Date: 20060217
Docket: T-1106-05
Citation: 2006 FC 218
Ottawa, Ontario, February 17, 2006
PRESENT: The Honourable Madam Justice Snider
BETWEEN:
SEI INDUSTRIES LTD.
Plaintiff
and
TERRATANK ENVIRONMENTAL GROUP
Defendant
REASONS FOR ORDER AND ORDER
[1] The plaintiff in this action, SEI Industries Ltd. (SEI), is the registered owner of the trade-mark TERRA TANK, registered February 5, 1988, as No. TMA336,796, on the Canadian Trade-marks Registry. Since 1985, SEI has used this trademark throughout Canada in association with flexible containers for liquid.
[2] On June 27, 2005, SEI filed a Statement of Claim against the defendant, Terratank Environmental Group (TEG), claiming that, since about June 2003, TEG was infringing SEI's rights in TERRA TANK by advertising and selling containers for liquid bearing the mark TERRATANK. TEG failed to file a statement of defence within the prescribed 30 days established by the Federal Courts Rules, 1998, SOR/98-106, R. 204. As provided for in Rule 210 of the Federal Courts Rules, SEI brought a motion for default judgment, ex parte and in accordance with Rule 369 (in writing). On October 31, 2005, by Order of this Court, default judgment was granted against the defendant, TEG.
[3] In this motion, TEG seeks an Order, pursuant to Rule 399 of the Federal Courts Rules, setting aside the Order for Default Judgment.
Issues
[4] Rule 399(1) of the Federal Courts Rules provides that, on motion, the Court may set aside an order that was made ex parte if the party against whom the order was made discloses a prima facie case why the order should not have been made. The test for setting aside a default judgment is well-established (Taylor Made Golf Co. Inc. et al v. 1110314 Ontario Inc. (1998), 148 F.T.R. 212; Brilliant Trading Inc. v. Tung Wai Wong and Zhen Hing Enterprise Ltd., [2005] F.C.J. No. 706, 2005 FC 571) and requires that the following issues be addressed:
- Does TEG have a reasonable explanation for its failure to file a Statement of Defence?
- Does TEG have a prima facie defence on the merits to SEI's claim?
- Has TEG brought this motion within a reasonable time?
[5] SEI concedes that TEG brought this motion to set aside the default judgment promptly. Thus, there is no need to address the third element of the test for setting aside a default judgment.
Analysis
Issue #1: Does TEG have a reasonable explanation for its failure to file a Statement of Defence?
[6] As noted, the first aspect of the test for setting aside a default judgment is the explanation for TEG's failure to file its defence within the time limits established by the Federal Courts Rules. Is there a "satisfactory excuse", "reasonable explanation", or "substantial reason" for TEG's failure to file its statement of defence ((Taylor Made Golf, above)?
[7] As its explanation, TEG offers the following facts:
- Mr. Ciranni is the managing partner of TEG and handles its legal matters. He was out of the country on a summer honeymoon, from about July 1st, 2005, until September 5. While he was away, all incoming mail was to be forwarded to the staff bookkeeper of the TEG partnership. On occasion, Mr. Ciranni called the office by telephone, but he was never informed of this action.
- In Mr. Ciranni's absence, his partner Mr. Evangelista received the Statement of Claim on July 4. Mr. Evangelista's affidavit evidence is that he spoke with a clerk at the Federal Court "who assured me that if we were about to miss the date to file a statement of defence, we could go for an extension and ultimately would have another chance to defend the lawsuit."
- Mr. Ciranni learned about the lawsuit upon his return and was told by Mr. Evangelista that they need not worry about missing the Statement of Defence deadline. Mr. Ciranni believed that their company had a good defence.
- TEG received no further word concerning the lawsuit until November 23, 2005, when they received a letter from SEI's counsel explaining that default judgment had been ordered on October 31 and that they were expected to comply by December 15, 2005. TEG had never received notification of, or a copy of, the Order itself.
[8] In sum, TEG argues that they meet the first part of the test because the partner who normally handled legal matters was out of the country and the other partner fell under an honest but mistaken belief that the failure to file a defence was easily curable. Additionally, SEI failed to inform them of ongoing matters once the Statement of Claim had been served.
[9] To begin, I note that it is not Mr. Ciranni who is the defendant; rather, it is TEG. Even if he was the only member of the partnership capable of responding to a lawsuit, the partnership itself has a responsibility to act. In Mr. Ciranni's absence, TEG ought to have sought out the help of someone capable of responding in their interests (Fibremann Inc. v. Rocky Mountain Spring (Icewater 02) Inc. and Ken Hon Kin Kwok, 2005 FC 977 at para. 22).
[10] Mr. Evangelista's mistaken understanding of information obtained from a court clerk is a reason for some of TEG's actions, but it is not, in my view, a "reasonable explanation" or a "satisfactory excuse". TEG was aware of the deadline to file a Statement of Defence and chose to ignore it.
[11] In other circumstances, reliance on this erroneous information may have attracted the leniency of the Court (see Brilliant Trading Inc., above at para. 10). However, in this case, TEG's consistent behaviour indicates a casual disregard for the importance of legal documents, rather than merely an honest, mistaken belief.
[12] As demonstrated by the affidavit evidence of SEI, Mr. Ciranni engaged in a policy of non-interaction with SEI prior to the lawsuit, when he either deliberately avoided responding or failed to allocate the necessary time and effort into dealing with SEI. Then, knowing that litigation was imminent, he left on his honeymoon, apparently without informing Mr. Evangelista or the staff that they could expect a lawsuit. He was in contact with the partnership but, curiously, no one mentioned the Statement of Claim to him, despite the fact that Mr. Evangelista was worried enough about it to contact the Court. Finally, and perhaps most puzzling, once Mr. Ciranni returned and was fully apprised of the situation, TEG continued to do nothing. Two months passed before they apparently received word that default judgment had been issued against them.
[13] As I understand the evidence of TEG, they appreciated the fact that they had been sued and had missed the deadline to file a statement of defence but, comforted by the mistaken knowledge that such a defect could be cured, they never sought an extension from the Court and never contacted SEI to fix their mistake or even inquire as to what might be necessary to do so. The actions of Mr. Ciranni and Mr. Evangelista were not those that one might reasonably expect from businessmen served with advance warnings of litigation followed by a statement of claim.
[14] Further, TEG cannot rely on the failure of SEI to keep them apprised of the ongoing litigation, since they engaged in a policy of silence when SEI attempted to discuss their dispute before initiating a lawsuit (Taylor Made Golf Co., above).
[15] In my view, TEG ignored the warnings of SEI's counsel and the Statement of Claim to the point of being wilfully blind (Brilliant Trading, above, at para. 12) and failed to give proper attention to legal documents (UMACS of Canada Inc. v. S.G.B. 2000 Inc. et al (1991), 34 C.P.R. (3d) 305 at 309). In conclusion on this issue, the actions of TEG in response to the lawsuit are not the indicators of a "satisfactory excuse", "reasonable explanation", or "substantial reason" for failing to respond to the Statement of Claim.
Issue #2: Does TEG have a prima facie defence on the merits to the Plaintiff's claim?
[16] The remaining question to be addressed is whether TEG has provided evidence in its motion record to satisfy me that they have a prima facie defence on the merits to SEI's claim.
[17] SEI's right to exclusive use of the registered trade-mark TERRA TANK is deemed to be infringed by a person not entitled to its use who sells, distributes or advertises wares or services in association with a confusing trade-mark or trade-name (Trade-marks Act, R.S.C., 1985, c. T-13, s. 20. In determining the issue of confusion, the court must have regard to all surrounding circumstances including:
(a) inherent distinctiveness of the trade-marks and the extent to which each has become known;
(b) the length of time that each has been in use;
(c) the nature of the wares, services or business;
(d) the nature of the trade; and
(e) the degree of resemblance (Trade-marks Act, s. 6(5)).
[18] In support of its motion for default judgment, SEI presented significant affidavit evidence relating to each of the factors. Of particular relevance was the following evidence:
- The only difference between the two marks is the elimination by TEG of a space between "TERRA" and "TANK".
- A search of the trade-marks registry found no other registered, pending or abandoned marks that were similar to SEI's mark.
- TERRA TANK, which has been registered for over 17 years, has been used by SEI in association with its flexible tanks for more than 20 years; TEG's mark has been in use for only three years.
- SEI uses its trade-mark in association with flexible containers for liquid, which are sold through its environmental site divisions. The tanks are available in varieties that can store fuels, chemicals or water. SEI's customers include oil and mineral exploration companies. TEG uses the TERRATANK name in association with its environmental services which includes the installation, inspections and removal of fuel storage tanks. TEG's customers also include oil and gas companies.
- TEG had submitted bids for the installation of flexible bladder tanks in direct competition with SEI to customers who also received SEI's bids for TERRA TANK branded flexible tanks.
[19] In short, the evidence presented by SEI formed a solid and compelling foundation upon which to conclude that TEG was infringing SEI's rights to the registered TERRA TANK trade-mark. Accordingly, I granted the Order for Default Judgment.
[20] As part of this motion to set aside that Order, and as required by Rule 399, TEG is required to disclose a prima facie case why the order should not have been made. Unfortunately, aside from a draft statement of defence, TEG failed to present any evidence or arguments on this important issue. Specifically, TEG put forward no affidavit evidence related to the issue of confusion. For example, I have nothing before me that would refute the statements of SEI's affiant that TEG put in bids for the installation of flexible bladder tanks that were directly in competition with SEI. On a motion for setting aside a default judgment, it is incumbent on the defendant to do more than merely provide a copy of a proposed statement of defence. There must be some evidence upon which the Court can assess whether the proposed defence has any merit.
[21] Even if I accept the draft Statement of Defence as "evidence", it falls far short of establishing a prima facie defence on the merits. As set out in the Statement of Defence, the main thrust of TEG's arguments appears to be that TERRA TANK is not distinctive. In support of this statement, they offer examples of a number of trade usages for the word "TERRA". I note that none of the examples offered uses TERRA and TANK together. While the name TERRA has wide use, the combination of the two components does not. Trade-marks must be considered in their totality, as it is the combination of elements that constitutes the trade-mark and gives distinctiveness to it (Polo Ralph Lauren Corp. v. United States Polo Assn. (2000), 9 C.P.R. (4th) 51, [2000] F.C.J. No. 1472 (F.C.A.) at para.18).
[22] Accordingly, on the evidence before me, I am not persuaded that TEG has a prima facie defence to the merits of SEI's claim.
Conclusion
[23] Having failed to satisfy me that there is either a reasonable explanation for failing to file a statement of defence or a prima facie defence on the merits to SEI's claim, TEG's motion must fail. The judgment will not be set aside.
ORDER
This Court orders that:
1. The motion to set aside its Order for default judgment dated October 31, 2005 is denied, with costs to SEI.
Judith A. Snider
Email this Content