Chanel S. de R.L. v. Lam Chan Kee Company Ltd.

Chanel S. de R.L. v. Lam Chan Kee Company Ltd.
Court (s) Database
Federal Court Decisions
Date
2016-08-30
Neutral citation
2016 FC 987
File numbers
T-653-13
Decision Content
Date: 20160830
Docket: T-653-13
Citation: 2016 FC 987
Ottawa, Ontario, August 30, 2016
PRESENT: The Honourable Mr. Justice Martineau
BETWEEN:
CHANEL S. DE R.L.,
CHANEL LIMITED AND
CHANEL INC.
Plaintiffs
and
LAM CHAN KEE COMPANY LTD.,
ANNIE PUI KWAN LAM AND SIU-HUNG LAM,
COLLECTIVELY DOING BUSINESS AS LAM CHAN KEE AND 2133694 ONTARIO INC.
Defendants
JUDGMENT AND REASONS
[1] As directed by the Federal Court of Appeal, this is a redetermination of the motion for summary trial presented by the plaintiffs, Chanel S. de R.L., Chanel Limited and Chanel Inc.
THE ORIGINAL JUDGMENT [2] On September 18, 2015, the plaintiffs obtained judgment [the original judgment] against Lam Chan Kee Company [LCK Company] and 2133694 Ontario Inc. [‘694 Inc.] [collectively, the corporate defendants], and Annie Pui Kwan Lam [Mrs. Lam], while their action against Mrs. Lam’s husband, Mr. Siu-Hung Lam, was dismissed: Chanel S de RL v Kee, 2015 FC 1091 [FC Reasons].
[3] Indeed, the Court accepted the plaintiffs’ uncontradicted evidence with respect to the following four instances, where counterfeit Chanel merchandise had been offered for sale or sold in the conventional retail store operating under the name LAM CHAN KEE [the Business] at Unit B25, Pacific Mall, 4300 Steeles Avenue East, Markham, Ontario [the Premises]:
(a) offering for sale 20-25 counterfeit Chanel cellular phone cases, at least one (1) small wallet, and a few plastic bracelets and hair clips on or about October 23, 2011;
(b) offering for sale five (5) counterfeit Chanel wallets on or about December 9, 2011;
(c) offering for sale six (6) pairs of counterfeit Chanel earrings, and three (3) counterfeit Chanel cellular phone cases, and the purchase of counterfeit Chanel earrings on April 26, 2012; and
(d) offering for sale 100 counterfeit Chanel items including cellular phone covers, necklaces, hair clips and fake nail stickers on or about June 2, 2013 and the purchase of an iPhone cover, a necklace, and a set of fake nail stickers [the June 2, 2013 infringement].
[4] The corporate defendants and Mrs. Lam [collectively, the subject defendants] were found by the Court to have infringed the rights of both Chanel Inc., which holds the license to use the Chanel Trade-marks in Canada, and Chanel Limited, which owns the rights to the Chanel Trade-marks (FC Reasons at para 22). Given the fact that the infringing activities of the subject defendants were ongoing until at least June 2, 2013, and given the nature of the activities involved, pursuant to section 53.2 of the Trade-marks Act, RSC 1985, c T-13 [the Act], the Court granted:
(a) declaratory relief confirming the validity and ownership of the Chanel Trade-marks;
(b) injunctive relief precluding the subject defendants from continuing their infringing activities; and
(c) injunctive relief requiring the delivery up and destruction of any remaining infringing goods within twenty-one (21) days of the original judgment.
[5] In addition to making the declarations and issuing the injunctive relief sought in the plaintiffs’ motions for default judgment and summary trial, the Court also ordered the subject defendants to pay the following sums to the plaintiffs: $64,000 in damages [the compensatory damages award]; $250,000 in punitive and exemplary damages [the punitive damages award]; and $66,000 in lieu of assessed costs [the costs award].
THE FEDERAL COURT OF APPEAL [6] The plaintiffs did not appeal the part of the original judgment of the Court that dismissed their motion for summary trial against Mrs. Lam’s husband, nor did the two corporate defendants appeal the default judgment rendered against them. However, as far as she had been condemned, jointly and severally with the corporate defendants, to pay damages, as well as punitive damages, Mrs. Lam sought to set aside the original judgment on several grounds. On April 11, 2016, Mrs. Lam’s appeal was allowed, on limited grounds and without costs, by the Federal Court of Appeal, who directed that the summary trial motion be remitted to the trial judge for redetermination in accordance with its reasons in Kwan Lam v Chanel S de RL, 2016 FCA 111 [FCA Reasons].
[7] First, the Federal Court of Appeal found no merit in the submissions of Mrs. Lam to the effect that the Court had erred in proceeding by way of summary trial (FCA Reasons at paras 15 and 16). Furthermore, the Federal Court of Appeal found that the Court did not err in making a nominal damages award, in setting the nominal damages amount for each act of infringement at the level of $8,000, or in awarding damages to both the trade-mark owners and the licensee for each act of infringement (FCA Reasons at paras 18 and 19). Thus, none of these findings can be revisited today by Mrs. Lam.
[8] Second, while the Federal Court of Appeal noted that the quantum of punitive and exemplary damages awarded to the plaintiffs “is significant and outstrips awards in many previous cases” (FCA Reasons at para 23), when the quantum of punitive damages is compared to the quantum of compensatory damages, it nonetheless held that this would not necessarily render the award vulnerable to being set aside, depending on the findings and the reasons given to support the award (FCA Reasons at paras 23 and 25). Nevertheless, the Federal Court of Appeal found that “an award of this magnitude” called for an explanation founded upon the applicable legal tests and the specific facts of the case that was “more expansive” than the explanation given by the trial judge (FCA Reasons 23). In this respect, consideration should be given to the relevant factors indicated by the Supreme Court of Canada in Whiten v Pilot Insurance Co, 2002 SCC 18 at paras 112-113 [Whiten], so as to ensure that the amount awarded is no higher than necessary to achieve the Court’s objective in imposing punitive damages (FCA Reasons at para 24).
[9] Third, as noted by the Federal Court of Appeal (FCA Reasons at para 13), the Court premised its compensatory and punitive damages awards on the basis that the subject defendants should be held liable of all four acts of infringement (October 23, 2011, December 9, 2011, April 26, 2012 and June 2, 2013 [the infringement dates]) mentioned in the FC Reasons, as it made them jointly and severally liable (FC Reasons at paras 5, 6, 16, 20, 22 and 24). However, the Federal Court of Appeal found that there was an ambiguity with respect to the finding that Mrs. Lam was personally liable of the June 2, 2013 infringement (FCA Reasons at paras 5, 8-13, 20 and 21). The ambiguity flows from the fact that many paragraphs of the FC Reasons can be read as a clear finding that Mrs. Lam is liable for all four instances of infringement (FC Reasons at paras 5, 18, 19, 20 and 22), but two other paragraphs seem to indicate that this Court found the appellant responsible for the infringing activities only up to May 28, 2013 (FC Reasons at paras 7 and 16).
[10] In particular, the Federal Court of Appeal made reference (FCA Reasons at paras 9 and 10) to what this Court wrote in paragraphs 7 (last sentence) and 16 of the FC Reasons, and which read as follows:
[7] […] On a balance of probabilities, the Court finds that despite any transfer of shares to Justin and Jessica Lam, LCK Company and Madam Lam continued to operate and control the Lam Chan Kee business until at least May 28, 2013.
[…]
[16] The Court finds on a balance of probabilities that LCK Company continued to operate the Lam Chan Kee business until at least May 28, 2013, after which ‘694 Inc must be held responsible for the infringing activities on the Premises. The Court further finds that Madam Lam continued to use the property as her own after the alleged transfer. There is also clear evidence on record suggesting that Madam Lam continued to control the business. Moreover, it is not clear whether staff were notified of the change in ownership. Furthermore, Madam Lam continued to be the owner and landlord of the Premises. It was Madam Lam who hired counsel, not Justin Lam, when the present action was taken by the plaintiffs. Nor did Madam Lam talk to her children regarding the cease and desist letter that was delivered on December 9, 2011 to the operator of the Lam Chan Kee business on the Premises. While the Court comes to the conclusion that Madam Lam must be held personally liable for infringing activities on the Premises up and until May 28, 2013, together with the two corporate defendants, there is not enough evidence to support such a conclusion against the other individual defendant, S. Lam, as I am not satisfied the latter was the controlling mind of the two corporate defendants or was personally involved in the infringing activities.
[11] In conclusion, assuming that the quantum may be different if Mrs. Lam is to be held liable for three instances instead of four instances of infringement, the Federal Court of Appeal concluded that this ambiguity in the original judgment tainted the compensatory damages award, the punitive damages award and the costs award (FCA Reasons at paras 21 and 22). Accordingly, the Court is to resolve today the ambiguity with respect to Mrs. Lam’s involvement in the June 2, 2013 infringement and redetermine, with adequate reasons, the quantum of damages and costs (FCA Reasons at para 28).
POSITION OF THE PARTIES WITH RESPECT TO REDETERMINATION [12] The parties agree that the scope of the present redetermination is limited and must be conducted in accordance with the FCA reasons. In a nutshell, the plaintiffs take the position that there are no reasons to sever the compensatory damages award and to reduce the amounts of the punitive and costs awards. On the other hand, Mrs. Lam asks this Court to sever the compensatory damages award and to reduce the amounts of the punitive and costs awards.
Plaintiffs position [13] Firstly, the plaintiffs submit that the “ambiguity” noted by the Federal Court of Appeal is only apparent, and that in the FC’s Reasons, the intended finding of fact of this Court was that Mrs. Lam was, at all relevant times, personally liable for all four instances of infringement referenced in the reasons, including the infringement that took place on June 2, 2013.
[14] While the evidence of Mrs. Lam’s husband’s direct participation or involvement in the alleged infringing activities may have been lacking – he no longer resided in Canada and had been living in China – the plaintiffs assert once again that, as the controlling mind of the corporate defendants, and the landlord of the Premises and owner of the Business, Mrs. Lam aided and abetted, authorized, and sanctioned the importation, advertisement, offer for sale and/or sale of fashion accessories bearing the Chanel Trade-marks at the Premises. Therefore, the Court should not disturb its previous findings and should pronounce the same declarations and condemnations against the subject defendants.
[15] Secondly, with respect to punitive damages, the plaintiffs assert that because the FC’s Reasons and the evidence in the summary trial both support liability for the June 2, 2013 infringement, the Court should uphold the entire damages assessment set out in the FC’s Reasons, including the award of punitive damages. Indeed, the Federal Court of Appeal stated that an award of punitive damages in the amount of $250,000 might be a reasonable remedy in a case like the present, even though it is proportionally higher than awards made in earlier cases (FCA Reasons at paras 24-26). Thus, given that the purported ambiguity relating to the June 2, 2013 infringement should be resolved as set out above, the bases for the punitive damages award may be relied upon to affirm the amounts set out in the FC’s Reasons.
[16] The plaintiffs further state that several of the Whiten factors are reflected in the conduct of the subject defendants, including the fact that the sales of counterfeit goods and later attempts to obscure Mrs. Lam’s involvement were “planned and deliberate”; the sale of counterfeit goods was lengthy and ongoing; the motive for Mrs. Lam was profit, and later, the avoidance of liability; Mrs. Lam continued to derive a financial benefit from the sale of the counterfeit merchandise; there is no question that Mrs. Lam was aware the conduct was unlawful; Mrs. Lam attempted to avoid liability by presenting evidence of a purported 2011 transfer; and the kind of theft in question constitutes a very serious offence (FCA’s Reasons at para 25).
[17] Thirdly, with respect to the costs award of $66,000, the plaintiffs note that in remitting this matter for redetermination, the Federal Court Appeal did not find any errors with the Federal Courts determination of costs in the summary trial. In addition, while the determination of liability for the June 2, 2013 infringement may affect compensatory damages, it does not affect the basis for the costs award in the FC Reasons.
[18] With respect to the present redetermination, the plaintiffs seek their solicitor and client costs of $22,000 in lieu of assessed costs and disbursements, given Mrs. Lam’s ongoing attempts to avoid liability, or in the alternative, the sum of $6,025.59, reflecting, double costs of $5,600 and $425.59 in disbursements arising from an offer to settle made by the plaintiffs, which can be produced upon request.
Mrs. Lam’s position [19] Firstly, Mrs. Lam interprets the FC Reasons at paragraph 16 as meaning that she has not been found to be associated with the LCK Company after May 28, 2013. Therefore, it would be inconsistent to render her personally liable for the incident of the June 2, 2013 infringement. Accordingly, the compensatory damages award of $64,000 must be severed in two distinct condemnations: (1) Mrs. Lam should be ordered to pay the amount of $48,000, jointly and severally with the corporate defendants; and (2) the corporate defendants should be condemned to pay, jointly and severally, a further sum of $16,000.
[20] Secondly, Mrs. Lam submits today that the Court’s determination of $250,000 in punitive damages against all three subject defendants is unreasonable and neither in line with the rules of proportionality, nor with the precedents set out in other trade-mark or copyright cases in Canada, even if all four instances of alleged infringement are considered (Louis Vuitton Malletier SA v Lin Pi-Chu Yang, 2007 FC 1179 [Yang]; Louis Vuitton Malletier SA et al v 486353 BC Ltd et al, 2008 BCSC 799 [486353 BC Ltd]; Louis Vuitton Malletier SA v Singga Enterprises (Canada) Inc, 2011 FC 776 at paras 168-170 [Singga]; and Chanel S de RL and Chanel Inc v Jiang Chu, 2011 FC 1303 [Chu]).
[21] It is not challenged by Mrs. Lam that an award of punitive and exemplary damages should be substantial enough to get the attention of the defendant (Singga at para 169). However, Mrs. Lam asserts that while punitive damages are meant to deter the behaviour of potential new infringers, the present punitive damages award creates a new threshold, despite more egregious behaviour on the part of other defendants. Mrs. Lam submits that she was not deemed to be a manufacturer or importer, and she was not charged with multiple counts of infringement under the Act, nor was she charged under the Copyright Act, RSC 1985, c C-42. Mrs. Lam asks the Court to reduce the punitive damages award by $175,000 and asserts that an award of $75,000 would be reasonable in the circumstances.
[22] Mrs. Lam notably submits that she did not engage in the full range of activities and infringement in which other defendants in other trade-mark infringement cases engaged. Moreover, her conduct should not be deemed to be planned or deliberate as she was not the seller at the time of the alleged infringing acts, nor was she present when the plaintiffs’ investigators attended the retail establishment and witnessed the trinkets bearing the Chanel Trade-marks. She also submits that she had no motive or intent, nor did she persist or carry out outrageous conduct over a lengthy period of time. Indeed, she submits that she had no control over the products that were being sold by the new corporation after she sold her interests in the company. Mrs. Lam also submits that the Court should take into account the fact that she was allegedly retailing trinkets and merchandise that the plaintiffs do not produce in their product line. She also submits that the she did not conceal or attempt to conceal her identity.
[23] Thirdly, Mrs. Lam submits that the legal costs granted to the plaintiffs in the original judgment were higher than the nominal damages awarded, calling proportionality into question. Mrs. Lam submits that the legal fees on a solicitor-client basis were awarded on a sum that is not consistent with actual costs for a summary judgment trial that occurred swiftly and in a timely fashion. The costs award of $66,000 against the subject defendants is unreasonable and should be reduced to $32,000 in lieu of assessed costs and payable forthwith. Furthermore, the plaintiffs should be condemned by the Court to pay forthwith to Mrs. Lam the sum of $32,000 inclusive of disbursements in lieu of assessed costs for this summary trial motion and redetermination by the Court.
REDETERMINATION OF THE MOTION FOR SUMMARY TRIAL [24] Having reconsidered the matter and reviewed the totality of the evidence previously submitted by the parties at the hearing of the motion for summary trial held in Vancouver on August 2, 2015 (FC Reasons at paras 3 and 4), in light of the earlier findings of the Court and the reasons of the Federal Court of Appeal, and considered the additional submissions made by counsel in their new materials and at the hearing held in Vancouver on August 3, 2016, it is the judgment of this Court that the findings, declarations, orders and condemnations pronounced or made against the corporate defendants and Mrs. Lam in the original judgment, including the compensatory damages award, the punitive damages award and the costs award, be confirmed and remain unchanged. In all respects and at all relevant times, Mrs. Lam is personally liable of the infringing activities that have taken place in the Business or at the Premises on October 23, 2011, December 9, 2011, April 26, 2012 and June 2, 2013.
PERSONAL LIABILITY OF MRS. LAM [25] The Court earlier found, and further finds and confirms today, that Mrs. Lam was at all relevant times the controlling mind of the two corporate defendants. She must be held personally liable in the ongoing infringing and illegal activities that have taken place for a number of years in the Business or at the Premises.
[26] In its original judgment, the Court dismissed Mrs. Lam and Mrs. Lam’s husband’s [the individual defendants] objection that this was not a proper case to render judgment following a summary trial, and notably found Mrs. Lam personally liable, while exonerating Mrs. Lam’s husband (FC Reasons at para 5). Despite the alleged transfer of shares in August or September 2011 to Justin and Jessica Lam (FC Reasons at para 13), the Court accepted the plaintiffs’ arguments (FC Reasons at para 14) and found that the defendants’ evidence was self-serving, inconclusive and contradictory (FC Reasons at para 15).
[27] The corporate changes, including the replacement in May 2013 of Mrs. Lam by her daughter as President of ‘694 Inc., did not affect, and should not affect today, the personal liability of Mrs. Lam. To hold otherwise would grant protection to individuals or corporations seeking to avoid liability by preparing corporate filings when they would otherwise clearly be responsible for infringing and illegal activities (see Fraudulent Conveyances Act, RSO 1990, c F 29 ss 2; Prodigy Graphics Group Inc v Fitz-Andrews,[2000] OJ No 1203, 2000 CarswellOnt 1178 (SCJ) at para 152).
[28] But for the ambiguity concerning Mrs. Lam’s involvement in the June 2, 2013 infringement (FCA Reasons at para 19), the Federal Court of Appeal also stated that there is no ground to set aside the other determinations made by the Court concerning Mrs. Lam’s involvement and responsibility in this matter (FCA Reasons at para 27). There is therefore no basis today to reconsider the joint and several liability of the corporate defendants (LCK Company and ‘694 Inc.) for any of the four instances of infringement, nor is there any argument that the remaining factual and legal findings already rendered in this case are not binding on all parties.
[29] Perhaps, the apparent ambiguity noted by the Federal Court of Appeal could have been clarified by the Court much earlier through the presentation by a party of a motion pursuant to Rule 397(1) of the Federal Courts Rules, SOR/98-106, to reconsider or clarify the conclusions of the original judgment – since the original judgment seemed not accord with part of the reasons. Moreover, Rule 397(2) allows the Court to correct at any time clerical mistakes, errors or omissions in a judgment or order. Be that as it may, there should be no confusion and no misunderstanding today. The Court wholly takes responsibility for any misuse in the impugned paragraphs of its reasons of the May 28, 2013 date, or its conjunctive use with the June 2, 2013 date (paras 8 and 16), and stands with its earlier finding that the subject defendants, including Mrs. Lam, are liable of all four instances of infringement, including the June 2, 2013 infringement (FC Reasons at paras 5, 18, 19, 20 and 22).
[30] The corporate defendants did not appear or made an appeal with respect to the findings made by the Court in the original judgment. To make it clear, the May 28, 2013 date is only relevant with the issue of the weight to be given by the Court to the corporate documents invoked by the individual defendants. At the risk of repeating itself, the Court already found that the individual defendants’ evidence was self-serving and should be afforded very little weight (FC Reasons at para 15). The corporate documents concerning ‘694 Inc., which was a shell company incorporated in 2007 by Mrs. Lam, were apparently completed in May 2013 by Suiwai (Ronald) Mak [Ronald Mak] who acted as the individual defendants’ accountant and assisted them in the alleged sale of the Business (FC Reasons at para 13). On May 2, 2013, Justin Lam and Jessica Lam were recorded as Directors, Jessica Lam was listed as Secretary, and Justin Lam was recorded as Treasurer of ‘694 Inc. On May 28, 2013, Jessica Lam was recorded as President of ‘694 Inc. However, neither Mrs. Lam nor her witnesses can dearly explain to the Court the reason for the long delay before filing the corporates changes to the Registry or before notifying the plaintiffs. While theses corporate changes were said to be approved and signed by Mrs. Lam and her children on or about August or September 2011, the signed documents were only filed and brought to the plaintiffs’ notice on May 2013, which occurred after the serving of the plaintiffs’ Statement of Claim. Furthermore, the personal addresses for the individual defendants, Justin Lam and Jessica Lam indicated on the corporate documents of ‘694 Inc. were identical at all material time: 119 Boake Trail, Richmond Hill, Ontario (FC Reasons at para 8).
[31] Be that as it may, regardless of the corporate changes, after May 28, 2013, Mrs. Lam continued to use the property as her own and continued to control the Business. According to the evidence on the record, it is still uncertain and inconclusive whether there had been a complete and effective sale of the ’694 Inc. At both hearings, Mrs. Lam failed to provide any evidence to support or corroborate her assertion that her children had completely paid the balance of the $30,000 for the sale of ‘694 Inc. (FC Reasons at para 13). Also, it is not clear whether staff were notified of the change in ownership. Mrs. Lam continued to be the owner and landlord of the Premises. Mrs. Lam also stated, in her testimony, there was no need to notify Pacific Mall of the change of corporation since the sale of the Business was done between her children. Furthermore, Mrs. Lam was still benefitting from the ongoing profits of the Business after the corporate sale, since she was receiving ongoing financial support for her living expenses and for the reimbursement of the management fee that she was paying for the Premises (cross-examination of A. Lam at p 64 ln 10 to p 65 ln 1; Cross-examination of J. Lam at page 87 ln 3 to p 88 ln 8). Moreover, it was Mrs. Lam who hired counsel implicated in the present case, not Justin Lam or Jessica Lam, when the present action was taken by the plaintiffs. Additionally, Mrs. Lam did not talk to her children regarding the cease and desist letter that was delivered on December 9, 2011 to the operator of the Business conducted in the Premises. Indeed, the Court notes that accordingly to Justin Lam’s testimony, he had no memory of Mrs. Lam advising him to take any steps to respond to the suit at any time, nor did he speak to a lawyer about the lawsuit. I give very little weight to the affidavits of Mrs. Lam and Justin Lam (March 16, 2015) in view of the contradictory or confusing answers provided at their cross-examinations (June 8, 2015 and June 9, 2015 respectively).
[32] Thus, the motivation behind the corporate changes and transfer of ownership alleged by the individual defendants is highly questionable (FC Reasons at para 15). The Court finds that they are fraudulent, insofar as they appear to be specifically directed to avoid the negative consequences arising from the recidivist and contemptible infringing and illegal activities of LCK Company and Mrs. Lam. All the surroundings factual circumstances must be taken into account, including the fact that the price of the sale was $30,000 but Mrs. Lam’s children apparently only paid $3,000 at the time (FC Reasons at para 13) and there is no third party document corroborating Mrs. Lam’s assertion that, subsequently to the sale of the Business, unspecified sums of money were effectively paid by the children. On the other hand, infringing activities continued to take place at the Premises after the service of the 2011 cease and desist letter, and even after the service of the Statement of Claim in April 2013, which forces this Court to question Mrs. Lam’s good faith and address the contentious issue of her personal liability at all relevant times.
[33] Despite any ambiguity in the original judgment, this Court is satisfied today that:
(a) The continued control and profit derived by Mrs. Lam in the Business and as the landlord of the Premises;
(b) Mrs. Lam’s personal knowledge of the infringing and illegal activities at the Premises; and
(c) The absence of proper means taken by Mrs. Lam after the personal serving of the Statement of Claim to her on April 18, 2013 to prevent that infringing and illegal activities continue to take place in the rented Premises,
constitute sufficient basis for condemning Mrs. Lam, with the corporate defendants, to pay compensatory and punitive damages, jointly and severally, as a result of the illegal and infringing activities conducted by the Business or occurring at the Premises, including the June 2, 2013 infringement.
[34] As asserted by the plaintiffs in this proceeding, there is ample evidentiary base in the record and compelling legal reasons to find Mrs. Lam personally liable of all four instances of infringement:
(a) Liability for an officer, director, principal employee or controlling and directing mind may be found where such party makes the unlawful act their own (Singga at paras 112-114; 486353 BC Ltd at para 45). The governing case in this respect is Mentmore Manufacturing Co Ltd v National Merchandising Manufacturing Co Inc, (1978), 40 CPR (2d) 164 at 174 (FCA). The conduct of an individual in controlling and directing a corporation does not depend on a formal employment relationship or the designation of officer or director, as such artificial distinction would inappropriately act to insulate controlling and directing individuals who would otherwise be liable for their actions. Mrs. Lam was clearly the controlling mind of the Business and derives financial benefit from its ongoing activities. While she was aware that the advertising and the selling of counterfeit product was contrary to both the law and the previous order rendered against her, Mrs. Lam failed to prove that she took sufficient steps to halt this unlawful practice.
(b) Vicarious liability may exist where, taking into account the dual purposes of such liability – fair and effective compensation and deterrence of future harm – there is a sufficient rationale to do so. Liability will be imposed where the relationship between the tortfeasor and the person against whom liability is sought is sufficiently close as to make the claim for vicarious liability appropriate. The proximity between Mrs. Lam and the corporate defendants is well established during all four acts of infringement, notwithstanding the alleged sale (see Bazley v Curry, [1999] 2 SCR 534 at para 15; 671122 Ontario Ltd v Sagaz Industries Canada Inc, [2001] 2 SCR 983 at paras 26-28; KLB v British Columbia [2003] SCC 51 at paras 18-20; Van Hartevelt v Grewal, 2012 BCSC 658 at paras 64-65).
(c) In continuing to treat the Business as her own, deriving financial benefit from the Business, and failing to take any or sufficient steps to halt the sale of counterfeit Chanel merchandise (despite being the party primarily involved in the 2006 Orders, the party in receipt of the communication of this action, and the party apparently instructing legal counsel), Mrs. Lam aided and abetted ongoing infringement at the Premises.
[35] For the reasons mentioned in the following paragraphs, there is also no cause to reduce the compensatory and the punitive awards, as this Court is also satisfied today that the subject defendants should be condemned to pay, jointly and severally, nominal damages of $64,000 and punitive damages of $250,000, while the costs award of $66,000 should be not be altered.
COMPENSATORY DAMAGES AWARD [36] The Court is also satisfied that the plaintiffs have suffered damages and that the subject defendants have made a profit. With respect to damages, the precise extent of the subject defendants’ activities are not known to the plaintiffs, but there is clear evidence on the record that the illegal and infringing activities were conducted at the Premises from October 2011 to June 2013, and at least, according to the uncontradicted evidence, on October 23, 2011, December 9, 2011, April 26, 2012 and June 2, 2013.
[37] At the hearing for remittance, Mrs. Lam did not seek leave to file additional credible documentation that could have guided the Court toward assessing more accurate compensatory damages instead of awarding $32,000 to each of the two interested plaintiffs (see paragraph 40 below). Since no such evidence was provided to assess the true value of profit gained from the infringements and since the personal liability of Mrs. Lam has been confirmed for all four infringements, the Court is justified today to rely on the minimum compensatory rule, described in the following paragraphs.
[38] As already noted in the reasons supporting the original judgment (FC Reasons at para 21), in 1997, the Court determined that, in the circumstances before the Court at that time and in relation to an Anton Piller order seizure, damages of $6,000 per plaintiff for trade-mark infringement should be applied as nominal damages against retail establishments selling counterfeit goods, where it would be difficult to prove actual damages or profits based on a lack of documentation regarding sales. More recently in Yang, the Court awarded a minimum compensatory damage of $7,250 per infringement against a retail establishment by adjusting the $6,000 value for inflation.
[39] In this respect, following the submissions made by the plaintiffs, the Court already determined that in the present circumstances, the proper base amount of nominal damages is $8,000, as adjusted for inflation from 1997 to each of the three relevant years, per instance of infringement. Accordingly, nominal damages are appropriately assessed as $8,000 multiplied by four instances (i.e. October 23, 2011, December 9, 2011, April 26, 2012 and June 2, 2013), equaling $32,000. Furthermore, the activities of the subject defendants have infringed the rights of both Chanel Inc., which holds the license to use the Chanel Trade-marks in Canada, and Chanel Limited, which owns the rights to the Chanel Trade-marks. In accordance with the established jurisprudence, each of these plaintiffs is entitled to an award of damages for the four instances of infringement, for a total of $32,000 per plaintiff, or $64,000 in total, and which amount is payable jointly and severally by the subject defendants (FC Reasons at para 22). There is no reason to find otherwise today.
[40] Indeed, the Federal Court of Appeal already confirmed in its judgment the Court’s method of awarding compensatory damages at the present level of $8,000 per act of infringement and to both the trade-mark owner and Canadians licensee in a case like the present (FCA Reasons paras 17-18). Nonetheless, the Court further reconsidered today the overall impact of the defendants’ unlawful business on the reputation of the plaintiffs’ trade-mark. Chanel Inc. and Chanel Limited both suffered prejudice. Similarly to the case of Singga, which dealt with the Louis Vuitton and Burberry Trade-marks, the defendants’ sale of substantially inferior quality counterfeit Chanel merchandise caused serious damage, and indeed irreparable harm, to the reputation and goodwill of the plaintiffs. Indeed, the worldwide brand of Chanel, which has been developed through decades, is commercializing a high quality of fashion products which attracts a specific clientele. At great expense, Chanel has developed and marked products that are associated with the most luxurious materials. Consumers who could purchase the defendants lower quality of counterfeit products will be likely to be disappointed, which could result by detrimentally affect the sale of authentic Chanel products. Therefore, the defendants’ infringements affect directly the superior quality of the products bearing the Chanel trade-marks (see Singga at para 12). Likewise, the availability of cheaper counterfeit Chanel products tarnishes the brand image associated to the plaintiffs’ trade-mark. Although, this aspect of the infringement may not seem so serious for the defendants, the erosion of the brand’s reputation for which the plaintiffs have worked very hard is a serious consequence of the continuing behaviour of the defendants and any others who may also be infringing the Chanel trade-mark (see Chu at para 25).
[41] Accordingly, the Court is satisfied today that there are no reasons to reduce or to sever the sum of $64,000 previously awarded to the plaintiffs as compensatory damages.
PUNITIVE DAMAGES AWARD [42] At the hearing of the motion for summary trial in August 2015, as noted in the reasons in support of the original judgment (FC Reasons at para 17), the submissions made by the individual defendants were minimal and did not really address the arguments made by the plaintiffs in their comprehensive submissions. Thus, the Court had no reason at the time to not endorse the plaintiffs’ general reasoning and arguments.
[43] In the original judgment, the Court notes at paragraphs 23 and 24:
[23] Additionally, it is submitted by the plaintiffs that punitive and exemplary damages, in the amount of $250,000, are appropriate in these circumstances. The prior Actions were only settled when Madam Lam and LCK Company agreed in the Settlement to consent to the Order, and additionally the Second Order, both of which unambiguously required, inter alia, that Madam Lam and LCK Company cease sales of all counterfeit Chanel merchandise. In breach of both the Settlement and the Orders, and in further breach of the plaintiffs’ rights, the subject defendants nevertheless continued their unlawful activity.
[24] The Court is satisfied that such blatant disregard for the rights of the plaintiffs, as well as the blatant disregard for the process and Orders of this Court, are clearly circumstances under which the subject defendants should be ordered to pay significant punitive and exemplary damages. Given the egregious nature of the subject defendants’ activities, the amount of nominal damages awarded above is simply not sufficient to denounce and deter the subject defendants’ activities. Having considered the awards of punitive and exemplary damages granted in the past, the Court is satisfied that an additional award of $250,000 in punitive and exemplary damages, payable jointly and severally, is appropriate and warranted in the circumstances.
[44] In the present redetermination, the Court has considered, with a fresh look, the totality of the evidence on record in light of the reasons of the Federal Court of Appeal (FCA Reasons at paras 23-26), the applicable legal principles mentioned by the Supreme Court of Canada in Whiten, the previous awards of punitive damages in trade-marks (or copyright) infringement cases in Canada, and the submissions made by counsel both in the materials and oral arguments made at the hearing of the motion for summary trial in August 2015 and its redetermination in August 2016, following the written submissions made on behalf of the parties in May 2016. For ease of reference, the Court will not come back on the evidence respecting the finding of personal liability of Mrs. Lam in all four instances of infringement (see paragraphs 25 to 35 above).
[45] On October 23, 2011, the plaintiffs became aware that illegal and infringing activities continued to take place at the Premises. On December 9, 2011, the plaintiffs served LCK Company, Mrs. Lam and Mrs. Lam’s husband with a letter demanding that they immediately cease and desist from such illegal and infringing activities. They were uncooperative and refused to relinquish counterfeit items in their possession and control. On April 17, 2013, the plaintiffs commenced the present action against LCK Company, and the individual defendants. While the corporate defendants did not file an appearance, the individual defendants alleged that LCK Company had ceased carrying on business on or around September 30, 2011, and had sold its business assets to ‘694 Inc. The action was amended on July 2, 2013 to add ‘694 Inc. as a co-defendant and to allege that the offering for sale and counterfeit items continued at the Premises on several occasions after the cease and desist letter of October 23, 2011, including most recently, on June 2, 2013.
[46] It is not the first time that LCK Company, Mrs. Lam, and Mrs. Lam’s husband, collectively doing business as LAM CHAN KEE, are sued for infringement of the Chanel Trade-marks. On February 13, 2006, two separate actions were commenced in the Court by Chanel S. de R.L. and Chanel Inc. in relation to their offering for sale, selling, importing, distributing, manufacturing, printing, advertising, promoting, shipping, storing, displaying or otherwise dealing in merchandise bearing any or one or more of the Chanel Trade-marks (T‑257‑06 and T‑313-06). As early as August 2, 2005, a pair of earrings bearing an unauthorized or counterfeit reproduction of one or more of the Chanel Trade-marks was purchased at the Premises and a cease and desist letter was served upon these defendants.
[47] On December 18, 2006, following the settlement reached between the parties, two judgments of the Court were issued by consent. As a result, LCK Company, Mrs. Lam and Mrs. Lam’s husband were ordered to pay damages in the amount of $6,000, jointly and severally, and were permanently ordered and