Date: 20000113
Docket: T-1030-99
BETWEEN:
TOP STAR DISTRIBUTION GROUP INC.
and ARASH MISSAGHI
Plaintiffs
- and -
SIGMA, and
AMIR NEJATIAN and
BEHNAM KATEBIAN and
JOHN DOE and JANE DOE and
OTHER PERSONS UNKNOWN TO THE PLAINTIFF
WHO OFFER FOR SALE, SELL, IMPORT, EXPORT, OR DEAL
IN TOP STAR TRADE MARKS
Defendants
REASONS FOR ORDER
LUTFY A.C.J.
[1]The plaintiffs and the defendants have moved for the review and the setting aside respectively of the Anton Piller order issued on June 14, 1999. The order was executed on June 18, 1999.
[2]The parties have provided substantially more information in support of these motions than was made available to the motions court judge who issued the Anton Piller order. The parties acknowledge that their motions are to be adjudicated de novo by the reviewing judge in the determination of whether the relief sought is appropriate: Adobe Systems Inc. v.KLJ Computer Solutions Inc., [1999] 3 F.C. 621 (T.D.) at paragraphs 47-49. The motions before me are original substantive applications and are not an appeal from the Anton Piller order issued by the first motions judge.
[3]The parties also agree on the three-pronged test for the issuance of an Anton Piller order. First, there must be an extremely strong prima facie case. Second, the damage, potential or actual, must be very serious for the applicant. Third, there must be clear evidence that the defendants have in their possession incriminating documents or things and that there is a real possibility they may destroy such material before any application between the parties can be made: Anton Piller KG v. Manufacturing Processes Ltd., [1976] Ch. 55 (C.A.) and Nintendo of America, Inc. v. Coinex Video Games Inc., [1983] 2 F.C. 189 (C.A.) at 198.
[4]It is also trite law that the party seeking an Anton Piller order or any other extraordinary interim relief on an ex parte basis must make full and fair disclosure of all the material facts: Brink"s-MAT Ltd. v. Elcombe, [1988] 3 All. E.R. 188 (C.A.); Pulse Microsystems Ltd. v. SafeSoft Systems Inc. (1996), 67 C.P.R. (3d) 202 (Man. C.A.) at 209-10; and Adobe Systems Inc, supra, at paragraph 46.
Extremely strong prima facie case
[5]On the record before me, I am satisfied that the rights being asserted by the plaintiffs in six trade-marks are, at the very least, uncertain. To some extent, the plaintiffs themselves have acknowledged this by filing a motion seeking leave to add Rex Inc. as an additional plaintiff. It appears that whatever rights the plaintiffs may have had in the trade-marks in issue may have been assigned to Rex Inc. In sum, there is no strong evidence, at this stage of the proceedings, that either of the two current plaintiffs has title to the six trade-marks.
[6]The validity of one or more of the trade-marks is also in dispute. Information, filed in the Canadian Intellectual Property Office for the registration of certain of the trade-marks, claims dates of first use prior to the date of the incorporation of the corporate plaintiff registrant which purportedly owns the marks.
[7]Again on the record before me, there is evidence that the registered trade-marks in issue do not actually distinguish the wares, in which they were alleged to be used by the registered owner, from the wares of other parties who assert their rights as the true trade-mark owners.
[8]The evidence establishes that for a period of time extending into 1998, the plaintiffs were importers or distributors of goods manufactured outside Canada by parties unrelated to the plaintiffs under trade-marks identical to at least certain of the six trade-marks in issue. Recent case law has made clear that distributors have no right, absent any other agreement, to register a trade-mark owned by foreign suppliers under their own name and for their own benefit: Havana House Cigar & Tobacco Merchants Ltd. v. Skyway Cigar Store (1998), 81 C.P.R. (3d) 203 (F.C.T.D.) at 217-22, aff"d [1999] F.C.J. No. 1749 (QL) (C.A.).
[9]At this stage of the proceedings, and understanding that supplementary evidence may be disclosed at a later date, I am not satisfied that the plaintiffs have established an extremely strong prima facie case concerning their rights in the trade-marks. I have an even stronger view concerning the plaintiffs" failure to meet the threshold to establish the third and essential condition for the issuance of an Anton Piller order.
Clear evidence of the possible destruction of material
[10]The crux of the evidence required to obtain an Anton Piller order more often concerns the third condition that an infringer will likely dispose of important evidence. This is aptly stated by Richard A.C.J., as he then was, in Adobe Systems Inc., supra:
| 37. It is difficult to prove with tangible evidence that an infringer has a history of destroying evidence or will dispose of important evidence. Applicants have therefore focused on the dishonest character of the infringer and the easily disposable nature of the infringing articles to invite the Court to draw an inference that evidence will disappear if notice is given. |
| 38. The Court has examined market-place realities and has been prepared to draw such an inference in cases involving vendors of counterfeit goods in situations such as flea markets, street stalls or concerts, given the temporary nature of their business, and their propensity to flee at the first hint of enforcement and to warn each other of execution of the orders. |
This Court has expressed the caution to be exercised on an ex parte application for an Anton Piller order to assure the proper balance between the rights of the wronged plaintiff who seeks a remedy and the rights of the defendant to privacy, absent compelling evidence of the latter"s flagrant conduct: Profekta International Inc. v. Mai,[1997] 1 F.C. 223 (T.D.) at 230-31.
[11]One of the two identified individual defendants has deposed that they carry on business as officers and employees of Sigma Consulting International Incorporated. However, for the purposes of this motion, I also accept that this corporate name was not disclosed in a name search conducted by the plaintiffs prior to seeking the Anton Piller order. The evidence does not explain why Sigma Consulting International Incorporated, a company created in May 1997 pursuant to the laws of Ontario, was not included in the corporate search report obtained by the plaintiffs.
[12]For the purposes of this motion, I accept the evidence of the defendants that since August 1998, Sigma has distributed products bearing certain of the trade-marks in issue and obtained its supplies from manufacturers outside Canada who purport to be the true owners of these trade-marks. In the same vein, I also accept that Sigma Consulting has carried out its business in an open and stable manner from conventional business premises in Markham, Ontario.
[13]On cross-examination, the plaintiff Arash Missaghi was asked to explain the assertion in his original affidavit that "there is a real risk that the counterfeit and unauthorized merchandise" in the possession of the defendants would be improperly disposed of. He replied that his belief was based on his personal feelings and that he could subsequently provide evidence in support of that opinion. No such evidence has been forthcoming to date. He also acknowledged that "[t]here was no document evidence when we did the Anton Piller Order. All we had to fall back on was the computer." It is still far from certain, on the evidence to date, that the defendants were in possession of any counterfeit material.
[14]The plaintiffs were aware that the defendants carried on business from a fixed address and that they also operated a large warehouse. Mr. Missaghi also deposed that he noticed that the defendants were acquiring "a significant portion" of the plaintiffs" market share in the products in dispute. There is no evidence that the defendants disposed of or attempted to dispose of any products or documents. In short, on the record before me, no inference can be drawn that the defendants are the kind of "fly-by-night" operation suggested by the plaintiffs. The defendants" business appears to be a far more stable operation than the flea markets and street stalls which are often targeted with Anton Piller orders. There is little, if any, credible information to suggest that the defendants" business was temporary in nature.
[15]In summary, I am fully satisfied on the record before me that the plaintiffs have not met the test to justify the issuance and continuance of the Anton Piller order.
Full and fair disclosure
[16]In Brink"s-MAT Ltd., supra, the duty to make full and frank disclosure when seeking an Anton Piller order on an ex parte basis was considered at pages 192-93:
| ... (i) The duty of the applicant is to make "a full and fair disclosure of all the material facts" ... (ii) ... materiality is to be decided by the court and not by the assessment of the applicant or his legal advisers ... (iii) ... The duty of disclosure therefore applies not only to material facts known to the applicant but also to any additional facts which he would have known if he had made such inquiries. ... (v) If material non-disclosure is established the court will be "astute to ensure that a plaintiff who obtains ... an ex parte injunction without full disclosure is deprived of any advantage he may have derived by that breach of duty ..." ... (vi) Whether the fact not disclosed is of sufficient materiality to justify or require immediate discharge of the order without examination of the merits depends on the importance of the fact to the issues which were to be decided by the judge on the application. [References omitted.] |
It was also stated (at page 196) that innocent non-disclosure "in the sense that the plaintiffs did not intentionally omit information which they thought to be material, amounted to material non-disclosure ...".
[17]The plaintiff Arash Missaghi deposed that he understood the burden of full and complete disclosure:
| I am aware that this Affidavit is being filed in support of a motion by the Plaintiffs in the Federal Court of Canada for extraordinary relief on an ex parte and in camera basis, and that the Plaintiffs and their counsel are required to put before the Court full and complete details of the relevant facts that have the bearing on this motion. My counsel has advised me of my responsibility to the Court and to the Defendants in this regard. |
Mr. Missaghi seems to have understood that he was obliged to disclose "details of the relevant facts". I am satisfied that the plaintiffs failed to disclose material facts on at least five issues.
| (i) The failure to disclose erroneous information concerning the dates of first use |
[18]In applying for the registration for certain of the trade-marks in issue, the plaintiffs provided incorrect information concerning the dates of first use. The dates preceded the date of incorporation of the corporate plaintiff. When asked to explain why these errors were not disclosed in his affidavit in support of the application for the Anton Piller order, Mr. Missaghi responded that "it is all technicalities after all". The counsel who assisted him during his cross-examination candidly acknowledged that he "naturally" would have disclosed this information to the Court had he been advised of this information by his clients.
[19]I agree with the response given by counsel for the plaintiffs that this was material information to be disclosed to the motions judge.
| (ii) The failure to disclose the cease and desist letters |
[20]In February and March 1999, the plaintiffs received cease and desist correspondence from solicitors representing the interests of persons whom they described to be the true owners of four of the trade-marks in issue. Mr. Missaghi testified, and his counsel before me argued, that disclosure of this correspondence was not material in the absence of any ensuing litigation. This is not a complete answer. If the plaintiffs had chosen to disclose the cease and desist letters, they could also have informed the motions judge that no litigation had yet been commenced. Mr. Missaghi also added that the allegations in the correspondence were wrong as the plaintiffs were the owners of the trade-marks. In my view, counsel who assisted Mr. Missaghi during the cross-examination was correct when he again stated that he "naturally" would have included this information in the application material had it been disclosed to him.
| (iii) The failure to disclose the allegations that the assignment of PARI BRAND & Design was fraudulent |
[21]In the autumn of 1998, the plaintiffs knew that a party purporting to be the lawful trade-mark owner of PARI BRAND & Design alleged that the assignment of this trade-mark was fraudulent. Mr. Missaghi testified that the completion of the assignment made it unnecessary to disclose the allegations of fraud. His counsel, again correctly in my view, stated on the record that he would "absolutely" have disclosed this information had the allegations been made known to him.
| (iv) The failure to disclose the plaintiffs"previous involvement with products under the same name |
[22]For a certain period of time ending in 1998, the plaintiffs had marketed in Canada goods under the same trade-marks as some of those now in issue. They had obtained these goods from manufacturers or the suppliers that were outside Canada. Mr. Missaghi"s explanation for his failure to disclose this relationship was that "it"s irrelevant as far as I"m concerned because the brand is my brand." He also failed to disclose litigation in the United States involving companies related to the plaintiffs instituted by a party purporting to be the true owner of one of the trade-marks in issue. In my view, these are material facts which should have been disclosed to the motions judge during the application for the Anton Piller order.
| (v) The failure to disclose the assignment of the trade-marks to Rex Inc. |
[23]The plaintiffs acknowledge that they failed to disclose that the trade-marks registered in the name of the corporate plaintiff had been assigned to Rex Inc. Mr. Missaghi"s explanation of this material omission is unsatisfactory. He offered two reasons for the non-disclosure. First, the assignment had yet to be registered by the Canadian Intellectual Property Office. Second, Mr. Missaghi viewed the corporate plaintiff and Rex Inc. as part of the same family business and did not feel that disclosure was necessary. He added that any omission in this regard was not to mislead the Court intentionally. Again, in my opinion, this explanation is unsatisfactory.
[24]In addition to the plaintiffs" failure to disclose, I have also noted from the record important undertakings which have yet to be completed and, in some cases, answers on cross-examination which can be characterized as cavalier.
Conclusion
[25]I have concluded that the plaintiffs have failed to show, on the merits of the evidence concerning the three conditions, that the Anton Piller order should be confirmed.
[26]While acknowledging that the plaintiffs had failed to disclose certain information to the motions judge, counsel who represented the plaintiffs before me argued that the facts in issue were not material. With respect, I cannot agree. Moreover, even if I had found that the plaintiffs had met the three-prong test for the issuance of the Anton Piller order, in the exercise of my discretion I would set aside the order as the appropriate sanction for the plaintiffs" serious omissions on the application for the Anton Piller order before the motions judge: Brink"s-MAT Ltd., supra at 193, subparagraph (vi).
[27]As noted earlier, the decision to issue an Anton Piller order must balance the rights of the wronged plaintiff with those of the defendant. Given the extreme nature of the Anton Piller remedy, it is especially important that the Court be given full disclosure in making this assessment. In my mind, there were significant defects in the plaintiffs" disclosure before this Court that have resulted in the defendants" rights being undermined.
[28]In the circumstances, the plaintiffs" motion in review of the Anton Piller order will be dismissed and the defendants" motion to set aside the Anton Piller order will be granted. An order will issue that the documents now in the possession of the defendants in sealed envelopes will be returned to the plaintiffs. Counsel for the defendants did not seriously contest the view that costs should be left for determination upon the final disposition of this action, either by way of summary judgment or at trial. The other relief sought in the defendant"s amended notice of motion may be adjudicated on another day, as directed in my order of December 2, 1999.
"Allan Lutfy"
Associate Chief Justice
Ottawa, Ontario
January 13, 2000
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