SUPERIOR COURT OF JUSTICE - ONTARIO
COURT FILE NO.: CV-10-411242-00
DATE: 20130104
RE:
paul ryan and 1131022 ontario inc. c.o.b. bloor street boxing & fitness
Plaintiffs/
Defendants by Counterclaim
- and -
dariusz zemla and smoothie world cafÉ c.o.b. bloor fitness 24/7
Defendants/
Plaintiffs by Counterclaim
BEFORE: Justice S. M. Stevenson
COUNSEL:
Ryan Atkinson, for the Plaintiffs
Evangelos Petropoulos, for the Defendants
DATE HEARD: December 12, 2012
E N D O R S E M E N T
Introduction
[1] The plaintiff, Paul Ryan ("Mr. Ryan") is a 75% shareholder of the plaintiff 1131022 Ontario Inc. ("113"). 113 carries on business as “Bloor Street Boxing & Fitness”. The defendant, Dariusz Zemla ("Mr. Zemla") is a 20% shareholder of 113. Mr. Ryan has been an owner and operator of Bloor Street Boxing & Fitness, located at 2295 Dundas Street West in Toronto, Ontario since 1995.
[2] In approximately March 2010, Mr. Zemla opened Bloor Fitness 24/7 and he alleges that he has been using the name, “Bloor Fitness 24/7”, since March 2010. It is located at 505 Dupont Avenue in Toronto, Ontario.
[3] The plaintiffs and defendants by counterclaim, Mr. Ryan and 113, seek an interlocutory injunction restraining the defendants from passing off their business as being related to the business of the plaintiffs. Specifically, they seek an order restraining the defendants and plaintiffs by counterclaim from: using the trade name "Bloor Fitness 24/7"; using the logo described as Exhibit "C" to the Affidavit of Robert Sisk; displaying the graphic representation of boxers and athletes represented in photographs of the interior of Bloor Street Boxing & Fitness and Bloor Fitness 24/7; using the domain name "www.bloorfitness.com" or any domain name with the word "bloor" in connection with the operation of a boxing and/or fitness facility in Toronto and using the phone number 416-645-2699 or any similar phone number that would cause the public to believe that the business of the plaintiffs and that of the defendants are related.
[4] Mr. Ryan and 113 also seek a declaration that Mr. Zemla shut off the plaintiffs' former website "www.bloorboxing.com" and caused it to crash and that Mr. Zemla is responsible for all ensuing damages. They also seek an order compelling Mr. Zemla to provide written permission to Mr. Ryan and Ryan Atkinson (counsel for the plaintiffs) to obtain directly all information and documentation that relates in any way to the domain name "www.bloorboxing.com" from any Internet, website, e-mail, or domain name service provider, including but not limited to the domain service provider "Names Direct".
[5] Mr. Ryan and 113 further seek an order compelling the production of documents by the defendants as requested in counsel's letter to the defendants' counsel dated October 4, 2012, or, in the alternative, to produce a better and further Affidavit of Documents.
The Position of the Plaintiffs
[6] In the summer of 2009, Mr. Ryan and Mr. Zemla began making plans to open a second location for Bloor Street Boxing & Fitness at 505 Dupont Avenue in Toronto, Ontario, known as “Bloor Fitness 24/7”. The plaintiffs state that Mr. Ryan and Mr. Zemla verbally agreed that they would be partners and that Mr. Zemla would be primarily responsible for setting up Bloor Fitness 24/7 and that he would receive an equal ownership stake in Bloor Fitness 24/7 as consideration for his efforts. However, they contend that Mr. Ryan was to be the controlling shareholder and director of Bloor Fitness 24/7.
[7] It is the plaintiffs' position that there was a falling out between the parties when Mr. Zemla advised Mr. Ryan that he was taking 100% ownership and control of Bloor Fitness 24/7.
[8] The plaintiffs allege that Mr. Zemla has continued to use a name, branding, web address, logos, phone number and interior design at Bloor Fitness 24/7 that are similar to that of Bloor Street Boxing & Fitness without permission of the plaintiffs. They contend that they have made repeated demands of the defendants to cease and desist from passing off their business as being related to that of the plaintiffs’, but the defendants have not ceased these activities. The plaintiffs contend that this repeated refusal has necessitated the request for an interlocutory injunction.
[9] The plaintiffs also argue that the Bloor Street Boxing & Fitness logo was created by Mr. Ryan's brother and has been in use in its original and modified form since on or about 1994. They further submit that the Bloor Street Fitness sign on the front of the building was installed at Bloor Street Boxing & Fitness in approximately 2008.
[10] They submit that they have established substantial goodwill in their boxing and fitness products at Bloor Street Boxing & Fitness as evidenced by annual membership sales approaching and exceeding $1 million over the last three years.
[11] It is the plaintiffs' position that they have suffered significant damages, mainly from a reduced growth in new memberships, and they contend that members are being diverted to Bloor Fitness 24/7.
[12] The plaintiffs also allege that in November 2011, Mr. Zemla used his administrator control and access to the Bloor Street Boxing & Fitness website and Internet domain to sabotage the website, causing it to crash. This had the effect of taking the website off-line so that Internet users could not access the website.
The Position of the Defendants
[13] The defendants counter that the plaintiffs do not meet the test for an interlocutory injunction. The defendants submit that most of the information before the Court is based on the Affidavit of Robert Sisk which is either inadmissible hearsay, contains unsubstantiated statements or, is an unqualified opinion or evidence that lacks the weight to justify the relief that the plaintiffs are seeking. They contend that neither Mr. Ryan nor any officer, director or employee of 113 have sworn affidavits regarding the issues before the Court. They further submit that Mr. Sisk mostly deposes to what he was told by Mr. Ryan and Mr. Michael Savella ("Mr. Savella"), 113's General Manager, and that Mr. Sisk does not have personal knowledge of the relationship between Mr. Zemla and Mr. Ryan.
[14] It is also the defendants' position that Bloor Fitness 24/7 began using both the name Bloor Fitness 24/7 and the website domain name "www.bloorfitness.com" by March 31, 2010 at the latest and have continued to do so since that date.
[15] The defendants state that 113 has changed the name of the business at least once and that it has also changed the logo. They contend that there is evidence that the logo that 113 currently uses was not used until February 2011 and that the logo currently in use by 113 is not similar to the logo that it formally used. They submit that 113's current use of the logo is both on the exterior of its building out of which it operates and on its website. They further contend that there is no evidence that Mr. Zemla or Bloor Fitness 24/7 are trying to pass off the new logo that Bloor Street Boxing & Fitness is currently using. They submit that Bloor Street Boxing & Fitness uses the old logo in the interior of its premises but there is no evidence that 113 is using the old logo to advertise the services that it offers.
[16] Mr. Zemla, in his Affidavit, deposes that Mr. Bryant acknowledged his consent to Mr. Zemla and Bloor Fitness 24/7 using both the name Bloor Fitness 24/7 and the associated website. The defendants also argue that the name "bloor" is either a descriptive or generic term.
[17] The defendants further contend that the plaintiffs have waited over two years since the issuing of their claim to bring this motion for an interlocutory injunction. In the interim they have known about the use of both the name Bloor Fitness 24/7 and the website.
[18] The defendants deny that the plaintiffs have suffered any damages and the plaintiffs have not shown any evidence that 113's website did in fact crash and if it did, that Mr. Zemla caused the crash. They contend that Mr. Sisk's statement is that Bloor Street Boxing & Fitness's website domain name crashed in November 2011; however, 113 changed its website domain name from www.bloorboxing.com to www.bloorstreetfitness.com in or around November 2010.
[19] It is also the position of the defendants that the relief that the plaintiffs are seeking constitutes summary judgment and that a proper summary judgment motion should have been brought. They further contend that they lack the capacity to compel the Internet service providers to produce the documents that the plaintiffs are seeking.
[20] With respect to the request by the plaintiffs to produce documents previously requested, the defendants submit that the plaintiffs have not shown that the alleged oral agreement (that 113 and Bloor Fitness 24/7 would own Bloor Fitness 24/7 on a 50-50 basis) is sufficient to obligate the defendants to produce the documents that they have requested.
[21] The defendants also submit that the delay by the plaintiffs in bringing this motion for an interlocutory injunction should cause the motion to be dismissed. They contend that the doctrine of laches may defeat an equitable claim and they rely upon the decision of Friends of Niagara District Secondary School et al. v. District School Board of Niagara, 2010 ONSC 4756 at paras. 5, 7 and 11 in support of their position.
[22] They also submit that it is settled law that acquiescence to the allegedly infringing conduct may also defeat an equitable claim. In support of their position, they rely upon the decision of IAMAW v. Air Canada et al., 2011 ONSC 2368 at para. 36.
The Law
[23] As set out in s. 101 of the Courts of Justice Act, R.S.O. 1990, c. C.43 and in Rule 40.01 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, a judge may grant an interlocutory order or mandatory order on such terms as are considered just.
[24] In order to succeed on this motion, the plaintiff must meet the three-part test set out in RJR-MacDonald Inc. v. Canada (Attorney General), 1994 117 (SCC), [1994] 1 S.C.R. 311, [1994] S.C.J. No. 17, at para. 43:
i) there is a serious issue to be tried;
ii) irreparable harm will be suffered by the applicant if the injunction is not granted; and
iii) the balance of convenience favours granting the injunction.
Issues
[25] 1) Do the plaintiffs meet the three-part test for the granting of an interlocutory injunction?
i) Is there a serious issue to be tried?
ii) Will the plaintiffs suffer irreparable harm if the injunction is not granted?
iii) Have the plaintiffs established that the balance of convenience favours it?
Are the plaintiffs entitled to a declaration that Mr. Zemla crashed the www.bloorboxing.com website and that he is liable for all damages that ensued from such action?
Are the plaintiffs entitled to an order compelling Internet service providers to produce documents relating to the website domain name "www.bloorboxing.com"?
Are the plaintiffs entitled to an order compelling the production of documents by the defendants as requested by counsel for the plaintiffs in a letter dated October 4, 2012, or, in the alternative, an order for the defendants to produce a further and better Affidavit of Documents?
1) Do the plaintiffs meet the three-part test for the granting of an interlocutory injunction?
(i) Is there a serious issue to be tried?
[26] The plaintiffs submit that they have established substantial goodwill as is evidenced by their annual membership sales approaching and exceeding $1 million over the last three years and that the defendants have misrepresented their gym as being related to or affiliated with the plaintiffs' gym. This, they submit, is misleading to the public and has created a false impression that the defendants' business is in some way approved or endorsed by the plaintiffs. As such, the plaintiffs contend that the defendants have capitalized on the plaintiffs' reputation and goodwill which has resulted in actual or potential damage to the plaintiffs.
[27] The plaintiffs argue that the actions of the defendants support a claim for passing off on the following grounds:
i) The plaintiffs' business has been operating since 1995. It had displayed the "Bloor Street Fitness" sign on the front of the gym for approximately 2 years prior to the defendants operating their business known as "Bloor Fitness 24/7";
ii) The plaintiffs have used a logo and its modified version from 1995 to present. The look and feel of the logo is almost identical to the one the defendants began using in July 2010;
iii) The plaintiffs' web address is "www.bloorstreetfitness.com" which is similar to the defendants' web address of "www.bloorfitness.com". The plaintiffs' and defendants' website for each displayed in the top three search results on Google for the search terms "Bloor Street Fitness" and "Bloor Fitness". Additionally, the defendants' search result indicates "Dupont Street Location" which implies that Bloor Fitness 24/7 is affiliated with the plaintiffs' business;
iv) The defendants have imitated the plaintiffs' business phone number with the plaintiffs' phone number being 416-535-2699 and the defendants' phone number being, 416-645-2699;
v) The plaintiffs' business is located near the corner of Bloor Street and Dundas Street, connecting the location with the business name, while Bloor Fitness 24/7 is not located anywhere near Bloor Street and is near the corner of Dupont Street and Bathurst Street. This therefore implies a connection with the plaintiffs' business.
[28] The defendants counter that there is no serious issue to be tried. They contend that the plaintiffs have not produced any evidence that the word "bloor" is distinctive of its wares, services and business. They also contend that there is no confusion between the two names and that the plaintiffs have not produced any evidence that they were using the name "Bloor Street Boxing & Fitness" prior to the defendants’ use of the name "Bloor Fitness 24/7".
[29] I do find that there is a serious issue to be tried. The threshold to establish whether there is a serious issue to be tried is low. The plaintiffs need only establish that the claim is not “frivolous and vexatious”. RJR-MacDonald, supra, at para. 44.
[30] I do not find that the claims made by the plaintiffs are frivolous or vexatious as there are striking similarities between the business names used by the parties, the logos used, the interiors of the parties' premises, the domain names and the telephone numbers; all of which could easily imply that there is a connection between the two businesses such that the general purchasing public could reasonably conclude that the two businesses are affiliated with one another. Further, the fact that the defendants' search result on Google indicates "Dupont Street Location" may imply to the public that Bloor Fitness 24/7 is affiliated with the plaintiffs' business.
(ii) Will the plaintiffs suffer irreparable harm if the injunction is not granted?
[31] Having found that there is a serious issue to be tried, the second part of the test requires the Court to determine if the plaintiffs will suffer irreparable harm if the interlocutory injunction is not granted.
[32] The plaintiffs submit that their evidence demonstrates that the plaintiffs suffered a reduced growth in membership sales shortly after the defendants "began mimicking" the plaintiffs' business and manipulating its website information. They contend that it is difficult to determine what quantum of harm was exacted by the defendants' actions, but submit that such damages exist when the two businesses provide the same services, in relatively close proximity with nearly identical names, branding and websites.
[33] They also contend that as a result of the defendants' actions, they have experienced the "loss of actual customers and potential customers, actual and potential goodwill, and a diminution of the plaintiff's reputation"; each of which amounts to irreparable harm. They conclude that the differences between the names, logos, interior design and websites of the two businesses are subtle and they are so similar to one another that the public could reasonably conclude that the parties are affiliated.
[34] The defendants counter that the plaintiffs have not produced any evidence to show that they will suffer irreparable damage if an injunction is not granted. They submit that any evidence the plaintiffs have produced is either inadmissible or should be given little to no weight. Additionally, they submit that the plaintiffs have claimed damages in the amount of $150,000 for passing off. As Mr. Zemla is a 20% shareholder of 113 and 113 alleges to have earned sales approaching and exceeding $1 million over the last three years, there is no evidence to suggest that Mr. Zemla would not be able to satisfy an award for damages.
[35] I do not find that the plaintiffs will suffer irreparable harm if an interlocutory injunction is not granted. As stated by Lauwers J. in Paradigm Shift Technologies Inc. v. Oudovikine, 2012 ONSC 148, [2012] O.J. No. 190 (S.C.J.), the moving party must show evidence of irreparable harm that is clear and not speculative. At para. 54 of that decision, Lauwers J. quoted from the decision in Barton-Reid Canada Ltd. v. Alfresh Beverages Canada Corp., 2002 34862 (ON SC), [2002] O.J. No. 4116, at para. 18:
[E]vidence of irreparable harm must be clear and not speculative. Barton-Reid has provided no real evidence, other than its bald statement, that it will either lose market share, or be put out of business. Lost sales and market share can be compensated in damages, and can generally be calculated on the basis of sales histories, and sales projections. Although perhaps difficult, the damages can be calculated. If the nature of the damage can be calculated in money, then no matter how hard it may be to quantify the damages, the court should decline to grant an injunction.
[36] The plaintiffs have not produced sufficient evidence to support the contention that they will suffer irreparable harm if an interlocutory injunction is not granted. I agree with the defendants that the evidence provided by the plaintiffs on this motion through the Affidavit of Mr. Robert Sisk, a non-party who resides in New Jersey, and who has acted as an online marketing consultant for the plaintiffs since 2008, is replete with hearsay evidence, unsubstantiated statements and unqualified opinion.
[37] Under the Rules of Civil Procedure an affidavit filed on a motion may contain statements of the deponent’s information and belief, if the source of the information and the fact of the belief are specified in the affidavit; however, when the court is being asked to grant an injunction that has serious consequences for the parties, the evidence to support the request for injunctive relief should be strong. Mr. Sisk does not provide information as to how he knows what he is swearing to and there is no evidence of this in his affidavit. The fact that Mr. Ryan did not swear an affidavit is concerning. Mr. Ryan has personal knowledge of his relationship with Mr. Zemla and is a party to the conversations that they would have had concerning these businesses. Mr. Ryan would also have personal knowledge as to who created the logo, when it was used, when it was modified and how it is being used now.
[38] Mr. Sisk does not appear to have personal knowledge of any circumstances that may have caused Bloor Street Boxing & Fitness's website to crash, if it did in fact crash. Mr. Sisk obtained his information regarding Mr. Zemla being responsible for crashing the website from Mr. Savella, who is the general manager of Bloor Street Boxing & Fitness. Mr. Sisk states in his Affidavit: "Savella further advised me and I verily believe that he is convinced beyond any doubt that Zemla was responsible for crashing the website." I query why Mr. Savella did not swear an affidavit if he had personal knowledge of this and why Mr. Ryan did not swear an affidavit if he had personal knowledge of the damage that the plaintiffs have suffered financially. I questioned counsel for the plaintiffs during the course of his submissions as to why there was no evidence from those who would have personal knowledge with respect to a number of these issues and I was advised by counsel that he felt that Mr. Sisk was in the best position to provide information on all of the issues. I do not agree with this conclusion as the Court did not have before it the best evidence on which it could rely to make a decision.
[39] I was also concerned by the fact that Mr. Sisk provided his opinion on who could deliberately shut off a domain website, and how the alleged crash of the plaintiffs’ website domain name and the defendants allegedly mimicking the business of the plaintiffs has resulted in a significant reduction in projected membership sales for the plaintiffs for the 2012 fiscal year. I agree with counsel for the defendants that Mr. Sisk does not state the basis of his opinion or why he is qualified to provide an opinion. Additionally, the information is hearsay and unverified.
[40] The evidence provided by the plaintiffs with respect to damages, which is a graph provided at Exhibit “H” of Mr. Sisk's Affidavit that purports to show the trend in membership sales at Bloor Street Boxing & Fitness from December 2009 to August 2012, is insufficient to prove irreparable harm. Mr. Sisk deposes that the graphic representation was explained to him by Mr. Savella and that Mr. Sisk has knowledge that the graphic representation was derived from factual statistics of the business carried on by the plaintiffs. There is no indication as to where these statistics came from, whether they are authentic and what documents formed the basis of this graphic representation. Additionally, there is no evidence that the trend in membership fees is based solely on the alleged passing off by the defendants as there could be a variety of reasons why membership sales have tapered off, including rapid growth in memberships that have simply plateaued after sustained growth for a number of years. There could also be other competition from third parties that has not been addressed.
[41] Additionally, no client lists have been produced evidencing that clients have transferred their business to the defendants nor have any affidavits been sworn by former clients evidencing that they have transferred their business to the defendants. Most importantly, based on the materials filed for this motion, evidence of irreparable harm is not clear and there is no evidence that the defendants would be unable to satisfy an award of damages. As in Barton-Reid Canada Ltd. v. Alfresh, any lost sales and market share of the plaintiffs can be compensated in damages and the nature of the damage can be calculated in money. As such, the Court should decline to grant an injunction.
(iii) Has the plaintiff established that the balance of convenience favours it?
[42] Given my determination on irreparable harm, it is not necessary to consider the balance of convenience in detail. However, I do find that the balance of convenience favours the defendants.
[43] The plaintiffs have taken over two years since this litigation commenced to bring this motion for an interlocutory injunction. I am not convinced, based on the evidence before me, that any goodwill built up by the plaintiffs has been seriously damaged by the defendants as the plaintiffs contend, as there is insufficient evidence before the Court at this point to support a conclusion that damage to the plaintiffs' goodwill has occurred in the last two years or will occur if the interlocutory injunction is not granted.
[44] Additionally, there is an issue with respect to whether the plaintiffs were using the name Bloor Street Boxing & Fitness prior to the defendants' use of the name Bloor Fitness 24/7. There is also an issue as to whether the plaintiffs consented or acquiesced to the defendants' use of the name Bloor Fitness 24/7 and the associated website as of March 2010.
[45] Based on my findings that the plaintiffs have not met the burden with respect to the second and third parts of the test for an interlocutory injunction as set out in RJR MacDonald, the motion brought by the plaintiffs with respect to their request for an interlocutory injunction is dismissed. Given my finding with respect to the interlocutory injunction, it is not necessary to address the issues that the defendants have raised with respect to laches and acquiescence.
2) Are the plaintiffs entitled to a declaration that Mr. Zemla crashed the www.bloorboxing.com website and that he is liable for all damages that ensued from such action?
[46] I agree with the submissions of counsel for the defendants, that this is a request in effect for a motion for summary judgment. As per the Practice Direction for motions in the Toronto region, a motion for summary judgment must be scheduled through the Motions Scheduling Court. In addition, there is insufficient evidence before the Court to make this determination given most of the evidence concerning this issue is hearsay evidence and has little weight. As such, this request by the plaintiffs is dismissed.
3) Are the plaintiffs entitled to an order compelling Internet service providers to produce documents relating to the website domain name "www.bloorboxing.com"?
[47] I find that there is insufficient evidence before the Court in order to properly determine whether the plaintiffs are entitled to the documents they seek and I decline to grant the order as requested.
4) Are the plaintiffs entitled to an order compelling the production of documents by the defendants as requested by counsel for the plaintiffs in a letter dated October 4, 2012, or, in the alternative, an order for the defendants to produce a further and better Affidavit of Documents?
[48] The defendants contend that unless Mr. Ryan and 113 prove that they are in fact shareholders of Bloor Fitness 24/7, the defendants are under no obligation to produce the documents that have been requested, including financial statements, bank account statements and sales reports for Bloor Fitness 24/7 from when it opened its business to current. The plaintiffs contend there was an alleged oral agreement that Mr. Ryan and Mr. Zemla would own Bloor Fitness 24/7 on a 50-50 basis.
[49] I was advised by counsel that despite the fact that this litigation was commenced over two years ago, examinations for discovery have not taken place. It must first be determined if the documents that are being sought are relevant and it would seem logical for the parties to conduct examinations for discovery in order to further examine this issue and if they have a disagreement as to the relevancy of the requests sought, these can be addressed in a further motion before a master. There is also insufficient evidence before the Court in order to properly determine this issue at this time and I decline to grant the order as requested.
Order
[50] I make the following order:
i) The motion by the plaintiffs is dismissed in its entirety without prejudice to the plaintiffs' right to bring a further motion for production of documents as set out in paragraphs (c) and (d) of its amended Notice of Motion filed with the Court on December 12, 2012.
ii) I urge the parties to agree on costs but if they are unable to do so, the defendants shall serve and file written costs submissions, along with a costs outline, within 20 days. The plaintiffs shall serve and file written costs submissions, along with a costs outline, 20 days thereafter.
Stevenson J.
DATE: January 4, 2013