OTTAWA, Ontario, February 1st, 2006
PRESENT: THE HONOURABLE MR. JUSTICE TEITELBAUM
BETWEEN:
and
AND BETWEEN:
EDGE COMBAT FITNESS INC.
Plaintiff by Counterclaim
and
KRAV MAGA ENTERPRISES, LLC
Defendant by Counterblaim
REASONS FOR ORDER AND ORDER
[1] This is an appeal from an Order of Prothonotary Milczynski dated December 13, 2005 granting leave to the Plaintiff Krav Maga Enterprises, LLC ("Krav Maga") to amend its Statement of Claim to add Moni Aizik as a personal Defendant. (Although this motion of appeal is brought by Mr. Aizik, I refer to him as the Defendant, and Krav Maga as the Plaintiff.)
[2] The main action concerns alleged infringement of the Plaintiff's registered trade-mark KRAV MAGA that is used in association with martial arts training services. The Plaintiffs allege that the Defendants have performed and advertised and sold related wares with the KRAV MAGA trade-mark.
[3] The Statement of Claim issued September 2, 2005 named Edge Combat Fitness Inc. as a Defendant. The Plaintiff asserts that only after issuing and serving its Statement of Claim did it discover additional instances of infringement by Mr. Aizik and Combat Survival Inc.
[4] On December 6, 2005, Combat Survival Inc. agreed to be added as a party. Prothonotary Milczynski then granted leave to add both Combat Survival Inc. and Moni Aizik personally. This appeal contests the Prothonotary's decision to add Mr. Aizik in his personal capacity.
[5] In her December 13, 2005 decision, Prothonotary Milczynski held that:
I am satisfied on the motion material filed, that the Plaintiff has plead sufficient material facts alleging Mr. Moni Aizik was acting in his personal capacity in engaging in the alleged infringing activities, and that his course of conduct may constitute the deliberate, willful and knowing pursuit of a course of conduct that was likely to constitute infringement (Order, in Edge Combat Fitness Inc.'s Motion Record, at page 5).
[6] Leave was therefore granted to amend the Statement of Claim to add Moni Aizik as an individual Defendant.
MONI AIZIK'S SUBMISSIONS:
Standard of Review
[7] It is submitted that a Prothonotary's Order should not be disturbed unless the questions raised in the motion are vital to the final issue of the case, or the order is based on an incorrect principle or a misapprehension of the facts and is therefore clearly wrong (McIntosh et al. v. Society of Composers, Authors and Music Publishers of Canada Ltd. (2004), 30 C.P.R. (4th) 257 at para. 12 (F.C.A.) ["McIntosh"]).
[8] It is argued that the addition of a defendant is vital to the resolution of the case, and that on such a motion the Judge should exercise the Prothonotary's discretion de novo (McIntosh, supra, at paras. 12, 14).
The Plaintiff should be refused leave to amend its Claim to add Mr. Aizik
[9] The Defendant argues that the Plaintiff's proposed amendments are conclusions that are unsupported by sufficient material facts, and therefore do not disclose a reasonable cause of action. It is submitted that purported evidence of Mr. Aizik's conduct cannot be considered by the Court in an application for leave to amend.
[10] The Defendant argues that the allegations of infringement against Mr. Aizik as a personal Defendant are without merit. It is argued that there is a difference between an allegation that a personal defendant is liable for own acts, and for being a directing mind of a corporate party (Windsurfing International Inc. et al. v. Novaction Sports Inc. et al., (1987), 18 C.P.R. (3d) 230 at p.5 ["Windsurfing International"]). It is asserted that the Plaintiff has failed to show as required that Mr. Aizik's alleged infringing activities were independent or distinguishable from the activities of the corporate Defendants (Windsurfing, supra).
[11] It is submitted that a Plaintiff cannot rely on a collective allegation against multiple defendants to substantiate personal allegations (Windsurfing, supra at p.3-5). It is argued that in this case the Plaintiff has failed to plead specific material facts indicating that Mr. Aizik acted in his personal capacity in infringing the Plaintiff's trade-mark rights.
[12] The Defendant submits that in order to find an officer or director personally liable, the officer or director must have engaged in the willful and knowing pursuit of a scheme that constituted infringement and that reflected an indifference to the risk of it (Mentmore v. National Merchandise Mfg. (1978), 40 C.P.R. (2d) 164 at 174 ["Mentmore"]). It is argued that material facts must be plead to put the personal defendant on notice of the kind of control over the company or the kind of personal conduct that is alleged (Katun Corp. v. Technofax Inc. (1988), 22 C.P.R. (3d) 269 at p.2-3 (QL)). The Defendant submits that the Plaintiff has failed to particularize the circumstances that would lead to a conclusion that the director or officer is engaged in deliberate, willful and knowing pursuit of a course of conduct that is likely to constitute infringement or reflects an indifference to the risk of it (Aktiebolag v. Dana Douglas Medical Inc. [1994] F.C.J. No. 1832 at para. 5; Painblanc v. Kastner (1994), 58 C.P.R. (3d) 502 at p.2 (QL)).
[13] It is argued that the actions of corporate officers must be pleaded, that there must be an allegation that the individual ordered or authorized the impugned acts, that liability attaches only when the director's own behaviour is tortious or when the corporation is used as a cloak for the personal activities of the director. The Defendant submits that being a director or officer is not sufficient to allow the addition of personal defendants. (Dimplex North Americal Ltd. v. Globaltec Distributors Ltd., [2005] F.C.J. No. 368 at para. 13; Sunsolar Energy Technologies (S.E.T.) Inc. v. Flexible Solutions International, Inc., [2004] F.C.J. No. 1459 at paras. 7, 8, 21-23).
[14] The Defendant asserts that the Plaintiffs have failed to provide the requisite material facts. They have not provided specific acts showing how Mr. Aizik is the guiding mind of the corporate Defendants. They have not pleaded any facts establishing the relationship between Mr. Aizik and the corporate Defendants, and assert that Mr. Aizik is not alleged to be an officer, director, shareholder or even an employee of the corporate Defendants. They conclude that no specific circumstances have been pleaded from which it would be reasonable to conclude that Mr. Aizik's intent has not been to direct manufacturing or selling, but rather is the deliberate, willful and knowing pursuit of a course of conduct that is likely to constitute infringement.
KRAV MAGA'S SUBMISSIONS:
[15] The Plaintiff asserts that an amendment in this case is permitted. Amendments that disclose a triable issue should be granted in the absence of prejudice to the opposing party (Rule 75(1) of the Federal Court Rules). The Plaintiff also asserts that it is entitled to add a new cause of action if the cause arises out of substantially the same facts as the cause of action in respect of which the plaintiff has already claimed relief in the action (Rules 76 and 201 of the Federal Courts).
[16] In its Written Representations and oral submissions, Krav Maga alleges that on or around October 6, 2005, Moni Aizik sent out an e-mail message with attached electronic flyers advertising public training seminars taught by Mr. Aizik in association with the KRAV MAGA trade-mark. The e-mail refers to a website www.combatsurvival.com. The Plaintiffs assert that the listed administrative contact for the site, a certain "moni issac", is actually Moni Aizik. The listed registrant's address is believed to be the home of Mr. Aizik.
[17] The Plaintiff claims that the Ontario Corporation Profile Report for Combat Survival Inc., a corporate Defendant, is the home address of Mr. Aizik.
[18] Krav Maga therefore argues that Moni Aizik has carried out infringing activities in his personal capacity, and that he has deliberately, willfully and knowingly directed the corporate Defendants to perform infringing activities.
[19] The Plaintiff argues that amendment is permitted under such circumstances (Mentmore, supra; Iris, Le Groupe Visuel (1990) Inc. v. Trustus International Trading Inc.(2004), 36 C.P.R. (4th) 1 F.C.A.). It argues that Mr. Aizik cannot escape the consequences of his own tortious conduct, and may also be liable for infringement. The Plaintiff asserts that this is consistent with jurisprudence that holds that Directors and employees of corporations are responsible for their tortious conduct (ADGA Systems International Ltd. v. Valcom Ltd. (1999), 43 O.R. (3d) 101 (C.A.), application for leave to the SCC dismissed, [1999] S.C.C.A. No. 124).
[20] I believe that the Judge has the authority to exercise the Prothonotary's discretion de novo as the issue on this motion is vital to the resolution of the case. A de novo hearing may also be necessary given the lack of reasons provided in the Prothonotary's Order.
[21] In my view, there is no question that procedurally the Rules provide that the Plaintiffs may amend what is now their Amended Statement of Claim. The issue is whether Moni Aizik should also have been added as an individual defendant.
[22] The jurisprudence regarding adding individual defendants states that they should not be added unless it can be shown that the individuals made the tortious acts their own. The fact that an individual is a director or employee of a closely held corporation is insufficient to show that the individual made the tortious act his own (Mentmore, supra, at page 172).
[23] Justice Hugessen has also cautioned in Painblanc, supra, that "an action in law is not a fishing expedition and a plaintiff who starts proceedings simply in the hope that something will turn up abuses the court's process".
[24] The Plaintiff must be able to show that as an officer or director, Mr. Aizik willfully and knowingly pursued a course of conduct that was likely to constitute infringement or reflected an indifference to the risk of it. As Justice Le Dain noted in Mentmore, supra, at page 172, however, the individual action that gives rise to personal liability depends on the circumstances of each case:
What, however, is the kind of participation in the acts of the company that should give rise to personal liability? It is an elusive question. It would appear to be that degree and kind of personal involvement by which the director or officer makes the tortious act his own. It is obviously a question of fact to be decided on the circumstances of each case.
[25] The parties dispute whether the Plaintiff has provided sufficient factual support to merit the addition of Mr. Aizik as an individual plaintiff. In essence, the Plaintiff claims it has shown a sufficient nexus between Mr. Aizik and the allegedly infringing activities for one to infer that he had sufficient personal involvement to make the tortious act his own. The Defendant alleges that the laws of corporation should shield Mr. Aizik from being added as an individual Defendant since the Plaintiff has been unable to provide specific circumstances that would lead to a reasonable conclusion that Mr. Aizik's purpose is the deliberate, willful and knowing pursuit of a course of conduct that is likely to constitute infringement or reflected an indifference to the risk of it.
[26] In my view, although Mentmore, supra, requires that allegations of personal liability do not stem merely from the fact that the individual defendant is a Director or officer of a closely held corporation, this is not a case where such allegations have been made simply because Mr. Aizik is a Director or officer. Rather, it appears from the information provided by the Plaintiffs that Mr. Aizik carried out the allegedly infringing activities. I believe that the present circumstances can therefore be likened to the recent case of Fibremann Inc. v. Rocky Mountain Spring (Icewater 02) Inc., [2005] F.C.J. No. 1238; 2005 FC 977 (QL) ["Fibremann"]. In Fibremann Justice Snider distinguished the decision in Mentmore as follows:
Mr. Kwok's situation is not the same as was before the Court of Appeal in Mentmore, where an officer of a company was found not to be personally liable for the actions of the company in infringing a patent. In that case, both the trial judge and the reviewing Court concluded, at para. 24, that the fact that " '[the officer] imparted the practical, business, financial and administrative policies and directives which ultimately resulted in the assembling and selling of some goods ... which I have found infringed the Plaintiff's rights' was not by itself sufficient to give rise to personal liability". In this case, Mr. Kwok's actions went far beyond imparting direction to employees. He wrote the letters that induced third parties to deal with Rocky Mountain and that advised customers that Rocky Mountain was merely a "name change". Other allegations in the statement of claim describe similar events that were carried out directly by Mr. Kwok. In each case, it was Mr. Kwok who carried out the activities which led to the alleged infringement of the trade-mark. Evidence produced for both the interim injunction and the motion for default judgment support these allegations. The only reasonable conclusion in this case is that Mr. Kwok personally should bear responsibility for the infringement and the passing off. I am satisfied that Mr. Kwok's actions were a deliberate, wilful and knowing pursuit of a course of conduct that was likely to constitute infringement and passing off or reflected an indifference to the risk of it. (Fibremann, supra, at para. 32.
[emphasis added]
[27] Similarly, in the present case, Mr. Aizik did not merely impart information. He sent e-mails, is the instructor of the martial arts, and is the one who carries out the activities that lead to the alleged infringement of the trade-mark. The Plaintiff has also linked Mr. Aizik to the Combat Survival website.
[28] Admittedly, Mr. Aizik's e-mail flyers were sent out from his Combat Survival e-mail address, and he signed the e-mail as Founder & Chief Instructor of Combat Survival Commando Krav Maga. It could be argued that Mr. Aizik is simply carrying out the activities as an employee, but that he has not crossed the line into deliberate, willful intent as required by the test in Mentmore.
[29] At this stage of the proceedings, I believe that the Prothonotary correctly determined that the Plaintiff, "has plead sufficient material facts alleging Mr. Moni Aizik was acting in his personal capacity" (Order, supra, at page 5). The Plaintiff has presented information that would require a trial judge to consider whether it would be appropriate in this case to lift the corporate veil. There is at least a genuine issue for trial as to whether Mr. Aizik should be held personally liable for infringement.
[30] I do not believe that this was a mere fishing expedition on the part of the Plaintiff; rather, the Plaintiff provided the Court with sufficient evidence of activities undertaken by Mr. Aizik. I agree with Justice Pelletier's comments that, "the principle underlying Le Dain's comment is that the courts will not allow a corporation to be used as an instrument of fraud" (Halford v. Seed Hawk Inc., [2004] F.C.J. No. 189; 2004 FC 88 (QL)at para. 330). This determination should be left to the trial judge, and the individual Defendant should remain a party in this action in case it is held that he has improperly hidden behind a corporate veil.
[31] In this case, I believe that the Prothonotary was correct in finding that the Plaintiff showed sufficient material facts alleging Mr. Moni Aizik was acting in his personal capacity in engaging in the alleged infringing activities, and that his course of conduct may constitute the deliberate, willful and knowing pursuit of a course of conduct that was likely to constitute infringement. In my view, the Court should not interfere with the Prothonotary's Order.
ORDER
THIS COURT ORDERS that for the above-stated reasons, the appeal is dismissed with costs.
JUDGE
FEDERAL COURT
NAME OF COUNSEL AND SOLICITORS OF RECORD
DOCKET: T-1506-05
STYLE OF CAUSE: Krav Maga Enterprises, LLC v. Edge Combat Fitness Inc.
PLACE OF HEARING: TORONTO, Ontario
DATE OF HEARING: January 31, 2006
REASONS FOR ORDER: TEITELBAUM, J.
APPEARANCES:
| Christopher Tortorice
|
|
| William Regan
|
SOLICITORS OF RECORD:
| Bereskin & Parr Barristers & Solicitors
|
|
| Ridout & Maybee Barristers & Solicitors
|