1

Produits Pylex Inc. v. Peak Products Manufacturing Inc., John Gross, George Davis

Produits Pylex Inc. («Pylex») has filed proceedings for passing off. Defendants filed a motion for dismissal based on the following grounds:

1. Defendants John Gross («Gross») and George Davis («Davis») are sued in their capacity of directors of the company, which cannot give rise to lifting the corporate veil;

2. No fact giving rise to the lifting of the corporate veil has been alleged;

3. An officer of Pylex admitted, during examination, that he did not have knowledge of any fact that would make Gross and Davis personally liable.

The Court refuses the first ground. Pylex’s motion alleges that "(translation) … John Gross’ and George Davis’ company …", thus enabling it to prove that Gross and Davis are shareholders of Pylex, subject to the lifting of the corporate veil.

The Court also dismissed the second ground as the allegations of the motion can lead the trial judge to conclude that the corporate veil should be lifted.

The Court also dismisses the third ground as evidence may be submitted through other witnesses or other means.

The motion for dismissal is dismissed.

Produits Pylex Inc. v. Peak Products Manufacturing Inc., John Gross, George Davis, Superior Court, 400-17-00519-039, 9 January 2004, Honourable Justice Legris.

2

Marché Lionel Coudry Inc. v. Métro Inc. et al., Marché Bellemare Inc.

Marché Lionel Coudry Inc. («Coudry») has filed proceedings for oppression remedy under Section 238 ss of the Canada Business Corporations Act. Coudry is asking for the issuance of a provisional interlocutory injunction.

The learned judge refuses to issue a provisional injunction, mainly on the grounds that the emergency requirement is not met. Indeed, the evidence shows that Coudry has, for years, been in an identical situation, although it complained about it. There was, within the alleged "reserved" territory, other Metro stores and it did not sustain any damages; its business even increased substantially during this period.

The learned judge indicates that provisional orders are possible in the course of an oppression remedy but they must comply with the criteria established by the jurisprudence.

Marché Lionel Coudry Inc. v. Métro Inc. et al., Marché Bellemare Inc., Superior Court, 500-17-018743-040, 8 January 2004, Honourable Justice Mélançon.

3

Soho Inc. v. 2416-0004 Québec Inc., Valnic Inc., Les Placements Valmax (1987) Inc.

The Superior Court condemned jointly and severally Soho Inc. ("Soho") and 2416-0004 Quebec Inc. ("2416") for abuse of rights vis-à-vis Valnic Inc. ("Valnic"), following the sudden expulsion of 2416 and the seizure of the inventories of the restaurant La Côte à Baron. The Trial Judge was of the opinion that Soho was the true operator of the restaurant and that 2416 and its directing mind, Verdier, carried on the business in appearance only.

Valnic alleged to have sustained losses in the amount of $317,000, $231,000 for non-reimbursed advances made to 2416, $36,000 for management fees and $50,000 as general damages.

The Court of Appeal reverses the judgment of the Superior Court. The Court examines the contracts between the parties. It is not contested that 2416 acted at all times and openly as the alter ego of Verdier. The latter really leased the building and obtained the concession. The contracts between him and Soho, although harsh, are not illegal.

As for Valnic, it acted imprudently when it did not consider the fragile financial situation of Verdier with all the care that a lender of money would have done. There is no evidence showing that Valnic was the true operator of the restaurant.

The appeal is granted and the action against Soho is dismissed.

Soho Inc. v. 2416-0004 Québec Inc., Valnic Inc., Les Placements Valmax (1987) Inc., Court of Appeal, 500-09-001920-941, 7 January 2004, Honourable Justices Chamberland, Pelletier, Dalphond.

4

Alsco Uniform & Linen Service Ltd. (previously Western Linen Supply Co. Ltd) v. Sylvain Major

The Superior Court condemned the Appellant Alsco Uniform & Linen Service Ltd. ("Alsco") to pay to Sylvain Major ("Major") the amount of $268,498.12 for wrongful dismissal.

The Court of Appeal finds it necessary to examine the particular context of the contractual relations of the parties since their beginning in 1993.

Major is the owner of 2 companies: Excel Design, a business specialized in the sale of promotional objects and Sérigraphie d’Aujourd’hui, a business operating in serigraphy.

In 1993, he sells Excel Design to a division of Gestion Textile Laverdure («Laverdure»), a company held by Alsco. The parties enter into a service agreement. This agreement provides for the possibility of conflict of interest and grants Major the right to make specific sales of promotional objects. From the beginning, the parties adopt a liberal approach and Sérigraphie d’Aujourd’hui gets numerous contracts from Alsco. Claude Laverdure, an officer of Alsco, also owns his own business and is in a similar situation.

In November 1995, for tax reasons, the service agreement is replaced by a contract of employment for 36 months. At the beginning of 1996, Major and his boss, Claude Laverdure, undertake negotiations with the Alzheimer Society for the supply of promotional objects. It seems that Alsco does not intend to enter into an agreement with the Society due to the limited financial capacity of the latter.

Major sends to the Alzheimer Society two purchase orders under the name of Sérigraphie d’Aujourd’hui. Alsco finds that he is attempting to appropriate one of its contracts and terminates his employment. The Trial Judge concluded that the practices within the company justified Major’s action.

The Court of Appeal first concludes that Alsco did not ratify the conduct of Major but this error is not fatal. However, in this particular context, the dismissal was not justified. Major did not appropriate for himself an important asset, since Alsco was not interested in the contract.

The appeal is dismissed.

Alsco Uniform & Linen Service Ltd. (previously Western Linen Supply Co. Ltd) v. Sylvain Major, Court of Appeal, 500-09-009647-009, 16 January 2004, Honourable Justices Mailhot, Morin, Rochon.

5

Cinar Corporation v. Shareholders of Cinar Corporation, 4113683 Canada Inc., 3918203 Canada Inc.

Cinar Corporation («Cinar») filed an Application for Interim and Final Orders Respecting an Arrangement involving Cinar Corporation, 4113683 Canada Inc. and 3918203 Canada Inc. (the "Application") pursuant to section 192 CBCA. The Application contemplates a three-step procedure:

1. To obtain an interim order that a meeting of CINAR shareholders be summoned to approve the Arrangement and orders relating to procedural matters;

2. To call and hold a special meeting of the shareholders to approve the Arrangement;

3. If the Arrangement is approved by the shareholders, to obtain a final order approving the Arrangement.

At this stage, the Court only address the request for the Interim Order and has to decide if the statutory requirements of the CBCA have been fulfilled, if the Arrangement is put forward in good faith and if the Arrangement is fair and reasonable. The Court finds that the 3^rd criteria should be dealt with at the time seeking the final order.

The Court reviews the case law and the doctrine pertaining to the issue and grants the Interim order in part.

Cinar Corporation v. Shareholders of Cinar Corporation, 4113683 Canada Inc., 3918203 Canada Inc., Superior Court, 500-11-022143-040, 12 January, 2004, Honourable Justice Silcoff.

6

Concentrés Scientifiques Bélisle Inc. v. Lyrco Nutrition Inc., David Régis Bonneau, Yves Benoît, Luc Nadeau, Les Élevages Benoît et Nadeau enr., Gestion Benoît et Nadeau Inc., Marthe Bénard, Gary Bélanger

Founded in 1956, Concentrés Scientifiques Bélisle Inc. («Concentrés») manufactures premixes of minerals and vitamins distributed to millers, veterinaries and agricultural producers.

In May 1994, Concentrés dismissed three of the defendants, Bonneau, Benoît and Nadeau, who have been in its employ for over 10 years. In August 1994, alleging unfair competition, it claims an amount of $755 000$, which will be increased to $1,487,434 in October 1997.

Bonneau, Benoît and Nadeau plead that they were dismissed a few days after Concentrés learned that they were trying to implement a union and add that they were never disloyal. They claim an indemnity for wrongful dismissal and damages. Lyrco Nutrition Inc. («Lyrco»), Les Élevages Benoît et Nadeau enr. («Élevages») and Gestion Benoît et Nadeau Inc. («Gestion») alleges that their activities were favorable to the business of Concentré. Bénard and Bélanger submit that they resigned because they could not keep working for Concentrés in such a context.

The duties of the defendants, all three agronomists, had two distinct but complementary aspects. They had to promote Concentrés’ products and advise producers. They did not however invoice their professional services. This dual role led to an important trust from their customers, who will follow them after their dismissal.

In May 1988, with the agreement of Pierre Bélisle, president of Concentrés, Benoît and Nadeau become partners in Élevages and acquire a farm to raise pigs. This business becomes a sales asset for the sale of Concentrés’ products to new customers.

In 1993, to coordinate the management of their operations, Bonneau, Benoît and Nadeau incorporate Lyrco, which purchases its supplies from Concentrés.

In January 1994, a new general manager is hired by Concentrés. The 3 defendants have a meeting with him and explain to him their success in sales and how they developed their clientele. The benefit for Concentrés resulting from their farm is discussed.

The Court examines the evidence submitted. The Court concludes that Bonneau, Benoît and Nadeau were dismissed on the false grounds of Lyrco’s activities. Their dismissal was caused by their leadership in setting up a union that would upset Concentrés’ objectives of modifying their working conditions without negotiations.

Concentrés’ claim is dismissed and the cross demands are granted.

Concentrés Scientifiques Bélisle Inc. v. Lyrco Nutrition Inc., David Régis Bonneau, Yves Benoît, Luc Nadeau, Les Élevages Benoît et Nadeau enr., Gestion Benoît et Nadeau Inc., Marthe Bénard, Gary Bélanger, Superior Court, 450-05-000514-949, 17 December, 2003, Honourable Justice Daigle.

7

Benito Liberatore, Anna Arquilla Liberatore v. Emilio Monaco, Giovanni Daniele, Dino Liberatore, 2943-5349 Québec Inc.

Plaintiffs Benito Liberatore («Benito») and his wife Anna Arquilla («Anna») co shareholders of 2943-5349 Québec Inc. ("2943") with defendants Emilio Monaco ("Monaco"), Giovanni Daniele ("Daniele") and Dino Liberatore ("Dino"). 2943 operated a video rental store under the name "Video Super Choix".

In April 1995, in order to obtain financing for 2943, Benito and Anna took a $112,000 loan secured by a first rank hypothec on their residence. Having had to reimburse the loan, they are asking defendants to assume part of the obligation based on their shareholding.

Daniele and Monaco plead that they never entered into a personal guaranty of the loan. Dino admits owing 24% of the amount to his parents.

Evidence indicates that, following various transfers, the shares of 2943 are held as follows:

Daniele 29%

Benito 26%

Dino 25%

Monaco 20%

In April 1996, Dino, Daniele and Monaco signed as personal surety the renewal of the loan for a period of one year.

The Court agrees with plaintiffs that the debt was contracted for the exclusive benefit of 2943. The latter made the monthly installments from its bank account until it defaulted. However, only the plaintiffs applied for the loan, even if Dino and Monaco were joint and several sureties. It is not a loan made by the company and secured by each of its shareholders.

The Court then analyzes the issue of each defendant’s liability. Dino, although no document was signed, acknowledges owing his share and, upon his bankruptcy in 2003, he indicated his parents as creditors for an amount of $24,094.78.

Monaco signed a debt recognition for an amount of $20,412.40. He alleges that the document is void since it was conditional to obtaining a loan of $125,000 whereas the loan was only for $112,000. The Court rejects his position.

As for Daniele, the Court confirms that his personal surety was only for one year. His liability is limited to the amount he invested in the company.

The action is granted in part.

Benito Liberatore, Anna Arquilla Liberatore v. Emilio Monaco, Giovanni Daniele, Dino Liberatore, 2943-5349 Québec Inc., Superior Court, 500-05-050039-997, 13 January, 2004, Honourable Justice Lefebvre.

8 

Ghislaine Fleury v. Jan-Guy Vandal, 2959-6756 Québec Inc., Les Immeubles T.V.C. Inc. et Agence d’investigation et de sécurité Unique Inc. 

Plaintiff Ghislaine Fleury is the heir of the shares that were held by Jean-Pierre Caron, who died in October 1996. Prior to his death, Caron held 50% of the shares of the 3 defendant companies. The other 50% was held by Jean-Guy Vandal ("Vandal").

In May 1998, Vandal purchased Fleury’s shares. Two notorial deeds were signed, a deed of sale of the shares and a debt recognition. Fleury is now suing for the unpaid balance of $75,000.

Vandal alleges that the agreed price for the shares is the result of error, even fraud, and that the value of the shares was grossly exaggerated. He is asking reimbursement of an amount of $25,000 already overpaid.

The Court indicates that the evidence does not reveal fraud. The Court then examines Vandal’s obligation, as director, to act prudently and diligently, as prescribed by Article 322 C.C.Q.

The evidence reveals that Caron and Vandal were the sole directors and shareholders of the companies for almost 20 years. Since purchasing the shares, Vandal remained sole director and shareholder. He accepted and signed the audited financial statements and the expert report mentioning the precarious financial situation of one of the companies.

The Court concludes that Vandal did not act as a prudent and diligent director, that he did not inform himself minimally and that his attitude is careless.

The action is granted.

Ghislaine Fleury v. Jan-Guy Vandal, 2959-6756 Québec Inc., Les Immeubles T.V.C. Inc. et Agence d’investigation et de sécurité Unique Inc., Superior Court, 500-17-010869-019, 20 January, 2004, Honourable Justice Hurtubise.

1

Iris, Le Groupe Visuel (1990) Inc. v. Trustus International Trading Inc. 

Plaintiff, Iris, Le Groupe Visuel (1990) Inc. («Iris»), filed proceedings for trade-mark infringement against Trustus International Trading Inc. ("Trustus"). On March 18, 2003, Iris filed a motion for leave to amend its statement of claim in order to, among other things, implead Jack Wang, Devun Walsh and Rob Dow, personally and jointly with Trustus and seek punitive damages against them in the amount of $1M each.

The motion was denied by the Prothonotary and Iris is appealing the decision.

The well-established rule is that an amendment should be allowed unless it is shown that it has absolutely no chance of success.

The Court indicates that the existence of a separate personality in a corporation has led the courts to be very cautious in arriving at conclusions of personal liability by directors of a company. There must be circumstances indicating the deliberate, willful and knowing pursue of a course of conduct that was likely to constitute infringement or reflected an indifference to the risk of it. Nothing in the records of the Court appears to provide the slightest indication to this effect.

Having concluded that there is no need to allow the shareholders and directors of Trustus to be sued personally, the Court finds no reason to allow an action for punitive and exemplary damages against them in their personal capacities.

Iris, Le Groupe Visuel (1990) Inc. v. Trustus International Trading Inc., Federal Court, Trial Division, 2003 FC 1193, Docket T-992-02, 15 October 2003, Honourable Justice Rouleau.

2

Produits Pylex Inc. v. Peak Products Manufacturing Inc., John Gross, George Davis

Since the year 2000, plaintiff, Produits Pylex Inc. ("Pylex") has been manufacturing and selling new metal plates designed to fasten vertical posts to horizontal wood surfaces. In 2003, defendants began to import and sell identical plates at a lower cost.

Pylex has filed proceedings alleging that defendants have neither the right to copy its design nor the right to pass their plates off as those manufactured by Pylex. Defendants filed a motion for dismissal pursuant to sections 165 and 75.1 CCP.

The Court states that Pylex’s invention was never registered under the Patent Act or the Industrial Design Act. Accordingly, the law of Canadian intellectual property does not prevent anybody from copying the invention.

With respect to passing off, three elements must be established: 1. the existence of goodwill associated with the identifying "get-up"; 2. a misrepresentation by defendants; and 3. an actual or potential damage.

At this point, the Court considers whether the action alleges any facts that could constitute presumption-of-fact evidence of the 3 elements. The Court also points out that the absence of registration of the invention is irrelevant in an action for passing off.

The Court cannot see any fact in this case that could make the action clearly unfounded.

The motion is dismissed.

Produits Pylex Inc. v. Peak Products Manufacturing Inc., John Gross, George Davis, Superior Court, 400-17-000519-039, 8 January 2004, Honourable Justice Legris.

3

LifeGear Inc. and Pride International Inc. v. Urus Industrial Corporation

LifeGear Inc. ("LifeGear") makes exercise equipment and produces an elliptical trainer sold under the registered trade-mark "Saturne". Under the name Koolatron, defendant Urus Industrial Corporation ("Urus") had a contract to distribute LifeGear’s elliptical trainers.

LifeGear filed proceedings against Urus for selling counterfeit versions of the Saturne elliptical trainer in violation of its trade-mark. LifeGear obtained a summary judgment and Urus was enjoined from further breaching of LifeGear’s trade-mark. It was also ordered to deliver the counterfeit goods to LifeGear.

LifeGear has now filed proceedings for contempt of court and alleges that Urus failed to respect the decision.

A representative of LifeGear was able to purchase an item sold as a Saturne elliptical trainer through Urus’ website. The item was clearly a fake.

The Court finds that the elements of contempt of court have been proven beyond a reasonable doubt. Urus knew clearly about the decision and the order and failed to comply.

LifeGear Inc. and Pride International Inc. v. Urus Industrial Corporation, Federal Court, Trial Division, 2004 FC 21, Docket T-815-01, 9 January 2004, Honourable Justice O’Reilly.

4

Wachovia Corporation v. International Safekeeping AB

Complainant is Wachovia Corporation ("Wachovia") of North Carolina, U.S.A. Respondent is International Safekeeping AB of Sweden ("AB"). The disputed domain name is "firstunionoffshorebank.com".

In the response to the complaint, AB alleges that the respondent is First Union Offshore Inc. ("Offshore"), a company incorporated in the British Virgin Islands pursuant to the International Business Companies Act. AB acted as agent for Offshore when registering the domain name.

Wachovia, formerly First Union Corporation, is a holding company that owns or controls numerous subsidiaries engaged in providing a wide variety of banking, financial, mortgage and investment related services throughout the world under a family of FIRST UNION service marks. Over the last 40 years, it has spent hundreds of millions of dollars promoting its financial services using its family of FIRST UNION marks.

The first issue the Panel has to deal with is which legal entity or entities is/are the proper respondent. Offshore did not submit any documentation appointing AB to register the domain name. Offshore did not make any submissions or refer to any authority under the Policy or the Rules authorizing a Panel to substitute a legal entity other than the registrant of the domain name in dispute. The Panel finds that the proper respondent is AB.

The Panel also finds that the other three elements, i.e. a confusing similarity, the absence of rights or legitimate interests and registration in bad faith have been proven and orders that the domain name be transferred.

Wachovia Corporation v. International Safekeeping AB, WIPO, Arbitration and Mediation Center, Administrative Panel Decision, No. D2003-0897, 3 January 2004.