Date:
20120801
Docket:
T-1957-10
Citation:
2012 FC 962
Ottawa, Ontario,
August 1, 2012
PRESENT: The
Honourable Mr. Justice de Montigny
BETWEEN:
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MOROCCANOIL ISRAEL LTD.
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Plaintiff
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and
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LES LABORATOIRES
PARISIENS CANADA (1989) INC. AND JOHN DOE O/A LES LABORATOIRES PARISIENS INC.
AND JOHN
DOE O/A LYS PARISIEN
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Defendants
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REASONS FOR
ORDER AND ORDER
[1]
On
January 17, 2012, the Honourable Mr. Justice Rennie granted default judgment to
the Plaintiff against the Defendants in an action for, inter alia,
trade-mark infringement and passing-off pursuant to the Trade-marks Act,
RSC 1985, c T-13.
[2]
The
Defendants have advanced a motion to set aside the Order of Justice Rennie, and
have subsequently filed a motion seeking to amend their motion to set aside in
order to introduce a draft Statement of Defence.
[3]
For
the reasons that follow, I find that the Defendants have not satisfied the
applicable test so as to entitle them to have the Judgment of Justice Rennie
set aside.
1. Background
[4]
As
previously mentioned, the Plaintiff brought an action against the Defendants
for trade-mark infringement and passing-off. A Statement of Claim was issued
on November 23, 2010 and served on the Defendants on November 30, 2010.
[5]
On
or about December 14, 2010, the Defendants provided to the Plaintiff’s counsel
a document entitled “Réponse aux Allégations” dated December 10, 2010,
which document was signed by “Christian Lebel” for Les Laboratoires Parisien
Canada (1989) Inc. It is unclear whether this document was intended to
be a Statement of Defence. This document has never been filed nor sought to be
filed with the Registry of the Court and there is no Statement of Defence filed
with the Court Registry in this action.
[6]
On
January 13, 2011, the Plaintiff advised the Defendants in writing that the Federal
Courts Rules, SOR/98-106, require that a corporation be represented by a
solicitor in all proceedings unless the Court grants leave in special
circumstances. The Plaintiff further advised the Defendants that the document
entitled “Réponse aux Allégations” dated December 10, 2010 had not been
filed with the Federal Court and that a Statement of Defence was required to be
filed with the Federal Court Registry.
[7]
By
letter dated January 20, 2011, Me Alain Béland advised that he had been
retained by the Defendants in this action. The letter from Me Béland
acknowledged that the Defendants had not filed their Statement of Defence and
further acknowledged that a request of the Court may be required to facilitate
the filing of a Statement of Defence. No action was taken by the Defendants or
their legal counsel in furtherance of the above-noted letter.
[8]
By
letter dated March 7, 2011, the Plaintiff once again communicated with Me
Béland, requesting that they take steps to immediately rectify their client’s
procedural irregularities. In this letter, the Plaintiff expressed its
intention to proceed with a motion for default judgment if the Defendants chose
not to take the appropriate steps to serve and file a Statement of Defence.
Once again, no action was taken by the Defendants or their counsel in response
to the above-noted letter.
[9]
On
April 21, 2011, the Defendants’ solicitors wrote to the Plaintiff authorizing
the Plaintiff to communicate directly with the Defendants. According to
counsel, Laboratoires Parisiens wanted to discuss an agreement “because of the
very low value involved”.
[10]
Between
June 8, 2011 and August 12, 2011, the parties attempted to settle the matter
and as a result, the Plaintiff delivered settlement documents to the
Defendants. On August 4, 2011, the Plaintiff wrote to the Defendants and
confirmed that the Plaintiff’s offer to settle was open for acceptance until
August 12, 2011, failing which the Plaintiff was withdrawing the offer and proceeding
with the litigation.
[11]
On
August 10, 2011, the Plaintiff once again wrote to the Defendants, reiterating
that the offer to settle was only open for acceptance until August 12, 2011.
The Plaintiff’s offer to settle was apparently not accepted by the Defendants
by that deadline.
[12]
In
the meantime, on June 1, 2011, the Plaintiff received a Notice of Status Review
from the Federal Court, and served and filed submissions in response to that
Notice. These submissions provided the Court with a full history of the status
of the action to date and expressed the Plaintiff’s intention to advance a
motion for default judgment. The Plaintiff’s response to the Notice of Status
Review was served upon the Defendants on June 16, 2011. The Defendants did not
respond to the Plaintiff’s submissions, nor file any submissions of their own
with this Court.
[13]
On
July 20, 2011, the Court ordered that the action continue as a specially
managed proceeding. By Direction dated October 11, 2011, the Plaintiff was
directed to file a Status Report. On or about October 18, 2011, the Plaintiff
served and filed a Status Report confirming, once again, the Plaintiff’s
intention to file a motion for default judgment.
[14]
The
Defendants did not contact the Plaintiff in response to the Plaintiff’s Status
Report nor file any submissions of their own with the Federal Court. By Oral
Direction of the Case Management Judge dated November 8, 2011, the Plaintiff
was ordered to bring its motion for default judgment on or before December 30,
2011. The Defendants were provided with a copy of this Oral Direction. Once
again, no action was taken by the Defendants. The Defendants did not contact
the Plaintiff in response to the Oral Direction, or otherwise, nor take any
steps to contact the Federal Court.
[15]
On
December 29, 2011, counsel for the Plaintiff wrote to the Defendants and
enclosed a courtesy copy of a Notice of Motion for default judgment. No action
was taken by the Defendants as a result, and the Defendants did not contact
counsel for the Plaintiff in response to that letter.
[16]
On
January 11, 2012, counsel for the Plaintiff once again wrote to the Defendants
and enclosed a further copy of the Notice of Motion for default judgment. Once
again, the Defendants took no action and did not contact counsel for the
Plaintiff. On January 17, 2012, Justice Rennie granted the Plaintiff’s request
for default judgment against the Defendants.
2. Issue
[17]
The
only issue to be decided in the current proceedings is whether the default
judgment against the Defendants should be set aside, and whether the Defendants
should be allowed to serve and file their Statement of Defence.
3. Analysis
[18]
Rule
399(1) of the Federal Courts Rules provides that the Court may, on
motion, set aside an order that was made ex parte if the party against
whom the order was made discloses a prima facie case why the order
should not have been made.
[19]
There
is no dispute between the parties as to the criteria to be met on such a
motion. As stated in cases such as Society of Composers, Authors &
Music Publishers of Canada v 654163 Ontario Ltd., 2010 FC 905, SEI
Industries Ltd. v Terratank Environmental Group, 2006 FC 218, Taylor
Made Gold Co. Inc. et al v 1110314 Ontario Inc. (1998), 148 F.T.R. 212, Brilliant
Trading Inc. v Tung Wai Wong and Zhen Hing Enterprise Ltd., 2005 FC 571,
and Molson Canada (an Ontario General Partnership) v Beauchamp, 2010 FC
109, the Defendants must establish that:
a) They
have a reasonable explanation for the failure to file a statement of defence;
b) They
have a prima facie defence on the merits of the Plaintiff’s claim;
c) They
move promptly to set aside the default judgment.
[20]
The
three elements of the test are conjunctive and the Defendants must therefore
satisfy all three parts to set aside the default judgment.
[21]
In
the case at bar, I am not satisfied that the Defendants’ explanation for not
filing a Statement of Defence is reasonable. Counsel for the Defendants
strenuously tried to convince me that the Defendants were acting in good faith
and failed to abide by the Court’s Rules as a result of their unfamiliarity
with legal procedures, and they were led to believe that they would reach an
out of court settlement as the amount of damages incurred by the Plaintiff was
not substantial. Unfortunately, the evidence submitted to the Court does not
support that explanation.
[22]
From
at least January 20, 2011 to April 21, 2011, the Defendants retained legal
counsel. The Defendants and their counsel were made expressly and repeatedly
aware by the Plaintiff that: a corporation must be represented by a solicitor
in all proceedings before the Federal Court; a proper Statement of Defence is
required to be filed with the Federal Court Registry; and given the delay in
filing same, a motion requesting permission for the late filing was required.
Yet, the Defendants have never purported to rectify these failures.
[23]
The
fact that the parties attempted to settle the action between April and August
2011 did not relieve the Plaintiff of their obligation to comply with the Federal
Courts Rules. Even if those discussions could provide a reasonable
explanation for not having filed a Statement of Defence during that period, it
would not explain why nothing was done either prior to April 2011 or following
August of that same year. This is particularly true in light of the
Plaintiff’s Status Report of October 18, 2011, sent to the Defendants on the
same date, the last paragraph of which states explicitly that “[t]he Plaintiff
proposes to file its motion for default judgment by December 30, 2011”. If
there was any doubt left in the mind of the Defendants, the copy of the Notice
of Motion filed in support of a request for default judgment sent to the
Defendants on December 29, 2011, should have cleared any possible ambiguity.
Even at this late stage, the Defendants continued to do nothing.
[24]
The
Defendants tried to argue that they are not familiar with the law and the
procedure before the Federal Court. Mr. Christian Lebel, who is the president
and sole shareholder of the Defendants, explained that he was under the
impression that the numerous adjournments of the criminal proceedings against
the Plaintiff pursuant to the Criminal Code, applied equally to the proceedings
before the Federal Court as they were intimately related. Mr. Lebel went so far
as to say that he is not fluent in English and did not always understand the
letters that he received from the Plaintiff’s counsel. He stated that he had to
rely on Mr. Jones, who acts as an administrator of the Defendants, to translate
these letters for him.
[25]
I
find neither of these explanations to be reasonable. First of all, none of the
postponements in the criminal action correspond to January 2012, at which time
the motion for default judgment was to be presented. Therefore, when advised
by the Court on November 8, 2011 that a motion for default judgment had to be
filed by December 30, 2011, and when twice advised by the solicitors for the
Plaintiff on December 29, 2011 and January 11, 2012 that the motion for default
judgment was to be presented on January 16, 2012, the Defendants could not
seriously and objectively believe the civil action before this Court was
postponed in conjunction with the criminal matters.
[26]
More
importantly, there is no explanation as to why Mr. Lebel chose to terminate the
retainer of his legal counsel with respect to the proceedings before this Court
on April 21, 2011, without first seeking legal advice from another counsel with
experience before the Federal Court, until receiving the default judgment.
Such inaction is especially troubling in light of the fact that Mr. Lebel, on
cross-examination, testified that Me Béland had told him very early on that he
was not familiar with the Federal Court and had referred him to other law firms
with expertise in intellectual property matters.
[27]
It
was ill-advised of Mr. Lebel to try to negotiate a settlement without any legal
advice, considering his avowed ignorance of the law and his difficulties to
communicate in English. While he may have thought that the amounts at issue
were insubstantial, he was clearly on notice that the Plaintiff was serious
about his claim and was intent on proceeding with its motion for default
judgment in the advent of failure to arrive at a settlement.
[28]
Mr.
Lebel’s casualness and imprudence verges on wilful blindness once the
negotiations with the Plaintiff broke down. He was then on notice that the
Plaintiff would proceed to Court. Even if he was not clear what the next steps
would be, or even whether the Plaintiff was seriously contemplating bringing his
motion to Court, he could not simply sit by idly and wait. Mr. Lebel was well
aware of the need to seek legal advice when he first retained Me Béland in
January 2011. He knew that Me Béland would not be able to adequately represent
him in Federal Court. It was therefore incumbent upon him, at least after the
settlement discussions broke down, to take steps in order to defend the
Statement of Claim that he had been served with almost one year earlier. As
this Court stated in UMACS of Canada Inc. v S.G.B. 2000 Inc. (1990), 34
C.P.R.(3d) 305, at p. 308, “[p]eople in business in Canada should give legal
documents significantly more attention” than the Defendants did in this case:
see also Taylor Made Gold Company Inc. v 1110314 Ontario Inc., at para.
2.
[29]
In
light of all of the evidence before this Court, there can be no doubt that the
Defendants, through their president and unique shareholder, did not provide a
reasonable explanation for the failure to file and serve a proper Statement of
Defence. Mr. Lebel clearly took the view, at his own peril, that this matter
was not serious enough to justify the expense and trouble of seeking legal
advice. While such behaviour may have been understandable in the early stages
of the proceedings and possibly up until the settlement discussions broke down,
it was clearly untenable and unreasonable to carry on afterwards as if the
matter would simply go away. The failure to satisfy the first element of the
test is fatal to the Defendants' motion, as the three elements of the test are
conjunctive.
[30]
In
any event, I am also of the view that the Defendants have not satisfied the
second prong of the test, as they have not established that they have a prima
facie defence on the merits of the Plaintiff's claim. At the hearing, counsel
for the Defendants conceded that they were not challenging the default judgment
with respect to the merits of the case (i.e. the conclusions that the
Defendants have infringed sections 7(b), (c) and (d) as well as s. 22 of the Trade-marks
Act), but merely the quantum of the damages. This is clearly not enough to
set aside the default judgment of Justice Rennie.
[31]
The
Defendants have not filed any evidence to substantiate their claim that the
damages awarded by Justice Rennie are grossly disproportionate and do not
reflect the actual losses suffered by the Plaintiff. As a result, this Court
must take it for granted that Justice Rennie arrived at his award of damages on
the basis of the evidence that was before him.
[32]
As
previously mentioned, counsel for the Defendants made a motion before this
Court for permission to amend its motion to set aside the default judgment, the
purpose of which is essentially to file a draft Statement of Defence and to
show that they have compelling arguments to make, in response to the Statement
of Claim of the Plaintiff. They claim, inter alia, that the amount of
damages awarded by Justice Rennie is grossly disproportionate as they have only
sold 2,933 units of the infringing product, for a net profit of $1,910.83.
[33]
There
are, however, a number of problems with this motion to amend. I do not even
find it necessary to consider the requirements to be met for filing additional
material, as I agree with the Plaintiff that the Defendants are not really
seeking to amend a document, but rather to introduce new material and evidence
under the guise of a motion to amend. It is a basic principle of the law of
evidence that a moving party can file evidence in reply, only to contradict or
qualify new fact issues raised in defence. A moving party must introduce all
the evidence in its possession upon which it relies as probative before the
closing of its case: Sopinka et al, The Law of Evidence in Canada, 3rd
ed., Lexis Nexis, 2009, pp. 1165 ff.
[34]
In
the present case the Defendants lead evidence in reply, that is in relation to
“grossly disproportionate damages”, an issue that is neither included in the
original Motion Record to set aside the default judgment, nor in the
Plaintiff's Responding Record. In the Plaintiff's Responding Motion Record, it
indicated that the Defendants had failed to file a draft Statement of Defence
in support of its motion, and evidence showing that it had a prima facie
defence. The Defendants are now clearly seeking to bolster their position in
support of their motion to set aside the default judgment in light of the
arguments (not new fact issues) put forward by the Plaintiff in its Responding
Motion Record. Therefore, the Defendants are not truly requesting to amend a
document, and the legal principles relating to amendments are not applicable.
Moreover, the Defendants have not provided any explanation as to why they did
not or could not file the draft Statement of Defence and/or all necessary
evidence as part of their original Motion Record to set aside a default
judgment, and why they waited more than three months from the filing of the
original motion to set aside the default judgment to do so.
[35]
The
Defendants’ motion to amend must therefore be dismissed. Not only does it not
purport to “amend” a pleading or a document pursuant to Rules 75(1) and 200,
but it would be more appropriately characterized as a disguised attempt to
improperly file inadmissible reply evidence. Furthermore, the affidavit
filed in support of the Defendants' motion is in the name of an
articling student for counsel for the Defendants, which clearly contravenes
Rule 82, whereby an attorney shall not both depose to an affidavit and present
argument to the Court based on that affidavit. To the extent that the
Statement of Defence goes to the very issue of damages suffered by the
Plaintiff and/or improper profits realized by the Defendants, the affidavit is
unacceptable and clearly insufficient to support the allegation that the
damages obtained are grossly disproportionate to the actual losses that have
been suffered by the Plaintiff.
[36]
Finally,
one must not lose sight of the fact that the damages awarded by Justice Rennie
were meant to compensate not only for the losses sustained by the Plaintiff but
also for depreciating the value of the goodwill attaching to the registered
trade-marks of the Plaintiff.
[37]
In
light of the evidence (or lack thereof) that is before the Court, the
Defendants have not established that they have a prima facie defence on
the merits of the Plaintiff's claim. Not only are the findings of Justice
Rennie not in dispute with respect to the infringements of the Trade-marks
Act, but they fail to bring any evidence in support of their claim that the
damages awarded were grossly disproportionate. Accordingly, they do not meet
the second requirement of the test to set aside a default judgment.
[38]
Having
failed to meet both the first and second elements of the test, the Defendants'
motion to set aside the default judgment of Justice Rennie is dismissed, with
costs payable to the Plaintiff.
ORDER
THIS
COURT ORDERS that the motions of the Defendants to set
aside the Order of Mr. Justice Rennie dated January 17, 2012, and to obtain
permission to amend, are both dismissed, with costs to the Plaintiff.
"Yves de Montigny"
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