Docket Nos: A-255-13
A-409-13
Citation: 2014 FCA 158
|
CORAM:
|
GAUTHIER J.A.
MAINVILLE J.A.
BOIVIN J.A.
|
|
BETWEEN:
|
|
BAUER HOCKEY CORP.
|
|
Appellant
|
|
and
|
|
SPORT MASKA INC. dba REEBOK-CCM HOCKEY
|
|
Respondent
|
REASONS FOR
JUDGMENT
MAINVILLE J.A.
[1]
These reasons concern two consolidated appeals
challenging two orders of Annis J. (Judge) of the Federal Court dated
respectively July 12, 2013 (First Order) and November 21, 2013 (Second Order).
A copy of these reasons shall be filed in each appeal docket A-255-13 and
A-409-13.
[2]
In the First Order, the Judge struck from Bauer
Hockey Corp.’s (Bauer) Statement of Claim in Federal Court docket T-311-12 any
reference to aggravated and punitive damages sought in the context of a
trade-mark infringement action. In the Second Order, the Judge dismissed
Bauer’s motion for leave to amend its Statement of Claim so as to reintroduce
aggravated and punitive damages within that action.
[3]
The thrust of Bauer’s submissions in both
appeals is that the Judge misconstrued the law when he concluded that punitive
damages may only be awarded in connection with litigation misconduct. I agree
that this was an error in law. However, that error did not affect the Judge’s
findings with respect to aggravated damages, nor was it a determining factor
with respect to the First Order. As a result, and for the reasons more fully
set out below, I would dismiss the appeal in docket A-255-13 with respect to
the First Order, but allow in part only the appeal in docket A‑409-13
with respect to the Second Order.
I.
The proceedings leading to the First Order
[4]
On December 21, 2012, Bauer filed an action against the respondent Sport
Maska Inc. dba Reebok-CCM Hockey (Reebok-CCM) for alleged infringement of a
SKATE’S EYESTAY design trade-mark registered under Canadian Trade-mark
registration No. TMA361,722. Reebok-CCM responded by seeking particulars with
respect to the allegations, including particulars of the facts and grounds
relied upon by Bauer to seek “[a]ggravated and punitive damages” at
sub-paragraph 1(k) of its Statement of Claim.
[5]
Bauer responded that the basis for the claim of aggravated and punitive
damages was set out in paragraph 18 of its Statement of Claim in that it
alleges that the infringing actions were willful and done with full knowledge
of Bauer’s trade-mark rights. In light of that response, Reebok-CCM brought a
motion to, inter alia, strike sub-paragraph 1(k) of the Statement of Claim
seeking aggravated and punitive damages on the ground that no material facts
were alleged to support such a claim.
[6]
The Judge agreed with Reebok-CCM. The Judge relied on the decisions of
the Federal Court in Wi-Lan Technologies Corp. v. D-Link Systems Inc.,
2006 FC 1484, 57 C.P.R. (4th) 1 (Wi-Lan) and Dimplex North America
Ltd. v. CFM Corp., 2006 FC 586, 54 C.P.R. (4th) 435 (Dimplex) to
conclude that knowingly and intentionally infringing a trade-mark cannot alone
lead to aggravated or punitive damages. It is this finding that Bauer is
appealing before us in docket A-255-13.
II.
The proceedings leading to the Second Order
[7]
Notwithstanding its appeal to this Court challenging the First Order,
Bauer also sought to amend its Statement of Claim so as to reintroduce
aggravated and punitive damages in its action with additional allegations with
respect to the factual basis supporting such a claim.
[8]
Bauer notably sought to allege that Bauer and Reebok-CCM have been in
competition for many years, that they have in-depth knowledge of their
respective products, that Reebok-CCM knows that Bauer is using the SKATE’S
EYESTAY design trade-mark and is fully aware of its significant commercial
importance, that it intentionally and willfully copied that trade-mark to place
it on its own products so as to improve its market position and to purposively
depreciate Bauer’s trade-mark. Bauer also sought to allege that Reebok-CCM’s
actions were “especially troubling” considering that its predecessor-in-title
had previously acknowledged Bauer’s exclusive right in the design protected by
the trade-mark.
[9]
In his Second Order, the Judge accepted most of the amendments proposed
by Bauer to justify its claim of aggravated and punitive damages. But even with
this new set of factual allegations, the Judge nevertheless refused to add to
the Statement of Claim the remedy of aggravated and punitive damages. In the
Judge’s view, the amendments effected no substantial change to the original
pleadings.
[10]
The Judge relied on Dimplex to conclude that “the only instances of punitive or exemplary
damages being awarded in patent cases were in connection with litigation misconduct”:
Second Order at para. 23. The Judge added that the more recent decisions of
Martineau J. of the Federal Court in Eurocopter v. Bell Helicopter Textron
Canada Ltée, 2012 FC 113, 100 C.P.R. (4th)
87 (Eurocopter FC) and of this Court in Bell Helicopter Textron
Canada Limitée v. Eurocopter, société par actions
simplifiée, 2013 FCA 219, 449 N.R. 111 (Eurocopter FCA) had
allowed a claim of punitive damages in a patent infringement case on the ground
of “the extra added element related to
the defendant’s behaviour at trial”: Second Order at para. 24.
[11]
The Judge consequently concluded that even in light of the new facts set
out by Bauer in its Amended Statement of Claim, a claim for aggravated and
punitive damages could not be sustained in this case. Bauer now also appeals
this Second Order to this Court.
III.
Standard of review and general principles
[12]
The decision of a judge to grant or to refuse a motion to strike or to
amend a pleading is discretionary. This Court will defer to such a decision on
appeal in the absence of an error of law, a misapprehension of the facts, a
failure to give appropriate weight to all relevant factors, or an obvious
injustice: Ereiser v. Canada, 2013 FCA 20, 444 N.R. 64 at para. 16; Apotex
Inc. v. Canada (Governor in Council), 2007 FCA 374, 63 C.P.R. (4th) 151 at
para. 15; Mayne Pharma (Canada) Inc. v. Aventis Pharma Inc., 2005 FCA
50, 38 C.P.R. (4th) 1 at para. 9.
[13]
The test for dismissing a claim on a motion to strike is the one laid
out by the Supreme Court of Canada in Hunt v. Carey Canada Inc., [1990]
2 S.C.R. 959 (Hunt v. Carey) requiring that it be plain and obvious that
the pleadings disclose no reasonable cause of action. This test has been
recently reiterated in R. v. Imperial Tobacco Canada Ltd., 2011 SCC 42,
[2011] 3 S.C.R. 45 at paras. 17 to 26 (Imperial Tobacco), where Chief
Justice McLachlin added that another way of putting the test is that the claim
must have no reasonable prospect of success. Where a reasonable prospect of
success exists, the matter should be allowed to proceed to trial. Valuable as
it is, the motion to strike is a tool that must nevertheless be used with care.
[14]
A motion to strike for failure to disclose a reasonable cause of action
proceeds on the basis that the facts pleaded are true, unless they are manifestly
incapable of being proven, and it is incumbent on the claimant to clearly plead
the facts upon which it relies in making its claim: Imperial Tobacco at
para. 22.
[15]
The Federal Courts Rules, SOR/98-106 govern amendments to
pleadings through Rules 75 to 79 as well as in Rules 200 and 201. These rules
provide for a liberal approach to amendments: Sanofi-Aventis Canada Inc. v.
Teva Canada Limited, 2014 FCA 65 at para. 13. The applicable principles
relating to amendments are set out in Canderel Ltd. v. Canada, [1994] 1
F.C. 3 (C.A.) at p. 10: “while it is
impossible to enumerate all the factors that a judge must take into
consideration in determining whether it is just, in a given case, to authorize
an amendment, the general rule is that an amendment should be allowed at any
stage of an action for the purpose of determining the real questions in
controversy between the parties, provided, notably, that the allowance would
not result in an injustice to the other party not capable of being compensated
by an award of costs and that it would serve the interests of justice”.
[16]
When determining whether an amendment should be allowed, it is helpful
for the judge deciding the matter to ask whether the amendment would be a plea
capable of being struck. If it is, then the amendment should not be permitted: Visx
Inc. v. Nidek Co. (FCA) (1996), 209 N.R. 342, 72 C.P.R. (3d) 19 at p. 24 of
the C.P.R. ed.
[17]
It is with these considerations in mind that I proceed to analyse the
parties’ submissions in this appeal.
IV.
Analysis
[18]
Since Bauer is seeking to include both aggravated and punitive damages
to its action, it is useful to first discuss the distinction between the two.
[19]
Punitive damages, as the name indicates, are designed to punish.
As a result they constitute an exception to the general rule, in both common
law and civil law, that damages are designed to compensate the injured, not to
punish the wrongdoer. Punitive damages may be awarded in situations where the
defendant’s misconduct is so malicious, oppressive and high-handed that it
offends the court’s sense of decency. Punitive damages bear no relation to what
the plaintiff should receive by way of compensation. Their aim is not to
compensate the plaintiff, but rather to punish the defendant. It is the means
by which the court expresses its outrage at the egregious conduct of the
defendant where the defendant’s conduct is truly outrageous. Punitive damages
are in the nature of a fine, which is meant to act as a deterrent to the
defendant and to others from acting in the impugned manner: Hill v. Church
of Scientology of Toronto, [1995] 2 S.C.R. 1130 at paras. 196 to 199 (Hill);
Whiten v. Pilot Insurance Co., 2002 SCC 18, [2002] 1 S.C.R. 595 (Whiten)
at para. 36.
[20]
The level of blameworthiness of the defendant's conduct leading to
punitive damages may be influenced by many factors, which include (a) whether
the misconduct was planned or deliberate; (b) the intent and motive of the
defendant; (c) whether the defendant persisted in the outrageous conduct over a
lengthy period of time; (d) whether the defendant concealed or attempted to
cover up its misconduct; (e) the defendant's awareness that what it was doing
was wrong; (f) whether the defendant profited from its misconduct; and (g)
whether the interest violated by the misconduct was known to be deeply personal
to the plaintiff: Whiten at para. 113.
[21]
Punitive damages are not limited to certain categories of claims: Vorvis
v. Insurance Corporation of British Columbia, [1989] 1 S.C.R. 1085 at pp.
1104-1105 (Vorvis); Whiten at para. 67. As a result, punitive
damages have been found to be available in all types of cases, notably in
patent infringement cases: Eurocopter FCA at paras. 180 to 184; Lubrizol
Corp. v. Imperial Oil Ltd., [1996] 3 F.C. 40, 67 C.P.R, (3d) 1 at p. 20 of
the C.P.R. ed. (Lubrizol); Whiten at para. 44.
[22]
Contrary to the Patented Medecines (Notice of Compliance) Regulations,
SOR/93-133 discussed by this Court in its recent decision of Teva Canada
Limited v. Pfizer Canada Inc. et al, 2014 FCA 138, the Trade-marks Act,
R.S.C. 1985, c. T-13 does not explicitly or implicitly preclude an award of
punitive damages in cases involving a trade-mark infringement. There is
therefore no principle impeding an award of punitive damages in a trade-mark
infringement case where the circumstances warrant such an award.
[23]
Aggravated damages will frequently cover conduct that could also
be the subject of punitive damages, but the role of aggravated damages remains
compensatory, and they usually are awarded to take account of intangible
injuries so as to augment damages assessed under the general rules relating to
the assessment of damages. Aggravated damages are thus compensatory in nature
and may only be awarded for that purpose: Vorvis at pp. 1097 to 1099; Hill
at paras. 188 to 191. They may be awarded in cases where the defendant’s
conduct has been particularly high-handed or oppressive, thereby increasing the
plaintiff’s humiliation and anxiety: Lubrizol pp. 17-18 of the C.P.R.
ed. It is useful to make a distinction between aggravated and punitive damages
where the plaintiff is a corporation, since it is questionable whether
aggravated damages based on humiliation and distress may be claimed by a
corporation: Walker et al. v. CFTO Ltd. et al. (1987), 37 D.L.R. (4th)
224, 59 O.R. (2d) 104 (Ont. C.A.).
[24]
In this case, Bauer’s Statement of Claim, as originally filed and as
amended, has never alleged humiliation or mental distress. Moreover, even if it
did allege humiliation or mental distress, it is questionable whether Bauer
would be capable of proving such allegations as a corporate entity. As a
result, the Judge committed no error in striking from Bauer’s action the claim
for aggravated damages and in refusing to reintroduce that claim through
Bauer’s proposed amendments.
[25]
With respect to punitive damages, Bauer’s original Statement of Claim
contained little factual elements supporting such a claim. As noted in Bauer’s
response to Reebok-CCM’s demand for particulars, the claim for punitive damages
was based on willful and knowing infringement of its trade-mark. Allegations of
willful and knowing infringement are alone insufficient to support a claim to
punitive damages. Intellectual property infringement cases, even in voluntary
infringement circumstances, will not necessarily attract punitive damages.
[26]
Punitive damages “are very much the exception rather than the rule” and
“should be resorted to only in exceptional cases and with restraint”: Whiten
at paras. 94 and 69. Such damages should only be awarded where the evidence
shows that there has been high-handed, malicious, arbitrary or highly
reprehensible conduct that departs to a marked degree from the ordinary
standards of decent behaviour. This is a high threshold that considerably
limits the circumstances in which punitive damages may be awarded: Eurocopter
FCA at para. 184.
[27]
As a result, the Judge’s First Order striking punitive damages from the
claim should not be disturbed.
[28]
The Second Order is however another matter. In that order, the Judge
concluded that punitive damages could only be awarded in connection with
litigation misconduct, and that consequently Bauer’s amendments claiming
punitive damages could not be allowed since no litigation misconduct was
alleged. As noted above, this is not the state of the law of punitive damages
in Canada.
[29]
The Judge’s reliance on Dimplex and Wi-Lan was misplaced
since these cases simply stand for the uncontroversial proposition that
punitive damages are not awarded simply because a defendant knowingly infringed
a patent. Those decisions should not be understood as defining punitive damages
with sole reference to litigation misconduct, since this is clearly not how the
Supreme Court of Canada has defined such damages.
[30]
Moreover, the Judge’s view that the award of punitive damages in Eurocopter
FC, and confirmed in Eurocopter FCA, was based on the defendant’s
behaviour at trial was also misplaced. In that case, the award of punitive
damages was based on the defendant’s willful infringement of a patent which it
knew to be valid, combined with deliberate and outrageous bad faith conduct: Eurocopter
FC at paras. 425 to 442 and 456; Eurocopter FCA at para. 192. There
was no discussion in both these decisions with respect to litigation misconduct
as a ground for awarding punitive damages.
[31]
Having found an error of law which formed the basis of the Judge’s
decision to deny the amendment claiming punitive damages, the issue before us
is therefore whether it is plain and obvious that Bauer’s claim for punitive
damages would not succeed at trial in light of the additional allegations of
fact set out in the Amended Statement of Claim accepted by the Judge.
[32]
In this case, most of Bauer’s new allegations concern the intentional
and willful infringement of its design trade-mark by Reebok-CCM. As I have
already noted, intentional and willful infringement of an intellectual property
right, such as a trade-mark, cannot alone form the basis of an award of
punitive damages. However, Bauer’s adds additional elements.
[33]
Bauer first adds at paragraph 18e of its Amended Statement of Claim that
Reebok-CCM “has previously acknowledged
that Bauer Hockey’s predecessor-in-title had exclusive rights in a
rectangular-shaped form located on the exterior side of the [skate] boot in a
generally centralized position”. At paragraph 19 (as amended),
Bauer also alleges that Reebok-CCM had entered into a “Transaction executed between the parties in which [it] acknowledged
the exclusive rights of the Plaintiff Bauer Hockey in a rectangular-shaped
window form located on the exterior side of the boot in a generally centralized
location of the boot” .
[34]
Bauer further alleges at paragraph 18d) of its Amended Statement of
Claim that Reebok-CCM’s actions were calculated to depreciate the distinctive
character of its well known design mark. This new allegation is in addition to
the original allegation set out at paragraph 21, where Bauer also states that
after receiving a letter of demand, Reebok-CCM not only failed to cease its
infringing activities, but rather adopted the design on its entire line of CCM
U+Series Hockey Skates.
[35]
In light of these additional elements, combined with the other
allegations, it cannot be concluded that Bauer’s claim of punitive damages has
no reasonable prospect of success, i.e. that it is plain and obvious that the
Amended Statement of Claim discloses no reasonable cause of action with respect
to punitive damages. Echoing the comments of Wilson J. in Hunt v. Carey
at pp. 988-989, I am of the view that it would be inappropriate in these
circumstances to deny a plaintiff who is raising factual allegations that could
potentially (but not necessarily) be found to justify an award of punitive
damages the opportunity to persuade a judge at the trial. As further noted in Hunt
v. Carey at p. 989, “[i]t is not for
this Court on a motion to strike out portions of a statement of claim to reach
a decision one way or the other as to the plaintiff’s chances of success. As
the law that spawned the ‘plain and obvious’ test makes clear, it is enough
that the plaintiff has some chance of success”. Though
these principles were set out by the Supreme Court of Canada within the context
of a motion to strike, they also apply to the amendment sought by Bauer in
these proceedings.
[36]
For these reasons, I would therefore dismiss the appeal from the First
Order in docket A‑255-13, and allow in part the appeal from the Second
Order in docket A-409-13 by permitting Bauer to further amend its Statement of
Claim by adding thereto paragraph 1(k) with respect to punitive damages, but
without any reference to aggravated damages. In light of the divided result,
there should be no order as to costs in both appeals.
“Robert M. Mainville”
“I agree.
Johanne
Gauthier J.A.”
“I agree.
Richard
Boivin J.A.”
Email this Content