T-476-71
Domco Industries Limited (Plaintiff)
v.
Armstrong Cork Canada Limited, Armstrong
Cork Company, Armstrong Cork Industries Lim
ited, Armstrong Cork Inter-Americas Inc., Con-
goleum-Nairn Inc., Congoleum Industries, Inc.
and Congoleum Corporation (Defendants)
Trial Division, Mahoney J.—Toronto, May 25;
Ottawa, May 27, 1981.
Practice — Patents — Reference under Rule 480 — Trial
judgment allowing plaintiff to recover its damages following
patent infringement — Damages to be subject to a reference
earlier ordered — Armstrong defendants' appeal dismissed by
Federal Court of Appeal — Motion for leave to appeal before
the Supreme Court of Canada granted — Plaintiff now moving
for directions as to the conduct of the reference — Defendants
moving to stay the reference — Whether reference stayed by
virtue of s. 70(1) of the Supreme Court Act — Whether
Supreme Court has jurisdiction to direct the reference to
proceed — Alternatively, whether this Court should exercise
its discretion to stay the reference — Supreme Court Act,
R.S.C. 1970, c. S-19, s. 70(1)(d) — Federal Court Act, R.S.C.
1970 (2nd Supp.), c. 10, s. 50(1)(a),(6) — Federal Court Rules
480, 500(2).
The Congoleum defendants, as patentee, and the plaintiff, as
their licensee, were originally all plaintiffs in an action for
patent infringement against the Armstrong defendants. Follow
ing a settlement between the Congoleum and the Armstrong
companies, the action was reconstituted and the Congoleum
companies were made defendants. Judgment issued allowing
plaintiff to recover its damages subject to a reference earlier
ordered. The Federal Court of Appeal dismissed the Armstrong
companies' appeal. A motion for leave to appeal before the
Supreme Court has been granted. Plaintiff now moves for
directions as to the conduct of the reference and the Armstrong
defendants move to stay the reference. Defendants argue that
the reference is automatically stayed by virtue of section 70(1)
of the Supreme Court Act, that the jurisdiction to direct the
reference to proceed now lies with the Supreme Court and that,
if this Court has jurisdiction, its discretion should be exercised
to stay the reference.
Held, the motion to stay the reference is granted. Section
70(1) of the Supreme Court Act does not operate to stay a
reference ordered under Rule 480 of the Rules of this Court.
Proceeding with the reference is not "execution ... in the
original cause"; it is a proceeding in the original cause trig
gered by the judgment but it is not execution of the judgment.
The fact that the appeal is before the Supreme Court does not
deprive this Court of jurisdiction to make the order sought by
the plaintiff (Federal Court Act, section 50(1)(b) and Rule
500(2)). Finally, the fact that, since its reconstitution, the
parties have approached this action as one raising a very
specific question of law requiring resolution of the Armstrong
defendants' liability by the Supreme Court of Canada is a
special circumstance that justifies the exercise of discretion to
grant the stay sought. It is in the interest of justice that the
reference be stayed.
Labatt Breweries of Canada Ltd. v. The Attorney General
of Canada [1980] 1 S.C.R. 594, referred to. Insinger v.
Cunningham [1923] 3 W.W.R. 1328, referred to. Sharpe
v. White (1910) 20 O.L.R. 575, referred to.
MOTION.
COUNSEL:
D. F. Sim, Q.C. for plaintiff.
D. Watson, Q.C. for defendants Armstrong.
D. MacOdrum for defendants Congoleum.
SOLICITORS:
D. F. Sim, Q.C., Toronto, for plaintiff.
Gowling & Henderson, Ottawa, for defend
ants Armstrong.
Lang, Michener, Cranston, Farquharson &
Wright, Toronto, for defendants Congoleum.
The following are the reasons for order ren
dered in English by
MAHONEY J.: The judgment herein ordered
that the plaintiff recover damages to be subject of
a reference. The plaintiff now moves for directions
as to the conduct of that reference and the Arm-
strong defendants move to stay the reference.
The action was commenced May 3, 1968. The
plaintiff and the last three named defendants, "the
Congoleum defendants", were originally all plain
tiffs and the first four named defendants, "the
Armstrong defendants", were the defendants. The
Congoleum defendants, as patentee, and the plain
tiff, as their licensee, sued the Armstrong defend
ants for patent infringement. The order that the
extent of the infringement and damages arising
therefrom be subject of a reference after judgment
was made September 23, 1974. On March 9, 1976,
the Congoleum defendants and the Armstrong
defendants settled. The Congoleum defendants
obligated themselves to indemnify the Armstrong
defendants in respect of any judgment obtained by
the plaintiff herein. On February 20, 1978, an
order reconstituting the action was made whereby
the Congoleum defendants were made defendants.
The amended pleadings were all filed by the end of
April 1978. An agreement as to facts and issues
was executed October 20, 1979, and the action
went to trial on the basis of the agreed facts and
admissions in the pleadings without additional evi
dence. Judgment was rendered March 21, 1980.'
An appeal was dismissed by the Federal Court of
Appeal on December 24, 1980. 2 Leave to appeal to
the Supreme Court of Canada was given February
1, 1981, and, on April 22, the appeal was inscribed
for hearing. It is not expected to be heard before
the session commencing October 6, 1981. It is
hoped it will be heard then.
A second action, No. T-1209-71, commenced
August 25, 1970, as reconstituted bears an identi
cal style of cause. Except for its date of com
mencement, its relevant chronology is identical to
that recited above. It was tried with this action and
the appeals have been, and are intended to be,
heard together.
The defendants argue that the reference is
automatically stayed by virtue of subsection 70(1)
of the Supreme Court Act; 3 alternatively, that the
jurisdiction to direct the reference to proceed now
reposes with the Supreme Court of Canada and, in
the further alternative that, if this Court has juris
diction, its discretion should be exercised to stay
the reference. The pertinent portion of the judg
ment here follows:
The Plaintiff do recover from the Defendants, Armstrong
Cork Canada Limited, Armstrong Cork Company, Armstrong
Cork Industries Limited and Armstrong Cork Inter-Americas
Inc., its damages which, on the reference ordered herein Sep-
tember 23, 1974, it proves to have been incurred as a result of
sales in Canada lost by it between July 25, 1967, and March 9,
1976.
' [1980] 2 F.C. 801.
2 [1981] 2 F.C. 510.
3 R.S.C. 1970, c. S-19.
Paragraph 70(1)(d) of the Supreme Court Act
provides:
70. (1) Upon filing and serving the notice of appeal and
depositing security as required by section 66, execution shall be
stayed in the original cause, except that
(d) where the judgment appealed from directs the payment
of money, either as a debt or for damages or costs, the
execution of the judgment shall not be stayed until the
appellant has given security to the satisfaction of the court
appealed from, or of a judge thereof, that if the judgment or
any part thereof is affirmed, the appellant will pay the
amount thereby directed to be paid, or the part thereof as to
which the judgment is affirmed, if it is affirmed only as to
part, and all damages awarded against the appellant on such
appeal.
Paragraphs (a), (b) and (c) clearly have no bear
ing in the circumstances.
In Insinger v. Cunningham, 4 a judge of the
British Columbia Court of Appeal, in chambers,
held that the provision applied in the following
circumstances. The action was for breach of a
contract to drive a tunnel. The Trial Judge, in his
reasons, found "justice will be done by allowing
$15 per foot .for all work not done, which was
stipulated to be done ... viz, 1,200 feet of tunnel
and 350 feet of upraise". In his judgment, subse
quently affirmed by the Court of Appeal and
further appealed to the Supreme Court of Canada,
he ordered a reference "to ascertain the quantum
of damages, at the rate of $15 per foot, for all
work not done which was stipulated to be done
.". The Appellate Judge observed that it was
"difficult to understand why the damages were not
then and there assessed and the delay and expense
of a reference avoided". The Appellate Judge held
that the judgment did direct "the payment of
money ... for damages" and that direction was
not "nullified by any one of the subsequent and
various means that might be adopted to insure,
with exactitude, its enforcement". He concluded
that he had the power to estimate the amount of
reasonable security to be given and held that, upon
its deposit, the provision would operate to stay the
reference.
4 [1923] 3 W.W.R. 1328.
In contrast to Insinger v. Cunningham, the
Ontario Divisional Court, in Sharpe v. White, 5
considering an Ontario rule of practice dealing
with appeals to the Judicial Committee of the
Privy Council, apparently very similar in its terms
to paragraph 70(1)(d), held:
By the judgment it is adjudged that the appellant is entitled to
damages, an inquiry as to them is directed, and further direc
tions are reserved, but there is no direction for the payment of
money.
In the result, the Divisional Court held that the
Judge who had stayed the reference had properly
exercised his discretion but that the stay had not
been mandatory under the Rule. In both cases, the
Courts were able to form an opinion as to the
amount of security reasonably required to satisfy
it.
While I am, ex officio, a judge of the court
appealed from as contemplated by paragraph
70(1)(d), I am spared the necessity of even consid
ering whether, in the circumstances. I should
follow the course of action adopted by the Appel
late Judge in Insinger v. Cunningham. There is
not, on the record, evidence upon which to base
even an educated guess as to what amount of
security would be reasonable here. All I know is
that the Armstrong defendants paid the Con-
goleum defendants $35,000,000 (U.S.) to settle
this and like actions in the United States and that,
as the judgment stands, the plaintiff is entitled to
some part of that amount. Progress from there to a
conclusion as to what would be a reasonable secu
rity for the plaintiff's damages could only be by
pure guess-work.
In this instance the reference was directed by
the order of September 23, 1974, made, on con
sent, pursuant to Rule 480. That order became
operative, to the extent of requiring that the refer
ence proceed, upon the judgment above recited
being given. It was not, however, the judgment
that directed the reference but, rather, it was the
earlier order. I do not agree that proceeding with
the reference would be "execution ... in the origi
nal cause"; it is a proceeding in the original cause
triggered by the judgment but it is not execution of
the judgment. I do not agree that subsection 70(1)
of the Supreme Court Act operates to stay a
5 (1910) 20 O.L.R. 575.
reference ordered under Rule 480 of the Rules of
this Court.
The plaintiff's argument to the effect that it is
the Supreme Court of Canada that now has juris
diction to direct the reference to proceed is based
on the following passage from a judgment of the
Supreme Court of Canada on a motion for a stay
of execution: 6
In my view, unless there be statutory authority to the con
trary, once a matter is before this Court on leave given either
by this Court or, as in this case, by a properly authorized
intermediate Court of Appeal, it is the statute, rules and powers
of this Court that govern any right to interlocutory relief, by a
stay or otherwise, pending final disposition of the appeal.
I would not for a moment suggest that the
Supreme Court of Canada is without jurisdiction
to stay proceedings in, or execution of a judgment
of, this Court. That, however, is not to say that it
has exclusive jurisdiction to do so nor that, in the
absence of its fiat, the proceeding, or execution, as
it may be, is automatically stayed. The fact that
the appeal is before the Supreme Court of Canada
does not deprive this Court of jurisdiction to make
the order sought by the plaintiff.
The Federal Court Act 7 provides:
50. (1) The Court may, in its discretion, stay proceedings in
any cause or matter,
(a) on the ground that the claim is being proceeded with in
another court or jurisdiction; or
(b) where for any other reason it is in the interest of justice
that the proceedings be stayed.
I do not accept the proposition that the appeal to
the Supreme Court of Canada herein falls within
paragraph 50(1)(a). I do accept that paragraph
50(1)(b) is in play. So is Rule 500(2).
Rule 500. .. .
(2) Whenever a reference has been made under this Rule,
the Court may, from time to time, direct a postponement of any
or all proceedings in connection with the reference for such
time and on such terms as seem just.
6 Labatt Breweries of Canada Limited v. The Attorney Gen
eral of Canada [1980] 1 S.C.R. 594 at p. 597.
7 R.S.C. 1970 (2nd Supp.), c. 10.
This is not an area in which I find decisions in
other jurisdictions very helpful. It is apparent that
both the Rules themselves and the approach to
their application differ. In a recent judgment of
this Court,' Mr. Justice Cattanach said:
I accept as an initial premise that the well-established prac
tice is not to grant a stay except in special circumstances and
that the onus is on the applicant to show that special circum
stances exist.
As I appreciated the fundamental basis of the contention by
counsel for the defendant it was that the expense of the
reference and the inconvenience thereof might well prove an
abortive exercise should the Appeal Division reverse the deci
sion of the Trial Judge.
In my view that circumstance of itself does not warrant the
grant of the stay sought and to do so would be contrary to the
weight of authority. It is against the ordinary course of the
courts to stay inquiries pending the outcome of an appeal unless
it can be shown that irreparable injury will otherwise be
caused.
I accept that, here, the expense and inconvenience
of the reference will be substantial and that that,
by itself, is not a sufficient ground for the exercise
of the Court's discretion to stay it. "Irreparable
damage", in its ordinary sense, is damage that
cannot be compensated by an award of money. It
is not at all clear to me what award of money,
beyond party and party costs, the Armstrong
defendants could claim in respect of a reference
conducted under the order and directions of this
Court. Party and party costs would clearly be
insufficient to compensate them for their outlays
to say nothing of the injury inherent in a business
competitor having extensive access to their trade
information. That, however, could be said in
almost every situation of this sort and yet it has
plainly not been regarded as a sufficient reason to
stay a reference any more than has expense and
inconvenience.
It is, I think, fair to say that, once the action
was reconstituted, the parties fully expected that
an appeal would likely be taken, if leave were
granted, to the Supreme Court of Canada. They
could hardly have expected a Trial Judge not to
' Baxter Travenol Laboratories of Canada Limited v. Cutter
(Canada), Ltd. Unreported judgment rendered March 27,
1981, Court No. T-167-80.
apply the decision of the Federal Court of Appeal
in American Cyanamid Company v. Novopharm
Limited 9 nor the Court of Appeal itself not to feel
bound, at least as a matter of judicial comity, to
follow that fairly recent decision. The parties were
able to agree on the facts necessary to put liability
in issue.
An order under Rule 480 is the rule, rather than
the exception, in patent infringement actions. It is
almost routinely sought and granted on consent. It
avoids an inquiry that may prove to have been
futile if liability is not found. It avoids everything
inherent in such an inquiry: the cost, inconve
nience, disruption of business, revelation of trade
information to competitors and so on. The fact
that here, since its reconstitution, the parties have
approached this action as one raising a very specif
ic question of law requiring resolution of the Arm-
strong defendants' liability by the Supreme Court
of Canada is a special circumstance that justifies
the exercise of discretion to grant the stay sought.
The parties did not really expect a final resolution
of liability until a decision by the Supreme Court
of Canada and, accordingly, in the peculiar cir
cumstances of this action, all of the reasons for
making an order for a reference at the trial stage
still pertain and will do so until the appeal is
disposed of. The appeal has been prosecuted as
expeditiously as has been reasonably possible. It is
in the interest of justice that the reference be
stayed pending disposition of the appeal herein to
the Supreme Court of Canada.
Ordinarily, I should expect to require security as
a condition of granting such a stay of proceedings.
I was not asked to do so here but do not wish to
foreclose that opportunity to the plaintiff should it
wish to move to vary the order to that effect. It
will have to give the Court some evidence upon
which to fix the amount of the security.
9 [1972] F.C. 739, reversing [1971] F.C. 534.
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.