Law Times

Page 6 January 21, 2013 Law Times • COMMENT u Editorial obitEr By Glenn Kauth Trouble brewing at Justice Canada I n a sign of potential discord at the federal Justice Department, a government lawyer has gone to court over his employer's duty to inform Parliament of legislation that may violate the Charter of Rights and Freedoms. According to The Globe and Mail, the lawyer, Edgar Schmidt, is challenging the government over the interpretation of that duty. He argues the test for informing Parliament is "whether, on balance, a measure is likely not in compliance," the Globe reported last week. But according to Schmidt, the practice has been to approve measures with a five-per-cent chance of success. Following his Federal Court action, the department suspended Schmidt without pay, the Globe reported. It seems odd for a lawyer to go out on a limb like that, especially given the financial and professional consequences of taking an employer as powerful as the federal government to court. The current federal government, of course, doesn't have a reputation as being kind to whistleblowers. The case, then, looks like an instance of a federal lawyer having had enough of an intractable government. After years of watching the government take legal positions that go against prevailing legal logic and court judgments themselves — the Omar Khadr case comes to mind — is this a sign that federal lawyers are fed up? According to the Globe story, Schmidt brought his concerns to his superiors last year. So he obviously tried to deal with the matter internally before taking the drastic step of going to court. Schmidt, 60, must feel he has little to lose. While the case raises questions about lawyers' duties to their clients and employees' obligations to their employers, Schmidt's whistleblowing court action is welcome. The department should, of course, be informing the public and Parliament about potential Charter violations in its laws and regulations. And a five-per-cent likelihood of success, if that's the practice, seems too low of a threshold for informing Parliament, especially given the concerns raised about a host of federal government laws introduced in recent years. So we should be grateful for Schmidt's intervention. In the meantime, the case is a sign of discord at Justice Canada. Perhaps the department should work harder at listening to its employees rather than continuing to push the prevailing government orthodoxy of dismissing those who challenge it. — Glenn Kauth Proof of actual damages required in passing-off case BY BRUCE ROHER For Law Times u SPEAKER'S CORNER A business that represents its products or services to the market in such a way that confuses consumers by leading them to believe it's selling the products or services of another company may be liable under the tort of passing-off. That is, a business may not pass off its goods or services as those of another. In the case of Dentec Safety Specialists Inc. v. Degil Safety Products Inc., the Ontario Superior Court concluded the plaintiff suffered losses as a result of passingoff. The defendant registered a domain name at dentecsafety.ca, which was similar to the plaintiff's dentecsafety. com web site, and then redirected potential Dentec customers to the defendant's degilsafety.com page. Degil admitted that it registered the dentecsafety.ca domain name and for a 5-1/2-month period redirected all Internet traffic through dentecsafety.ca to the degilsafety.com web site.  After reviewing the legal elements to establish the tort of passing-off, the court concluded Degil was liable to the plaintiff. However, Degil argued the plaintiff was unable to establish that it lost any customers or sales through this redirection of Internet traffic and that as a result, there could be no compensatory damages payable. The plaintiff was seeking $10,000 in pecuniary losses and $50,000 in punitive damages. As stated by the court, damages were difficult to prove in this case. "Having concluded that the plaintiff has Law Times blank 'home page,' Internet traffic to the 'site' still did not abate. This suggests that it is reasonable to conclude that, between February 23 and August 6, 2009, it is likely that considerable Internet traffic was redirected to Degil through the dentecsafety. suffered actual pecuniary losses by reason of the defen- ca domain name, and that many potential Dentec cusdant's passing off, I must assess and determine the quan- tomers made their necessary industrial safety product tum of those damages," wrote Justice Kenneth Campbell.  purchases from Degil." "This task is made more difficult because there is no Furthermore, the court, applying the factors recogclear and direct evidence as to the sales, customers or nized by the Supreme Court of Canada in Whiten v. business the plaintiff may have lost due to the defendant's Pilot Insurance Co., didn't accept that the misconduct passing-off, and no clear and direct evidence of any con- by the defendant was so egregious as to merit punitive fusion on the part of any member of the public as a result damages. For example, one of the key factors in the deciof the passing-off. At the same time, however, it would be sion to not award punitive damages was that the defenunreasonable to conclude that the plaintiff suffered no dant stopped engaging in the misconduct shortly after damages as a result of the defendant's passing-off." learning that the plaintiff took issue with it. The plaintiff In 2009, the plaintiff had 570,941 hits on its dentec- initiated the lawsuit on July 7, 2009, and the redirection safety.com web site. The defendant redirected Internet stopped on Aug. 6, 2009. traffic from dentecsafety.ca to its own web site during In this case, it appears the defendant received a the 5-1/2-month period from Feb. 23, 2009, to Aug. slap on the wrist since the plaintiff didn't prove it had 6, 2009.  The court concluded that the plaintiff was suffered significant damages from its actions. In othentitled to at least some modest compensatory dam- er cases, expert evidence could establish more subages. "While there is not statistical evidence available stantial damages through, for example, details on the as to how many hits dentecsafety.ca experienced during extent of Internet traffic attracted to the competing this 5-1/2-month period, the evidence does show that, web site, the decline in sales of the plaintiff's business, even after Degil ceased redirecting the dentecsafety. and the estimated loss in sales. LT ca domain name to degilsafety.com, Internet traffic on the dentecsafety.ca domain name continued.  In other uBruce Roher is a partner in the business valuations and words, according to the evidence, even after August 6, litigation support practice at the Toronto office of Fuller 2009, when Internet visitors to the dentecsafety.ca web Landau LLP.  He can be reached at broher@fullerlandau. address would be met with nothing but an entirely com or 416-645-6526. Thomson Reuters Canada Ltd. One Corporate Plaza, 2075 Kennedy Rd., Toronto, ON • M1T 3V4 Tel: 416-298-5141 • Fax: 416-649-7870 • www.lawtimesnews.com Group Publisher . . . . . . . . . . . . . . . . . . . Karen Lorimer Editorial Director . . . . . . . . . . . . . . . . . . . Gail J. Cohen Editor. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Glenn Kauth Staff Writer . . . . . . . . . . . . . . . . . . . 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