Date: 20090916
Docket: T-1035-06
Citation: 2009
FC 909
Ottawa, Ontario, September 16, 2009
PRESENT: The Honourable James K. Hugessen
BETWEEN:
UNDERWRITERS
LABORATORIES INC.
Plaintiff
and
SAN FRANCISCO GIFTS LTD.,
SAN FRANCISCO RETAIL GIFTS INCORPORATED
(previously called SAN FRANCISCO GIFTS
INCORPORATED),
SAN FRANCISCO GIFT STORES LIMITED,
SAN FRANCISCO GIFTS (ATLANTIC) LIMITED,
SAN FRANCISCO STORES LTD.,
SAN FRANCISCO GIFTS & NOVELTIES INC.,
SAN FRANCISCO GIFTS & NOVELTY
MERCHANDISING CORPORATION
(previously called SAN FRANCISCO GIFTS AND
NOVELTY CORPORATION),
SAN FRANCISCO (THE ROCK) LTD.
(previously called SAN FRANCISCO
NEWFOUNDLAND LTD.),
SAN FRANCISCO RETAIL GIFTS &
NOVELTIES LIMITED (previously called
SAN GIFTS & NOVELTIES and
BARRY SLAWSKY
Defendants
REASONS FOR ORDER AND ORDER
Introduction
[1]
These are two motions brought by the defendants appealing two
separate orders made by the case management prothonotary dismissing, in one
case in its entirety, in the other in part, two motions brought by the
defendants. The first motion sought the dismissal of the plaintiff's action for
delay; the second sought to strike out certain parts of the statement of claim.
While the motions were heard and disposed of separately by the case management
prothonotary, the motions in appeal of those orders were heard together and are
disposed of in the present Reasons.
The motion to dismiss for delay
[2]
The action was brought in June 2006 and has thus been pending for
over three years. It has not progressed very far although I was informed at the
hearing that documentary discovery is imminent and that oral examinations
should follow shortly thereafter. The prothonotary carefully reviewed the
various steps which had been taken since the start of the action. She found
that a substantial portion of the delay had been caused by the fact that the
action had been stayed on a number of occasions at the request of the parties.
Since a stay can only be obtained by order of the Court the prothonotary was
correct to hold that, absent bad faith or fraud on the part of the plaintiff,
of which there was no evidence, the plaintiff could not be held responsible for
delays so caused. She also found that a further substantial period of time lost
was due to the defendants having brought a motion (the same motion which is the
subject of the second appeal) which was irregular in form and required
considerable time to correct and arrange a hearing date. This too was clearly
not plaintiff’s fault. She also found that plaintiff should not be held
responsible for delays due to the running of the normal time periods allowed by
the rules for the taking of various steps in the litigation process. There is
no reviewable error in these findings.
[3]
As a result of her examination of the record the prothonotary
concluded that only some four months of delay should be laid at plaintiff’s
door and that in the circumstances this delay was neither inordinate nor
inexcusable. Although the point was not strictly speaking essential, the motion
under Rule 167 not being a regular status review, the prothonotary also noted
that the plaintiff was not in default of any scheduling order.
[4]
Finally, the prothonotary declined to consider the defendants’
evidence of alleged prejudice due to the delay although she noted in passing
that she considered such evidence to be of little value or weight. I agree with
that assessment. Indeed, with respect for certain dicta to the contrary, it is
my view that prejudice to other parties is not a necessary component of a
decision that a plaintiff's action has been unduly delayed and should be
dismissed; put briefly, evidence of prejudice to other parties is relevant but
not essential to an order of dismissal for delay.
[5]
Assuming that a discretionary decision not to dismiss an action
for delay falls into the category of decisions which are of a nature to affect
the final outcome of the case requiring a reviewing court to exercise its own
discretion de novo, my own discretion would not lead me to any different
conclusion than that of the prothonotary. I can find no error of law or other
reviewable flaw in her reasoning or conclusions. I specifically reject the
argument advanced by defendants’ counsel to the effect that a plaintiff's
obligation to move the case forward is in effect an obligation of result and
that the court should look behind the various stay orders that were given
herein and the other delays which were the responsibility of the defendants
themselves and dismiss the plaintiff’s action simply on the basis that the
plaintiff might possibly have done more to force the matter forward. The rules
of civil procedure are designed to provide a just and expeditious solution to a
dispute on its merits, not to lock the parties into a rigid timetable which forces
them into a headlong rush to a conclusion without regard for the consequences.
[6]
The first appeal will be dismissed.
The motion to strike
[7]
While there were a number of questions raised by defendants in
their motion to strike before the prothonotary, only two of them were put in
issue in the appeal: the adequacy of the allegations raising the personal
liability of Mr. Slawsky and the propriety of the allegation of prior criminal
conviction of one of the corporate defendants.
[8]
Dealing first with the question of the allegations of personal
liability against Mr. Slawsky, it is clear that this aspect of the motion
before the prothonotary was based on Rule 221(1)(a): that no cause of action
against Mr. Slawsky was pleaded in the statement of claim. That is unambiguously
stated in para. 2 of the “grounds” section of the defendants’ motion dated
February 13, 2007. Both before the prothonotary and again on the appeal before
me defendants’ counsel attempted to “bootleg” into the record affidavit
evidence of the extent of Mr. Slawsky’s personal involvement, or lack of it, in
the activities of the corporate defendants. That is in direct breach of the
prohibition contained in Rule 221(2).
[9]
Defendants’ counsel attempts to overcome this difficulty by
saying that his motion is also based on Rule 221(1)(f). It is argued that to
implead a defendant without alleging a cause of action against him is an abuse
of process. The argument is unacceptable. As already shown, it is in direct
contradiction of defendants’ own motion materials. It also ignores the clear
wording of Rule 221(1)(f) which by the use of the word “otherwise” appears to
exclude from the possible abuses of process which may be raised under that
paragraph any which can and should be raised under the preceding paragraphs,
all of which, depending on the circumstances, may constitute an abuse of the
court’s process. The defendants’ motion to strike, as required by Rule 221(2)
must be judged solely on the basis of the allegations of the statement of claim
and particulars, which are assumed for these purposes to be proved, but without
considering any evidence. To do otherwise would convert a simple preliminary
motion on a question of law into a disguised form of summary judgment motion.
[10]
The relevant allegations are found in paras. 49-51 of the
statement of claim as particularized and read as follows:
49. Slawsky, through Laurier
Investments owns 100% of SFG Ltd. and through it, all other Defendants. He is
also the president and sole director of each of the Defendants. Slawsky is the
driving force and directing mind of San Francisco.
50. Slawsky executed both the Minutes of Settlement and Undertaking on
behalf of San Francisco. Therefore, Slawsky had prior knowledge of the
existence of the UL Certification Mark and San Francisco’s agreement to cease
offering for sale and selling merchandise bearing counterfeit reproductions of
the UL Certification Mark. In addition, Slawsky was aware of the Alberta
Provincial Court’s observation that San Francisco’s importation and sale of, inter
alia, electrical products bearing counterfeit labels bearing the UL
Certification Mark constituted “a despicable fraud on the public”.
Nevertheless, Slawsky, through San Francisco, continues to offer for sale and
sell uncertified electrical products bearing unauthorized and counterfeit
reproductions of the UL Certification Mark in knowing or reckless and callous
disregard of UL’s rights in the UL Certification Mark and the potential fraud
on the consuming public from the sale of the San Francisco Electrical Products.
51. Alternatively, Slawsky,
as the directing mind of San Francisco, caused it to engage in the wrongful
conduct particularized above, knowing or recklessly disregarding that he,
through San Francisco, was misleading the public and damaging UL’s reputation
and business.
[11]
In my view these allegations go well beyond the simple assertions
of directorial management and control which were found to be insufficient in
the cases of Mentmore Manufacturing Co. v. National Merchandise
Manufacturing Co. (F.C.A.), [1978] F.C.J. No. 521 and Kastner v.
Painblanc (F.C.A.), [1994] F.C.J. No. 1671 to found personal liability of a
director and controlling shareholder. The following words of Mr. Justice LeDain
in the former case are instructive:
[28] I do not think we
should go so far as to hold that the director or officer must know or have
reason to know that the acts which he directs or procures constitute
infringement. That would be to impose a condition of liability that does not
exist for patent infringement generally. I note such knowledge has been held in
the United States not to be material where the question is the personal
liability of directors or officers. See Deller’s Walker on Patents, 2nd ed.,
1972, vol. 7, pp. 117-118. But in my opinion 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. The precise
formulation of the appropriate test is obviously a difficult one. Room must be
left for a broad appreciation of the circumstances of each case to determine
whether as a matter of policy they call for personal liability. Opinions might
differ as to the appropriateness of the precise language of the learned trial
Judge in formulating the test which he adopted - - “deliberately or recklessly
embarked on a scheme, using the company as a vehicle to secure profit or custom
which rightfully belonged to the plaintiffs”- - but I am unable to conclude
that in its essential emphasis it was wrong. […]
[12]
I conclude, as did the prothonotary, that the quoted allegations
if proved are sufficient to permit the reasonable conclusion that Slawsky’s
personal liability is engaged by his knowing and deliberate conduct in causing
the breach of the plaintiff's intellectual property rights.
[13]
The second aspect of the defendants’ motion to strike arises from
para. 32 of the statement of claim:
32. On or about December
30, 2004 San Francisco pleaded guilty to charges under section 42 of the Copyright
Act including one (1) count arising from San Francisco’s sale of electrical
products bearing a counterfeit safety certification label depicting the UL Certification
Mark.
[14]
It is said that this allegation is both irrelevant and highly
prejudicial. The argument, as I understand it, is that since the pleaded plea
of guilty and conviction were in relation to the Copyright Act and the
present claim is for Trade Mark infringement there is simply no relationship
between the allegation and the present claim. With respect, I do not agree. It
is a commonplace that there may be copyright in a trade mark. Again, the
allegation must, for the purposes of this motion, be taken as proven and it
makes it plain that, whatever the statutory basis of the defendants’ proven and
admitted criminality, the facts giving rise thereto are identical in each case,
namely the sale of electrical products bearing a counterfeit version of the
plaintiff's well known UL Certification mark. While that allegation may well be
prejudicial to the defendants, it is manifestly extremely relevant to the
issues in the present action as an admission of previous conduct identical to
what is alleged here. I know of no rule which would exclude evidence of such
conduct. This is not “similar fact” evidence but evidence of the prior
commission of the very illegal act which is the subject of the present action.
[15]
The second appeal motion will also be dismissed.
Costs
[16]
The plaintiff should have its costs of each motion. Those costs
should be separately assessed since the motions were separately brought and
contested and were only brought together for hearing at the very end; the time
of hearing should be divided equally between the two motions.
[17]
In addition, while I do not think that the appeals raised any
particularly difficult or important questions of law so as to justify an award
of costs above the usual scale (Column III) it is my view that neither motion
should have been brought. The case management prothonotary had had the carriage
of this case for over two and a half years; she was intimately familiar with
all the details of the case and her orders under appeal dealt with relatively
routine matters of procedure. To appeal such orders as the defendants did
without a solid basis in law simply adds to the expense and delay of
litigation. The defendants shall pay plaintiff’s costs forthwith and in any
event of the cause.
ORDER
THIS COURT ORDERS that the
appeals of the case management prothonotary’s Orders of June 23, 2009 and July
2, 2009, are both dismissed with costs to be assessed and payable forthwith and
in any event of the cause.
“James
K. Hugessen”
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