TRAVEL LEADERS GROUP, LLC Plaintiff/Defendant by Counterclaim v. 2042923 ONTARIO INC., 2023 FC 613

Date: 20230427 Docket: T-202-17 Citation: 2023 FC 613 Toronto, Ontario, April 27, 2023 PRESENT: Madam Justice Walker BETWEEN: TRAVEL LEADERS GROUP, LLC Plaintiff/Defendant by Counterclaim and 2042923 ONTARIO INC. D.B.A. TRAVEL LEADERS Defendant/Plaintiff by Counterclaim ORDER AND REASONS (COSTS) I. Overview [ 1 ] This Order and Reasons addresses the costs and disbursements of this action payable to the Plaintiff/Defendant by Counterclaim, Travel Leaders Group, LLC (TLG), by the Defendant/Plaintiff by Counterclaim, 2042923 Ontario Inc. (Ontario Inc.).

The central issue in this proceeding was the validity of a Canadian trademark registration, namely registration number TMA790523 (the Registration) owned by Ontario Inc. for the trademark TRAVEL LEADERS. [ 2 ] On March 8, 2023, I released my decision (see Travel Leaders Group, LLC v 2042923 Ontario Inc. (Travel Leaders) , 2023 FC 310 ) (the Decision)), granting judgment in favour of TLG and declaring the Registration invalid on the basis that Ontario Inc. had abandoned the TRAVEL LEADERS trademark as of February 14, 2017. I also dismissed Ontario Inc.’s counterclaim.

In addition to expungement of the Registration, I granted a permanent injunction against Ontario Inc. in respect of the use of TLG’s TL NETWORK trademark and awarded nominal and punitive damages to TLG. [ 3 ] As requested by the parties, I reserved my decision on costs to give them an opportunity to reach agreement, in lieu of which each party was afforded an opportunity to make written submission on costs.

Despite efforts to pursue agreement, none was reached and the parties filed their written submissions. [ 4 ] For the reasons set out below, I am awarding TLG costs in the total amount of $454,741.95, composed of lump sum award for legal costs of $371,800.00, plus disbursements of $82,941.95. II. Post-trial procedural matters [ 5 ] On October 19, 2022, following completion of the trial of this action, Ontario Inc. filed a motion requesting (1) leave pursuant to Rule 120 of the Federal Courts Rules , SOR/98-106 (the Rules ) to allow its President, Mr.

Amin Saleh, to represent the corporation; and (2) permission to file additional evidence that was available but not filed at trial. As Mr. Saleh had no standing to introduce the relief sought in the second element of the motion and to safeguard the integrity of the trial process, I directed the parties that I would consider only the Rule 120 motion. [ 6 ] On November 14, 2022, I issued an Order dismissing the Rule 120 motion. I found that Ontario Inc. had not shown special circumstances that warranted the granting of the Rule 120 motion and the appointment of Mr.

Saleh as its representative in the absence of complete and persuasive financial information demonstrating its inability and that of its shareholders to retain counsel. I also found that Ontario Inc. had not demonstrated that Mr. Saleh would be an appropriate representative. I made this second finding for a number of reasons, including Mr.

Saleh’s improper accusations at trial and in the motion materials, and his attempts to introduce new evidence after completion of the trial in a manner that impedes the orderly and fair conduct of this proceeding and is prejudicial to TLG. [ 7 ] Subsequently, Ontario Inc.’s counsel, Mr. Baker, filed a motion for an order permitting him to be removed as solicitor of record pursuant to Rules 125 and 369 . On December 12, 2022, Justice Aylen, as Case Management Judge, granted Mr.

Baker’s motion and ordered Ontario Inc. to file a notice of appointment of solicitor by January 31, 2023 or seek an extension of time to do so. [ 8 ] Finally, on February 1, 2023, in response to an inquiry from Mr. Saleh dated January 30, 2023, requesting clarification and direction following Justice Aylen’s Order, the Court indicated that the terms of the Order speak for themselves and, in accordance with paragraph 2 of the Order, if Ontario Inc. seeks to appoint a solicitor, it will be required to file with its notice of appointment a request for an extension of time. III.

Positions of the parties regarding costs [ 9 ] TLG filed its Costs submissions on March 27, 2023. TLG requests that the Court award costs on a lump sum basis in the amount of

$650,000.00 inclusive of legal costs incurred, disbursements and the amounts awarded as nominal and punitive damages at trial. The lump sum amount consists of: (a) $546,000.00 (35% of its total legal fees incurred); plus (

b) disbursements of $82,941.95 and (

c) damages of $22,000.00. TLG attaches to its submissions (1) a detailed Bill of Costs calculating costs applying Column III (mid Units) and Column V (upper Units) of Tariff B for legal fees incurred in prosecuting the action and counterclaim , plus itemized disbursements and (2) its December 21, 2021 Offer to Settle pursuant to Rule 419. [ 10 ] On April 5, 2023, Mr. Saleh filed Costs submissions on behalf of Ontario Inc. Mr. Saleh indicates that Ontario Inc. cannot afford new counsel, stating that the corporation is unable to try to retain new counsel in the unique circumstances of this proceeding. However, Mr.

Saleh has no standing to file documents on behalf of Ontario Inc. in light of my Rule 120 Order dated November 14, 2022, and Justice Aylen’s Order of December 12, 2022. [ 11 ] Briefly, Ontario Inc.’s Costs submissions attempt to use the opportunity to file reply submissions regarding costs as a platform to renew its attacks on the merits of the proceeding and TLG, and to add serious claims of misfeasance against its former counsel, Mr. Baker.

Ontario Inc. does so in the guise of requesting that the Court reconsider its Decision under Rule 400(1), issue costs in favour of TLG in a nominal amount and award costs against Mr. Baker personally. The submissions consist primarily of allegations against former counsel, including an allegation of fraud pursuant to the Criminal Code , RSC 1985, c C-46 . Ontario Inc. also reiterates its suspicions and allegations against TLG. Mr.

Saleh was warned during his testimony at trial against doing so but repeated his allegations in his Rule 120 motion and now as part of Ontario Inc.’s submissions. [ 12 ] In reply, by letter filed April 11, 2023, TLG requests that the Court completely disregard Ontario Inc.’s costs submissions, arguing that Ontario Inc.’s conduct makes clear that it remains undeterred in its efforts to make false accusations. [ 13 ] I have summarized Ontario Inc.’s Costs submissions to provide a comprehensive picture of the parties’ costs submissions. I have otherwise disregarded the submissions. IV. Analysis A.

General Principles on Costs [ 14 ] Rule 400(1) provides the Court full discretion over the amount of costs to be paid and by whom those costs will be paid.

The general rule is that the successful party is entitled to its costs, subject to departure from this approach in cases involving true divided or mixed results ( Allergan Inc. v Sandoz Canada Inc. , 2021 FC 186 at para 30 ( Allergan )). [ 15 ] The Court’s exercise of its discretion is informed by the factors set out in Rule 400(3) and the objectives of an award of costs: to indemnify the successful party, deter behaviour that increases the duration and expense of proceedings, and encourage settlement.

Costs are typically fixed by reference to column III of Tariff B (Rule 407) or, in appropriate circumstances, in a lump sum amount in lieu of, or in addition to, assessed costs (Rule 400(4)). In determining the quantum of a lump sum award of costs, the Court’s discretion must be exercised prudently and in a manner consistent with the principles of consistency and predictability ( Nova Chemicals Corporation v Dow Chemical Company , 2017 FCA 25 at para 19 ( Nova Chemicals )). [ 16 ] Rule 400(3)(

e) directs the Court to consider any written offer to settle made during the litigation. Rule 420 set out the consequences of a party’s failure to accept a formal offer to settle made in accordance with the conditions in Rule 420(3).

Where a party makes an offer to settle at least 14 days before a trial that is not withdrawn and does not expire before the commencement of the trial and obtains judgment as favourable or more favourable than the terms of the offer to settle, that party is entitled to party-and-party costs to the date of service of the offer and costs calculated at double that rate, but not double the disbursements, after that date. B. Suitability of a Lump Sum Costs Award [ 17 ] TLG requests a lump sum costs award, rather than an award based on the Tariff.

TLG submits that a lump sum award is appropriate in the circumstances of this proceeding due primarily to the importance and complexity of the case, Ontario Inc.’s conduct over the course of the litigation process, including its commencement of a separate proceeding for trademark infringement, passing-off and depreciation of goodwill, and TLG’s Rule 419 offer to settle made in December 2021. [ 18 ] In recent years, lump sum costs awards have been increasingly favoured by courts in many matters, ranging from the simple to the very complex ( Nova Chemicals at paras 11-12 ).

Such costs awards are broadly accepted and used in intellectual property cases, particularly when dealing with sophisticated commercial litigants ( Loblaws Inc. v Columbia Insurance Company , 2019 FC 1434 at para 8 ( Loblaws Inc. ); Allergan at para 27 ).

The Federal Court of Appeal has recognized that a significant lump sum cost award well in excess of the Tariff may be appropriate in intellectual property litigation for various reasons, including the gap between what is covered by the Tariff and the complexity of the proceedings ( Venngo Inc. v Concierge Connection Inc. (Perkopolis) , 2017 FCA 96 at para 85 ( Venngo ). [ 19 ] I am satisfied that a lump sum award is appropriate and reasonable in this case, calculated as a percentage of TLG’s legal fees.

While I have insufficient information to assess the full nature of all work undertaken by TLG’s counsel in the absence of invoices or the inclusion of a column in its Bill of Costs calculating solicitor-and-client costs, the evidence and submissions provided are sufficient to establish that a costs award in this proceeding based on the Tariff would not adequately compensate TLG for costs incurred.

Further, the record before me contains sufficient information on which to make a reasoned award based on the facts and circumstances of this litigation ( Loblaws Inc. at paras 8-9 ; Dragona Carpet Supplies Mississauga Inc. v Dragona Carpet Supplies Ltd. , 2022 FC 1200 at para 6 ; Milano Pizza Ltd. v 6034799 Canada Inc. , 2022 FC 425 at para 169 ). C. Analysis

[ 20 ] TLG submits that the Court should make a lump sum award of costs in its favour in an amount of $546,000.00 or 35% of actual legal fees incurred plus disbursements in the amount of $82,941.95. TLG states, and I agree, that the trend in the jurisprudence in intellectual property cases, both patent and trademark, is to award lump sum costs in the range of 25 to 50% of actual costs, plus disbursements ( Nova Chemicals at para 17 ; Allergan at para 27 ; Loblaws Inc. at paras 14-16 ). In its Costs submissions, TLG provides a

summary of calculations from its Bill of Costs that reflects aggregate fees under ( mid Units) Column III of $109,238.40 (Legal fees: $67,129.60, Double after offer: $42,108.80) and under ( upper Units) Column V of $271,800.00 (Legal fees: $167,256.00, Double after offer: $104,544.00). [ 21 ] I am mindful that I must exercise my discretion prudently and that the factors set out in Rule 400(3), the jurisprudence and the objectives of an award of costs must inform my decision ( Nova Chemicals at para 19 ). Accordingly, I will next consider the application of the relevant Rule 400(3) factors, including those referenced by TLG.

(1) Result of the Proceeding and Amounts Recovered (Rules 400(3)(

a) and (b)) [ 22 ] TLG was successful in its request for expungement of the Registration on the basis of abandonment and the remedies it sought, namely a permanent injunction, nominal damages in the amount of $2,000.00 and punitive damages in the amount of $20,000.00. TLG also defeated Ontario Inc.’s counterclaim in its entirety.

(2) Importance of the case and complexity (Rule 400(3)(c)) [ 23 ] This case was important to both parties. For TLG, Ontario Inc.’s Registration and use of the TRAVEL LEADERS trademark prevented it from using its preferred name and trademark in Canada, consistent with its US business. For Ontario Inc., the Registration and use of the trademark had been the cornerstone of its decision to market itself as a travel agency in Milton, Ontario following its acquisition in 2004 of a predecessor business. [ 24 ] TLG submits that this proceeding was complex.

It began as an expungement action in respect of the Registration and expanded to include Ontario Inc.’s counterclaim of infringement, passing off and depreciation of goodwill, necessitating a further exchange of pleadings and significantly broadening the issue at play. TLG also notes that the parties’ Joint Statement of Issues prepared for trial identified 11 issues to be addressed by the Court. [ 25 ] I agree with TLG that the proceeding involved multiple interrelated claims and gave rise to some complexity.

TLG was required to respond to a range of issues and related arguments, participate in five rounds of examination for discovery of Mr. Saleh and initiate a motion to obtain disclosure of unredacted documents from Ontario Inc. The trial spanned six days and involved written and oral opening and closing statements.

The amount of work in preparing for and litigating this proceeding to trial was considerable (Rule 400(3)(g)). [ 26 ] Overall, I assess this matter as a moderately complex trademark proceeding that did not involve the complexity of some jurisprudence, notably complicated patent cases, where lump sum costs awards nearing the higher levels of the 25% to 50% range were appropriate.

(3) Conduct of Ontario Inc. (Rule 400(3)(i)) [ 27 ] TLG submits that Ontario Inc.’s actions unduly lengthened the proceedings and refers to the Court record and its conduct of the trial. I agree insofar as the Court record is concerned and the multiple stages engendered by Ontario Inc.’s decision to bring a separate proceeding well after the filing of TLG’s statement of claim and the completion of several rounds of discovery. The discovery stage was lengthy and gave rise to production of voluminous documents, inadmissible recordings and materials.

However, the remaining stages of the litigation proceeded largely in the normal course without undue delay or complication by Ontario Inc. [ 28 ] Ontario Inc. has repeatedly relied on a series of unsupported suspicions and allegations against TLG and its counsel suggesting that TLG interfered with its clients and business. As Justice Barnes stated in Gordon v Canada , 2019 FC 1348 at paragraph 17 , " “[t]he authorities indicate quite clearly that unmeritorious accusations of dishonesty, malice and bad faith that are pleaded and maintained in the course of litigation may be met with an award of enhanced costs” " .

Although Ontario Inc. did not plead dishonesty and misfeasance on TLG’s part, its repeated references to its suspicions and allegations, despite the Court’s warning, is a relevant consideration in my determination of the appropriate percentage of total fees to be used in calculating a lump sum award.

(4) Rules 419-420: TLG’s offer to settle dated December 14, 2021 [ 29 ] On December 14, 2021, TLG made a formal offer to settle this proceeding that, if accepted, would have settled all issues between the parties and ended the dispute. TLG offered to pay Ontario Inc. (a) $25,000.00 in full and final settlement of the claim and counterclaim; and (

b) party and party costs of Ontario Inc. to be assessed by an assessment officer of the Court. In consideration, Ontario Inc. would withdraw its opposition to the trademark application for TL NETWORK and TLG would withdraw its trademark application for TRAVEL LEADERS NETWORK. TLG’s offer did not require Ontario Inc. to give up the Registration. [ 30 ] The period from December 14, 2021 to completion of the trial on September 22, 2022 necessarily involved extensive legal work, preparation and trial attendance. The trial itself extended over six days.

The extent and nature of the legal work undertaken on TLG’s behalf is readily apparent in its Bill of Costs. [ 31 ] The offer to settle was irrevocable and remained open for acceptance until five minutes after the commencement of trial. TLG alerted Ontario Inc. in the offer that if Ontario Inc. were to obtain judgment less favourable than the terms of the offer to settle, TLG would be entitled to its legal costs calculated at double the party-and-party rate as of the date of service of the offer. [ 32 ] I find that the offer is compliant with the conditions in Rule 420.

It is clear and unequivocal, contains an element of compromise, complies with the time limits in the Rules and brings this proceeding to an end ( Venngo at para 87 ).

[ 33 ] It is clear that TLG obtained judgment more favourable than the terms of its offer to settle. Accordingly, TLG is presumptively entitled to double its costs from the date of service of the offer, December 14, 2021. The offer to settle supports an order of increased costs (Rule 400(3)(e)).

(5) Other Relevant Matters (Rule 400(3)(o)) [ 34 ] I made no finding of bad faith on the part of Ontario Inc. in the Decision but determined that an award of punitive damages was appropriate in this proceeding.

Ontario Inc.’s deliberate conduct in the years following its application for the Registration, namely its 2015 attempt to sell the TRAVEL LEADERS trademark to TLG’s competitors to prevent TLG from using the mark in Canada, its course of action following the commencement of this action, its use of TLG’s TL NETWORK mark and unfounded complaint to the Travel Industry Council of Ontario , can be characterized as planned, malicious and high-handed.

Ontario Inc.’s motive in pursuing these actions was to harm TLG’s business in Canada and its likelihood of success in this proceeding. [ 35 ] The reasons for my award of punitive damages against Ontario Inc. also support a lump sum award of costs in excess of the amounts contemplated by the Tariff.

(6) Reasonableness of TLG’s legal fees and sufficiency of information received by the Court [ 36 ] TLG has itemized its legal costs under Tariff B in its Bill of Costs, including three sets of counsel fees for trial preparation and attendance (one senior and two junior counsel). However, I do not have further evidence demonstrating the fees actually incurred ( Nova Chemicals at para 18 ).

I have TLG’s explanation of its aggregate legal fees ($1,554,530.50), including the fact that the costs calculated in accordance with Column V (upper Units) (before adjustment for the offer to settle) reflect only 11% of its total fees. [ 37 ] TLG emphasizes the Court’s recognition of the reasonableness of requiring three counsel to prepare for and conduct a complex intellectual property trial. TLG relies on a number of patent cases in support of its argument ( Novopharm Ltd v Eli Lilly and Company , 2010 FC 1154 ; Eurocopter v Bell Helicopter Textron Canada Limitée , 2012 FC 842 ).

TLG also cautions against judging litigation choices, particularly in hindsight ( Wenham v Canada (Attorney General) , 2021 FCA 208 at para 28 ; Bauer Hockey Ltd. v Sport Maska Inc. (CCM Hockey) , 2020 FC 862 at paras 17-21 ). I am mindful of the jurisprudence that cautions against a trial judge telling the successful party how they should have conducted the litigation ( Seedlings Life Science Ventures, LLC v Pfizer Canada ULC , 2020 FC 505 at para 15 ). [ 38 ] I have reviewed the itemized Bill of Costs submitted by TLG and its submissions on the appropriateness of the items included.

I find that TLG’s itemized inclusions are reasonable when assessed in light of the Court record and the complexity of the issues addressed at trial. The Bill of Costs mirrors the chronology of the Court record without embellishment. [ 39 ] Drawing from the Bill of Costs, its itemized entries and the explanation provided by TLG in its submissions, I find that the amount of $1,554,530.50 in respect of legal fees incurred is generally consistent with quantum of fees of experienced intellectual property counsel in a proceeding of this nature and duration. D.

Disbursements [ 40 ] TLG claims disbursements of $82,941.95, one component of which relate to fees charged by its expert ($37,263.32). TLG properly incurred this expenditure in response to Ontario Inc.’s counterclaim. Another component relates to fees charged by TLG’s two investigation agencies ($5,766.70 in aggregate). In my view, the expenses charged in each of these regards are reasonable. [ 41 ] The remaining disbursements itemized in the Bill of Costs are also reasonable. E.

Conclusion regarding the appropriate percentage of actual fees for lump sum award [ 42 ] Considering all of the above, including the unsuccessful counterclaim, I find the circumstances of this proceeding support a lump sum costs award slightly below the low end of the 25% to 50% range. [ 43 ] This litigation proceeded over five years, recognizing a period of some dormancy during the COVID-19 pandemic, expanded considerably after TLG conducted multiple examinations for discovery of Mr. Saleh, and required a six-day trial to resolve the issues in dispute between the parties.

TLG was successful on all counts in this litigation. The litigation was commercially important and moderately complex. Ontario Inc.’s repetition of unsupported suspicions and serious allegations in the course of the litigation should be deterred. The timing and terms of TLG’s offer to settle permit the doubling of the substantial legal costs incurred by TLG after December 14, 2021 and support an award of costs that exceed the Tariff amounts.

Ontario Inc. was warned in the offer to settle of the costs risk it took in electing to continue the proceeding. [ 44 ] Weighing against TLG’s argument that 35% is an appropriate percentage in the present case is the moderate complexity of the case and the absence of complete information regarding actual legal costs incurred. Taking these factors into account, I am satisfied that a lump sum costs award representing just under 25% ($388,632.63 rounded down to $371,800.00) of TLG’s legal costs for the proceeding is justified and appropriate in the circumstances.

A costs award calculated using the upper Unit maximum of Column V of the Tariff, doubled after the offer to settle, would be $271,800.00. An additional amount of $100,000.00 is reasonable following my consideration of the various factors important to the exercise of my discretion. F. Rule 404: Liability of solicitor for costs

[ 45 ] While Ontario Inc.’s Costs submissions are not properly before the Court and I have disregarded them, I nevertheless note that there is a request in those submissions that costs be awarded against former counsel.

Although Ontario Inc. refers to Rule 57.07 of the Ontario Rules of Civil Procedure , RRO 1990, Reg 194 , the appropriate reference in a proceeding in this Court is Rule 404. [ 46 ] Rule 404 permits the Court to make an order against a solicitor directing the solicitor to pay the costs of a party personally if it considers the solicitor was responsible for costs incurred improperly or without reasonable cause or wasted by misconduct. [ 47 ] Ontario Inc.’s allegations of misfeasance against its solicitor are a continuation of its determination to contest the merits of this action.

The allegations are unproven in this Court. Ontario Inc. began to air its concerns at the conclusion of the trial in September 2022, after five years of representation by the same counsel without indication to the Court of any such concerns or improprieties. [ 48 ] I will make no award of costs pursuant to Rule 404 against Ontario Inc.’s former counsel as there is no persuasive evidence before the Court that counsel acted without instruction, caused undue delay or engaged in other misconduct. V.

Conclusion [ 49 ] My Order below awards costs in favour of the Plaintiff in this proceeding in the total amount of $454,741.95, composed of a lump sum award in respect of legal fees incurred of $371,800.00, plus disbursements of $82,941.95. This costs award does not include the nominal and punitive damages awarded at trial and which remain payable by Ontario Inc. ORDER IN T-202-17 THIS COURT ORDERS THAT: 1 .

The Defendant/Plaintiff by Counterclaim, 2042923 Ontario Inc., shall pay the Plaintiff/Defendant by Counterclaim, Travel Leaders Group, LLC, costs in the lump sum amount of $454,741.95, inclusive of disbursements ($82,941.95). "Elizabeth Walker" Judge FEDERAL COURT SOLICITORS OF RECORD DOCKET: T-202-17 STYLE OF CAUSE: TRAVEL LEADERS GROUP, LLC v 2042923 ONTARIO INC. D.B.A. TRAVEL LEADERS COSTS SUBMISSIONS IN WRITING CONSIDERED AT OTTAWA, ONTARIO, PURSUANT TO THIS COURT’S JUDGMENT IN 2023 FC 310 ORDER AND REASONS (COSTS): WALKER J.

DATED: April 27, 2023 WRITTEN REPRESENTATIONS BY : May Cheng For The Plaintiff/defendant by counterclaim Amin Saleh For The Defendant/plaintiff by counterclaim SOLICITORS OF RECORD :

Dipchand LLP Barristers and Solicitors Toronto, Ontario For The Plaintiff/defendant by counterclaim