Date:
20071116
Docket: A-587-06
CORAM: LÉTOURNEAU
J.A.
PELLETIER
J.A.
TRUDEL
J.A.
BETWEEN:
CAROLINE DUCHESNE,
In her capacity as liquidator of the
Estate of Patrick Desjean
Appellant
and
Intermix Media Inc.
Respondent
REASONS FOR JUDGMENT
PELLETIER J.A.
INTRODUCTION
[1]
The
appellant, Caroline Duchesne, in her capacity as liquidator of the Estate of
Patrick Desjean, is appealing a decision of Mr. Justice de Montigny, which held
that the Federal Court lacks jurisdiction over Mr. Desjean’s complaint that the
respondent violated the Competition Act, R.S.C. 1985, c. C-34, and
that he suffered damages as a result. The respondent allegedly installed
software known as “spyware” on his computer without his knowledge. The
appellant also disputes the fact that the judge, on his own motion, struck out
the motion for certification of Mr. Desjean’s action as a class action because
it “[did] not meet the requirements set out in rule 299.18 of the Federal
Courts Rules . . . ”.
FACTS AND SUBMISSIONS OF THE PARTIES
[2]
The
facts giving rise to this litigation can be summarized quickly. The respondent,
Intermix Media Inc., is an American corporation with offices in California that carries
on business on the Internet where it offers, free of charge, various screen
savers that the user can choose to download to his or her own computer.
According to the statement of claim filed by Mr. Desjean, when users consent to
download the respondent’s software, they also download spyware that [translation] “uses the users’ Internet
connection in the background to collect personal information, without their
knowledge or consent, in particular, information about their interests and
browsing habits, and to transmit that information to an advertising network.”
Mr. Desjean’s statement of claim goes on to say that the installation of this
spyware and other software that he did not consent to impaired the operation of
his computer and resulted in loss of time and money.
[3]
Mr.
Desjean’s statement of claim alleges that the respondent breached section 52 of
the Competition Act: its advertising about its screen saver is false and
misleading because it does not mention the existence or effect of this
software, which is installed surreptitiously on the user’s computer. Mr.
Desjean is seeking damages from the respondent based on section 36 of the same
Act, which reads as follows:
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36. (1) Any person who
has suffered loss or damage as a result of
(a) conduct
that is contrary to any provision of Part VI, or
(b) the failure
of any person to comply with an order of the Tribunal or another court under
this Act,
may, in any court of
competent jurisdiction, sue for and recover from the person who engaged in
the conduct or failed to comply with the order an amount equal to the loss or
damage proved to have been suffered by him, together with any additional
amount that the court may allow not exceeding the full cost to him of any
investigation in connection with the matter and of proceedings under this
section.
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36. (1) Toute personne
qui a subi une perte ou des dommages par suite:
a) soit d'un
comportement allant à l'encontre d'une disposition de la partie VI;
b) soit du
défaut d'une personne d'obtempérer à une ordonnance rendue par le Tribunal ou
un autre tribunal en vertu de la présente loi,
peut, devant tout
tribunal compétent, réclamer et recouvrer de la personne qui a eu un tel
comportement ou n'a pas obtempéré à l'ordonnance une somme égale au montant
de la perte ou des dommages qu'elle est reconnue avoir subis, ainsi que toute
somme supplémentaire que le tribunal peut fixer et qui n'excède pas le coût
total, pour elle, de toute enquête relativement à l'affaire et des procédures
engagées en vertu du présent article.
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[4]
The
respondent disputed these allegations by filing a motion to strike the
statement of claim on the ground that the Federal Court lacks jurisdiction over
both the respondent and the subject matter of the statement of claim. De
Montigny J. granted the motion. After summarizing the facts and the parties’
arguments, he briefly reviewed the case law on the jurisdiction of Canadian courts
pertaining to foreign defendants. Relying on Morguard Investments Ltd. v. De
Savoye, [1990] 3 S.C.R. 1077 (Morguard), Tolofson v. Jensen;
Lucas (Litigation Guardian of) v. Gagnon, [1994] 3 S.C.R. 1022 (Tolofson)
and Hunt v. T&N plc, [1993] 4 S.C.R. 289 (Hunt), he concluded
that, before exercising their jurisdiction over a foreign defendant who has no
presence in Canada and who has not submitted to their jurisdiction, Canadian
courts require a real and substantial connection between the defendant, the cause
of action and Canada. The judge then turned to an analysis of the circumstances
giving rise to the dispute, in light of the factors delineated in Muscutt v.
Courcelles (2002), 213 D.L.R. (4th) 577 (Court of Appeal for Ontario) (Muscutt),
to determine whether there was in fact a real and substantial connection
between the respondent, the cause of action as set out in Mr. Desjean’s
statement of claim and Canada.
[5]
After
analyzing each of the relevant factors, the judge was of the view that none of
them, either individually or taken as a whole, supported the finding of a real
and substantial connection with Canada.
He noted that the respondent has no commercial or financial links with Canada. He concluded his analysis by
ruling that the Court lacked jurisdiction over both the person of the
respondent and the subject matter of the action. The judge went on to say that
even if he believed that the Federal Court had jurisdiction, the Court would
not be justified in exercising it because the American courts were better
positioned to do so. Last, the judge noted that there is a clause in the
licence agreement governing the downloading of the software, a clause that
provides that the applicable law is the law of the State of California. Accordingly, the judge
granted the motion to strike and, on his own motion, also dismissed the motion
for leave to commence a class action since it had no purpose once the statement
of claim was struck out.
[6]
The
appellant is appealing this decision. She agrees that the issue is whether
there is a real and substantial connection with Canada but submits that the
judge erred in not analyzing this issue in accordance with the Supreme Court of
Canada’s decision in Moran v. Pyle National (Canada) Ltd., [1975] 1
S.C.R. 393 (Moran). In that case, the Supreme Court had to determine the
place of commission of a tort. Saskatchewan law required an order
allowing service of a statement of claim on a defendant outside the province
where a tort had been committed outside the province. By means of the order
allowing service of the statement of claim, the Saskatchewan courts assumed jurisdiction over the
defendant and over the basis of the statement of claim.
[7]
Having
analyzed the various theories as to the situs of a tort, the Supreme Court
summarized its conclusion in the following passage, which is the cornerstone of
the appellant’s argument:
By tendering his products in the market
place directly or through normal distributive channels, a manufacturer ought to
assume the burden of defending those products wherever they cause harm as long
as the forum into which the manufacturer is taken is one that he reasonably
ought to have had in his contemplation when he so tendered his goods.
[Moran,
at paragraph 12]
[8]
According to the appellant, the essence of this passage was
subsequently adopted in the Morguard, Tolofson and Hunt
decisions, which the trial judge referred to.
[9]
The appellant adopts the analysis of the factors set out in Muscutt
and, based on her own analysis of the facts considered in light of the Moran
case, suggests that the judge had to find that there was a real and
substantial connection between the respondent’s business and Canada. In doing
so, the appellant does not identify any error on the part of the trial judge.
She simply substitutes her analysis of the relevant factors for that of the
judge.
[10]
The appellant challenges the judge’s finding with respect to
the forum conveniens because the application of this rule, she says,
presupposes the existence of a parallel proceeding in another jurisdiction.
There is no parallel proceeding here. The only dispute dealing with downloading
the respondent’s software was settled in the State of New York.
According to the judge, the American courts would be in a better position to
deal with this dispute. One of the factors in the judge’s reasoning on this
point was the choice of forum clause in the software licence agreement.
According to that clause, by downloading the software, the user has indicated
his or her consent that the law of California will govern
the contract.
[11]
The appellant argues that this clause cannot be set up
against her because the user could download the software in question without
reading the conditions in the licence agreement and without otherwise
indicating his or her intention to be bound by these conditions.
ANALYSIS
[12]
The Court cannot allow this appeal for a number of reasons.
[13]
To the extent that the appellant relies on an assessment of
the facts other than that of the judge, she must comply with the standard of
review regarding findings of fact or mixed fact and law. She must establish
that the judge has made a palpable and overriding error in assessing them: see Housen
v. Nikolaisen, 2002 SCC 33, [2002] 2 S.C.R. 235. The appellant is not free
to simply substitute her assessment of the facts and of questions of mixed fact
and law for that of the judge.
[14]
It is clear that the appellant bases her appeal on her
analysis of the facts:
[translation]
Although
the Supreme Court of Canada ostensibly provided an indication to the trial
judge in Moran v. Pyle National (Canada) Ltd., [1975] 1 S.C.R. 393, the
order that was made deviated from the case law of the highest court because it
is based on erroneous premises as a result of a poor analysis of the facts of
the case.
[Appellant’s
memorandum, at paragraph 38]
[15]
From there, the appellant proceeds to simply substitute her
assessment of the facts for that of the judge without ever establishing that he
was not entitled to make the findings that he did. In the course of her
argument, the appellant asks two questions:
- Is there a real connection?
- Is this connection substantial?
[16]
In considering whether there is a real connection, the
appellant describes the nature of the respondent’s business and then states
that the respondent cannot defeat the principle laid down in Morguard,
in particular, that a manufacturer ought to assume the burden of defending its
products wherever they cause harm as long as [translation]
“the forum into which the manufacturer is taken is one
that he reasonably ought to have had in his contemplation when he so tendered
his goods” (appellant’s memorandum, at paragraph 52). She makes no
reference to the trial judge’s reasons nor does she demonstrate any error on
his part.
[18]
It is not open to this Court to proceed in this way. Since
the appellant has not established that the judge’s assessment of the facts or
of the mixed questions of fact and law contains a palpable and overriding
error, we must respect his findings.
[19]
This ground alone warrants dismissing the appeal. On the
other hand, given the importance that the appellant attributes to Moran
in her argument, it is useful to compare that case with the cause of action
that Mr. Desjean pleaded in his statement of claim.
[20]
At paragraph 36 of her memorandum, the appellant describes
the nature of Mr. Desjean’s claim:
[translation]
35. The
action is based on the tort committed by the respondent when it took advantage
of the downloading of the screen saver to surreptitiously install spyware or
adware that damaged the computer owned by the appellant, in her capacity as
liquidator, who thought she was only receiving a screen saver.
[21]
This is clearly erroneous, which is apparent from reading
the statement of claim itself, in particular paragraphs 33 to 36 thereof, which
are reproduced below:
33.
Defendant engaged in persistent deceptive, fraudulent and illegal practices,
and false advertising, in the distribution of certain advertising software,
known as "spyware" and "adware" by offering free software
to download without giving Plaintiffs notice that would install devices on
their computers that would enable Defendants to wrestle away control over
certain features of the plaintiffs' computers and causing them to seriously
malfunction.
34.
Defendant engaged in persistent deceptive, fraudulent and illegal practices,
and false advertising, in the distribution of certain advertising software
known as "spyware" and "adware" thereby enabling third
parties to expose Plaintiffs to all sorts of schemes.
35.
By do doing Defendant contravened sections 52(1), 52(1.1) 52(2)(e) of the Competition
Act (R.S.C. 1985 c. C-34).
36.
Plaintiff is entitled to seek recovery of damages pursuant to sections 36(1)(a)
and 36(3) as provided for by section 62 of the said Act, and Plaintiff
disclosed reasonable cause of action to apply for certification of this action
as a class action in accordance with rule 229.12(3) of the Federal Court
Rules (SOR/2002-417, s. 17).
[22]
The following are the relevant provisions of the Competition
Act:
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52. (1) No
person shall, for the purpose of promoting, directly or
indirectly, the supply or use of a product or for the purpose of promoting,
directly or indirectly, any business interest, by any means whatever,
knowingly or recklessly make a representation to the public that is false or
misleading in a material respect.
(1.1) For greater
certainty, in establishing that subsection (1) was contravened, it is not
necessary to prove that any person was deceived or misled.
(2) For the purposes
of this section, a representation that is
. . .
(e) contained
in or on anything that is sold, sent, delivered, transmitted or made available
in any other manner to a member of the public,
is deemed to be made
to the public by and only by the person who causes the representation to be
so expressed, made or contained, subject to subsection (2.1)
. . .
62. Except as
otherwise provided in this Part, nothing in this Part shall be construed as
depriving any person of any civil right of action.
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52. (1) Nul
ne peut, de quelque manière que ce soit, aux fins de
promouvoir directement ou indirectement soit la fourniture ou l'utilisation
d'un produit, soit des intérêts commerciaux quelconques, donner au public,
sciemment ou sans se soucier des conséquences, des indications fausses ou
trompeuses sur un point important.
(1.1) Il est entendu
qu'il n'est pas nécessaire, afin d'établir qu'il y a eu infraction au
paragraphe (1), de prouver que quelqu'un a été trompé ou induit en erreur.
(2) Pour l'application
du présent article, sauf le paragraphe (2.1), sont réputées n'être données au
public que par la personne de qui elles proviennent les indications qui,
selon le cas:
. . .
e) se
trouvent dans ou sur quelque chose qui est vendu, envoyé, livré ou transmis
au public ou mis à sa disposition de quelque manière que ce soit.
. . .
62. Sauf disposition
contraire de la présente partie, celle-ci n'a pas pour effet de priver une
personne d'un droit d'action au civil.
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[23]
It must be
recalled that section 36 of the Competition Act authorizes any person
who has suffered a loss as a result of conduct that is contrary to Part VI to
sue in any court of competent jurisdiction and to recover from the person who
engaged in the conduct an amount equal to the loss or damage. As we have seen,
subsection 36(3) specifies that the Federal Court is a court of competent
jurisdiction for purposes of section 36.
[24]
We are
thus far from Moran where the defendant’s liability stemmed from the
allegation that it had put a defective product on the market. Here, the
respondent’s liability, according to Mr. Desjean’s own allegations, is
based on non-compliance with a statutory provision prohibiting certain false or
misleading practices. In other words, the fault on which Mr. Desjean bases his
statement of claim consists in providing false or misleading information, not
in marketing a defective product.
[25]
The
principle set out in Moran therefore has no impact on the issue of
whether there is a real and substantial connection between Canada and the respondent’s
activities.
[26]
For
these reasons, the appellant’s appeal should be dismissed with costs.
“J.D.
Denis Pelletier”
“I concur.
Gilles Létourneau J.A.”
“I
concur.
Johanne Trudel J.A.”
Certified
true translation
Mary
Jo Egan, LLB
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