Fibremann Inc. v. Rocky Mountain Spring (Icewater 02) Inc., 2005 FC 977

[7]         Mr. Kwok has admitted that he could not understand his affidavit without translation. The translation was carried out by his wife, who cannot be described as independent. The original affidavit is not in compliance with Rule 80(2.1). The question becomes whether this breach of the Rules should lead to the inadmissibility of the affidavit or whether I should exercise my discretion to allow the affidavit.

[12]       The question of the late admission of an affidavit was dealt with by the Federal Court of Appeal in Atlantic Engraving Ltd. v. LaPointe Rosenstein, 2002 FCA 503. From that case, I take the following guidelines for the acceptance of a late evidence:

1.       The evidence to be adduced will serve the interests of justice;

2.       The evidence will assist the Court;

3.       The evidence will not cause serious prejudice to the other side; and

4.       The evidence sought to be adduced was not available to prior to the cross-examination of the opponent's affidavits.

[13]       What differentiates this case from the situation before the Court of Appeal in Atlantic Engraving is that, before me, Mr. Kwok is not seeking to add or amend his evidence. He is attempting to rectify a defect in his affidavit. Fibremann had the opportunity to cross-examine the affiant and did so. Since that cross-examination, not a word of the affidavit has changed. Accordingly, I can see no serious prejudice to Fibremann by accepting the second affidavit at this late stage.

[14]       In summary, this is a motion that is heavily dependent on the facts. The contents of the first affidavit directly address all three of the elements of the test for setting aside a default judgment.

[15]       There is no other evidence corroborating Mr. Kwok's version of the events. The second affidavit, having been filed late without a motion for its admission, also is procedurally defective. Thus, individually, there are likely sufficient grounds to dismiss each affidavit.

[16]       However, a ruling that both affidavits are inadmissible would result in a dismissal of the motion. I do not believe that this would lead to a just result. Looking at the particular circumstances surrounding the filing of the two affidavits and noting the lack of prejudice to Fibremann, I do not believe that the interests of justice would be served by dismissing this motion on the basis of the defective affidavits. In this case, I am prepared to exercise my discretion and accept the affidavits.

2.         Should Default Judgment be set aside?

[17]       As noted above, a party seeking to set aside a default judgment of this Court must satisfy a tri-partite test. Each of the elements of the test is addressed in the following.

(a)        Explanation for failure to file a defence

[18]       Mr. Kwok submits that he failed to file a defence in this action because he believed that the action involved him only in his capacity as a director of Rocky Mountain and not in his personal capacity. He puts forward as a reasonable explanation that:

_     he has only a limited knowledge of English and only a general knowledge of legal matters;

_     he does not recall being served with the statement of claim; and

_     he thought that the interim injunction was the end of this matter.

[19]       Mr. Kwok was, at all times, named personally as a defendant in this law suit. Although he claims that he was unaware of whether he was served with the statement of claim, the affidavit of an independent process server is that he was served with this document on December 29, 2004.

[20]       On January 10, 2005, he appeared in Court, before Justice Phelan, to speak to the Plaintiff's motion for an interim injunction. He was permitted by Justice Phelan to argue the motion on behalf of Rocky Mountain as well as on his own behalf. The Plaintiff obtained its interim injunction and the Defendants were ordered to pay $2,500.00 in costs. In cross-examination on this motion, Mr. Kwok acknowledged that he knew that the order of Justice Phelan required him to pay $2,500.00 in costs.

[21]       Finally, I note that at least two persons, one of whom was a legal assistant, explained the various documents to Mr. Kwok.

[22]       In view of this evidence, it is implausible that Mr. Kwok was unaware that this action involved him personally. In any event, Mr. Kwok could have and should have sought out legal advice at an earlier stage. His failure to do so on this action is even more difficult to understand given that he had retained a lawyer for a related matter in Court of Queen's Bench of Alberta.

[23]       A more plausible explanation for waiting until after the default judgment to defend this action may be found in the following exchange during cross-examination of Mr. Kwok:

Q. Was it your evidence that you did not know you were a Defendant in this case until you          

      got this order [for default judgment] . . . in the mail?

A. . . . But I just understand that by the time I received this document, I saw there's a    

      number of money that I should need to pay, so I am very scared about that you know

      about how come - you know, because last time the Court order say I just only pay    

      $2,500.00. How come I should need to pay so much money? So, you know -because

      they explain to me, and then, you know, I still wondering what's going on for that.

Q. So it was because it was so much money that you then decided you should go and see a

      lawyer about it, right?

A. Yes.     

[24]       In other words, Mr. Kwok's motivation in attempting, at this late stage, to defend himself arose due to his dismay at the award of costs; and, not for the other reasons he now puts forward.

[25]       Mr. Kwok has not persuaded me that he has a reasonable explanation for the failure to file a defence in this action.

(b)        Timing of motion to set aside

[26]       Pursuant to the second branch of the test for setting aside a default judgment, Mr. Kwok must persuade me that he brought this motion within a reasonable length of time. What length of time is reasonable will depend on the circumstances. In this case, Mr. Kwok was served with the default judgment against him on February 15, 2005. When he contacted a law firm, he was referred to another counsel who prepared and filed the motion on April 19, 2005. The time between those two dates can be adequately explained. In the circumstances, this is not an unreasonable time to act on this matter.

(c)        Prima facie defence

[27]       The third arm of the test for setting aside a default judgment is that the Defendant must demonstrate that he has a prima facie defence on the merits to the Plaintiff's claim. Mr. Kwok submits that he has the following potential defences to the claim of Fibremann:

1.       acquiescence or estoppel by representation. Mr. Kwok alleges that Mr. Hon, President and Director of Fibremann, "either expressly or impliedly gave permission to [Rocky Mountain] to simply 'step in the shoes' of Icewater" and did not take steps to prevent the use of the ICEWATER trade-mark until November 2004. This, in his view, gives rise to a defence of acquiescence or estoppel by representation.

2.       no personal liability for infringement of the trade-mark. Mr. Kwok submits that he was not engaged in a "deliberate, wilful and knowing pursuit" to infringe (Sunsolar Energy Technologies (S.E.T.)Inc. v. Flexible Solutions International, Inc., 2004 FC 1205, at para. 19, citing Mentmore Manufacturing Co. Ltd. v. National Merchandise Manufacturing Co. Inc. et al [1978] F.C.J. No. 521 (F.C.A.), at para. 28) such that there should be a piercing of the corporate veil.

[28]       Mr. Kwok's argument of acquiescence is not sustainable on the evidence before me. The period of delay between the commencement of the infringing activities and of this claim was not overly long and, in any event, mere delay is not sufficient grounds to invoke acquiescence and laches (White Consolidated Industries, Inc. v. Beam of Canada Inc. (1991) 47 F.T.R. 172, at para. 84 (F.C.T.D.); Unilever PLC et al v. Proctor and Gamble Inc. et al [1993] F.C.J. No. 117, at p. 12 (F.C.T.D.)).

[29]       With respect to the potential defence of estoppel by representation, Mr. Kwok swears, in his affidavit, that Rocky Mountain was incorporated to allow Mr. Kwok to continue in the bottled water business while Mr. Hon acquired Icewater for its tax losses. Beyond Mr. Kwok's statements, there is simply no support for his view that Mr. Hon expressly or impliedly permitted him to infringe the ICEWATER trade-mark. And, whether or not that allegation was true at the beginning, there is evidence of continuing infringement of the trade-mark after Mr. Kwok knew he no longer had permission to use the trade-mark.

[30]       Turning to the possible defence of the lack of personal liability for the acts of the corporation, Mr. Kwok submits that all activity complained of was carried out by him in his capacity as a Director of the Corporation. Accordingly, he argues that he should not be held personally liable.

[31]       An individual defendant director of a company cannot always hide behind the veil of his corporation. As stated by Justice Le Dain in Mentmore, at para. 28,

There 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 the deliberate, wilful and knowing pursuit of a course of conduct that was likely to constitute infringement or reflected an indifference to the risk of it. [emphasis added]

[32]       Mr. Kwok's situation is not the same as was before the Court of Appeal in Mentmore, where an officer of a company was found not to be personally liable for the actions of the company in infringing a patent. In that case, both the trial judge and the reviewing Court concluded, at para. 24, that the fact that " '[the officer] imparted the practical, business, financial and administrative policies and directives which ultimately resulted in the assembling and selling of some goods . . . which I have found infringed the Plaintiff's rights' was not by itself sufficient to give rise to personal liability". In this case, Mr. Kwok's actions went far beyond imparting direction to employees. He wrote the letters that induced third parties to deal with Rocky Mountain and that advised customers that Rocky Mountain was merely a "name change". Other allegations in the statement of claim describe similar events that were carried out directly by Mr. Kwok. In each case, it was Mr. Kwok who carried out the activities which led to the alleged infringement of the trade-mark. Evidence produced for both the interim injunction and the motion for default judgment support these allegations. The only reasonable conclusion in this case is that Mr. Kwok personally should bear responsibility for the infringement and the passing off. I am satisfied that Mr. Kwok's actions were a deliberate, wilful and knowing pursuit of a course of conduct that was likely to constitute infringement and passing off or reflected an indifference to the risk of it.

[33]       In short, Mr. Kwok has failed to convince me that he has a prima facie defence to the claims made against him.

Conclusion

[34]       With the possible exception of the second branch of the test, Mr. Kwok has failed to persuade me that he meets the test for setting aside a default judgment. The motion will be dismissed, with costs to Fibremann. Parties will have until July 29, 2005, to serve and file their written submissions, not to exceed two pages double spaced, on the assessment of those costs, and until August 5, 2005 to serve and file responding submissions, not to exceed one page.

ORDER

This Court orders that:

1.          The motion is dismissed with costs to the Plaintiff;

2.          Parties will have until July 29, 2005 to serve and file their written submissions, not to exceed two pages double spaced, on the assessment of costs, and until August 5, 2005 to serve and file responding submissions, not to exceed one page.

     "Judith A. Snider"

______________________________

Judge