Date: 20040901
Docket: T-1065-04
Citation: 2004 FC 1205
Vancouver, British Columbia, Wednesday, the 1st day of September, 2004
Present: THE HONOURABLE MR. JUSTICE ROULEAU
BETWEEN:
SUNSOLAR ENERGY TECHNOLOGIES (S.E.T.) INC.
Plaintiff
- and -
FLEXIBLE SOLUTIONS INTERNATIONAL, INC.
FLEXIBLE SOLUTIONS INC.
and DANIEL O'BRIEN
Defendants
REASONS FOR ORDER AND ORDER
[1] This matter arises out of a trade-mark infringement action. The Court entertained two issues at Vancouver, British Columbia, on August 24, 2004.
[2] The first motion was filed by the Plaintiff seeking to amend the style of cause. One of the named Defendants was described as "Flexible Solutions Inc.". Counsel brought to the Court's attention that this was in error and that the Defendant "Flexible Solutions Inc.", should have been properly described as "Flexible Solutions Ltd.".
[3] With consent of the parties, the style of cause is hereby amended to read:
SUNSOLAR ENERGY TECHNOLOGIES (S.E.T.) INC.
Plaintiff
- and -
FLEXIBLE SOLUTIONS INTERNATIONAL, INC.,
FLEXIBLE SOLUTIONS LTD., and DANIEL O'BRIEN
Defendants
[4] The Defendants shall be allowed 15 days from the date of this Order to file an amended Statement of Defence and Counterclaim.
[5] The next issue to be determined was an appeal from a decision of Prothonotary Hargrave dated July 14, 2004, in which he dismissed a motion by the Defendants who were seeking to have the named Defendant Daniel O'Brien struck as a party. In the alternative, the Defendants sought particulars from the Plaintiff to support various allegations in the Statement of Claim. Particulars were ordered and an amended particularized Statement of Claim was filed with the Court on July 28, 2004.
[6] In his Order of July 14, 2004, the Prothonotary wrote as follows with respect to the application of striking Mr. Daniel O'Brien as a party Defendant:
On my reading of the Statement of Claim it points to circumstances on which it could be reasonable to conclude that Mr. O'Brien, as president of both of the corporate Defendants, could have been involved in a deliberate, willful and knowing pursuit of a course of conduct likely to constitute infringement, or a course of conduct reflected in an indifference to the risk of it, thus coming within scope of the test for personal liability on the part of an officer or director, set out in National Merchandise Manufacturing Co. Inc. (1978) 40 C.P.R. (2d) 164 at 174. This is not to say that the case against Mr. O'Brien is at all certain, but rather it is to say that it is far from plain, obvious and beyond doubt that there is no reasonable cause of action against Mr. O'Brien. The claim will not be struck out as against Mr. O'Brien.
[7] The Plaintiff's only pleadings of material facts directed at the individual Defendant, Mr. O'Brien, are:
3. ... Defendant Daniel O'Brien is President and Director of the corporate Defendants and his address is 2614 Queenswood Dr. Victoria. BC, V8N 1X5.
17. The corporate Defendants, under the authority and guidance of Defendant Daniel O'Brien, [are] using, without the authorization of Plaintiff, the expression "TROPICAL FISH" as a trade-mark.
18. The corporate Defendants, under the authority and guidance of Defendant Daniel O'Brien, [are] using without authorization the expression "Tropical Fish" in association with the sale of the Fish and in association, inter alia, with Plaintiff's website, sales documentation and telephone solicitation.
19. The corporate Defendants, under the authority and guidance of Defendant Daniel O'Brien, has [sic] also copied and uses [sic], without authorization, the Fish in a manner calculated to mislead the public as to the quality, source and origin of the wares sold by Defendants under the trade-mark ECOSAVR.
[8] The only changes submitted by the Plaintiff in the new particularized Statement of Claim relating to the named Defendant Mr. O'Brien were to paragraph 18 which I reproduce:
18. The corporate Defendants, under the authority and guidance of Defendant Daniel O'Brien, is [sic] using without authorization the expression "TROPICAL FISH" in association with the sale of the Fish and in association (...) with Plaintiff's website, sales documentation, financial and technical documentation and telephone solicitation and in fact Defendants or persons acting on behalf of and under the direction of Defendants have falsely asserted to customers of Plaintiff that Plaintiff is no longer in business, that TROPICAL FISH is Defendants' product, that Defendants have "rebranded TROPICAL FISH as ECOSAVR, that Plaintiff can no longer sell TROPICAL FISH and further, Defendants direct internet users to Defendants' site through the illegal use of the mark "TROPICAL FISH";
[9] All other paragraphs in the Statement of Claim refer to the Defendants generally and state several conclusions that the Defendants' actions constituted "deliberate adoption and imitation" and "willful infringement" respectively.
[10] It is submitted that neither the Statement of Claim nor the particularized Statement of Claim contain any allegations of actions that are directed at the Defendant Mr. O'Brien apart from "under the authority and guidance" of the corporate Defendant. The infringement actions are alleged to have been done by the corporate Defendants or "by persons acting on their behalf".
[11] Orders of a prothonotary based on a question of law are reviewed upon a standard of correctness. The Court must now determine whether the Statement of Claim pleads sufficient material facts to uphold an action against an individual corporate officer.
[12] It is submitted that in his Reasons for Order, the Prothonotary held that "... the Statement of Claim... points to circumstances on which it could be reasonable to conclude that Mr. O'Brien, as president of both of the corporate Defendants, could have been involved in a deliberate, willful and knowing pursuit of a course of conduct likely to constitute infringement, or a course of conduct reflected in an indifference to the risk of it...".
[13] It is argued that Mr. O'Brien must be more than "involved" in actions of the corporate Defendants; that to be liable he must have actually known of likely infringement or been indifferent to the risks thereof, and such knowledge must be pleaded with particularity.
[14] Rule 174 of the Federal Court Rules requires that a pleading must contain a concise statement of the material facts on which a party relies. Pursuant to Rule 181, a pleading must contain particulars of every allegation when dealing with fraud or breach of trust.
[15] I have not been convinced that the Statement of Claim nor the particularized Statement of Claim met any of these obligations; let alone provide the Defendants with sufficient particulars to draft a proper Defence.
[16] The leading principles and jurisprudence dealing with the liability of corporate officers and directors are generally derived from the case of Mentmore Manufacturing Co. Ltd. et al. v. National Merchandise Manufacturing Co. Inc. et al., 40 C.P. R. (2d). Mr. Justice Le Dain writing for the Court determined that a corporate director could not be held personally liable even in a situation where the president and principal shareholder clearly controlled the company and directed its operations. He wrote "[i]t is what he actually did that matters".
[17] In the Mentmore supra case, the trial judge had found as a fact that the principal shareholders "imparted the practical, business, financial and administrative policies and directives...". He had found that the director or officer must have directly ordered or authorized the acts complained of and that the acts constituted infringement and struck the director and officers as parties defendant.
[18] On appeal to the Federal Court of Appeal, Mr. Justice Le Dain upheld the trial judge and emphasized that to render a director or officer of a company responsible for tortious acts it must be shown that the acts were expressly directed. Le Dain J. wrote at page 171 of the decision, otherwise:
It would render the offices of director or principal officer unduly hazardous if the degree of direction normally required in the management of a corporation's manufacturing and selling activity could by itself make the director or officer personally liable for infringement by his company. This is a principle that should apply, I think, not only to the large corporation but also to the small, closely held corporation as well. There is no reason why the small, one-man or two-man corporation should not have the benefit of the same approach to personal liability merely because there is generally and necessarily a greater degree of direct and personal involvement in management on the part of its shareholders and directors.
[19] At page 174 of Mentmore supra he continued:
I do not think we should go so far as to hold that the director or officer must know or have reason to know that the acts which he directs or procures constitute infringement. That would be to impose a condition of liability that does not exist for patent infringement generally...But, in my opinion there must be circumstances from which it is reasonable to conclude that the purpose of the director or officer was not the direction of the manufacturing and selling activity of the company in the ordinary course of his relationship to it but the deliberate, wilful and knowing pursuit of a course of conduct that was likely to constitute infringement or reflected an indifference to the risk of it.
[20] In a decision of the Federal Court of Appeal, Painblanc v. Kastner (1994), 58 C.P.R. (3d) 502, Hugessen J. writing for the Court first referred the fact that the Court was entertaining an appeal from a trial judge who had refused to strike a named defendant. He repeated the allegation contained in the statement of claim which read as follows:
3. The individual Defendant Fernand Painblanc (hereinafter referred to as "Painblanc") is a businessman residing at Villa L'Amandior, En Senaugin, 1162 Saint-Prex, Switzerland. Painblanc is the Chief Executive Officer and majority and controlling shareholder of the Defendant Lacroix. Painblanc alone and/or in concert with others has directly authorized and is directly and solely responsible for and is instrumental in the incorporation, direction, management and operation of Lacroix and Lacroix's activities generally, and more specifically, the activities described herein.
He then concluded:
The learned motions judge seems to have been of the view that the plaintiffs/respondents should be given the chance to see if they could learn some further facts and obtain some more evidence implicating Painblanc personally during examination for discovery. We are all of the view that in so doing the judge erred in law and proceeded upon a wrong principle. An action at law is not a fishing expedition and a plaintiff who starts proceedings simply in the hope that something will turn up abuses the court's process.
[21] My review of the allegations contained in the Statement of Claim as well as the particularized Statement of Claim do not provide any facts upon which a defendant or the Court could turn to in order to conclude that there is a "deliberate, willful and knowing pursuit of a cause of conduct that was likely to constitute infringement or reflected any indifference to the risk of it."
[22] Those principles were clearly canvassed by Le Dain J. in Mentmore supra and are upheld in Painblanc. A pronouncement by the Prothonotary that "as president of both corporate Defendants he could have been involved in deliberate acts" cannot support his conclusion to refuse to strike. I am of the view that he applied the wrong legal principle.
[23] Clearly, Mr. O'Brien must be shown to be more involved in the actions of the corporate Defendants. Actual actions of the corporate officer must be pleaded. Bare assertion of a conclusion is not an allegation of material fact, nor can it support a cause of action against an individual Defendant. One cannot "reasonably conclude" he was implicated to a sufficient extent to support a finding of deliberate acts on the part of Mr. O'Brien. As Hugessen J. wrote in Painblanc supra, "an action at law is not a fishing expedition".
[24] As requested by the Defendants, the appeal is allowed; David O'Brien is hereby struck as a party defendant. Costs to the applicant Defendant which I fix at $1,500.00 inclusive of disbursements.
(Sgd.) "Paul Rouleau"
Judge
I HEREBY CERTIFY that the above document
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is a true copy of the original filed of record
in the Registry of the Federal Court
on the _______ day of ___________ A.D. 20 ____
Dated this _______ day of ____________ 20 ____
Iris Hill, Registry Officer
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FEDERAL COURT
NAMES OF COUNSEL AND SOLICITORS OF RECORD
DOCKET: T-1065-04
STYLE OF CAUSE: SUNSOLAR ENERGY TECHNOLOGIES (S.E.T.) INC. v. FLEXIBLE SOLUTIONS INTERNATIONAL, INC. et al.
PLACE OF HEARING: Vancouver, BC
DATE OF HEARING: August 24, 2004
REASONS FOR ORDER AND ORDER: ROULEAU J.
DATED: September 1, 2004
APPEARANCES:
Paul Marcil FOR PLAINTIFF
Franc Boltezar FOR DEFENDANTS
SOLICITORS OF RECORD:
Marcil & Cooper FOR PLAINTIFF
Pointe Claire, QC
Smart & Biggar FOR DEFENDANTS
Vancouver, BC
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