Date: 20010111
Docket: T-1058-98
Ottawa, Ontario, this 11th day of January 2001
PRESENT: THE HONOURABLE MR. JUSTICE PELLETIER
BETWEEN:
THE WALT DISNEY COMPANY AND OTHERS
Plaintiffs
and
JANE DOE and JOHN DOE and PERSONS, NAMES UNKNOWN, WHO OFFER FOR SALE, SELL, IMPORT, MANUFACTURE, PRODUCE, PRINT, DISTRIBUTE, ADVERTISE, DISPLAY, STORE, SHIP OR DEAL IN UNAUTHORIZED OR COUNTERFEIT DISNEY MERCHANDISE, AND THOSE PERSONS WHEN LISTED IN SCHEDULE "A"
Defendants
and
BETWEEN:
T-550-99
VIACOM HA! HOLDING COMPANY AND OTHERS
Plaintiffs
and
JANE DOE and JOHN DOE and PERSONS, NAMES UNKNOWN,
WHO OFFER FOR SALE, SELL, IMPORT, MANUFACTURE, PRODUCE,PRINT, DISTRIBUTE, ADVERTISE, DISPLAY, STORE, SHIP OR DEAL IN UNAUTHORIZED OR COUNTERFEIT SOUTH PARK MERCHANDISE, AND THOSE PERSONS WHEN LISTED IN SCHEDULE "A"
Defendants
and
BETWEEN:
T-823-99
NINTENDO OF AMERICA INC. and
NINTENDO OF CANADA LTD.
Plaintiffs
and
JANE DOE and JOHN DOE and PERSONS, NAMES UNKNOWN,
WHO OFFER FOR SALE, SELL, IMPORT, MANUFACTURE, PRODUCE,PRINT, DISTRIBUTE, ADVERTISE, DISPLAY, STORE, SHIP OR DEAL IN UNAUTHORIZED OR COUNTERFEIT POKÉMON MERCHANDISE, AND THOSE PERSONS WHEN LISTED IN SCHEDULE "A"
Defendants
and
BETWEEN:
T-1064-98
TIME WARNER ENTERTAINMENT COMPANY, L.P.
Plaintiff
and
JANE DOE and JOHN DOE and PERSONS, NAMES UNKNOWN,
WHO OFFER FOR SALE, SELL, IMPORT, MANUFACTURE, PRODUCE,PRINT, DISTRIBUTE, ADVERTISE, DISPLAY, STORE, SHIP OR DEAL IN UNAUTHORIZED OR COUNTERFEIT LOONEY TUNES CHARACTERS MERCHANDISE AND THOSE PERSONS WHEN LISTED IN SCHEDULE "A"
Defendants
REASONS FOR ORDER
PELLETIER J.
[1] The plaintiffs in each of these actions have brought a motion seeking the dismissal of the Counterclaims filed by the defendants. As the issues and the facts are identical in all the files, these reasons shall apply to each of the actions. A separate order shall issue in each action.
[2] This motion raises the question of the effect of an order reviewing the execution of an Anton Piller Order and continuing the order in effect until the trial of the action. The question arises as a result of the plaintiffs' Notice of Motion seeking an order striking the defendant's Counterclaim on the grounds that, inter alia, they are "immaterial, redundant, and/or frivolous and vexatious because they reassert the facts alleged unsuccessfully by the defendants in the review motion proceedings". The implication is that the matters decided in the review motion are res judicata as between these parties and cannot be relitigated in the action proper.
[3] The facts are quickly stated. Each of the plaintiffs obtained a"rolling" Anton Piller Order from a judge of this Court. On May 23, 1999, the plaintiffs' representatives executed those orders upon the defendants Alnashir Tejani ("Tejani") , Ghanwa ElMerhebi, Global Fashion and Toys, Toys in Motion and Bathroom City Enterprises Ltd. ("the ElMerhebi defendants"). At the same time, Notices of Motion were served upon the proposed defendants setting the date for the hearing of the review motions at June 7, 1999. The defendants, who were then represented by counsel, appeared at the review motion, sought and obtained various adjournments for the purpose of submitting their own materials. As a result, he review motions were not heard until March 24, 2000.
[4] The defendants raised a number of issues at the review motion. As it appears from the Reasons for Order of Madam Justice Tremblay-Lamer, who heard the review motion, the defendants put into issue the following matters:
| - whether the conditions for the issuance of an Anton Piller Order had been satisfied in the first instance. |
| - whether there was evidence of the likelihood of the destruction of evidence by these defendants so as to justify the execution of the Anton Piller Order. |
| - whether the Anton Piller Order was executed in accordance with its terms as to the time of execution, the explanations to be given upon execution, the number of persons allowed to participate in the execution, the opportunity to be given to the proposed defendants to consult with counsel, and the preparation of an accurate inventory of the goods removed from the premises. |
| - whether the order was invalid by reason of offending the provisions of the Canadian Charter of Rights and Freedoms. |
[5] In carefully drafted reasons, Madam Justice Tremblay-Lamer dismissed all of the objections and granted the review order. An appeal was taken from that order. A motion seeking a stay of the order of Madam Justice Tremblay-Lamer pending the hearing of the appeal was dismissed. Mr. Justice McKeown allowed a motion seeking an extension of time for the filing of Statements of Defence. He also allowed a motion allowing Ghanwa ElMerhebi to file a defence on behalf of Bathroom City Enterprises Ltd. but declined to allow her to act on behalf of the corporation to any other extent.
[6] Statements of Defence and Counterclaims were eventually filed. The Statements of Defence put into issue the question of the infringement of the plaintiffs' intellectual properties and, in the alternative, pleaded that the infringement, if any was innocent. In addition, the Statement of Defence filed on behalf of the ElMerhebi defendants put into question the failure to plead the corporate status of Global Fashion & Toys and Toys in Motion.
[7] The Statements of Defence and Counterclaims are reproduced below.
STATEMENT OF DEFENCE AND COUNTERCLAIM
| 1. The Defendant Alnashir Tejani ("Tejani") denies each and every allegation contained in the Statement of Claim, except as otherwise expressly admitted. |
| 2. Tejani denies the allegations of fact contained in Paragraph 1 of the Statement of Claim and further denies that the Plaintiff is entitled to any of the relief claimed. |
| 3. Tejani further denies the allegation of fact contained within Paragraph 2-35 inclusive of the Statement of Claim and puts the Plaintiff to the strict proof thereof. |
| 4. Without limiting the generality of the foregoing, Tejani denies that he has in any fashion infringed the Plaintiff's copyright, violated the Plaintiff's trademark, owned or possessed counterfeit goods, or passed his own goods as those of the Plaintiff, whether in contravention of the Copyright Act, Trademark Act, the common law or otherwise. |
| 5. Without limiting the generality of the foregoing Tejani specifically denies that he possessed, owned or traded in products that violated the Plaintiff's intellectual property rights, whether pursuant to the Copyright Act, the Trademark Act or otherwise. |
| 6. Alternatively, if Tejani breached any provision of the Trademark Act, the Copyright Act or otherwise engaged in any of the conduct complained of by the Plaintiff in the Statement of Claim, all of which is denied, then Tejani's conduct was innocent as he honestly and reasonably believed that the goods complied with the provisions of the Copyright Act and the Trademark Act and otherwise did not violate the Plaintiff's intellectual property rights, such goods acquired in the normal course of business. |
| 7. No conduct on the part of Tejani justifies an award to the Plaintiff of either punitive or exemplary damages, or solicitor - client costs. |
| Wherefore Tejani submits that the action against him should be dismissed with costs. |
| COUNTERCLAIM OF ALNASHIR TEJANI |
| 1. Tejani, the Plaintiff by Counterclaim, is employment at Global Fashion & Toys Ltd. |
| 2. On or about May 23rd 1999, the Plaintiff (Defendants by Counterclaim) seized assets at the premises of Global Fashion & Toys Ltd., doing business as Toys in Motion, claiming that the seized assets were manufactured and distributed in violation of the Copyright Act and the Trademark Act. |
| 3. The seizure of the said assets was done in the presence of our children with absolute disregard of the future effects of witnessing such an occurrence. |
| 4. The actions of the Plaintiff (Defendants by Counterclaim) were extremely intimidating and brutal outside of the requirements of the Order in their possession, such that an award of aggravated and punitive damages is required, along with an order for the costs against the Plaintiff (Defendant by Counterclaim) of solicitor - client cost. |
[8] The Counterclaim filed on behalf of Ghanwa ElMerhebi, Global Fashion & Toys and Toys in Motion is set out below:
STATEMENT OF DEFENCE AND COUNTERCLAIM
| 1. The Defendants Ghanwa ElMerhebi, ("ElMerhebi") Global Fashion & Toys in Motion ("Toys") deny each and every allegation contained in the Statement of Claim, except as otherwise expressly admitted. |
| 2. The Statement of Claim contains no indication of the legal status of Global or Toys. |
| 3. A prerequisite of the existence of a cause of action is that the claim is made against a legal entity. |
| 4. The failure to assert the legal status of Global and Toys is fatal to a claim against them and the Plaintiff's claim should stand dismissed summarily against Global and Toys. |
| 5. Alternatively if it is intended or implied that Global and Toys are the alter ego of ElMerhebi, then their inclusion as parties is unnecessary, hereafter all defences raised by ElMerhebi apply mutatis mutandis to Global and toys. |
| 6. ElMerhebi denies the allegations of fact contained in Paragraph 1 of the Statement of Claim and further denies that the Plaintiff is entitled to any of the relief claimed. |
| 7. ElMerhebi further denies the allegations of fact contained within Paragraph 2-29 inclusive of the Statement of Claim and puts the Plaintiff to the strict proof thereof. |
| 8. Without limiting the generality of the foregoing, ElMerhebi denies that she has in any fashion infringed the Plaintiff's copyright, violated the Plaintiff's trademark,owned or possessed counterfeit goods, or passed her own goods as those of the Plaintiff, whether in contravention of the Copyright Act, Trademark Act, the common law or otherwise. |
| 9. Without limiting the generality of the foregoing ElMerhebi specifically denies that she possessed, owned or traded in products that violated the Plaintiff's intellectual property rights, whether pursuant to the Copyright Act, the Trademark Act or otherwise. |
| 10. Alternatively if ElMerhebi breached any provision of the Trademark Act, the Copyright Act or otherwise engaged in any of the conduct complained by the Plaintiff in the Statement of Claim all of which is denied, then ElMerhebi's conduct was innocent as she honestly and reasonably believed that the goods she possessed, owned or traded in fully complied with the provisions of the Copyright Act and the Trademark Act and did not otherwise violate the Plaintiff's intellectual property rights, such goods having been legitimately acquired by ElMerhebi for the purpose of resale, in the normal course of business. |
| 11. No conduct on the part of ElMerhebi justifies an award to the Plaintiff of either punitive or exemplary damages, or solicitor-client costs. |
| Wherefore the Defendants Ghanwa ElMerhebi, Global Fashion & Toys, and Toys in Motion submit that the Plaintiff's claim be dismissed with costs. |
| COUNTERLAIM OF GHANWA ELMERHEBI, GLOBAL FASHION & TOYS AND |
TOYS IN MOTION
| 1. ElMerhebi, the Plaintiff by Counterclaim, is a businesswomen. |
| 2. On or about May 23, 1999, the Plaintiff (Defendant by Counterclaim) unlawfully seized assets belonging to ElMerhebi ("the seized assets") claiming inter alia, that the seized assets were manufactured and distributed in violation of the Copyright Act and the Trademark Act. |
| 3. The seized assets wee not manufactured or distributed in violation of the Copyright Act, the Trademark Act or any other intellectual property right of the Plaintiff (Defendant by Counterclaim). |
| 4. The seizure was wrongful and the Plaintiff (Defendant by Counterclaim) knew or ought to have known that the seized assets comprised legitimate trade goods. |
| 5. ElMerhebi has suffered damages as a result of the wrongful seizure, including but not limited to general damages, special damages and damages for los of reputation. |
| 6. The actions of the Plaintiff were high-handed and officious such that an award of aggravated and punitive damages is required, along with an order for costs against the Plaintiff (Defendant by Counterclaim) of Solicitor-client costs. |
[9] No Counterclaim was filed on behalf of the defendant, Bathroom City Enterprises Ltd.
[10] The Notice of Motion seeks an order pursuant to Rule 221 of the Federal Court Rules, 1998 striking out the Counterclaims on the ground that they are frivolous and vexatious or an abuse of process as they put into issues matters which were decided on the review motion. The applicants plead the doctrines of issue estoppel and res judicata.
| 7. The Counterclaim of Alnashir Tejani should be struck in its entirety for disclosing no reasonable cause of action. Further, the Counterclaim is immaterial and redundant, and/or frivolous and vexatious, because it reasserts the facts alleged unsuccessfully by the Defendants in the review motion proceedings, which were dismissed by the Order of Madam Justice Tremblay-Lamer dated April 14, 2000, and which is also the subject of an appeal by the Defendants. |
| 8. The Counterclaim of Ghanwa ElMerhebi, Global Fashion & Toys and Toys in Motion should be struck in its entirety as disclosing no reasonable cause of action. Further, the Counterclaim is immaterial and redundant, and/or frivolous and vexatious, because it reasserts the facts alleged unsuccessfully by the Defendants in the review motion proceedings, which were dismissed by the Order of Madam Justice Tremblay-Lamer dated April 14, 2000, and which is also the subject of an appeal by the Defendants. |
[11] In my view, this is a not a matter of issue estoppel or res judicata but of the jurisdiction of this Court to entertain a claim by one subject claiming relief against another subject. As is well known, the jurisdiction of the Federal Court is statutory, extending only so far as granted by statute:
| [para46] As a statutory court, the Federal Court of Canada has no jurisdiction except that assigned to it by statute. In light of the inherent general jurisdiction of the provincial superior courts, Parliament must use express statutory language where it intends to assign jurisdiction to the Federal Court. In particular, it is well established that the complete ouster of jurisdiction from the provincial superior courts in favour of vesting exclusive jurisdiction in a statutory court (rather than simply concurrent jurisdiction with the superior courts) requires clear and explicit statutory wording to this effect. |
[12] The Court's jurisdiction in intellectual property matters derives in part from the Copyright Act, R.S.C. 1985 c. C-42 and the Trade-marks Act, R.S.C. 1985 c. T-13. In the circumstances of this case, the jurisdiction to issue an Anton Piller Order and to assess damages upon proof of counterfeiting at trial are found in section 53.2 of the Trade-Marks Act:
| 53.2 Where a court is satisfied, on application of any interested person, that any act has been done contrary to this Act, the court may make any order that it considers appropriate in the circumstances, including an order providing for relief by way of injunction and the recovery of damages or profits and for the destruction, exportation or other disposition of any offending wares, packages, labels and advertising material and of any dies used in connection therewith. |
[13] This however, does not confer jurisdiction on the Court to deal with any other claims arising between subject and subject, even though such claims arise in the context of a claim which is within jurisdiction. For example, in Innotech Pty. Ltd. v. Phoenix Rotary Spike Harrows Ltd., [1997] F.C.J. 855, a patent infringement action, the Federal Court of Appeal struck a Counterclaim which claimed damages for breach of a licensing agreement, which was also pleaded as a defence to the claim of infringement:
| [para4] With respect, it appears to us that although it is the same license which is involved in both the statement of defence and the counterclaim, it is invoked for a different purpose in each pleading. In the statement of defence it is being used as a shield against a claim of infringement. In the counterclaim it is being used as a sword, a basis for obtaining remedies against the appellant for its enforcement. The counterclaim, when viewed by itself, would stand alone as an action for breach of contract and as such is not within the jurisdiction of this Court. Using the language of Kellogg v. Kellogg (1941) 1 C.P.R. 30 at 39 (S.C.C.) the main action is primarily for the enforcement of a patent. That claim can be decided on the basis of the statement of claim and the statement of defence, and incidental to that determination the license, its existence, terms, and validity may well have to be considered. But the counterclaim which must be viewed as a distinct action primarily involves a claim for an alleged breach of contract. Ruhrkohle Handel Inter GmbH et al v. Fednav Ltd. et al (1992) 42 C.P.R.(3d) 414 at 418 (F.C.A.). [Citations incorporated into text] |
[14] Applying this principle to these facts produces the following results. Paragraphs 1 and 2 of the Tejani Counterclaim go to the issue of wrongful seizure. Paragraph 3 refers to execution of the order in the presence of the children "with absolute disregard for the future effects" upon the children. To the extent that this is a claim by or on behalf of the children, it is a tort claim between private individuals, a matter in which the Federal Court has no jurisdiction. Paragraph 4 once again refers to the manner of execution of the order and claims aggravated and punitive damages. This is in substance an action between private individuals for wrongful seizure. While it is logically related to this Court's intellectual property jurisdiction, there is no legislation which would allow the Court to adjudicate such a claim. It must be brought in the provincial superior court. In the result, there is nothing left of the Tejani Counterclaim and it must be struck.
[15] As for the Counterclaim of the ElMerhebi defendants, it is concerned entirely with the wrongful seizure of goods which are claimed not to be counterfeit. The plea of genuine article is a good defence to the allegation of infringement but as in Innotech, supra, there is no jurisdiction in this Court to award damages between subject and subject for wrongful seizure. This Counterclaim must be struck as well.
[16] This does not mean that the defendants are without a remedy. If the seizure is found to be wrongful after trial, the defendants can call upon the plaintiffs' undertaking as to damages which was given as a condition of the granting of the Anton Piller orders. The undertaking is required by the Court for the very reason which manifests itself here. A wrongful seizure may not be actionable at all, or may not be actionable in this Court.
[17] The defendants argue that the wrongful execution of the Anton Piller orders was an abuse of process and that the Court always has jurisdiction to control the use to which its own process is put. To the extent that this is an attempt to relitigate the issues raised in the review motion, it is a matter which has already been decided, and that decision is binding on the parties. The following appears in Stamper (Next friend of) v. Finnigan, [1984] N.B.J. No. 65, cited with approval by Prothonotary Hargrave in Ruby Trading S.A. v. Parsons, [2000] F.C.J. No. 1326 :
| [para3] With respect to the first issue, one must initially determine whether the rule of estoppel by res judicata applies to decisions on interlocutory applications. |
| [para4] The basic argument against its application is that the judicial decision on an interlocutory application is not "final" in the sense that the decision is interlocutory: see comments of Master Peppiatt in Royal Bank v. Barringer (1984), 44 O.R. (2d) 509. |
| [para5] In the Supreme Court of Canada case of [1924] S.C.R. 308">Diamond v. Western Realty Co., [1924] S.C.R. 308, however, the comments of Duff J. at pp. 315-316 are relevant: |
| "It is true that in a sense the decision was interlocutory; that is to say, the proceeding in which it was given was an interlocutory proceeding; but it was nevertheless a final decision in the sense that in the absence of appeal it became binding upon all parties to it" |
| [para6] I would adopt that view and hold that the rule of estoppel by res judicata applies to decisions on interlocutory applications. |
[18] That is the case here. The review motion is an interlocutory proceeding in the sense that it does not finally dispose of the issues between the parties. But on the issues canvassed in the review motion, it is a final decision. This is so because the review motion is a procedure required by the Court's own order for the purpose of reviewing the execution of the order. The need to bring such a motion does not depend upon a complaint originating with the defendant. The Court calls the holder of the Anton Piller Order which it has granted forward to account for the use to which the order has been put. If there has been abuse, the Court will deal with it at that stage, and indeed, the defendants did their best to make that case before the learned Motions judge. They failed then and have appealed. That is their remedy.
[19] To the extent that the plea of abuse of process is intended to sound in damages, it is caught by the lack of jurisdiction in this Court to deal with claims between subject and subject, except as specifically provided in federal legislation. In either case the Counterclaim must fail.
[20] In the result, the Counterclaims of Tejani and of the the ElMerhebi defendants are struck as being outside the jurisdiction of the Court. As a result, no extension of time is required for the filing of a Statement of Defence to Counterclaim. The plaintiffs shall have 10 days to file a reply if they are moved to do so.
"J.D. Denis Pelletier"
Judge
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