Date: 20030417
Docket: T-1706-02
Citation: 2003 FCT 448
BETWEEN:
UNIVERSAL FOODS INC.,
Plaintiff
and
HERMES FOODS IMPORTERS LTD.,
MASOUD MOTAMEDI TOUS ENTERPRISES LTD.,
H & R IMPORT-EXPORT INC.,
HAMIDEH RAFATI, FEREYDON EBADIAN, SUPER ARZON INC.,
SUPER ARZON LTD., SUPER KHORAK INC., o/a THE MARKET SUPER KHORAK, ASY'S MARKET INC., JOHN DOE and JANE DOE
Defendants
REASONS FOR ORDER
LEMIEUX J.:
[1] These reasons relate to the trial in a contempt proceeding held pursuant to Rule 467 of the Federal Court Rules, 1998 (the "Rules").
[2] The trial was mandated by order of Mr. Justice Rouleau dated January 13, 2003. Justice Rouleau ordered Universal Foods Inc. ("Universal") and Morteza Katebian, in his personal capacity as an officer and director of Universal, to appear before a judge of this Court to hear proof why they should be found guilty of contempt for having breached an order of Justice Pinard dated December 10, 2002 and to offer their defence to such charges. Justice Rouleau fixed costs payable forthwith.
[3] Justice Pinard, on December 10, 2002, ordered Universal to return forthwith to Tous Enterprises Ltd. ("Tous") all goods and documents seized from Tous in the course of the execution of an Anton Piller Order issued by Justice Campbell on October 21, 2002.
[4] The sole legal issue in this contempt proceeding is whether Universal, based on the evidence adduced, did forthwith return the goods to Tous.
BACKGROUND
[5] Justice Campbell's Anton Piller Order authorized Universal to search and seize unauthorized or counterfeit BADR merchandise. The BADR trademark is used in association with food products.
[6] Universal, whose activities and head office are in Ontario, carried out a number of seizures in the Vancouver area and, in particular, on November 5, 2002, seized from Tous, carrying on business as Nancy Market, a grocery store in North Vancouver, 19 cases (20 jars to a case) and 120 individual jars containing jams and pickles as well as 150 bottles of syrup ("the seized goods").
[7] Tous moved to set aside the Anton Piller Order on the grounds Universal had failed to disclose material facts to Justice Campbell. Tous' motion was made returnable December 9, 2002 but before it was heard, Universal discontinued its Anton Piller proceeding which set the stage for Justice Pinard's December 10, 2002 order, issued on consent.
[8] As noted, Justice Pinard ordered Universal to forthwith return to, inter alia, Tous, the seized goods. He adjourned Tous' motion for costs and damages.
THE EVIDENCE
(a) On behalf of Tous
[9] Tous called two witnesses: Ms. Christine Sharik, a legal assistant to Tous' solicitor in this matter and Mr. Nosratollah, the owner of Nancy Market. The purpose of Ms. Sharik's testimony was to prove documents as evidence.
[10] Mr. Katebian testified on behalf of Universal.
[11] The evidence shows the following events occurred after Justice Pinard's December 10, 2002 order was issued and before the receipt by Tous of a pallet of goods from Universal on January 20, 2003, which Tous says contained most of the seized goods but not all of them and some of the goods included on the pallet were not seized from Nancy Market but from other food stores in the Vancouver area. A summary of these events is:
(a) On December 17, 2002, Tous' solicitors wrote to Universal's solicitors of record in Vancouver. A copy of that letter was faxed directly by Mr. Nosratollah to Mr. Katebian on December 19, 2002. The December 17th letter states the seized goods had not been returned, and is act of non compliance with Justice Pinard's order; it asked for an explanation.
(b) Tous' fax of December 19, 2002 had a cover sheet where Mr. Nosratollah told Mr. Katebian if he did not return his goods by December 27, 2002, "I will tell my lawyer to tell the Court you don't obey". He attached a copy of Justice Pinard's order.
(c) It was Mr. Nosratollah's evidence that, after sending the December 19, 2002 fax, Mr. Katebian
[...] on two or maybe three occasions had contacted my cashiers and asked for me, and one day I was there, sitting there, [that day turned out to be January 6, 2003, the day Mr. Katebian had faxed a letter to Mr. Nosratollah, a letter concerning returning the goods] the phone rang, I picked up the phone and it was Mr. Katebian. I advised him to contact my lawyer, Mr. Paul Smith. (Transcript, page 21)
(d) Mr. Nosratollah testified the following goods were not returned to him when he received the pallet from Universal:
(I) one case of Rose Flower Jam;
(ii) eight cases and 15 jars of Orange Blossom Jam; and
(iii) four large jars of Liteh Pickles.
(e) Moreover, he testified that in the shipment he received from Universal, there were three cases of okra pickles (12 jars to a box) that did not belong to him. He noted on the bill of lading some goods were damaged.
(f) Mr. Nosratollah then discussed his purchase price of the seized goods. Generally, one case of jams would cost him $40 a case, which works out to be $2 a jar. The large jars of Liteh Pickles would cost him $3 a jar. Generally, his mark-up was 25 to 30%. He estimated his profit on the goods not returned to be $100. He told me there were five jars of damaged goods amongst those returned.
(b) On behalf of Universal and Mr. Katebian
[12] Mr. Katebian acknowledged he was aware of Justice Pinard's order shortly after December 9, 2002, when his lawyer returned to Toronto after attending Justice Pinard in Vancouver. He said he had not received a hard copy of Justice Pinard's order until he received one from Mr. Nosratollah on December 20, 2002.
[13] He testified he had familiarity with Anton Piller Orders having previously been involved in litigation in respect of such orders.
[14] He admitted on cross-examination that the seized goods had not been returned forthwith to Tous and offered the following excuses:
(a) he personally did not have, until January 9, 2003, a list of the seized goods recorded by Universal's attending solicitor on the execution of the Anton Piller at Nancy Market on November 5, 2002. He needed the list of the seized goods because the bailiff in Vancouver who had taken possession of the seized goods did not segregate and clearly identify them separately from other BADR goods seized on or about that time from other retail stores in the Vancouver area. He testified that on December 20, 2002, he had called two of his solicitors involved in the file in order to obtain the list.
(b) However, he left for vacation that day only to return on January 2, 2003. He indicated that throughout the holiday season, Universal was closed. He said as soon as he received the list on January 9, 2002, he shipped out the goods to Tous that same day.
(c) He testified he tried to reach Mr. Nosratollah on January 2 and 3, left him messages but got no response. He called him again on January 6, 2003, after having faxed him a letter in the following terms:
I attempt[sic] to contact you several times to arrange for returning the goods. Due to season holidays and also the mix-up by the bailiff in Vancouver, we were unable to do that yet. Please fax us your copy of the goods, which was taken from your store so we can send you the goods. [Exhibit D-5]
He confirmed Mr. Nosratollah told him to contact his lawyer.
(d) He expressed the view all of the goods had been returned to Tous because he was in Universal's warehouse in the Toronto area when the shipment to Tous was being prepared and verified as to content; he had the list and he checked the goods against those on the pallet.
(e) In terms of cost and value, his evidence does not differ from that of Mr. Nosratollah. Basically, he sells each jar of jam for $2.
(f) He testified Universal did not deliberately fail to return the seized goods to Tous. However, he recognized some responsibility when he said the following:
A. Well, I apologize for delay. I'm sorry that it was delayed, but I would like to indicate that I did my best to return the goods in good faith. But again, I realize that there was some confusion in our side and that caused the delay. [transcript, page 65]
(g) On cross-examination, he acknowledged the procedures related to the execution of the Anton Piller order "went wrong" (Transcript, page 68). Also, on cross-examination (Transcript, page 72), he acknowledged that Universal did nothing during the time he was on vacation to try to secure the return of the goods but added that he was not in Canada during the holidays.
(h) He stated he had a cheque in the amount of $1,500 payable to Tous for the costs fixed by Justice Rouleau.
FINDINGS
(a) Guilty of contempt or not
[15] The Supreme Court of Canada in Bhatnager v. Canada (Minister of Employment and immigration), [1990] 2 S.C.R. 217, established the following principles when dealing with contempt proceedings of a court order:
(1) An allegation of contempt of court is a matter of criminal (or at least quasi-criminal) dimension (page 224) since a finding of guilt could subject Universal or Mr. Katebian to a fine and the possibility of imprisonment to a period fo less than five years (see Rule 472). "It is necessary, therefore, that the constituent elements of contempt be proved against the appellants, and proved beyond a reasonable doubt (page 224).
(2) The onus of proof is, in this case, on Tous - the party alleging the contempt (page 225).
[16] "Contempt of Court" is defined in Rule 466 of the Rules. I reproduce paragraphs 466(a), (b) and (c) which are relevant tot the present proceedings:
| 466. Subject to rule 467, a person is guilty of contempt of Court who (a) at a hearing fails to maintain a respectful attitude, remain silent or refrain from showing approval or disapproval of the proceeding; (b) disobeys a process or order of the Court; (c) acts in such a way as to interfere with the orderly administration of justice, or to impair the authority or dignity of the Court; [emphasis mine]
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466. Sous réserve de la règle 467, est coupable d'outrage au tribunal quiconque : a) étant présent à une audience de la Cour, ne se comporte pas avec respect, ne garde pas le silence ou manifeste son approbation ou sa désapprobation du déroulement de l'instance; b) désobéit à un moyen de contrainte ou à une ordonnance de la Cour; c) agit de façon à entraver la bonne administration de la justice ou à porter atteinte à l'autorité ou à la dignité de la Cour; |
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[17] Justice Pratte in Valmet Oy v. Beloit Canada Ltd., [1988] F.C.J. No. 87, touched upon the required element to find third party liability in contempt proceedings. He held:
The only person who may disobey an order of a court is the party to whom that order is addressed. However, a third party who knowingly aided and abetted a party to disobey an injunction may be found guilty of contempt not because he breached the injunction, but, rather, because he acted in a manner that interfered with the course of justice.
[18] Justice MacKay in Dimatt Investments Inc. V. Presidio Clothing Inc., [1993] 4 C.P.R. (3d) 46, adopted a similar approach.
[19] "Forthwith" is defined in the New Shorter Oxford English Dictionary as "Immediately, at once, without delay". See Smith v. Canada, [1991] 3 F.C. 3 (F.C.T.D.); also Firebird Transportation Systems Inc. v. Hamelin Leasing Ltd. (1990), 43 C.P.C. (2d) 36, (B.C.S.C), where both courts adopted that dictionary definition.
(i) Universal
[20] On the evidence before me, I have no hesitation finding Universal guilty of contempt for breach of Justice Pinard's order to which it had consented to. The seized goods were to be returned immediately to Tous by Universal. They were only returned one month and ten days later.
[21] The obligation of an immediate return of the seized goods, of course, must be gauged in the context and circumstances at hand. (See Smith, supra.)
[22] There is a special context to Justice Pinard's order. That order relates to goods seized under an Anton Piller Order which Universal obtained ex parte and which, insofar as Tous was concerned, was scheduled to be reviewed on November 18, 2002 and which resulted in a consent order issued that day by Justice Layden-Stevenson, Tous having appeared on the review through its solicitors. The review of the execution of the Anton Piller Order was adjourned for three weeks to the general sittings in Vancouver on December 9, 2002, but without prejudice to Tous to bring on a motion at any time for the purpose of having the Anton Piller against it set aside or varied.
[23] Justice Layden-Stevenson also ordered that "all merchandise and related records, which were seized or delivered up by Tous Enterprises Ltd. on November 5, 2002, shall be detained in the custody of the Plaintiff's solicitors for a period of three weeks", that is, until December 9, 2002.
[24] Moreover, under Justice Campbell's Anton Piller Order, Universal had special obligations because of the very extraordinary nature of an Anton Piller Order which allows seizure for the purpose of preserving evidence at trial.
[25] Under that order, Universal's solicitors are obligated to ensure that a list is made of all of the merchandise, related equipment and records that are seized or delivered up. There is also an obligation upon plaintiff's solicitors to retain custody of the seized goods or, alternatively, deposit the seized goods with the Registry of this Court for safekeeping.
[26] In the circumstances, and I stress again that Universal consented to Justice Pinard's order after it discontinued its Anton Piller proceedings in this Court the previous day, was obligated to return the seized goods to Tous within a matter of days and no reasonable justification has been advanced by Universal why the return of the seized goods could not be accomplished in a very short delay.
[27] It is no excuse the bailiff in Vancouver may not have identified the seized goods in a properly segregated way. He is under Universal's control.
[28] It is no excuse for Universal or Mr. Katebian, who was apparently in Vancouver when the executions of the Anton Piller Order took place on November 4 and 5, 2001, did not have a copy of the list of seized goods from Tous. Its solicitors had a copy.
[29] No satisfactory explanation was given to me why the seized goods found their way into Universal's warehouse in the Toronto area thereby making the return that much more tardy and seemingly in contravention of Justice Layden-Stevenson's custody order.
(ii) Mr. Katebian
[30] I do not think Mr. Katebian's conduct reaches the level of interference with justice as expressed in Velmet Oy, supra. He did not knowingly aid and abet Universal to disobey Justice Pinard's order. All of his actions are consistent in attempting to effect the return of the goods. The problem he faced was not of his making. He could not get his hands on the list of seized goods which was necessary because the bailiff in Vancouver had not segregated the seized goods from other goods also seized.
(b) Penalty
[31] In Lyons Partnership, L.P. v. MacGregor (2000), 5 C.P.R. (4th) 157, I summarized some of the factors which should guide the Court in assessing a penalty for contempt of court. They include: the gravity of the contempt, deterrence of similar conduct, any profit made from the contemptuous conduct, mitigating factors such as good faith or apology, and the respondent's past conduct.
[32] As an appropriate penalty, Universal seeks a fine of between $2,500 and $5,000. In addition, it asks for its costs of the hearing before me on a solicitor-client basis, fixed immediately and payable within four days. Since Justice Rouleau's order of January 13, 2003, fixing a fee of $1,500 in respect of the ex parte appearance before him, counsel for Tous estimates solicitor-client fees and disbursements amounting to $5,200 excluding the appearance before me.
[33] In balancing the factors which must be taken into account in assessing an appropriate fine, I find the following factors are in Universal's favour:
(1) Justice Pinard's order has been substantially complied with and steps had been taken before the contempt proceedings were launched to effect compliance thus exhibiting some good faith on Universal's part;
(2) the evidence before me does not establish Universal or Mr. Katebian deliberately flaunted Justice Pinard's order. Rather, I think the evidence establishes Universal and Mr. Katebian did not place sufficient importance in achieving compliance with Justice Pinard's order; certainly before and during Mr. Katebian's vacation, they were nonchalant about compliance;
(3) this is not the type of case where Universal made a profit or financial advantage by not complying;
(4) the value of the goods involved is not substantial;
(5) Mr. Katebian apologized to the Court and to Tous.
[34] Weighing against Universal are the following elements:
(1) Justice Pinard's order was breached and there is no justification for non-compliance;
(2) the circumstances behind Justice Pinard's order do not favour Universal. The subject goods were seized under an ex parte Anton Piller Order obtained by Universal. Rather than pursuing against Tous, Universal abandoned its Anton Piller Order when Tous indicated it was moving to set aside that order. It was as a result of abandoning that proceeding that Universal agreed to return the seized goods to Tous forthwith;
(3) deterrence is an important element in this case. A signal must be given to those who obtain ex parte Anton Piller Orders that the letter of all court orders connected with the initial grant of an Anton Piller Order must be complied with even if abandoned subsequently. A factor aggravating or contributing to non-compliance by Universal is the fact the stringent conditions surrounding custody of goods seized under Anton Piller Orders were not fully complied with.
[35] In my view, the weighing of these factors favours the assessment of a fair and reasonable fine at the upper end of the range recommended by Tous' counsel. I set that fine at $4,000.00 payable to the Court within fifteen (15) days.
[36] I now deal with the request by Tous for solicitor-client costs in connection with the proceeding before me, appreciating that Justice Rouleau fixed at $1,500.00 costs payable to Tous in the proceeding before him and recognizing what Justice MacKay said in Dimatt Investments, supra,:
In addition to imposing fines, I ordered that reasonable costs, on a solicitor and client basis be awarded to the plaintiff. This accords with normal practice in a successful application for an Order finding contempt, ensuring that the role of the party acting to support compliance with an Order of the Court does not result in undue costs for the applicant. In a number of recent cases in this Court costs awarded on that basis have been set at a fixed amount, but since there was no evidence of the costs actually incurred by the plaintiff and thus of what might be considered reasonable in this case, I declined to fix the amount in the expectation that reasonable costs on a solicitor and client basis would be agreed upon, or failing agreement could be taxed. [emphasis mine]
[37] I am of the view that, in this particular case, solicitor-client costs should not be awarded to Tous and thus circumstances exist to warrant an exception to the general rule referred to by Justice MacKay in Dimatt, supra.
[38] By the time this matter was heard by me, the seized goods had been returned by Universal and had been in Tous' possession for approximately three weeks. It is true there are some cases unaccounted for and Tous has some jars of Okra that were not seized by Universal. Tous is pursuing Universal for costs and damages arising out of the execution of the Anton Piller Order and presumably an accounting will take into account what is missing and what is extra. In addition, five or six jars were damaged when received by Tous which will be covered in Tous' damage and cost proceedings.
[39] I am not satisfied this contempt hearing was necessary to achieve compliance with Justice Pinard's order. As noted, Universal was already taking steps to achieve compliance albeit those steps were taken late. Tous knew the fact of return of their seized goods in early January but I give weight to Tous' submission this breach of Justice Pinard's order may have already occurred by then.
[40] By January 10, 2003, the goods had been shipped back to Tous and Tous knew this but I accept that the pressure put on by Tous' solicitors on Universal probably encouraged Universal's return of the goods.
[41] As noted, by January 20, 2003, Tous had substantially received all of the seized goods with the exceptions noted.
[42] In my view, in line with Justice MacKay's reasoning in Dimatt, supra, enforcement of a Court order taken for the enforcement of private rights in a private law action is legitimate up to a point.
[43] However, the break-point for solicitor-client costs in addition to penalty, will depend on the circumstances. In this case, an award of solicitor-client costs would be a disproportionate cost upon Universal.
[44] I estimate Tous' solicitor-client costs for the hearing of this contempt proceeding, based on the information received during the hearing from Tous' counsel, to be $6,400.00. I fix the costs payable by Universal to Tous at $3,200.00 payable within fifteen (15) days.
[45] For all of the above reasons, I find Universal guilty of contempt of Justice Pinard's December 10, 2002 order. I assess a fine against Universal at $4,000.00, payable to this Court within fifteen (15) days of the date of this order. I assess all costs and disbursements on Tous' account of this hearing at $3,200.00 payable by Universal to Tous within fifteen (15) days of the date of this order.
"François Lemieux"
J U D G E
OTTAWA, ONTARIO
APRIL 17, 2003
FEDERAL COURT OF CANADA
TRIAL DIVISION
NAMES OF COUNSEL AND SOLICITORS OF RECORD
DOCKET: T-1706-02
STYLE OF CAUSE: Universal Foods Inc. v. Hermes Foods Importers Inc.
et al
PLACE OF HEARING: Vancouver, British Columbia
DATE OF HEARING: February 14, 2003
REASONS FOR Order : Lemieux, J.
DATED: April 17, 2003
APPEARANCES:
Mr. Colin Brown FOR PLAINTIFF
Mr. Paul Smith FOR DEFENDANT, TOUS ENTERPRISES LTD.
SOLICITORS OF RECORD:
Thomas McPherson & Associates FOR PLAINTIFF
Aurora, Ontario
Paul Smith Intellectual Property Law FOR DEFENDANT, TOUS
Vancouver, British Columbia ENTERPRISES LTD.