COURT OF APPEAL FOR ONTARIO

Advanced Esthetics Inc., 2016 ONCA 661

DATE: 20160908

DOCKET: C61475

Feldman, Simmons and Lauwers JJ.A.

BETWEEN

Colornow Canada Limited

Plaintiff (Respondent)

and

Rivage Institute of Advanced Esthetics Inc.

Defendant (Appellant)

Philip Smith, for the appellant

Terry Corsianos, for the respondent

Heard and released orally: August 23, 2016

On appeal from the judgment of Justice G. Dow of the Superior Court of Justice, dated November 19, 2015.

ENDORSEMENT

[1] The appellant appeals from an order dismissing its motion to set aside a default judgment.

[2] This appeal must be allowed. In our view, the motion judge erred by failing to properly assess the merits of the “wrong defendant” defence; by failing to take proper account of the potential counterclaim for rent and breach of trademark; by failing to address the prejudice to the appellant arising from the seizure of the trademark; and by failing to attempt to craft appropriate conditions on which the action could proceed on the merits.

[3] Concerning the “wrong defendant” defence, on the record before us, the only payments for the product for which the respondent claims flowed between the respondent and a company other than the appellant. Particularly in the absence of a written agreement, this factor supports the position that the appellant is not the right defendant.

[4] As for the potential counterclaim for rent, the motion judge recognized, as appears from the record, that the rental premises at issue were rented for the benefit of the respondent. The motion judge therefore acknowledged that the appellant had had some success in demonstrating that the amount of the default judgment was inflated by the respondent’s claim to be reimbursed for rental payments it made. However, what the motion judge failed to acknowledge was that the appellant also advances a counterclaim against the respondent for rental payments it (the appellant) made. Similarly, the motion judge made no reference to the evidence, that after the falling out between the parties, the respondent sold its product directly to customers without permission to use the appellant’s trademark.

[5] In all the circumstances, the appeal is allowed and the default judgment and noting of default are set aside on the following conditions:

(1) payment by the appellant of $7,500 of costs of the appeal;

(2) payment by the appellant of $22,000 of costs thrown away;

[6] The setting aside of the default judgment is conditional on those two payments being made within 30 days.

[7] The other conditions are:

(3) the appellant will file a statement of defence by the end of September, 2016;

(4) the writ of seizure and sale will stay in place; and

(5) the trademark shall be returned to the appellant within 30 days after receipt of the payment of the $29,500 costs, failing which the appellant can apply to the Superior Court to have the action dismissed.

“K. Feldman J.A.”

“Janet Simmons J.A.”

“P. Lauwers J.A.”