Ottawa, Ontario, September 19, 2006
PRESENT: The Honourable Mr. Justice Phelan
BETWEEN:
DURSOL-FABRIK OTTO DURST GMBH CO. KG
and
POLISOL NORTH AMERICA INC.,
ROBERT SCOTT and MARLENE CASTELLANO
REASONS FOR JUDGMENT AND JUDGMENT
[1] The Defendant, Robert Scott (Scott), and his company, Polisol North America Inc. (Polisol), were charged with several incidents of contempt of the August 9, 2004 Order of Justice Mactavish (Mactavish Order), the October 22, 2004 Order of Justice Phelan (Phelan Order), both of which were on consent, and the January 17, 2005 ex parte Order of Justice Phelan (Amended Order). Those Orders included prohibitions against marketing and selling as well as a requirement to deliver up various materials.
[2] The trial of the alleged contempts occurred over several days in December 2005 and March 2006. There were numerous other interlocutory proceedings, particularly related to securing records from computers and the segregation of relevant from irrelevant material.
[3] Scott and Polisol’s position (which are identical since Scott controls Polisol and other companies involved in the contemptuous behaviour) can be summarized as denial, a plea of accident or ignorance, someone else’s fault, lack of intent and minimal adverse effect.
[4] The Court is satisfied beyond a reasonable doubt that the contempt occurred in twelve of the thirteen charges of contempt, that Scott was either deliberate or so recklessly and wilfully blind to his legal obligations that there is no excuse for his conduct, nor are there any compelling mitigating factors.
II. FACTS - SUMMARY
[5] The Plaintiff (Dursol) commenced an action dated June 17, 2004 against the Defendants seeking declarations in respect of the alleged infringement of its trade marks, for passing off, depreciation of good will, infringement of copyright and further claimed that the Defendants made false and misleading statements in respect of their wares. In addition, the Plaintiff sought interim, interlocutory and permanent injunctive relief and other relief.
[6] Prior to the commencement of the Federal Court action, on November 27, 2003, Justice Cusinato of the Ontario Superior Court of Justice issued an order which included a term that one of the Defendants, Dursol North America (DNA) was not to hold itself out as being in any way associated with the Plaintiff or its trade marks, including DURSOL and AUTOSOL.
[7] By Order of August 9, 2004, on consent of the parties in this action, Justice Mactavish issued her Order which provided, amongst other matters:
3. THIS COURT FURTHER ORDERS that, pending further order of this Court or the consent of the parties in writing, Dursol North America Inc. (“DNA”), Polisol North America Inc. (“Polisol”), Robert Scott (“Scott”), Marlene Castellano (“Castellano”), as well as their respective employees, agents, representatives, directors, officers, successors and assigns (including without limitation AG Group Worldwide Inc., JPR Industries and Vic Shanley), are prohibited and restrained from:
i. marketing or selling metal polish or other wares in association with the word, name, trade-mark and/or trade name POLISOL, AUTOSOL or DURSOL; and
ii. marketing or selling metal polish or other wares in association with any packaging or promotional material that bears any resemblance to the packaging or promotional material used by DNA or Dursol-Fabrik Otto Durst GmbH & Co. KG at any time, including without limitation the German phrases “Boots-Schnellreiniger” and “Boots Reiniger”, the image of the bows of three boats, the image of three gold medals, the image of a sunburst symbol, the slogans “The Original Gold Medal Winner”, “Cleans, Polishes and Protects”, “Product is Made in Canada from the Original German Product”, “North America has a New Shine” and “Europe’s Finest Export”, the SKU numbers 1000, 1100 and 1210, and the EAN-UCC bar code/company prefix number “4004982” (or any variation thereof, including the company prefix number “004982”);
[8] There is no issue that Scott and Polisol had knowledge of the Mactavish Order and consented to it.
[9] Scott and Polisol were charged with contempt of the Mactavish Order for having marketed and/or sold metal polish products in association with the trade mark AUTOSOL and the trade name POLISOL to E-Z Way Products Canada Inc./Carl Lorell on or about August 18, 2004. In his October 18, 2004 affidavit, Scott admitted that the acts took place but pleaded that he did not have any intent to breach the Mactavish Order and that he had merely fulfilled a customer’s order received prior to the injunction.
[10] As a result, Polisol and Scott consented to an order finding them in breach of the Mactavish Order and further consented to an expanded injunction order (Phelan Order) dated October 22, 2004.
[11] The Phelan Order contained a geographical restriction to the prohibition against marketing and selling of metal polish and other wares as well as a requirement to deliver up certain items to the Plaintiff and an authority for a bailiff to seize these items. The relevant portions of the Phelan Order are:
1. THIS COURT ORDERS that, pending trial, the Defendants and their respective employees, agents, directors, officers, successors and assigns are enjoined and restrained from:
…
(ii) marketing or selling metal policy or other wares in Canada in association with the trade-mark and trade name POLISOL;
…
2. THIS COURT ORDERS that the Defendants forthwith deliver up to the Plaintiff all products, signs, advertising, trade show graphics, catalogues, price lists, Material Safety Data Sheets, labels, packages, printed matter, printing dies, plates, compact disks containing label or other designs, artwork, and all other material in the possession, custody or control of the Defendants, the use of which would offend any injunction or declaration granted herein;
3. THIS COURT ORDERS that a bailiff in the province of Ontario be authorized to seize the items listed in paragraph (2) above before judgment at 1634 Seacliffe Drive, Kingsville, Ontario, N9Y 2M6, and any other storage facilities of the defendants, to be stored at a facility designated by the Plaintiff at the joint cost of the Plaintiff and Defendants;
[12] As a result of what the Plaintiff learned after the Phelan Order was issued and the problems encountered with enforcement of the Phelan Order, the Plaintiff obtained, by ex parte application, amendments to the Phelan Order (Amended Order) which eliminated the geographical restrictions in the Phelan Order, expanded on the powers of the bailiff to seize items and expanded the obligation on the Defendants to deliver up items to include records comprising computer records, files and hard drives.
[13] Scott and Polisol were charged by Notice of Motion of November 25, 2005 with thirteen acts of contempt of either of the Mactavish Order, the Phelan Order or the Amended Order. The specifics of these charges and the evidence is more fully addressed in the Analysis section of these Reasons.
[14] At the contempt hearing, the Plaintiff called evidence from Lisa Valleau, the President of Autosol LLC and the agent for the Plaintiff as well as from James Albert Herr, the bailiff who executed the seizures under the Phelan Order and the Amended Order.
[15] Ms. Valleau’s testimony included corporate history, her efforts to secure evidence of Scott and Polisol’s contempt and her instructions and dealings with the bailiff. She was challenged by Scott and Polisol, particularly as to efforts to secure a Federal Express (FedEx) waybill as proof of Scott and Polisol’s contempt; the suggestion being (which she denied) that she had held herself out as being Robert Scott to obtain the documents from FedEx. Ms. Valleau was a credible witness, no doubt filled with vengeance about what she saw as Scott’s efforts to diminish “her” business. I accept her evidence as being credible.
[16] Herr gave evidence about his seizures of items and records. There is considerable conflict between Scott and Herr as to whether Scott had “delivered up” as required by the Phelan and Amended Orders. He denied that Scott indicated that there were other items which fell under the respective Orders and that he, Herr, suggested that if the Plaintiff wanted more, he would come back for those items. Herr also described how, on January 18, 2005, he found more product in Scott’s warehouse which had not been surrendered. His evidence is critical to the contempt charges in respect of failing to “deliver up” as required by this Court’s Orders.
[17] I accept Herr’s evidence and particularly where it conflicts with Scott. He was clear and forthright, he is an experienced bailiff, and he had no reason, as claimed by Scott, not to take all the items to which his attention was drawn.
[18] Scott and Polisol’s evidence was put in by Scott, James Anthony Verdoni and Bob Sehmbi.
[19] Scott outlined his general business which included not only the defendant corporations but also that of Freeway to Success (FTS) and Sports Wall of Fame (SWOF). As the evidence established, these corporate entities were all run by Scott and the separation of their corporate activities, one from the other, was inconsistent and haphazard. Scott provided his explanation for each of the alleged contempts, which are dealt with more fully later in these Reasons. Much blame was attributed to Ms. Castellano who was never called to corroborate any of Scott’s evidence.
[20] In summary, and taking account of the natural nervousness of a witness, as well as the high evidentiary threshold on a contempt charge, I find Scott’s evidence to be confusing and both internally and externally contradictory. His answers were often unresponsive and evasive, conceding only when there was no place to hide. His testimony was marked by a minimalist approach to compliance with the three Orders and a regrettable economy with the truth. Where his evidence conflicted with other credible evidence, I generally accepted that other evidence. In particular, I prefer Herr’s evidence to that of Scott’s and prefer the documentary evidence to that of Scott’s explanation or interpretation of such documents.
[21] Verdoni is a law clerk at FedEx. His evidence appeared to be called to challenge that of Valleau, particularly as to FedEx’s policy and practice which was that no third party could secure a FedEx waybill. The problem with his evidence is that he had no direct involvement in the matters at issue. His evidence of corporate policy and practice is not sufficient to overcome Valleau’s evidence which was direct, personal and which withstood cross-examination.
[22] A further defence to the contempt charges in respect of marketing and selling is that Scott did not know that on numerous e-mails he sent, the names DURSOL and/or POLISOL appeared because he did not understand how his e-mail address system functioned.
[23] Sehmbi is a Microsoft Certified Professional, Certified Administrator and Certified System Engineer. The purport of his evidence, which was to corroborate part of Scott’s evidence that he did not know his e-mails used the words DUROSOL and/or POLISOL, was that Scott would only see his name, as opposed to the full address, when he sent a message.
[24] As a result of the penetrating cross-examination by Mr. Kealy, Sehmbi’s overall testimony was of little assistance to Scott. As discussed later in these Reasons, Scott’s defence of ignorance could not be sustained because he either knew or ought to have known what his e-mail addresses showed including that it showed the words DUROSOL and/or POLISOL.
[25] In order to put the evidence in context, it is necessary to deal with the specifics of the contempt charges.
First Charge: Marketed POLISOL Products to Autozone Inc. during the period August 15, 2004 and September 13, 2004 contrary to the Mactavish Order
[26] Scott and Polisol admit to the act of marketing the product but deny liability on the grounds that the marketing was done in the United States of America where Autozone Inc. is located.
[27] Firstly, Scott and Polisol conducted these marketing activities from their place of business in Ontario. The fact that aspects of marketing also occurred in the United States does not address that aspect of the marketing which occurred in Canada.
[28] Secondly, the Mactavish Order contains no geographical restriction to the prohibited marketing. That restriction only appears in the Phelan Order of October 22, 2004.
[29] Scott’s explanation that as “an ordinary person”, he felt that the Mactavish Order applied only to Canada shows a complete disregard for the authority of a court order. There is no evidence that he sought legal advice about the terms of that Order even when faced on September 8, 2004 with an order charging him with contempt of the Mactavish Order regarding a sale to E-Z Way Products Canada Inc./Carl Lovell.
[30] There are no mitigating circumstances in this case. Scott was reckless in his dealing with matters related to the Mactavish Order. While Scott and Polisol claim that there were no sales and/or profit from this marketing activity, there is little credible objective evidence on this point. Scott and Polisol did not engage in this activity for any other reason than profit. These mitigating factors and others were raised in respect of each contempt charge and are dismissed for the same reasons.
[31] Scott and Polisol contend that if either or both were in contempt, the evidence relied upon by the Plaintiff in support of the allegation of breach was obtained wrongfully from FedEx without Scott’s knowledge and consent.
[32] As part of the evidence relied on to secure the Amended Order was an affidavit of Valleau which attached a FedEx International Waybill to demonstrate the alleged breach of the Phelan Order. Valleau says that she obtained the waybill by entering a number of codes, having a common numerical sequence starting point, until she obtained the right code and therefore the waybill number. Thereafter, she merely asked FedEx for that waybill. Given the vengeance with which Valleau has approached this case, it is plausible that she would take the time and go to that significant effort to secure evidence of Scott’s wrongdoing.
[33] While FedEx records indicate that a “Rob Scott” called FedEx on November 26, 2004 and asked for the specific waybill and gave Valleau’s fax number, she denies that either she or her husband represented themselves as Scott. For reasons given, I accept her evidence. There is only circumstantial evidence to rebut her direct, firsthand evidence.
[34] Furthermore, the argument of “clean hands” is a distraction from the main issue of Scott and Polisol’s contempt. Even if Valleau had acted as Scott and Polisol alleged, the equities still favour enforcement of this Court’s Order. The issue of contempt is not purely a matter as between the parties – the Court has a vital interest in ensuring compliance with its orders.
[35] Therefore, the Court finds that Scott and Polisol, beyond a reasonable doubt, committed contempt in respect of this First Charge.
Second Charge: Alleged Breach of Mactavish Order by marketing and shipping POLISOL Products to Autozone Inc. on or about November 10, 2004 and failed to deliver up to the Plaintiff the POLISOL Products so delivered to Autozone, contrary to the Phelan Order
[36] Scott and Polisol admit that Polisol products were shipped to Autozone in the United States on or about November 10, 2004; however, Scott denies any personal involvement and casts responsibility on his U.S. agent Robert Marr and on his secretary, Marlene Castellano. Scott and Polisol also make the same claim of “unclean hands” and absence of profit or compensation. Scott and Polisol also claim that they were not marketing and selling in Canada, as specifically geographically prohibited in the Phelan Order.
[37] Scott and Polisol failed to call either Marr or Castellano to corroborate Scott’s denial of personal involvement. However, a series of approximately 20 e-mails contained in Exhibit 1B sent to or from Scott (shown on the e-mail address as “Bob Scott<bscott@polisol.ca>” between August 10, 2004 and October 13, 2004 show Scott’s direct and personal involvement with his agent Marr in the marketing and sale of product to Autozone. Scott’s activities were conducted from Canada and therefore fell within the scope of the Phelan Order after October 22, 2004 and under the Mactavish Order prior thereto.
[38] Part of these activities was to have sample POLISOL product delivered to Autozone in advance of November 10, 2004. A November 12, 2004 e-mail from Marr to Autozone inquires as to receipt of the samples sent. In the context of all the evidence, the reference can only be to the samples in respect of which Scott was intimately involved.
[39] Scott (and Polisol) arranged for the delivery of POLISOL product to Autozone which constitutes marketing of an item in association with the trade mark POLISOL. Scott and Polisol are therefore found in contempt on this charge.
Third Charge: Sale of POLISOL Product to the Capital Theatre and Arts Centre on or about September 23, 2004 in breach of the Mactavish Order
[40] There is no question that this sale occurred. Scott and Polisol admit that, prior to the Mactavish Order, Polisol received an order from the Capital Theatre and Arts Centre for 12 tubs of metal polish. That order was not filled when the Mactavish Order came into effect.
[41] Scott’s excuse for this sale is that he believed that he was obligated to fulfil the sale because the order has been placed before the Mactavish Order. This excuse ignores both fact and law that the act of delivery is part of a “sale” and that the Mactavish Order was clear as to the prohibition against marketing and selling.
[42] Prior to the delivery to Capital Theatre, Scott and Polisol were served with the contempt proceedings in respect to the sale to E-Z Way and therefore had knowledge of the Plaintiff’s position as to the scope of the Mactavish Order. Nevertheless, Scott admits that he did not seek legal advice on either the Capital Theatre or E-Z Way matters until approximately October 18, 2004.
[43] Scott’s failure to seek legal advice when faced with a Court Order, his failure to seek clarification from or dispute with the Plaintiff when the Plaintiff’s position was made known, all in the face of lawsuits in this Court and the Ontario Superior Court, shows a reckless disregard for the legal process. His plea of “ignorance” is no excuse – it in fact condemns him by his inaction and disregard. There are no mitigating circumstances.
[44] There is no doubt that Scott and Polisol are in contempt on this charge as well.
Fourth Charge: Sale by Scott & Polisol to Palmar Inc. on October 12, 2004 in association with the work, name, trade mark and trade name POLISOL, contrary to the Mactavish Order
[45] There is no question that Scott and Polisol sold silicone sealant to Palmar Inc. The defence is that the silicone sealant is not “other wares” as that term is used in the Mactavish Order.
[46] Scott and Polisol take a narrow interpretation of the Mactavish Order; however, that interpretation does not accord with the Order read as a whole nor does it address the purpose and intent of the Order.
[47] The Mactavish Order addresses three situations which were to be restrained. The first is the marketing and sale by the Defendants of metal polishes of any nature and kind. That is consistent with the Plaintiff’s view that this is a “signature product” (my words) being a unique product associated with the Plaintiff and a principal product in its overall business.
[48] The second and third situations are those involving marketing and sales of anything else in association, either with the names, marks, etc. POLISOL, AUTOSOL or DURSOL, or in association with a certain type and style of packaging. This is entirely consistent with the legal actions and positions taken in this Court and the Ontario Superior Court where “disassociation” from each side was critical to the Plaintiff. The Plaintiff was seeking to sever any connection with the Defendants and to prevent the Defendants from enjoying whatever goodwill existed from the former relationship.
[49] The use of the term “other wares” must be read in conjunction with the associative nature of the marketing or sale. If the parties had wished to limit the matter to metal polishes and “similar wares” or to automotive care products, they would have done so. They chose broader words which encompass any other goods.
[50] The product was sold through Polisol North America Inc. and that company issued its own invoice. If Scott and Polisol were in any manner uncertain about the scope of the Mactavish Order, they took no action to seek clarification from this Court. In that regard, Scott and Polisol were reckless and exhibited an intent to avoid the terms of the Mactavish Order.
[51] Therefore, Scott and Polisol were in contempt of the Mactavish Order on this charge. I cannot agree that this contempt, as well as the others, was not done in a public way. It was done openly and with third parties.
Fifth Charge: Marketed the product “Waterless Wash & Wax” to Canadian Tire in association with the words, names, trade marks and trade names DURSOL and POLISOL, contrary to the Mactavish Order
[52] On or about August 16, 2004, Scott and Polisol marketed the product “Waterless Wash & Wax” to Canadian Tire Corporation Ltd. The contemptuous action was alleged to be the sending of e-mails with the e-mail address “bscott@dursolnorthamerica.com” and which had as the signature “Bob Scott, President, Polisol North America Inc. bscott@polisol.ca”.
[53] Scott and Polisol do not deny the transaction but say that it does not offend the Mactavish Order because it is not one of Dursol’s “wares” and no confusion would arise. Further, Scott says that he was ignorant in respect of e-mail addresses and e-mail signatures. On this aspect of his defence, Scott relies on the evidence of Sehmbi to the effect that on Scott’s computer screen, the “from” line would simply show “Bob Scott”. The complete e-mail address only shows up on the receiving screen, not the sending screen, and only where Scott was not already in the recipient’s contact list. Therefore, Scott was unaware that his e-mails continued to demonstrate the word “Dursol” and/or “Polisol”.
[54] As to the issue of “wares”, that matter has been dealt with in the Fourth Charge. It is also noteworthy that the target of the sale was Canadian Tire, a significant purchaser of the Plaintiff’s products. The potential for association with the Plaintiff is even more evident in this instance.
[55] Scott’s plea of ignorance (as if that were an excuse) must be assessed against his own contradictory and inconsistent statements. Firstly, he said that he committed no breach by using the addresses; then he said that he knew he had three e-mail addresses but did not know how they worked or paid much attention to the matter; then he testified that Castellano was attempting to change an e-mail address but had technical trouble; he further testified that he did not know how his address appeared (why Castellano would be instructed to change an e-mail address which Scott did not know about is not explained); he then goes on to plead ignorance of computers, that it was other people’s fault and that generally he did not know what was transpiring with respect to e-mails.
[56] Even if one accepted Scott’s explanation, which I do not, he was a business man who used computers constantly to transact business. He took no steps to deal with his address and signature. In today’s world such ignorance, or, more importantly, the refusal to secure the technical assistance to deal with these types of matters, is not acceptable. Scott exhibited recklessness and a complete disregard for the obligations he had under this Court’s Orders.
[57] Sehmbi’s evidence, as indicated earlier, was of little assistance to Scott. It was established that in creating a new e-mail, Scott would see his default e-mail address of “bscott@dursolnorthamerica.com” in his draft. Scott could easily have used any one of his e-mail addresses, the only one not problematic being “bscott@freewaymarketing.com”. It was also confirmed that he would see his default signature. The same would occur if he printed the e-mail.
[58] In addition, Sehmbi confirmed that Scott could easily have changed his address to remove reference to Polisol as Scott obviously did in an e-mail to Trent Beaudry at Canadian Tire on August 11, 2004 where he changed his e-mail signature to show that he was the President of Sports Wall of Fame Inc. Because Scott had multiple e-mail addresses, he would have had to choose a non-default address (which used the name dursol) when he sent e-mails as “bscott@polisol.ca”.
[59] The source of much of the evidence of the operation of Scott’s e-mail account came from his seized computer hard drive. The evidence is reliable and I accept that the e-mails in Exhibit 22 are how the e-mails appear once they are sent and saved.
[60] Therefore, Scott and Polisol are in contempt on this charge as well.
Sixth Charge: Marketed a hockey art print entitled “Hockey’s Kingston Trio” to Canadian Tire in association with the words, names, trade marks and/or trade names DURSOL and POLISOL during the period August 10 to October 21, 2004, contrary to the Mactavish Order
[61] During this time frame, Scott owned and controlled a company 1164966 Ontario Inc. operating as Freeway to Success Marketing Group (FTS). FTS was engaged in the marketing of hockey prints allegedly as part of a scheme to raise some money for the Rose Cherry Foundation. If Scott had stayed within the confines of FTS, he might well have avoided contempt, but the simple fact is that he so intermingled his companies’ affairs, it became impossible to determine any substantive separation between them.
[62] On numerous occasions during this period, Scott sent e-mails addressed or described in paragraph 51 clearly linking his marketing efforts with DURSOL and POLISOL.
[63] While Scott denies that he was trading on the Dursol name and business relationship with Canadian Tire and others, the weight of the evidence suggests otherwise. Examples of this include a foreign merchandising agreement (FMA) in respect of the hockey prints issued to Dursol on October 7, 2004. Although Scott says that this was an error which was corrected immediately, he sent an e-mail dated November 18, 2004 to a Canadian Tire employee using the e-mail address “bscott@dursolnorthamerica.com”. In that letter in which he tries to explain that the publication, sale and distribution of the Hockey’s Kingston Trio are the property of SWOF, his penultimate paragraph is:
The prints are being distributed through Polisol North America Inc. also a company that I own 100%. I hope this clears up any confusion.
[64] While Scott claimed that no one at Canadian Tire would be confused as to who was promoting what, he failed to call evidence to establish this point and he went on to explain that, in any event, the above statement about distribution was a lie which he made knowingly to Canadian Tire. One is almost driven to the conclusion that, in respect of this saga, Scott ceased to know where any truth lay.
[65] Further evidence of the blurred lines between Scott’s companies, the trading on the Dursol relationship and their sale and marketing of wares in association with DURSOL and POLISOL is a letter of April 5, 2004 to Canadian Tire dealers on the letterhead “Freeway to Success Marketing Group/Dursol North America Inc.” which opens with “As a long time Vendor of [sic] Canadian Tire Corporation, I am ..” and concludes with “As a friend of Dursol North America, we would like to offer you …”.
[66] There was other evidence of the connection to Dursol/Polisol and these marketing efforts including an invoice issued by Polisol, and a domain name registration “Polisol.ca” in which FTS was a registrant.
[67] There was also evidence that FTS acted on its own. This included the invoice sent to Canadian Tire and the payments received on behalf of FTS, as well as litigation either commenced by FTS against Canadian Tire and by Henderson against FTS and SWOF. However, the weight of the evidence, including e-mails, contracts, and Scott’s own evidence, show beyond a reasonable doubt that Scott and Polisol marketed the hockey prints to Canadian Tire in association with the trade marks and/or trade names DURSOL and POLISOL.
Seventh Charge: On or about August 20, 2004 marketed wares to kadam@cogeco.ca in association with the word, name, trade mark and trade name POLISOL, contrary to the Mactavish Order
[68] Scott maintains that FTS, not Polisol, marketed the “Hockey’s Kingston Trio” print on E‑Bay. The e-mails sent incorporated the e-mail signature “Bob Scott, President, Polisol North America Inc.” and addressed from “bscott@polisol.ca”.
[69] Scott’s defence is essentially the same as that in the sixth charge. For the same reasons as given in respect of that charge, I find Scott and Polisol in contempt on this charge.
Eighth Charge: During the period October 25 to November 18, 2005, Scott and Polisol continued to market their products to Canadian Tire in association with the trade marks/trade names DURSOL and POLISOL by sending e‑mails to Canadian Tire through the e-mail address bscott@dursolnorthamerica.com and incorporating the e-mail signature “Bob Scott, President, Polisol North America Inc. bscott@polisol.ca”, contrary to the Phelan Order
[70] There is no doubt as to the facts of marketing as described. Scott and Polisol’s defence to this charge is the same as its earlier submissions particularly as to “other wares”, and that Canadian Tire was dealing with FTS. For the same reasons as given earlier, this defence is without merit.
[71] Scott and Polisol also contend that Scott’s lack of knowledge of e-mail addresses and signatures is a mitigating fact. Again, for reasons earlier stated, this position is rejected.
[72] The Phelan Order prohibited Scott and Polisol from infringing the Plaintiff’s rights in the trade mark DURSOL. The use of the trade mark DURSOL in e-mails intended to sell wares infringed those rights.
[73] The Phelan Order also enjoined marketing and selling wares in association with the trade mark and trade name POLISOL which those e-mails clearly breached.
[74] However, I am not satisfied that the prohibition in the Phelan Order, paragraph (v) against passing off and confusion has been met as there was no evidence of confusion established beyond a reasonable doubt.
[75] However, it is evident that Scott and Polisol did make representations to the public in respect of wares that were false and misleading, as prohibited by the Phelan Order, paragraph 1(ix) by holding out an association between themselves, the wares and the trade mark POLISOL.
[76] Therefore, Scott and Polisol are in contempt of the Phelan Order and specifically paragraphs 1(i), (ii), (iv) and (ix).
Ninth Charge: During the period October 22, 2004 to mid-January 2005, Scott and Polisol used the trade marks/trade names AUTOSOL, POLISOL and/or DURSOL in numerous e-mail messages which Scott sent using the e-mail address “bscott@dursolnorthamerica.com”; 31 e-mails using the e-mail address “bscott@polisol.ca”; and one e-mail using the e-mail address “autosol@dursolnorthamerica.com”, contrary to the Phelan Order
[77] There is no doubt that the events alleged occurred. However, Scott’s claim is that he did not intend to breach the Phelan Order, he relies on the same defence as in earlier charges with respect to e-mail addresses and relies on the evidence of Sehmbi.
[78] In view of my earlier disposition of their defences, Scott and Polisol must be found in contempt on this charge. While intent to breach an order is not a requirement for a contempt finding, given all the evidence of Scott’s dealings, he must be presumed to know the consequences of his actions or he was reckless as to those consequences. It is evident that Scott had no intention of following either the letter, much less the spirit and intent, of the various orders of this Court.
Tenth Charge: On or about October 25, 2004, Scott and Polisol used the trade mark/trade name POLISOL by sending an e-mail to Anna Olejniczak using the e-mail signature “Bob Scott, President of Polisol North America Inc. bscott@polisol.ca, contrary to the Phelan Order
[79] Scott and Polisol contended that the marketing of Wayne Gretsky Highland Gold Coins to Ms. Olejniczak was done using the e-mail address bscott@freewaymarketing.com.
[80] The evidence does show and confirm the pattern of treating FTS and Scott’s other companies as one and the same. However, there is insufficient evidence of marketing and selling of Wayne Gretsky Highland Gold Coins to ground a finding of contempt.
[81] For this reason, this charge of contempt will be dismissed.
Eleventh Charge: Failing to deliver up to the Plaintiff items contrary to the Phelan Order
[82] The issue of alleged failure to deliver up involves the contradictory evidence of Scott and of the bailiff Herr.
[83] Scott testified that the bailiff attended at Scott/Polisol’s Setherington warehouse on two occasions. On the first seizure in November 2004, Scott claimed that he pointed out where the various products were kept. The warehouse was an open warehouse containing various other products. Scott denies that he failed to deliver up the items required and says that, in response to a question to Herr as to whether he would be removing all the items, Herr is reported to have said, in effect, “if they want them, they’ll come and get them”.
[84] A second seizure between January 18 and 20, 2005 was carried out, without warning to Scott. Herr seized 33 pallets of materials, files from 13 cabinet drawers and two computers from Scott’s warehouses pursuant to the Amended Order.
[85] In the 33 pallets taken on this second seizure were 150,000 units of goods, labels, packaging and promotional materials containing trade marks/trade names AUTOSOL or POLISOL. The items seized included:
a. five pallets containing thousands of finished AUTOSOL-branded and POLISOL-branded goods;
b. six pallets containing approximately 77,615 empty POLISOL metal polish tubes;
c. five pallets containing approximately 69,825 POLISOL metal polish cartonettes;
d. four pallets containing thousands of AUTOSOL-banded and POLISOL-branded master cartons and packaging materials;
e. thousands of POLISOL labels;
f. AUTOSOL-branded films and printing dies manufactured by Montebello Packaging; and
g. AUTOSOL-branded promotional material.
[86] The material listed in the above paragraph is all material which was required to be delivered up under the Phelan Order and should have been delivered up at the first seizure at least. Scott had a positive obligation to deliver up the items – the bailiff was not obliged to search and seize.
[87] As to the conflict in testimony between Herr and Scott, Herr denies that he said anything like suggesting that if the Plaintiff wanted items, they would come and get them. According to Herr, at the end of the November seizures, he asked Scott if he had seized everything. Scott allegedly said that if he found anything else, he would inform Herr. Scott never followed up.
[88] As between the two versions of events, I prefer that of Herr. The quality of Scott’s evidence has been dealt with earlier in these Reasons. Scott asks this Court to accept that an experienced bailiff would miss 33 skids of material. There is simply no reason to believe that Herr would be so negligent in his duties.
[89] Herr was a credible witness who provided straightforward consistent testimony. I find, as a fact, that the events, as he recounted them, did occur.
[90] The obfuscation of the delivery up of items is consistent with Scott’s actions and attitude toward this Court’s Orders. He failed to meet that obligation to deliver up in any material manner. The only thing that can be said in his favour is that the items were not sold or had not disappeared.
[91] Scott and Polisol were in contempt of this Court’s Order as alleged.
Twelfth Charge: Failure to deliver up certain designs and artwork files contrary to the Phelan Order
[92] During the January 2005 seizure, Herr seized the following labels, designs and artwork files:
a. floppy disks labelled “Autosol Packaging”, one floppy disk labelled “Autosol Medals”, one floppy disk labelled “Marine Shine/Metal Polish”, one floppy disk labelled “Leather Care/Gold + Silver Polish”, one compact disk labelled “Polisol Metal Polish”;
b files contained on the computer designated by Scott as his personal computer entitled: “autosol_tube.pdf”; “JonesPolisol.qxd”, “Spanish-tube.pdf”, “Spanish-can.pdf”, “Spanish-bottle.pdf”, “MetalBottle.pdf”, “Metal Polish btl.pdf”, “Metal Polish btl.psd”, “metpbot.jpg”, “metpcan.pdf”, “metpcan.psd”, “Poli Wax.pdf”, “Steel Shine back.pdf”, “Steel Shine back.psd”, “Steel Shine Front.pdf”, “Ststlbck.jpg”, “Autosol-ad1.jpg”, “Autosol-ad1.tif”, “Autosol-ad2.tif”, “Classiwbmw.psd”, “Classicbmw.tif”, “Globe.tif”, “Layout.psd”, “Layout2.psd”, “Map.tif”, “Stang.psd”, “Leather.pdf”, “bottle.pdf”, “can.pdf”, “sp‑prod.jpg”, “tube.pdf”, “Alumi Shine Front.pdf”, “1000 Tube.pdf”, “Autosol New Packaging.jpg”, “Metal Bottle.pdf”, “Polisol Logo (1).psd”, “Polisol Logo-#2.jpg”, “Spanish-prod.jpg”; “New Tube Die Line.ai” and
c. files contained on the computer designated by Scott as his business computer entitled “Metal Polish Can Label.pdf,” “METALBFIN-noDierQrk.eps.pdf”, “Polisol Logo New.pdf”, “Polisol_tube.pef”, “Can Label Re-Sized.pdf.”, “leather.jpg”, “polish1.jpg”, “spraybottles.jpg”, “autocan&marinelabel.jpg”, “dealsheet.jpg”, “marinecart.jpg”, “autosol in doc.doc”, “club shine labels.doc”, “39-2950-6.doc” and “39-2975-8.doc.”
[93] Scott’s explanation that he was unaware of these files defies credibility. The sheer size of the materials, the fact that they were on his computer or on a computer disk, which computer he used constantly for his business, and the fact that he consented to an Order requiring the delivery up of this material, all point to a deliberate disregard of this Court’s orders.
[94] Scott and Polisol are in contempt of the Phelan Order in respect of this failure to deliver up the design and artwork files.
Thirteenth Charge: Failure to deliver up to the Plaintiff two boxes of POLISOL branded goods following January 17, 2005
[95] As with most of the other contempt charges, there is no issue as to the basic facts. Scott and Polisol failed to deliver up these items as required. Scott’s excuse is that he was unaware of their existence. Scott’s evidence is not credible and this case is replete with instances of refused and/or neglect to comply with the Court’s Orders.
[96] Again, there is conflict between Scott and Herr as to the circumstances and timing of the “delivery up”. As previously indicated, I accept Herr’s version of events.
[97] Scott and Polisol are in contempt on this last matter as well.
III. ANALYSIS
[98] The law in respect of contempt of court is clear and well set out in Justice Martineau’s decision in Brilliant Trading Inc. v. Wong, 2005 FC 1214, [2005] F.C.J. No. 1480 (QL) at paragraph 15:
Court orders are to be followed strictly. Any failure to do so interferes with the orderly administration of justice and impairs the authority or dignity of the Court (Dimatt Investments Inc. v. Presidio Clothing Inc., supra). A finding of contempt shall be based on proof beyond a reasonable doubt (section 469 of the Rules). That being said, the requisite elements of contempt are knowledge of a court order and a failure to comply with that order (Lifegear, Inc. v. Urus Industrial Corp., 2004 FC 21, [2004] F.C.J. No. 19 (F.C.) (QL), at para. 24). In this regard, a party’s knowledge of a court order may be shown by personal service of that order (Coca-Cola Ltd. v. Pardhan (c.o.b. Universal Exporters), [1999] F.C.J. No. 1764 (F.C.T.D.) (QL), at para. 20; Desnoes & Geddes Ltd. v. Hart Breweries Ltd. (2002), 17 C.P.R. (4th) 20 (F.C.T.D.), at para. 21. On another note, the lack of mens rea or the presence of good faith are relevant only to the question of penalty. The lack of contumacious intent is not a defence to a finding of contempt (Merck & Co. v. Apotex Inc. (2003), 25 C.P.R. (4th) 289 (F.C.A.), at paras. 55-56; Tele-Direct (Publications) Inc. v. Canadian Business Online Inc., [1998] F.C.J. No. 1306 (F.C.T.D.) (QL), at para. 20). That being said, evidence of good faith may be a relevant element to consider when it comes to imposing the appropriate sentence. This latter factor has to be weighted with other factors. Deterrence, both general and specific is an important factor in sentencing (Merck & Co. v. Apotex Inc., supra, at paras. 82-84 and cases cited in these paragraphs).
[99] The activities which are said to constitute contempt must be ones clearly covered by the prohibition either expressly or by necessary implication. (Cartier, Inc. v. Cartier Men’s Shops Ltd., [1998] F.C.J. No. 450 (QL))
[100] For the reasons already given, the actions or inactions by Scott and Polisol were clearly covered by the relevant Court orders not only expressly but also by implication in the context of the matters in dispute. The proof of the contempt satisfies the requirement of proof beyond a reasonable doubt.
[101] It is particularly telling that, with the exception of the Amended Order, Scott and Polisol consented to the orders. He must be presumed to have considered the consequences of his consent although his actions show the most callous disregard for his obligations to which he consented.
[102] Having found Scott and Polisol in contempt on every event but one, the issue is what should the appropriate penalty be.
[103] In Lyons Partnership, L.P. v. MacGregor, [2000] F.C.J. No. 341 (QL), this Court summarized the relevant factors to be considered in framing a penalty. In assessing the penalty for contempt, the Court should consider the gravity of the contempt, deterrence of similar conduct, any profit made from the contemptuous behaviour, whether the contempt is a first offence, the contemptor’s past conduct and the presence of any mitigating factors such as good faith or apology.
[104] The severity of the law, the necessity to uphold Court orders, must also be tempered by justice. (Baxter Travenol Laboratories of Canada, Ltd. v. Cutter, [1987] 2 F.C. 557, [1987] F.C.J. No. 205 (QL).
[105] I do not agree with Scott and Polisol’s counsel that, save and except for the failure to deliver up, any other contempts were not serious. Except for the early events in and around the time of the Mactavish Order where Scott showed a recklessness as to compliance, thereafter he undertook to obscure, confuse, ignore and, if necessary, flout the clear terms of this Court’s Orders. He traded under the guise of his other companies (and not well at that) on the very relationship with Dursol and Polisol which the orders prohibited. He did it publicly, to customers, to customers of customers and throughout the course of his business.
[106] This Court cannot ignore the repeated efforts to evade compliance. The failure to deliver up was merely the culminating event in a scheme to ignore Scott’s obligations under the Court’s Orders.
[107] It is impossible to accept, based on the quality of the evidence produced, that for all the multiple events of contempt, the total profit earned was $100.00. The precise amount of profit was never objectively established nor was Scott and Polisol’s ability or inability to pay objectively established.
[108] Therefore, as to the relevant factors to be considered in determining a remedy, I have concluded that:
· the contempt was serious, repeated and in bad faith.
· deterrence is an important factor both as regards Scott and Polisol and others who may be prepared to ignore court orders;
· absence of profit is not well established;
· the inability to pay is not well established;
· the contempt was not a single event but a repeated pattern;
· there was no good faith or apology; and
· the Plaintiff was put to extraordinary lengths to establish even the most obvious facts of contempt.
[109] Therefore, in addition to finding Scott and Polisol in contempt, a fine is justified. This Court’s decision in CHUM Ltd. v. Stempowicz (c.o.b. Lizard King’s Playhouse), 2004 FC 611, [2004] F.C.J. No. 732 (QL) where a fine of $25,000.00 was assessed is more closely aligned with the facts of this case than that of Dimatt Investments Inc. v. Presidio Clothing Inc., [1993] F.C.J. No. 281 (QL) relied on by the Defendants.
[110] The Plaintiff asks this Court to consider that Scott or his company have violated Justice Cusinato’s order of November 27, 2003. In the absence of a finding by Justice Cusinato, it would be presumptuous of this Court to make such a finding.
[111] In my view, a fine, joint and severally payable, by Scott and Polisol in the amount of $20,000.00 is appropriate.
[112] But for the submissions of Mr. Martini, I would have been inclined to immediately commit Scott to imprisonment for 14 days. If the fine is not paid in sixty (60) days of the Judgment in this matter, Scott will serve a term of imprisonment of 14 days (to be served on weekends) and thereafter until the fine is paid.
[113] The Plaintiff asks that this Court strike out the Defendants’ Statement of Defence. It was clear from the outset that, for the Plaintiff, termination of this litigation was an important objective. It is a reasonable objective but this contempt proceeding is not the appropriate circumstance for that determination. The issues in the litigation are broader than the events of contempt.
[114] The Plaintiff asks for full indemnity for its costs (legal and disbursements). I adopt Chief Justice Lutfy’s reasoning in Coca-Cola Ltd. v. Pardhan (c.o.b. Universal Exporters) (2000), 5 C.P.R. (4th) 333 that those who assist the Court in the enforcement of its orders should not, generally, be out of pocket for their efforts.
[115] Scott and Polisol forced the Plaintiff on a “merry chase” throughout this litigation. The Plaintiff proposed legal fees of $135,001.90 and disbursements of $8,952.63 are allowed.
[116] The Court will not assign the benefits of the Hockey’s Kingston Trio prints to the Plaintiff or order disgorgement of moneys received or owed. There is not a sufficient record on which this Court could assess the impact of such an order.
[117] The Court declares that all records, materials and items seized by the Plaintiff since October 22, 2004 which are covered by the Court’s Orders, including all associated intellectual property rights, are the property of the Plaintiff.
[118] The Court shall stay seized of this matter should there be any difficulty with the terms of the Order to be issued.
JUDGMENT
1. THIS COURT DECLARES that Robert Scott and Polisol North America Inc. are in contempt of paragraph 3(i) of the Order of Justice Mactavish dated August 9, 2004 (Mactavish Order) by having:
(a) marketed POLISOL products to AutoZone Inc. during the period of August 13 to September 30, 2004;
(b) sold POLISOL products to the Capital Theatre and Arts Center in Windsor, Ontario on or about September 23, 2004;
(c) sold products to Palmar Inc. on or about October 12, 2004 in association with the work, trade mark and trade name POLISOL;
(d) marketed the product “Waterless Wash & Wax” to Canadian Tire Corporation Ltd. (Canadian Tire) in association with the words, names, trade marks and trade names DURSOL and/or POLISOL;
(e) marketed a hockey art print entitled “Hockey’s Kingston Trio” to Canadian Tire in association with the words, names, trade marks and/or trade names DURSOL and POLISOL during the period of August 10 to October 21, 2004; and
(f) marketed their wares to kadam@cogeco.ca in association with the word, name, trade mark and trade name POLISOL on or about August 20, 2004.
2. THIS COURT FURTHER DECLARES that Robert Scott and Polisol North America Inc. are in contempt of the Order of Justice Phelan dated October 22, 2004 (Phelan Order) as a result of the following:
(a) marketed and delivered POLISOL products to AutoZone Inc. on or about November 10, 2004, and failing to deliver up to the Plaintiff the POLISOL products so delivered to AutoZone Inc.;
(b) during the period of October 25 to November 18, 2004, continued to market products to Canadian Tire in association with the trade marks/trade names DURSOL and POLISOL contrary to paragraphs 1(i), (ii), (iv) and (ix) of the Phelan Order;
(c) during the period of October 22, 2004 to mid-January 2005, used the trade marks/trade names AUTOSOL, POLISOL and/or DURSOL in numerous e-mail messages, with the Defendant Robert Scott sending 105 e-mails using the e-mail address bscott@dursolnorthamerica.com, 31 e-mails using the e-mail address bscott@polisol.ca, and one e-mail using the e-mail address autosol@dursolnorthamerica.com during this period;
(d) failed to deliver up to the Plaintiff the following items following October 22, 2004, contrary to paragraph 2 of the Phelan Order:
· five pallets containing thousands of finished AUTOSOL-branded and POLISOL-branded goods;
· six pallets containing approximately 77,615 empty POLISOL metal polish tubes;
· five pallets containing approximately 69,825 POLISOL metal polish cartonettes;
· four pallets containing thousands of AUTOSOL-branded and POLISOL-branded master cartons and packaging materials;
· thousands of POLISOL labels;
· AUTOSOL-branded films and printing dies manufactured by Montebello Packaging; and
· AUTOSOL-branded promotional material;
(e) failed to deliver up the following label designs and artwork files following October 22, 2004, contrary to paragraph 2 of the Phelan Order:
· floppy disks labelled “Autosol Packaging”, one floppy disk labelled “Autosol Medals”, one floppy disk labelled “Marine Shine/Metal Polish”, one floppy disk labelled “Leather Care/Gold + Silver Polish”, one compact disk labelled “Polisol Metal Polish”;
· files contained on the computer designated by Mr. Scott as his personal computer entitled: “autosol_tube.pdf”; “JonesPolisol.qxd”, “spanish-tube.pdf”, “Spanish-can.pdf”, “Spanish-bottle.pdf”, “MetalBottle.pdf”, “Metal Polish btl.pdf”, “Metal Polish btl.psd”, “metpbot.jpg”, “metpcan.pdf”, “metpcan.psd”, “Poli Wax.pdf”, “Steel Shine back.pdf”, “Steel Shine back.psd”, “Steel Shine Front.pdf”, “Ststlbck.jpg”, “Autosol-ad1.jpg”, “Autosol-ad1.tif”, “Autosol-ad2.tif”, “Classiwbmw.psd”, “Classicbmw.tif”, “Globe.tif”, “Layout.psd”, “Layout2.psd”, “Map.tif”, “Stang.psd”, “Leather.pdf”, “bottle.pdf”, “can.pdf”, “sp‑prod.jpg”, “tube.pdf”, “Alumi Shine Front.pdf”, “1000 Tube.pdf”, “Autosol New Packaging.jpg”, “Metal Bottle.pdf”, “Polisol Logo (1).psd”, “Polisol Logo-#2.jpg”, “Spanish-prod.jpg”; “New Tube Die Line.ai” and
· files contained on the computer designated by Mr. Scott as his business computer entitled “Metal Polish Can Label.pdf,” “METALBFIN-noDierQrk.eps.pdf”, “Polisol Logo New.pdf”, “Polisol_tube.pef”, “Can Label Re-Sized.pdf.”, “leather.jpg”, “polish1.jpg”, “spraybottles.jpg”, “autocan&marinelabel.jpg”, “dealsheet.jpg”, “marinecart.jpg”, “autosol in doc.doc”, “club shine labels.doc”, “39-2950-6.doc” and “39-2975-8.doc”.
3. THIS COURT FURTHER DECLARES that Robert Scott and Polisol North America Inc. are in contempt of paragraph 2 of the Order of Justice Phelan dated January 17, 2005 for having failed to deliver up to the Plaintiff two boxes of POLISOL-branded goods following January 17, 2005.
4. THIS COURT ORDERS Robert Scott and Polisol North America Inc., on a joint and several basis, to pay a fine in the amount of $20,000.00 payable within sixty (60) days of this Judgment.
5. THIS COURT ORDERS Robert Scott and Polisol North America Inc., on a joint and several basis, to pay costs to the Plaintiff in the amount of $135,001.90 for legal fees and $8,952.62 for disbursements and GST to be paid forthwith.
6. THIS COURT ORDERS that in the event that the fine ordered in paragraph 4 above has not been paid to the Plaintiff as ordered, the Defendant Robert Scott is to be imprisoned for a period of not less than 14 days and in any event until the fine is paid, such term of imprisonment is to be served from each Saturday at 8:00 a.m. to the next Monday at 8:00 a.m.
7. THIS COURT ORDERS that all records, materials and items seized by the Plaintiff from the Defendants since October 22, 2004 (currently located at NAFTA Warehousing Services Inc., the Federal Court of Canada, and Cassels Brock & Blackwell LLP), including all associated intellectual property rights, are hereby the property of the Plaintiff.
8. THIS COURT shall stay seized of this matter to address any issue arising from the terms of this Judgment.
FEDERAL COURT
NAMES OF COUNSEL AND SOLICITORS OF RECORD
DOCKET: T-1171-04
STYLE OF CAUSE: Dursol-Fabrik Otto Durst GmbH & Co.
and
Dursol North America Inc., Polisol North America Inc.,
Robert Scott and Marlene Castellano
PLACE OF HEARING: Toronto, Ontario
DATE OF HEARING: December 15 and 16, 2005
March 6 and 7, 2006
REASONS FOR JUDGMENT: Phelan J.
APPEARANCES:
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Mr. Lorne Silver Mr. Michael Kealy
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Mr. Claudio Martini Mr. Joseph Barile
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SOLICITORS OF RECORD:
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CASSELS BROCK & BLACKWELL LLP Barristers & Solicitors Toronto, Ontario
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MARTINI BARILE MARUSIC LLP Barristers & Solicitors Windsor, Ontario |