Date: 20000223
Docket: T-146-00
BETWEEN:
ETHICAL FUNDS INC.
Plaintiff
- and -
MACKENZIE FINANCIAL CORPORATION
Defendant
REASONS FOR ORDER
GIBSON J.
Introduction
[1] These reasons arise out of an application by the plaintiff ("Ethical Funds") for:
| (a) (a) an interim injunction to restrain the Defendant, Mackenzie Financial Corporation, by itself, its servants, agents or representatives from: |
| (i) using or advertising the trade-marks ETHICAL, ETHICAL FUNDS and ETHICAL GROWTH FUND, or any one of them or any other trade-mark, trade name or corporate name including the mark ETHICAL as a component thereof or any other confusingly similar word, design, name or mark which is likely to cause confusion with the plaintiff"s trade-marks; |
| (ii) passing off its wares, services or business as and for the wares, services or business of the plaintiff or otherwise directing public attention to its wares, services or business in such a way as to cause or be likely to cause confusion with the wares, services or business of the plaintiff; |
| until the hearing of the plaintiff"s application for an interlocutory injunction on the terms set out above or until further Order of this Court, |
| (b) in the alternative, directions with respect to the plaintiff"s application for an interlocutory injunction pending the trial of this matter; and |
| (c) such further and other orders as counsel may advise and that this Honourable Court considers just. |
[2] Both Ethical Funds and the defendant ("Mackenzie") provide financial and investment services by operating and managing mutual funds which are available for sale to public investors. The application giving rise to these reasons was filed in Vancouver on 9th of February, 2000, during what has traditionally been a very active period for mutual fund sales, described by Ethical Funds in its motion as "...one of the most significant sales periods for the plaintiff"s products."
[3] Following the filing of the application, the Associate Chief Justice provided informal direction for an expedited schedule for filing of Mackenzie"s materials and fixed the hearing of the application for the 21st of February, 2000 in Toronto.
[4] On the 22nd of February, 2000, I dismissed Ethical Funds" application and indicated that these reasons would follow.
The Parties
[5] Ethical Funds is a company duly incorporated pursuant to the laws of Canada which promotes and manages a family of 12 "socially responsible" mutual funds known as the Ethical Funds. The first word in the name of each of Ethical Funds" "family" of funds is "Ethical".
[6] Ethical Funds is the owner of registered trademarks ETHICAL GROWTH FUND, ETHICAL and ETHICAL FUNDS. Each is registered for use in Canada in association with financial and investment services, namely the operation and management of mutual funds.
[7] Mackenzie is the third largest mutual fund company in Canada. It is the largest fund company selling its mutual funds through independent dealers.
[8] Mackenzie offers five families of mutual funds including the Universal fund family which is comprised of 33 mutual funds. The Universal fund family, offered by Mackenzie since 1993, is, according to the evidence before the Court, the fastest growing fund family in Canada. Mackenzie"s evidence indicates that the Universal name is recognized by independent financial advisers and investment consumers as belonging to Mackenzie.
Background
[9] On the 30th of November, 1999, Mackenzie filed a preliminary prospectus for a new fund in the family of Universal funds, Universal Ethical Opportunities Fund (the "Universal Ethical Fund"). In early January of 2000, Mackenzie launched the Universal Ethical Fund. Mackenzie filed the final prospectus on the 10th of January, 2000 to make the fund available to the public. Orders for the Universal Ethical Fund began to flow into Mackenzie from dealers and, on or about the 19th of January, 2000, Mackenzie formally began processing orders for the Universal Ethical Fund.
[10] On or about the 11th of January, 2000, Ethical Funds first learned of the launch of the Universal Ethical Fund. By letters dated the 12th and 18th of January, 2000, Ethical Funds demanded that the Mackenzie cease and desist from using its registered trademarks. Mackenzie refused to comply with the "cease and desist" demands. In the result, Ethical Funds filed a statement of claim in this Court on the 27th of January, 2000. Ethical Funds claims for: a declaration that Mackenzie has adopted and used its registered trademarks and has passed off its wares, services and business as the wares, services and business of Ethical Funds; an interim, interlocutory and permanent injunction in the terms of the injunction here being sought on an interim basis; delivery up to the plaintiff of all materials bearing the registered trademarks; damages or an accounting of Mackenzie"s profits as Ethical Funds may elect; and costs.
[11] On the 15th of February, 2000 Mackenzie filed its statement of defence together with a counterclaim. In its counterclaim, Mackenzie seeks an order pursuant to section 57 of the Trade-marks Act1 that Ethical Funds" registered trademarks here at issue be expunged.
The Issue
[12] The issue before the Court on this application is simply stated: whether or not the plaintiff is entitled to an interim injunction in the terms sought or in a variation of those terms.
The Test for Issuance of an Interim Injunction
[13] In R.J.R.-Macdonald Inc. v. Canada (Attorney-General)2, the Supreme Court of Canada consolidated the guidance for lower courts on applications for interlocutory injunctions. I am satisfied that the guidance applies equally on applications such as this for interim injunctions.
[14] At page 334, Justices Sopinka and Cory, for the Court, wrote:
| Metropolitan Stores adopted a three-stage test for courts to apply when considering an application for either a stay or an interlocutory injunction. First, a preliminary assessment must be made of the merits of the case to ensure that there is a serious question to be tried. Secondly, it must be determined whether the applicant would suffer irreparable harm if the application were refused. Finally, an assessment must be made as to which of the parties would suffer greater harm from the granting or refusal of the remedy pending a decision on the merits. |
[15] At pages 337-8, the Court wrote:
| What then are the indicators of "a serious question to be tried"? There are no specific requirements which must be met in order to satisfy this test. The threshold is a low one . The judge on the application must make a preliminary assessment of the merits of the case. ... |
| Once satisfied that the application is neither vexatious nor frivolous, the motions judge should proceed to consider the second and third tests, even if of the opinion that the plaintiff is unlikely to succeed at trial. A prolonged examination of the merits is generally neither necessary nor desirable. |
[emphasis added]
[16] While two exceptions to the foregoing general principles are described, I am satisfied that neither is applicable on the facts of this matter.
[17] At pages 340-1, the Court went on to consider the second test, that is to say, "irreparable harm". It wrote:
| Beetz J. determined in Metropolitan Stores, at p.128 that "[t]he second test consists in deciding whether the litigant who seeks the interlocutory injunction would, unless the injunction is granted, suffer irreparable harm". The harm which might be suffered by the respondent, should the relief sought be granted, has been considered by some courts at this stage. We are of the opinion that this is more appropriately dealt with in the third part of the analysis. Any alleged harm to the public interest should also be considered at that stage. |
| At this stage the only issue to be decided is whether a refusal to grant relief could so adversely affect the applicants" own interests that the harm could not be remedied if the eventual decision on the merits does not accord with the result of the interlocutory application. |
| "Irreparable" refers to the nature of the harm suffered rather than its magnitude. It is harm which either cannot be quantified in monetary terms or which cannot be cured, usually because one party cannot collect damages from the other. |
[emphasis added]
[18] Finally, at pages 342-3, the Court wrote:
| The third test to be applied in an application for interlocutory relief was described by Beetz J. in Metropolitan Stores at p. 129 as: "a determination of which of the two parties will suffer the greater harm from the granting or refusal of an interlocutory injunction, pending a decision on the merits". In light of the relatively low threshold of the first test and the difficulties in applying the test of irreparable harm in Charter cases, many interlocutory proceedings will be determined at this stage. |
| The factors which must be considered in assessing the "balance of inconvenience" are numerous and will vary in each individual case. In American Cyanamid , Lord Diplock cautioned, at p. 408, that: |
| [i]t would be unwise to attempt even to list all the various matters which may need to be taken into consideration in deciding where the balance lies, let alone to suggest the relevant weight to be attached to them. These will vary from case to case. |
| He added , at p. 409, that "there may be many other special factors to be taken into consideration in the particular circumstances of individual cases". |
| The decision in Metropolitan Stores, supra, at p. 149, made clear that in all constitutional cases the public interest is a "special factor" which must be considered in assessing where the balance of convenience lies and which must be "given the weight it should carry".3 |
[19] Since this is not a constitutional case, the public interest is not a factor to be considered.
Analysis
[20] I n Fournier Pharma Inc. v. Apotex Inc.4, Madame Justice Tremblay-Lamer, in considering an application for an interim injunction, wrote at page 346:
| It has been said many times by this Court, that interim injunctions are a rare and exceptional remedy. As stated in The Kun Shoulder Rest: |
| The granting of interim injunctions is provided for in sub-Rule 469(2) of the Rules [now Rule 374]. It marks a clear departure from the procedural requirements which are applied to standard applications for interlocutory injunction. Both the Rules and the particular nature of an application for an interim injunction require that the applicant demonstrate an urgency of such importance that there is no alternative way to proceed in order to counter the harm that might or is actually occurring. |
I am satisfied that the urgency requirement is demonstrated here. The RRSP season, this year January 1, to February 29, is indicated by the evidence before me to provide a unique annual opportunity for marketers of mutual funds such as Ethical Funds and Mackenzie.
[21] While the threshold to establish a serious issue for trial is low, the threshold for establishing irreparable harm is much higher. Madame Justice Tremblay-Lamer adopted the following passage from the reasons of our colleague Mr. Justice Dubé in Merck Frosst Canada Inc. v. Canada (Minister of Health)5:
| At this stage of the proceedings, and more so where the applicant is merely seeking a ten-day injunction, it is not for the motion judge to go very deeply into the merits of the case. Thus, the threshold of serious issue is very low: the motion judge merely has to decide whether or not there is some merit in the sense that it is not frivolous. However, the threshold of irreparable harm is very high. An injunction is an extraordinary remedy. It is discretionary. The Court ought not to grant it merely to favour one side at the expense of another in what is obviously an on-going battle ... |
Like Madame Justice Tremblay-Lamer, I concur in this description of the threshold regarding irreparable harm particularly where as here, what is being sought is not merely a ten-day interim injunction.
[22] Further, I note that the Federal Court of Appeal cautioned in Centre Ice Ltd. v. National Hockey League6 that the evidence of irreparable harm must be "clear and not speculative".
[23] The registered trade-marks of Ethical Funds for the expressions ETHICAL FUNDS, and ETHICAL GROWTH FUND, and the word ETHICAL, all for use in Canada in association with financial and investment services, namely the operation and management of mutual funds, are before the Court along with evidence that Ethical Funds promotes and manages a family of twelve "socially responsible" mutual funds known as the "Ethical Funds". Further, there is evidence before the Court that Ethical Funds spends very substantial sums of money in the advertising and promotion of the "Ethical Funds"and that they have very substantial market acceptance.
[24] A prominent element of the name of the new fund launched by Mackenzie, to which objection is here taken, is the word "Ethical" although that word is used in association with, and preceded by, the word "Universal" which is a term closely associated with Mackenzie"s "Universal" family of funds.
[25] On the other side of the equation, Mackenzie has put in evidence before the Court material which tends to indicate that the term "Ethical" in relation to investing generally, and mutual funds more particularly, is a generic or descriptive term.
[26] I am satisfied that, against the low threshold on the question of triable issue, the issue of whether or not "Ethical" is the exclusive property of Ethical Funds or is a generic term in the context of the market in which Ethical Funds and Mackenzie operate is an issue for trial and not one that should be determined on an application such as this. The registration of a trade-mark is prima facie evidence of its validity. I adopt the conclusion of Mr. Justice Dubé in Tele-Direct (Publications) Inc. v. American Business Information Inc.7 where he wrote at pages 12 and 13:
| There is undoubtedly a serious question to be tried. Section 7 of the Trade-marks Act provides that no person shall direct public attention to his services in such a way as to cause confusion, or pass off other services for those requested. Section 19 stipulates that the registration of a trade-mark, unless shown to be invalid, gives to the owner the exclusive right to its use throughout Canada. Section 20 provides that the right of the owner of a registered trade-mark shall be deemed to be infringed by a person not entitled to its use. And s. 22 dictates that no person shall use a trade-mark so as to depreciate the value of the goodwill attached thereto. |
[27] I reach a different conclusion on the issue of irreparable harm. The harm to Ethical Funds if Mackenzie is allowed to continue to market its Universal Ethical Opportunities Fund lies in loss of sales, possible confusion between Ethical Funds" family of funds and Mackenzie"s new fund and through depreciation of the value of the goodwill attached to Ethical Funds" "Ethical" marks. Evidence before me demonstrates that quantification of such harm would be difficult and expert evidence on the subject is liable to reach widely differing conclusions but that, of itself, is not sufficient to demonstrate irreparable harm. Further, there can be no doubt that Mackenzie is a substantial corporation and that damages assessed would be recoverable. Indeed, in an affidavit of David Feather, executive vice-president, marketing, of Mackenzie Financial Services Inc. and senior vice-president of Mackenzie Financial Corporation that is before the Court, Mr. Feather attests that Mackenzie"s income from the first year of operation of Universal Ethical Opportunities Fund would not be substantial and would be well within the ability of Mackenzie to satisfy an award. Mr. Feather further undertakes on behalf of Mackenzie to "... keep a careful account of all sales of units of this fund" and indicates that Mackenzie "... is willing to expedite this matter to an early trial date, well before next year"s RRSP season."
[28] On the evidence before me, against an appropriately high threshold for determination of irreparable harm on an application such as this, I simply am not satisfied that Ethical Funds has met that threshold.
[29] Having reached the conclusion that I have with respect to irreparable harm, it is not necessary for me to go further to consider the issue of balance of convenience. However, very briefly, if I were required to do so I would conclude that the balance of convenience in this matter lies in favour of Ethical Funds.
[30] Mackenzie commenced operation of its Universal Ethical Opportunities Fund in circumstances where I am satisfied it had full knowledge of the operation by Ethical Funds of its family of socially responsible funds. While at the trial of this matter, it might very well be determined that the descriptor "ethical", in relation to the promotion and sale of mutual funds, is a generic term descriptive of the investment philosophy underlying certain mutual funds, that remains to be determined. I am satisfied that Mackenzie undertook the risk of the litigation with which it is now faced, either with full knowledge that a risk existed or in complete disregard of such a risk.
[31] In the circumstances, the "status quo" to which this matter should be related is the "status quo" as it existed before Mackenzie entered the market with its Universal Ethical Opportunities Fund and not the "status quo" that exists today. Were I required to do so, I would find that the balance of convenience favours Ethical Funds.
Conclusion
[32] Based upon the foregoing considerations and analysis, this application for an interim injunction was dismissed on the 22nd of February, 2000. I determined that costs should be left to the discretion of the Trial Judge.
"Frederick E. Gibson"
J.F.C.C.
TORONTO, ONTARIO
February 23, 2000
FEDERAL COURT OF CANADA
Names of Counsel and Solicitors of Record
| STYLE OF CAUSE: ETHICAL FUNDS INC. |
- and -
MACKENZIE FINANCIAL CORPORATION
| DATES OF HEARING: MONDAY - TUESDAY, FEBRUARY 21-22, 2000 |
| PLACE OF HEARING: TORONTO, ONTARIO |
| REASONS FOR ORDER BY: GIBSON J. |
DATED: WEDNESDAY, FEBRUARY 23, 2000
| APPEARANCES: Ms. Jennifer Lynch |
| SOLICITORS OF RECORD: Blake, Cassels & Graydon |
Barristers and Solicitors
2600 - 595 Burrard Street
Vancouver, BC
V7X 1L3
Barristers & Solicitors
40 King Street West
Toronto, Ontario
M5H 3Y4
FEDERAL COURT OF CANADA
Date: 20000223
Docket: T-146-00
Between:
Plaintiff
- and -
MACKENZIE FINANCIAL CORPORATION
Defendant
REASONS FOR ORDER
__________________
1 R.S.C. 1985, c. T-13.
2 [1994]1 S.C.R. 311.
3 References to the Metropolitan Stores and American Cyanamid cases in the quotations from RJR-Macdonald are to Metropolitan Stores (MTS) Ltd. v. Manitoba Food & Commercial Workers, Local 832 [1987] 1 S.C.R. 110 and American Cyanamid Co. v. Ethicon Ltd., [1975] A.C. 396.
4 (1999), 1 C.P.R. (4th ) 344 (F.C.T.D.).
5 (1997), 74 C.P.R. (3d) 460 (F.C.T.D).
6 (1994), 53 C.P.R. (3d) 34 at 52 (F.C.A.).
7 (1994), 58 C.P.R. (3d) 10 (F.C.T.D.).
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