ASSURED DIAGNOSIS INC. v. MY CARE MEDTECH INC., 2023 FC 543

Date: 20230413 Docket : T-1010-22 Citation: 2023 FC 543 Vancouver, British Columbia, April 13, 2023 PRESENT: Madam Associate Judge Catherine A. Coughlan BETWEEN: ASSURED DIAGNOSIS INC. AND MY CARE MEDTECH INC. Plaintiffs/ Defendants by Counterclaim and TELUS CORPORATION AND TELUS HEALTH SOLUTIONS INC. Defendants/ Plaintiffs by Counterclaim ORDER AND REASONS UPON MOTION of the Defendants/Plaintiffs by Counterclaim, TELUS Corporation and TELUS Health Solutions Inc. (Defendants), dated November 30, 2022, for an Order: (

a) requiring the Plaintiffs /Defendants by Counterclaim (Plaintiffs) to deposit into Court, by no later than twenty (20) days following this Order, the amount of $50,000.00 as security for the Defendants’ costs leading up to and including a first round of oral examinations for discovery; (

b) directing that any amount to be paid into Court by the Plaintiffs pursuant to paragraph 1 above is without prejudice to an application by the Defendants for further and increased security for costs, as required; (

c) staying this action until the amount ordered to be paid into Court has been tendered, in accordance with the Federal Courts Rules , SOR/98-106 [ Rules ]; (

d) dismissing this action in the event that the amount to be paid into Court by the Plaintiffs pursuant to paragraph 1 above is not paid within twenty (20) days following this Order; (

e) Costs of this motion; and (

f) Such further or other relief as counsel may advise and as this Honourable Court may deem just; AND UPON reading the motion records filed on behalf of the parties; AND UPON hearing submissions from the parties at a Special Sitting held via Zoom Videoconference on March 15, 2023; I. General Principles [ 1 ] The general principles applicable on a motion for security for costs are well-established. The purpose of security for costs is to ensure that the defendant recovers its costs in the event that it is successful in the action. Subsection (

b) of Rule 416(1) of the Rules prov ides that the Court may order a plaintiff to give security for the defendant’s costs where the plaintiff is a corporation and there is reason to believe that the plaintiff would have insufficient assets in Canada available to pay the costs of the defendant, if ordered to pay costs. [ 2 ] The quantum of security for costs is at the discretion of the Court: Bodum USA, Inc v Trudeau Corp

(1889) Inc , 2012 CarswellNat 619, 2012 FC 240 , [2012] FCJ No. 268, 101 CPR (4th) 455 at paras 18-19 [ Bodum ], but 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 to 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: Bodum at para 19 [ 3 ] The appropriate factors to be taken into account in fixing the security for costs were set out by Prothonotary Hargrave in Tough Traveler, Inc v Taymor Industries, Ltd , 1994 CarswellNat 326 , 52 ACWS (3d) 969 , 59 CPR (3d) 186 , 90 FTR 70 (FCTD) at para 15 : [15] 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 forcosts ought not to be illusory, but at the same time ought not to be oppressive so as to hamper the plaintiff in bringing alegitimate lawsuit; and that if the security proves inadequate, the defendant can always apply for additional security at alater date. [4]With respect to the defendant’s onus, the burden under Rule 416(1)(

b) is not a particularly heavy one. The defendant need onlyshow, on a prima facie basis, that the plaintiff is unable to pay costs. If the defendant provides that evidence, the burden then shiftsto the plaintiff to show that it has sufficient assets in Canada to pay the defendant’s costs or that it is impecunious but has ameritorious action: Double Diamond Distribution Ltd v Crocos Canada Inc. 2019 FC 1373 [Double Diamond] at paras12, 14, and 19 and Rule 417. II.

Issues for Consideration [5] There is no real dispute in this matter as to whether the Defendants have made out a prima facie case for security; the Plaintiffseffectively concede that the Defendants have done so. Rather, the Plaintiffs rely on Rule 417 and assert they are impecunious but have ameritorious action. In the result, the Plaintiffs ask the Court to exercise its jurisdiction in their favour and refuse to order security forcosts. [6] As a result of the Plaintiffs’ concession, the following issues are left to be resolved by the Court: i.

Have the Plaintiffs satisfied their onus to establish impecuniosity? ii. Is the Plaintiffs’ claim sufficiently meritorious to permit the Court to refuse an order for security for costs? iii. What is the appropriate quantum of security? iv. What impact, if any, should the Defendants’ offer to settle have on the quantum of security? A.

Have the Plaintiffs satisfied their onus to establish impecuniosity? [7] The jurisprudence of both this Court and the Federal Court of Appeal is clear; the onus of proof to establish impecuniosity is high andmust be discharged with “robust particularity”: Mapara v Canada (Attorney General), 2016 FCA 305 at para 8; Heli Tech Services(Canada) Ltd v Weyerhaeuser Company, 2006 FC 1169 at para 8; Chaudhry v Canada (Attorney General), 2009 FCA 237 at para 10.

Inorder to discharge that onus, "“full and frank”" disclosure of a party’s financial circumstances is required; bald allegations ofimpecuniosity will not suffice to discharge the onus: Sauve v Canada, 2012 FCA 287 at para 9 [Sauve]. Ultimately, the there must be nounanswered material questions: Fraser v Janes Family Foods Ltd, 2012 FCA 99 at para 37. [8] Material evidence is required to sustain a claim of impecuniosity: Sauve at para 10.

That evidence includes clear and completefinancial information. “Tax returns, bank statements, list of assets, and (where possible) financial statement should be submitted.Evidence of the impracticability of borrowing from a third party to satisfy the security order should also be provided. The possibility ofaccessing family and community resources should be considered. No material issue should be left unanswered” (Sauvé at para 10). [9] On this motion, the Plaintiffs filed the affidavit of Jim Viccars. Mr Viccars is a director and part shareholder of both corporatePlaintiffs.

He deposes that both Plaintiffs are developing companies and are in the growth phase of a business cycle. He further deposesthat both companies had difficulty generating revenue due to the COVID-19 pandemic. He notes that both companies saw a significantdecrease in revenue in 2020 and 2021 but saw some improvement in mid-2022. He estimates that MyCare Medtech Inc., will haverevenues in the range of $700,000.00 for 2022. He deposes that the other Plaintiff, Assured Diagnosis Inc., will not have similarincreases in revenue for 2022.

He further affirms that both companies rely on credit to continue to operate. [10] Attached as exhibits to his affidavit are the Financial Statements for the years 2019 to 2021 for both Plaintiffs. He affirms thatrequiring the Plaintiffs to pay a significant amount of money for security will have "“a deleterious effect”" on the Plaintiffs’ operationsand their ability to pursue the action to protect their registered trademarks. [11] The Defendants argue that the provision of the Financial Statements does not amount to full and frank disclosure for the purposes ofasserting impecuniosity under Rule 417.

The Defendants say there is no evidence before the Court to address why the Plaintiffs cannotobtain further financing; why more current financial information was not provided or why tax returns were not disclosed. [12] I agree with the Defendants. The record before me simply does not satisfy the high onus on the Plaintiffs to establish allegedimpecuniosity with robust particularity.

Further, I am left with a number of unanswered questions regarding the Plaintiffs’ true ability toraise funds for a security order. [13] As a result of that conclusion, there is no need for me to determine the second aspect of Rule 417; that is, whether the Plaintiffs’claim has merit. I decline to address that matter. B. What is the appropriate quantum of security? [14] In their motion record, the Defendants seek security for costs of $50,000.00 up to and including the first round of examinations fordiscovery.

That quantum represents total tariff costs at column III of $24,320.00 plus a doubling to account for an offer to settle theaction made under Rule 420. In support of their positions, the Defendants provided a Skeleton Bill of Costs. In that Bill of Costs, theDefendants suggest that their solicitor-client costs as at November 27, 2022 are $40,000.00 and they estimate their solicitor-client coststhrough the first round of examinations for discovery will be $143,793.50. The Defendants’ Bill of Costs also provides for costs at

column IV in the total amount of $37,120.00 or $74, 240.00 when doubled. [15] Citing to a number of decisions from this Court, the Defendants argue that in intellectual property matters, this Court typicallyawards a lump sum amount in a range of $30,000.00 to $100,000.00 through the first round of examinations for discovery, reserving thedetermination of further security until after the proceeding is more advanced: Double Diamond; Encore International Inc v Pliteq Inc(T-1479-19); Bodum; Bodum USA, Inc and PI Design AG v Meyer Housewares Canada Inc (T-1240-09); John Stagliano Inc v Elmaleh,2006 FC 1096 ; Desnoes & Geddes Ltd v Pacific Pinnacle Investments Ltd, 1996 CarswellNat 594, 112 FTR 315, 37 CPR (3d)459, 63 ACWS (3d) 225, 67 CPR (3d) 459 (FCTD); Paid Search Engine Tools, LLC v Google Canada Corporation unreported T-40-18dated July 9, 2018. [16] In response, the Plaintiffs argue that if the Court is inclined to order security for costs, the quantum should not exceed $5,440.00.

Atthe hearing of the motion, counsel for the Plaintiffs argued that costs should be set at column III of the Table to Tariff B. The Plaintiffsdid not prepare a draft Bill of Costs but relying on the Defendants’ draft, the Plaintiffs argued the overall quantum should not exceed$6,200.00 up to and including the first round of examinations for discovery.

The Plaintiffs rejected the Defendants’ arguments that thejurisprudence generally favours higher awards of costs in intellectual property matters. [17] Having reviewed the draft Bill of Costs and having considered both the written and oral submissions of counsel, I see no basis, atleast at this stage of the action, to depart from the default position of column III: Richter Gedeon Vegyészeti Gyar RT v Merck & Co et al(1996), 109 FTR 37 (TD) at para 9. In that sense, the parties are in agreement since the Defendants’ request is based on column III.

Theparties’ differences are largely attributable to the disagreement with the number of units claimed within column III. [18] The action is in the relatively early stages of litigation and it is difficult to predict how it will unfold. At this early stage, assessingan amount to be fixed as security for costs is certainly not an exact science; it is more

an act of discretion. The estimates of the partiesand their submissions on the relative strengths of their estimates is helpful. Nonetheless, I am not persuaded that either estimate isentirely appropriate. The Plaintiffs’ estimate of costs is so low as to make costs illusory. At the same time, the Defendants’acknowledged at the hearing that there was some duplication in their Bill of Costs and conceded those amounts must be removed fromthe draft. [19] In the result, I conclude that the proper amount to be paid as security by the Plaintiffs is $20,000.00.

It is to be noted that inassessing this quantum, I have adjusted for the April 1, 2023 increase in the unit value of the Tariff to $170.00. C. What impact, if any, should the Defendants’ offer to settle have on the quantum ofsecurity? [20] Prior to the hearing of this motion, the Defendants sought direction from the Court with respect to filing a formal offer to settle to bemade available solely to me as Case Management Judge for the purposes of this motion and in accordance with Rule 422.

The formaloffer is referenced in the affidavit of Amy Jobson filed in support of this motion and was conveyed to me in a sealed envelope prior to thehearing of this motion. The formal offer to settle had been conveyed to the Plaintiffs in July 2022. [21] In consequence of that offer, the Defendants now seek, pursuant to Rule 420, to have the offer considered and the amount set assecurity doubled. [22] In Bodum, Justice de Montigny confirmed that a formal offer to settle an action should be considered in determining the quantum ofsecurity.

At paragraph 23 of his decision, de Montigny, J notes, “As such, the double party-and-party costs are not hypothetical but arepart of the defendants’s costs that should have been taken into consideration by the Prothonotary when determining the amount of thesecurity for costs that the plaintiffs should deposit into Court.” [23] In order to trigger the double costs rule, the offer must meet the following criteria: Bodum at para 22: 1. The offer must be clear and unequivocal: Apotex Inc. v Syntex Pharmaceuticals, 2001 FCA 137 , [2001] FCA137, [2001] F.C.J. No. 727 (QL), at para. 10; 2.

The offer must contain an element of compromise: Canadian Olympic Assn. v Olymel, Société en commandite, (FC), [2000] F.C.J. No. 1725 (QL), at para. 10) 3. The offer must be timely: Sammamas Compania Maritima S.A. v Netuno (the) Action in rem against the Ship “Netuno”,[1995] F.C.J. No. 1442 (QL), at paras. 30-31) 4. The offer must bring the dispute to an end: (TRW Inc. v Walbar of Canada Inc., (1992) 43 C.P.R.(3d) 499, 146 N.R. 57,34 A.C.W.S.(3d) 743, at p. 456). [24] The Plaintiffs argue that the Court should not consider the offer in fixing the quantum of security.

The Plaintiff argues that the termsof the offer represent a series of ever decreasing offers based upon steps taken in the action and Rule 420 does not contemplate achanging or variable offer. Furthermore, the plaintiffs say the offer can be withdrawn at any time and as a result, it should not beconsidered in fixing security. [25] I am not persuaded by the Plaintiffs’ arguments. I have reviewed the offer and I accept that it satisfies the Bodum criteria. As aresult, I have discretion to consider whether it will be factored into the fixing of a quantum.

I am satisfied that a doubling of costs reflectsthe Defendants probable costs if successful in this action. III. Costs of the Motion

[ 26 ] The Defendants seek their costs in this motion of a lump sum of $7,500.00, payable forthwith and in any event of the cause. They argue that the factors under Rule 400 apply and they have been put to unnecessary time and expense because the Plaintiffs’ conduct lengthened the proceeding. More specifically, they assert that as a result of the Plaintiffs’ failing to concede that the Defendants had a prima facie entitlement to security, they were compelled to undertake unnecessary research to determine whether the Plaintiffs’ had eligible assets in Canada to pay their probable costs of the litigation.

The results of that research was provided to the Court and created a disbursement of $804.48. [ 27 ] The Plaintiffs argue that costs should not exceed $1,900.00 based on column III of Tariff B. [ 28 ] I am satisfied that the Defendants are entitled to their costs on this motion to be paid forthwith and in any event of the cause. In fixing the quantum, I am satisfied that this motion was unnecessary and the Defendants were put to unnecessary expense. That said, I find the sum of $6,000.00 to be more appropriate. ORDER in T-1010-22 THIS COURT ORDERS that: 1 . The motion is allowed. 2 .

The Plaintiffs shall post $40,000.00 as security for costs up to and including the first round of examinations. 3 . The security shall be paid into Court unless the parties otherwise agree that it may be held in a trust account. 4 . The Plaintiffs shall not take any further steps in this action, including the bringing of any motions, until they have paid the security for costs hereby ordered. This provision shall not apply to the bringing of an appeal from this Order. 5 .

Costs of this motion hereby fixed in the amount of $6,000.00 inclusive of disbursements and taxes, shall be paid by the Plaintiffs to the Defendants, forthwith and in any event of the cause. "Catherine A. Coughlan" Associate Judge FEDERAL COURT SOLICITORS OF RECORD DOCKET: T-1010-22 STYLE OF CAUSE: ASSURED DIAGNOSIS INC. AND MY CARE MEDTECH INC. v TELUS CORPORATION AND TELUS HEALTH SOLUTIONS INC. PLACE OF HEARING: by videoconference DATE OF HEARING: March 15, 2023 ORDER AND REASONS: COUGHLAN A.J. DATED: April 13, 2023 APPEARANCES : David Cumming For The PlaintiffS/ DEFENDANTS BY COUNTERCLAIM Christopher S.

Wilson For The DefendantS/ PLAINTIFFS BY COUNTERCLAIM SOLICITORS OF RECORD : McLeod Law LLP Calgary, Alberta For The PlaintiffS/ DEFENDANTS BY COUNTERCLAIM

Norton Rose Fulbright Canada LLP Vancouver, British Columbia For The DefendantS/ PLAINTIFFS BY COUNTERCLAIM