Date: 19980219
Docket: T-323-97
BETWEEN:
HAVANA HOUSE CIGAR & TOBACCO MERCHANTS LTD.
and EMPRESSA CUBANA DEL TABACO trading as
CUBATABACO and HABANOS S.A.
Plaintiffs
- and -
MARINO NAEINI carrying on business as
PACIFIC TOBACCO, PACIFIC CIGARS and
PACIFIC TOBACCO & CIGARS and
OREX COMMUNICATIONS LTD. carrying on business as
PACIFIC TOBACCO & CIGARS, PACIFIC TOBACCO and
PACIFIC CIGAR and TOBACCO CORP. carrying on business as
PACIFIC CIGAR and PACIFIC TOBACCO and
FARAH KASHEFI, carrying on business as
PACIFIC TOBACCO and PACIFIC TOBACCO & CIGARS and
ASA CIGAR CONNOISSEUR CORP.,
carrying on business as CIGAR CONNOISSEURS
Defendants
Heard at Toronto, Ontario, February 12, 1998.
Order delivered at Winnipeg, Manitoba, February 19, 1998.
REASONS FOR ORDER BY: THE HONOURABLE MR. JUSTICE ROTHSTEIN
Date: 19980219
Docket: T-323-97
BETWEEN:
HAVANA HOUSE CIGAR & TOBACCO
MERCHANTS LTD., EMPRESSA CUBANA DEL TABACO
trading as CUBATABACO and HABANOS S.A.
Plaintiffs
- and -
MARINO NAEINI carrying on business as
PACIFIC TOBACCO, PACIFIC CIGAR and PACIFIC TOBACCO &
CIGARS and OREX COMMUNICATIONS LTD.
carrying on business as PACIFIC TOBACCO & CIGARS,
PACIFIC TOBACCO and PACIFIC CIGAR, and PACIFIC CIGAR AND
TOBACCO and FARAH KASHEFI, carrying on business as PACIFIC CIGAR and PACIFIC TOBACCO and PACIFIC TOBACCO & CIGARS and ASA CIGAR
CONNOISSEUR CORP., carrying on business as CIGAR CONNOISSEURS
Defendants
REASONS FOR ORDER
[Delivered from the Bench at Toronto,
February 12, 1998, as edited]
ROTHSTEIN, J.:
[1] This is the second application for an interlocutory injunction in this matter. The first application was dismissed by Reed J. by order dated August 1, 1997. In coming to her decision, Reed J. identified a number of deficiencies in the plaintiffs' evidence respecting the issue of irreparable harm. The plaintiffs have now returned with this second application with evidence which they say meets the deficiencies pointed out by Reed J.
[2] The plaintiffs' evidence of irreparable harm appears in the affidavits of Abel Gonzalez Ortego, Marketing Director of the plaintiff Havana House and John Broen, Vice President of Rothmans Benson & Hedges Inc. I quote from Mr. Ortego's affidavit, paragraphs 54 (a) and (b):
| 54. . . . |
| (a) Because of the inferior nature of the counterfeit Cuban cigars, members of the public who purchase and/or smoke these cigars may be offended by the flavour and poor quality and never purchase another Cohiba, Montecristo, Partagas or Romeo y Julieta or other Cuban cigar. As we do not know how many of the counterfeit cigars are sold, or to whom, it is impossible to calculate the damages that is caused by their continued importation and sale in Canada; |
| (b) With regard to the counterfeit black market cigars, the problem is different but the result is the same. Because genuine Cuban cigars are perishable goods, counterfeit black market cigars deteriorate once they are taken from the controlled, high quality manufacturing and distribution chain of the Plaintiffs. The result is that the consumer again gets a cigar of inferior quality which he or she believes to be of the highest quality, as promised by the Plaintiffs. As with the counterfeit cigars, the Plaintiffs have no way of knowing how many or to what extent the market in Canada is damaged by these inferior cigars. The public believes and is led to believe by the Defendants that its counterfeit and counterfeit black market cigars are just like the genuine Cuban cigars bearing the Plaintiffs' Trade-Marks when, in fact, that is not the case. The harm caused by such activities is real but incalculable. |
[3] In paragraphs 12 and 13 of his affidavit, Mr. Broen states:
| 12. As with any counterfeit product, the quality of counterfeit cigars is often inferior (or even worse) compared to that of the genuine product. Based on my experience in the cigar and cigarette industry and the tobacco business generally, one of the greatest difficulties with counterfeit product, is that the inexperienced purchaser believes he or she has purchased and is consuming the real thing. The consumer is encouraged in this belief by the unscrupulous or unknowing retailer and the illicit use of well known trade-marks. As is the case with undifferentiated consumer product categories, one bad experience with counterfeit product can result in the consumer being turned off that product brand forever. Unfortunately, there is no way for the owner and distributor of the genuine product to know when this occurs. Moreover, one disgruntled consumer can affect the purchasing choices and habits of numerous other consumers by word of mouth after his or her single bad experience. Numerous sales can be lost as a result. The extent of the cost of such counterfeit experiences to the owner of the brand and its distributors are incalculable because of their very nature. |
| 13. Based on my experience in the tobacco industry, once customers are lost in this fashion, it is extremely hard (if not impossible) to attract them to the genuine product simply because they believe they smoked the genuine product and it was a distasteful and unhappy experience. |
[4] This evidence is to the effect that if the defendants are not enjoined from selling counterfeit cigars as if they were genuine cigars with respect to which the plaintiffs have trade-marks, members of the consuming public may be offended by poor flavour or quality and never again purchase a genuine cigar of that type. The plaintiffs say this is evidence of lost sales and damage to their goodwill which are incalculable.
[5] The critical problem with this evidence is that it is speculative. There is no evidence of any complaint about counterfeit cigars purchased from the defendants because of their poor quality or flavour. There is evidence from the plaintiffs' investigator about the colour, bands, wrapper quality and other features of some of the defendants' cigars, but there is no evidence from anyone who has smoked one of those cigars. I do not suggest the plaintiffs are required to conduct a search for members of the consuming public who have smoked the defendants' cigars and have been dissatisfied. However, such evidence might have been expected from other retailers who, when they attempted to sell genuine cigars, were faced with complaints about quality and flavour of counterfeit cigars bearing the plaintiffs' trade-marks purchased from the defendants. In her decision, Reed J. was of the view that evidence of retailers with close connections to the plaintiffs was somewhat suspect. However, if those retailers obtained details of quality and flavour complaints from customers with the identity of those customers, such evidence would have more cogency. No such evidence was forthcoming.
[6] Plaintiffs' counsel referred to certain evidence before Reed J., in particular an affidavit of Aaron Van Pykstra, an authorized Havana House retailer. Before Reed J., competitors of the defendants such as Mr. Van Pykstra, alleged that they did receive complaints from consumers. However, the complaints related to why their prices were high in comparison to the defendants' prices. If anything, this evidence would suggest that consumers did not consider there was any difference in quality between the plaintiffs' and defendants' cigars and that the price difference was unjustified by quality difference.
[7] On the other hand, there was evidence from John Trifoli, an expert in the cigar trade and an independent witness, that he had purchased inferior quality cigars sold by the plaintiff Havana House. In his affidavit, he states at paragraph 3:
| 3. The foregoing characteristics may be used to distinguish counterfeit cigars from genuine cigars. However, those characteristics vary significantly amongst cigars sold by the Plaintiff Havana House Cigar & Tobacco Merchants Ltd. ("Havana House") of Toronto. I have for example, seen cigars originating from Havana House that are of an inferior quality based on the foregoing characteristics, so that I would have considered them to be counterfeit cigars, had they not originated from Havana House. My experience is that low quality cigars have in recent times been distributed by Havana House more frequently than in the past. However, as an agricultural, hand-made product, Cuban cigars have always varied in quality from one box to another. |
Plaintiffs attempted to impeach this evidence by saying that Mr. Trifoli really did not know that the cigars came from Havana House, but he is an independent witness and I accept his evidence as given.
[8] There is other evidence of variation in quality in Cuban cigars generally. The plaintiffs attempted to distinguish high-end cigars from this quality variation. Nonetheless, the evidence of Dr. Paul Devlin, a cigar connoisseur and customer of the defendants, indicates that such variation in quality does appear even in high-end cigars.
[9] There are other difficulties with this evidence but I need go no further. The evidence that the plaintiffs have suffered or will suffer a loss of sales and goodwill due to the inferior quality or flavour of counterfeit cigars bearing the plaintiffs' trade-marks sold by the defendants is insufficient. Irreparable harm is not proven.
[10] There is a further aspect to this case that requires comment. The plaintiffs' action was started on February 26, 1997 almost one year ago. The plaintiffs made an application for summary judgment that was adjourned sine die to allow the first interlocutory injunction application to proceed quickly. The adjournment order provided that the application was to be brought back on at the request of the plaintiffs after the decision of Reed J. on the first interlocutory injunction application. The plaintiffs have not attempted to reactivate that application, except informally in a conference call with the Court a few weeks ago when discussing the defendants' motion for summary judgment which was filed recently. The plaintiffs have taken steps to add some defendants to the style of cause arising from comments by Reed J. They have also appealed the order of Reed J. Of course, they have also brought on this application. However, there has been no exchange of affidavits of documents and no examinations for discovery or any other significant substantive step toward moving this matter on for trial although one year has elapsed since the filing of the statement of claim. The plaintiffs seem to have focussed their resources and attention on obtaining interlocutory relief rather than expediting the final resolution of the matter.
[11] After receiving a negative decision on their first interlocutory injunction application, one would think that if the plaintiffs had a serious case to pursue and are suffering harm with the passage of time, whether irreparable or not, they would have attempted to move the case forward to trial with expedition. Plaintiffs' counsel filed a letter detailing the activity on the matter. The information provided by counsel confirms that the case has moved forward at a rather relaxed pace.
[12] An interlocutory injunction is an extraordinary remedy. It is not to be viewed as an end in itself (although sometimes the granting of an interlocutory injunction will end a matter). Therefore, when an interlocutory injunction is sought long after an action is commenced, the conduct of the plaintiffs in moving the matter on to trial will be relevant. The Court will take a dim view of a second interlocutory injunction application when a plaintiff has not aggressively been advancing the case toward trial. A party is ill-advised to keep returning to the Court for pre-trial relief in such circumstances.
[13] The interlocutory injunction application is dismissed. Costs are awarded to the defendants in the sum of $10,000 inclusive of disbursements in any event of the cause and payable forthwith.
"Marshall Rothstein"
J U D G E
Winnipeg, Manitoba
February 19, 1998
FEDERAL COURT OF CANADA
TRIAL DIVISION
NAMES OF COUNSEL AND SOLICITORS OF RECORD
COURT NO.: T-323-97
STYLE OF CAUSE:
HAVANA HOUSE CIGAR & TOBACCO MERCHANTS LTD. and EMPRESSA CUBANA DEL TABACO trading as CUBATABACO and HABANOS S.A.
- and -
MARINO NAEINI carrying on business as PACIFIC TOBACCO, PACIFIC CIGARS and PACIFIC TOBACCO & CIGARS and OREX COMMUNICATIONS LTD. carrying on business as PACIFIC TOBACCO & CIGARS, PACIFIC TOBACCO and PACIFIC CIGAR and TOBACCO CORP. carrying on business as PACIFIC CIGAR and PACIFIC TOBACCO and FARAH KASHEFI, carrying on business as PACIFIC TOBACCO and PACIFIC TOBACCO & CIGARS and ASA CIGAR CONNOISSEUR CORP., carrying on business as CIGAR CONNOISSEUR
PLACE OF HEARING: Toronto, Ontario
DATE OF HEARING: February 12, 1998
REASONS FOR ORDER OF THE COURT: The Honourable Mr. Justice Rothstein
DATED: February 19, 1998
APPEARANCES:
Mr. M.B. Fraleigh Interested Party
Kenneth D. McKay for the Plaintiffs
Timothy M. Lowman
Michael D. Manson
Brian Kingwell for the Defendants
SOLICITORS OF RECORD:
McCarthy, Tétrault
Suite 4700, Toronto Dominion Bank Tower
Toronto Dominion Centre
Toronto, Ontario Interested Party
M5K 1E6
Sim, Hughes, Ashton & McKay
330 University Avenue, 6th floor
Toronto, Ontario
M5G 1R7
for the Plaintiffs
Smart & Biggar
Box 11560, Vancouver Centre
650 West Georgia Street, Suite 2200
Vancouver, B.C.,
V6B 4N8 for the Defendants
FEDERAL COURT OF TRIAL
Date: 19980219
Docket: T-323-97
BETWEEN:
HAVANA HOUSE CIGAR & TOBACCO MERCHANTS LTD. and EMPRESSA CUBANA DEL TABACO trading as CUBATABACO and HABANOS S.A.
Plaintiffs
- and -
MARINO NAEINI carrying on business as PACIFIC TOBACCO, PACIFIC CIGARS and PACIFIC TOBACCO & CIGARS and OREX COMMUNICATIONS LTD. carrying on business as
PACIFIC TOBACCO & CIGARS, PACIFIC TOBACCO and PACIFIC CIGAR and TOBACCO CORP. carrying on business as PACIFIC CIGAR and PACIFIC TOBACCO and FARAH KASHEFI, carrying on business as PACIFIC TOBACCO and PACIFIC TOBACCO & CIGARS and ASA CIGAR CONNOISSEUR CORP., carrying on business as CIGAR CONNOISSEURS
Defendants
REASONS FOR ORDER