A-392-80
The Queen (Appellant) (Defendant)
v.
87118 Canada Ltd. (Respondent) (Plaintiff)
Court of Appeal, Pratte and Heald JJ. and
Lalande D.J.—Montreal, March 26; Ottawa,
April 29, 1981.
Crown — Contracts — Incorporation of a company —
Appeal from Trial Division decision granting to the respondent
corporation damages for losses incurred when corporate name
had to be changed — Department of Consumer and Corporate
Affairs approved respondent's proposed name subject to
respondent assuming responsibility for risk of confusion with
existing business names and trade marks — Later, respondent
was forced to change its name because the Department dis
covered an existing business name which was confusing with
respondent's name — Trial Judge found that appellant's
servants had negligently given false information in response to
request for corporate name search, and that "business names"
did not include corporate names — Whether appellant was
liable either in delict or in contract for damages suffered by
respondent — Appeal is allowed — Canada Business Corpo
rations Act, S.C. 1974-75-76, c. 33, ss. 11, 12, 254 — Canada
Business Corporations Regulations, SOR/75-682, as amended
by SOR/76-665, s. 82(1), Schedule 2.
APPEAL.
COUNSEL:
Ben Bierbrier for appellant (defendant).
Norton Segal for respondent (plaintiff).
SOLICITORS:
Deputy Attorney General of Canada for
appellant (defendant).
Lechter & Segal, Montreal, for respondent
(plaintiff).
The following are the reasons for judgment
rendered in English by
PRATTE J.: Her Majesty appeals from a judg
ment of the Trial Division [[1981] 1 F.C. 96]
granting to the respondent corporation damages in
the amount of $4,000 for the loss it incurred when
the name under which it had been incorporated
had to be changed.
On April 26, 1977, articles of incorporation of a
corporation to be named "Mondial Ceramic &
Marble Ltd." were submitted to the Department
of Consumer and Corporate Affairs pursuant to
the Canada Business Corporations Act.' The sum
of $210 was enclosed with the articles in payment
of the prescribed incorporation fee of $200 and of
a fee of $10 to search the name of the intended
corporation. 2 By letter dated May 18, 1977, an
examiner acting on behalf of the Director
informed the incorporator's attorneys that the
name "Mondial Ceramic & Marble Ltd."
appeared to be available for use as a corporate
name. That letter read in part as follows:
This is in reply to your recent enquiry concerning the availabili
ty of the following name(s):
[1] MONDIAL CERAMIC & MARBLE LTD.
' S.C. 1974-75-76, c. 33.
2 Section 254 of the Canada Business Corporations Act
empowers the Governor in Council to make regulations
"requiring the payment of a fee in respect of the filing,
examination or copying of any document, or in respect of any
action that the Director is required or authorized to take under
this Act, and prescribing the amount thereof". Subsection
82(1) of the Canada Business Corporations Regulations,
SOR/75-682, as amended by SOR/76-665 was made pursuant
to that authority. It prescribes that:
82. (1) The fee in respect of the filing, examination or
copying of any document or in respect of any action that the
Director is required or authorized to take under the Act shall
be the fee set out in Schedule 2 and, except in the case of the
fee payable under item 1 in Schedule 2, shall be paid to the
Director upon the filing, examination or copying of the
document or before the Director takes the action in respect
of which the fee is payable.
The first two paragraphs of Schedule 2 read as follows:
1. Each request to the Director containing a maximum of
three alternative names for searches concerning the availa
bility of a corporate name, including the reservation of the
name $ 10.00
2. Issuance by Director of
(a) certificate of incorporation under section 8 200.00
The Act does not contain any provision relating or referring to
"searches concerning the availability of a corporate name".
However, it contains a provision relating to the reservation of a
corporate name; it is subsection 11(1) which reads as follows:
11. (1) The Director may, upon request, reserve for ninety
days a name for an intended corporation or for a corporation
about to change its name.
The name appears to be available for use as a corporate
name subject to and conditional upon the applicants assum
ing full responsibility for any risk of confusion with existing
business names and trade marks (including those set out in
our search report ....
attached ).
There was attached to that letter, in addition to
the search report, which was a computer print-out
containing some 37 names, a notice advising that
the Corporations Branch of the Department of
Consumer and Corporate Affairs was "now con
ducting all name searches using an automated
search system" and, also, the certificate of incor
poration of the respondent.
The respondent had been operating its business
for nearly a year when, at the end of March 1978,
it received a letter from the Department of Con
sumer and Corporate Affairs stating that it had
just been discovered that there existed a corpora
tion named "Mondeal Ceramics Ltd." which had
been incorporated in 1974. As that name was
considered to be confusing with that of the
respondent, "Mondial Ceramic & Marble Ltd.",
the letter directed the respondent to change its
name within 60 days pursuant to section 12 of the
Act. When the respondent failed to comply with
that directive, the Director issued a certificate of
amendment changing its name to "87118 Canada
Ltd."
Following that change, the respondent sued Her
Majesty for damages, claiming that it had had to
change its name owing to the negligence of the
employees of the Department of Consumer and
Corporate Affairs who had failed to discover,
when they had searched the name "Mondial
Ceramic & Marble Ltd.", that there was then in
existence a Canadian corporation known as "Mon-
deal Ceramics Ltd."
The evidence adduced at trial disclosed that,
following the receipt of the articles of incorpora
tion of the respondent, employees of the Depart
ment had conducted a search, through a computer,
in order to discover, among the 1,200,000 trade
names and trade marks that formed part of the
data base, the names which could be confusing
with "Mondial Ceramic & Marble Ltd." The
computer failed to pick out the name "Mondeal
Ceramics Ltd." which, as a consequence, was not
mentioned in the search report sent to the incor-
porator's attorneys on May 18, 1977. The result of
the search would have been different, however,
had it been made a few months later. In August
1977, an improved automated search system
became operational and began to be used by the
Department. It is common ground that a search of
the name "Mondial Ceramic & Marble Ltd." with
this new system would have discovered the name
"Mondeal Ceramics Ltd."
The Trial Judge decided in favour of the
respondent. He held that, had not the appellant's
servants been negligent, they should have found
and disclosed, when they answered the request for
search of the name "Mondial Ceramic & Marble
Ltd.", that there existed a corporation named
"Mondeal Ceramics Ltd." As a consequence, he
decided that the appellant was liable, both in delict
and in contract, for the damage suffered by the
respondent as a consequence of that negligence.
He assessed that damage at $4,000.
The learned Judge's finding of delictual liability
was based on his opinion that the appellant's ser
vants had negligently given false information in
answer to the request for search of the respond
ent's proposed name. But what was the informa
tion conveyed by the appellant's servants? It was
contained in the letter of May 18, 1977:
This is in reply to your recent enquiry concerning the availabili
ty of the following name(s):
[1] MONDIAL CERAMIC & MARBLE LTD.
The name appears to be available for use as a corporate
name subject to and conditional upon the applicants assum
ing full responsibility for any risk of confusion with existing
business names and trade marks (including those set out in
our search report....
attached
The Trial Judge construed that letter as stating
that the proposed corporate name was not confus
ing with any other existing corporate name while it
might be confusing with existing business names
and trade marks. He interpreted the expression
"business names" used in the letter as having a
meaning which did not include "corporate names".
I cannot accept that interpretation. The expression
"business names", in the letter, appears to me to
be used as a synonym of "trade name", a phrase
which section 12 of the Regulations correctly
defines as meaning "the name under which any
business is carried on, whether it is the name of a
body corporate, a trust, a partnership, a proprie
torship or an individual". In my view, the state
ment contained in the letter merely means that the
Director has no objection to the proposed name
but does not guarantee that it is not confusing with
an existing trade name or trade mark. I am there
fore of opinion that the letter did not convey any
false information and, for that reason, I cannot
share the learned Judge's view that, in the absence
of contract, the appellant was delictually respon
sible for the damage suffered by the respondent.
The judgment under attack, however, is mainly
based on the view that the respondent's claim was
based on contract. The appellant, according to the
learned Judge, was contractually bound to make a
search and determine whether the proposed corpo
rate name was confusing with another existing
name; that search, still according to the Trial
Judge, was made negligently and, for that reason,
gave incomplete and misleading results. The
damage suffered by the respondent therefore
resulted, in the Judge's opinion, from the negligent
performance of the appellant's contractual obliga
tions. I cannot agree with that conclusion. I doubt
that the Director ever entered into a contract to
search the respondent's proposed corporate name
and, if he did, I am of the view that that contract
was not made with the respondent but with the
incorporator. I also doubt that the Judge's finding
of negligence is supported by the evidence. How
ever, I do not have to express any opinion on those
points since, in my opinion, the terms of the letter
of May 18, 1977, 3 clearly excluded any contractu
al liability for the damage that might result from
the existence of a confusing trade name or trade
mark. The learned Trial Judge held otherwise
because of the meaning that he gave to the phrase
"business names". I have already said that I
cannot agree with him on this point.
3 "... subject to and conditional upon the applicants assum
ing full responsibility for any risk of confusion with existing
business names ...".
For those reasons, I would allow the appeal with
costs, set aside the judgment of the Trial Division,
and dismiss the respondent's action with costs.
* * *
HEALD J.: I concur.
* * *
LALANDE D.J.: I concur.
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.