Date: 20070425
Docket: T-1838-05
Citation: 2007 FC 437
[ENGLISH TRANSLATION]
BETWEEN:
ECLIPSE
INTERNATIONAL FASHIONS CANADA INC.
Plaintiff
and
THE
JEAN SHOP LIMITED
Defendant
AND
BETWEEN
THE
JEAN SHOP LIMITED
Plaintiff
by counterclaim
and
ECLIPSE INTERNATIONAL
FASHIONS CANADA INC.,
DARSHAN KHURANA, SANTOSH KHURANA,
LLOYD
PRIZANT, JOYCE MANN PRIZANT,
SUBHASH KHANNA,
LAUREEN
FERGUSON ET TRIO SELECTION INC.
Defendant
by counterclaim
REASONS FOR ORDER
PROTHONOTARY MORNEAU
[1]
This is essentially a motion by the defendants by
counterclaim under Rule 221 of the Federal Courts Rules (the Rules) to
strike a series of paragraphs from the counterclaim that the defendant The Jean
Shop Limited (the defendant Jean Shop) appended to the defence that it filed on
March 8, 2007.
Background
[2]
In a statement of claim filed in October 2005, the plaintiff
Eclipse International Fashions Canada Inc. (hereinafter Eclipse Canada) alleged
that the defendant Jean Shop, through the operation of businesses that sell
clothing under the corporate name Eclipse, infringed its ownership rights in
the registered trade-mark Eclipse that is used by Eclipse Canada in association
with women’s clothing and in association with other types of clothing with
respect to one of the defendants by counterclaim, namely Trio Selection Inc.,
which is licensed to use the Eclipse mark (hereinafter Trio Selection Inc.).
[3]
Based essentially on Rule 191, the defendant Jean Shop joined
as defendants by counterclaim, aside from the plaintiff Eclipse Canada, the
licensee Trio Selection Inc., as well as the three (3) respective directors of
each of these corporations.
[4]
First, the defendants by counterclaim are objecting that Trio
Selection Inc. and the two groups of directors were included as defendants by
counterclaim.
[5]
The other major problem raised by these defendants involves
the paragraphs of the counterclaim where Jean Shop seeks an injunction against Eclipse
Canada to prevent it from pursuing an administrative remedy before the Registraire
des entreprises du Québec through which, according to Jean Shop, Eclipse Canada
could obtain a remedy that could interfere with the broader jurisdiction of
this Court.
Analysis
Tests for striking out
[6]
As pointed out in the following passage from the Federal
Court of Appeal’s decision in Sweet et al. v. Canada (1999), 249 N.R.
17, at paragraph 6 on page 23, nothing can be struck out under either paragraph
of Rule 221 unless the situation is plain and obvious:
[6] Statements of claim are struck out as
disclosing no reasonable cause of action only in plain and obvious cases and
where the Court is satisfied that the case is beyond doubt (see Attorney
General of Canada v. Inuit Tapirisat of Canada et al., [1980] 2 S.C.R. 735
at 740; Operation Dismantle Inc. v. The Queen, [1985] 1 S.C.R. 441 and Hunt
v. Carey Canada. Inc., [1990] 2 S.C.R. 959). The burden is as stringent
when the ground argued is that of abuse of process or that of pleadings being
scandalous, frivolous or vexatious (see Creaghan Estate v. The Queen,
[1972] F.C. 732 at 736 (F.C.T.D.), Pratte J.; Waterside Ocean Navigation
Company, Inc. v. International Navigation Ltd et al., [1977] 2 F.C. 257 at
259 (F.C.T.D.), Thurlow A.C.J.; Micromar International Inc. v. Micro Furnace
Ltd. (1988), 23 C.P.R. (3d) 214 (F.C.T.D.), Pinard J. and Connaught
Laboratories Ltd. v. Smithkline Beecham Pharma Inc. (1998), 86 C.P.R. (3d)
36 (F.C.T.D.) Gibson J.). The words of Pratte J. (as he then was), spoken in
1972, in Creaghan Estate, supra, are still very much appropriate:
“… a presiding judge should not make such an
order unless it be obvious that the plaintiff's action is so clearly futile
that it has not the slightest chance of succeeding ...”
[7]
With regard to the motion to strike the paragraphs of the
counterclaim involving the application for an injunction against any
proceedings before the Registraire des entreprises du Québec, therefore
essentially paragraphs 98(g), (h) and 108 to 113 of the counterclaim (hereinafter
the anti-suit injunction), I consider that it is not plain and obvious that
these paragraphs must be struck.
[8]
The concept of the anti-suit injunction, while unusual, is
not unknown in law.
[9]
The Court also aptly notes the statements of Jean Shop to
the effect that this request for a non-suit injunction is brought with the counterclaim
essentially as a preliminary filing and that if Jean Shop intends to pursue
that vein, it will proceed by motion. It is therefore premature to consider the
defendants by counterclaim’s objection to this non-suit injunction in the counterclaim
since Eclipse Canada will have the chance to argue all grounds for objection in
due course. Therefore, nothing will be struck out with regard to the paragraphs
involving the non-suit injunction.
[10]
With respect to the defendants by counterclaim’s objection
regarding the inclusion of Trio Selection Inc. and the directors of that
corporation and those of Eclipse Canada, in my view, at this stage, the situation
warrants the intervention of this Court with respect to the directors.
[11]
It appears that Jean Shop considers that all the defendants
by counterclaim currently named in the style of cause are so close to one
another at the corporate level, and on an individual level between the two
groups of directors, that this group of corporations and individuals are in
fact ultimately a single corporate entity.
[12]
Jean Shop is pursuing each member of this corporate entity
on a contribution and indemnity basis with regard to any allegation that could
be addressed to Jean Shop by virtue of the principal action, since Jean Shop considers
that Eclipse Canada and Trio Selection Inc. have known for many years that Jean
Shop used the Eclipse mark as a trade name. Jean Shop therefore refers to the application
with regard to the defendants by counterclaim of the equitable institution known
as “laches and acquiescence”.
[13]
I think that the defence and counterclaim contain
sufficient allegations about Eclipse Canada and Trio Selection Inc. with regard
to their role, sometimes confused, of owner or of licensee of the Eclipse mark,
and accordingly their alleged blindness with regard to Jean Shop’s use of this
mark, that the Court should at this stage refuse to strike Trio Selection Inc. as
a defendant by counterclaim. The Court considers that there is a sufficient
connection between the primary cause of action and the cause of action of the counterclaim
to maintain this counterclaim against Eclipse Canada and Trio Selection Inc.
[14]
However, with regard to the directors of these two corporations,
Eclipse Canada and Trio Selection Inc., namely the six (6) individuals who also
appear in the style of cause as defendants by counterclaim, the situation warrants,
as mentioned earlier, that the Court intervene.
[15]
I think that to assess the situation, it is necessary to
apply, mutatis mutandis, the principles referred to by this Court
when a party seeks to implicate the personal liability of corporate officers in
an intellectual property matter.
[16]
In Dolomite Svenska Aktiebolag v. Dana Douglas Medical
Inc. (1994), 58 C.P.R. (3d) 531 (hereinafter Dolomite), the
Court summarized as follows at page 533 what should be alleged by a party to
properly establish a cause of action in a personal capacity against a director
or officer of a corporation:
In order to
properly establish a cause of action against an individual as the directing
mind of a corporation, a plaintiff cannot merely plead the facts of the
defendant's capacity as a director or officer. The plaintiff must allege that
the defendant knowingly and willingly authorized the infringing actions which
form the basis of the cause of action. A statement of claim must particularize
the circumstances from which it is reasonable to conclude that the purpose
of the director or officer is not the direction of the manufacturing and
selling activity of the company in the ordinary course of his relationship to
it, but the deliberate, willful and knowing pursuit of a course of
conduct that is likely to constitute infringement or reflects an indifference
to the risk of infringement: Mentmore Manufacturing Co., Ltd. v. National
Merchandise Manufacturing Co. Inc. (1978), 40 C.P.R. (2d) 164 at
p. 174, […] Individuals who are officers and directors of corporations are not ipso
facto responsible for infringement committed by their corporation: Katun
Corp. v. Technofax Inc. (1988), 22 C.P.R. (3d) 269 at p.
270, 21 C.I.P.R. 270.
(Emphasis
added.)
[17]
The passage from Mentmore that the Court refers to
in Dolomite reads as follows:
[T]here must
be circumstances from which it is reasonable to conclude that the purpose of
the director or officer was not the direction of the manufacturing and selling
activity of the company in the ordinary course of his relationship to it but
deliberate, willful and knowing pursuit of a course of conduct that was likely
to constitute infringement or reflected an indifference to the risk of it.
[18]
If I apply these instructions to review the various
allegations in the counterclaim, I cannot find sufficient material fact
allegations to be able to accept or understand that the counterclaim is
directed at the conscious conduct of any of the directors that goes beyond
their traditional corporate affairs management duties.
[19]
Accordingly, an order will be issued that stipulates that
only the corporations Eclipse Canada and Trio Selection Inc. must appear as defendants
to counterclaim in the style of cause and that in the fifteen (15) days of the
date of the order, Jean Shop must serve and file an amended defence and counterclaim
with a style of cause changed accordingly and with any allegation involving the
directors struck out.
[20]
Eclipse Canada (and Trio Selection Inc. with respect to the
defence to counterclaim) will have twenty (20) days after that to serve and
file their amended reply and defence to counterclaim.
[21]
In view of the divided success of this motion, no order as
to costs.
“Richard Morneau”
Montréal, Quebec
April 25, 2007
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