Docket:
T-1802-12
Citation: 2013 FC 1137
Ottawa, Ontario, November 8,
2013
PRESENT: The
Honourable Madam Justice Gleason
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BETWEEN:
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AVON PRODUCTS, INC.
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Applicant
(Responding Party)
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and
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MOROCCANOIL ISRAEL LTD.
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Respondent
(Moving Party)
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REASONS FOR ORDER AND ORDER
[1]
In this motion, the respondent, Moroccanoil
Israel Ltd. [Moroccanoil or the respondent] appeals from the May 30, 2013
decision of Prothonotary Morneau in which he dismissed Moroccanoil’s motion to
strike 58 paragraphs (or partial paragraphs) of the affidavit of Dean Philip
Michaud, filed by the applicant, Avon Products, Inc. [Avon]. Moroccanoil argues
that the impugned paragraphs in Mr. Michaud’s affidavit are inadmissible
hearsay and therefore ought to have been ordered struck on an interlocutory
basis.
[2]
In the underlying application in which this
matter arises, Avon seeks to expunge Moroccanoil’s trade-mark, “Moroccanoil”.
Moroccanoil is the name under which the respondent sells a line of hair care
products. In its expungement application, Avon alleges that the Moroccanoil
trade-mark is invalid because it was not registrable at the date of
registration and was not distinctive at the time that proceedings bringing into
question its validity were commenced.
[3]
The 58 impugned paragraphs in Mr. Michaud’s
affidavit contain hearsay evidence, detailing conversations Mr. Michaud had
with individuals at a variety of businesses in Canada. The conversations
concerned the sale by those businesses of other hair care products that contain
the words “Moroccan”, “Morocco” and “Oil” or “Argan Oil” and the date such
products were first sold by the business in Canada. The parties agree that this
evidence is relevant to the second basis for Avon’s expungement application,
namely, the claim that the “Moroccanoil” trade-mark lacked distinctiveness at
the time proceedings challenging its validity were commenced.
Decision of
the Prothonotary
[4]
In the decision under appeal, Prothonotary
Morneau first enunciated the test applicable to determine whether the impugned
paragraphs should be struck, citing from Armstrong v Canada (Attorney
General), 2005 FC 1013, 141 ACWS (3d) 5 [Armstrong] and Gravel v
Telus Communications Inc, 2010 FC 595 [Gravel], and held that the
party seeking at an interlocutory stage to strike an affidavit filed in an
application must establish that there are exceptional circumstances which
warrant the order. The passages the Prothonotary cited from Armstrong
and Gravel indicate that such circumstances will exist only when the
interests of justice require the affidavit be struck. Examples given in the
quotation from Armstrong as to when the interests of justice might
require that an affidavit be struck on an interlocutory basis include
situations where a party would be materially prejudiced if the order is not
made or where the failure to strike the affidavit might impair the orderly
hearing of the application on the merits.
[5]
After setting out the applicable law,
Prothonotary Morneau then considered the facts before him and determined that
Moroccanoil had not established the presence of exceptional circumstances
sufficient to warrant striking the impugned paragraphs in Mr. Michaud’s
affidavit. He reasoned in this regard that the judge hearing the expungement application
on the merits would be charged with determining whether the impugned paragraphs
in the affidavit were admissible, and, if so, how much weight they should be
afforded. He also found that Moroccanoil had not established that it would be
unduly onerous for it to conduct its own verifications of the hearsay
statements contained in the affidavit. The Prothonotary therefore concluded
that it would not materially prejudice Moroccanoil if the decision on the
admissibility of the impugned paragraphs in Mr. Michaud’s affidavit were left
to the judge hearing the application on the merits and accordingly dismissed
Moroccanoil’s motion.
[6]
Prothonotary Morneau then went on to consider
the issue of whether the impugned paragraphs might be admissible under the
exception to the hearsay rule in obiter dicta (or comments included in
his decision that do not form part of the reasons why the motion was
dismissed). Here, once again, he commenced his analysis by first setting out
the applicable legal principles, this time referring to the leading case of R
v Smith, [1992] 2 S.C.R. 915, 94 DLR (4th) 590 [Smith], and noted that
to come within the exception to the rule against hearsay evidence must meet the
twin criteria of necessity and reliability. The Prothonotary next reasoned
that, had he been called upon to make the determination, he would have
concluded that these criteria were met in respect of the impugned paragraphs in
Mr. Michaud’s affidavit because there is no other reasonable way to get the
evidence before the Court as the declarants are unwilling to sign affidavits.
He also reasoned that the hearsay evidence was reliable as it was corroborated
by the two sets of telephone calls that were made and, to a certain extent, by
the documentary exhibits that Mr. Michaud attached to his affidavit (whose
admissibility was not contested by Moroccanoil).
Test
applicable on this appeal
[7]
The parties concur that to succeed on this
appeal, Moroccanoil must establish that Prothonotary Morneau’s Order was
clearly wrong as the Order is a discretionary one and is not vital to the
outcome of the case. In this regard, it is, as the parties concurred,
well-settled that to overturn a discretionary order made by a prothonotary, an
appellant must either establish that the questions raised in the motion were
vital to the final issue in the case or that the order is clearly wrong (Merck
& Co v Apotex Inc, 2003 FCA 488 at para 17, 315 NR 175 [Apotex];
and R v Aqua-Gem Investments Ltd (1993), 149 NR 273, 61 FTR 44 at para
67). The test for determining if an order is clearly wrong requires that the
appellant establish that the exercise of discretion by the prothonotary was
based upon a wrong principle or upon a misapprehension of the facts (Apotex
at para 19; Gordon v R, 2013 DTC 5112 at para 11, 229 ACWS (3d) 90).
Is the
Prothonotary’s decision clearly wrong?
[8]
In terms of the central finding made by
Prothonotary Morneau that Moroccanoil had not established the presence of
exceptional circumstances sufficient to warrant striking the impugned
paragraphs in Mr. Michaud’s affidavit, Moroccanoil argues that the Prothonotary
was mistaken as to the applicable law. It argues that the requirement for there
to exceptional circumstances before evidence in an application will be struck
on an interlocutory basis applies only in judicial review matters, noting that Armstrong
was a judicial review case. Moroccanoil further argues that Prothonotary
Morneau failed to consider the issue of the prejudice it would suffer if the
impugned paragraphs in the affidavit are not struck or, in the alternative,
incorrectly assessed the prejudice it would suffer and argues that it should
not be called upon to answer to inadmissible evidence regardless of how much
time might be required for it to do so. It asserts in this regard that it is
inherently prejudicial to be faced with the prospect of having a ruling on
admissibility made by the judge hearing the expungement case on the merits
because that would require it to potentially file its own inadmissible evidence
to reply to that of Avon. It further submits that the Prothonotary erred in his
application of the necessity and reliability criteria. It finally argues that
the Prothonotary’s refusal to deal with this issue will result in a lengthier
and more complex hearing on the merits which ought to be avoided by deciding
the admissibility issue in an interlocutory fashion. It submits that this case
is on all fours with Canadian Tire Corp v P S Partsource Inc, 2001 FCA
8, 267 NR 135 [Canadian Tire] and GlaxoSmithKline Inc v Apotex Inc,
2003 FC 920, 27 CPR (4th) 49 [GlaxoSmithKline], where evidence, which
Moroccanoil alleges is similar to that in question here, was ordered struck in
an interlocutory motion.
[9]
In my view, none of these arguments has merit.
[10]
Insofar as concerns the assertion that
Prothonotary Morneau applied the wrong principles, contrary to what Moroccanoil
argues, the need for there to be exceptional circumstances before evidence
filed in an application will be struck on an interlocutory basis apples to all
applications and not merely to judicial review applications, as indeed was held
in by the Federal Court of Appeal in Canadian Tire. That case dealt with
evidence filed in a trade-mark expungement proceeding. There, Justice Malone,
writing for the Court of Appeal, stated:
[…] I would emphasize
that motions to strike all or parts of affidavits are not to become routine at
any level of this Court. This is especially the case where the question is one
of relevancy. Only in exceptional cases where prejudice is demonstrated and the
evidence is obviously irrelevant will such motions be justified. In the case of
motions to strike based on hearsay, the motion should only be brought where the
hearsay goes to a controversial issue, where the hearsay can be clearly shown
and where prejudice by leaving the matter for disposition at trial can be
demonstrated.
[11]
The requirement for there to be exceptional
circumstances before an affidavit filed in a non- judicial review application
will be struck on an interlocutory basis was also recognised in GlaxoSmithKline,
where Justice Rouleau noted at para 4 of his reasons:
It is an established
principle that motions to strike affidavits should be granted only in
exceptional circumstances. One of the exceptions to this general rule is where
the affidavit in question is clearly irrelevant, which is precisely the issue
before the Court in the present application.
[12]
Thus, Prothonotary Morneau cannot be said to
have applied an incorrect principle in determining that it was incumbent on
Moroccanoil to establish the presence of exceptional circumstances in order to
have the impugned evidence struck. The Prothonotary in addition cited the
correct test from the applicable jurisprudence for what constitutes an
exceptional circumstance.
[13]
Nor, in my view, did the Prothonotary commit a
reviewable error in his application of the applicable test to the facts of this
case. As Avon correctly argues, this case is fundamentally different from Canadian
Tire and GlaxoSmithKline.
[14]
In the GlaxoSmithKline, Justice Rouleau
found that the evidence in question was clearly irrelevant and thus could not
be held to be admissible by the judge hearing the application on the merits (at
para 5). Here, on the other hand, the impugned evidence is relevant to a key
issue on the expungement application, as, indeed, Moroccanoil concedes.
[15]
Canadian Tire is
likewise distinguishable, and, moreover, does not stand for the proposition
Moroccanoil advances, namely, that it will always be prejudicial to a party to
have a ruling on the admissibility of evidence made by the judge hearing the
application. In Canadian Tire, the Federal Court of Appeal affirmed that
“the Court will usually not make an a priori ruling on admissibility
unless the case is obvious” (at para 17). However, in that case, the Court
found that it was obvious that the impugned paragraph of the affidavit was
hearsay, and there was no suggestion that the necessity and reliability
exception, as enunciated in Smith and R v Khan, [1990] 2 S.C.R. 531,
113 NR 53 [Khan], applied. Indeed, in that case, the Prothonotary made
no assessment of whether the exception to the hearsay rule applied, absolutely
no evidence or argument was offered as to why it was necessary for the
applicant to submit hearsay evidence and the evidence contained no details as
to the source of the hearsay or of any other matter that might confirm its
reliability (at para 14).
[16]
Here, on the other hand, the Prothonotary
assessed the admissibility of the evidence and concluded that he would find it
admissible. His reasoning on this point cannot be said to be clearly erroneous
as he set out the correct law and his assessment of necessity and reliability
is reasonable, as is more fully detailed below.
[17]
Insofar as concerns the necessity criterion for
the admission of hearsay, a party seeking to have evidence admitted must
establish that it is reasonably (as opposed to absolutely) necessary that the
hearsay be admitted (Khan at para 31). In my view, there is a reasonable
basis for the Prothonotary’s determination that the necessity criterion would
be met in this case as there is a solid argument that there is no other
reasonable way for the evidence of the declarants to be brought before the
Court in an expungement application, short of summonsing each of them to
testify during the hearing on the merits, which in itself would be highly
exceptional and require leave of the judge hearing the application under Rule
316 of the Federal Courts Rules, SOR/98-106 [the Rules]. Moroccanoil can
point to no authority that would suggest otherwise.
[18]
Likewise, there is a reasonable basis for
Prothonotary Morneau’s assessment that the hearsay evidence in the 58 impugned
paragraphs in Mr. Michaud’s affidavit meets the reliability criterion. In this
regard, the fact that many declarants twice provided the same evidence during
the two sets of calls that Mr. Michaud made supports the reliability of the
statements. Moreover, the documentary exhibits corroborate several of the
hearsay statements contained in the affidavit and thus likewise support their reliability.
[19]
I find no merit in Moroccanoil’s suggestion that
the hearsay evidence should be regarded as suspect because it was gathered at
the direction of counsel for Avon or because counsel was present during two of
the phone calls detailed in the affidavit. There is not a shred of evidence to
suggest that counsel improperly tailored the responses or that Mr. Michaud did
not follow a set procedure for making his calls. Moreover, evidence in any
proceeding is always gathered and prepared under the direction of counsel, so
the fact that Mr. Michaud was retained by counsel for Avon does not impact the
reliability of his affidavit.
[20]
Likewise, there is no merit in Moroccanoil’s
suggestion that some of the declarants were willing to sign affidavits and Avon neglected to obtain them. This submission is premised on what were obviously
typographical errors in Mr. Michaud’s affidavit, as should have been readily
apparent to counsel for Moroccanoil.
[21]
The other points that Moroccanoil raises
regarding the alleged lack of reliability of the hearsay statements are
similarly without merit, as Moroccanoil has misread Mr. Michaud’s affidavit in
the several instances where it alleges that the hearsay statements do not
confirm the sale of the products in question. Similarly, the fact that each
declarant did not consult a database before answering Mr. Michaud’s questions
does not necessarily render their statements less reliable. Thus, there was a
reasonable basis for the Prothonotary’s conclusion that the hearsay statements
contained in Mr. Michaud’s affidavit were reliable.
[22]
Moroccanoil raises three other arguments in
support of its appeal that I likewise find to be without merit. First, it
submits that it should not be required to meet inadmissible evidence and argues
that it is fundamentally unfair that it be required to do so. This submission
amounts to a claim that evidentiary issues must always be decided on an
interlocutory basis. The case law, however, establishes that admissibility
issues should normally be decided by the judge hearing the application on the
merits unless exceptional circumstances pertain. Thus, it is to be anticipated
that in most cases, a party will not have an advance ruling on evidence it
wishes to contest. An exceptional case, according to Canadian Tire and GlaxoSmithKline,
involves circumstances where the challenged evidence is clearly inadmissible.
This cannot be said of the impugned paragraphs in Mr. Michaud’s affidavit for
the reasons already discussed.
[23]
Second, Moroccanoil argues that its inability to
cross-examine the declarants is fundamentally unfair and should not be
countenanced. This is clearly wrong as the lack of ability to cross-examine a
declarant does not ever affect the admissibility of the hearsay statements. In
every case of hearsay, the declarant is not available for cross-examination,
and that is why the evidence is hearsay. Its admissibility depends on
establishing that the non-cross-examined evidence is both necessary and
reliable, as discussed above. The inability to test the evidence through
cross-examination, therefore, is a matter that goes to weight but not
admissibility (Smith at para 40).
[24]
Finally, I disagree that allowing this evidence
to stand will result in a lengthier or less effective hearing. Delay is more
likely to be caused by interlocutory motions and appeals, like the present,
than by having the judge hearing the case on the merits rule on the
admissibility of the impugned paragraphs in Mr. Michaud’s affidavit, as in the
normal course.
[25]
Thus, it cannot be said that Prothonotary
Morneau was clearly wrong. This appeal must accordingly be dismissed.
[26]
Avon has requested its
cost of this appeal, on an elevated basis, payable forthwith. Moroccanoil has
requested that no order be made on costs and, accordingly, that they be in the
cause. It underscores that this approach was adopted by the Prothonotary in the
decision under appeal and argues that it ought be followed by me if I dismiss
this appeal.
[27]
Given the lack of authority directly on point, I
cannot say that this appeal was so unmeritorious that it ought not have been
brought and, therefore, do not believe that Avon should be awarded costs under
Rule 401(1) of the Rules. Rather, I believe the approach of Prothtontary
Morneaeau in respect of costs is the appropriate one and accordingly make no
order as to costs, which shall therefore be in the cause.
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