A-421-8C
Sternson Limited (Appellant) (Defendant)
v.
CC Chemicals Limited (Respondent) (Plaintiff)
Court of Appeal, Ryan and Le Dain JJ. and
MacKay D.J. — Toronto, December 12, 1980;
Ottawa, May 4, 1981.
Practice — Discovery — Appeal from Trial Division order
restraining appellant from proceeding with an examination for
discovery of the assignor of a patent residing in the U.S. —
Examination for discovery was ordered by a U.S. Court —
Trial Judge held that Rule 465(5) did not give the appellant a
right to examine for discovery an assignor of a patent who was
resident abroad and not subject to subpoena — Whether Trial
Judge erred in making an order that restrained the appellant
from exercising a right derived from an order of a foreign
court acting within its jurisdiction — Federal Court Rule 465
— United States Code, Title 28, s. 1782.
This is an appeal from an order of the Trial Division,
restraining the appellant from proceeding with an examination
for discovery of the assignor of a patent who is outside the
jurisdiction of the Court. The respondent, the assignee of the
patent, began an action for patent infringement. The examina
tion for discovery was ordered by a United States District
Court. The appellant submitted that Rule 465(5), which per
mits the examination for discovery of the assignor of a patent
by a party who is adverse to the assignee, gives it a right to
examine the assignor. Furthermore, this right provided a basis
for the United States order. The Trial Judge held that Rule
465(5) did not vest in the appellant a right to examine for
discovery an assignor, resident abroad, who would not be
subject to subpoena under Rule 465(9). The question is
whether the Trial Judge erred in making an order that
restrained the appellant from exercising a right derived from an
order of a foreign court acting within its jurisdiction, an order
that was not made vexatiously.
Held, the appeal is allowed. The Trial Judge granted the stay
because the appellant "circumvented the law of this jurisdiction
by which law this action must be governed" and had thus
gained an advantage which would not be legitimate. It is true
that the Trial Division could not have ordered the examination
for discovery of the assignor because he would not be subject to
a subpoena issued in Canada, but for this reason only. This
should not prevent the appellant from going into a United
States court which has jurisdiction over the assignor to obtain
under applicable United States law the sort of order it could
have obtained from the Federal Court had the assignor of the
patent been within Canada. The sort of procedure invoked
abroad is a procedure which is available in the Federal Court
action in respect of an assignor of a patent who is subject to
service in Canada. The examination conducted abroad will have
no status under Rule 465. That does not mean that it would be
illegitimate to conduct it.
Lido Industrial Products Limited v. Teledyne Industries,
Inc. [1979] 1 F.C. 310, referred to. Ellerman Lines,
Limited v. Read [1928] 2 K.B. 144 (C.A.), referred to.
Armstrong v. Armstrong [1892] P. 98, distinguished.
APPEAL.
COUNSEL:
Robert Barrigar and John Morrissey for
appellant (defendant).
Donald H. MacOdrum for respondent (plain-
tiff).
SOLICITORS:
Barrigar & Oyen, Ottawa, for appellant
(defendant).
Hayhurst, Dale & Deeth, Toronto, for
respondent (plaintiff).
The following are the reasons for judgment
rendered in English by
RYAN J.: This is an appeal from an order of the
Trial Division, dated June 18, 1980, [[1981] 1
F.C. 541] restraining the appellant ("the defend
ant") from proceeding with an examination for
discovery of Solomon J. Rehmar so long as he is
outside the jurisdiction of the Federal Court.
In September 1977, the respondent ("the plain
tiff') began an action in the Trial Division of the
Federal Court alleging that the defendant was
infringing a patent. Solomon J. Rehmar is alleged
to be the inventor of the invention described in the
patent. The plaintiff is alleged to be the owner of
the patent under an assignment from Mr. Rehmar.
The examination for discovery which is in ques
tion was ordered by a United States District Court
Judge on June 10, 1980. Mr. Rehmar resides
within the area of jurisdiction of the Court which
made the order. The order was made pursuant to
section 1782 of Title 28 of the United States Code.
A subpoena was issued on June 12, 1980 out of the
United States District Court requiring Mr. Reh-
mar's attendance for examination in Cleveland,
Ohio, on June 25, 1980.
The Trial Division made the order under appeal,
restraining the defendant from proceeding with the
examination of Mr. Rehmar.
It seems clear that, in making this order, the
Trial Judge was exercising a discretionary power.
Nonetheless, the appellant submitted (even assum
ing an exercise of discretion) that the Trial Judge
erred in the exercise of his discretion by miscon
struing paragraph (5) of Rule 465 of the Federal
Court Rules or, alternatively, by making an order
that restrained the appellant from exercising a
right derived from an order of a foreign court
acting within its jurisdiction, an order that was not
obtained vexatiously.
Paragraph (5) of Rule 465 provides for the
examination for discovery of the assignor of a
patent by a party who is adverse to the assignee.
The paragraph reads:
Rule 465... .
(5) The assignor of a patent of invention, copyright, trade
mark, industrial design or any property, right or interest may
be examined for discovery by any party who is adverse to an
assignee thereof. (Where the context so permits, a reference in
this Rule to an individual to be questioned or to an individual
being questioned includes such an assignor).
Paragraphs (6) to (9) and paragraph (12)
provide:
(6) An examination for discovery under this Rule may be
conducted before a person hereinafter referred to as "the
examiner" who may be
(a) a prothonotary;
(b) a person agreed upon by the parties, who may be the
verbatim reporter; or
(e) a judge nominated by the Associate Chief Justice, or
some other person, if so ordered by the Court.
(7) Upon request of the party who proposes to exercise a
right under this Rule to examine for discovery, a person who is
qualified by paragraph (6) to be the examiner and who has
agreed so to act for the particular examination shall issue an
appointment signed by him fixing the time when, and the place
where, the examination is to be conducted (Such appointment
shall indicate the names of the examining party, the party to be
examined for discovery and the individual to be questioned).
(8) An appointment issued under paragraph (7), together
with appropriate conduct money, shall be served upon the
attorney or solicitor for the party to be examined in the case of
any examination for discovery other than one falling under
paragraph (1)(b) or paragraph (5); and it shall be so served in
the case of an examination for discovery falling under para
graph (1)(b) if the Court so orders before the service is
effected; and, in any case to which this paragraph applies, no
notification other than service of the appointment on the attor
ney or solicitor for the party to be examined is necessary.
(9) In any case to which paragraph (8) does not apply, the
attendance of the individual to be questioned may be enforced
by subpoena (which may be a subpoena ad testificandum or a
subpoena duces tecum) in the same manner as the attendance
of a witness at the trial of an action. In any such case, the
appointment issued under paragraph (7) shall be served on the
attorney or solicitor for the party to be examined or the party
adverse in interest to the examining party, as the case may be.
(12) Where an individual to be questioned on an examination
for discovery is temporarily or permanently out of the jurisdic
tion, it may be ordered by the Court, or the parties may agree,
that the examination for discovery be at such place, and take
place in such manner, as may be deemed just and convenient.
The appellant submitted that paragraph (5) of
Rule 465 gives it a right to examine the assignor of
the patent on discovery. This right, it was argued,
provided a basis for the order obtained from the
United States District Court Judge who, in grant
ing the order, was acting pursuant to section 1782
of Title 28 of the United States Code which reads:
§ 1782. Assistance to foreign and international tribunals and
to litigants before such tribunals.
(a) The district court of the district in which a person resides or
is found may order him to give his testimony or statement or to
produce a document or other thing for use in a proceeding in a
foreign or international tribunal. The order may be made
pursuant to a letter rogatory issued, or request made, by a
foreign or international tribunal or upon the application of any
interested person and may direct that the testimony or state
ment be given, or the document or other thing be produced,
before a person appointed by the court. By virtue of his
appointment, the person appointed has power to administer any
necessary oath and take the testimony or statement. The order
may prescribe the practice and procedure, which may be in
whole or part the practice and procedure of the foreign country
or the international tribunal, for taking the testimony or state
ment or producing the document or other thing. To the extent
that the order does not prescribe otherwise, the testimony or
statement shall be taken, and the document or other thing
produced, in accordance with the Federal Rules of Civil
Procedure.
A person may not be compelled to give his testimony or
statement or to produce a document or other thing in violation
of any legally applicable privilege.
(b) This chapter does not preclude a person within the United
States from voluntarily giving his testimony or statement, or
producing a document or other thing, for use in a proceeding in
a foreign or international tribunal before any person and in any
manner acceptable to him.
The United States District Court, by granting
the application made to it by the appellant,
authorized the issuance of a subpoena duces tecum
commanding Mr. Rehmar to appear at an address
in Cleveland and submit to a discovery deposition
"... for use in a proceeding now pending before
the Federal Court of Canada, Trial Division, enti
tled CC Chemicals Limited v. Sternson Limited,
T-3587-77." The order provided that "... the
testimony shall be taken in accordance with the
Federal Rules of Civil Procedure." These would,
of course, be the United States Rules.
The Trial Judge, in deciding to grant the stay of
the proceedings under the United States order,
took the view, as I understand him, that paragraph
(5) of Rule 465 vested in the appellant no right to
examine for discovery an assignor, resident
abroad, who would not be subject to subpoena
under paragraph (9) of Rule 465.
The Trial Judge relied on the decision of this
Court in Lido Industrial Products Limited v.
Teledyne Industries, Inc.' In that case, Chief Jus
tice Jackett said at pages 313 and 314:
Rule 465 also includes provision (Rule 465(5)) for something
that is called an examination for discovery but that does not fall
within what is ordinarily thought of as an examination for
discovery. It is not an examination for discovery of one party by
another; it is a pre-trial questioning of a potential witness, and
the only person who can be questioned thereunder is the
assignor of the property right that is the subject of the litiga
tion, who is subject to being questioned whether or not he is an
officer or other employee of the opposing party.
The mode of enforcing attendance for examination of a
person subject to questioning by virtue of Rule 465(5) is a
subpoena (Rule 465(9)); as such a person is not necessarily
under the control of the opposing party, that party does not
become subject to having his defence struck out or to having his
action dismissed by reason of such person failing to attend and
answer as required. (Rule 465(20).) Presumably, Rule 465(12)
contemplates the Court authorizing such an examination taking
place outside Canada but one does not find anything in the
Rules authorizing the Court to order such a person to appear
for examination inside or outside Canada; and any such author
ity would not be expected having regard to the provision for a
subpoena in Canada and the Court's inability to issue orders or
other process having effect outside its geographical jurisdiction.
In other words, there is an implied limitation, as far as Rule
465 is concerned, on the ambit of Rule 465(5) in that it cannot
I [1979] 1 F.C. 310.
operate where the person to be examined is outside Canada and
cannot be made the subject of a subpoena issued out of a
Canadian court. This is not to say that there may not be an
international convention between Canada and another country,
duly implemented by statute in both countries, that would
authorize such examinations. I do not recall any such conven
tion that contemplates pre-trial examination of potential wit
nesses as opposed to obtaining evidence in one country for use
at trial in another country.
I have said so much in this connection not only to make it
clear that, in my view, the appellant is not failing to obtain
what he seeks merely because he frames his application inade
quately, but also to make it clear that, in my view, he sought
something that the Rules did not, and could not, give him any
right to obtain ....
I do not find error in the Trial Judge's construc
tion of Rule 465 in so far as he found, as in my
view he did find, that the Rule confers no legal
right on a party to a patent action, adverse in
interest to a patentee who is also party to the
action, to examine on discovery the assignor of the
patent, the assignor not being a party to the action
and not agreeing to be examined, where by reason
of the assignor's absence from Canada he is not
subject to subpoena under paragraph (9); and, I
would add, there appearing to be no relevant inter
national convention which might provide a basis
for an order under paragraph 465(12). There is
thus, as I see it, no legal right by virtue of para
graph (5) of Rule 465 to examine Mr. Rehmar for
discovery which would provide a basis for the
United States District Court order. Paragraph (5)
must be read along with the other paragraphs of
the Rule, particularly paragraph (9), and so read
is subject to the implied limitation (to use the
words of Chief Justice Jackett) "... that it cannot
operate where the person to be examined is outside
Canada and cannot be made the subject of a
subpoena issued out of a Canadian court."
There is, however, the further consideration,
argued by the appellant by way of alternative
submission, that the United States District Court,
purporting to act under United States law and in
relation to a person within its jurisdiction, did
make the order which the appellant has been
prohibited by the Trial Division from exercising. It
was argued that the Trial Division erred in issuing
the restraining order, having in mind (it was sub-
mitted) that the implementation of the order
would not be vexatious, nor would it be otherwise
open to objection as interfering with the action in
the Trial Division.
The Trial Division has jurisdiction, in a proper
case, to enjoin the enforcement by a party to an
action before it of an order obtained from a for
eign court relating to the subject-matter of the
action 2. The question is whether this is a proper
case.
In this case, the order was obtained from the
United States District Court, not in respect of a
separate action in that Court based on the same
cause of action as that under way in the Trial
Division, but for the purpose of the Federal Court
action. It is quite understandable, then, that the
Trial Judge should have placed some reliance on
Armstrong v. Armstrong 3 , a decision of the Eng-
lish Probate Division. In that case, the petitioner in
a divorce proceeding had obtained a commission to
examine witnesses in Vienna. The co-respondent,
who had appeared in the divorce proceeding under
protest, disputed the jurisdiction of the Court; the
commission to examine witnesses in Vienna was
suspended pending argument of the jurisdictional
issue. Meanwhile, the petitioner, through agents in
Vienna, had summoned witnesses before a Court
in Vienna to take evidence for the perpetuation of
testimony. In an affidavit, an Austrian advocate
stated that the Viennese Courts claimed power
under an article of the Austrian Code to take the
examination on oath of witnesses whose testimony
was required in the English proceeding.
A motion was brought to restrain the petitioner
from proceeding with the examination of the wit
nesses in the Viennese Court, and the motion was
granted. Mr. Justice Jeune, in his judgment, point
ed out that the proceedings in the divorce action
had been stayed. Nonetheless, the petitioner was
proceeding in Vienna to obtain the testimony. His
Lordship said at page 100:
Is that a proceeding which this tribunal ought to permit the
petitioner to take? I think it is not, and on two main grounds.
2 See Ellerman Lines, Limited v. Read [1928] 2 K.B. 144
(C.A.).
3 [1892] P. 98.
First, I think it is useless, in the sense that the petitioner can
obtain no legitimate advantage from it; secondly, I think it is or
may be injurious to the proper course of proceeding in this
Court. It is admitted that the evidence thus taken could not be
used before this tribunal. Apart from other considerations, the
Act of 1857 expressly and exhaustively provides how evidence
may be taken, and by s. 47 it provides that in certain cases a
commission may be issued for the examination of witnesses
abroad in the manner therein specified. But the Court has held
that it is not entitled to order the issue of such a commission in
this case in the position in which it stands at the present
moment. What has been done at Vienna has been represented
as auxiliary to this suit; but it clearly is not auxiliary in the
sense that the evidence taken before the Court in Vienna can in
any way be made available before the Court here. The case of
the Peruvian Guano Co. v. Bockwoldt (23 Ch.D. 225) appears
to me to shew that, whether the second proceeding be before a
foreign tribunal or a tribunal in this country, in either case the
rule is this: that such a proceeding ought not to be allowed if a
person can only obtain an illusory advantage from it. In this
case I think that no legitimate advantage of any kind can be
obtained. This brings me to the second ground to which I have
referred. The only advantage suggested here is that the peti
tioner may be able to bring before the Vienna tribunal wit
nesses whose evidence he does not know, and to take their
proofs under the pressure of an oath. He thus will get to know
all that the witnesses may prove, and he will be under no
obligation to produce that evidence before this Court, as he
would be if the evidence were taken on commission. That
appears to me to be an interference with the proper course of
the administration of justice in this Court. Moreover, we do not
know under what rule of law these witnesses may be examined.
They may, and from what was said by Mr. Ram I gather will,
be unwilling witnesses; and they may be subjected to questions
in the nature of cross-examination by the petitioner's counsel,
and, it appears also, by the Court, and, further, information
beyond their proper evidence may be extracted from them. This
appears to be a mode of dealing with testimony which we
should not allow, and to go far beyond any process of discovery
recognised in the procedure of this country. It amounts to
interrogating your opponent's witnesses before trial ....
It seems to me that there are important distinc
tions between that case and this. The most impor
tant distinction is that the process of compulsory
oral examination for discovery under oath of an
adverse party or of a witness was not available
under the appropriate rules of the English Court.
Under our Rules, such discovery is available in
respect of an adverse party and of a party in the
position of the party sought to be examined in this
case, the assignor of the invention. It is, of course,
true that Mr. Rehmar is not subject to such
examination under Rule 465(5) because he is out
of the jurisdiction. But he would be if he were in
Canada. The procedure obviously is not a proce
dure we find vexatious or oppressive. It is a proce
dure which we ourselves apply in respect of assign-
ors of patents who are within our jurisdiction. Mr.
Justice Jeune was concerned that the witnesses in
Vienna might be unwilling witnesses and might be
subject to cross-examination. He was concerned
that the mode of dealing with the testimony of the
witnesses in Austria was a mode which would ".
go far beyond any process of discovery recognised
in the procedure of this country." But that is not
so in the present case.
It would also appear that the examination of
Mr. Rehmar would be useful to the appellant. It
may well be that the testimony could not be read
in at the trial, but it would be of use in preparing
the appellant's case, which is one of the purposes
of an examination for discovery.
And a final point of difference: the present case
is not one in which the proceedings abroad were
taken and would be pursued during a stay in the
Federal Court action, a process that might con
ceivably constitute an interference with an action.
There is, of course, the circumstance that the
examination would be held under the United
States Rules of Civil Procedure, and there was no
evidence of their content. There is, however, no
showing that use of the United States Rules would
involve procedures that we would find unaccept
able.
The Trial Judge referred to a statement appear
ing in the affidavit which was used in support of
the application before the United States Court to
the effect that there was no jurisdictional basis by
way of subpoena or otherwise by which the Fed
eral Court of Canada could compel Mr. Rehmar
to submit to an examination for discovery. The
Trial Judge agreed, but added [at page 561]:
It is contrary to law for the Federal Court of Canada to so
order.
The Court will restrain a litigant before it from prosecuting
proceedings in a foreign court for the purpose of searching out
evidence or information respecting an action in the Court which
proceedings in the foreign court are not permissible under its
Rules.
Later in his reasons, the Trial Judge, after
examining Armstrong v. Armstrong, stated [at
pages 565-566]:
Here the defendant, like the petitioner before Jeune J., can
obtain "no legitimate advantage". The evidence obtained in the
respective proceedings could not be used in the courts seized of
the actions and neither court could nor would grant an order
such as was granted by the foreign court.
The advantage accruing to the defendant is an advantage to
which, in the applicable circumstances under the law of this
jurisdiction, it is not entitled. That is not a legitimate advan
tage. The defendant by invoking the process of a foreign
jurisdiction in a proceeding which is not truly auxiliary (and
could not be without the order of this Court) to the action
properly before this Court, but separate and distinct therefrom,
has circumvented the law of this jurisdiction by which law this
action must be governed.
This, in my view, is a proceeding which this Court ought not
permit the defendant to take.
It was for those reasons that I gave the order that I did at the
conclusion of the hearing.
As I read his reasons, the Trial Judge granted
the stay because in his view the appellant "... has
circumvented the law of this jurisdiction by which
law this action must be governed", and had thus
gained an advantage which would not be legiti
mate. With respect, I do not agree.
It is true that, for the reasons given in the Lido
case, the Trial Division of the Federal Court could
not have ordered the examination of Mr. Rehmar
for discovery. This would be so because Mr.
Rehmar would not be subject to a subpoena issued
in Canada, but for this reason only. I do not see,
however, why this should prevent the appellant
from going into a United States Court which has
jurisdiction over Mr. Rehmar to obtain under ap
plicable United States law the sort of order it
could have obtained from the Federal Court had
Mr. Rehmar, the assignor of the patent, been
within Canada. The sort of procedure invoked
abroad is a procedure which is available in the
Federal Court action in respect of an assignor of a
patent who is subject to service in Canada. The
examination conducted abroad will, of course,
have no status under Rule 465. That does not
mean, however, that it would be illegitimate to
conduct it.
I would allow the appeal with costs and set aside
the order appealed against. The appellant should
also have its costs in the proceedings below.
* * *
LE DAIN J. concurred.
* * *
MACKAY D.J. concurred.
You are being directed to the most recent version of the statute which may not be the version considered at the time of the judgment.