T-4853-77
W. H. Brady, Co. (Plaintiff)
v.
Letraset Canada Limited (Defendant)
Trial Division, Walsh J.—Ottawa, September 1
and 2, 1983.
Practice — Discovery — Production of documents —
Application for R. 448 order compelling defendant to serve
and file better list of documents, particularly those within
possession or custody of parent company and therefore within
power of defendant to list — Patent infringement action
involving priority of invention issue — Documents list already
provided pursuant to previous R. 448 order not including
documents in possession of parent company — Witness to be
examined having access to documents — Parent not party to
proceedings — Plaintiff arguing documents within "power" of
witness to list notwithstanding not in defendant's "possession"
— Application allowed — Facts of each case determinative —
Nature of issue, fact that most information required to resolve
issue in possession of parent company, and fact witness having
power to obtain information key considerations in disposition
of case — Federal Court Rules, C.R.C., c. 663, RR. 448, 451,
453, 456, 464.
CASES JUDICIALLY CONSIDERED
CONSIDERED:
Leeson Corp. v. Snia Viscosa Canada Ltd. (1975), 26
C.P.R. (2d) 136 (F.C.T.D.); Foseco International Ltd. et
al. v. Bimac Canada et al. (1980), 53 C.P.R. (2d) 186
(F.C.T.D.); Bowlen v. The Queen, [1977] 1 F.C. 589
(T.D.); Bowlen v. The Queen, [1978] 1 F.C. 798 (C.A.);
Joseph A. Likely Ltd. v. Peter Kiewit & Sons Co. Ltd., et
al. (1977), 19 N.B.R. (2d) 294 (N.B.S.C.); Taylor v.
Rundell (1841), 41 E.R. 429, Cr. & Ph. 104 (Ch.);
Lonrho Ltd. et al. v. Shell Petroleum Co. Ltd. et al.,
[1980] 2 W.L.R. 367 (Eng. C.A.).
COUNSEL:
A. David Morrow for plaintiff.
Gervas W. Wall for defendant.
SOLICITORS:
Smart & Biggar, Ottawa, for plaintiff.
Gowling & Henderson, Ottawa, for defend
ant.
The following are the reasons for order ren
dered in English by
WALSH J.: Plaintiff seeks an order pursuant to
Rule 448 [Federal Court Rules, C.R.C., c. 663] to
serve and file a better list of documents that are in
the defendant's "possession, custody or power"
relating to issues raised in paragraphs 2(a) and
2(b) of the further amended reply and defence to
counterclaim herein dated December 22, 1982,
and an affidavit verifying such list and in particu
lar listing documents that, although not within the
possession or custody of defendant are within the
possession or custody of its parent company Letra-
set Limited and within the power of the defendant
by virtue of its relationship with its parent com
pany Letraset Limited. Details of the documents
sought are set out in the order rendered herein and
will not be repeated here.
The matter is of extreme urgency as, by agree
ment, arrangements have been made to examine
John Bardner, President of the defendant and
chief officer of the parent company Letraset Lim
ited in London, England on September 7 and 8,
1983 and plaintiff wishes the list of documents to
be available before such examination.
There is no issue, at least on the present motion,
as to the fact that Letraset Canada is now owned
to the extent of 51% by Letraset Limited which is
now owned indirectly by a Swedish company. They
are part of a large group of international compa
nies and Letraset Limited publishes consolidated
annual reports including the report of Letraset
Canada. They are clearly intimately connected,
although of course having separate corporate
personalities.
The action is one for infringement of patent
which has been going on for 7 years, including an
appeal of an interlocutory judgment respecting
answers to questions by a witness formerly exam
ined for discovery. The defence and counterclaim
attacks the validity of plaintiff's patent. In answer
to this plaintiff in the aforementioned paragraphs
2(a) and 2(b) alleges that the issue of priority of
invention was determined by a decision of the
Commissioner of Patents in 1970 in conflict pro
ceedings relating to the patent. Furthermore it
alleges that there is a duty of uberrimae fidei in
conflict proceedings and that if the inventor Rich-
ards from whom defendant's rights originate did
not disclose all prior art now relied on by defend
ant in the conflict proceedings, defendant is now
estopped from raising the issue of priority of inven
tion again.
It is evident, that aside from this legal issue, the
Trial Judge, if he is to deal with priority of inven
tion must have all relevant documentation before
him and this is what defendant appears to be
seeking to avoid, although it has raised the issue in
its defence.
Justice Mahoney made an order on February
16, 1982 requiring both parties to file and serve
lists of documents under Rule 448 and that
defendant furnish an officer for further examina
tion for discovery on the amended pleadings, and
an appeal from this judgment was dismissed on
December 14, 1982. This has led to the arrange
ments for the examination of Mr. Bardner in
England. The list of documents provided by
defendant on or about June 30, 1983 only included
documents in the possession of Letraset Canada
Limited and none in the custody of the parent
company. It is these documents, which are obvi
ously relevant to the issue to be eventually decided,
which plaintiff now seeks.
Mr. Bardner has been associated with Letraset
Limited since 1969 and almost certainly has access
to the documents in question. The issue in the
present motion is whether he can be required to
list the documents sought, Letraset Limited, the
parent company not being a party to the proceed
ings, although it would appear that it is controlling
the defence; a patent agent in its employ attended
all prior examinations for discovery, and Richards
who claims to be the prior inventor, being a former
employee and shareholder who transferred his
rights to it. Defendant has allegedly opposed his
examination for discovery and he is not a compel-
lable witness for such examination by plaintiff in
Canada.
The issue turns largely on the wording of Rule
448 which uses the words "possession, custody or
power", unlike Rule 464 which only uses the word
"possession". Plaintiff argues strongly that while
the documents sought are not in the possession of
the defendant, they are within the "power" of the
witness Bardner to be examined as an officer of
the defendant to list, as he wears two hats, being
also the Group Managing Director with ready
access to all Letraset Limited's documents. The
Canadian company thus has the "power" to obtain
these documents.
In the case of Leeson Corp. v. Snia Viscosa
Canada Ltd. (1975), 26 C.P.R. (2d) 136
(F.C.T.D.) dealing with discovery under Rule 465
it was held that the deponent who was President of
defendant and also an officer of the parent com
pany should inform himself and answer questions
relating to the parent company's knowledge. In the
case of Foseco International Ltd. et al. v. Bimac
Canada et al. (1980), 53 C.P.R. (2d) 186
(F.C.T.D.), the plaintiff, Foseco International
Ltd., was a wholly-owned subsidiary of a British
company. In this patent infringement action
Mahoney J. found that plaintiffs were not entitled
to refuse to produce relevant documents of an
American company also wholly-owned by the Brit-
ish company nor to refuse to answer questions
simply because they have to get the necessary
information from it. Plaintiff also relies on the
trial judgment in the case of Bowlen v. The Queen,
[ 1977] 1 F.C. 589, decided by Smith D.J. in which
it was held (quoting in part from the headnote [at
page 590]) that "Production may be of all docu
ments in possession of a stranger to an action
providing they are sufficiently described and rele
vant to the issues between the parties to the extent
that it is likely their production would be compel-
lable at trial." Defendant however invokes the
appeal judgment in the same case reported in
[1978] 1 F.C. 798 in which an order for produc
tion was refused of documents in possession of a
wholly-owned subsidiary of the Royal Bank, a
separate corporation established under American
law and operating in the United States as it had
not been shown that the documents sought were
the property of the Royal Bank or that the subsidi
ary held them in trust or as its agent. This was an
application arising from Rule 464. At page 800
Thurlow C.J. stated in reference to Rule 464 "It
will be observed that the Rule applies only 'When
a document is in the possession of a person not a
party to the action and the production of such
document at a trial might be compelled'. It was
submitted that the use of the single word 'posses-
sion' indicates that the application of the Rule is
narrower than that of Rules 448, 451 and 453 to
456, under which a party may be required to
discover documents that are or have been in his
`possession, custody or power' and to produce such
of them as are in his `possession, custody or
power'. On the face of it, this appears to be so but,
on reflection, I doubt that there is much differ
ence, at least in so far as the right to production is
concerned. However, it is not necessary to decide
the point. What is involved is simply the meaning
of `possession' in Rule 464." It is evident that the
question of the meaning of the word "power" in
Rule 448 was not dealt with at length, the learned
Chief Justice's comments on the similarity to Rule
464 being obiter in nature, as he himself states.
Plaintiff refers to the dictionary definition of
"power" as "Ability to do something or anything,
or to act upon a person or thing". Reference was
made to the decision of the New Brunswick
Supreme Court, Appeal Division, in the case of
Joseph A. Likely Ltd. v. Peter Kiewit & Sons Co.
Ltd., et al. (1977), 19 N.B.R. (2d) 294 which held
that "in the power of' includes all documents
which, though not in possession of the party he has
a right to obtain from the person who has them. In
the present case the witness John Bardner would
appear to have the right to obtain the documents
sought from the parent company Letraset Limited.
It is true, however, that this would be on discovery,
involving the narrower wording of Rule 464.
Finally plaintiff referred to the British case of
Taylor v. Rundell (1841), 41 E.R. 429, Cr. & Ph.
104 (Ch.), in which at page 433 (E.R.) it is stated
"If it is in your power to give the discovery, you
must give it; if not, you must shew that you have
done your best to procure the means of giving it."
Defendant, in addition to relying on the state
ment of Thurlow C.J. in the Bowlen case (supra)
relies on the recent British case of Lonrho Ltd. et
al. v. Shell Petroleum Co. Ltd. et al., [1980] 2
W.L.R. 367 (Eng. C.A.) in which Shell and B.P.
did not include in their lists of documents those in
possession of their subsidiaries in South Africa or
Rhodesia. Lord Denning, in addressing the ques
tion of whether a parent company has "power"
over the documents of a subsidiary in another
country stated at page 373 "I would like to say at
once that, to my mind, a great deal depends on the
facts of each individual case. For instance, take the
case of a one-man company, where one man is the
shareholder—perhaps holding 99 per cent. ( ... )
where perhaps he is the sole director. In these
circumstances, his control over that company may
be so complete—his "power" over it so complete—
that it is his alter ego. ( ... ) But in the case of
multi-national companies, it is important to realise
that their position with regard to their subsidiaries
is very different from the position of one-man
companies. And often it is different from the
position of a 100 per cent. company operating in
one country only." On the next page he refers to
the fact that the South African and Rhodesian
companies were very much self-controlled, the
directors being local directors—running their own
show with comparatively little interference from
London. On page 376 he refers to the documents
of the subsidiary companies not being in the
"immediate power" of the parent and that if it has
to take further steps to get them they need not be
disclosed.
Certainly if a parent company cannot be obliged
to disclose documents in possession of a subsidiary,
the converse would be even more true—that the
subsidiary does not have the "power" to force
disclosure by the parent. While this proposition
may well be sound as a general principle, the facts
of each individual case must be considered as Lord
Denning suggests. In the present case we are not
dealing with taxation, nor with damages, but with
priority of invention of a patent, with most of the
information required to decide it being in the
possession of the parent company. While the
defendant may not have the "immediate power" to
obtain the information and list the documents,
Rule 448 does not use the word "immediate".
Bardner, the witness to be examined for discovery
undoubtedly has the "power" and most probably
even the "immediate power" to give defendant the
information to enable it to list them. He is the
principal officer of both companies.
No doubt with the Lonrho case in mind, plain
tiff on the examination for discovery of Frederick
Miles, General Manager of defendant, asked a
number of searching questions concerning the
autonomy of the Canadian company, defendant
herein. Reference was made to guidelines for the
operation of the Canadian company, emanating
from Mr. Bardner and to implicitly following the
suggestions of a superior. Finally the witness
stated "I operate virtually autonomously." This
may well be the case with respect to day-to-day
operations of the company, but when we come to
consider the question of patent infringement,
which is the basis of the present proceedings, this
is hardly a matter which would be dealt with or
contested by the Canadian company Letraset
Canada Limited on its own behalf without direc
tions from the parent company which controls it,
and more specifically from Mr. Bardner.
As I stated earlier the documentation sought
will have to be revealed to the Court sooner or
later, whether on the present application, on the
examination for discovery of Mr. Bardner or by
some other procedure, and on the facts of this case
it appears desirable that this information by way
of a further and better list of documents should be
in plaintiffs possession before the examination for
discovery of Mr. Bardner, for use in connection
with the examination.
For these reasons, although the issue is admit
tedly a controversial and difficult one, I have
issued the order sought by plaintiff.
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.