Terrace Beach Resort and Cabins Inc. v. Clayton, 2004 FC 334

Date: 20040224

Docket: T-2389-03

Citation: 2004 FC 334

BETWEEN:

                                    TERRACE BEACH RESORT AND CABINS INC.

and JASON PRIESTLEY

                                                                                                                                                       Plaintiffs

                                                                                 and

                                                          RONALD NEIL CLAYTON,

SEAN STEPHEN JORDAN

and 638065 B.C. LTD.

dba THE CABINS AT TERRACE BEACH /

GO CABINS! A VACATION PROPERTY MANAGEMENT COMPANY

                                                                                                                                               Defendants

                                                            REASONS FOR ORDER

HARGRAVE P.

BACKGROUND

[1]                 The Plaintiffs and the Defendants are competing providers of lodging on the west coast of Vancouver Island, although at one time they were part of the same operation. The Plaintiffs, who operate as "Terrace Beach Resort & Cabins" on Vancouver Island, near Ucluelet, seek to strike out portions of the defence. The pleadings of both sets of parties contain background which is useful, surplusage which is unobjectionable and irrelevant material, some of which, if left in place, requires a response. However, the crux of the action and largely that of the present motion is section 7 of the Trade-marks Act, the allegations of confusion by the Plaintiffs between the unregistered trade-marks of the Plaintiffs and the Defendants and the responses in the defence, including prior use.

[2]                 Allegations in the defence, which I must accept, for the purposes of the motion, as if proven and which are at issue here, in effect, set out that the Defendants were the first to use a somewhat similar trade-mark, "The Cabins at Terrace Beach" and the that if any confusion exists, the Plaintiffs brought it upon themselves when they began to use the conflicting name at a later date. I now turn to the general approach which I have taken to the motion.

CONSIDERATION

[3]                 On an application to strike out pleadings in a trade-mark dispute, just as in hearing a trade-mark dispute, confusion being at issue, one must consider the matter as a whole. That is even more the case when the marks possess little inherent distinctiveness, are not strong, do not claim to have a broad scope of protection and may be distinguished by even minor differences: see for example [1965] S.C.R. 734">Ultravite Laboratories Ltd. v. Whitehall Laboratories Ltd. [1965] S.C.R. 734 at 737, Park Avenue Furniture Corp. v. Wickes/Simmons Bedding Ltd. (1991) 37 C.P.R. (3d) 413 at 426-427 (F.C.A.) and Kellogg Salada Canada v. Registrar Trade-marks and Maximum Nutrition Ltd. (1992) 43 C.P.R. (3d) 349 at 359 (F.C.A.). Consistent with this approach I am not about to take an unnecessarily active stance in striking out pieces of the defence in this matter, but will strictly abide by what is set out in the cases, including Hunt v. Carey Canada Inc. [1990] 2 S.C.R. 959, Operation Dismantle Inc. v. The Queen [1985] 1 S.C.R. 441 and [1980] 2 S.C.R. 735">Canada v. Inuit Tapirisat [1980] 2 S.C.R. 735, that it must be plain, obvious and beyond doubt that a plea will not succeed before it may be struck out. Moreover, mere surplusage will remain if it tends to provide useful background. I also intend to keep in mind not only the general equitable principles of fairness and reasonableness, but also specific equitable maxims including that equity looks to the intent, rather than to the form.

[4]                 The Plaintiffs say that their claim for confusion and passing off has its basis in section 7(b) of the Trade-marks Act, that there is no common law jurisdiction in the Federal Court in passing off and thus, while the Defendants could counter the allegations of confusion by claiming confusion and passing off in a counterclaim, the Defendants must remain silent on the subject in their defence. The Defendants, perhaps in consideration of the common law jurisdiction of the B.C. Supreme Court in the area of passing off, decline to counterclaim and submit that surely they may fully and properly defend the Federal Court action by saying that their earlier use of "The Cabins at Terrace Beach" and the confusion that the Plaintiffs allege is a result of the actions of the Plaintiffs themselves.

[5]                 The Plaintiffs object to paragraph 10 of the defence, a paragraph responding to part of the assertion of the Plaintiffs, in paragraph 15 of the statement of claim, that the corporate plaintiff, at some unspecified time, "... began managing its resort business under the trade-marks TERRACE BEACH RESORT & CABINS and TERRACE BEACH RESORT & CABINS & Design ...". To this there is a general denial on the part of the Defendants, followed by an assertion, in paragraph 10 of the defence, that the corporate plaintiff, "Terrace Beach Resort and Cabins Inc., did not file for a trademark under that name until December 22, 2003 and that trademark currently remains unregistered.".

[6]                 The Plaintiffs do not anywhere claim a registered trade-mark: thus there is no prima facie proof of title to the mark. But more important is the fact that, in a claim for passing off, registration forms no part of the case of a plaintiff. Thus paragraph 10 of the defence is struck out. However a plaintiff alleging passing off may be required to give particulars of the date when the plaintiff's mark first became distinctive of his or her business: see for example Fox on the Canadian Law of Trade-Marks 3^rd Edition, Carswell 1972 at page 603. That registration of a trade-mark forms no part of a case for passing off does not, of course, prevent the Defendants from examining on the trade-mark allegations in paragraph 15 and elsewhere in the statement of claim during the examination for discovery process, for those references must have some relevance to the statement of claim as a whole. This leads to the objections to various paragraphs of the defence which bear, at least in part, on confusion.

[7]                 The Plaintiffs next turn to the Defendants' allegations in paragraph 8, 11 and 16 of the defence, that the confusion alleged by the Plaintiffs is self-inflicted damage.

[8]                 Paragraph 8 of the defence, looking more at the substance of the plea and less at its form, is in answer to paragraph 13 of the statement of claim. This portion of the defence sets out that the person who incorporated Terrace Beach Resort and Cabins Inc. caused confusion by choosing a name close to that of the Defendant's existing business. In paragraph 11 of the defence, the Defendants allege that Messrs Priestley, one being a Plaintiff, left a rental pool and business called "The Cabins at Terrace Beach", that involving the Defendants and then commenced an operation called "Terrace Beach Resort and Cabins", thereby creating their own confusion. Again, this is a plea that the Plaintiffs were later entrants in the market. One should not, in choosing an operating name, select one which is too close to that of an already existing competitor: see, for example, McDowelll v. Standard Oil Co. [1927] A.C. 632 (H.L.). Further, the length of time the trade-marks or trade-names have been used is relevant. Moreover, such subsequent selection of a trade-name or mark and alleged self-inflicted confusion may give rise to a form of personal estoppel: see for example paragraphs 13-153 and following in Kerley on the Law of Trade-marks and Traded Names, Smith and Maxwell London, 2001. As to paragraph 11 I will digress slightly, for the Plaintiffs also complain about an allegation that the Priestleys voluntarily left the rental pool, the Plaintiffs maintaining that whether there was some form of termination of the Defendants by the Priestleys, as set out in the statement of claim, or a voluntary leaving, as set out in the defence, they are one and the same thing. I disagree. That portion of paragraph 11 will certainly remain.

[9]                 Paragraph 16 of the defence is also objected to. It is an answer to paragraph 23 of the statement of claim, which is an allegation of the creation of confusion by the Defendants. Again, the Defendants say that the confusion was created by the Plaintiffs. Paragraph 16 of the statement of claim goes on to indicate that the Plaintiffs have placed some form of signage on the Defendant's property, referring to Terrace Beach Resort and Cabins, which the strata council has asked the Plaintiffs to remove. In the context of the whole of paragraph 16 of the defence, it indicates further confusion which may have been caused by the Plaintiffs themselves.

[10]            In looking at what is set out in paragraphs 8, 11 and 16, the allegations of confusion initially created by the Plaintiffs may well constitute some form of a common law defence to the Plaintiffs' claim of passing off, supported by allegations of confusion. This is not in the form of a counterclaim and I think need not be, for it may well form aspects of common law defences. Relying upon Canadian Council of Professional Engineers v. Memorial University of Newfoundland (1997) 75 C.P.R. (3d) 289, at 290, a decision of Mr. Justice Rothstein, as he then was, common law defences would seem open to the Defendants:    indeed, such defences may be necessary in order to allow the Defendants to mount a full defence and receive a fair trial. I cannot say that paragraphs 8, 11 and 16 are so futile that they plainly, obviously and beyond doubt ought to be struck out on the grounds, contended by the Plaintiffs, that they are irrelevant and prejudicial.

[11]            I finally turn to paragraph 17 of the defence. It sets out that the Plaintiffs do not hold a registered trade-mark and have shown bad faith and created confusion by registering a trade-mark that is similar to "The Cabins at Terrace Beach". As I understand it the Plaintiffs may be trying to register that trade-mark, but so far have not succeeded. Paragraph 17 is struck out, but with leave amend. As I have indicated, the registration of the trade-mark is not relevant, but confusion and perhaps bad faith could be relevant.

CONCLUSION

[12]            There is much in both the statement of claim and in the defence which appears to be surplusage or, at best, background. While some of the material might lengthen the proceedings, that is not a ground for further examination of paragraphs 8, 11 and 16, for the superfluous material in those paragraphs does not meet the standard required under the test for striking out.

[13]            Paragraph 10 of the defence is struck out; paragraphs 8, 11 and 16 may remain; and paragraph 17 is struck out with leave to amend.

[14]            Success being mixed, costs will be in the cause.

(Sgd.) "John A. Hargrave"

   Prothonotary

                                                                 FEDERAL COURT

                              NAMES OF COUNSEL AND SOLICITORS OF RECORD

DOCKET:                                                                                     T-2389-03

STYLE OF CAUSE:                           TERRACE BEACH RESORT AND CABINS INC. et al.

v.

RONALD NEIL CLAYTON et al.

PLACE OF HEARING:                                                             Vancouver, BC

DATE OF HEARING:                                                               16-FEB-2004

REASONS FOR JUDGMENT:                                               John A. Hargrave, Prothonotary

DATED:                                                                                        24-FEB-2004

APPEARANCES:

SOLICITORS OF RECORD: