Date: 19990427
Docket: T-2529-96
T-1525-97
OTTAWA, ONTARIO, THIS 27th DAY OF APRIL 1999
PRESENT: THE HONOURABLE MR. JUSTICE PELLETIER
BETWEEN:
LEVI STRAUSS & CO. and
LEVI STRAUSS & CO. (CANADA) INC.
Plaintiffs
- and -
ROADRUNNER APPAREL INC.
Defendant
REASONS FOR ORDER AND ORDER
PELLETIER J.
[1][ 2] Levi Strauss & Co and Levi Strauss & Co (Canada) Inc (Levi Strauss) commenced an action to enjoin the Defendant Roadrunner Apparel Inc. (Roadrunner) from using or infringing certain trade marks claimed by Levi Strauss and claiming damages arising from the alleged infringement. Road Runner defended the action by putting into question Levi Stauss" ownership of the marks in question and alleging that the action was an abuse of process as its only purpose was to intimidate Roadrunner into ceasing the use of designs which it was entitled to use.
[1] The litigation appears to have been hard fought. By order dated June 11, 1998, the parties were to designate a representative for examinations for discovery and the examinations were to be commenced no later than July 9, 1998. Roadrunner served an unsworn Affidavit of Documents on the solicitors for Levi Strauss on June 22, 1998 in purported compliance with the order dated June 11, 1998. The lawyer who had day to day responsibility for the file was Mr Sheskay, under the direction of Mr. Seller. Mr. Sheskay is no longer with the firm. Evidence as to his understanding of the course of the litigation was provided to the Court through the affidavits of Mr. Seller and Mr. Bercovitch, one of the principals of Roadrunner. Mr. Seller"s Affidavit Sept 4, 1998 sets out that Mr Sheskay was apparently under the mistaken impression that Levi Strauss had agreed to proceed on the basis of a draft Affidavit as to Documents.
[1] Objection was taken to the absence of certain documents relating to the question of damages from the documents disclosed as well as the fact that the Affidavit was unsworn. Levi Strauss applied by Notice Of Motion for better disclosure and on June 30, 1998 Reed J. made the following order:
| THIS COURT ORDERS THAT: |
| 1. The Defendant serve and file an accurate and complete Affidavit of Documents which lists documents relating to the following allegations in the Statement of Defence in Court Action No. T-2529-96: |
| i. paragraph 6(b), including a document showing a rendition of the Defendant"s new stitching design; |
| ii. paragraph 7(e), including documents that show advertising promotions, point of sale displays etc. for the Defendant"s Jonny-Q jeans; |
| iii. paragraph 9, including documents identifying the stores where the Defendant"s Jonny-Q brand garments are sold; |
| iv. Paragraph 13, including documents showing a rendition of the design presently used by the Defendant; and, |
| v. Paragraphs 16 and 18, including documents showing renditions of the relevant designs on each of the brands of jeans listed at Schedule "A", |
| failing which the said paragraphs, for which no documents are listed, shall be struck from the Statement of Defence in Court Action No. T-2529-96; |
| 2. The Defendant serve and file an accurate and complete Affidavit of Documents which lists documents relating to the following allegations in the Statement of Defence in Court Action No. T-1525-97; |
| i. paragraphs 11(e) and 12(e), including documents that show advertising promotions, point of sale displays etc for the Defendant"s Jonny-Q jeans and Illegal jeans; |
| ii. paragraph 14, including documents identifying the stores where the Defendant"s Jonny-Q and Illegal brand garments are sold; |
| iii. paragraphs 19 and 21, including documents showing renditions of the relevant designs on each of the brands of jeans listed at Schedule "A"; and, |
| iv. paragraphs 27 and 29, including documents showing renditions of the relevant designs on each of the brands of jeans listed at Schedule "B", |
| failing which the said paragraphs, for which no documents are listed, shall be struck from the Statement of Defence in Court Action No. T-1525-97; |
| 3. The Defendant serve and file an accurate and complete Affidavit of Documents which lists documents relating to the Plaintiffs" damages and the profits made by the Defendant as a result of its unlawful activities as alleged in the Statements of Claim in Court Action Nos. T-2529-96 and T-1525-97, failing which the Statements of Defence shall be struck and Judgment entered accordingly; |
| 4. The Defendant produce all documents not already produced for inspection and copying by no later than July 7, 1998; and, |
| 5. The Defendant pay the Plaintiffs" costs of this application taxed in accordance with the maximum number of units under Column V of Tariff B. |
[1] This order ("the Reed order") was extremely distasteful to Roadrunner. As the deadline for production of documents and examinations for discovery approached, there was a flurry of correspondence between counsel. On July 6, 1998 counsel for Roadrunner wrote to counsel for Levi Strauss advising that an appeal was to be taken from the order of Reed J. and that examinations for discovery were being cancelled. Counsel for Levi Strauss responded:
| "With respect to production of documentation from your client, once again, we have a Court order requiring production by a certain date barring which your client`s defence or portions thereof will be struck. An appeal will not stay that order and we are proceeding accordingly." |
[1] On July 7, 1998, counsel for Roadrunner forwarded another Affidavit of Documents, also unsworn, to counsel for Levi Strauss containing some, but not all of the documents specified in The Reed Order. In particular, no documents were disclosed with respect to the issue of the Plaintiff"s damages. On that same date, counsel for Roadrunner wrote to Mr. S. Bercovitch, one of the principals of Roadrunner:
| "...You indicated to me that you use a number of back pocket designs and change them frequently. Therefore it is impossible for you to provide financial documents relating to the damages and profits information requested by the Court". |
| "...I confirm that we discussed the apparent danger that Levis will argue that your defence and counterclaim should be struck for the failure to provide any documentation with respect to damages and profits. You were adamant that you did not wish to provide any financial documentation whatsoever to Levis." |
| "Accordingly, I will appeal the decision of Her Ladyship Madam Justice Reed and will apply for an extension of time of the Order which sets out the schedule for holding discoveries..." |
[1] An appeal of the decision of Madam Justice Reed was launched on July 10, 1998 but no steps were taken at that time to obtain a stay of the order pending the hearing of the appeal.
[1] By Notice of Motion returnable August 4, 1998, Levi Strauss applied for an order striking Roadrunner"s Statement of Defence for failure to comply with The Reed Order. The grounds cited as the basis for the motion were the failure of Roadrunner to comply with The Reed Order.
[1] The fact that compliance with the order notwithstanding the notice of appeal was in issue was flagged in paragraph 8 of Levi Strauss" written submissions in support of the Motion which clearly identifies the fact that an appeal does not stay the order from which the appeal is taken..
[1] On August 25, 1998, Mr. Justice Hugessen, ordered that Roadrunner"s defence be struck for failure to comply with The Reed Order. Mr. Bercovitch"s Affidavit is silent as to when he learned that he had been misinformed by his counsel, but presumably this came to his attention upon being advised that Roadrunner"s Statement of Defence had been struck. This prompted a Motion on behalf of Roadrunner before Hugessen J. seeking reconsideration of his order pursuant to Rule 397 (1) which allows the Court to reconsider its order if a matter which ought to have been dealt with has been overlooked or accidentally omitted. That application was dismissed on September 9 on the basis that no material had been filed which would justify an order under that Rule.
[1] Subsequent to this, an application was made to the Court of Appeal for a stay of the Reed order. The court was advised by counsel for Levi Strauss that the application was dismissed. The appeal itself is currently under status review in the Court of Appeal.
[1] Roadrunner launched a motion returnable September 15, 1998 to vary or stay the order of Mr. Justice Hugessen, which motion was finally argued before me on April 6. The basis on which the application to vary is made is Rule 399 (2) which provides as follows:
(2) On motion, the Court may set aside or vary an order
(a) by reason of a matter that arose or was discovered subsequent to the making of the order; or
(b) where the order was obtained by fraud.
(2) La Cour peut, sur requête, annuler ou modifier une ordonnance dans l"un ou l"autre des cas suivants :
a) des faits nouveaux sont survenus ou ont été découverts après que l"ordonnance a été rendue;
b) l"ordonnance a été obtenue par fraude.
[1] The matter which arose or was discovered subsequent to the making of the order is the fact that Roadrunner received bad legal advice with respect to compliance with The Reed Order. The solicitors for Roadrunner acknowledge the deficiencies in the advice given to their client and ask that the client not be asked to pay for their shortcomings.
[1] The specific matter with respect to which bad advice is said to have been received is the necessity of obtaining a stay of The Reed Order for the production of financial information going to the issue of the Applicant"s damages, pending the hearing of the appeal of the order.
[1] Roadrunner has submitted two affidavits in support of its position. Sheldon Bercovitch, one of the principals of Roadrunner deposes in his affidavit that:
| 7. I have also been advised that our solicitors have provided us with erroneous legal advice which may have prevented the Order of August 25, 1998 |
| 15. Needless to say, I was upset with the Reed Order. In response to my query as to the available options, my solicitors advised me that Roadrunner could either produce all of its sales documents or that it could appeal the Reed Order., without having the produce said documents until a determination was made on the appeal. |
| 16. I never intended to act in breach of the Reed Order. My solicitors did not advise me that I should have moved for a stay of the Reed Order pending the appeal. I mistakenly understood that, because the Reed Order was appealed, Roadrunner did not have to provide any further documents pursuant to that Order pending the appeal. |
| 17. It is and has always been Roadrunner"s intention to defend this action on the merits. |
[1] In his Affidavit, Mr Fred Seller, senior counsel on the file, but not the lawyer who had day to day carriage of the matter (which was Mr. Sheskay) deposes that:
| 5. I am informed by Sheskay and do verily believe that, at the hearing of the motion on August 25, 1998, he neglected to make submissions with respect to important matters, which, in retrospect, should have been brought to the Court"s attention. Namely, the failure of Roadrunner to comply with the Order of Madame Justice Reed of June 30, 1998, referred to in the Motion Record material was not intentional, and was largely due to the advice that our firm provided to Roadrunner. |
| 8. When our client was informed of the Order of her Ladyship Madame Justice Reed, of June 30, 1998 (the "Reed Order"), our client was upset and looked to our firm for advice with respect to any alternative options. |
| 9. We advised Roadrunner that it could either produce all of its sales documents or that it could appeal the Reed Order without the requirement of producing the sales documents until an order on the appeal was made. |
| 10. Accordingly, Roadrunner instructed our firm to appeal the Reed Order. |
| 11. Unfortunately, we did not advise Roadrunner of the importance of moving for a stay of the Reed Order prior to appearing in Court on August 25, 2998. Our firm was under the mistaken belief that moving for a stay was more in the nature of a formality than a requirement. Therefore, due to our advice, our client was in breach of the Reed Order, which would not have been the case had our client moved for a stay. |
[1] I am unable to reconcile paragraph 16 of the affidavit of Mr. Bercovitch in which he deposes that he mistakenly believed that it was not necessary to comply with Reed J.`s order "pending the appeal", with the written advice given by Mr. Sheskay to Mr. Bercovitch in his letter of July 7 that there was a danger that Levi Strauss would move to strike Roadrunner"s Statement of Defence and Counterclaim for failure to comply with The Reed Order. On July 6, Mr. Sheskay had been reminded that an appeal did not stay the order appealed from and that Levi Strauss intended to proceed accordingly. This is reflected in Mr. Sheskay"s advice to Mr. Bercovitch on July 7 as to the danger of an application to strike Roadrunner"s defence. This advice is inconsistent with any notion that a notice of appeal operated as a stay of the order from which an appeal was taken. Levi Strauss could not apply to enforce an order which was stayed. It is difficult to discern the basis of Mr. Bercovitch"s mistaken belief that compliance was not
necessary pending the hearing of the appeal in the face of the warning contained in Mr. Sheskay"s letter of July 7.
[1] In the same way, I have difficulty reconciling paragraphs 9 and 11 of Mr. Seller"s affidavit with the advice contained in Mr. Sheskay"s letter of July 7 to Mr. Bercovitch. It is clear that Mr. Sheskay understood and communicated to Mr. Bercovitch that non-compliance with the order created the risk of an application being made to strike Roadrunner"s defence. Accepting Mr. Seller"s evidence as truthful, the conclusion which imposes itself is that when Roadrunner was told it could either comply with the Reed order or appeal the order without complying, it was not on the basis of the appeal effecting a stay of the order, but on some other basis. Paragraph 11 of Mr. Seller"s affidavit suggests that the firm"s view was that applying for a stay was more in the nature of a formality than a requirement. While this may be true in a general sense, it is clear that the possibility of an application by Levi Strauss to enforce the Reed order had been considered. If the making of an application for a stay was thought to be a formality, it can only have been on the basis of considerations which have not been disclosed.
[1] It is clear that something went wrong in the handling of this file. It is very unusual for a claim to be disposed of on a procedural point when there is a triable issue1. In this case, the Statement of Defence has been struck, a motion for reconsideration has been dismissed, and an application to the Court of Appeal for a stay of an order appealed from has been dismissed. I am asked to vary the order dismissing the Defendant"s Statement of Defence on the basis of subsequently discovered information which is the bad advice provided by the Defendant"s solicitors. It is clear that the consequences of the advice were disastrous. What is less clear is the exact nature of the advice. I do not accept that this is a simple case of believing that a notice of appeal stays the effect of the order from which the appeal is taken. Other considerations were involved and I do not know what they are. I am therefore unable to identify any subsequently discovered information other than the untoward result. If this were accepted as a ground of review, no order would be final. As a result, the Defendants are not entitled to the relief which they seek.
[1] As matters now stand, Levi Strauss would be entitled to apply for judgement before Roadrunner"s appeal is heard. If the Court of Appeal were disposed to give Roadrunner some relief, it would be faced with a final judgement in this Court which would then have to be dealt with in some fashion. In the interests of protecting the integrity of Roadrunner"s right of appeal, I would be inclined to exercise my discretion to give Roadrunner some relief by preventing Levi Strauss from applying for judgement until the appeal of the Reed order is disposed of. This would not deprive Levi Strauss of the benefit of its order since it would be free to proceed immediately to judgement if the appeal is not successful. The difficulty is that there has been no attempt by Roadrunner to comply with the Reed order which remains effective until set aside by the Court of Appeal. Given the nature of the dispute, disclosure and production of the documents in question would render the appeal nugatory. However, production under seal pending the disposition of the appeal would probably be sufficient compliance to allow the Court to grant Roadrunner some interim relief pending the disposition of the appeal. If Roadrunner is disposed to make such an application, they have leave to bring it before me.
| [1] The motion is dismissed with costs. |
Judge
__________________1 In characterizing the lapse which is at the root of the Roadrunner`s difficulties as a procedural defect, I do not intend to minimize the seriousness of a failure to comply with an order of the Court; I am merely drawing a distinction between a disposition on a procedural as opposed to a substantive basis.