T-2707-86
Ikea Limited/Ikea Limitée and Ikea Canada Lim
ited Partnership (Plaintiffs)
v.
Idea Design Ltd. and Michael Mortimore, carry
ing on business as Idea (Defendants)
INDEXED AS: IKEA LTD. V. IDEA DESIGN LTD.
Trial Division, McNair J.—Vancouver, May 11;
Ottawa, May 21, 1987.
Practice — Discovery — Production of documents — R.
448 application for order requiring plaintiffs to file and serve
list of financial records of Victoria store for period when
parties in direct competition and for comparable prior period
— Relevancy of financial records to issue of liability in trade
mark infringement action — Application allowed — Docu
ments satisfying test of relevancy for production in Boxer v.
Reesor (1983), 43 B.C.L.R. 352 (S.C.) — Whether documents
may fairly lead to train of inquiry which may directly or
indirectly advance case or damage opponent's case — Precise
extent of right to discovery decided by reference to description
of nature of documents and relevance to issues based upon
reasonable interpretation of pleadings — Defendants' argu
ment documents required for inspection by accountant to form
opinion on legal issue of confusion to no avail as witnesses not
permitted to give evidence on question Court to determine —
Evidence of actual confusion may be helpful, but not neces
sary, to issue of likelihood of confusion — Federal Court
Rules, C.R.C., c. 663, RR. 448, 480, 500.
Trade marks — Infringement — Application for order
requiring plaintiffs to file and serve financial records of Vic-
toria store for period of direct competition with defendants,
and for comparable prior period — Relevancy of financial
records to issue of liability — Application allowed — Rele
vancy test in Boxer v. Reesor (1983), 43 B.C.L.R. 352 (S.C.)
applied — Argument documents required for inspection of
witness to form opinion on legal issue rejected — Consider
ation of usefulness of actual evidence of confusion to issue of
likelihood of confusion — Federal Court Rules, C.R.C., c.
663, RR. 448, 480, 500.
This is an application under Rule 448 for an order requiring
the plaintiffs to make full discovery of documents by filing and
serving a list of such documents. The defendants seek a list of
the plaintiffs' financial records of their Victoria store for the
period during which the parties have been in direct competition,
and similar records for a comparable prior period. The issue is
whether financial records are relevant to the issue of liability
for trade mark infringement, which turns on the issue of
likelihood of confusion. The plaintiffs argue that such records
relate to damages only. The defendants seek such records to
support their position, and for analysis by their accountant in
order to express an opinion as to whether there was any
evidence bearing on the legal issue of confusion.
Held, the application should be allowed.
It is a function of the Court alone to determine whether the
public will be confused by the use of disputed trade marks and
no witness can give evidence on the very question which the
Court must decide: Cochrane-Dunlop Hardware Ltd. v. Capi
tal Diversified Industries Ltd. (1976), 30 C.P.R. (2d) 176
(Ont. C.A.). The averments requiring the list of documents for
the defendants' accountant to analyze in order to express an
opinion on a legal issue defeat their purpose.
The defendants also contended that evidence of actual confu
sion was relevant to the issue of likelihood of confusion. The
Court cannot rely on a statement of Laskin J., as he then was,
in La Maur, Inc. v. Prodon Industries Ltd. et al., [1971 S.C.R.
973; 2 C.P.R. (2d) 114 as that was an expungement case, which
turned on its particular facts. His statement goes no further ,
than suggesting that evidence of actual confusion might be
helpful in establishing likelihood of confusion, but that does not
mean that the party could not establish its claim without it.
W. R. Jackett, former Chief Justice of the Federal Court of
Canada, in his treatise on practice under the Federal Court
Rules, pointed out that while the former right to discovery of
documents had been abrogated, any party may apply under
Rule 448 for an order for discovery of documents in the
possession of his opponent relating to any matter in question.
The applicant must convince the Court that there is something
in the circumstances of the particular case warranting this
more expensive type of discovery.
The test of relevancy for the production of documents is
whether the documents may fairly lead a party to a train of
inquiry which may directly or indirectly advance its case or
damage the opponent's case: Boxer v. Reesor (1983), 43
B.C.L.R. 352 (S.C.).
The case law has established that the question of the precise
extent of the right to discovery of such documents must be
decided by reference to the description of the nature of the
documents sought to be discovered and their relevance to the
matters in issue based upon a reasonable interpretation of the
pleadings.
The defendants have sufficiently demonstrated their clear
entitlement to a Rule 448 list of documents specified in their
notice of motion.
CASES JUDICIALLY CONSIDERED
APPLIED:
Cochrane-Dunlop Hardware Ltd. v. Capital Diversified
Industries Ltd. (1976), 30 C.P.R. (2d) 176 (Ont. C.A.);
Compagnie Financiere du Pacifique v. Peruvian Guano
Company (1882), 11 Q.B.D. 55 (C.A.); Boxer v. Reesor
(1983), 43 B.C.L.R. 352 (S.C.); Everest & Jennings
Canadian Ltd. v. Invacare Corporation, [1984] 1 F.C.
856 (C.A.).
DISTINGUISHED:
La Maur, Inc. v. Prodon Industries Ltd. et al., [1971]
S.C.R. 973; 2 C.P.R. (2d) 114.
CONSIDERED:
R. v. Special Risks Holdings Inc., [1983] 2 F.C. 743
(C.A.).
REFERRED TO:
Koninklijke Nederlandsche Stoombootmaatschappij
N.V. (Royal Netherlands Steamship Co.) v. The Queen,
[ 1967] 2 Ex.C.R. 22.
COUNSEL:
S. R. Schachter for plaintiffs.
Aaron A. G. Gordon for defendants.
SOLICITORS:
Davis & Company, Vancouver, for plaintiffs.
Hanan, Gordon & Company, Victoria, for
defendants.
The following are the reasons for order ren
dered in English by
MCNAIR J.: This is an application by the
defendants under Rule 448 [Federal Court Rules,
C.R.C., c. 663] for an order requiring the plain
tiffs to make full discovery of documents by filing
and serving a list of such documents in the pre
scribed form, but without the necessity of having
to verify the same by affidavit.
The plaintiffs' action is for infringement of its
trade marks "Ikea" and "Ikea and Design" and
for passing-off as well as a permanent injunction
to restrain the defendants from using the trade
marks or trade names "Idea" and "Idea and
Design" and damages in respect thereof or an
accounting as to profits. The defendants' defence
and counterclaim was entered on January 23,
1987. The defendants allege that their trade names
"Idea" and "Idea Design" are accurately descrip
tive of their wares and are unlikely to cause confu
sion with the plaintiffs' trade mark no. 223,749
"Ikea" and the wares of the plaintiffs associated
therewith. The counterclaim seeks the expunge -
ment of the plaintiffs' said trade mark.
On February 3, 1987, the plaintiffs brought an
application for an interlocutory injunction to
restrain the defendants from selling their wares
and services under the trade marks or trade names
"Idea" and "Idea and Design" on the ground that
they were confusing with the plaintiffs' registered
trade marks "Ikea" and "Ikea and Design". Mr.
Justice Dubé dismissed the motion for an inter
locutory injunction [(1987), 13 C.P.R. (3d) 476;
11 C.I.P.R 313 (F.C.T.D.)] on terms that the
defendants keep an account of all sales to the date
of judgment and that the defendants issue a dis
claimer to all their customers advising them that
they were not "Ikea" and did not sell "Ikea"
furniture. In deciding that the plaintiffs had met
the threshold test of establishing that there was a
serious issue to be tried, the learned Judge
observed as follows [at pages 478-479 C.P.R.; 317
C.I.P.R.]:
A regular customer of Ikea will not be visually confused,
either by the names, the marks, or the appearances of the
stores. The Ikea store in Victoria is surrounded by Swedish
flags, whereas its competitor flies a good number of Canadian
flags. But it is certainly possible that the imperfect pronuncia
tion of either name, by telephone or directly to a prospective
customer, could lead to confusion and direct some people to the
wrong store. Idea may have had that general idea when it
decided to locate its store where it did.
The hearing of the present motion was some
what cluttered at the outset by a motion brought
by the plaintiffs under Rule 480 for the splitting of
their case in order to proceed to trial on the issue
of liability for trade mark infringement with the
question of damages and profits flowing or arising
therefrom to be made the subject of a reference
under Rule 500. Counsel finally agreed that the
motion for general discovery of documents should
be dealt with first and that the other motion under
Rule 480 should be deferred, pending the disposi
tion of the first motion.
After some preliminary skirmishing, counsel
were able to come to agreement as to the majority
of the documents required to be listed under Rule
448 in the prescribed Form 20. Counsel are to be
commended for their efforts in that regard.
It is my understanding that the only matter left
in dispute is whether the plaintiffs must list in a
further and better list of documents the business
and sales records specified in paragraph 2(c) of the
defendants' notice of motion, which reads:
2 ...
(c) all business records, books and documents of the Plain
tiffs' Victoria retail outlet for the period in which the Plain
tiffs and the Defendants have been in direct competition
along with similar records, books and documents for a com
parable prior period.
Counsel for the plaintiffs strenuously contends
that the narrow issue, and indeed the only substan
tial point of dispute, is whether the plaintiffs' sales
records are relevant at this juncture to the issue of
liability, which turns on the issue of the likelihood
of confusion and nothing more. He submits that
the records of sales and comparisons thereof go
only to the question of harm or damage, which is a
proper subject-matter for the reference.
Counsel for the defendants contends that he is
entitled as of right to a listing of the documents
specified in paragraph 2(c) of his notice of motion
because this would enable him to pursue lines of
inquiry that might serve to advance his own case
and to damage the case of his adversary on the
issue of liability. He supports this submission by
relying on the affidavit of the defendant, Michael
Mortimore, more particularly paragraphs 7 to 12
inclusive, which read:
7. THAT I believe that an analysis of the books and records of
the Plaintiff, IKEA, will support the position of the Defendant
and produce relevant and admissible evidence that the buying
public in Victoria is not confused as between the Plaintiffs and
the Defendants.
8. THAT I verily believe that the said analysis will support the
contention of the Defendant that if any confusion exists, it does
not survive the "mechanism of purchase".
9. THAT I have retained Mr. James McAvoy, C.G.A., to
analyze the said books and records. Mr. McAvoy has spent
many years with the special investigations unit of Revenue
Canada and is skilled in forensic accounting.
10. THAT I am advised by Mr. McAvoy and verily believe that
he requires the following data to give an opinion as to whether
the presence of the Defendant has injured the Plaintiff:
(a) the year over year sales records of the Victoria IKEA
outlet;
(b) similar records from other IKEA outlets serving sales
areas of roughly similar size and demography;
(c) breakdown of IKEA'S sales by product categories in order
to compare product areas in which the Plaintiff and Defend
ant compete with product areas in which they do not
compete.
11. THAT I am advised by Mr. McAvoy and verily believe that
if he had the necessary documents from the Plaintiffs he could
give an opinion as to whether there is any evidence to support
the contention of the Plaintiffs that the public is confused and
more particularly whether that confusion has survived the
mechanism of purchase.
12. THAT I am advised by my solicitor and verily believe that
evidence of actual confusion or the lack of same is both relevant
and admissible at the trial of this matter on the issue of the
liability of the Defendant, if any, to the Plaintiff.
Counsel for the plaintiffs makes the rejoinder
that it is "patently unbelievable" that an account
ant should be heard to express an opinion on
confusion or the likelihood thereof based on his
examination of sales records, and he cites Coch-
rane-Dunlop Hardware Ltd. v. Capital Diversified
Industries Ltd. (1976), 30 C.P.R. (2d) 176 (Ont.
C.A.). In that case, Blair J.A., delivering the
judgment of the Ontario Court of Appeal, stated
the well-established rule at page 184 as follows:
... it is a function of the Court alone to determine whether the
public will be confused by the use of disputed trade marks and
no witness can give evidence on the very question which the
Court must decide: North Cheshire and Manchester Brewery
Co. Ltd. v. Manchester Brewery Co. Ltd., [ 1899] A.C. 83.
The inquiry required under para. (a) of s. 6(5) is as to the
inherent distinctiveness of both trade marks. Expert evidence
on qualities of distinction in a trade mark is admissible: Saville
Perfumery Ltd. v. June Perfect Ltd. and F.W. Woolworth &
Co. Ltd. (1941), 58 R.P.C. 147, per Viscount Maugham at
p. 174.
I wholeheartedly concur with Mr. Justice Blair's
statement of the rule.
In my opinion, the averments contained in para
graphs 9 to 11 inclusive of the Mortimore affidavit
defeat the very purpose for which they were
intended, that is, to require a listing of documents
pertaining to business or sales records so that the
defendants' accountant could ultimately examine
the same with a view to expressing an opinion as to
whether or not there was any evidence bearing on
the legal issue of confusion. It follows therefore
that these paragraphs must be disregarded.
This leaves intact paragraphs 7 and 8 of the
Mortimore affidavit. The only other evidentiary
bastions of support for compelling the listing of
sales records in any list of documents provided
under Rule 448 seem to be paragraph 5 of the said
affidavit, including Exhibit "A" thereto, and para
graph 12. The essence of paragraph 5 and the
exhibit is that Ikea's sales at its Victoria outlet for
the four-month period from September 1, 1986 to
the end of the calendar year were up 49 per cent
over the same period in 1985 and at a time when
the plaintiffs were facing direct competition from
the defendants' store.
Paragraph 12 of the Mortimore affidavit reads:
12. THAT I am advised by my solicitor and verily believe that
evidence of actual confusion or the lack of same is both relevant
and admissible at the trial of this matter on the issue of the
liability of the Defendant, if any, to the Plaintiff.
Counsel for the defendants argues that this
statement finds support in the statement of Laskin
J. [as he then was], in La Maur, Inc. y. Prodon
Industries Ltd. et al., [1971] S.C.R. 973, at page
976; 2 C.P.R. (2d) 114, at page 116:
Although evidence of actual confusion may not be necessary on
an issue of mere likelihood of confusion, it would none the less
be admissible respecting use of the competing trade marks after
the relevant date.
I consider that this particular passage cannot be
taken out of context from that what was stated by
the learned Judge immediately thereafter [at
pages 976 S.C.R.; 116-117 C.P.R.]:
I note that the admissibility of evidence of actual confusion on
an issue of likelihood of confusion was approved in British
Drug Houses Ltd. v. Battle Pharmaceuticals ([1944] Ex.C.R.
239), at p. 244, which was affirmed by this Court ([1946]
S.C.R. 50), but without express reference to this point. The
weight of such evidence would depend on a variety of factors
that need not be canvassed here. In this case, the trial judge's
reference to want of evidence of actual confusion did not mean
that the appellant could not establish its claim without it but,
simply, that it would have been helpful in meeting the burden
of proof resting upon the appellant to show likelihood of
confusion.
The case was an appeal from a decision of the
Exchequer Court dismissing the appellant's motion
for expungement of the respondent's registered
trade mark. The Court dismissed the appeal on the
ground that the competing marks considered in
their entirety were not confusing within the mean
ing of section 6 of the Trade Marks Act [R.S.C.
1970, c. T-10]. Mr. Justice Laskin went to some
pains to point out that expungement cases turned
on their own particular facts. The present case is
not an expungement case, save for the defendants'
counterclaim for such relief. Moreover, I am of the
view that the statement of Laskin J., goes no
further than to suggest that evidence of actual
confusion might be helpful to a party having to
meet the burden of establishing the likelihood of
confusion, but that this does not mean that the
party could not establish its claim without it.
On March 12, 1987 Mr. Gordon, of the firm of
the defendants' solicitors, wrote the plaintiffs'
solicitors regarding the defective list of documents
and pointing out that they would require a proper
list before examinations for discovery. The letter is
annexed as Exhibit "B" to Mr. Gordon's affidavit
relating to discovery of documents. Among other
things, the letter points to the increased sales and
profits of the plaintiffs' Victoria store and suggests
that this is indicative of the fact that Ikea was
assisted rather than hurt by the competition from
the defendants' store. The letter goes on to say:
It further suggests that far from being confused, the members
of the buying public in Victoria are well aware of the distinctive
and unique furniture offered by the two different stores and
have increased their patronage of both stores. We believe that
an examination of the financial records of your Victoria store
will reveal cogent evidence that the public are not confused.
Both counsel concede that the narrow issue is
whether financial records showing volumes of sales
have to be listed in a Rule 448 list of documents,
where the only matter in issue is that of liability. I
regard this as a formal admission made in an
interlocutory proceeding for the purpose of facili
tating its disposition: see Sopinka and Lederman,
The Law of Evidence in Civil Cases, at pages
355-357.
The point of the case is whether business or
financial records pertaining to sales are relevant to
the issue of liability. The defendants say "yes" and
the plaintiffs say "no".
It becomes necessary to look at the wording of
Rule 448 to determine the scope of its application
and intendment. Rule 448 reads as follows:
Rule 448. (1) The Court may order any party to an action to
make and file and serve on any other party a list of the
documents that are or have been in his possession, custody or
power relating to any matter in question in the cause or matter
(Form 20), and may at the same time or subsequently order
him to make and file an affidavit verifying such a list (Form
21) and to serve a copy thereof on the other party.
(2) An order under this Rule may be limited to such docu
ments or classes of document, or to such of the matters in
question in the cause or matter as may be specified in the order.
W. R. Jackett, former President of the Exche
quer Court and Chief Justice of the Federal Court
of Canada, wrote an excellent treatise on the
practice under the new Federal Court Rules, en
titled A Manual of Practice. In contrasting the old
Exchequer Court Rules and the new Rules in
respect of the discovery of documents, the learned
author makes this statement at page 68 of the
Manual:
Under the new Rules the right to discovery of documents in the
possession or control of the opponent that might conceivably be
of help to the party demanding discovery has disappeared. Such
right has disappeared even though it would obviously serve the
ends of justice that there be discovery of such documents. The
reason for thus curtailing the ambit of discovery as of right is
the purely practical one that while, on the one hand, it is felt
that there are relatively few cases where a party can be
building his case on documents that he hopes to get from his
opponent, on the other hand it is a very onerous, tedious and
difficult task, involving considerable expense and delay, to
prepare a list of documents that would, conceivably, be of aid to
one's opponent. This is particularly so when a party has wide
spread operations the details of which he prefers to keep from
his opponent who is also his business competitor. On balance, it
seems probable that the costs and delays of making such
discovery outweigh, in most cases, the theoretical advantages
obtained from it.
While discovery as of right has been thus limited in scope,
any party may apply for an order for the old style discovery by
his opponent of the documents that are or have been in his
possession, custody or power relating to any matter in question
in the cause or matter (Rule 448). Such an application will only
be granted where the applicant can convince the Court that
there is something in the circumstances of the particular case
calling for this more expensive type of discovery and, if grant
ed, it may be granted on a restricted basis (Rule 448(2)). There
is an automatic right of inspection and to make copies of any
documents discovered pursuant to such an order (Rule 453).
The leading case is Compagnie Financiere du
Pacifique v. Peruvian Guano Company (1882), 11
Q.B.D. 55 (C.A.), where Brett L.J., stated the
principle applicable to the interpretation of the
words of the rule "a document relating to any
matter in question in the action", at page 63 as
follows:
It seems to me that every document relates to the matters in
question in the action, which not only would be evidence upon
any issue, but also which, it is reasonable to suppose, contains
information which may—not which must—either directly or
indirectly enable the party requiring the affidavit either to
advance his own case or to damage the case of his adversary. I
have put in the words "either directly or indirectly," because, as
it seems to me, a document can properly be said to contain
information which may enable the party requiring the affidavit
either to advance his own case or to damage the case of his
adversary, if it is a document which may fairly lead him to a
train of inquiry, which may have either of these two conse
quences ....
This general principle has been consistently fol
lowed and applied by the courts over the years,
and has been extended to the area of the produc
tion of documents.
In Boxer v. Reesor (1983), 43 B.C.L.R. 352
(S.C.), McEachern C.J., stated the following test
of relevancy for the production of documents [at
page 359]:
It seems to me that the clear right of the plaintiffs to have
access to documents which may fairly lead them to a train of
inquiry which may directly or indirectly advance their case or
damage the defendant's case particularly on the crucial ques
tion of one party's version of the agreement being more prob
ably correct than the other, entitles the plaintiffs to succeed on
some parts of this application. Other parts seem to me, with
respect, to be asking for too much.
In Everest & Jennings Canadian Ltd. v.
Invacare Corporation, [1984] 1 F.C. 856, the Fed
eral Court of Appeal upheld an appeal from an
order refusing to require the respondent to produce
the balance of a file from which an exhibit had
been produced on the examination for discovery of
its officer on the ground of its irrelevancy. The
Court held that the production of the exhibit was
an acknowledgment of the relevancy of the file
itself.
In reaching this result, Mr. Justice Urie, deliver
ing judgment for the Court, expressly adopted the
test of McEachern C.J., as the correct test of
relevancy for purposes of discovery.
The question of the precise extent of the right to
discovery of documents that may enable a party to
advance his own case or damage the case of his
adversary must be decided by reference to the
description of the nature of the documents sought
to be discovered and their relevance to the matters
in issue, based upon a reasonable interpretation of
the pleadings: Compagnie Financiere du Pacifique
v. Peruvian Guano Company, supra; Boxer v.
Reesor, supra; R. v. Special Risks Holdings Inc.,
[1983] 2 F.C. 743 (C.A.); and Koninklijke Neder-
landsche Stoombootmaatschappij N.V. (Royal
Netherlands Steamship Co.) v. The Queen, [1967]
2 Ex.C.R. 22.
Incidentally, it should be noted that in R. v.
Special Risks, supra, Mr. Justice Heald pointed
out that any reference to the production of docu
ments under Rule 448 was clearly inaccurate
because the Rule speaks only of an order compell
ing the filing and serving of a list of documents.
Applying the law to the facts of the case, I find
that the defendants have sufficiently demonstrated
their clear entitlement to a Rule 448 list of the
documents specified in paragraph 2(c) of their
notice of motion. What is sought here is essentially
the sales records of Ikea's Victoria retail outlet for
the period during which the parties have been in
direct competition as well as similar records of the
same outlet for the comparable prior period, which
I take to mean the period immediately preceding
when the parties were not in competition. In my
opinion, this is not casting the net too broadly
inasmuch that it encompasses an avenue of inquiry
that could reasonably be expected to turn up evi
dence that might serve, either directly or indirect
ly, to bolster the defendants' case or to weaken the
case of their adversary on the issue of confusion.
By agreement of counsel, it is conceded that the
other classes of documents referred to in the
defendants' notice of motion should be enumerated
in any Rule 448 list of documents, subject to minor
limitations or exceptions. While the defendants
were successful in obtaining full discovery of the
documents specified in paragraph 2(c) of their
notice of motion, their success with respect to the
other specified categories of documents of wide
ranging variety was the result of agreement.
Consequently, I consider that costs should be in
the cause.
In the result, an order will go in accordance with
these reasons.
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