Date:20030723
Docket: A-321-03
Citation: 2003 FCA 309
Ottawa, Ontario, July 23, 2003
Present: THE HONOURABLE MR. JUSTICE LINDEN
BETWEEN:
SUNTEC ENVIRONMENTAL INC.
Appellant
(Defendant)
and
TROJAN TECHNOLOGIES INC.
Respondent
(Plaintiff)
REASONS FOR ORDER
[1] This is a motion by the Appellant Suntec Environmental Inc. (Suntec) for a stay of an injunction, order for delivery up and order for determination of damages or profits, which was granted on July 4, 2003, following a motion for summary judgment brought by Trojan Technologies Inc. (Trojan) heard in February 2003.
[2] Trojan's motion is for infringement of their Canadian Letters Patent 1,327,877 (the 877 patent) which is for a "Fluid Purification Device" that uses ultraviolet light to disinfect wastewater.
[3] The hearing took place over two days, February 17 and 18, 2003. Viva voce evidence was not heard, but several affidavits and cross-examination upon those affidavits were before the Motions Judge, who prepared a careful and thorough set of reasons comprising 46 pages, which allowed the Motion for Summary Judgment, issued declarations of validity of the claims and that Suntec had infringed those claims. The order enjoined Suntec from manufacturing or selling its LPX200 Ultraviolet Disinfection System and delivery up of all offending materials.
[4] This motion seeks to stay paragraphs 3, 4 and 5 of the Order dated July 4, 2003 which read:
3. The Defendant, its officers, directors, employees, shareholders, agents and all those over whom they exercise control are enjoined from infringing Canadian Letters Patent No. 1,327,877 and from manufacturing, importing, exporting, selling or offering for sale in Canada or from Canada, any Suntec Environmental LPX200 Ultraviolet Disinfection System and equivalent and related products.
4. The Defendant is required to deliver up to the Plaintiff all Suntec Environmental LPX200 Ultraviolet Disinfection Systems and components, equivalents and products, as well as any apparatus, documents or other things within the possession, power or control of the Defendant and which may offend the injunction hereby granted.
5. As provided by Order made on consent, dated the 22nd of April, 2002, all issues concerning any questions as to the extent of infringement of any right, any question as to the damages flowing from any infringement of any right, and any question as to the profits arising from the infringement of any right shall be determined separately after the date of this Order and Judgment.
[5] The test for obtaining a stay pending an appeal is the same as that for obtaining an interlocutory injunction, that is, the applicant must establish (1) a serious issue to be tried, (2) that it would suffer irreparable damage if a stay is not granted, and (3) that the balance of convenience is in its favour. In my view the applicant has succeeded in convincing me that this test has been complied with.
[6] First, the serious issue to be tried element. While this Court has wider powers than the Ontario Court of Appeal on motions for summary judgment, it must be recalled that the decision in question is one for summary judgment. Although such a judgment has the same effect as a judgment after a trial, there has been no trial at which witnesses have testified orally and been cross-examined.
[7] It is argued that, because there were two main experts on construction whose affidavits and cross-examinations were before the Motions Judge, and because these two experts disagreed fundamentally with each other, the Motions Judge should not have accepted the testimony of one, the Respondent's witness, over the other, the Appellant's witness. The Motions Judge indicated that neither expert had been "significantly shaken" on cross-examination, but he "preferred" the expert of the Respondent, Mr. Moreland, over that of the Appellant's expert, Mr. Scheible. On the anticipation and obviousness issues, the Motions Judge also preferred the Respondent's witness, even though he felt both experts were credible and trustworthy. Similarly, the Motions Judge accepted the evidence of the Respondent's witness on the matter of infringement. The Motions Judge held:
The necessary facts can be found and there is no serious issue of credibility. While I find the affidavit evidence of both experts to be credible and trustworthy, I prefer the evidence of Trojan's expert on each of the critical issues and I am satisfied that having the evidence of the experts presented at trial where a trial judge would have an opportunity to observe their demeanour and their reactions under cross-examination would not in all likelihood affect the end result in any significant manner.
While the Motions Judge may well have been correct in his construction of the patent and on the other related issues, I am of the view that the Appellant has demonstrated to me that it has a serious issue to be argued about whether, on a summary judgment motion, it was correct to treat the conflicting expert evidence in this way in this case.
[8] Second, as for irreparable damage, I have been persuaded by the Appellant that, if this injunction is not stayed, the Appellant will suffer irreparable damage in that its business would be unable to continue to operate. The line of credit would not continue to be honoured by the bank. The guarantor would not extend its guarantee. Some of its employees would move on to other positions, crippling the company. If it succeeds on the appeal, it would encounter grave problems in reconstructing the business. This is not mere speculation in this case, but reality.
[9] The balance of convenience in this case, or inconvenience as it has been called, favours the Appellant, in my view. The Respondent points to some loss of profits and the unlikelihood of being able to collect any damages from the Appellant, a business that is not yet earning any profit. It states that the price "undercutting" by the Appellant is driving down the price the Respondent is able to charge its customers, thereby impairing its ability to continue doing the valuable research it does. No doubt, these are serious disadvantages being suffered by the continuing operation of the Appellant. It does not, however, compare with the loss of the business altogether, which the Appellant would suffer in the interim between now and the time the decision of the appeal case is rendered.
[10] Recognizing that it is a discretionary matter to be granted sparingly, I, nevertheless, will grant a stay of sections 3, 4 and 5 of the order and judgment dated July 4, 2003 subject to the following conditions:
(1) The Appellant must keep an account of its revenues and profits and provide monthly statements thereof to the Respondents on the 5th day of each month starting September 5, 2003.
(2) It being particularly unfair to potential new customers in the light of the circumstances, the Appellant shall make no new bids pending the appeal, but will be allowed to fulfill its contracts that have been signed, that are being negotiated at the present time, and any contracts which shall be concluded on the basis of bids that have already been made. It may also service its existing customers pending the outcome of the appeal.
(3) Terms of existing contracts shall not be altered by the Appellant so as to reduce its expected revenues or profits.
(4) The Appellant may not transfer property or make any payments to shareholders.
(5) The Appellant shall make payments to creditors and employees only as required in the ordinary course of business and for the conduct of this appeal.
(6) The security that has been posted by the agreement of the parties of $50,000 which is being held in trust, shall remain so pending the outcome of the appeal. In addition, 10% of total revenues received by the Appellant will be deposited in trust at the firm of the respondents to be held with the $50,000 security already posted.
(7) The appeal of this matter will be expedited and heard on November 12, 2003 at 10:00 a.m. in Ottawa.
"A.M. Linden"
J.A.
FEDERAL COURT OF APPEAL
NAMES OF COUNSEL AND SOLICITORS OF RECORD
DOCKET: A-321-03
STYLE OF CAUSE: SUNTEC ENVIRONMENTAL INC. v. TROJAN TECHNOLOGIES, INC.
MOTION FOR A STAY OF AN ORDER OF THE FEDERAL COURT DATED JULY 3, 2003, FEDERAL COURT FILE NO. T-1811-01
PLACE OF HEARING: OTTAWA, ONTARIO
DATE OF HEARING: JULY 22, 2003
REASONS FOR JUDGMENT OF THE COURT: LINDEN J.A.
APPEARANCES:
Mr. Robert H.C. MacFarlane FOR THE APPELLANT
Mr. L.E. Trent Horne
Mr. Christopher Van Barr FOR THE RESPONDENT
Ms. Julie Florent
SOLICITORS OF RECORD:
Sim, Hughes, Ashton & McKay
Toronto, Ontario FOR THE APPELLANT
Gowling Lafleur Henderson LLP
Ottawa, Ontario FOR THE RESPONDENT
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