Claims under the Trade-marks and Competition Acts insufficient basis to stay Ontario defamation action

On December 22 2015, Justice Perell dismissed a motion to temporarily stay a defamation action in the Ontario Superior Court of Justice until completion of an action in the Federal Court involving the same parties and similar issues (2015 ONSC 7980).

Canadian Standards Association sued Gordon Knight and his corporation in the Federal Court for copyright infringement. After this litigation was started Mr. Knight set up a website which discussed the copyright litigation. CSA alleged that the commentary on Knight’s website was false and defamatory and served several libel notices on Knight, but did not immediately commence a defamation action. Instead, CSA amended its copyright claim to include claims under the Trade-marks and Competition Acts.

After the initial round of discovery was commenced in the Federal Court, CSA commenced a defamation action in Ontario, alleging that the website and a publication circulated to government departments, senior cabinet members and government committees continued to contain slanderous and defamatory statements made to discredit CSA. Knight then brought a motion under rule 21.01(3)(c) of the Rules of Civil Procedure to have the defamation action temporarily stayed until the conclusion of the Federal Court action.

Rule 21.01(3)(c) gives the Court discretion to stay an action on the ground that another proceeding is pending in Ontario or another jurisdiction between the same parties in respect of the same subject matter. Justice Perell noted that the jurisprudence establishes that the court should exercise its discretion sparingly and that a stay should only be ordered in the clearest of cases. Where only a temporary stay is sought the Court may be more prepared to grant the stay where there is a substantial overlap in the factual background and of the legal issues in the two proceedings; the determination of the issues in one proceeding will have a substantive effect on the determination of the issues in the other; and issuing a temporary stay will avoid unnecessary and costly duplication of judicial resources.

Whether the stay is permanent or temporary, the onus is on the party seeking the stay to show that it would be oppressive or vexatious or in some other way an abuse of process to have to be involved in more than one proceeding and also that the stay would not cause an injustice or prejudice to the other party.

In dismissing the motion Justice Perell noted that the defamation action has different substantive elements and different remedies compared to the Federal Court action:

[32] Mr. Knight and his corporation submit that in 2012, CSA made a tactical decision to amend the copyright action in the Federal Court and to add claims for breaches of s. 7(a) of the Trade-marks Act and s. 52 of the Competition Act rather than commencing an action in the Superior Court, which has the jurisdiction to decide all the claims and also the tort claim in defamation. They submit that CSA should be bound by its tactical decision.

[33] I disagree with this argument. It was reasonable and sensible to augment the claims within the existing Federal Court action and to give Mr. Knight and his corporation notice that CSA might bring a defamation claim if Mr. Knight and his corporation did not cease and desist from commenting about the Federal Court action on the website and in published material. Had Mr. Knight and his corporation relented, then it might be arguable that the Superior Court action should be temporarily stayed because its major work of stopping the alleged defamatory utterances and advancing the claims for general damages and punitive damages would not be pressing matters pending the resolution of the statutory claims in the Federal Court.

A copy of Justice Perell’s reasons for decision can be found here.