Date: 20050525
Docket: T-1459-97
Citation: 2005 FC 743
Ottawa, Ontario, May 25, 2005
Present: The Honourable Madam Justice Danièle Tremblay-Lamer
BETWEEN:
ITV TECHNOLOGIES, INC.
Plaintiff
AND
WIC TELEVISION LTD.
Defendant
AND:
WIC TV AMALCO INC. and
GLOBAL COMMUNICATIONS LIMITED
Plaintiffs by Counterclaim
AND
ITV TECHNOLOGIES, INC.
Defendant by Counterclaim
REASONS FOR ORDER AND ORDER
[1] In the Order dated September 10, 2003, the claim for expungement made by the plaintiff, defendant by counterclaim, ITV Technologies Inc. (ITV), was dismissed with costs. The counterclaim for passing off, trademark infringement and depreciation of goodwill attached to registered trademarks made by the defendant, plaintiff by counterclaim, WIC Television Ltd./Global Communications Limited (WIC), was also dismissed with costs.
[2] Following the decision and the appeal on the counterclaim being dismissed this motion was brought by ITV to seek an order against WIC for compensation for the damages it suffered as a result of the November 25, 1997 interim injunction that shut down its website, in an amount to be determined by reference or trial.
[3] ITV is also seeking an order for costs in this application, and in the subsequent reference or trial.
ANALYSIS
1. The proper forum to determine whether leave to follow up should be granted
[4] WIC submits that this matter should be before the Court on a continuation of trial or a trial of an issue and not a reference. According to WIC, the question of whether a previously enjoined party should be granted leave to follow up on the undertaking as to damages should be dealt with at trial. In the case at bar, an order preceding the trial directed that this matter be resolved after judgment on the issues. Moreover, the parties have not yet had full documentary and oral discovery regarding the issue of damages resulting from the injunction. WIC submits it has a right to such discovery, and that it may even lead to admissions or a narrowing of issues between the parties.
[5] ITV, on the other hand, suggests that documentary and oral discovery on its entitlement to follow up has already occurred. ITV is also open to the possibility of further discovery regarding damages, as indicated in the directions it seeks. According to ITV, further discovery prior to the beginning of the reference or trial process would amount to a fishing expedition on the part of WIC and would only cause greater delays and unnecessary expenses.
[6] I agree with ITV.
[7] The Order of Prothonotary Hargrave, dated November 7, 2002, essentially provided that the present action would proceed in three phases. The first phase was a trial on the merits of the claim and counterclaim while the second and third phases were, "if necessary", to consist of "a determination of whether [ITV] should be granted leave to follow up on the undertaking" and "a determination of whether [ITV] suffered damages as a result of the interim injunction", respectively.
[8] The first phase is now complete and despite WIC's submission to the contrary, this motion is the proper forum to resolve the issue of whether leave to follow up should be granted. As Justice Sharpe clearly explains in his text, Injunctions and Specific Performance, looseleaf (Aurora, On: Canada Law Book Inc., 2004) at 2-39, "[t]he appropriate procedure is for the [party subject to the injunction] to apply to the trial judge for an order directing an inquiry as to the damages [that party] has suffered", citing, for example, Sherk v. Horwitz (1973), 39 D.L.R. (3d) 17 (Ont. H.C.J.), and Norstrant v. Drumheller (1920), 51 D.L.R. 373 (Alta. S.C. App. Div.). John F. Renshaw (Canada) Inc. v. Captiva Investments Ltd. (1989), 70 O.R. (2d) 458 (Ont. H.C.J.), is support for this proposition as well.
[9] Courts have in the past declined to allow parties to follow up on undertakings as to damages where the trial on the merits has yet to take place or the proceedings were not at an end (see 746278 Ontario Ltd. v. Courtot (1989), 25 F.T.R. 281 (F.C.T.D.); Ordina Shipmanagement Ltd. v. Unispeed Group Inc. (1998), 161 F.T.R. 129 (F.C.T.D.)). However, where the merits of an action have effectively been decided, as in the present case, an application for a trial or reference to follow up on the undertaking relating to damages is the normal course (see, for e.g., Ciba-Geigy Canada Ltd. v. Novopharm Ltd. (1999), 3 C.P.R. (4th) 405 (F.C.T.D.), aff'd 14 C.P.R. (4th) 491 (F.C.A.), where the main action had been discontinued).
[10] And for good reason: to require an additional step of documentary and oral discovery, the primary focus of which would concern whether the party is even entitled to seek leave to follow up, would only result in further unnecessary delays and costs. ITV is not suggesting that no further discovery will take place with respect to the issue of damages if this motion is granted. Rather, given the relatively low threshold upon which leave is typically granted, and taking into consideration that WIC has already had an opportunity to cross-examine the affidavit evidence, no additional discovery regarding ITV's entitlement to follow up is required.
[11] In short, I do not find that it would be an efficient way to proceed to have a trial to decide if there is a need for a reference or a trial. This is precisely what this motion is about.
2. Leave to follow up
[12] Whether an order for leave to follow up should be granted is a matter of equity and wholly within the Court's discretion. Even so, where the party who obtained the injunction is not successful at trial, leave to follow up on the undertaking will follow absent a demonstration that "special circumstances" exist: see Sharpe, supra at 2-38ff; [1965] S.C.R. 195">Vieweger Construction Co. Ltd. v. Rush & Tompkins Construction Ltd., [1965] S.C.R. 195; and, Ciba-Geigy, supra. This "special circumstances" exception has been characterized as being of "extraordinary quality": Nelson Burns & Co. v. Gratham Industries Ltd. (1987), 23 C.P.C. (2d) 279 (Ont. C.A.), leave to S.C.C. ref'd, (1987), 88 N.R. 318n. If granting leave to follow up on an undertaking as to damages was not the norm, the risk borne by the party who obtained the injunction would be substantially reduced, regardless of its success at trial. And the very reason why an undertaking is typically required is to distribute the measure of risk between the two parties: see Sharpe, supra at 2-35.
[13] WIC raises several arguments in opposition to this motion for leave to follow up.
[14] First, WIC submits that the evidence of loss provided by Ms. Blome in her affidavit should be given little weight since almost all her evidence is hearsay. Ms. Blome, who joined ITV Technologies in April 1997, states in her affidavit that ITV lost major clients due to the shut down of their website. WIC argues, however, that only the clients themselves can provide first-hand knowledge of the reasons why they ceased doing business with ITV.
[15] I do not find this argument persuasive in the present context. To begin, I am not convinced that the evidence in dispute is hearsay. Precisely why the clients in question ceased to do business with ITV is within their personal knowledge. However, putting their motives aside, the witness can nevertheless attest directly to the fact that these clients did in fact stop doing business with ITV. Ms. Blome also personally observed ITV's clients reacting in disappointment when the news of the injunction was communicated. This appears clearly from her cross-examination.
[16] WIC's attack on this evidence, moreover, is misguided. WIC argues that "to be relevant to this motion, any business lost by [ITV] must have been caused by the 23 day interim injunction itself." On the contrary, legal issues such as causation and foreseeability tied to the damages resulting from the injunction remain outstanding. That is why a trial with respect to damages is justified (instead of a reference, as explained below). Thus the quality of Ms. Blome's evidence, its admissibility and weight can be determined at trial.
[17] More fundamentally, this motion concerns whether leave to follow up should be granted. And WIC carries the onus of showing why leave should not be given. In my view, even assuming that the admissibility of this evidence is questionable, this is not by itself sufficient to trigger the application of the "special circumstances" exception.
[18] Second, WIC submits that ITV does not have "clean hands" and as such is not entitled to seek equitable relief. It highlights three points for the Court to consider in this respect: ITV did not defend itself on the injunction; ITV failed to comply with conditions set by the injunction; and, ITV established or used the company ITVnet, Inc. in an attempt to avoid this Court's jurisdiction and continue to carry on business.
[19] With respect to the first point, WIC relies on Montreal Street Railway Co. v. Ritchie (1889), 16 S.C.R. 622, where the appellant was denied damages resulting from an injunction because he did not present a defence to the motion requesting the injunction. The circumstances in the case at bar differ appreciably, however. Unlike the defendant in Montreal Street Railway Co., supra, ITV did submit a response to the injunction in the form of an affidavit by Mr. Mutual and requested an adjournment. Moreover, even though ITV did not physically attend in response to the motion, MacKay J. still saw fit to include the undertaking as part of the Order granting the interim injunction. Once the venue was changed to Vancouver for the hearing on the interlocutory injunction, ITV did defend itself against WIC's submissions, and the motion for an interlocutory injunction was dismissed.
[20] These circumstances therefore do not support WIC's contention that ITV does not have clean hands.
[21] Second, the issue of the visibility and adequacy of the notice of non-affiliation between ITV.net and the CITV website was dealt with at trial. While ITV was required to put the notice on its website, it was not required to put the notice on every webpage. Although the notice was absent from the website around November 2002, WIC had by that time ceased using the mark "ITV". The omission was corrected immediately when Mr. Mutual was notified. This second argument thus also fails to show that ITV does not have clean hands.
[22] Third, I am not convinced that ITV tried to circumvent the jurisdiction of this Court by providing services through ITVnet, Inc. WIC has not proven to this Court that this allegation is based on anything more than suspicion. I do not find that there is any indication in Mr. Mutual's examination on discovery that the U.S. company is carrying on business for ITV.
[23] In my opinion then, the case at bar presents no "special circumstances" justifying a refusal by this Court to the follow up of WIC's undertaking. To reiterate, in Nelson Burns, supra, the Ontario Court of Appeal stated that such "special circumstances" are extraordinary and highly unusual. Such "special circumstances" include cases where the plaintiffs are public bodies and act in the public interest and the injunction is granted to keep the status quo until the parties' rights are determined, and cases where the defendant, although he succeeded upon technical grounds, certainly had been guilty of conduct which did not move the court to exercise its discretion in his favour. For instance, in Gu v. Fai Toong International Ltd. (2001), 5 C.P.C. (5th) 187, aff'd (2003) 30 C.P.C. (5th) 260 (Ont.C.A.), the enjoined party was refused an inquiry into damages following an undertaking because he was actively carrying on business in the United States in violation of the injunction.
[24] The circumstances in the present case are significantly different. Thus, I grant ITV leave to follow up on WIC's undertaking. It will take the form of a trial pursuant to Rule 107 of the Federal Court Rules, 1998 since there are questions of law that need to be resolved such as causation and foreseeability. (Ciba-Geigy Canada Ltd. v. Novopharm Ltd. (1999), 181 F.T.R. 6). The whole with costs.
ORDER
THIS COURT ORDERS that
a) the Plaintiff shall file and serve a document entitled "Plaintiff's Statement of Issues" outlining its statements of the matters in issue within 30 days of this Order;
b) the Defendant shall file and serve a document entitled "Defendant's Statement of Issues" outlining its statements of the matters in issue within 30 days of being served with the Plaintiff's Statement of Issues;
c) each party shall serve an Affidavit of Documents and produce to the other copies of all documents in their respective possession, custody or power relating to any matter in issue (subject to privilege claims), within 30 days of the date of service of the Defendant's Statement of Issues;
d) the Plaintiff shall attend for Examinations for Discovery in respect of all matters in issue in the reference within 60 days of the service of its Affidavit of Documents, if so requested by the Defendant;
e) the Defendant shall attend for Examinations for Discovery in respect of all matters in issue in the reference within 60 days of the service of its Affidavit of Documents, if so requested by the Plaintiff;
f) the Plaintiff shall, after the Examination for Discovery of the Defendant and after the Examination for Discovery of the Plaintiff, or after the periods for completing those examinations have lapsed, requisition the Court to fix a time and place for the hearing;
g) there shall then be a trial of the issues;
h) the costs of the trial shall be determined by the trial judge; and
i) the costs of this motion are granted to the Plaintiff.
"Danièle Tremblay-Lamer"
J.F.C.
FEDERAL COURT
NAMES OF COUNSEL AND SOLICITORS OF RECORD
DOCKET: T-1459-97
STYLE OF CAUSE: ITV Technologies, Inc.
and
WIC Television Ltd.
PLACE OF HEARING: Vancouver, British Columbia
DATE OF HEARING: May 3, 2005
REASONS FOR ORDER
AND ORDER OF Tremblay-Lamer J.
DATED: May 25, 2005
APPEARANCES:
Mr. Paul Gornall FOR PLAINTIFF
Mr. Brian Edmonds
Mr. Barry Fraser FOR DEFENDANT
SOLICITORS OF RECORD:
Lawyer - Reg'd Patent & TM Agent
1820-355 Burrard Street
Vancouver, British Columbia
V6C 2G8 FOR PLAINTIFF
McCarthy Tétrault
Toronto, Ontario and
Vancouver, British Columbia FOR DEFENDANT
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