoulin LLP Ottawa, Ontario	For The defendant