Canadian Standards Association v P.S. Knight Co Ltd, 2015 ONSC 7980

Making public statements that could be seen as defamatory, especially when made against a company’s trade-mark or brand, is a very serious matter. Not only may the company start an action for defamation against you in the Ontario Superior Court of Justice (“SCJ”), but the company could also start an independent action for making false and misleading statements or misrepresentations under the Trade-marks Act, RSC 1985, c T-13 (the “Trade-marks Act”) and the Competition Act, RSC 1985, c C-34 (the “Competition Act”) in the Federal Court (“FC”). As this SCJ case makes clear, you could be sued twice. The SCJ decided that the legal tests and the remedies available in the two actions are different enough that a stay of proceeding to block one action before the conclusion of the other should be denied.

Background

The Canadian Standards Association (“CSA”) is an accredited development, testing and certification organization that sets standards for goods and services. [4] Part of CSA’s standards development mandate includes the production of the Canadian Electrical Code. In 2012, CSA brought an action in the FC against Gordon Knight and his corporation, P.S. Knight Co. Ltd., (collectively, “Knight”) for copyright infringement. [1] CSA alleged that one of Knight’s publications, the Electrical Code Simplified Book 2, infringed CSA’s copyright in the Canadian Electrical Code. [6] After the FC action was launched, Knight started a website named “RestoreCSA” wherein Knight discussed the FC copyright litigation between Knight and CSA.

CSA served several libel notices on Knight, alleging that the commentary in Knight’s website and other publications was false and defamatory and demanding it be removed. In 2013, CSA amended their Statement of Claim to include a breach of the prohibition in section 7(a) of the Trade-Marks Act against knowingly or recklessly making false or misleading statements tending to discredit the business, goods or services of a competitor; and the prohibition in section 52 of the Competition Act against knowingly or recklessly making false or misleading representations to the public. [8] CSA alleged that the libel and slander continued. [14] In 2015 CSA commenced a defamation action in the SCJ against Knight. [14]

Knight brought a motion under rule 21.01(3)(c) of the Rules of Civil Procedure, RRO 1990, Reg 194 (the “Rules”) to dismiss or permanently stay the defamation action, or temporarily stay the defamation action until the completion of the FC action.

Rule 21.01(3)(c)

Rule 21.01(3)(c) provides a court with discretion to stay an action if another proceeding between the same parties and in respect of the same subject matter is pending in Ontario or another jurisdiction. A stay should only be granted in the clearest of cases where the continuation of the action would cause the party seeking the stay prejudice or injustice, more than mere inconvenience or additional expense, and where the stay or dismissal would not be unjust to the other party. [23] The onus was on Knight to establish that permitting the defamation action to continue would be oppressive, vexatious or would be an abuse of process, and that ordering a stay would not cause an injustice or prejudice to CSA. [23]

Knight argued that the factual footprint of both actions was the same, that the determination of the issues in the FC action would have a substantive impact on the determination of the issues in the defamation action and that it was oppressive and unfair for Knight to simultaneously defend two actions, as being forced to do so might lead to Knight’s inability to amply respond to both matters. [28]

The SCJ did not agree with Knight’s arguments. There were different substantive elements and different remedies available in both actions. The SCJ noted that legal work had already been done in the FC action, and that any difficulties that Knight might encounter in simultaneously defending two actions could be mitigated if both parties agreed to a timetable. [29]

Knight also attempted to argue that CSA made a tactical decision, to which it should be bound, to amend their FC action to add claims for breaches of the Trade-marks Act and the Competition Act instead of starting an action in the SCJ. [32] Although the SCJ disagreed with this argument, it noted that had Knight stopped commenting about the FC action on its website and publications then perhaps the SCJ action could have been temporarily stayed because it would have stopped the alleged defamatory utterances, and its claims for general and punitive damages would no longer be pressing matters pending the resolution of the FC action. [33] The SCJ dismissed Knight’s motion for a stay.

Commentary

A court’s discretion under the Rules to stay an action on the ground that another proceeding is pending between the same parties in respect of the same subject matter is used sparingly. A party seeking a stay in such circumstances has a heavy onus on them. A motion to stay will likely be denied if the substantive elements and available remedies between two proceedings are different, which means both actions will proceed. In this case, a defamation action and an action for making false and misleading statements or representations were allowed to proceed in parallel.