Trudel v. Clairol Inc. of Canada, [1975] 2 SCR 236

Supreme Court of Canada

Trudel v. Clairol Inc. of Canada, [1975] 2 S.C.R. 236

Date: 1974-05-27

Paul Trudel (Defendant) Appellant;

and

Clairol Inc. of Canada (Plaintiff) Respondent.

1973: February 19, 20; 1974: May 27.

Present: Abbott, Martland, Judson, Ritchie, Spence, Pigeon and Laskin JJ.

ON APPEAL FROM THE COURT OF QUEEN’S BENCH, APPEAL SIDE, PROVINCE OF QUEBEC

Injunction—Sale of goods—Haircoloring—Special packaging for professional use—Undertaking signed by distributors—Sale for personal use prohibited—Code of Civil Procedure, Art. 752.

Respondent manufactures and sells a haircoloring called “Miss Clairol Hair Color Bath”. It maintains for this preparation two separate markets: one for personal use at home, the other for professional use in beauty salons or hairdressing schools. The product is identical in both cases; the difference lies in the distribution, packaging and pricing. The product for home use is sold to wholesalers who resell it to various dealers who sell it at retail. The product for professional use is sold to wholesalers with the understanding that they will only sell it to hairdressers or other professionals in the trade, who use it in the course of their professional operations. It is sold at a price substantially less than that of the product for personal use and the “directions” for use packed with each bottle intended for personal use are not packed with each bottle for professional use. However, there is on every bottle a warning concerning the possibility of skin irritation or loss of sight that could result from using this product unless certain precautions are taken.

Respondent sells the product for professional use only to wholesalers who agree to sign an undertaking whereby they promise to sell the preparation only to professionals who use it only in their establishments. Appellant, who is the owner of seven hairdressing establishments, sells this product at retail. As he is not a wholesaler authorized by respondent to sell this product, he has never signed the undertaking. Appellant appeals to this Court from a judgment of the Superior Court, affirmed by the Court of Appeal, which granted an injunction prohibiting him from continuing to sell this product.

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Held: The appeal should be dismissed.

Per Martland, Ritchie, Spence, Pigeon and Laskin JJ.: Appellant, by inducing party to a breach of the contract between respondent and each of its agents, committed a delict for which he is liable, because it is an act of dishonesty to be associated knowingly with a breach of contract. He was aware of respondent’s policy and instructions concerning the sale of its product. He had an obligation not to prejudice respondent by favouring even indirectly a breach of an undertaking which was justified by a significant interest and which was validly assumed. Appellant has been unable to cite anything contrary to these principles of jurisprudence and case law on which the trial judge and the Court of Appeal have mainly relied in reaching their conclusions. Furthermore, in the record of the present case there are none of the elements required to conclude that the contracts between respondent and its distributors are invalid.

With regard to the right to an injunction, art. 752 of the Code of Civil Procedure states that one may demand an injunction by action. The circumstances in which one may do so are not specified. Consequently it is matter of a discretionary power to be exercised having in mind the principles established in common law jurisdictions, since this is a remedy taken from them. Nothing was said which would tend to show that there was a departure from those principles in granting an injunction to prohibit appellant from continuing an operation which was held to infringe the rights of respondent.

Per Abbott and Judson JJ.: If the system of distribution adopted by respondent is reasonable and not contrary to law or to the public interest, then it is a wrongful act deliberately to frustrate the steps taken by respondent to safeguard the public, and at the same time itself. By selling to the general public the product intended for professional use only, appellant may be exposing respondent not only to damages but to the loss of goodwill that may result through users obtaining unsatisfactory results.

[Eldon Industries Inc. v. Reliable Toy Co. Ltd. (1965), 48 C.P.R. 109; In re Apollinaris Company’s Trade-Marks, [1891] 2 Ch. 186; North Western Salt Company Limited v. Electrolytic Alkali Company Limited, [1914] A.C. 461; Tripoli Company Inc. v. Wella Corporation (1970), 425 F. 2d 932; Côté v. Morgan (1881), 7 S.C.R. 1; Godfrey Etc. Ltd v. Coles Book Stores Ltd. (1973), 1 O.R. (2d) 362, referred to.]

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APPEAL from a judgment of the Court of Queen’s Bench, Province of Quebec[1], affirming a judgment of the Superior Court. Appeal dismissed.

J.A. Robb, Q.C., and Gérald Tremblay, for the appellant.

John Bishop, Q.C., for the respondent.

The judgment of Abbott and Judson JJ. was delivered by

ABBOTT J.—I agree with Pigeon J. that this appeal should be dismissed. I do so on the basis stated by Montgomery J.A., (whose reasons were concurred in by Tremblay C.J.Q., and Rinfret J.A.), in the following terms with which I am in respectful agreement and which I adopt:

In Ross v. Dunstall, Ross v. Emery, (1921) 62 S.C.R. 393, (commonly known as the Ross Rifle cases) the Supreme Court held that a manufacturer may be held liable for damages for placing a potentially dangerous product in the hands of the public, even though there be no contractual relationship between him and the person suffering the damages. It further appears from these cases that a manufacturer may be liable even for damages caused by the misuse of his product, provided that it be reasonably previsible that such misuse may occur if the product should fall into the hands of persons not sufficiently instructed in its use. I therefore find it reasonable that a manufacturer should take steps to insure that his product shall not fall into the hands of the public without proper instructions for its use and a warning as to the dangers of misuse. On the other hand, I see no reason why a manufacturer should not be permitted to make a separate distribution to a special class of customers who, by reason of their training and experience, do not require this warning. If, as I believe to be the case, the system of distribution adopted by Respondent is reasonable and not contrary to law or to the public interest, then it is in my opinion a wrongful act deliberately to frustrate the steps taken by Respondent to safeguard the public, and at the same time itself. By selling to the general public the hair dye package for professional use only, Appellant may be exposing Respondent not only to actions in damages but to the loss of goodwill that

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may result through users obtaining unsatisfactory results and suffering damages not readily appreciable in money.

I would therefore dismiss the appeal with costs.

The judgement of Martland, Ritchie, Spence, Pigeon and Laskin JJ. was delivered by

PIGEON J.—By way of introduction, I shall quote the following passages from the judgment of the Superior Court:

[TRANSLATION] Plaintiff manufactures and sells various preparations for the care or beautification of the hair, including a haircoloring called “Miss Clairol Hair Color Bath”. It has decided to maintain for this preparation two separate markets: one for those who make personal use of it at home, the other for those who use it professionally in beauty salons or hairdressing schools.

In both cases, the product is identical; the difference lies in the distribution, packaging and pricing of the product. The “Miss Clairol” for home use is sold to wholesalers who resell it to various dealers (pharmacists being dealers in this line); these in turn sell it to customers at retail for their personal use. The “Miss Clairol” for professional use is sold to wholesalers with the understanding that they will only sell it to hairdressers or other professionals in the trade, who use it in the course of their professional operations….

To ensure that the “Miss Clairol” for professional use is used only by hairdressers or owners of beauty salons, plaintiff sells it only to wholesalers who agree to sign an undertaking, a copy of which is on record as Exhibit P-3 (English text) or P-25 (French version).

In signing this form, the distributor assumes certain obligations; he undertakes among other things to sell the “Miss Clairol” preparation only to professionals (owners of salons or hairdressing schools and beauticians), who do not resell it but use it only in their establishments.

One of the reasons for prohibiting the resale of the product intended for professional use to those who would make personal use of it is to be found in form

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P-3 or P-25. Plaintiff sells this product at a lower price, following established practice in the industry, in order to be competitive. The price differential is quite substantial, as defendant realizes a profit on the resale of the product for professional use at $1.29, while he has to resell the product for personal use at $1.95….

Raising the discussion above considerations of personal interest, plaintiff points out that every bottle of the product for personal use is accompanied by practical suggestions as to the choice of the shade of the haircoloring, and in particular by instructions or “directions” for its use. A consumer unaware of these precise instructions would risk unfortunate results: a colour other than that desired, a colour which changes rapidly in sunlight or, even more serious, an allergy from the “Miss Clairol” preparation. The packaging of every bottle of the product for personal use recommends a preliminary test on the skin to detect any allergy to the preparation; it also carries the following warning:

“This product contains ingredients which may cause skin irritation on certain individuals, and a preliminary test according to accompanying directions should first be made. This product must not be used for dyeing the eyelashes or eyebrows; to do so may cause blindness.”

This important warning is not considered necessary for the professional, who is already aware of the possible danger and of the precautions to be taken in choosing and applying the haircoloring. On every bottle of the product intended for professional use, which is resold to customers for personal use, the above instructions and warning are accordingly absent….

Defendant is the owner of seven hairdressing establishments. In these he sells beauty preparations, including 300 or 400 bottles a week of “Miss Clairol for professional use”; he sells this product at retail to individuals for their personal use. As he is not a wholesaler authorized by plaintiff to sell this product, he has never signed the undertaking of which a copy is on record as Exhibits P-3 and P-25.

It must be noted immediately that there is in this statement of the facts an error which remained unnoticed in the Court of Appeal. In point of fact, the following warning is to be found on the label of the product for professional use:

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CAUTION. This product contains ingredients which may cause skin irritation on certain individuals, and a preliminary test according to accompanying directions should first be made. This product must not be used for dyeing the eyelashes or eyebrows, as this could result in loss of sight.

The evidence shows, moreover, that each package contains as many copies of the “directions” as there are bottles, so that appellant can supply them with every purchase, as he has in fact done to a certain extent. This means, therefore, that inasmuch as the injunction restraining appellant from selling for personal use the product packaged for professional use is based upon the potential danger of the preparation, the case might easily be disposed of by limiting the injunction to a prohibition to deliver the product without an accompanying copy of the “directions”. As this, however, would not give respondent what it is mainly seeking, namely the discontinuation of such sales for personal use, we must examine the validity of the other ground accepted by the Superior Court judge in his discussion of the law, the substance of which is in the following passages:

[TRANSLATION] … It is clear that if defendant becomes party to a breach of the contract between plaintiff and each of its agents, he commits a delict for which he is liable (H. et L. Mazeaud et Tunc, Traité de la responsabilité civile, 6th ed. 1965, Vol. I, no. 144, page 175); for it is an act of dishonesty to be associated knowingly with a breach of contract (Lalou et Azard, Traité de la responsabilité civile, 6th ed. 1962, no. 716, page 449)….

Defendant is aware of plaintiff’s policy and instructions concerning the sale of its products. The contractual prohibition against retail resale is mentioned in the action herein; it was already stated in the notice printed on the packages of the product as early as 1966 …

Defendant has an obligation not to prejudice plaintiff by favouring even indirectly a breach of the undertaking previously quoted; for this undertaking not to resell the product at retail is justified both by a significant interest on the part of plaintiff and, to a certain degree, by the public interest. Everyone has a moral obligation not to contribute to the breach of a validly assumed undertaking; contravention of this

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moral obligation is subject to sanction under the civil law (G. Ripert, La règle morale dans les obligations civiles, 3rd ed. Paris 1935, no. 170, page 336).

This conclusion is all the more necessary considering that the act relating to trade marks and unfair competition prohibits the doing of any act or the adoption of any business practice “contrary to honest industrial or commercial usage in Canada” (1952-53, 1-2 Eliz. II, c. 49, s. 7, (e))….

Finally, section 22 of the act relating to trade marks and unfair competition prohibits using a “trade mark registered by another person in a manner likely to have the effect of depreciating the value of the goodwill attaching thereto”. The use made by defendant of the trade mark “Miss Clairol” tends to diminish its prestige in the eyes of the consumer. He sells the product unwrapped, stripped of its attractive packaging, and deprives the user of a warning necessary for his protection and the good reputation of plaintiff.

In France, contractual prohibitions have given rise to judgments against third parties who have knowingly participated in the exporting of the product (Savatier, Traité de la responsabilité civile, 2nd ed. 1951, no. 145, page 188; Lalou, “De la prohibition conventionnelle d’exportation”, Chronique D.H. 1929, page 77). The same binding effect is recognized in respect of third parties for agreements between the manufacturer and his buyer to fix the resale price (Planiol et Ripert, Traité de droit civil, Vol. 6, no. 590). In the same way, it must be recognized that the agreement between plaintiff and its wholesalers must be respected by any purchaser who has knowledge of it (J. Guyénot, “L’incidence du droit des marques de fabrique sur le refus de vendre et les pratiques commerciales d’exclusivité”, Chronique D-S. 1965, page 75; “Opposabilité aux tiers des conventions d’exclusivité de vente”, Rev. Crit. de jur. belge, 1961 page 452). By offering an outlet to purchasers who obtain the “Miss Clairol” preparation contrary to the obligations assumed by all the wholesalers to whom plaintiff sells its products, defendant favours and encourages the breach of these obligations; it matters little that he does not deal directly with the wholesaler who violates his contractual obligation toward plaintiff.

I doubt very much that the relief granted in this case can be justified by the provisions of

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the Trade Marks Act (now R.S.C. c. T-10). I am inclined to believe that s. 7 (e) must be given the limited scope indicated in the judgment of the Ontario Court of Appeal, Eldon Industries Inc. v. Reliable Toy Co. Ltd.[2] The following appears in a judgment of the English Court of Appeal (In re Apollinaris Company’s Trade-Marks)[3], at p. 234:

…It was further argued that the contract entered into between Oppel and the Apollinaris Company was one of which every purchaser abroad must have notice, and every person who bought to import into this country must also have notice, and that no person who took with notice could lawfully import into this country. It is difficult, perhaps impossible, to believe that this argument can prevail. If it can, a fetter hitherto unthought of will be placed on the commerce of this country. But, again, if it ever can prevail, it must do so by force of the contract and notice, and no one, in our opinion, can use the Trade Marks Act for the purpose of supporting such a cause of action.

I have not found it necessary to go more deeply into this question, as from the point of view of the civil law appellant’s solicitor has been unable to cite anything contrary to the French legal textbooks and case law on which the trial judge and the Court of Appeal have mainly relied in reaching their conclusions. My own research has on the contrary convinced me that the textbooks and case law were clearly to the effect indicated by the Superior Court and the Court of Appeal. Thus, I have found in the Gazette du Palais of 1934 (2nd week, p. 640), a judgment of the Cour de Cassation, the summary of which reads as follows:

[TRANSLATION] Anyone who resells perfumery at a price lower than that fixed by the firm is liable to damages under Art. 1382 C.C., even though he has personally given no undertaking, if, having been for a number of years an export agent and reseller of perfumery, he cannot claim to be unaware of the practices peculiar to certain firms and in particular the recognized obligation not to sell their products

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below the set price, and if, to avoid being charged with not fulfilling his undertakings, he approaches an intermediary and induces him to breach his contract, by obtaining through him products which he can resell at a lower price.

It is quite obvious that this Court would have to decide a similar case differently, but this would be by reason of what is now s. 38 of the Combines Investigation Act (R.S.C., c. C-23). For some twenty years now, this provision has made resale price maintenance illegal. It follows undoubtedly that any agreement for such purpose is absolutely void (Arts. 13 and 14 C.C.). Can it be said in the present case that such is indirectly the effect of the contracts by which respondent maintains a two-tier market for the same product at different prices; should one see an undue restraining of competition, or an advantage granted to certain purchasers, which is not available to their competitors? It is clear that the commercial value of the system is considerable, and that the consequences for the consumer are significant: respondent sells the same product to distributors for professional use at $6.50 a dozen, and to distributors for general use at $12.50 a dozen, while the only difference is the packaging and the instructions printed for the guidance of the users. This obviously results in a substantial difference in the retail selling price. At the hearing, appellant’s counsel informed us that he did not rely on the Combines Investigation Act and did not maintain that respondent’s contracts were in contravention of Part V, entitled Offences in relation to trade. Obviously this would not relieve us of the obligation of declaring of our own motion a nullity on account of public order. To do so, however, we would have to find in the record all the elements required to conclude that a violation of the law has been committed.

In North Western Salt Company Limited v.

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Electrolytic Alkali Company Limited[4], the House of Lords set aside a decision declaring some contractual trade restrictions invalid. The grounds of the judgment were that such an illegality must be pleaded when it is not entirely evident and depends upon the circumstances.

Among the cases decided in the United States, there is a recent judgment in which a majority in the United States Court of Appeals did not find any violation of the laws against trade monopolies and discriminatory trade practices in a system of distributing products for the use of beauticians and barbers presenting striking analogies with the one which gave rise to the litigation herein (Tripoli Company Inc. v. Wella Corporation)[5]. In the reasons of the majority one reads (p. 938):

… Even treating the two hair conditioners separately, the difference in packaging and quantity, and the difference in the manner of calling to the user’s attention appropriate instructions for use, would seem ample justification for the resale restrictions as to them.

Without necessarily agreeing with this last opinion, I am unable to find in the record of the present case the elements required to conclude that the contracts between appellant and its distributors, which are the basis of the relief granted by the Superior Court and the Court of Appeal, are invalid. Common law decisions holding that such contracts do not give rise to such relief were cited in argument. I do not find it necessary to examine those cases because, inasmuch as there is no question of a violation of the criminal law, the matter is one of private law. Consequently the principles to be applied are exclusively those of the civil law. The criminal law is now completely codified (Criminal Code, s. 8). There can therefore be no question of an offence consisting in a violation of a common law rule and, as we have seen, appellant does not invoke the statute designed essentially for the protection of freedom of trade

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through prohibition of restrictive trade practices.

I do not feel obliged to take time to consider the arguments advanced by appellant with regard to the right to an injunction. It appears to me sufficient to note that Art. 752 of the Code of Civil Procedure states that one may demand an injunction by action. The circumstances in which one may do so are not specified. Consequently it is a matter of a discretionary power to be exercised having in mind the principles established in common law jurisdictions, since this is a remedy taken from them (Côté v. Morgan)[6], at p. 20. Nothing was said here which would tend to show that there was a departure from those principles in granting an injunction to prohibit appellant from continuing an operation which was held to infringe the rights of respondent.

In this regard I must point out that at the hearing, respondent’s counsel stressed that the packaging of every bottle intended for sale to the general public contains not only the necessary instructions for the suggested test to detect an allergy or hypersensitivity, but also directions on how to obtain the desired colour and satisfactory results. These directions were said to be protected by copyright and, consequently, there would be an infringement in delivering copies which were not supplied by respondent. According to a recent judgment of the Supreme Court of Ontario in Godfrey Etc. Ltd. v. Coles Book Stores Ltd.[7], the holder of a copyright may make use of it to prohibit a Canadian bookseller from selling an inexpensive edition published in the United States. This is of quite substantial interest since, for one of the works, the regular price of the only authorized Canadian edition is $8, while the inexpensive edition distributed in the United States sells for 99 cents. Can a manufacturer make use of copyright on the directions for use of his product so as to subject its sale to all the rights provided in

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the Copyright Act (R.S.C., c. C-30)?

In view of the conclusion I have reached in respect of the other points, I do not consider it necessary to express an opinion on this. I wish to emphasize, however, that I am not saying that the system of distribution adopted by respondent is not contrary to the Combines Investigation Act. I merely note that appellant has not argued that such was the case and that I have not found in the record the elements that would be necessary for finding of our own motion, without prior consideration at trial and on appeal, that such a violation has been committed.

I conclude that the appeal should be dismissed with costs.

Appeal dismissed with costs.

Solicitors for the defendant, appellant: Stikeman, Elliott, Tamaki, Mercier & Robb, Montreal.

Solicitors for the plaintiff, respondent: Ogilvy, Cope, Porteous, Hansard, Marler, Montgomery & Renault, Montreal.