Executive Summary: Key Legal and Evidentiary Issues

• The Plaintiffs, based outside Canada, were ordered to post security for costs due to lack of demonstrated Canadian assets.

• The Defendant's draft Bill of Costs was dismissed for being based on Ontario rules and improperly filed as evidence.

• The Court accepted the Plaintiffs’ Tariff B-based cost estimate as procedurally correct and reasonable for early litigation stages.

• A total of $20,000 was ordered as security, to be paid in two stages aligned with litigation milestones.

• The Defendant’s claim of frivolous and vexatious litigation was not accepted due to lack of credible evidence.

• Costs of the motion were reserved, with the parties encouraged to reach an agreement or submit written arguments.

Facts and outcome of the case

The case centers on a motion by the Defendant, Aquilini Restaurants, seeking an order for security for costs against the Plaintiffs, who are foreign companies based outside of Canada. The motion was grounded in Rules 369, 416(a), and 416(g) of the Federal Courts Rules. The Plaintiffs initiated legal proceedings against Aquilini over allegations related to trademark and brand misappropriation in Canada, although the substance of those claims was not addressed in this decision.

The Defendant argued that since the Plaintiffs were not resident in Canada and had no known Canadian assets, they should be required to post security for the Defendant’s potential legal costs should it ultimately prevail. The Defendant also claimed the Plaintiffs’ case was frivolous and vexatious. In support of its motion, the Defendant submitted a draft Bill of Costs totaling $175,000, intended to represent approximately 30% of anticipated litigation expenses through trial.

The Plaintiffs did not dispute their status as foreign parties and acknowledged the Court’s discretion to order security for costs. However, they challenged the proposed amount, arguing it was excessive and unsupported by evidence. They countered with their own draft Bill of Costs based on the Federal Court’s Tariff B, suggesting a total security amount of $17,560, to be posted in stages.

Justice Duchesne found that the Defendant was prima facie entitled to security for costs under Rule 416(1)(a) due to the Plaintiffs' foreign residency and absence of Canadian assets. However, the Court found the Defendant’s draft Bill of Costs inadmissible because it was not properly introduced as evidence and was based on inapplicable Ontario rules. The Plaintiffs’ submission, by contrast, complied with Federal Court requirements and offered a credible basis for calculating costs under Tariff B.

The Court ultimately ordered the Plaintiffs to post a total of $20,000 in security for costs, divided into two $10,000 installments: the first by June 15, 2025, and the second within 15 days of receiving the Defendant’s affidavit of documents. The Plaintiffs were barred from taking further steps in the litigation until the first installment was paid.

Importantly, the Court declined to base its cost determination on the Defendant’s allegations of bad faith or frivolous litigation. Justice Duchesne emphasized that such determinations require credible evidence, which had not been provided, and that these matters would be better addressed at later stages of the litigation. The Court also reserved the issue of costs related to this motion, encouraging the parties to reach an agreement by May 29, 2025, or to submit cost submissions for judicial consideration.

This decision illustrates the Court’s approach to balancing procedural fairness with protection against cost recovery risks in cross-border litigation, while strictly applying evidentiary and procedural standards under the Federal Courts Rules.