Date: 20121123
Docket: T-943-11
Citation:
2012 FC 1355
Ottawa, Ontario,
November 23, 2012
PRESENT: The
Honourable Mr. Justice Manson
BETWEEN:
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MICHAEL KORS, LLC AND MICHAEL
KORS (CANADA) CO.
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Plaintiffs
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and
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BEYOND THE RACK ENTERPRISES
INC.
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Defendant
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REASONS FOR
JUDGMENT AND JUDGMENT
[1]
The
Defendant, Beyond the Rack Enterprises Inc. [BTR] appeals three orders of Madam
Prothonotary Milczynski dated September 21, 2012 seeking to:
A. Set
aside the Order of the Prothonotary Milczynski dismissing BTR’s motion to
strike out paragraphs 1(d), (e), (vii) and (g), 1(e) (ii)-(iv), 1(f), 1(i),
9-18 inclusive, 19(b)-(e), 21 and 31(c) of the Plaintiffs’ Further Amended
Statement of Claim, except to the extent they relate to claims other than the
trade-mark infringement and passing off without leave to amend;
B. Strike
out the Impugned Claims pursuant to Rule 221(f), or in the alternative Rule
221(a);
C. Set
aside and vacate the Order of Prothonotary Milczynski granting the Plaintiffs’
motion for a further and better affidavit of documents from BTR;
D. Set
aside the Order of the Prothonotary Milczynski to amend the Protective Order
dated June 21, 2012 to include a “Counsel’s Eyes Only” provision, and to issue
a Confidentiality Order to the same effect;
E. Amend
the Protective Order dated June 21, 2012 to include a “Counsel’s Eyes Only”
provision;
F. Fix
costs of the motion and payable forthwith.
[2]
Counsel
for the Defendant has admitted that if the motion to strike the claim as set
out above fails, then the motion for a further and better production should
also fail.
I. Standard of Review
[3]
While
there was some dispute as to the standard of review in this matter, I accept
and adopt the test to be applied on a review with a discretionary decision of
Prothonotary Milczynski is the one reformulated by the Federal Court of Appeal
in Merck &Co Inc v Apotex Inc, 2003 FCA 488 at para 19, [2003] FCJ
No 1925:
To avoid the confusion which we have seen from time
to time arising from the wording used by MacGuigan J.A., I think it is
appropriate to slightly reformulate the test for the standard of review. I’ll
use the occasion to reverse the sequence of the proposition as originally set
out, for the practical reasons that a judge should logically determine first
whether the questions are vital to the final issue: it is only when they are
not that the judge affectively needs to engage in the process determining
whether the orders are clearly wrong. The test would now read: Discretionary
orders of Prothonotaries ought not to be disturbed on appeal to a judge unless:
(a) the questions raised in the motion are vital to
the final issue of the case, or
(b) the orders are clearly wrong, in the sense that
the exercise of discretion by the prothonotary was based upon a wrong principle
or upon a misapprehension of the facts.
[4]
As
Madam Justice Sandra J. Simpson stated in Sanofi-Aventis Canada Inc v Teva
Canada Inc Ltd, 2010 FC 1210, [2010] FCJ No 1503 at paras 27 and 28:
…one looks at the order made by the Prothonotary and
only reviews it de novo if it has, in fact, had an impact on the trial
that could be categorized as vital.
[5]
Therefore,
if the question issue is not vital to the final determination of the case, the
Court must consider whether the “Orders were clearly wrong” before disturbing
them, which is a deferential standard (see Canada (Attorney General)
v United States Steel Corp, 2011 FC 226 at para 15, [2011] FCJ No 279).
[6]
It
is my determination that none of the three issues are vital to the final
determination of the case. Therefore the issues will be decided on whether or
not the Prothonotary can be demonstrated to have been “clearly wrong,” in the
sense that the exercise of discretion by the prothonotary was based upon a
wrong principle or upon a misapprehension of the facts.
II. Issues
A. Should
the Impugned Paragraphs of the Statement of Claim be Struck?
[7]
The
pleading or portions of the pleading should not be struck unless it is “plain
and obvious” that it discloses no reasonable cause of action (see Hunt v
Carey Canada Inc, [1990] 2 S.C.R. 959 at page 980, [1990] SCJ No 93).
[8]
Moreover,
as cited by the Federal Court of Appeal in Montana Band v Canada, 2002 FCA 331 at para 7, [2002] FCJ No 1257:
We would like to emphasize once again the heavy
burden upon litigants seeking to overturn an interlocutory order by a case
management judge. This Court is loathe to interfere with interlocutory orders
in any case due to the delay and expense which such appeals add to any
proceeding. This is all the more so where an appeal is taken from an
interlocutory decision of a case management judge who is intimately familiar
with the history and details of a complex matter. Case management cannot be
effective if this Court intervenes in any but the "clearest case of a
misuse of judicial discretion" to echo the words of Mr. Justice Rothstein
in Sawridge Indian Band et al v Canada, 2001 FCA 339, (2001) 283 NR 112.
[9]
On
this front, Defendant’s counsel submits that the claim lacks material facts in
support of the bald allegations that make up the impugned claims of trademark
infringement and passing off in the alleged facts in paragraphs 9 to 18 of the
further Amended Statement of Claim. It is argued that these are bold and
speculative allegations and not material facts that support the causes of action
for passing off and trademark infringement and that the action is a “fishing
expedition”. The Defendant argues that an action cannot be brought on
assumptions and speculation that something “will turn up” in discovery.
Defendant’s counsel refers to paragraph 12 of his written representations
concerning the cross examination of the representative for the Plaintiff, Ms.
Grodnitzky, to support the Defendant’s position.
[10]
The
Defendant’s position is that the facts, as pleaded, and in view of the evidence
on this cross examination of Ms. Grodnitzky, are not a proper pleading of
material facts.
[11]
The
Defendant’s Statement of Defence denies selling unauthorized Michael Kors
products and alleges that it only sells genuine Michael Kors brand of products
and therefore has not infringed any trademark rights of the Plaintiffs or been
involved in any passing off. In the Plaintiffs’ Reply to the Defence, it is the
Plaintiffs’ position that Michael Kors is not aware of any genuine Michael Kors
products being sold in Canada outside of Michael Kors authorized distribution
channels and in paragraph 8, specifies that it is the Plaintiffs’ position that
the Defendant is not selling “genuine” or “legitimate” Michael Kors products on
the BTR website.
[12]
I
have considered the facts as pleaded in this case, as well as the evidence
submitted on cross examination during the motion for further and better
production on discovery, and I agree with Prothonotary Milczynski that it
cannot be said that the claim is so bereft of material facts so as to
constitute an abuse or a fishing expedition. Having regard to the pleadings as
a whole, and particularly paragraphs 9 to 18 of the Statement of Claim,
sufficient material facts have been pleaded in to sustain the claims for
trade-mark infringement and passing off and the action should proceed. If the
Defendant has a legitimate defences of grey market goods and exhaustion of
rights, then that will clearly be grounds for the Defendant to prove as the
action proceeds.
B. Should
the Order for the Documents Productions Stand?
[13]
Given
the Defendant’s counsel’s agreement that if Prothonotary Milczynski’s decision
is upheld with respect to striking the causes of action in the Statement of
Claim, then the Order for further production on discovery is not disputed and
that Order stands.
C. Should the Protective
Order be Amended?
[14]
Finally,
with respect to the motion for an Order pursuant to Rule 151 and 152 to amend
the Protective Order dated June 21, 2012 to include a “Counsel’s Eyes Only”
provision, again, I do not find that Prothonotary Milczynski exercised her
discretion on any purely wrong principle. The fact that two in-house counsel
for the Plaintiffs may have access to the documents and information to instruct
external counsel is reasonable in the circumstances of this case therefore, the
order, as issued, is appropriate in this case.
[15]
For
all the above reasons, I dismiss the Defendant’s motion with costs to the
Plaintiffs in the cause.
JUDGMENT
THIS
COURT’S JUDGMENT is that the Defendant’s motion is dismissed
with costs to the Plaintiffs in the cause.
“Michael D. Manson”
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