MacDonald et al. v. Vapor Canada Ltd.

MacDonald et al. v. Vapor Canada Ltd.
Collection
Supreme Court Judgments
Date
1976-01-30
Report
[1977] 2 SCR 134
Judges
Laskin, Bora; Martland, Ronald; Judson, Wilfred; Spence, Wishart Flett; Pigeon, Louis-Philippe; Dickson, Robert George Brian; Beetz, Jean; de Grandpré, Louis-Philippe
On appeal from
Federal Court of Appeal
Subjects
Constitutional law
Decision Content
Supreme Court of Canada
MacDonald et al. v. Vapor Canada Ltd., [1977] 2 S.C.R. 134
Date: 1976-01-30
John A. MacDonald and Railquip Enterprises Ltd. Appellants;
and
Vapor Canada Limited Respondent;
and
Attorney General for Canada, Attorney General for Ontario and Attorney General for Quebec Intervenors.
1975: February 25, 26 and 27; 1976: January 30.
Present: Laskin C.J. and Martland, Judson, Spence, Pigeon, Dickson, Beetz and de Grandpré JJ.
ON APPEAL FROM THE FEDERAL COURT OF APPEAL
Constitutional law—Federal Act dealing with dishonest trade practices and providing a civil remedy—Not within the powers of Parliament in relation to the criminal law, the regulation of trade and commerce or implementation of the obligations arising out of an international treaty—Legislation in relation to property and civil rights—Jurisdiction of the Federal Court—Trade Marks Act, R.S.C. c. T-10, ss. 7, 53 and 55—British North America Act, ss. 91(2) (27), 92(13), (16) and 101.
Appellant MacDonald worked for several years for respondent Vapor Canada, which was in the heating equipment business. While in respondent’s employ, MacDonald caused appellant Railquip Enterprises Ltd. to be incorporated and he has controlled Railquip at all relevant times. After ceasing to work for respondent, MacDonald submitted a tender in Railquip’s name to supply heaters. Respondent contends that, in order to do so, MacDonald made use of knowledge which he had acquired as an employee of respondent, and that he also used confidential information in breach of his contract of employment, contrary to s. 7(e) of the Trade Marks Act.
In the Trial Division of the Federal Court, respondent based its argument on s. 7(e) of the Trade Marks Act, obtaining an interlocutory injunction which restrained appellants from using or communicating to third parties confidential information or documents which appellant MacDonald had acquired while he was in respondent’s employment. Other conclusions of the injunction related to patent infringement and are not in issue before this Court. In its principal action respondent also sought relief by way of damages, an accounting of profits and delivery up of the allegedly misappropriated materials. The injunction was upheld by the Federal Court of Appeal with certain variations, since the Court considered that s. 7(e) was intra vires the Parliament of Canada. Hence the appeal to this Court. Appellants and the Attorneys General of Quebec and Ontario content that s. 7(e) is ultra vires the Parliament because it constitutes legislation concerned with property and civil rights, and the Federal Court did not have jurisdiction in the case.
Held: The appeal should be allowed.
Per Laskin C.J. and Spence, Pigeon, Dickson and Beetz JJ.: The Federal Court, being a Court established pursuant to s. 101 of the British North America Act, can only be endowed with such jurisdiction as flows from laws competently enacted by Parliament. It seems that s. 101 does not enable Parliament to set up a Court competent to deal with matters purely of civil right as between subject and subject. However, questions on the validity of ss. 7(e) 53 of the Unfair Competition Act would arise even if the provincial superior courts were charged with enforcement of these provisions.
Section 7(e) cannot be justified as legislation relating to the criminal law. Even though the federal criminal law power enables preventive legislation to be enacted, that does not in any way give encouragement to federal legislation which, in a situation unrelated to any criminal proceedings, would authorize independent civil proceedings for damages and an injunction. Although s. 115 of the Criminal Code provides a penalty for disobedience of a federal statute, it is really not possible to mount the civil remedy of s. 53 of the Trade Marks Act on the back of the Criminal Code. This section of the Criminal Code is merely a “default” provision and can certainly not be a base upon which to support the validity of a completely independent civil remedy to which the injured parties may have recourse.
Section 7(e), whether it is taken alone or as part of a limited scheme reflected by s. 7 as a whole, constitutes an overlaying or an extension of civil causes of action recognizable in the provincial courts and falling within provincial legislative competence. In the absence of any federal regulatory administration to oversee the prescriptions of s. 7, there is no basis in federal power to justify such legislation. It is not a sufficient peg on which to support the legislation that it applies every- where in Canada when there is nothing more to give it validity.
Section 7(e) cannot be based on federal jurisdiction with respect to patents and trade marks. The legislation has no generality. No administrative body is established and no criminal offence is created. The provision is not concerned with trade as a whole, nor does it establish a scheme of regulation. Therefore, the law cannot be justified under s. 91 (2) of the B.N.A. Act.
In the absence of an express declaration in the Trade Marks Act that the Act as a whole, including s. 7 or s. 7 itself, was enacted in implementation of the obligations of the International Convention for the Protection of Industrial Property (the Union Convention of Paris), it cannot be argued that there had been a valid exercise in this case of the federal treaty or convention implementing power, assuming such a power exists in the present case.
Per Martland, Judson and de Grandpré JJ.: At first sight, respondent’s argument that s. 7 (e) is a legislative measure enacted by Parliament pursuant to the power of Canada to sign treaties seems to have some merit. However, on close examination, it cannot be accepted for the simple reason that the Union Convention of Paris for the Protection of Industrial Property does not deal with unfair competition in the abstract but only in a context not found in the case at bar. One must read art. 10bis of the Convention which refers to unfair competition in the context of other articles, none of which deals with contractual relations between employers and employees.
[R. v. Hume, Consolidated Distilleries Ltd. v. Consolidated Exporters Corp. Ltd., [1930] S.C.R. 531 applied; The Kitchen Overall & Shirt Co. Ltd. v. Elmira Shirt and Overall Co. Ltd., [1937] Ex. C.R. 230; Good Humor Corp. of America v. Good Humor Food Products Ltd., [1937] Ex. C.R. 61; A.C. Spark Plug Co. v. Canadian Spark Plug Service, [1935] Ex. C.R. 57; Booth v. Sokulsky (1953), 13 Fox Pat. Cas. 145; Kellogg Company v. Helen Kellogg, [1941] S.C.R. 242; Goodyear Tire and Rubber Co. of Canada Ltd. v. R., [1956] SCR. 303; International News Service v. Associated Press (1918), 248 U.S. 215; A.L.A. Scheckter Poultry Corp. v. U.S. (1935), 295 U.S. 495; Corbeil v. Dufresne (1933), 40 R.L.N.S. 40; Giguère Automobile Ltée v. Universal Auto Ltd. (1941), 70 Que. Q.B. 166; Eagle Shoe Co. Ltd. v. Slater Shoe Co. Ltd. (1929), 46 Que. K.B. 121; Canadian Converters Co. Ltd. v. Eastport Trading Co. Ltd. (1968), 70 D.L.R. (2d) 149; Breeze Corp. v. Hamilton Stamp Clampings Ltd. (1961), 37 C.P.R. 153; Building Products Ltd. v. B.P. Canada Ltd. (1961), 21 Fox Pat. Cas. 130; Green-glass v. Brown (1962), 24 Fox Pat. Cas. 21; The Noshery Ltd. v. The Penthouse Motor Inn Ltd. (1969), 61 C.P.R. 207; Eldon Industries Inc. v. Reliable Toy Co. Ltd. (1965), 54 D.L.R. (2d) 97; Clairol International Corp. v. Thomas Supply & Equipment Co. Ltd., [1968] 2 Ex. C.R. 552; S. & S. Industries Ltd. v. Rowell, [1966] S.C.R. 419; Citizens Insurance Co. v. Parsons (1881), 7 App. Cas. 96; Attorney-General for Ontario v. Attorney-General for Canada, [1937] A.C. 405; Attorney-General for Ontario v. Attorney-General for Canada, [1896] A.C. 348; Attorney-General for Canada v. Attorney-General for Alberta, [1916] 1 A.C. 588; Hodge v. R. (1883), 9 App. Cas. 117; In Re Board of Commerce Act, [1922] 1 A.C. 191; Proprietary Articles Trade Association v. Attorney-General for Canada, [1931] A.C. 310; R. v. Eastern Terminal Elevator Co., [1925] S.C.R. 434; Reference re Natural Products Marketing Act, [1937] A.C. 377; Murphy v. C.P.R., [1958] S.C.R. 626; Shannon v. Lower Mainland Dairy Products Board, [1938] A.C. 708; Reference re the Ontario Farm Products Marketing Act, [1957] S.C.R. 198; Reference re Alberta Statutes, [1938] S.C.R. 100; Reference re the Natural Products Marketing Act, [1936] S.C.R. 398; Johnson v. The Attorney-General of Alberta, [1954] S.C.R. 127; Reference re the Dominion Trade and Industry Commission Act, 1935, [1936] S.C.R. 379; Attorney-General for Canada v. Attorney-General for Ontario, [1937] A.C. 326; Francis v. R., [1956] S.C.R. 618; In re The Regulation and Control of Aeronautics in Canada, [1932] A.C. 54. In re The Regulation and Control of Radio Communications in Canada, [1932] A.C. 304; References re The Weekly Rest in Industrial Undertakings Act, The Minimum Wages Act and The Limitation of Hours of Work Act, [1936] S.C.R. 461; Reference re Legislative Jurisdiction over Hours of Labour, [1925] S.C.R. 505, referred to.]
APPEAL from a decision of the Federal Court of Appeal[1] varying the interlocutory injunction granted by Walsh J. of the Federal Court[2]. Appeal allowed.
Malcolm E. McLeod and J. Nelson Landry, for the appellants.
G.F. Henderson, Q.C., and E. Binavince, for the respondent. G.W. Ainslie, Q.C., and W. Lefebvre, for the Attorney General of Canada.
J.D. Hilton, Q.C., for the Attorney General of Ontario.
Jean LeFrançois, for the Attorney General of Quebec.
The judgment of Laskin C.J. and Spence, Pigeon, Dickson and Beetz JJ. was delivered by
THE CHIEF JUSTICE—This appeal, brought here by leave given by the Federal Court of Appeal pursuant to s. 31(2) of the Federal Court Act, 1970 (Can.),c. 1, concerns three paragraphs of an interlocutory injunction order which, as varied by the Federal Court of Appeal upon an appeal thereto from the order as originally made by Walsh J. of the Federal Court, reads as follows:
Defendants John A. MacDonald and Railquip Enterprises Ltd. and each of them, their servants and agents and anyone on their behalf are restrained from
(1) Using in the business of Railquip Enterprises Ltd., or in any other business in which either of them may be in any way associated or concerned, either by communication to third persons or otherwise, any confidential information or knowledge acquired by reason of the employment with plaintiff of defendant MacDonald, or making any tenders for the manufacture or sale of products in respect of which such confidential information acquired by MacDonald is used or useful;
(2) Using in the business of Railquip Enterprises Ltd., or in any other business in which either of them may be in any way associated or concerned, any plans, specifications, reports, letters or other documents belonging to plaintiff acquired by reason of the employment with the plaintiff of defendant MacDonald or conniving with any employee of plaintiff to obtain any such plans, specifications; letters or other documents;
(3) Defendants John A. MacDonald and Railquip Enterprises Ltd. are required to deliver up forthwith to the plaintiff all plans, specifications, reports, letters and other documents belonging to the plaintiff that are in his or its possession as a result of having been acquired for use in the business of Railquip Enterprises Ltd. by reason of the employment with the plaintiff of the defendant MacDonald and all copies or reproductions of any such documents that are in his or its possession.
Two other paragraphs of the injunction, each relating to patent infrigement have not been challenged and are not in issue before this Court.
The action out of which the interlocutory injunction arose was brought in the Federal Court by the respondent complaining of patent infringement by a former employee, the personal appellant herein, and by the appellant Railquip, a company incorporated by and controlled by the personal appellant, and complaining also of unlawful disclosure, in breach of contract, of trade secrets and unlawful business use of such trade secrets (including certain plans, specifications and letters) to the damage of the respondent and contrary to honest industrial and commercial usage in Canada. Relief by way of damages, an accounting of profits and an injunction, and delivery up of the allegedly misappropriated materials, was sought in the action.
Unlike the proceedings before Walsh J., the main issue before the Federal Court of Appeal and before this Court is a constitutional one, involving the jurisdiction of the Federal Court, as a Court established pursuant to s. 101 of the British North America Act, to entertain the plaintiff’s claims for civil redress by way of damages and injunction and ancillary relief; and this issue in turn involves the question whether the statutory basis for such relief, under ss. 7(e), 53 and 55 (as amended by s. 64(2) of the Federal Court Act, 1970 (Can.), c. 1) of the Trade Marks Act, R.S.C. 1970,c. T-10 is one that the Parliament of Canada may prescribe.
It is trite law that the Federal Court, being a Court established pursuant to s. 101 aforesaid “for the better administration of the laws of Canada”, can only be endowed with such jurisdiction as flows from laws competently enacted by Parliament. In R. v. Hume, Consolidated Distilleries Ltd. v. Consolidated Exporters Corp. Ltd.[3], the point is well made by Anglin C.J.C. who said (at p. 535) that “while there can be no doubt that the powers of Parliament under s. 101 are of an overriding character when the matter dealt with is within the legislative jurisdiction of the Parliament of Canada, it seems equally clear that they do not enable it to set up a court competent to deal with matters purely of civil right as between subject and subject”. Over and above this, the question of validity of ss. 7(e) and 53 would arise even if it were the provincial superior courts that were charged with enforcement of the substantive provisions of s. 7(e). Legislation sought to be enforced in provincial courts must, of course, be legislation which it was competent for the enacting legislature to pass.
I would note at this point that if the conclusion be that s. 7(e) is valid federal legislation, competently committed to the Federal Court for its enforcement, I would not interfere with the determination of the courts below that, on the facts, the interlocutory injunction order in issue here was a proper one in the light of the prescriptions of s. 7(e).
The constitutional issue raised in this case, one of high importance as to the scope of federal legislative power, especially as it arises under s. 91(2) of the British North America Act, has brought the Attorneys-General for Canada, for Ontario and for Quebec into this case as intervenors, pursuant to Rules of Court governing notice of constitutional issues and opportunity for intervention. The Attorney-General for Canada supports the judgment in appeal but the Attorneys-General for Ontario and Quebec support the appelants’ contention that ss. 7(e) and 55 are ultra vires and that s. 53 must fall with them.
Proper perspective requires a reference to the whole of s. 7 and, indeed, to the scheme of the Trade Marks Act and to some legislative history. I reproduce here ss. 7, 53 and 55 before proceeding to examine their context and the constitutional issue arising upon the whole of the case. They are as follows:
7. No person shall
(a) make a false or misleading statement tending to discredit the business, wares or services of a competitor;
(b) direct public attention to his wares, services or business in such a way as to cause or be likely to cause confusion in Canada, at the time he commenced so to direct attention to them, between his wares, services or business and the wares, services or business of another;
(c) pass off other wares or services as and for those ordered or requested;
(d) make use, in association with wares or services, of any description that is false in a material respect and likely to mislead the public as to
(i) the character, quality, quantity or composition,
(ii) the geographical origin, or (iii) the mode of the manufacture, production or performance of such wares or services; or
(e) do any other act or adopt any other business practice contrary to honest industrial or commercial usage in Canada.
53. Where it is made to appear to a court of competent jurisdiction that any act has been done contrary to this Act, the court may make any such order as the circumstances require including provision for relief by way of injunction and the recovery of damages or profits, and may give directions with respect to the disposition of any offending wares, packages, labels and advertising material and of any dies used in connection therewith.
55. The Federal Court of Canada has jurisdiction to entertain any action or proceeding for the enforcement of any of the provisions of this Act or of any right or remedy conferred or defined thereby.
Section 7 of the Trade Marks Act is the first of five sections of the Act (ss. 7 to 11) that are subsumed under the sub-title “Unfair Competition and Prohibited Marks”. It stands alone, however, among those sections in not being concerned with trade marks or trade names. It alone gives any substance to the “Unfair Competition” portion of the sub-title. Section 7 had a forerunner in s. 11 of the Unfair Competition Act, 1932 (Can.),c. 38. That Act, like the present Trade Marks Act, which replaced it, was concerned with the regulation of the use of trade marks and with a scheme of registration and protection therefor; and although it contained a sub-title “Unfair Competition”, covering ss. 3 to 11 thereof, the only provision that related to unfair competition was s. 11. This section was in these words:
11. No person shall, in the course of his business,
(a) make any false statement tending to discredit the wares of a competitor;
(b) direct public attention to his wares in such a way that, at the time he commenced so to direct attention to them, it might be reasonably apprehended that his course of conduct was likely to create confusion in Canada between his wares and those of a competitor;
(c) adopt any other business practice contrary to honest industrial and commercial usage.
It is evident from a comparison of s. 7 of the present Trade Marks Act and s. 11 of the Act of 1932 that the former has expanded the acts proscribed by the latter and indeed has added in s. 7(c) and (d) provisions not found in s. 11. Section 7(e) differs from its predecessor equivalent s. 11(c) in three respects. It has added the words “do any other act” to what is proscribed, it has introduced the disjunctive in place of the conjunctive when referring to “honest industrial or commercial usage” and it has added the qualifying words “in Canada”. There is, however, a more significant difference between the old s. 11 and the present s. 7. There was no provision in the 1932 Act for civil enforcement of the proscriptions of s. 11 at the suit-of persons injured by their breach. There was, of course, provision there, as in the present Trade Marks Act, for enforcement of its trade mark provisions at the suit of an injured person. The provisions of s. 20 of the 1932 Act giving the then Exchequer Court of Canada “jurisdiction to entertain any action or proceeding for the enforcement of any of the rights conferred or defined by this Act” were not urged in this Court in this case as providing a civil remedy in support of s. 11 equivalent to that expressly ordained by s. 53 of the present Trade Marks Act in support of s. 7 as well as in support of other substantive provisions of the Act. I note, however, that in The Kitchen Overall & Shirt Co. Ltd. v. Elmira Shirt & Overall Co. Ltd.[4], Maclean P. looked upon s. 11 as giving “a statutory right of action for the same wrongs for which a remedy was given at common law in passing off cases”.
Section 11 has had but a modest exposure to judicial scrutiny. In only one of the few cases in which it was considered did its constitutionality come into question, and that was in Good Humor Corp. of America v. Good Humor Food Products Ltd.[5], a case involving alleged trade mark infringement. There Angers J. dealt with an objection that ss. 3, 7 and 11 of the Unfair Competition Act were ultra vires and that consequently the Exchequer Court had no jurisdiction to entertain the action. Sections 3 and 7 dealt with trade marks and trade names respectively and, as to those sections, the trial Judge was of opinion that they fell within federal competence under the trade and commerce power. He made no pronouncement as to s. 11 (despite what the headnote to the report says) because (to use his words, at p. 75) “section 11 applies to acts of unfair competition and has no relevance to the present case”.
In the other cases in which s. 11 was considered, the questions in them concerned the application of that provision in the various situations that were said to bring it into play. In A.C. Spark Plug Co. v. Canadian Spark Plug Service[6], it appeared to be the opinion of the Court that s. 11 did nothing more than codify the tort of passing off, and the same view was apparent in the Kitchen Overall case. The Spark Plug case concerned an alleged infringement of a registered trade mark and there was also an allegation of contravention of s. 11 of the Unfair Competition Act. Maclean J. concluded his reasons for dismissing the action as follows (at p. 69):
Inasmuch as I find that there has been no infringement and no passing off, I cannot see how it can be said that the business carried on by any one of the defendants offends sec. 11 of the Act or is contrary to honest industrial and commercial usage.
The Kitchen Overall case, in deciding that s. 11 gave a statutory cause of action as at common law in passing off cases, may have proceeded on the basis that it was enough to sustain s. 11 that jurisdiction was vested in the Exchequer Court. If so, this is an unacceptable proposition. There is reference in the reasons for judgment of Maclean J. to the international convention, to which I refer later in these reasons, and it was said by him that s. 11 was intended to implement Canada’s obligation thereunder. He did say as well that no question was raised as to the jurisdiction of the Exchequer Court to entertain actions contemplated by s. 11. The action in the Kitchen Overall case was for an injunction to restrain use of an unregistered trade mark or trade name, and it succeeded.
Booth v. Sokulsky[7], gave effect to s. 11(c) in an action brought in the Exchequer Court under the Unfair Competition Act, 1932, and based on an alleged misuse of plaintiffs unregistered trade mark and trade name on wares sold by the defendant which were similar to those of the plaintiff. Although it was a passing off action, it was held that the Exchequer Court had jurisdiction under s. 22 (c) of the Exchequer Court Act because, within the terms of that provision, the action was one “respecting any trade mark”. I do not regard this case as being at all helpful on the question in issue here, which does not concern trade mark litigation.
Kellogg Company v. Helen Kellogg[8], was another case touching the jurisdiction of the Exchequer Court as a matter of construing legislation conferring jurisdiction but again without touching constitutionality, a point that was made expressly in that case.
The contention of the appellants and of the supporting intervenants, briefly put, was that s. 7(e), if not also the whole of s. 7, was legislation in the relation to property and civil rights in the province or, alternatively, legislation in relation to matters of a local or private nature in the province, within s. 92(13) or (16) of the British North America Act. The respondent and the Attorney-General for Canada supported s. 7(e) as being (1) legislation in relation to the regulation of trade and commerce within s. 91(2) of that Act; (2) supportable “as legislation in implementation of a Canadian international obligation arising out of a treaty or convention, and thus falling within federal power for the peace, order and good government of Canada in relation to a matter not coming within s. 92; and (3) legislation in relation to the criminal law within s. 91(27).
This last mentioned basis of validity deserves no more than a brief statement of reasons for rejecting it. Assuming that s. 7(e) (as, indeed, the other subparagraphs of s. 7) proscribe anti‑social business practices, and are thus enforceable under the general criminal sanction of s. 115 of the Criminal Code respecting disobedience of a federal statute, the attempt to mount the civil remedy of s. 53 of the Trade Marks Act on the back of the Criminal Code proves too much, certainly in this case. The principle which would arise from such a result would provide an easy passage to valid federal legislation to provide and govern civil relief in respect of numerous sections of the Criminal Code and would, in the light of the wide scope of the federal criminal law power, debilitate provincial legislative authority and the jurisdiction of provincial Courts so as to transform our constitutional arrangements on legislative power beyond recognition. It is surely unnecessary to go into detail on such an extravagant posture. This Court’s judgment in Goodyear Tire and Rubber Co. of Canada Ltd. v. The Queen[9], upholding the validity of federal legislation authorizing the issue of prohibitory order in connection with a conviction of a combines offence, illustrates the preventive side of the federal criminal law power to make a conviction effective. It introduced a supporting sanction in connection with the prosecution of an offence. It does not, in any way, give any encouragement to federal legislation which, in a situation unrelated to any criminal proceedings, would authorize independent civil proceedings for damages and an injunction.
I point out also that s. 115 of the Criminal Code is, so to speak, a “default” provision, coming alive when no “penalty or punishment” is expressly provided, and I cannot subscribe to the proposition that s. 115 can be a base upon which to support the validity, under the federal criminal law power, of a completely independent civil remedy, which lies only at the behest of private parties claiming some private injury.
I did not understand counsel to urge that s. 7, or s. 7(e) alone, should be supported under the criminal law power by excluding s. 53 as a means of enforcement. If that had been the argument, it would have meant a concession by the respondent and the intervening Attorney‑General for Canada that s. 53 should be regarded as inapplicable to s. 7(e). No such concession was made.
The contentions of the appellants and the remaining two contentions of the respondent, supported as they are by the intervenors, require a more extensive canvass of the scope of legislative power than I have made in disposing of the submission under the criminal law power. I approach this canvass by examining first what it is that the legislation in question does, and what the legal position (not the constitutional position necessarily) was and would be apart from the challenged legislation.
I think it fair to look upon s. 7 as embodying a scheme, one limited in scope perhaps but nonetheless embodying an array of connected matters. I shall come later to what appeared to be a fundamental underpinning of the respondent’s position and that of the Attorney-General for Canada, namely, that s. 7 or at least s. 7(e) must not be construed in vacuo, but must itself be brought into account as a segment or a piece of a tapestry of regulation and control of industrial and intellectual property.
It was not disputed that the common law in the provinces outside of Quebec and the Civil Code of Quebec governed the conduct or aspects thereof now embraced by s. 7 and embraced earlier by s. 11 of the Act of 1932. To illustrate, s. 7 (a) is the equivalent of the tort of slander of title or injurious falsehood, albeit the element of malice, better described as intent to injure without just cause or excuse, is not included as it is in the common law action: see Fleming on Torts (4th ed. 1971), at p. 623. Section 7(b) is a statutory statement of the common law action of passing off, which is described in Fleming on Torts, supra, at p. 626 as “another form of misrepresentation concerning the plaintiffs business… which differs from injurious falsehood in prejudicing the plaintiffs goodwill not by deprecatory remarks but quite to the contrary by taking a free ride on it in pretending that one’s own goods or services are the plaintiff’s or associated with or sponsored by him”. It differs from injurious falsehood in that “it is sufficient that the offensive practice was calculated or likely, rather than intended, to deceive”.
Section 7(c) is a curious provision to be armed with a civil sanction by way of damages when one already exists in the ordinary law of contract. The provision refers to substitution of other goods for those ordered or requested, but there is always the right to reject upon discovery of the substitution, and if the substituted goods are knowingly accept- ed there would appear to be no relief. If s. 7(c) purports to give additional relief even if the substituted goods are knowingly accepted, where are the damages? Or does the provision envisage damages arising from failure to deliver the proper goods in time? If so, there is the usual remedy for breach of contract. I can see s. 7(c) in the context of a regulatory regime subject to supervision by a public authority, but its presence under the sanction of a private civil remedy merely emphasizes for me federal intrusion upon provincial legislative power.
Section 7(d) appears to be directed to the protection of a purchaser or a consumer of wares or services, in contrast with s. 7(a) which involves slander of title or injurious falsehood qua a competitor in business. It involves what I would term deceit in offering goods or services to the public, deceit in the sense of material false representations likely to mislead in respect of the character, quality, quantity or composition of goods or services, or in respect of their geographic origin or in respect of their mode of manufacture, production or performance. If any aggrieved person would have a cause of action under s. 53 in respect of damages suffered by him by reason of a breach of s. 7(d), it would ordinarily be expected to arise through breach of contract. One can envisage, of course, a statutory tort of deceit under s. 7(d), but this hardly adds to its constitutional propriety as federal legislation. Whether sounding in contract or in tort, it is not limited to those bases of relief in respect of enterprises or services that are otherwise within federal legislative competence. Again, the issue of a violation of s. 7(d) could as easily arise in a local or intraprovincial transaction as in an interprovincial one; there is nothing in s. 7(d) that emphasizes any interprovincial or transprovincial scope of the prohibition in s. 7(d) so as to establish some connection with federal legislative authority under s. 91(2) of the British North America Act.
Section 7(e) is, in terms, an additional proscription to those enumerated in subparagraphs (a) to (d) of s. 7. Its vagueness is not, of course, a ground of constitutional invalidity, but I am satisfied that it does have subject matter, as the facts of this very case demonstrate. It would encompass breach of confidence by an employee by way of appropriating confidential knowledge or trade secrets to a business use adverse to the employer. So too, it would appear to be broad enough to cover the fruits of industrial espionage. Counsel for the respondent referred the Court to the judgment of the Supreme Court of the United States in International News Service v. Associated Press[10], as exemplary of the thrust of s. 7(e). It recognized as enjoinable unfair competition the “pirating” of news by one news service from another and selling it while its commercial value as news was still evident, although the appropriation was effected by lawful means, e.g., through the reading of bulletin boards and early editions of the complainant’s newspapers. I note only that this result, albeit not without dissent, was reached on grounds which included equitable considerations; and it was reached without reliance on statute. In a later case, A.L.A. Schecter Poultry Corp. v. U.S.[11], at pp. 531‑2, Hughes C.J. saw the Associated Press case as an extension of the passing off cases (which, as the main instance of unfair competition at common law, involved the palming off of one’s goods as those of a rival trader). The scope of the tort has been extended, he said, “to apply to misappropriation as well as to misrepresentation, to the selling of another’s goods as one’s own—to misappropriation of what equitably belongs to a competitor”.
The fact that s. 7(e) has subject matter, whether as embodying claims cognizable at common law or as providing a statutory basis for a civil cause of action, does not differentiate it, in constitutional terms, from s. 7(a) (b) (c) and (d). As a class of prescriptions, additional to those in the preceding catalogues, it appears to me to be simply a formulation of the tort of conversion, perhaps writ large and in a business context. As does the common law, as applied in the provincial courts in the common law provinces, so does the Quebec Civil Code comprehend civil actions for relief in respect of matters covered by s. 7. The causes of action are founded largely on the general fault provision, art. 1053: see, for example, Corbeil v. Dufresne[12] (a slander of title situation as understood at common law); Giguère Automobile Ltée v. Universal Auto Ltd.[13] (false and misleading advertisements, amounting to deceit); Eagle Shoe Co. Ltd. v. Slater Shoe Co. Ltd.[14] (passing off in use of trade name).
The similarity of what is covered by the Quebec Civil Code to what is dealt with in s. 7 is underlined by the following extract from Nadeau, Traité Pratique de la Responsibilité Civile Délictuelle (1971) at p. 221:
Civil Code.—Unlawful or unfair competition injustly causing injury to others comes within the civil responsibility contemplated in Art. 1053 of the Civil Code. Actions for damages for unfair competition lie not only under federal law, but also under the general principles of civil delictual responsibility. Accordingly, an act of unfair competition will be a cause of action for damages only for a competitor who can prove actual damage. It should also be noted that federal law does not cover all possible cases of unfair competition, since the latter may border on defamation, if there is disparagement of a competitor.
Forms of unfair competition.—It may generally be stated that competition is unfair if it goes against the “accepted practice” of industry or business. It then oversteps the bounds of fairness. Our courts require an element of bad faith or at least of malicious intent in order to constitute unfair competition. While one’s desire to benefit from the misfortune of a competitor, whose factory has been partly destroyed by fire, by inviting some of the latter’s customers and salesmen to place their orders with him, betrays an obvious lack of magnanimity, it is not in itself an act of unfair and unlawful competition, any more than a mere inaccurate statement would support a judgment, if no damage has been caused. The same holds true for sensational or even malicious advertising that is not directed at a particular person. P. Cousineau J. in Corbeil defined unfair competition as [TRANSLATION] “an act done in bad faith for the purpose of causing confusion between the products of two manufacturers or tradesmen, or an act which without causing confusion, casts discredit on a rival firm”. Unfair competition may accordingly take various forms. It may refer to passing off, fraudulent copying, resorting to fraudulent practices to create difficulties for a competitor by hiring away his staff, using highly deceptive advertising, such as offering for sale at extremely low prices automobiles of the same make as a competitor’s when none are available, stealing secrets, and, finally, assuming a trade name without authorization.
Turning to the cases which have dealt with s. 7, I know of none in which the constitutionality of that provision or of any of its parts has been passed upon prior to the present case. Some at least of the cases may be said or thought to assume the validity of s. 7 or the part thereof involved, as for example Canadian Converters Co. Ltd. v. Eastport Trading Co. Ltd.[15]. The cases are instructive, however, for revealing the scope of s. 7, and how it either squares with or overlays or extends, where it does so at all, the common law and the civil law on the matters with which that section deals.
The references that I now make are illustrative rather than exhaustive. Breeze Corp. v. Hamilton Clamp Stampings Ltd.[16], a judgment of Donnelly J. of the Ontario Supreme Court, concerned an alleged breach of confidence in violation of an agreement and the use of the confidential information outside the limits permitted by the agreement. The only interest of the case here is in the observation that s. 7, as was evident from clause (c) thereof, was not limited to the common law action for passing off.
A long line of cases, both in the Exchequer Court and in the provincial courts, exhibit either direct or alternate reliance on s. 7(b) to support claims for relief to protect trade names. Examples are Building Products Ltd. v. B.P. Canada Ltd.[17] and Greenglass v. Brown[18], both Exchequer Court cases which agree that s. 7(b) goes beyond the old s. 11 of the Unfair Competition Act in not requiring that the likelihood of confusion be between competitors, but appear to disagree on whether ss. 2 and 6, which relate to the meaning and application of “confusing” for trade mark and trade name purposes, apply when s. 7(b) is invoked. In The Noshery Ltd. v. The Penthouse Motor Inn Ltd.[19], Addy J., then in the Ontario Supreme Court, differed from both of the foregoing cases in holding that s. 7(b) applied only as between competitors.
Two cases in particular which canvassed s. 7 show how much it reflects well known common law and civil law causes of action between private persons. The two cases are Eldon Industries Inc. v. Reliable Toy Co. Ltd.[20], and Clairol International Corp. v. Thomas Supply & Equipment Co. Ltd.[21]. I cite these cases not for what they actually decided but for the view that they take of s. 7. Thus, in the Eldon Industries case, which involved claims for relief in respect of the copying of a toy by a competitor of the plaintiffs, Schroeder J.A., speaking for the Ontario Court of Appeal, had this to say (at pp. 105-106, 107-108):
It has not been suggested that the defendants’ conduct was brought within the prohibition of s. 7(a) of the Act nor has it been claimed that they offended in any respect against the provisions of s. 7(d). Paragraphs (b) and (c) of s. 7 declare in codified form the common law tort of passing off one person’s wares for those of another. Paragraph (b) relates to the wrongful act of passing off one’s wares as and for those of another by directing public attention to the wares (not necessarily in compliance with an order or request) as, e.g., by giving one’s products a partic