Trademark Infringement and The Tort of Passing Off

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In Royal Pacific Real Estate Group Ltd. v. Dong, 2020 BCCA 323, the British Columbia Court of Appeal made it clear that unauthorized use of a trademark carries legal consequences. The Court found that the Defendant, Mr. Dong, had committed the tort of passing off, despite his arguments that he had proper consent from the Plaintiff, Royal Pacific Real Estate Group Ltd., to use the Royal Pacific trademark. Mr. Dong had signed an agreement with the Plaintiff whereby he would work under the real estate group as an independently contracted real estate representative. The agreement allowed and even encouraged Mr. Dong to use the Royal Pacific trademark in this capacity, because the group is well-known for success in the Vancouver area, having arranged billions of dollars of sales. But Mr. Dong could only properly use the trademark for his work under the real estate group; he was not authorized to use the trademark for his other private businesses. One of these included his business named Bliip Box, which he’d hoped to have as a supplier of real estate websites.

Mr. Dong took several actions which constituted trademark infringement including making available the contact information of the Royal Pacific group on his personal website, such that the public would consider Royal Pacific to be endorsing or associated with Mr. Dong’s personal site. The Defendant also sent solicitation emails to various real estate agents, saying that Royal Pacific was seeking to endorse local businesses through his personal Bliip Box company, while Royal Pacific had no intent of this. Even after Royal Pacific lawfully terminated their agreement with the Defendant, and as such he no longer had authority to use the trademark whatsoever, he continued to do so. Bliip Box continued to display Royal Pacific’s trademark, and in launching this business relied on the Royal Pacific online domain name. The Court of Appeal upheld the trial judgement that Mr. Dong had committed the tort of passing off outlined under section 7 of the Trademark Act. The Court recognized that the three elements of passing off were present, being: The existence of reputation or goodwill, a misrepresentation leading the public to believe an association between the parties, and damage or potential damage to the Plaintiff, as outlined in Vancouver Community College v. Vancouver Career College (Burnaby) Inc., 2017 BCCA 41.

The goodwill associated with familiar trademarks has commercial value, and companies such as Royal Pacific will not stand silent in the face of passing off. The Defendant passing off his goods and services as being endorsed by and associated with the trademarked name can be viewed as the unauthorized use of goodwill, and wrongful confusion of the public. While the trial judge only awarded nominal damages of $6,000 to the Plaintiff, an injunction restraining Mr. Dong from continued trademark infringement was also granted. The Court held that the Plaintiffs underwent considerable inconvenience, but that Mr. Dong hadn’t financially benefited from his conduct.

 

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Minority Shareholder Oppression Rights In British Columbia

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In the recent case of Canex Investment Corporation v. 0799701 B.C. Ltd., 2020 BCCA 231, the British Columbia Court of Appeal showed its flexibility in offering oppression remedies for wronged minority shareholders. The case involved exceptionally high-handed conduct by the two directors of Canex Investment Corporation (“Canex”), leading to their personal financial gain at the expense of the minority shareholder Plaintiffs. Neither Canex nor its minority shareholders benefited from the $500,000 loan taken out and secured by Canex’s properties, rather, the loan was used to finance a related company (Flame Engineering & Construction) controlled by the Defendants. Further, the Defendants falsified financial records related to the Flame Engineering loan, manipulated Canex’s records to reduce the Plaintiffs’ investment through charging excessively high interest and management fees, and advanced arguments which Justice Harris termed as “bogus”.

Section 227 of the Business Corporations Act allows shareholders to apply for remedies when they’ve suffered harm that is typically, but not necessarily, separate from the harm suffered by the corporation as a whole. The remedy granted in this case was the return of the minority shareholders’ initial investment plus interest. In addition, the Court of Appeal found that punitive damages of $100,000 were appropriate, considering the egregious conduct of the Defendants. While the Defendants tried to assert that a derivative rather than an oppression action ought to have been brought by the shareholders, meaning that the Plaintiffs would have additional hurdles in order to obtain financial relief, the Court held that the oppression action was supported. Typically, if harm has been done to the company itself, a derivative action is appropriate. Oppression actions are brought when harm has been done to individual shareholders. But the Court held that the remedy of oppression will not be limited by mere corporate structure, and that the substantive reality of how a company is operated, instead of the legal from, is what matters.

On appeal, the Defendants argued that the trial judge had failed to recognize the formalities of corporate governance when imposing personal liability on the Defendants as directors. But based on the Defendants’ wrongful conduct and taking financial advantage, personal liability had to be imposed despite the separate legal personality of Canex as a corporation. Further, one of the Defendant’s personal liability survived beyond her declaration of bankruptcy because the fraud was committed while acting in a fiduciary capacity. While directors typically only owe fiduciary duties to a company itself rather than individual shareholders, the Court recognized the reality of this closely held corporation. Here, the two shareholders were in a special relationship of trust and dependency with the directors; the directors were expected to manage the company’s financial records honestly and in good faith, yet breached those duties. The Court brought home its disapproval of the Defendant’s oppressive conduct by imposing punitive damages. These types of damages are appropriate when conduct is so high-handed or malicious that it offends the Court’s sense of dignity. Particularly relevant for closely held corporations such as Canex, this case highlights the Court’s willingness to offer expanded remedies to minority shareholders based on the substantive conduct that occurred, and to turn down arguments based on technical corporate structure.

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Is a Strata Corporation Able to Disallow Residents Under a Certain Age?

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Strata corporations (“stratas”) are legal entities with all the powers of natural persons at full capacity. They’re often created to divide buildings and/or parcels of land into individually owned pieces, while the common land and amenities are owned together. Stratas have certain responsibilities under the Strata Property Act and Regulations, including being responsible for common expenses and disclosing Rules and Bylaws which apply to occupiers. Stratas also have the power to provide Bylaws for the management and use of the lots, including prohibiting occupants under certain ages.

Age is not a protected ground of discrimination under the Human Rights Code in the context of property purchases, but race and gender, among other factors, are included. Stratas have the power to disallow would-be owners who are not of a certain age. The Human Rights Code gives broader protection covering age-based discrimination to tenants, as opposed to owners. Stratas may only require that tenants be at least 55 years of age. They cannot require, for example, that tenants be at least 19 years of age, but the strata could require that owners be at least 19 years of age. Individuals who resided within the strata before the time that an age restriction bylaw was passed are considered ‘grandfathered’ in and may continue residing despite the new provision.

Age-based requirements can occasionally make it challenging for young families to find housing for purchase, but the Condominium Homeowners Association of BC reported that buildings with 19-plus age restrictions represented only a small portion of the overall market. Affordable and accessible housing is a developing area and age-based provisions may undergo further legislative reform in the future.

 

 

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