Date: 20031015
Docket: T-992-02
Citation: 2003 FC 1193
Between:
IRIS, LE GROUPE VISUEL (1990) Inc.
Plaintiff/
Defendant to Counterclaim
And:
TRUSTUS INTERNATIONAL TRADING INC.
Defendant/
Plaintiff by Counterclaim
REASONS FOR ORDER
ROULEAU J.
[1] This is a motion to appeal the decision by Prothonotary Richard Morneau on May 15, 2003, refusing in part to allow the plaintiff to amend its statement of claim and awarding costs to the defendant in a trademark infringement action.
[2] On March 18, 2003, the plaintiff filed a motion for leave to amend its statement of claim, and in particular to:
[TRANSLATION]
(a) implead Jack Wang, Devun Walsh and Rob Dow, personally and jointly with the defendant/respondent;
(b) seek an order against the defendant/respondent and against the said Jack Wang, Devun Walsh and Rob Dow, personally and jointly, for punitive damages in the amount of $1 million each, plus a personal and joint order to pay costs and out-of-court fees incurred by the plaintiff/applicant;
(c) make the order sought valid against anyone in Canada in possession of any wares so contravened, for the purpose of selling them or distributing them in any manner whatever; and
(d) find that the defendant/respondent has made an unlawful use of the trademark "IRIS".
[3] By his decision of May 15, 2003, Prothonotary Richard Morneau authorized the plaintiff to amend its statement of claim to include the conclusion contained in paragraph (d), namely that the defendant made an unlawful use of the "IRIS" trademark. However, the prothonotary dismissed the amendments contained in paragraphs (a) and (b). Further, the plaintiff discontinued the amendment contained in paragraph (c) at the hearing of the motion.
[4] In the reasons for his decision Prothonotary Morneau justified his refusal to authorize the amendments sought by the fact that in his view the allegations in the amended statement of claim as proposed by the plaintiff clearly did not reveal enough essential facts to fully establish the liability of Messrs. Wang, Walsh and Dow as defendants in their personal capacities.
[5] Briefly, the plaintiff submitted that the amendments sought should be allowed on the grounds that:
(a) the amendments did not cause any detriment to Trustus;
(b) the amendments sought were sufficient for it to claim a joint order against Messrs. Wang, Walsh and Dow together with Trustus; and
(c) the amendments sought are not clearly, manifestly and undoubtedly devoid of all chance of success.
[6] The plaintiff cited The Queen v. Aqua-Gem Investments Ltd., [1993] 2 F.C. 425 (F.C.A.), in which MacGuigan J.A. determined the standard of review for a prothonotary's decisions as follows:
Discretionary orders of prothonotaries ought not to be disturbed on appeal to a judge unless:
a) they 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, or
b) they raise questions vital to the final issue of the case.
Where such discretionary orders are clearly wrong in that the prothonotary has fallen into error of law (a concept in which I include a discretion based upon a wrong principle or upon a misapprehension of the facts), or where they raise questions vital to the final issue of the case, a judge ought to exercise his own discretion de novo.
[7] The plaintiff argued that this is one of those very cases where a judge should intervene on appeal as, in its view, the prothonotary's decision was vitiated by flagrant errors.
[8] First, the plaintiff submitted that the prothonotary could not dismiss the amendments sought on the basis that there was no evidence to support the arguments they contained as the very nature of a pleading, as defined in the Federal Court Rules and in the case law, only requires a brief statement of the facts, not the evidence in support of those facts.
[9] Then, the plaintiff submitted that the prothonotary erred in law in that he ignored the provisions of sections 75, 81.1 and 201 of the Federal Court Rules and the precedents applicable to the liability of company directors.
[10] Specifically, the plaintiff submitted that the prothonotary ignored the rule that the amendment should be allowed unless it was clear that it was doomed to failure; that he did not assume the facts alleged in the affidavit of Lucie Laurin (the appellant's principal manager) were true; he did not take into account the fact that the affidavits filed in support of the motions could be based on belief and on information; he indicated a misunderstanding of the rules governing claims for punitive damages; he did not examine the allegations appearing in the amended statement of claim; and he ignored the precedents applicable to the liability of company managers.
[11] Accordingly, the plaintiff argued that the prothonotary erred in exercising his discretion with a misapprehension of the facts and ignoring certain facts of critical importance.
[12] In short, the plaintiff submitted that the prothonotary's decision should be the object of de novo review by the Court. It submitted that the Court should exercise its discretion de novo, correct the prothonotary's decision and authorize IRIS to proceed with the amendments sought, with costs.
[13] For its part, the defendant also pointed to the rule of precedent laid down in The Queen v. Aqua-Gem Investments Ltd., [1993] 2 F.C. 425 (F.C.A.), recommending some deference to the prothonotary's exercise of the discretionary power, and argued that in the case at bar there is no reason to intervene as the decision by Prothonotary Richard Morneau was not in any way vitiated by flagrant error.
[14] The defendant then submitted, with supporting precedents, that in order to sue the managers and directors of a company personally it is necessary to show that the parties deliberately undertook a line of conduct in order to obtain profit from the plaintiff's rights.
[15] Additionally, as to punitive and exemplary damages, the defendant pointed out that this type of damage is only awarded in exceptional cases and in the event of completely inexcusable conduct, which is not the case here.
[16] Finally, the defendant argued that although the facts set out in pleadings must be presumed to be true in order to determine whether the amendment should be allowed, this does not amount to saying that the facts contained in the affidavit in support of the motion for that amendment must also be assumed to be true.
[17] In short, the defendant submitted that the appeal at bar should be dismissed. Additionally, the defendant argued that even if the Court considers that it should exercise its discretion de novo, the amendments sought should be disallowed with costs.
[18] The rule that an amendment should be allowed unless it is shown that it has absolutely no chance of success has been stated and applied by the courts many times, in particular by the Federal Court of Appeal in Apotex Inc. v. Eli Lilly & Co. (2002), 22 C.P.R. (4th) 19 (F.C.A.).
[19] Despite the somewhat strict appearance of this rule, the decision-maker still has a certain amount of room for manoeuvre in his assessment of what constitutes an amendment which is obviously doomed to failure. Thus, the decision-maker always has some discretion in assessing the evidence as a whole that will help him to decide whether this is in fact a situation that would justify denying the amendment.
[20] In the case at bar Prothonotary Richard Morneau, in view of the evidence as a whole and after considering the applicable rules of law, decided to disallow the amendments sought by the plaintiff. In my opinion, Prothonotary Morneau did not err in assessing the evidence as a whole in order to arrive at his conclusion, and consequently his decision contains no flagrant error that would justify this Court's intervention.
[21] First, it should be noted that Prothonotary Morneau was quite familiar with the precedents regarding the acceptance of amendments and mentioned them in his decision, and although he departed from this general rule it was in part on the basis of another rule of precedent, developed by the Federal Court of Appeal in Painblanc v. Kastner (1994), 58 C.P.R. (3d) 502 (F.C.A.), in which the Court said, per Hugessen J.A:
It was perfectly clear from the material before the motion judge that the plaintiffs/respondents had no other evidence and knew of no facts which would engage the personal liability of Painblanc beyond his position as controlling shareholder and sometime managing director of the company. This is manifestly not enough . . . An action at law is not a fishing expedition and a plaintiff who starts proceedings simply in hope that something will turn up abuses the court's process.
[22] The facts of the case at bar are similar to those in Painblanc, as nothing in the plaintiff's pleadings, any more than in the affidavit in support of the said pleadings, appears to suggest the personal participation by Messrs. Wang, Walsh and Dow in the wrongful acts the defendant is alleged to have committed.
[23] Additionally, as the defendant noted, the existence of a separate personality in a corporation has led the courts to be very cautious in arriving at conclusions of personal liability by directors of a company.
[24] Specifically, for managers and directors of a company to be personally liable for infringement the company must have been founded for the very purpose of infringing the plaintiff's rights. To use the words of Le Dain J.A. in Mentmore Manufacturing Co. v. National Merchandise Manufacturing Co. (1978), 40 C.P.R. (2d) 164 (F.C.A.), when he was on the Federal Court of Appeal:
. . . there must be circumstances from which it is reasonable to conclude that the purpose of the director or officer was not the direction of manufacturing, and selling activity of the company in the ordinary course of his relationship to it, but the deliberate, willful and knowing poursuit of a course of conduct that was likely to constitute infringement or reflected an indifference to the risk of it.
(My emphasis.)
[25] There is nothing in the record of the Court (either the affidavit by Ms. Laurin or the press clipping filed in support of the said affidavit) that appears to provide the slightest indication to this effect.
[26] As regards the assessment of the evidence by the prothonotary, and in response to the plaintiff's argument that the prothonotary erred by not assuming the content of Ms. Laurin's affidavit to be true, I adopt the defendant's argument that the requirement that the facts contained in pleadings be accepted as true does not mean that the facts contained in the affidavit in support of the said pleadings must also be taken to be true.
[27] As to the rejection of the second amendment seeking an order for punitive and exemplary damages against the respondent and against Messrs. Wang, Walsh and Dow, I consider that, like the rejection of the first amendment, it is justified and does not require intervention by this Court.
[28] Since I have come to the conclusion that there is no need to allow Messrs. Wang, Walsh and Dow to be sued personally, it goes without saying that a fortiori there is no reason to allow an action for punitive and exemplary damages against the latter in their personal capacities.
[29] Finally, I must consider for a few moments the plaintiff's argument that the prothonotary should have shown deference in assessing the evidence and left this function to the judge of the merits. I have to say that I do not share this view at all. The prothonotary is not just a clerk who is asked to do purely administrative work devoid of any thoughtful aspect. He is trained in law and his function is to facilitate the administration of justice in this Court. His reflection on the material in a case is not merely desirable but necessary for the smooth functioning of the Court. Prothonotary Morneau's decision, far from being an ultra vires decision, is the result of taking into account factors both legal (the legal separation between a corporation and its officers) and practical (not unnecessarily burdening the legal system, limiting the discussion before the judge on the merits to the parties really involved).
[30] I award costs and disbursements, which I set at $1,500, to the defendant regardless of the outcome of the case.
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"P. Rouleau"
Judge
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OTTAWA, Ontario
October 15, 2003
Certified true translation
Suzanne M. Gauthier, C. Tr., LL.L.
FEDERAL COURT OF CANADA
SOLICITORS OF RECORD
DOCKET: T-992-02
STYLE OF CAUSE: Iris, Le Groupe Visuel (1992) Inc. v. Trustus International Trading Inc.
PLACE OF HEARING: Montréal, Quebec
DATE OF HEARING: Tuesday, September 16, 2003
REASONS: Rouleau J.
DATE OF REASONS: October 15, 2003
APPEARANCES:
Paul-André Mathieu FOR THE PLAINTIFF
(Defendant to Counterclaim)
Hélène D'Iorio FOR THE DEFENDANT
(Plaintiff by Counterclaim)
SOLICITORS OF RECORD:
MATHIEU ET ASSOCIÉS FOR THE PLAINTIFF
Montréal, Quebec (Defendant to Counterclaim)
GOWLING, LAFLEUR, FOR THE DEFENDANT
HENDERSON, s.r.l. (Plaintiff by Counterclaim)
Montréal, Quebec
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