T-831-82
Algonquin Mercantile Corporation (Plaintiff)
(Appellant)
v.
Dart Industries Canada Limited (Defendant)
(Respondent)
INDEXED AS: ALGONQUIN MERCANTILE CORP. V. DART INDUS
TRIES CANADA LTD.
Trial Division, Addy J.-Toronto, April 7, 8, 9,
10, 11, 16, 17, 18, 21; Ottawa, October 28, 1986.
Practice - Interest - Industrial design infringement pro
ceedings dismissed - Assessment of damages suffered by
defendant due to interlocutory injunction - Appeal from
prothonotary's report - Interest to be determined according to
provincial substantive law to extent federal legislation not
inconsistent - Pre-judgment interest awarded - S. 36
Ontario Judicature Act applied - S. 40 Federal Court Act
not barring application of post-judgment rate of interest in
effect in jurisdiction governing liability - Post-judgment
interest calculated according to ss. 137 and 139(1) Ontario
Courts of Justice Act - Federal Court Act, R.S.C. 1970 (2nd
Supp.), c. 10, ss. 20, 40 - Exchequer Court Act, R.S.C. 1927,
c. 34, s. 22 (as am. by S.C. 1928, c. 23, s. 3(c)) - Judicature
Act, R.S.O. 1980, c. 223, s. 36 - Courts of Justice Act, S.O.
1984, c. 11, ss. 137, 138, 139(1) - Interest Act, R.S.C. 1970, c.
I-18, s. 3 - Canadian Charter of Rights and Freedoms, being
Part I of the Constitution Act, 1982, Schedule B, Canada Act
1982, 1982, c. 11 (U.K.).
Practice - References - Appeal from prothonotary's
report assessing damages suffered by defendant as result of
interlocutory injunction - Role of Trial Judge similar to that
of appellate court sitting on appeal from assessment, by trial
judge, of damages following hearing with viva voce evidence
Unnecessary to conclude prothonotary's findings irrational to
modify or reverse - Sufficient Trial Judge satisfied pro-
thonotary wrong in interpreting evidence or applying law
Federal Court Rules, C.R.C., c. 663, RR. 500, 503, 505, 506,
507.
Industrial design - Infringement proceedings dismissed
Appeal from prothonotary's report assessing damages suffered
by defendant due to interlocutory injunction - Post-injunc
tion damages recoverable - Undertaking to indemnify in
injunction cases amounting to undertaking to pay all damages
flowing from injunction - Not restricted to damages occur
ring while injunction in effect - Common law not imposing
cut-off date - Post-injunction assessment subject to usual
limitations as to remoteness — Pre-judgment and post-judg
ment interest awarded.
Proceedings instituted against the defendant for alleged
infringement of the plaintiff's industrial design of a griddle
called the "Breakfast Nook" were dismissed. The plaintiff now
appeals from the prothonotary's report assessing the damages
suffered by the defendant as a result of its compliance with an
interlocutory injunction. The issues relate to the defendant's
entitlement to post-injunction damages, and to the calculation
of pre- and post-judgment interest. Before determining those
issues, the Court answered questions relating to its role in an
appeal of this type; the degree of proof required to establish
damages and the consequence of the prothonotary's failure to
mention certain evidence.
Held, the amount of post-injunction damages awarded by the
prothonotary should be reduced; pre-judgment interest should
be awarded and the rate of pre- and post-judgment interest
calculated according to the applicable provincial legislation.
The role of a Trial Division judge sitting on appeal from the
assessment of a referee is substantially the same as that of an
appellate court sitting on appeal from an assessment of dam
ages by a trial judge following a hearing with viva voce
evidence: the same general principles apply. In order to reverse
or modify the findings of the prothonotary it is not necessary
that the Trial Judge conclude that those findings were irration
al or that no judge acting rationally could possibly have come
to that conclusion. The Trial Judge need only be satisfied that
the prothonotary was wrong either in interpreting the evidence
or in applying the law.
The Trial Judge must also be satisfied on a balance of
probabilities that the relevant facts have been established by
the party on whom the onus of proof rests. He is entitled, if he
believes a witness, to rely entirely on that witness' evidence
regardless of whether that person is an interested witness or
even a party to the action.
The argument that the prothonotary's failure to mention
certain evidence led to an erroneous determination of the facts
could not be accepted. Omitting one particular area of the
evidence without reviewing contrary evidence does not consti
tute proper ground for an appellate tribunal to conclude that all
relevant evidence was not taken into consideration.
The issue whether post-injunction losses were recoverable led
to a review of the law on the question of undertakings to
indemnify in injunction cases. The usual undertaking given by
parties requesting an interlocutory injunction involves an
undertaking to pay all damages which flow from the granting
of the injunction and is not restricted to those which occurred
during the existence of the injunction. Nor does the common
law impose any artificial cut-off date. The assessment for the
period following the injunction remains subject to the usual
limitations as to remoteness, that is, whether after a certain
period of time has passed and other circumstances have inter
vened, losses, if any, can still, on a balance of probabilities, be
attributed to the injunction with any reasonable degree of
certainty.
It is well established that entitlement to interest, whether
pre-judgment or post-judgment, is a question of substantive
law. In the present case, the provincial substantive law appli
cable is that of the Province of Ontario to the extent that it is
not excluded by any federal statute to which the Federal Court
would be required to conform.
The defendant is entitled to pre-judgment interest. The
proposition that, in the Federal Court, interest cannot be
awarded on unliquidated damages prior to their assessment,
could not be agreed with. Nor could the proposition that, since
section 40 of the Federal Court Act deals with post-judgment
interest in cases where no right of interest is provided for in the
judgment, it must be presumed that Parliament did not intend
pre-judgment interest to be awarded. In the case at bar, the
applicable provision with respect to pre-judgment interest is
section 36 of the Judicature Act of Ontario. The damages
claimed are general in nature, i.e. immediate, direct and proxi-
mate results of the defendant being prevented from selling its
goods. Since the damages: are unliquidated, the date of the
undertaking requested by the defendant and imposed by the
Court is that from which interest would run in accordance with
subparagraph 36(3)(b)(ii). Subsection 36(6), which empowers
the judge to vary the rate, was applied. Interest rates should be
fixed at 8.25% and 16.5%.
With respect to post-judgment interest, it was urged that,
pursuant to section 40 of the Federal Court Act, the judgment
may not bear interest at a rate higher than 5% unless special
circumstances justify the increase. That argument was rejected.
Section 40 governs where the court has chosen not to set any
post-judgment interest. Where it decides to do so, it may apply
the regular post-judgment rate in effect in the jurisdiction
whose laws govern the liability. In the case at bar, the appropri
ate provisions are sections 137 and 139(1) of the Ontario
Courts of Justice Act. Post-judgment interest is to be calculat
ed from the date of judgment on the total of the damages plus
the pre-judgment interest and costs since they all constitute
"money owing under an order" pursuant to subsection 139(1).
CASES JUDICIALLY CONSIDERED
APPLIED:
Teledyne Industries, Inc. et al. v. Lido Industrial Prod
ucts Ltd. (1982), 68 C.P.R. (2d) 204 (F.C.T.D.).
DISTINGUISHED:
Cossette v. Dun (1890), 18 S.C.R. 222.
CONSIDERED:
Hoffman- LaRoche (F) & Co AG v. Secretary of State
for Trade and Industry, [1974] 2 All E.R. 1128 (H.L.);
McCracken et al. v. Watson, [1932] Ex.C.R. 83; Le Vae
Marjorie Manz et al. v. The Steamship Giovanni Amen-
dola, [1956] Ex.C.R. 55; The Queen v. Murray et al.,
[1967] S.C.R. 262; Attorney General of Canada and
Motel Fontaine Bleue Inc. (1979), 29 N.R. 394 (F.C.A.);
Davie Shipbuilding Limited v. The Queen, [1984] 1 F.C.
461 (C.A.); McKinnon and McKillap v. Campbell River
Lbr. Co., Ltd. (No. 2), [1922] 2 W.W.R. 556 (B.C.C.A.);
Consolidated Distilleries Ltd. v. The King, [1932] S.C.R.
419; [1933] A.C. 508 (P.C.); Consolboard Inc. v. Mac-
Millan Bloedel (Saskatchewan) Ltd. (1982), 63 C.P.R.
(2d) 1 (F.C.T.D.); affirmed (1983), 74 C.P.R. (2d) 199
(F.C.A.); Domestic Converters Corporation v. Arctic
Steamship Line, [1984] 1 F.C. 211; (1983), 46 N.R. 195
(C.A.); Marshall v. Canada (1985), 60 N.R. 180
(F.C.A.); R. v. Nord-Deutsche Versicherungs-Gesell-
schaft, [1971] S.C.R. 849; 20 D.L.R. (3d) 444.
REFERRED TO:
Smith v. Day (1882), 21 Ch. D. 421 (CA.); Nusbaum
v. Hartford Fire Ins. Co., 132 A. 177 (Pa. 1926);
Eisenson v. Home Ins. Co., 84 F. Supp. 41 (N.D. Fla.
1949); Rogers v. American Ins. Co., 338 F.2d 240 (8th
Cir. 1964); Great Northern Oil Co. v. St. Paul Fire &
Marine Ins. Co., 227 N.W.2d 789 (Minn. 1975); McAs-
phalt Industries Limited v. Algoma Central Railway,
T-4226-82, Federal Court, Trial Division, order dated
February 2, 1984, not reported; Irving Refining Ltd. v.
The Travelers Indemnity Co., [1969] I.L.R. 790
(N.B.C.A.); Warwick Shipping Ltd. v. R., [1981] 2 F.C.
57 (T.D.); Magrath v. National Parole Board of Canada,
[1979] 2 F.C. 757 (T.D.); Astro Tire & Rubber Co. of
Canada Ltd. v. Western Assurance Co. (1979), 24 O.R.
(2d) 268 (C.A.); Brock v. Cole et al. (1983), 40 O.R.
(2d) 97 (C.A.); Dugdale v. Boissneau et al. (1983), 41
O.R. (2d) 152 (C.A.); Broddy et al. and Director of Vital
Statistics (Re) (1983), 142 D.L.R. (3d) 151 (Alta. CA.);
Bisaillon v. Keable, [1983] 2 S.C.R. 60; British Pacific
Properties Ltd. v. Minister of Highways and Public
Works, [1980] 2 S.C.R. 283; 33 N.R. 98; Prince Albert
Pulp Co. Ltd. et al. v. The Foundation Company of
Canada Ltd., [1977] 1 S.C.R. 200; 306793 Ontario Ltd.
v. Rimes (1980), 30 O.R. (2d) 158; 16 C.P.C. 36 (C.A.);
CAE Industries Ltd. et al. v. The Queen (1983), 79
C.P.R. (2d) 88 (F.C.T.D.); Rothwell v. R. (1985), 10
C.C.E.L. 276 (F.C.T.D.); Consolboard Inc. v. MacMil-
lan Blosdel (Saskatchewan) Limited, [1983] 1 F.C. 89;
(1982), 65 C.P.R. (2d) 100 (T.D.).
COUNSEL:
Ronald E. Dimock, Q.C. and Gordon J. Zim-
merman for plaintiff (appellant).
G. A. Macklin, Q.C. and Anthony G. Creber
for defendant (respondent).
SOLICITORS:
Sim, Hughes, Toronto, for plaintiff (appel-
lant).
Gowling & Henderson, Ottawa, for defen
dant (respondent).
EDITOR'S NOTE
The Executive Editor has decided to report His
Lordship's 53-page reasons for judgment herein
as abridged. The omitted portion of the rea-
sons—some 14 pages—deals with the evidence
as to losses during and following existence of the
injunction and as to the existence, extent and net
effect of "cannibalization".
The following are the reasons for judgment
rendered in English by
ADDY J.:
THE APPLICATION:
This action involved an alleged infringement by
West Bend, a division of the defendant company,
of an industrial design of the plaintiff of a griddle
called the "Breakfast Nook" which the latter had
been producing since 1979. It consisted of a flat
griddle with a covered warming compartment at
one end. The defendant in 1982 was producing and
had begun to distribute and sell to suppliers a
similar griddle called "Family Griddle with
Warmer" (hereinafter referred to as F.G.W.W.).
The action was ultimately dismissed with costs
[[1984] 1 F.C. 246 (T.D.)] and an interlocutory
injunction which had been obtained by the plain
tiff was dissolved following the trial.
In the present proceedings the plaintiff is
appealing from a report of a prothonotary who was
ordered by the Trial Judge to assess the damages
which the defendant suffered as a result of it
having complied with the interlocutory injunction
imposed on March 12, 1982 and removed on
March 28, 1983. At the time the interlocutory
injunction was imposed, the plaintiff gave the
usual undertaking to the Court to abide by any
order this Court might make as to damages. It is
understood that the injunction, which was con
tinued from the date the trial commenced until it
was finally dissolved following trial, remained in
effect throughout, subject to the same undertaking
on the part of the plaintiff.
The proceedings before the referee to determine
the damages suffered by the defendant entailed 25
days of hearing. The report, an extremely long
one, went into considerable detail regarding the
evidence adduced by both parties.
Following the reference, damages in the amount
of $708,597 were awarded under three headings:
freight and advertising wasted, profits lost during
period of injunction and profits lost following re
moval of injunction. There is no dispute regarding
the freight and advertising charges wasted as a
result of the injunction.
Counsel at the hearing before the prothonotary
agreed that all questions regarding the rates of and
the actual calculations of both pre-judgment and
post-judgment interest would be reserved to be
heard by the judge hearing the appeal since they
consisted almost entirely of questions of law.
GENERAL PRINCIPLES:
The transcript of the hearing before the pro-
thonotary occupies some 24 volumes and that evi
dence was extensively referred to by counsel for
both parties, at the hearing before me.
There are three matters raised by counsel which
should be decided before dealing with the actual
assessment of damages, as they relate to the over
all manner in which the present appeal should be
considered and to the effect which should be given
to many highly contradictory parts of the evidence.
(A) Appeals under Rule 506:
The first question raised was the role of the
Court in an appeal of this type. It seems abundant
ly clear that the matter was referred by the Trial
Judge, Mahoney J., to the prothonotary for final
assessment on which, if not appealed, judgment
would automatically issue on motion to the Court.
It was not a question of his referring the matter for
a mere assessment in the nature of a recommenda
tion and then having the referee report back to
him for his final decision on the assessment.
The relevant portions of my brother Mahoney
J.'s judgment in the matter read as follows:
4. THAT the damages sustained by the Defendant by reason of
interlocutory injunction be determined on a reference pursuant
to Rule 500.
5. THAT the Defendant do recover from the Plaintiff the
amount of the said damages.
6. THAT J. A. Preston, Prothonotary of the Federal Court of
Canada, is named the person to act as referee.
7. THAT the reference be held in Toronto, Ontario.
8. THAT the parties, or either of them, may apply to the referee
for an order fixing the date of hearing of the reference.
9. THAT the costs of the reference be in the discretion of the
referee.
10. THAT, subject to paragraph 9, the Defendant do recover
from the Plaintiff its costs of the action and reference to be
taxed.
Rule 500 [Federal Court Rules, C.R.C., c. 663]
reads in part as follows:
Rule 500. (1) The Court may, for the purpose of taking
accounts or making inquiries, or for the determination of any
question or issue of fact, refer any matter to a judge nominated
by the Associate Chief Justice, a prothonotary, or any other
person deemed by the Court to be qualified for the purpose, for
inquiry and report.
(4) The hearing of a reference shall proceed in the same
manner as a trial before the Court.
Rule 503 provides that the referee has the same
power and authority in matters of practice and
procedure as a trial judge. He cannot issue judg
ment (Rule 505) but his report becomes absolute if
not appealed from within 14 days and judgment
issues thereon upon motion after 8 days' notice to
the other party (Rule 507).
I am seized of the present appeal pursuant to
provisions of Rule 506 which read as follows:
Rule 506. Within 14 days after service of the notice of the
filing of any report, any party may, by a motion setting out the
grounds of appeal, of which at least 8 days' notice is to be
given, appeal to the Court against any report, and upon such
appeal the Court may confirm, vary or reverse the findings of
the report and deliver judgment or refer it back to the referee,
or some other referee, for further consideration and report.
Regarding the role of an appellate tribunal
when considering an assessment of damages made
at trial, counsel for the respondent referred to the
decision of the Supreme Court of Canada in Cos-
sette v. Dun (1890), 18 S.C.R. 222, where that
Court reversed a decision of the Court of Queen's
Bench of the province of Quebec which sat on
appeal from a judgment of the Superior Court of
that province. The Supreme Court of Canada res
tored the decision of the Trial Judge regarding
damages. Gwynne J., on the role of appellate
tribunal in such cases, had this to say at pages 256
to 258 of the report:
Upon the question of reduction of damages I am of opinion
that the cases of Gingras v. Desilets, Cassels's Dig. 116, and of
Levi v. Reid, 6 Can. S.C.R. 482, in this court must be taken as
establishing the principle which is well settled in England and
conformable with sound sense, namely, that no court has any
right to reduce the verdict of a jury as to damages where a jury
is the tribunal, or of a judge adjudicating without a jury, on the
ground of the damages being excessive in cases in which, like
the present, the damages recoverable are not ascertainable by
the application of any rule prescribing a measure of damages,
or are not determinable by precise calculation, unless the
damages awarded be so excessive, having regard to the evi
dence, as to shock the understanding of reasonable persons; to
be so outrageous, in fact that no reasonable twelve men, if the
tribunal be a jury, could give; and that no judge, if a judge be
the tribunal, could rationally give, that is without like shock to
the understanding of reasonable persons. The question is not
what damages the judge sitting in appeal thinks he would have
given if he had tried the case, but whether the judge who did
try the case can with propriety be said (as in the case of a jury)
to have acted altogether beyond the bounds of reason in
awarding the amount of damages which he has awarded. This
cannot well be said in the present case, for some of my learned
brothers think the damages given by the learned judge of the
Superior Court to be reasonably moderate in their view of the
evidence. Not having tried the case I cannot for my part
precisely say what damages I should have given if I had tried it;
I think it sufficient to say that in my opinion the Court of
Queen's Bench in appeal should not set aside a judgment on the
ground of excessive damages, or have reduced the amount
awarded in the present case, unless upon the ground that the
amount awarded by the Superior Court was altogether and
palpably beyond the bounds of reason; and this cannot, I think,
with any propriety be said in the present case, whether I should
or should not have given the same amount myself if I had tried
the case.
However, it is to be noted, as pointed out by
counsel for the appellant, that the case related to
general damages for slander, libel and defamation,
where, as stated by Gwynne J. in the above-quoted
passage, the damages recoverable were "not ascer
tainable by the application of any rule prescribing
a measure of damages". Regardless of whether the
test, as stated in the Cossette case in 1890 would
be fully applicable today, the situation before me
is a different one since the damages, although
general in nature, relate to a loss of profits which
can to some extent be estimated by the application
of market formulae, various market performance
curves indicating projected life cycles, comparisons
with the sales of other products of either the same
class or form, the proxy theory and other similar
tests referred to by the experts called by both
parties.
In order to reverse or modify the findings of the
prothonotary, I need not as the Cossette case
seems to imply come to the conclusion that they
were totally irrational or that no judge acting
rationally could possibly have come to that conclu
sion, providing I am fully convinced that he was
wrong either in interpreting the evidence or in
applying the law.
In cases such as the present one, a judge of the
Trial Division sitting on an appeal from the assess
ment of the referee is substantially in the same
position as an appellate court sitting on an appeal
from an assessment of damages from a trial judge
following a hearing with viva voce evidence and
must therefore be governed by the same general
principles.
Both counsel referred to my former decision in
Teledyne Industries, Inc. et al. v. Lido Industrial
Products Ltd. (1982), 68 C.P.R. (2d) 204
(F.C.T.D.), and more particularly to the following
statements at pages 227 and 228 of the report:
(G) Nature of present application
Before considering the findings of the referee on the matter
of interest, in the light of the above-mentioned principles, it
would be useful to emphasize the role which a judge must play
in an appeal under Federal Court Rules, Rule 506, from the
conclusions of a referee.
Counsel for both parties agreed that, unless the referee is
manifestly wrong or has proceeded on an erroneous principle, I
should not interfere with the report. They were also ad idem on
the proposition that it is not sufficient that I merely entertain
doubts as to whether the decision below is right but that I must
be convinced that it is wrong. They also had no quarrel with the
following jurisprudence on the issue. Embee Electronic Agen
cies Ltd. v. Agence Sherwood Agencies Inc. et al., Unreported,
Federal Court No. T-5990-78, released on September 15, 1980
[summarized 5 A.C.W.S. (2d) 86], and Gastebled v. Stuyck et
al. (1973), 12 C.P.R. (2d) 102, [1973] F.C. 1039. In the
former case, the Associate Chief Justice of this court had this
to say on the subject of pp. 5-6 of his reasons:
The Lightning Fastener Co. Ltd., supra, decision is helpful in
several ways, not the least of which is in a consideration of
my role in this matter. I do not perceive it to be my
responsibility to attempt to reassess the damages and in the
absence of the testimony which was presented to the adminis
trator, I am, of course, not in a position to do so. It is not for
me to decide whether, had I been assessing the damages in
this case, I would have done it in the same way, but rather, to
determine whether the assessor appeared, in my opinion, to
properly discharge the responsibility which was entrusted to
him.
In the case of Gastebled v. Stuyck, supra, my brother Walsh
J. is quoted as saying at the conclusion of his reasons on p. 106
of the report:
Even if it were found that the learned referee made an error
in law in appraising these damages, it would still be neces
sary in order to set aside his report to conclude that, as a
result of this error, he arrived at a manifestly wrong and
inadequate amount. I do not so find and hence I dismiss the
appeal and confirm the report of the referee, although under
the circumstances I will allow no costs on the dismissal of
this appeal.
I still consider this to be good law and even if
counsel for the parties in the Teledyne case had
not agreed on the principles I would have come to
the same conclusion.
(B) Degree of proof in assessment of damages:
The second matter of general application relates
to the nature and degree of proof required in order
to establish damages in a case such as the present
one.
Counsel for the plaintiff pointed out that the
defendant, in addition to the experts called on its
behalf, chose to call only three witnesses from
major independent purchasers in order to establish
the loss of sales of the F.G.W.W. He argued that
the evidence of the several sales representatives
employed by the defendant and called by it to
establish the expected sales to several other major
suppliers should not be considered as reliable or as
sufficient evidence as they would be interested
witnesses. He argued that this was not the best
evidence available, that there existed a legal obli
gation on the defendant to call witnesses from
those firms as opposed to witnesses of its own firm
and that, as a result, the prothonotary should have
disregarded that evidence and not concluded that
any sales to other firms had been lost.
I completely reject this argument. No such rule
of law exists. The person trying the issue of dam
ages, as in the case of a person trying any other
factual issue in a civil matter, must be satisfied on
a balance of probabilities that the relevant fact has
been established by the party on whom the onus of
proof rests. In order to come to that conclusion he
is fully entitled, if he believes a witness, to rely
entirely on that witness' evidence regardless of
whether he or she is an interested witness or even
an actual party to the action. Both in presenting its
main case or in rebuttal, the plaintiff was itself of
course perfectly free to call any witnesses from any
of these customers, several of whom were also in
fact its own customers. It cannot now be heard to
argue that the findings would have been otherwise
had those witnesses been called or that the findings
of the prothonotary should be rejected because
those witnesses were not called.
(C) Omissions from reasons:
The prothonotary in certain passages of his rea
sons commented on and apparently subsequently
relied upon certain evidence favourable to the
defendant. He failed in some of those instances to
mention other evidence which might have led to a
different conclusion. Counsel for the plaintiff
argued that, as a result, I was to presume that the
prothonotary had either forgotten or completely
failed to take that evidence into consideration and
that it was therefore open to me to reconsider all
of the evidence on each such issue on the basis that
a serious error in determining the facts had
occurred. He cited certain cases from appellate
tribunals where findings of fact at trial were
reversed and where evidence not mentioned in the
reasons of the trial judge was referred to in sup
port of the decision of the appellate court.
It is quite true that on reading certain appeal
decisions one might perhaps be led to conclude
that the appellate judge concerned had instructed
himself to the effect that in the reasons for judg
ment of the trial judge, evidence not mentioned
was evidence not considered. In the absence of a
clear authoritative statement to that effect by a
court whose decision would be absolutely binding
on me, I refuse to accept any such proposition as
representing the law. Should any presumption
exist at all it must be to the effect that the tribunal
has hearkened to all of the evidence and has
subsequently fully considered and weighed it as
well as the arguments advanced on behalf of the
parties, before arriving at its findings.
The mere fact that the trial judge has mentioned
one particular area of the evidence or referred to
the testimony of one or more witnesses without
reviewing or mentioning contrary evidence does
not constitute proper ground for an appellate tri
bunal to conclude that all of the relevant evidence
was not taken into consideration. Where a trial
judge refers to and appears to rely on a particular
piece of evidence it is most frequently because he
or she has been particularly impressed by the
evidence or wishes to emphasize it and is not an
indication that evidence to the contrary has been
ignored.
The above is of course subject to the overriding
rule that, where oral testimony on which the trial
judge relies is clearly contradicted by physical
evidence or other evidence which cannot reason
ably be disgarded, the appellate tribunal is entitled
to and indeed is obliged to reverse the resulting
finding on the grounds that the trial judge was
wrong but not on the basis that the other evidence
has not been mentioned in the reasons for
judgment.
The temptation to re-try a case is often difficult
for appellate judges to resist, especially in the face
of skillfully presented argument, such as in the
appeal before me.
THE ISSUES:
There are six issues with which I was requested
to deal:
1. Whether damages can be awarded for lost sales
resulting from the injunction but actually occur
ring during the post-injunction period;
2. Whether the referee's estimate of 30,000 sales
of the F.G.W.W. lost during the existence of the
injunction is exaggerated and not supported by the
evidence;
3. Whether the referee's finding that there were
any sales and more particularly 20,000 sales lost
during the year following the lifting of the injunc
tion was erroneous and not supported by the
evidence;
4. In calculating the loss, whether and to what
extent the phenomenon of market substitution is
applicable to the circumstances of the present case;
5. Whether the differential method of calculating
loss is applicable without modification should sub
stitution be found to exist;
6. Whether there is an entitlement to pre-judg
ment interest and, if so, the applicable rate and
method of calculation as well as the rate at which
and date from which post-judgment interest is to
be calculated.
WHETHER POST-INJUNCTION LOSSES RECOVER
ABLE:
On this issue the appellant argued that, as the
claim for damages was founded on a formal under
taking with the Court and not on a contract be
tween the parties and as the plaintiff could not be
considered a tortfeasor, the damages to be recov
ered were to be limited strictly to those incurred
during the period while the interlocutory injunc
tion was in force, namely between March 12, 1982
and March 28, 1983.
The respondent agreed that a party seeking the
injunction in good faith could not be considered a
tortfeasor and that the undertaking is not a con
tract. Although contractual elements do exist and
one might well say that, in consideration for the
undertaking to indemnify, the plaintiff received in
return the interlocutory injunction sought, the
Court, unlike any contracting party, has no inter
est in the matter. Indeed, it must never have any
interest whatsoever in the outcome of any litiga
tion before it nor in any collateral matter relating
thereto. It thus can never be considered a contract
ing party. It is the administration of justice itself
and the party enjoined who will suffer the conse
quences if the undertaking is not carried out.
The law on the question of undertakings to
indemnify in injunction cases has evolved consider
ably. Originally no undertakings were required by
courts of Chancery before granting interlocutory
injunctions. When such undertakings were first
imposed liability existed only where the party in
whose favour the injunction was granted had mis
informed the Court, had deliberately concealed or
suppressed relevant information or had committed
some other dishonest or morally reprehensible act
in order to mislead the Court and obtain the
injunction. Smith v. Day (1882), 21 Ch. D. 421
(C.A.). For many years now, however, no such
conditions have been imposed by the courts on the
right to recover pursuant to any such undertaking.
The legal effect of the undertaking is now unques
tionably considered absolute, regardless of whether
or not the applicant acted in good faith, was
truthful and made full and fair disclosure of the
facts or whether the injunction was in fact granted
by reason of a mistake of law or fact on the part of
the judge.
It is perhaps trite to state that a party is at all
times free to await the ultimate outcome of the
trial and to refrain from invoking the right to
apply for an interlocutory injunction and that,
should the injunction only be granted following
trial, full damages for the interim period up to the
date of judgment can be obtained in the same
manner as damage suffered previous to the time
when the interlocutory injunction could have been
applied for. Should the decision of a judge grant
ing an injunction following trial of the action later
be reversed on appeal, the plaintiff of course
cannot be held liable in any way for damages
caused the other party for the period during which
the injunction was in effect following judgment,
regardless of whether there had or had not been
any pre-trial undertaking.
In support of an argument to the effect that
damages must be restricted to those which
occurred during the period of the injunction and
not include any consequential or residuary dam
ages for any period following the removal of the
injunction, counsel for the plaintiff argued that the
indemnity undertaking was to be considered in the
same way as indemnity clauses in business inter
ruption insurance policies. He relied on several
United States cases among which were the follow
ing: Nusbaum v. Hartford Fire Ins. Co., 132 A.
177 (Pa. 1926), Eisenson v. Home Ins. Co., 84 F.
Supp. 41 (N.D. Fla. 1949), Rogers v. American
Ins. Co., 338 F.2d 240 (8th Cir. 1964), Great
Northern Oil Co. v. St. Paul Fire & Marine Ins.
Co., 227 N.W.2d 789 (Minn. 1975). He also
referred to an article by the American author
George W. Clarke, "Problem Claims Under Busi
ness Interruption Policies" (1958), The Practical
Lawyer 64.
These authorities, in my view, have no applica
tion as they deal with the interpretation of the
actual text of various insurance policies and with
the application of certain principles peculiar to
insurance law. It is obvious, as previously stated,
that I am not dealing with a contract.
Although the undertaking is not a contract, it
has been held that damages are to be assessed as if
there was a contract between the party who is
granted the interlocutory injunction and the party
enjoined by the Court. Lord Wilberforce in the
case of Hoffman-LaRoche (F) & Co AG v. Secre
tary of State for Trade and Industry, [ 1974] 2 All
E.R. 1128 (H.L.), dealt with the manner in which
damages are to be assessed pursuant to an under-
taking to pay such as the present one in the
following terms at page 1150 of the report:
The court has no power to compel an applicant for an interim
injunction to furnish an undertaking as to damages. All it can
do is to refuse the application if he declines to do so. The
undertaking is not given to the defendant but to the court itself.
Non-performance of it is contempt of court, not breach of
contract, and attracts the remedies available for contempts; but
the court exacts the undertaking of the defendant's benefit ....
It is assessed on an enquiry into damages at which principles to
be applied are fixed and clear. The assessment is made on the
same basis as damages for breach of contract would be assessed
if the undertaking had been a contract between the plaintiff
and the defendant, that the plaintiff would not prevent the
defendant from doing that which he was restrained from doing
by the terms of the injunction. (See Smith v. Day, (1882) 21
Ch D 421 at 427, per Brett LJ.) [Emphasis added.]
I believe that the above also represents the
common law in Canada on the subject. However,
although non-performance of the undertaking
undoubtedly constitutes contempt of Court, this
does not, in my view, prevent the party for whose
benefit the undertaking was given from applying
for the issue by the court of any of the execution
remedies, such as Fi -Fa, once the damages result
ing from the undertaking have been ascertained
and confirmed.
Counsel for the plaintiff also referred to the
statement in the unreported reasons of Collier J. of
this Court issued following a motion in the case of
McAsphalt Industries Limited v. Algoma Central
Railway, order and reasons for order dated Febru-
ary 2, 1984, T-4226-82, and on the case of Irving
Refining Ltd. v. The Travelers Indemnity Co.,
[1969] I.L.R. 790 (N.B.C.A.). No statement in
either of these cases purports to lay down the
principle on which he seeks to rely nor does any
statement of Reed J. in her written reasons dated
February 15, 1984, T-831-82 (unreported) in an
application in the present action for production of
documents. Nothing in the reasons given in sup
port of her order in any way provides or even
implies that documents pertaining to the period
following the expiry of the injunction are not to be
produced. Madam Justice Reed (at page 2 of her
reasons) merely stated that the application before
her was for the production of certain documents
tending to show the extent to which, had the
F.G.W.W. been produced during the injunction
period, the sales of that griddle would have
reduced the sales of the defendant's other similar
products. She did not in any way state that the
documents were to be limited to those tending to
show damages which occurred during that period.
At another place (page 4 of her reasons) she was
merely enumerating as examples certain factors to
be taken into account in calculating damages and
was by no means attempting to lay down an
exhaustive or complete list of those factors, since
she qualified the enumeration by the words "such
as".
The usual undertaking given to the court by
parties requesting an interlocutory injunction in
the context of today's society in Canada involves,
in my view, an undertaking to pay all damages
which flow from the granting of the interlocutory
injunction and is not in any way restricted to those
which occurred during the period of the existence
of the injunction itself, nor does the common law
impose any artificial cut-off date. The assessment
for the period following the injunction remains
subject to the usual limitations as to remoteness,
that is, as to whether in the particular circum
stances of the case, after a certain period of time
has passed and other circumstances have inter
vened, losses, if any, can still on a balance of
probabilities, be attributed to the injunction with
any reasonable degree of certainty.
EDITOR'S NOTE
It was impossible to calculate with certainty the
number of sales which would have been made
had the injunction been denied. Damages could
only be estimated based on what was estab
lished, on the balance of probabilities, by the
evidence. The opinion evidence of the expert
witnesses called by the two parties was diametri
cally opposed. The opinion of the plaintiff's wit
ness, that the two companies enjoyed separate
and distinct markets, was supported neither by
logic nor by the evidence. The conclusion that
West Bend experienced difficulty in competing in
the spring of 1983 largely because the life cycle
of griddles with warmers had peaked and was, in
fact, in decline, was justified by the evidence.
Also supported by the evidence was the pro-
thonotary's finding that the effects of the injunc
tion were manifest for one year following its re
moval. His finding that 30,000 sales were lost
during the injunction and 20,000 the following
year was substantiated by the evidence. There
had been no error in the ultimate findings of fact
nor any error in the application of legal principles.
It would accordingly be improper for the Court to
substitute its views of the evidence for those of
the referee.
The plaintiff argued that, had the injunction
been denied, "cannibalization" would have
occurred because the F.G.W.W.s would have
drawn upon the sales of other West Bend grid
dles. "Cannibalization" can take place when a
prospective purchaser, examining two models of
the same type of appliance, decides to purchase
one over the other due to its having some addi
tional feature or attractive gimmick. If an appar
ently improved form of an appliance becomes
available, the small retailer—faced with space
restrictions and other practical considerations—
will be inclined to stock and promote the new
model to the exclusion of others. The referee
rejected the "cannibalization" theory but a study
of the evidence revealed that he had erred in
concluding that there had been a total absence of
"cannibalization". A West Bend internal memo
predicted "cannibalization" of sales of its flat
griddles to the extent of 5 to 10%. There was no
reason to question this projection other than for
the fact that West Bend had underestimated the
extent of market success of griddles with warm
ers. The percentage of sales of West Bend's
other griddles which would have been lost during
the relevant period should be fixed at 15%. The
amounts for loss of profit arrived at by the referee
would have to be reduced to reflect the Court's
finding as to "cannibalization".
DIFFERENTIAL METHOD OF CALCULATING
LOSSES:
From my findings regarding "cannibalization"
and my application to the loss of F.G.W.W. sales
of calculation resulting therefrom, as well as my
acceptance of the learned referee's findings
regarding lost sales of F.G.W.W., it is obvious that
I am of the view that there is no legal obligation to
apply without modification the differential method
of calculating loss in all cases.
I know of no rule of law establishing a fixed
method of calculating estimated losses which
would be applicable to all actions. On the contrary,
in order to arrive at a just determination of com
pensation, the method chosen and the extent to
which it will be applied must necessarily depend on
the many circumstances which normally vary to a
considerable extent when each case is considered
in detail.
INTEREST:
(A) General:
Subject to any specific statutory enactment to
the contrary, in determining what interest, if any,
should be awarded pursuant to the undertaking by
the plaintiff to indemnify, full effect must be given
to the substantive law, including the statutory
enactments of the jurisdiction the laws of which
govern the cause of action.
Pursuant to section 20 of the Federal Court Act
[R.S.C. 1970 (2nd Supp.), c. 10] the Trial Divi
sion has concurrent jurisdiction with the provincial
courts in matters of industrial design. The relevant
portions of section 20 read as follows:
20. The Trial Division ...
... has concurrent jurisdiction in all other cases in which a
remedy is sought under the authority of any Act of the Parlia
ment of Canada or at law or in equity, respecting any ...
industrial design.
Once it has jurisdiction and subject only to any
specific statutory provision to the contrary, the
Federal Court of Canada may, in determining the
issues before it, exercise all of the powers and
enforce all of the remedies available to both courts
of law and courts of equity. In other words, to
dispose of any case before it, it may exercise the
same powers and apply the same laws and princi
ples as the Superior Court of the province where
the cause of action lies.
In the case of McCracken et al. v. Watson,
[1932] Ex.C.R. 83, Maclean J., in interpreting
section 22 of the Exchequer Court Act [R.S.C.
1927, c. 34 (as am. by S.C. 1928, c. 23, s. 3(c))]
stated at page 88 of the report:
Construing the subsection literally, I think, it means that where
the subject matter of the action primarily, but not incidentally,
concerns a patent of invention, trade-mark or copyrights, the
court may grant any appropriate remedy known to the common
law or equity.
The subsection in the Exchequer Court Act
which the Judge was considering at the time
referred to "a remedy ... sought under the author
ity of any Act of the Parliament of Canada or at
Common Law or in Equity respecting any patent"
etc. (Emphasis added.) When section 20 of the
Federal Court Act was enacted the expression
"common law" was replaced by the word "law"
and, in my view, this word is intended to include
all applicable statutory law whether provincial or
federal.
In the case of Le Vae Marjorie Manz et al. v.
The Steamship Giovanni Amendola, [ 1956]
Ex.C.R. 55, Smith D.J.A. stated at page 64 that
he could:
... see no reason why recognition should not be given in the
Exchequer Court to provincial legislation defining substantive
law.
In The Queen v. Murray et al., [1967] S.C.R.
262, Martland J., in delivering reasons for judg
ment on behalf of the Supreme Court of Canada
on an appeal from the Exchequer Court stated at
page 266:
The applicability of provincial legislation to the federal
Crown in a damage claim based upon negligence was also
considered by this Court in Toronto Transportation Commis
sion v. The King ([1949] S.C.R. 510). As a result of a collision
between a street car and a Royal Canadian Air Force truck, an
aircraft, loaded on the truck, was damaged. The trial judge
found both drivers to be negligent and apportioned the respon
sibility equally between them. It was held by this Court that
while, if the common law alone were applicable, the Crown's
claim would fail, because it failed to prove that the negligence
of the street car driver alone caused the damage, the Crown
could take advantage of the Ontario Negligence Act, R.S.O.
1937, c. 115, and could, pursuant to that statute, recover
one-half of its damages.
and again at page 267:
The words "limit of the liability effectively declared by law" at
the end of the statement must mean, in a federal state, effec
tively declared by that legislative body which has jurisdiction to
declare such limit.
He was referring at the time to a limitation on the
liability of an owner or of an operator of a motor
vehicle.
In the case of Attorney General of Canada and
Motel Fontaine Bleue Inc. (1979), 29 N.R. 394
(F.C.A.), which involved the application of the
provisions of the Quebec Civil Code, Pratte J., in
expressing the opinion of the majority of the Court
stated at page 401:
I think it is clear that, in the exercise of the powers conferred
on it by s. 16 of the Expropriation Act, the court may apply
provincial law without contravening the principles laid down in
the McNamara and Quebec North Shore cases. [See Govern
ment of Canada v. McNamara Construction (Western) Limited
et al., (1975), 13 N.R. 181; [1977] 2 S.C.R. 654, and Canadi-
an Pacific Ltd. v. Quebec North Shore Paper Co. (1976), 9
N.R. 471; [1977] 2 S.C.R. 1054.]
Jackett C.J., who dissented in the result, did how
ever agree with the statement that the Quebec
Civil Code would apply.
If the federal Crown is bound by provincial
substantive law when its liability is being deter
mined in the Federal Court then, a fortiori, other
parties must be subject to the same rule.
There seems to be no doubt that an entitlement
to interest, either pre-judgment or post-judgment,
is a question of substantive law. That principle was
firmly established by the Supreme Court of
Canada in the case of Consolidated Distilleries
Ltd. v. The King, [1932] S.C.R. 419; [1933] A.C.
508 (P.C.), where section 34 of the Ontario
Judicature Act, dealing with interest, was held to
be substantive law and to be applicable. In the case
of Consolboard Inc. v. MacMillan Blcedel (Sas-
katchewan) Ltd. (1982), 63 C.P.R. (2d) 1
(F.C.T.D.), my brother Cattanach J. applied the
law of Saskatchewan to the question of whether
interest should be awarded or not. His decision
was upheld by the Court of Appeal (1983), 74
C.P.R. (2d) 199. The Federal Court of Appeal
also applied the provisions of the Quebec Civil
Code to determine entitlement to pre-judgment
interest in the case Domestic Converters Corpora
tion v. Arctic Steamship Line, [1984] 1 F.C. 211;
(1983), 46 N.R. 195 (C.A.). It also followed the
last mentioned decision in the case of Marshall v.
Canada (1985), 60 N.R. 180 (F.C.A.) where the
interest provisions of the Ontario Judicature Act
were applied. Finally in the case of R. v. Nord-
Deutsche Versicherungs-Gesellchaft, [1971]
S.C.R. 849; 20 D.L.R. (3d) 444, the Supreme
Court of Canada applied the interest provisions of
the Quebec Civil Code to the claim.
The provincial substantive law applicable to the
present case would clearly be that of the Province
of Ontario, since both parties were doing business
in Ontario and since the occurrences which gave
rise to the action all took place within that Prov
ince: the defendant was manufacturing the
F.G.W.W. in Barrie and was selling it from its
warehouse in Mississauga, both within the Prov
ince of Ontario. The damages which resulted from
the interlocutory injunction must therefore be
assessed and interest, if any, must be awarded in
accordance with the laws of Ontario to the extent
that they are not excluded by any federal statute
to which the Federal Court would be required to
conform in the circumstances of the case at bar.
This issue of damages arising from the undertak
ing as well as those claimed in the action itself are
essentially questions of property and civil rights.
Constitutionally such questions, except in areas
specifically allocated to the federal authority fall
within provincial jurisdiction.
Finally, I agree with counsel for the defendant
when he states that, where two courts exercise
concurrent jurisdiction over precisely the same
subject matter it would be most unfair, inequitable
and indeed unjust to have two different scales of
recovery. Even in a federal state there should be
but one law governing the rights and duties of
citizens in any given set of circumstances. Sub
stantive law should never depend on the choice of
tribunal before which it is being interpreted and
applied, unless very explicit statutory provisions to
the contrary exist. Even in such a case, having
regard to our Charter of Rights and Freedoms
[being Part I of the Constitution Act, 1982,
Schedule B, Canada Act 1982, 1982, c. 11 (U.K.)]
and the principles of equality before the law which
it propounds, our courts would in all probability
declare one of the conflicting laws to be void or
inoperative or one of the two tribunals to be
without jurisdiction, in order to ensure the applica
tion of a uniform rule of law.
(B) Pre-judgment interest:
Counsel for the plaintiff stated that in the Fed
eral Court of Canada the established law is that
interest is not awarded on unliquidated damages
prior to the assessment of same. In support of this
proposition he cited three cases namely: Consol -
board Inc. v. MacMillan Plcedel (Saskatchewan)
Ltd., supra, on which I have already commented;
Davie Shipbuilding Limited v. The Queen, [1984]
1 F.C. 461 (C.A.), at page 467; McKinnon and
McKillap v. Campbell River Lbr. Co., Ltd. (No.
2), [1922] 2 W.W.R. 556 (B.C.C.A.). In the Con-
solboard case Cattanach J. held that the substan
tive law of Saskatchewan applied and specifically
referred to the Queen's Bench Act of that province
in order to determine whether pre-judgment inter
est should be paid. He held that it was not payable
because the Saskatchewan statutes did not provide
for it and not because of any established law to
that effect in the Federal Court. His decision was
upheld by the Court of Appeal. The Davie Ship
building case, supra, merely stated that interest
was normally payable in admiralty cases as
opposed to common law cases. The McKinnon
case, supra, was a Supreme Court of British
Columbia case which merely restated the well
recognized principle that, in the absence of any
written agreement providing for same, interest is
not recoverable at common law, but only pursuant
to express statutory authority.
Counsel for the plaintiff also argued that
because post-judgment interest is dealt with in
section 40 of the Federal Court Act in cases where
no right of interest is provided for in the judgment,
it must be presumed that Parliament did not
intend that pre-judgment interest be awarded. I do
not accept this proposition. He cited in support the
case of Warwick Shipping Ltd. v. R. [1981] 2 F.C.
57 (T.D.), and Magrath v. National Parole Board
of Canada, [1979] 2 F.C. 757 (T.D.). They are not
applicable as they deal with questions of practice
and procedure and not with substantive law.
The relevant portions of section 36 of the
Ontario Judicature Act, R.S.O. 1980, c. 223,
which are applicable to pre-judgment interest are
as follows:
36.—(1) In this section, "prime rate" means the lowest rate
of interest quoted by chartered banks to the most credit-worthy
borrowers for prime business loans, as determined and pub
lished by the Bank of Canada.
(2) For the purposes of establishing the prime rate, the
periodic publication entitled the Bank of Canada Review pur
porting to be published by the Bank of Canada is admissible in
evidence as conclusive proof of the prime rate as set out therein,
without further proof of the authenticity of the publication.
(3) Subject to subsection (6), a person who is entitled to a
judgment for the payment of money is entitled to claim and
have included in the judgment an award of interest thereon,
(a) at the prime rate existing for the month preceding the
month on which the action was commenced; and
(b) calculated,
(i) where the judgment is given upon a liquidated claim,
from the date the cause of action arose to the date of
the judgment, or
(ii) where the judgment is given upon an unliquidated
claim, from the date the person entitled gave notice in
writing of his claim to the person liable therefor to the
date of the judgment.
(4) Where the judgment includes an amount for special
damages, the interest calculated under subsection (3) shall be
calculated on the balance of special damages incurred as
totalled at the end of each six month period following the notice
in writing referred to in subclause (3)(b)(ii) and at the date of
the judgment.
(5) Interest under this section shall not be awarded,
(f) where interest is payable by a right other than under
this section.
(6) The judge may, where he considers it to be just to do so
in all the circumstances,
(a) disallow interest under this section;
(b) fix a rate of interest higher or lower than the prime rate;
(c) allow interest under this section for a period other than
that provided, in respect of the whole or any part of the
amount for which judgment is given.
New statutory provisions were enacted in
Ontario by the Courts of Justice Act, S.O. 1984, c.
11, which took effect on the 1st of January 1985.
Subsection 138(4) of that Act however provides
that section 138 does not apply to proceedings
commenced before the Act came into force, which
of course is the case here. Section 36 of the
Judicature Act therefore continues to apply.
The Court of Appeal of Ontario has held that
interest should be awarded in all cases where the
law provides for it unless special circumstances
exist which justify departing from the general
practice. Astro Tire & Rubber Co. of Canada Ltd.
v. Western Assurance Co. (1979), 24 O.R. (2d)
268 (C.A.).
It is apparent that the Ontario Legislature,
when paragraph 36(5)(f), supra, was enacted,
intended to preserve all rights to interest tradition
ally recognized by Court of Equity in such matters
as fraud, breach of trust, conversion or misappro
priation of funds, as opposed to Common Law
Courts where no right to pre-judgment interest
was recognized except in contract matters (Brock
v. Cole et al. (1983), 40 O.R. (2d) 97 (C.A.)).
It seems clear however in the case at bar that
principles of equity are not involved. The payment
or non-payment of interest remains entirely a
question of law, since the damages arise out of an
undertaking. The mere fact that the undertaking
did not constitute a true contract at law or that it
related to the granting of an interlocutory injunc
tion which is an equitable remedy, does not, in my
view, change the essential element that the dam
ages are directly attributable to a formal promise
and not to any equitable principle and that they
are to be calculated as if they were being granted
upon a contract to indemnify (see Hoffman-
LaRoche (F) & Co AG v. Secretary of State for
Trade and Industry, supra).
The action for infringement of design was
instituted by the plaintiff on the 9th of February
1982. However, the defendant's right to or claim
for damages did not originate or arise at that time.
Indeed, the right never existed at all until the
undertaking was given by the plaintiff and the
damages only began to arise at that time by reason
of the imposition of the interlocutory injunction.
Furthermore, it seems that the right is not based
on the action at all but merely on the undertaking
which was given in the course of the action. When
applying paragraph 36(3)(a) to the facts of the
case, it does not matter whether we consider that
the prime rate should be that of the month
immediately preceding the action, that is January
1982 or of the month immediately preceding the
undertaking, that is February 1982, because in
each case the prime rate was 16.5%. This should
therefore be considered the governing rate.
Subsection 36(4) provides for a special method
of calculating interest every six months on "spe-
cial" damages. The term is not defined in the
statute nor are general damages defined. Special
damages might be taken to signify damages which,
on the date of judgment, can be specifically identi
fied and itemized. Black's Law Dictionary, 5th
edition, defines special damages as those which are
the actual but not the necessary result of the injury
complained of and general damages as those which
are the immediate, direct and proximate result of
the wrong. Similarly, The Canadian Law Diction
ary, 1980 (Law and Business Publications
(Canada) Inc.), defines general damages as such
damages as the law will presume to be the direct,
natural and probable consequences of the act com
plained of and distinguishes them from special
damages as those which the law will not infer from
the nature of the act and which are exceptional in
character.
The losses of $365,438 and $256,468.75 were
without a doubt the immediate, direct and proxi-
mate results of the defendant being prevented
from selling its griddles. Whatever definition of
special damages one might care to adopt, it seems
to me that the term is not applicable to the dam
ages claimed and awarded in the present case: they
are more accurately described as general damages.
Subsection 36(4) therefore need not be taken into
consideration.
As to the period of calculation, since the dam
ages are clearly unliquidated, the date that the
undertaking requested by the defendant and
imposed by the Court, namely the 12th of March
1982, must be regarded as the date for which the
interest is to run in accordance with subparagraph
36(3)(b)(ii). It is true that no written notice of the
claim was given to the plaintiff at the time, but the
formal undertaking of that party given to the
Court and the acceptance of that undertaking by
the Court as a pre-condition to granting the
injunction must necessarily be considered a much
more solemn, formal and effective notice of the
defendant's claim than any mere written notice
could ever be.
Subsection 36(6) empowers the judge to disal
low interest, and to vary either the rate or the time
from which interest is to be calculated "where he
considers it, to be just to do so in all the circum
stances", and "in respect of the whole or any part
of the amount for which judgment is given". Those
provisions create a very wide discretion. Section 36
requires that, normally speaking, the interest be
awarded from the time of the notice of claim
unless it is considered just to do otherwise, (Dug-
dale v. Boissneau et al. (1983), 41 O.R. (2d) 152
(C.A.)).
There is no need in the case before me to
consider paragraph 36(5)(d) since all the losses
have now taken place. The Court however must
not allow an excessively high recovery and there
fore should not hesitate to exercise its discretion
where the circumstances indicate that it might not
be just to adhere strictly to the other provisions of
section 36. The discretion to vary a fixed rate has
been exercised in many cases both in Ontario and
in the other provinces.
The injunction remained in place from the 12th
of March 1982 until the 28th of March 1983.
There was of course no damage at the outset of
that period: it accumulated throughout, until it
attained, on the last day, a total of $365,438.
Considering the provisions of subsection 36(6), I
consider that it would be just in those circum
stances to strike an average and apply ' of the
governing rate, that is 8.25%, to the full amount of
$365,438 for the period ending on the 28th of
March 1983. Thereafter the full rate of 16.5%
should apply on that loss until my judgment is
rendered in this matter and post-judgment interest
rates are applied. Similarly for the sum of
$256,468.75 being the post-injunction damages
incurred during the period which was limited to
one year by the referee, that is the 28th of March
1983 until the 28th of March 1984, the damage
should be averaged by applying 'h of the rate for
the whole of that period. Thereafter the rate of
16.5% would prevail on that amount until
judgment.
The freight and advertising charges of $1,097
which were due from the 31st of March 1982 will
bear interest from that date at 8.25% to date of
judgment. I have deliberately treated this last
mentioned amount, which in fact represents spe
cial damages, without applying either the full rate
of interest nor the method of calculation provided
for in subsections (3) and (4) of section 36 of the
Ontario Judicature Act (supra) in view of the fact
that the amount was fully agreed upon and also,
constitutes an extremely minimal amount having
regard to the total amount of general damages
involved.
Based on the above, the pre-judgment interest
would be calculated as follows:
$365,438 at 8.25% from
March 12, 1982 to March 28, 1983 = $ 31,552.81
$365,438 at 16.5% from
March 28, 1983 to date of judgment
(October 28, 1986) = $216,409.37
$256,468.75 at 8.25% from
March 28, 1983 to March 28, 1984 = $ 21,158.67
$256,468.75 at 16.5% from
March 28, 1984 to date of judgment
(October 28, 1986) = $109,561.01
$1,097 at 8.25% from
March 31, 1982 to date of judgment
(October 28, 1986) = $ 414.57
Total $379,096.43
(C) Post-judgment interest:
Turning now to post-judgment interest, I do not
accept the argument of the plaintiff to the effect
that, in accordance with section 40 of the Federal
Court Act, the judgment may not bear interest at a
higher rate than 5% unless special circumstances
justify the increase. The section reads as follows:
40. Unless otherwise ordered by the Court, a judgment,
including a judgment against the Crown, bears interest from
the time of giving the judgment at the rate prescribed by
section 3 of the Interest Act.
Counsel relied on the following cases: Domestic
Converters Corporation v. Arctic Steamship Line,
[1984] 1 F.C. 211, at pages 229-230; (1983), 46
N.R. 195 (C.A.), at page 208, Consolboard Inc. v.
MacMillan Blcedel (Saskatchewan) Limited,
[1983] 1 F.C. 89, at page 91; (1982), 65 C.P.R.
(2d) 100 (T.D.), at page 102.
In the Domestic Converters case, the Court of
Appeal (refer paragraph 30 of the above-men
tioned report) far from supporting the proposition
advanced by counsel for the plaintiff, decided that
post-judgment interest was properly allowed at
8%, being the rate provided for by the Civil Code
of the Province of Quebec which governed the
liability of the plaintiffs in that case. In the last
cited Consolboard case, although the Trial Judge
merely allowed interest at the rate prescribed in
the Interest Act and also commented that there did
not appear to be special circumstances which
would warrant a higher rate, the reasons for judg
ment do not indicate that the provincial law gov
erning post-judgment interest was either argued or
considered. In my view, section 40 of the Federal
Court Act merely governs where the Court has not
chosen to set any post-judgment interest. Where,
however, it has decided to do so, then it may apply
the regular post-judgment rate of the province
whose laws govern the liability and, in addition,
the court in such cases should normally apply that
rate unless some particular circumstances exist
which would justify a variation from the statutori-
ly fixed provincial rate. This principle applies a
fortiori where the case is one where the Federal
Court and the appropriate Provincial Court share
concurrent jurisdiction over the subject matter, in
order, as previously stated, to avoid applicable
substantive law from being determined by the
choice of tribunal.
In support of an argument that there existed
some constitutional restriction on this Court to
apply the Ontario statute to the question of post-
judgment interest, counsel for the plaintiff pur
ported to rely on the cases of Broddy et al. and
Director of Vital Statistics (Re) (1983), 142
D.L.R. (3d) 151 (Alta. C.A.), and the case of
Bisaillon v. Keable, [ 1983] 2 S.C.R. 60. The
Broddy case states that provinces do not have the
power to define words in federal law unless such
power is expressly granted by federal legislation.
This is quite correct but it is not the issue here nor
can I find anything in the Bisaillon case which
would justify a change or variation of the accepted
principle that interest is a matter of substantive
law and, being part of the compensation, it is also
a matter of property and civil rights where appli
cable provincial law must govern, providing validly
enacted federal legislation in the field of interest
does not otherwise decree.
Section 3 of the Interest Act, R.S.C. 1970,
c. I-18 provides that, where no rate is fixed by law,
the rate shall be 5% per annum. Martland J. in
Prince Albert Pulp Co. Ltd. et al. v. The Founda
tion Company of Canada, Ltd., [1977] 1 S.C.R.
200, stated that where a court in its judgment has
awarded interest the section would not be appli
cable. In British Pacific Properties Ltd. v. Minis
ter of Highways and Public Works, [ 1980] 2
S.C.R. 283; 33 N.R. 98, it was also held by the
Supreme Court of Canada that the 5% rate in the
Interest Act is not applicable where a judge under
a statutory authority awards interests and fixes the
rate since the rate then becomes "fixed by law" as
provided for in the section.
Having been requested to fix post-judgment in
terest and having decided to do so, the matter
must be determined with reference to the law of
Ontario. The Court of Appeal of Ontario has held
that post-judgment interest is a question of sub
stantive law (see 306793 Ontario Ltd. v. Rimes
(1980), 30 O.R. (2d) 158; 16 C.P.C. 36 (C.A.)).
The Courts of Justice Act, S.O. 1984, c. 11,
subsection 139(1), provides as follows: "Money
owing under an order, including costs to be
assessed or costs fixed by the court, bears interest
at the postjudgment interest rate, calculated from
the date of the order." Section 137 of the same
Act provides that the "postjudgment interest rate"
is the bank rate rounded to the next higher whole
number plus 1% as of the first day of the last
month of the quarter preceding the date of the
order. In the case of CAE Industries Ltd. et al. v.
The Queen (1983), 79 C.P.R. (2d) 88 (F.C.T.D.),
Collier J. agreed that post-judgment interest would
run from the date of judgment which he fixed as
being the date of his reasons for judgment. The
decision was upheld on appeal. In the Federal
Court case of Rothwell v. R. (1985), 10 C.C.E.L.
276 (F.C.T.D.) Strayer J. exercising his discretion
pursuant to section 40 of the Federal Court Act,
directed that post-judgment interest would be pay
able at the same rate as the pre-judgment interest
which he fixed in accordance with section 36 of the
Ontario Judicature Act. In the case Consolboard
v. MacMillan Bleedel (Saskatchewan) Ltd. (1983),
74 C.P.R. (2d) 199, the Court of Appeal agreed
that the date fixed by the judge receiving the
referee's report, namely the date when the award
became ascertained by his judgment, was the cor
rect date from which to calculate the post-judg
ment interest.
The post-judgment interest on the award plus
costs will run from the date of my formal judg
ment in this matter and the rate shall be fixed in
accordance with the provisions of section 137 of
the Courts of Justice Act.
The relevant provisions read as follows:
137.—(1) in this section and in sections 138 and 139,
(a) "bank rate" means the bank rate established by the
Bank of Canada as the minimum rate at which the Bank
of Canada makes short-term advances to the chartered
banks;
(b) "date of the order" means the date the order is made,
notwithstanding that the order is not entered or enforce
able on that date, or that the order is varied on appeal,
and in the case of an order directing a reference, the
date the report on the reference is confirmed;
(c) "postjudgment interest rate" means the bank rate at the
end of the first day of the last month of the quarter
preceding the quarter in which the date of the order
falls, rounded to the next higher whole number where
the bank rate includes a fraction, plus 1 per cent;
(e) "quarter" means the three-month period ending with the
31st day of March, 30th day of June, 30th day of
September or 31st day of December.
(2) After the first day of the last month of each quarter, the
Registrar of the Supreme Court shall forthwith,
(a) determine the prejudgment and postjudgment interest
rate for the next quarter; and
(b) publish in The Ontario Gazette a table showing the rate
determined under clause (a) for the next quarter and for
all the previous quarters during the preceding ten years.
There would appear to be very little likelihood
of there being difficulty in determining, in accord
ance with section 137, the proper rate of interest to
be applied to the amount of the judgment. How
ever, should any problem arise in this area, the
parties may submit evidence and request that I fix
the rate of post-judgment interest to be applied.
Subsection 139(1) of the Courts of Justice Act,
S.O. 1984, c. 11, provides as follows:
139.—(1) Money owing under an order, including costs to be
assessed or costs fixed by the court, bears interest at the
postjudgment interest rate, calculated from the date of the
order.
Post-judgment interest must therefore be calculat
ed from the date of judgment on the total of the
damages plus the pre-judgment interest and costs
since they all constitute "money owing under an
order".
JUDGMENT AND COSTS:
Judgment will issue today in accordance with
these reasons. As success on the present appeal is
divided, I am reserving as to costs and will be
prepared to hear whatever representations counsel
might wish to make on the subject. Should neither
party apply within 15 days to make representa
tions as to costs, an order will issue directing how
they are to be taxed.
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.