Date: 20000118
Docket: T-1289-99
BETWEEN:
TOMMY HILFIGER LICENSING, INC.
and TOMMY HILFIGER CANADA INC.
Plaintiffs
- and -
PRICE COSTCO INC.
Defendant
REASONS FOR ORDER
McGILLIS J.:
[1] The plaintiffs Tommy Hilfiger Licensing, Inc. and Tommy Hilfiger Canada Inc. ("Hilfiger") have brought a motion for leave to amend the Statement of Claim in this action for trade-mark infringement by filing a Fresh Amended Statement of Claim. The defendant Price Costco Canada Inc. ("Costco") has consented to the relief sought on the motion, save and except for the request to join certain defendants.
[2] In 1998, allegedly counterfeit Hilfiger garments, including t-shirts and jeans, were purchased at various Costco locations in Canada. In the fall of 1998, Hilfiger's American attorneys and Costco's in-house counsel for its American parent corporation engaged in discussions concerning the chain of custody and source of supply of the allegedly counterfeit items. By letter dated October 21, 1998, Costco's corporate counsel named GPD Trading Inc. of Mississauga, Ontario ("GPD Trading") and 3271064 Canada Inc. of Montreal, Quebec ("3271064 Canada") as "the most likely vendors" of certain items.
[3] From May to August 1999, allegedly counterfeit Hilfiger socks were purchased at various Costco locations.
[4] On July 16, 1999, the Statement of Claim was issued.
[5] Following the service of the Statement of Claim, Costco took various steps to cooperate with Hilfiger, and counsel for the parties engaged in settlement negotiations. In a "without prejudice" letter dated October 22, 1999, sent during the ongoing settlement negotiations, counsel for Costco forwarded various documents to counsel for Hilfiger. Those documents revealed the identities of certain Costco suppliers. Two of those suppliers were not named in the October 1998 letter written by Costco's in-house counsel prior to the commencement of the action.
[6] Costco adduced evidence on the motion to establish that the documents revealing the names of its suppliers were disclosed on a "without prejudice" basis in the context of ongoing settlement negotiations. That affidavit evidence stated, in part, as follows:
| Further, at all material times, it was understood that these documents would only be provided to the representatives of [Hilfiger] on a without prejudice basis pursuant to settlement discussions between the parties in an effort to resolve their differences. |
[7] That affidavit evidence was not challenged by way of cross-examination. The "without prejudice" letter that accompanied the documents was not produced in evidence on the motion by either party.
[8] Counsel for Costco submitted that the motion by Hilfiger to join the suppliers as defendants in the action should be dismissed at this stage of the proceeding as "a matter of public policy", in that their names were disclosed on a "without prejudice" basis in the context of ongoing settlement negotiations. He further submitted that the motion was premature and that counsel for Hilfiger ought to have waited until Costco produced its affidavit of documents to see whether Costco was prepared to disclose voluntarily the names of its suppliers or whether it would be necessary for Hilfiger to bring a motion for the production of the information.
[9] The existence of a privilege for settlement negotiations is well recognized. The rationale underlying the privilege and the conditions to be met in order to successfully assert it were succinctly summarized in J. Sopinka et al, The Law of Evidence in Canada, 2d Ed. (Toronto: Butterworths, 1999) in the following terms:
| III. COMMUNICATIONS IN FURTHERANCE OF SETTLEMENT |
| A. Policy and General Rule |
| "14.201 It has long been recognized as a policy interest worth fostering that parties be encouraged to resolve their private disputes without recourse to litigation, or, if an action has been commenced, encouraged to effect a compromise without resort to trial. |
| ... |
| "14.203 In furthering these objectives, the courts have protected from disclosure communications, whether written or oral, made with a view to reconciliation or settlement. In the absence of such protection, few parties would initiate settlement negotiations for fear that any concession they would be prepared to offer could be used to their detriment if no settlement agreement was forthcoming. |
| ... |
| B. Conditions for Recognition of the Privilege |
| "14.207 There are a number of conditions that must be present for the privilege to be recognized: |
| (a) a litigious dispute must be in existence or within contemplation; |
| (b) the communication must be made with the express or implied intention that it would not be disclosed to the court in the event negotiations failed; and, |
| (c) the purpose of the communication must be to attempt to effect a settlement. |
[10] In applying the relevant criteria, I note at the outset that the names of GPD Trading and 3271064 Canada were disclosed to Hilfiger in 1998 prior to the issuance of the Statement of Claim. In the circumstances, the identities of GPD Trading and 3271064 are not protected by any privilege and they may be included by Hilfiger as defendants in the action.
[11] With respect to the names of the other suppliers referred to in the documents forwarded with the "without prejudice" letter dated October 22, 1999, those names were provided to Hilfiger only following the institution of the action and with the express or implied intention, as evidenced by the use of the term "without prejudice", that they would not be disclosed. Furthermore, the unchallenged affidavit evidence establishes that those names were provided "...pursuant to settlement discussions between the parties in an effort to resolve their differences". In the circumstances, Costco has satisfied the necessary criteria and has established that the names of the other suppliers are protected by the privilege for settlement negotiations. It was therefore inappropriate for counsel for Hilfiger to make a unilateral decision to include the names of Costco's other suppliers in the draft fresh amended statement of claim at this stage of the proceeding. During the discovery process, Costco will have to address squarely the question of revealing the names of its suppliers and will be required to make whatever procedural and tactical decisions are necessary given its relationship with its suppliers. The unilateral decision made by counsel for Hilfiger to reveal the names provided to it on a "without prejudice" basis in the context of settlement discussions not only breached the privilege but also would have pre-empted counsel for Costco from making certain decisions, from both a business and legal perspective, in conducting his defence of the action.
[12] The motion is granted in part. The style of cause is amended by deleting the party defendant "Price Costco Canada Inc." and replacing it with "Costco Canada Inc." and "Costco Wholesale Canada Ltd." The style of cause is further amended by adding "GPD Trading Inc." and "3271064 Canada Inc." as party defendants. In all other respects, the motion is dismissed without prejudice to the right of Hilfiger to file a Fresh Amended Statement of Claim that makes no reference to the names of the two suppliers protected by the privilege for settlement negotiations. Counsel will be provided with an opportunity to make submissions on the question of costs in a teleconference to be held later today.
"D. McGillis"
Judge
Toronto, Ontario
January 18, 2000
FEDERAL COURT OF CANADA
Names of Counsel and Solicitors of Record
| COURT NO: T-1289-99 |
| STYLE OF CAUSE: TOMMY HILFIGER LICENSING, INC. |
and TOMMY HILFIGER CANADA INC.
- and -
| PRICE COSTCO INC. |
| DATE OF HEARING: MONDAY, JANUARY 17, 2000 |
| PLACE OF HEARING: TORONTO, ONTARIO |
| REASONS FOR ORDER BY: McGILLIS J. |
DATED: TUESDAY, JANUARY 18, 2000
| APPEARANCES: Mr. Tom Slahta |
| For the Plaintiffs |
| Mr. Ian MacPhee |
| For the Defendant |
| SOLICITORS OF RECORD: Kestenberg Siegal Lipkus |
Barristers & Solicitors
65 Granby Street
Toronto, Ontario
M5B 1H8
| For the Plaintiffs |
| Lapointe Rosenstein |
Barristers & Solicitors
1250 René-Lévesque Blvd. West
Suite1400
Montréal, Québec
H3B 5E9
| For the Defendant |
FEDERAL COURT OF CANADA
Date: 20000118
Docket: T-1289-99
Between:
| TOMMY HILFIGER LICENSING, INC. |
and TOMMY HILFIGER CANADA INC.
Plaintiffs
- and -
| PRICE COSTCO INC. |
Defendant
REASONS FOR ORDER