Date: 20030910
Docket: T-778-01
Citation: 2003 FC 1053
Ottawa, Ontario, this 10th day of September, 2003
Present: The Honourable Mr. Justice Russell
BETWEEN:
TERRA NOVA SHOES LTD. and
TERRA NOVA FOOTWEAR LIMITED
Plaintiffs
and
NIKE INC. and NIKE CANADA LTD.
Defendants
REASONS FOR ORDER AND ORDER
APPEAL ON MOTION TO STRIKE
ORDER SOUGHT
[1] This motion is for an Order reversing, in part, the Order of Prothonotary Lafrenière dated May 21, 2003.
STANDARD OF REVIEW:
[2] The parties agree that the standard of review to be applied on this Appeal is the standard set out in Canada v. Aqua-Gem Investments Ltd., [1993] 2 F.C. 425 (C.A.), namely, that the Prothonotary's discretionary order should not be disturbed on appeal unless it is clearly wrong, in the sense that his exercise of discretion was based on a wrong principle of law or a misapprehension of the facts.
[3] As a Case Management Prothonotary, Prothonotary Lafrenière is to be given latitude to manage cases, and his exercise of discretion is only to be interfered with in clear cases. The Defendants submit that the Prothonotary was clearly wrong in failing to apply the correct legal standard for the striking out of pleadings, and that the Prothonotary was also clearly wrong when he failed to consider material evidence of third party use of the word 'terra'.
NATURE OF THE ACTION
[4] The Plaintiffs have brought the underlying action against the Defendants for trade-mark infringement and passing off. The Plaintiffs assert trade-mark rights to the common word 'terra'. One of the principal defences of the Defendants is that the word 'terra' has been adopted by various third parties in Canada as a trade-mark or trade name in association with footwear and related clothing items. The Defendants intend to show at trial that the word 'terra' is so commonly adopted by third parties who are unrelated to the Plaintiffs that the Plaintiffs' TERRA trade-marks are non-distinctive and are invalid. The Defendants further intend to show that consumers are accustomed to seeing the word 'terra' in the marketplace and are not confused as to the source between the Plaintiffs' safety footwear products and the Defendants' athletic shoes.
[5] In support of this defence, the Statement of Defence and Counterclaim sets out in para. 9 some of the material facts supporting the allegations of non-distinctiveness of the Plaintiffs' TERRA trade-marks.
[6] The Defendants allege that the Plaintiffs have pleaded over and have answered the Defendants' allegations of third party use and there was no issue regarding the Plaintiffs' ability to understand and answer the nature of the Defendants' defence as described in the impugned pleadings.
[7] In compliance with the Defendants' disclosure obligations under the Rules, the Defendants provided the Plaintiffs with documentation within their knowledge supporting the allegations of third party use of the word 'terra' in association with footwear and related items.
[8] At the hearing of the Plaintiffs' motion before Prothonotary Lafrenière, the Plaintiffs did not file the Defendants' documents produced during the examination for discovery. While this material was made available to the Prothonotary for review, the Defendants allege he did not give appropriate regard to the materials in support of the allegations found in the impugned paragraphs. As a result of not having properly considered the relevant material, the Defendants allege, the Prothonotary ordered that the impugned paragraphs be struck out. His Order contained the following reasons:
A party must have grounds for making an allegation in a pleading, otherwise the allegation is frivolous in nature. Although the discovery process is substantially complete, the Defendants have offered no facts, only assumptions and speculation, in support of the allegations of third party uses.
[9] The Defendants submit that, had the Prothonotary given appropriate regard to the Defendants' documentary productions, it would have been clear that there was ample evidence to support the validity of the impugned pleadings. Accordingly, the Prothonotary erred in concluding that there were "no facts, only assumptions and speculation, in support of the allegations of third party uses."
ANALYSIS:
[10] The Defendants argue that a close examination of the relevant documents shows prima facie use of the word "terra" in association with third party footwear and/or related items, and also indicates that these products are available for sale in Canada.
[11] Having reviewed the relevant documents, I cannot agree with the Defendants in this regard. The documents amount to a list of dealers and products. The word "terra" does appear, but there is no link between the word "terra" and any products available in Canada.
[12] In my opinion then, in making his order, Prothonotary Lafrenière did not misapprehend the facts as alleged by the Defendants. Even on the basis of the relevant documents produced before me in this appeal motion the Defendants have offered no facts, only assumptions and speculation in support of the allegations of third party uses, as Prothonotary Lafrenière concluded in his decision which was not, therefore, clearly wrong in this regard.
[13] But the Defendants argue further in this matter that, as a matter of law, the Prothonotary erred in ordering that the impugned pleadings be struck out. The discretion to strike out pleadings should only be exercised in plain and obvious cases where the court is satisfied beyond doubt that the allegation cannot be supported and is certain to fail because it contains a radical defect.
Hunt v. Carey Canada Inc., [1990] 2 SCR 959 at 980
[14] In cases where the grounds to strike out pleadings are those alleged by the Plaintiffs, the Defendants argue that the threshold test to strike out pleadings and to deny a party a cause of action or a defence prior to trial is very high.
The Court will only strike pleadings in plain and obvious cases where it is beyond doubt that the plaintiff will not succeed where the issue is the disclosure of a reasonable cause of action . . . In an instance in which the issue is whether a pleading is scandalous, frivolous, vexatious or an abuse, the test is at least as stringent.
Inmates of Mountain Prison v. Canada, [1998] FCJ No. 573 at para. 1 (F.C.T.D.)
A frivolous and vexatious action includes one which will not lead to a practical result. The terms frivolous and vexatious define a claim which obviously cannot be sustained.
Yearsley v. Canada, [2001] FCJ No. 1078 at para. 14 (F.C.T.D.)
[15] The Defendants go further and say that, as a matter of law, pleadings may not be struck out for being frivolous where another party has pleaded over them.
Dene Tsaa First Nation v. Canada, [2001] FCJ No. 1177 at para. 3, 4 (F.C.T.D.), varied but not on this point, [2002] FCJ No. 427 (F.C.A.).
[16] Caterpillar Tractor Co. v. Babcock Allatt Limited., [1983] 1 F.C. 487, 67 C.P.R. (2d) 135 (T.D.); affirmed (1983), 72 C.P.R. (2d) 286 (Fed. C.A.) is generally regarded as authority for the proposition that where the party with the onus of proof pleads without evidence to support a pleading, it is frivolous and vexatious. A claim that does not sufficiently reveal the facts upon which a cause of action is based makes it impossible for the opposing party to answer the claim or the court to regulate the action. Hence, it is a frivolous and vexatious action.
[17] As the Defendants have not yet offered evidence on the impugned paragraphs, they remain frivolous and vexatious as these words are commonly used in the jurisprudence.
[18] The issue raised by the Defendants is whether this clear rule continues to apply where the other party has pleaded over the pleadings at issue. In this regard, the Defendants rely upon the words of Hugensen J. in Dene Tsaa First Nation, supra, at paras. 3 and 4 (F.C.T.D.):
3 In my view, the great weight of the case law in this Court is to the effect that a motion which is based on the subparagraphs of Rule 221 other than subparagraph a) must be brought before the defendant has pleaded over, or if brought after that time the plea itself must have contained a reservation with regard to the impugned paragraphs. I am satisfied to cite only one case in support of that proposition and that is the decision of the Court of Appeal in Proctor & Gamble Co. v. Nabisco Brands Ltd. (1985), 62 N.R. 364 at 366.
4 There is a reason for the rule, namely that where a motion to strike is based on paragraph a), that is to say that the statement of claim or the impugned paragraphs do not disclose a reasonable cause of action, the motion goes to the very heart of the action itself and it is appropriate that the Court should be able to deal with matters of that sort at any stage with perhaps only cost consequences flowing if the person making the motion does so on a late basis. However, where the motion is based on paragraphs b) to f) of the Rule, it is essentially a technical pleading matter and the policy of the Court is, and has for many years, been that parties should be encouraged to put those matters behind them at an early stage. If a party wishes to take issue on a technical basis with another party's pleading, that must be done as soon as possible in the proceedings, otherwise the party must hold his or her peace.
. . .
[19] In the present case, a review of the proceedings reveals that the Plaintiffs have consistently requested details of third party usage of terra in conjunction with the sale of products in Canada and the Defendants have consistently represented that such details will be supplied if and when they become available to the Defendants. As Prothonotary Lafrenière pointed out in his order "the discovery process is substantially complete [and] the Defendants have offered no facts, only assumptions and speculation, in support of the allegations of third party uses."
[20] As the Case Management Prothonotary, Prothonotary Lafrenière was well aware of this situation and, as part of his order, took care to provide as follows:
Paragraphs 9©) - (bb), 9(dd), and 9(ff) shall be struck from the Statement of Defence and Counterclaim with leave to apply to amend should the defendants obtain information regarding sales in Canada of the products listed in such paragraphs.
[21] I understand the Dene Tsaa First Nation, supra, case to be authority for the proposition that the amount of time between the close of pleadings and bringing the motion to strike is a relevant factor to be taken into account in exercising the discretion to strike and Hugessen J. went as far as saying that "[i]n my view, the great weight of the case law in this court is to the effect that a motion which is based on the subparagraphs of rule 221 other than subparagraph a) must be brought before the defendant has pleaded over, or, if brought after that time, the plea itself must have contained a reservation with regard to the impugned paragraphs." In the case at bar, the situation is significantly different from the one confronted by Hugessen J. in Dene Tsaa First Nations, supra. The Plaintiffs have not plead over in the sense intended by Hugessen J. in that case. In their reply they have simply asked the Defendants to prove their assertions of third party usage and have waited to give the Defendants sufficient time to produce details concerning third party products sold in Canada. As the discovery process is substantially complete and the Defendants have still not produced such details, this is an appropriate time in the proceedings to strike the impugned paragraphs. There is nothing clearly wrong with Prothonotary Lafrenière's decision to do so at this time and the exercise of his discretions was not based upon a wrong principle of law or a misapprehension of the facts.
ORDER
THE COURT HEREBY ORDERS THAT:
1. The Appeal is dismissed.
2. The Plaintiffs shall have costs of this Appeal, irrespective of the event.
"James Russell"
J.F.C.C.
FEDERAL COURT OF CANADA
TRIAL DIVISION
NAMES OF COUNSEL AND SOLICITORS OF RECORD
DOCKET: T-778-01
STYLE OF CAUSE: TERRA NOVA SHOES LTD. and TERRA FOOTWEAR
LIMITED
Plaintiffs
- and -
NIKE INC. and NIKE CANADA LTD.
Defendants
PLACE OF HEARING: TORONTO, ONTARIO
DATE OF HEARING: MONDAY, JULY 21, 2003
REASONS FOR ORDER
AND ORDER BY: RUSSELL J.
DATED: SEPTEMBER 10, 2003
APPEARANCES:
Mr. David Reive
Ms. Angela M. Furlanetto
For the Plaintiffs
Mr. Christopher J. Pibus
Mr. James H. Buchan
For the Defendants
SOLICITORS OF RECORD:
Mr. David M. Reive
Ms. Angela M. Furlanetto
Barristers and Solicitors
Toronto, Ontario
For the Plaintiffs
Mr. Christopher J. Pibus
Mr. James H. Buchan
Barristers and Solicitors
Toronto, Ontario
For the Defendants
FEDERAL COURT OF CANADA
Date:
Docket: T-778-01
BETWEEN:
TERRA NOVA SHOES LTD. and TERRA FOOTWEAR LIMITED
Plaintiffs
and
NIKE INC. and NIKE CANADA LTD.
Defendants
REASONS FOR ORDER
AND ORDER