Docket: T-300-16
Citation:
2016 FC 975
Vancouver, British Columbia, August 26, 2016
PRESENT: Prothonotary Roger R. Lafrenière
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BETWEEN:
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THE REGENTS OF
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THE UNIVERSITY
OF CALIFORNIA
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AND TEARLAB
CORPORATION
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Plaintiffs
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and
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I-MED PHARMA
INC.
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Defendant
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ORDER AND REASONS
[1]
On July 29, 2016, the Defendant, I-MED Pharma
Inc. (I-MED), moved in writing pursuant to Rule 369 of the Federal Courts
Rules for:
(a)
an order requiring the Plaintiff, TearLab
Corporation Inc. (TearLab), to deposit into Court, by no later than ten (10)
days following this order, the amount of $141,101.00 as security for costs
granted to I-MED by Justice Manson in a Judgment dated June 22, 2016 for
TearLab’s unsuccessful motions for interim and interlocutory injunctions;
(b)
costs of $2,000.00 for this motion, payable
forthwith if this motion is opposed; and
(c)
an order for such further or other relief as
counsel may advise and as to this Honourable Court may seem just;
I.
Background
[2]
A brief review of the procedural background is
required in order to place the present motion in proper context.
[3]
I-MED brought an earlier motion on March 11,
2016 for an order requiring Tearlab to deposit into court the amount of
$100,000.00 as security for I-MED's costs leading up to and including the first
round of oral examinations for discovery. I-MED also sought an additional
amount of $150,000.00 as security for I-MED's costs to defend against TearLab’s
interlocutory injunction motion. The motion was made returnable at the General
Sittings in Montreal on March 22, 2016. Prothonotary Morneau directed that the
motion be placed before me as case a management judge.
[4]
During a case management conference with counsel
for the parties on March 14, 2016, the parties were encouraged to attempt to
resolve the issue. The parties ultimately agreed that TearLab would post
$50,000.00, without prejudice to either party’s right to seek an increase or
decrease of security at a later time. At the joint request of the parties,
I-MED’s motion was adjourned to be heard, if necessary, at a special sitting
before me on April 27, 2016.
[5]
On March 24, 2016, Mr. Justice James Russell
dismissed Tearlab’s motion for an interim injunction. He directed that the parties could address
the Court on the issue of costs of the motion after the interlocutory decision
was made.
[6]
During a case management conference on April 1,
2016, the parties requested that
I-MED’s motion for security for costs be heard at the same time as Tearlab’s
motion for an interlocutory injunction. By Order dated April 27, 2016, Tearlab’s
motion for an interlocutory injunction and I-MED’s motion for security for
costs were fixed to be heard together on
May 17, 2016.
[7]
On May 31, 2016, Mr. Justice Michael Manson
issued an order dismissing Tearlab’s motion for an interlocutory injunction. He
also granted I-MED’s motion for increased security, in part, based on the
following reasons:
[95] The
Defendant also sought $150,000.00 in security to cover its likely costs of
defending against the interlocutory injunction. I agree with TearLab that the
request for this relief is not appropriate in the context of security for
costs, as this motion was heard on the same day as the motion for interlocutory
injunction, and the interim injunction has since passed.
[96] I find
that though TearLab has provided some evidence it has assets in Canada, the
financial and banking information from TearLab is weak and shows little asset
value. I would increase security payable by TearLab into the Court to a total
of $100,000 at this stage of the proceeding.
[8]
Justice Manson further ordered that costs of
both motions be awarded to I-MED. The parties were directed to provide written
submissions on costs, including the costs of the interim injunction motion,
within 10 days.
[9]
On June 22, 2016, Justice Manson fixed the costs
of the interim and interlocutory injunction motions in the lump sum amount of
$141,101.00, to be paid by Tearlab following disposition or conclusion of the
action. He also fixed the costs of the motion for security for costs in the
amount of $2,500.00 in favour of I-MED.
[10]
Tearlab has appealed Justice Manson’s Order
dated May 31, 2016. In its notice of appeal filed on June 10, 2016, Tearlab
seeks its costs of the appeal and the motions below.
[11]
I-MED now moves for increased security in the
equivalent amount of costs awarded by Justice Manson in dismissing Tearlab’s
motion for an interlocutory injunction.
II.
Analysis
[12]
I-MED submits that increased security is
warranted in light of the substantial costs awarded in its favour by Justice
Manson on June 22, 2016. Tearlab counters that the present motion is barred by
the doctrine of res judicata. According to Tearlab, the issues in this
motion are the same as the issues raised in I-MED’s motion for security for
costs dated March 10, 2016, that involve the same parties. I disagree that
I-MED is precluded from seeking increased security.
[13]
When dealing with I-MED’s request for Tearlab to
post an additional amount of $150,000.00 as security to cover I-MED’s likely
costs in defending the interlocutory injunction, Justice Manson did not purport
to finally adjudicate the issue of security. He simply decided that increased
security in the amount of $50,000.00 should be posted by Tearlab “at this stage of the proceeding”. It was clearly
contemplated that the parties would be providing submissions on the issue of
costs of the motions when the Order dated May 31, 2016 was issued. Given the
intervening (and substantial) cost award against Tearlab - the quantum of which
had not been adjudicated at the time of the Order dated May 31, 2016 - I-MED is
perfectly entitled to ask the Court to revisit the issue of security.
[14]
On a motion to increase security for costs, the
moving party has the onus of establishing that: (i) there is a significant gap
between the security ordered and the actual expenses; (ii) the actual expenses
were not reasonably foreseeable; and (iii) the original request for security
was based on an assessment of the complexity of the case which in hindsight was
not realistic: Bruno Appliance and Furniture Inc v Cassels Brock &
Blackwell LLP, 2009 CanLII 72029 (ON SC).
[15]
I-MED has established that there is now a
significant gap between the security of $100,000.00 posted and the actual costs
awarded in its favour. This gap will no doubt increase since the parties have
yet to embark on discovery.
[16]
It is common ground that Tearlab is ordinarily
resident outside of Canada, within the meaning of Rule 416(1)(a) of the Federal
Courts Rules. Tearlab therefore had to demonstrate that it has sufficient
Canadian assets to pay costs, and to establish why the Court should not
exercise its discretion to grant the security sought by I-MED.
[17]
On the basis of the material before me, I am not
satisfied that Tearlab has any assets of value in Canada. Although the company
may have bank accounts in Canada that receive revenue from its Canadian sales
and have maintained positive balances, these are fleeting assets that are
easily transferable. There is also no suggestion that Tearlab is impecunious or
that an order for increased security for costs would create a financial burden
rendering it impossible for the company to carry on the action.
[18]
There is no magic formula in deciding how much
security should be posted by a party. Taking into account the cost awards
already made in favour and against each party to date and the steps that remain
to be taken by the parties in order to complete examinations for discovery,
I conclude that an additional amount of $100,000.00 should be posted by Tearlab
as security for I-MED's costs. The matter of security may be revisited in the
event Tearlab is successful on its appeal or another significant gap develops
between I-MED’s actual costs and the security posted.
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