T-1604-95
Illva Saronno S.p.A. (Plaintiff)
v.
Privilegiata Fabbrica Maraschino "Excelsior", Girolamo Luxardo S.p.A., Girolamo Luxardo Maraschino Canada Ltd., Saverio Schiralli Agencies Limited and Vanrick Corporation Limited (Defendants)
Indexed as: Illva Saronno S.p.A.v. Privilegiata Fabbrica Maraschino "Excelsior"(T.D.)
Trial Division, Evans J."Toronto, October 5; Ottawa, October 19, 1998.
Practice — References — Appeal from dismissal of motion to have issues of damages, profits determined by reference — A.S.P. holding defendants not providing any evidence bifurcating issues of liability, remedy resulting in inevitable saving of time, expense — Appeal dismissed — R. 107 permitting Court at any time to order issues in proceeding be determined separately — Exercise of r. 107 discretion subject to principles applicable under former R. 480, subject to two changes made by 1998 Rules: (1) Court having more flexibility as may now order severance of issues, even though severed issues not suitable for determination on reference because raising issues of both fact, law; (2) r. 107 must be applied so as to secure just, most expeditious, least expensive determination of every proceeding on merits as required by r. 3 — On r. 107 motion, Court may order postponement of discovery, determination of remedial issues until after discovery, trial of liability issues, if satisfied on balance of probabilities that, in view of evidence and all circumstances of case (including nature of claim, conduct of litigation, issues, remedies sought), severance more likely than not to result in just, expeditious, least expensive determination of proceeding on merits — Defendants not meeting burden — Court particularly influenced by paucity of information in defendants' affidavit; that discovery underway; existence of profits questionable; delays in final disposition of case likely to be prejudicial to plaintiff; difficulty of totally disentangling questions of law going to liability from those going to remedy.
This was an appeal from the Associate Senior Prothonotary's order dismissing the defendants' motion to have the issues of damages and profits determined by a reference.
The statement of claim alleged trade mark infringement. In the case of one defendant liability was alleged to have extended over a period of nearly 30 years, while the infringements allegedly committed by the other defendants commenced only in the late 1980s. The Associate Senior Prothonotary dismissed the motion on the ground that the defendants had failed to provide any evidence that there would be an inevitable saving of time and expense if discovery and trial of the remedial issue were deferred until after discovery and trial of the liability issue. He relied on VISX Inc. v. Nidek Co. in which Hugessen J. held that the principles governing the separation of issues under former Rule 480 were applicable to current rule 107. Giles A.S.P. inferred therefrom that the case law establishing those principles continued to be binding. He summarized the test as requiring litigants seeking a separate determination of issues to show that there will necessarily be some saving of expense and time if discovery and trial of damages or profits is postponed until the matter of liability is settled. Rule 107 permits the Court at any time to order that issues in a proceeding be determined separately. Former Rule 480 enabled a party who wished to proceed to trial without adducing evidence of any issue of fact, including questions as to the damages caused by or profits arising from the infringement of a right, to seek a determination by a reference of such issues after trial.
The issues were: (1) whether rule 107 must be applied by reference to the principles and case law governing the exercise of discretion under former Rule 480; and (2) whether the test formulated for determining when discretion should be exercised under rule 107 to postpone remedial questions was too stringent.
Held, the appeal should be dismissed.
(1) The exercise of the Court's discretion under rule 107 to order a separate trial or a reference of remedial issues is subject to the principles applicable under former Rule 480. However, those principles, and the case law establishing them, must be read subject to two changes made by the 1998 Rules. First, rule 107 gives the Court more flexibility in the sense that, unlike the former Rule 480, the Court may now order a severance of issues even though the severed issues may not be suitable for determination on a reference because they raise issues of both fact and law. Second, like all provisions of the new Rules, rule 107 must be read subject to rule 3, and accordingly "applied so as to secure the just, most expeditious and least expensive determination of every proceeding on its merits". However, since the saving of time and expense was also understood to be the rationale of the former Rule 480, not too much should be made of this point in this context.
(2) The test formulated by Giles A.S.P. for determining when discretion should be exercised under rule 107 to postpone remedial questions was too stringent. On the basis of previous authority, and in light of the changes introduced by the 1988 Rules, on a motion under rule 107, the Court may order the postponement of discovery and the determination of remedial issues until after discovery and trial of the question of liability, if the Court is satisfied on the balance of probabilities that in view of the evidence and all the circumstances of the case (including the nature of the claim, the conduct of the litigation, the issues and the remedies sought), severance is more likely than not to result in the just, expeditious and least expensive determination of the proceeding on its merits.
In order to exercise de novo the discretion conferred by rule 107, the Court started with the premise that it will normally be more efficient to require that all the issues in a proceeding be determined together rather than separately, bearing in mind that a moving party has the burden of proof and persuasion that a departure from the general rule is justified. The defendants had not discharged that burden. In so concluding, the Court was particularly influenced by the paucity of information in the defendants' affidavit; the fact that discovery was already underway; the existence of profits was questionable; delays in the final disposition of the case were likely to be prejudicial to the plaintiff; and the difficulty of totally disentangling questions of law that go to liability from those pertaining to the remedy to be granted, if any.
statutes and regulations judicially considered
Federal Court Rules, C.R.C., c. 663, RR. 476, 480, 500.
Federal Court Rules, 1998, SOR/98-106, RR. 3, 51, 107, 153.
Trade-marks Act, R.S.C., 1985, c. T-13.
cases judicially considered
applied:
Canada v. Aqua-Gem Investments Ltd., [1993] 2 F.C. 425; (1993), 93 DTC 5080 (C.A.).
considered:
VISX, Inc. v. Nidek Co., [1998] F.C.J. No. 811 (T.D.) (QL); Depuy (Canada) Ltd. v. Joint Medical Products Corp. (1996), 67 C.P.R. (3d) 145 (F.C.A.); Brouwer Turf Equipment Ltd. v. A and M Sod Supply Ltd., [1977] 1 F.C. 51; (1976), 13 N.R. 83 (C.A.); Canamerican Auto Lease & Rental Limited v. The Queen, [1985] 1 F.C. 638 (T.D.).
APPEAL from the dismissal of the defendants' motion to have the issues of damages and profits determined by a reference (Illva Saronno S.p.A. v. Privilegiata Fabbrica Maraschino —Excelsior—, [1998] F.C.J. No. 1282 (T.D.) (QL)). Appeal dismissed.
appearances:
B. D. Edmonds for plaintiff.
Newton Wong for defendants.
solicitors of record:
McCarthy Tétrault, Toronto, for plaintiff.
Newton Wong & Associates, Toronto, for defendants.
The following are the reasons for order and order rendered in English by
Evans J.: This is an appeal under Federal Court Rules, 1998 [SOR/98-106], rule 51 against an order of Giles, A.S.P., dated September 8, 1998 [[1998 F.C.J. No. 1282 (T.D.) (QL)], dismissing a motion brought under rule 107 by the defendants in the action to order the postponement of the discovery and trial of the issue of the quantum of damages or profits payable to the plaintiff until the liability of the defendants to the plaintiff has been determined at trial.
The plaintiff's statement of claim alleges that the defendants have infringed its rights under the Trade-marks Act [R.S.C., 1985, c. T-13] through the manufacture, importation, marketing and distribution in Canada of a liqueur with a name and get-up confusingly similar to that of a product of the plaintiff. In the case of the defendant, Saverio Schiralli Agencies Limited, liability is alleged to extend over a period of nearly 30 years, while the infringements allegedly committed by the other defendants commenced only in the late 1980s.
The plaintiff is an Italian corporation, as is the defendant Luxardo, the manufacturer of the liqueur. The plaintiff has not yet elected whether to claim damages for loss suffered, or to seek an accounting of profits made by the defendants as a result of their alleged infringement of the plaintiff's rights under the Trade-marks Act.
There have been six days of discovery of the defendant Saverio Schiralli to date, including one day devoted to the remedial issue; counsel anticipate that another three days will be required on this issue. The discovery of the two other defendants has not yet commenced, although it may not require as much time as that spent on Saverio Schiralli since the alleged infringements only go back for approximately 10 years. The fact that the defendants are said to have a number of product lines is a complicating factor in the discovery directed at determining the amount of any unlawfully made profits that they may be required to disgorge to the plaintiff. Counsel for the defendants, the moving party in this motion, estimated that five days of the trial were likely to be required on the remedial issue.
Giles A.S.P. dismissed the motion on the ground that the defendants had failed to provide any evidence that bifurcating the issues of liability and remedy would result in an inevitable saving of time and expense if discovery and trial of the remedial issue were deferred until after discovery and trial of the issue of liability.
He relied on VISX Inc. v. Nidek Co., [1998] F.C.J. No. 811 (T.D.) (QL), in which Hugessen J. held that the principles governing the separation of issues under former Rule 480 [Federal Court Rules, C.R.C., c. 663] were applicable to the current rule 107. Giles A.S.P. inferred from Hugessen J.'s reasons that the case law establishing those principles continued to be binding. The relevant test he summarized as follows [at paragraph 2]:
That in my view makes it necessary for litigants seeking separate determination of issues to show there will necessarily be some saving of expense and time if discovery and trial of damages or profits is postponed until the matter of liability is settled. The fact that discovery and trial time would be reduced if the defendant were successful at trial, is not sufficient . . . [Emphasis in original.]
It was common ground between the parties that on an appeal under rule 51 the Court could only interfere with a prothonotary's disposition of a motion if the prothonotary had misapprehended the facts or proceeded on some wrong principle, or the order raises a question vital to the final issue of the case; however, if such an error were identified, then the Court could exercise its own discretion de novo, and dispose of the motion on the merits: Canada v. Aqua-Gem Investments Ltd., [1993] 2 F.C. 425 (C.A.). The first issue, therefore, is whether Giles A.S.P. was correct in his conclusion that rule 107 must be applied by reference to the principles and case law governing the exercise of discretion under former Rule 480.
With an economy and simplicity that characterize the 1998 Rules, rule 107 provides:
107. (1) The court may, at any time, order the trial of the issue or that issues in proceeding be determined separately.
As Hugessen J. pointed out in VISX, an order under rule 107 does not preclude a further order, if appropriate, that the quantum of damages or profits be determined by a reference under rule 153 to the extent that they raise questions of fact alone.
Former Rule 480 enabled a party who wished to proceed to trial without adducing evidence of any issue of fact including, inter alia, questions as to the damages caused by or profits arising from the infringement of a right, to seek a determination by a reference of such issues after trial under Rule 500, et seq. Rule 476 also authorized the Court to order that a question be decided at trial before discovery on some issue that depended on the determination of that question.
Giles A.S.P. was certainly correct to hold that in the VISX case, which raised issues very similar to those in the case at bar, Hugessen J. stated that the principles previously applicable to motions to postpone discoveries and trial of the remedial issue until after the trial on liability [at paragraph 3] "appear to me to be applicable in this case."
Hugessen J. cited Depuy (Canada) Ltd. v. Joint Medical Products Corp. (1996), 67 C.P.R. (3d) 145 (F.C.A.), as illustrative of those principles. In that case, Hugessen J.A., as he then was, delivering the judgment of the Court, held [at page 146] that the motions judge had erred in law when he required the applicants to show "exceptional circumstances and extraordinarily complex issues" before ordering a severance of the issues of liability and remedy. "That", said Hugessen J.A. (at page 146), "set the threshold far too high". However, he also cited with approval the statement by Jackett C.J. in Brouwer Turf Equipment Ltd. v. A and M Sod Supply Ltd. , [1977] 1 F.C. 51 (C.A.), at page 54 to the effect that:
. . . the general principle is that the plaintiff must make out the whole of his case in the first instance; and, in the absence of consent or of "reasons bearing on the conduct of the action as a whole", Rule 480 should not be invoked to set that principle aside.
My conclusion is that Giles A.S.P. was broadly correct to state that the exercise of the Court's discretion under rule 107 to order a separate trial or a reference of remedial issues is subject to the principles applicable under former Rule 480. However, those principles, and the jurisprudence establishing them, must be read subject to two changes made by the 1998 Rules. First, rule 107 gives the Court more flexibility in the sense that, unlike the former Rule 480, the Court may now order a severance of issues even though the severed issues may not be suitable for determination on a reference because, for example, they raise issues of both fact and law. Second, like all provision of the new Rules, rule 107 must be read subject to rule 3, and accordingly "applied so as to secure the just, most expeditious and least expensive determination of every proceeding on its merits". However, since the saving of time and expense was also understood to be the rationale of the former Rule 480 (see Brouwer Turf , loc. cit.), not too much should be made of this point in this context.
This leads me to the further conclusion that the test formulated by Giles A.S.P. for determining when discretion should be exercised under rule 107 to postpone remedial questions was too stringent. I do not see in Depuy, or the cases therein cited, a requirement that the production of proof that such an order will necessarily result in a saving of time and expense, although in Canamerican Auto Lease & Rental Limited v. The Queen, [1985] 1 F.C. 638 (T.D.), Dubé J. approached this standard when he stated that a reference was appropriate if "it appears reasonably certain" that severance would result in a saving of time and expense. However, in my opinion, Giles A.S.P.'s test is closer to that disapproved in the more recent case of Depuy , and is even more restrictive than that formulated in Canamerican.
Accordingly, on the basis of previous authority and in light of the changes introduced by the 1998 Rules, I would formulate the test to be applied under rule 107 as follows. On a motion under rule 107, the Court may order the postponement of discovery and the determination of remedial issues until after discovery and trial of the question of liability, if the Court is satisfied on the balance of probabilities that in the light of the evidence and all the circumstances of the case (including the nature of the claim, the conduct of the litigation, the issues and the remedies sought), severance is more likely than not to result in the just, expeditious and least expensive determination of the proceeding on its merits.
Having found that Giles A.S.P. erred in his formulation of the relevant test, I must now exercise de novo the discretion conferred by rule 107. This is no easy task. However, I start with the premise on which Jackett C.J.'s statement on Brouwer Turf is based, namely, that it will normally be more efficient to require all the issues in a proceeding be determined together rather than separately. In addition, I am mindful of the fact that the moving party has the burden of proof and persuasion that a departure from the general rule is justified.
Turning to the facts of the present case, I note that, while there has been one day of discovery of one defendant on the remedial question, there are estimated to be three more to go, and discovery of the other parties has not yet started. The discovery required for the remedy of the disgorgement of profits is apt to be particularly time-consuming and expensive for defendants where, as here, they have a number of product lines. The fact that two of the parties are Italian corporations may also involve extra time and expense, in the translation of documents and the attendance of witnesses, for example. The length of time over which the infringements allegedly occurred (nearly 30 years in the case of one defendant, and 10 years in the case of another) also favours bifurcation.
On the other hand, as Mr. Edmonds, counsel for the plaintiff, pointed out when responding to this motion, postponing discovery and trial of the remedial issues until after trial of the question of liability may itself occasion additional and unnecessary expense and delay. Thus, if the defendants are held liable, bifurcation may duplicate discovery, trials and possible appeals. Moreover, he submitted, when the parties are in possession of all the relevant information after a complete discovery on all the issues, it may be easier for them to reach a settlement of the proceeding, or to consider at that stage the desirability of separating the issues.
Mr. Edmonds also relied on the facts that, the bulk of the discovery was finished; the defendants had not raised the possibility of severance until the fourth day of discovery; there had been little need for translation of documents; and it was not yet clear whether the defendants had made any profits at all that they could be required to disgorge. He was also concerned about the advanced ages of those in possession of financial information pertaining to the business of one of the defendants, and the possibility that, if final judgment were delayed, the judgment debt might be incapable of collection.
Mr. Edmonds also emphasized a point made by Giles A.S.P. in the reasons for his order, namely that bifurcation would only shorten the trial time if the defendants won on the issue of liability, something that the defendants had not addressed by showing that the plaintiff's claim was weak. On the other hand, it could also be said with some plausibility that, if the plaintiff were successful at trial, the defendants might be more willing to agree an amount to be paid in settlement of their liability.
On balance, I have decided that the defendants have not discharged the burden of establishing on the balance of probabilities that savings of expense and time are sufficiently likely, nor the interest of a just disposition of the proceeding on its merits liability to be advanced, as to justify departing from the general principle that all issues in a proceeding should be dealt with together. In reaching this conclusion, I have been particularly influenced by the following considerations: the paucity of information in the defendants' affidavit; discovery is already under way; the existence of profits is questionable; delays in the final disposition of the case are likely to be prejudicial to the plaintiff; and the difficulty of totally disentangling questions of law that go to liability from those pertaining to the remedy to be granted, if any.
For these reasons I would dismiss the appeal from Giles A.S.P., but because I have found that he applied the wrong test to the exercise of discretion under rule 107, I make no award of costs.
ORDER
The motion to set aside the order of the Associate Senior Prothonotary dated September 8, 1998 dismissing the defendants' motion to have the issues of damages and profits determined by a reference is hereby dismissed. No award as to costs.