ONTARIO SUPERIOR COURT OF JUSTICE

COURT FILE NO.: CV-10-395577
DATE: 20140325

BETWEEN:

BEDESSEE IMPORTS LTD. and BEDESSEE IMPORTS INC.
Plaintiffs

– and –

K M IMPORTS INC. and KHALIL MOHAMMED
Defendants

Peter E. J. Wells and Joanna Vatavu, for the plaintiffs
Khalid Baksh and Akbar Mohamed for the defendants

Heard at Toronto: October 16, 17, 18 and 19, 2012

Reasons for judgment

Stinson J.

[1] On the consent of the parties, this action was retried by me on the transcript of the trial proceedings, the trial judge having been prevented from rendering a decision. In addition to the trial transcript, through the use of the digital audio recording maintained by the court, I have had the benefit of listening to substantial portions of the trial testimony. This decision, therefore, is founded upon a comprehensive review of the trial evidence, both in transcript and audio format, as well as the exhibits and the submissions made by counsel at the trial.

[2] This action concerns claims for the common law tort of defamation, together with statutory causes of action pursuant to s. 53.2 of the Trade-marks Act, R.S.C. 1985 c. T-13, founded upon breaches of s. 7 (unfair competition) and s. 22 (depreciation of goodwill) of that statute. The plaintiffs also assert claims based on the tort of unlawful interference with economic relations. All of the claims are founded upon allegations that, between January and June 2009, the defendants, by their statements and conduct, made false, misleading and defamatory statements about the plaintiff and its products which had the effect of discrediting the plaintiffs' wares, services and business and depreciating the goodwill in their trademarks.

[3] The case involves resolution of several factual disputes, including whether the statements and conduct in question are properly attributable to the defendants. The case also raises legal issues relating to limitation periods, causes of action and defences in defamation, and others.

facts

The parties

[4] The plaintiffs are related corporations, that trace their origins to a retail store opened in Toronto in 1977 by the Bedessee family. Bedessee Imports Ltd. ("BIL") imports and distributes Caribbean foods in Canada. It operates from a large warehouse and manufacturing facility in Scarborough. Its Canadian operations are managed by Rayman Bedessee and Invor Bedessee, who are two sons of the founder of the business.

[5] Bedessee Imports Inc. ("BII") operates a similar business in the United States, based in New York. It also has a wholesale outlet in Florida. Like BIL, the operations of BII are managed by two other Bedessee brothers who also are sons of the original founder. A fifth brother, Ravi Bedessee, operates a grocery store in Florida. Save where it is necessary to distinguish between the two plaintiffs, I shall refer to them jointly as "Bedessee".

[6] When BIL started business, it concentrated on Caribbean and West Indian food items. It now sells over 100 different brands of products, including house brands. BIL owns over 70 Canadian trademarks, including the trademarks “Bedessee’s” and "Demerara Gold".

[7] The defendant K M Imports Inc. ("KMI") is also an importer and distributor in Canada of Caribbean and West Indian products. KMI is a competitor of BIL. Its business was founded by the defendant Khalil Mohammed in 1994; it was incorporated in 2000. KMI imports and distributes West Indian products to ethnic stores and chain stores.

[8] The businesses and activities of two other enterprises are also relevant to this dispute, although neither is a party to this lawsuit. The first is Chief Brand Products Limited ("CBP"). CBP is a business that is located in the Caribbean country of Trinidad and Tobago. It is engaged in the business of manufacturing and exporting Caribbean food products. CBP has distributors located in various countries, including Canada. The relationships between CBP and the plaintiffs and between CBP and the defendants featured prominently in the trial evidence. BIL began importing products from CBP into Canada in 1998. KMI began importing CBP products from Trinidad into Canada in around 2000, purchasing them not from CBP, but from the local Trinidad market. KMI later became a direct importer and distributor of CBP products in Canada. CBP stopped supplying products to Bedessee in mid-2009. The circumstances of the termination of that relationship are at the heart of this case.

[9] The other enterprise that featured prominently in evidence was the Guyana Sugar Corporation Inc. ("GuySuCo"). GuySuCo was formed in 1976 when the government of the South American country of Guyana nationalized several large sugar manufacturing operations in that country. One of the products manufactured by GuySuCo is marketed under the name "Demerara Gold" sugar. Bedessee had been using “Demerara Gold” as a trademark in Canada and the United States as early as 1984, for sugar and other products.

[10] Beginning in June 2009, GuySuCo began a public campaign against Bedessee asserting that the use by Bedessee of “Demerara Gold” as a trademark amounted to counterfeiting of GuySuCo's product. Allegations to this effect were published in a number of publications, including a newspaper called the Guyana Current, that is published in Ontario. Among other things, the Guyana Current reported that GuySuCo had accused Bedessee of having "a reputation to deceitfully brand and package its product" and "a reputation of dishonesty in marketing, branding and packaging its products in order to deceive West Indians residing in North America". As a result of the publication of these and other statements, Bedessee commenced Action CV-09-381202 against GuySuCo and a number of other defendants. The significance in the present proceeding of the GuySuCo campaign against Bedessee, is the allegation that the defendants republished the GuySuCo allegations about Bedessee to CBP, as part of a strategy to displace Bedessee as CBP's representative in Canada.

Relations among CBP, BIL and KMI

[11] As I have mentioned, BIL began to import CBP goods to Canada in the late 1990s. Prior to that time CBP had a very small local distributor in Canada, who covered some very small stores. According to the evidence of Rayman Bedessee, his company replaced the prior distributor and became CBP's major distributor in Canada. Although there was no written distribution agreement, according to Mr. Bedessee, he told CBP that if it sold products to his company, it should not sell to anyone else, because having two or three people selling the same products did not make any logical sense in the small Canadian market.

[12] The billing arrangement between BIL and CBP was that BIL would send a pro forma order to Trinidad, CBP would approve and price the pro forma order, BIL would make payment and CBP would then ship the product to Canada.

[13] In the period between 2003 and 2009, BIL imported approximately $1 million worth of CBP products into Canada. In the last full year of their relationship, 2008, BIL imported $227,000 worth of CBP goods. In turn, BIL resold these goods to retail stores, with an average markup of between 20 and 24%. At the peak of the relationship, BIL sold approximately 50 different items supplied by CBP. BIL also promoted CBP products by way of advertising.

[14] Beginning in 2002, CBP also supplied goods directly to KMI, for resale in the Canadian market. Prior to this time KMI had been a customer of BIL for CBP products. BIL complained to CBP regarding its direct sales to KMI. CBP responded that KMI was going to import products in order to service restaurants and small stores that BIL was not covering. BIL was not happy with this but did not make an issue about it.

[15] By 2008, CBP had added a third Canadian distributor, Chelsea. The following table sets out the volume of CBP products imported into Canada by these three distributors from 2006 through June 2009:

Period
BIL
KMI
Chelsea

2006
$189,147.90
$85,509.14
nil

2007
$173,277.15
$54,024.50
nil

2008
$227,507.25
$65,605.00
$45,080.00

Jan – June, 09
$33,798.50
$139,060.00
$31,000.00

[16] It may thus be seen that, in the years leading up to 2009, CBP's sales to BIL for the Canadian export market were more than double the volume of its sales to other distributors who serviced the Canadian market. That changed radically in 2009, when CBP stopped making direct sales to BIL and ended their distributorship relationship. One of the principal disputes in this lawsuit is the cause of CBP's decision to end its relationship with BIL.

[17] By 2005, the volume of KMI’s imports of CBP products to Canada had grown to the point where the orders were being placed by container load. KMI managed to make inroads into chain stores, such as Price Chopper and others. KMI succeeded in getting CBP products listed by the Electronic Commerce Council, such that they had SKU numbers and bar codes that allowed them to be scanned electronically at checkouts in supermarkets. Other labelling requirements for sale in the Canadian market were also satisfied.

[18] By late 2008, KMI’s relationship with CBP was growing. To further increase the volume of its sales in the Canadian market, KMI sought and received from CBP special pricing on certain products, so that they could be offered by the ultimate retailer as part of special sales.

[19] For its part, through the end of 2008 and into 2009, BIL continued its historic relationship with CBP. It placed and received delivery of an order from CBP for almost $49,000 worth of goods in November 2008 and a further $34,000 worth of products in May 2009.

[20] In August 2009, BIL placed a further order with CBP, following its usual practice of submitting an order, and awaiting a pro forma invoice from CBP so that it could pay for the goods and take delivery. Despite a number of follow-up emails, CBP did not respond to BIL's order. Finally, on November 26, 2009, BIL received a five word email from CBP’s Export Manager, Zameer Hosein: "Contact KM Imports for supply". Thus came to an end the 10 year distributorship relationship between CBP and BIL.

[21] Meanwhile, CBP continued to deal with KMI. With the severance of relations between CBP and BIL, KMI became the principal importer and distributor of CBP’s products in Canada. The direct relationship between CBP and BIL never resumed.

The impugned communications

[22] In this lawsuit, BIL complains that the severance of its Canadian distributorship relationship with CBP was caused by defamatory and derogatory communications made to CBP by KMI. These communications, it is alleged, caused CBP to become unhappy with and lose confidence in BIL, despite the fact that BIL was CBP’s leading Canadian distributor. Whether there was a cause and effect relationship between the impugned communications and the severance of the CBP – BIL relationship is a disputed fact.

The February 2009 Communications

[23] One of the CBP products imported and sold in Canada by BIL while it was one of the CBP distributors in Canada was a flavored Chinese sauce sold under the brand name "Chief Chinese Sauce". BIL began importing that product from CBP and distributing it in Canada in mid-2006.

[24] A competing brand of Chinese sauce is manufactured by a Guyanese company known as Ricks & Sari, one of the original sauce and curry manufacturers in Guyana. Its products are often distributed under the brand name "R & S".

[25] In late 2008, BIL discovered that a large shipment of competing Chinese sauce was being sold on the Canadian market under the brand name "R & S Chief Chinese Sauce”. CBP is the owner of the trademark "Chief Brand Products & Design" in Canada and thus, arguably, the use of the name "Chief” in the “R & S Chief Chinese Sauce” brand name was an infringement of CBP's trademark. BIL encouraged CBP to take steps to deal with the situation. As a result, CBP retained Paul Herbert of the Toronto law firm of Riches, McKenzie & Herbert LLP to undertake efforts to stop the infringing product from being imported into Canada.

[26] Mr. Herbert did not testify. The extent of his activities on behalf of CBP is reflected in three reporting letters sent by him to CBP, dated February 6, February 10 and February 10, 2009.

[27] The full text of the February 6, 2009 letter from Mr. Herbert to CBP is as follows:

We wish to bring you up to date with respect to our efforts to stop the infringing product from being imported into Canada.

We have received conflicting information from various companies including companies claiming to be your distributors in Canada. We would appreciate it if you would advise us.

We have spoken with Raymond [sic] Bedessee, Vice President of Bedessee Imports Limited located at [address and telephone number redacted]. Mr. Bedessee stated that he was the primary importer of your products into Canada and told us that 80% of the infringing product was imported by PSI Mid-Atlantic Seafoods. He said that the Chinese sauce was 85% to 90% of the products imported by PSI and was being sold to 50 to 60 small stores in Canada.

We then spoke with Khalil Mohammed of KM Imports Inc. located at [address and telephone number redacted]. Mr. Mohammed indicated that he also imported your products to Canada and was familiar with the PSI Mid-Atlantic Seafoods importation.

Mr. Mohammed also clearly accused Mr. Bedessee of importing the product from Guyana as well as your product and said that Mr. Bedessee was not telling the truth. He claimed that Mr. Bedessee through his company was selling both products in Canada.

We have been in contact with Abdul of A.S.A. Meat & West Indian Grocery Inc., [telephone number redacted] and he indicated that he would return our call with the number of products that he has after he has have had [sic] an opportunity to review his inventory. We shall let you know what he says.

We have been unable to speak with PSI Mid-Atlantic Seafoods as yet but we shall continue our efforts.

We would appreciate your comments as to the apparent conflict between the information provided by Khalil Mohammed of KM Imports Inc. and Raymond Bedessee of Bedessee Imports Limited.

[Emphasis added.]

It is undisputed that Mr. Mohammed made the statements attributed to him (the underlined passage) to Mr. Herbert and that they were, in turn, relayed to CBP in Mr. Herbert’s letter. For ease of reference, I will refer to them as the "February 2009 Communications".

[28] On February 10, 2009, Mr. Herbert sent the following reporting letter to CBP:

Further to our letter of February 6, 2009, we have now spoken with Abdul of A.S.A. Meat & West Indian Grocery Inc.

He indicated that he had no more then [sic] one case of the infringing product and that he would immediately return it to PSI Mid-Atlantic Seafoods. He said he would remove it from his shelf.

We shall ask Mr. Raymond [sic] Bedessee of Bedessee Imports Limited to verify this matter.

[29] Later on the same day, February 10, 2009, Mr. Herbert sent the following additional letter to CBP:

Further to our letter of February 10, 2009, we have now spoken with Raymond [sic] Bedessee on February 6, 2009 and he said that he would verify that A.S.A. Meat & West Indian Grocery Inc. had removed the product from their shelves. He also indicated that he would provide to me a list of retail stores selling the counterfeit product.

We shall keep you advised in this matter.

[30] In this lawsuit, the plaintiffs assert that the statements made by Mr. Mohammed referable to Rayman Bedessee and the Bedessee companies and quoted in the letter dated February 6, 2009 from Mr. Herbert to CBP were defamatory and actionable.

The June 2009 Communications

[31] The plaintiffs' complaint in this regard is founded upon the statements and publications about Bedessee originating from GuySuCo in June 2009. It will be recalled that in press releases and public statements at that time, GuySuCo and its representatives accused Bedessee of having a reputation "to deceitfully brand and package its products" as well as a "reputation of dishonesty in marketing, branding and packaging its products to deceive West Indians residing in North America" (the "GuySuCo Allegations”). As I have noted, the plaintiffs are pursuing a separate remedy as against GuySuCo in relation to these statements. In the present action the plaintiffs allege that Mr. Mohammed on behalf of KMI republished the defamatory GuySuCo Allegations by drawing them to the attention of CBP (the "June 2009 Communications"). There is a factual dispute whether Mr. Mohammed had any involvement in bringing the GuySuCo Allegations to the attention of CBP.

ISSUES AND ANALYSIS

Positions of the parties

The plaintiffs

[32] The position of the plaintiffs is that the February 2009 Communications by Mr. Mohammed to Mr. Herbert and reported by Mr. Herbert to CBP are untrue and defamatory. They assert that these statements caused CBP to lose confidence in BIL, with the ultimate result that CBP terminated BIL as a distributor of CBP's products. The plaintiffs further assert that the statements made by Mr. Mohammed tended to discredit the plaintiffs' business, contrary to s. 7 of the Trademarks Act.

[33] In relation to the GuySuCo Allegations and the June 2009 Communications, the plaintiffs allege that they are untrue and defamatory and further are breaches of s. 7 of the Trademarks Act. Specifically, the plaintiffs assert that on behalf of KMI, Mr. Mohammed republished the GuySuCo Allegations by drawing them to the attention of CBP. As a consequence, CBP severed its relationship with the plaintiffs.

[34] Finally, the plaintiffs allege that as a result of the publication by Mr. Mohammed of the February 2009 Communications and the June 2009 Communications, they suffered damages, including but not limited to the loss of revenue they enjoyed from the distributorship relationship with CBP.

Position of the defendants

[35] In relation to the February 2009 Communications, although Mr. Mohammed concedes that he made them to Mr. Herbert, he testified that he believed them to be true, by reason of certain observations that he made. The defendants further assert that any claim the plaintiffs may have had in relation to the February 2009 Communications is barred by the passage of the applicable limitation period.

[36] In relation to the June 2009 Communications, Mr. Mohammed denies that he republished or communicated the GuySuCo Allegations to CBP. In either case, the defendants deny that any improper communications by or on their behalf had any influence on the decision of CBP to sever its distributorship relationship with the plaintiffs.

Issues to be decided

[37] Based upon the pleadings and the parties' submissions, the issues for me to decide are as follows:

1. Are the plaintiffs’ claims in relation to the February 2009 Communications barred by the expiry of a limitation period?
2. Are Mr. Mohammed and KMI responsible for the publication or republication of the February 2009 Communications?
3. Were the February 2009 Communications defamatory of the plaintiffs?
4. Have the defendants made out a defence in relation to the February 2009 Communications?
5. Were the February 2009 Communications actionable as being contrary to s. 7 or s. 22 of the Trade-marks Act?
6. Were the GuySuCo Allegations republished or communicated by Mr. Mohammed to CBP by means of the June 2009 Communications?
7. Were the GuySuCo Allegations and the June 2009 Communications defamatory of the plaintiffs?
8. Have the defendants made out a defence in relation to the June 2009 communications?
9. Were the June 2009 Communications actionable as being contrary to s. 7 or s. 22 of the Trade-marks Act?
10. Are the defendants liable to the plaintiffs for the tort of unlawful interference with economic relations?
11. What damages were suffered by the plaintiffs, and specifically, did the impugned communications cause CBP to cease doing business with the plaintiffs?

[38] The answers to some of these questions will require me to make findings of fact. In order to carry out that function, I am required to assess the evidence of certain witnesses, with a view to determining its credibility and reliability and the weight that I should assign to it. I will do so in the context of my analysis of the above issues.

(Sections [39] through [109] reproduced verbatim as provided above.)

CONCLUSION and DISPOSITION

[110] For the foregoing reasons, I award BIL damages of $50,000, plus pre-judgment interest. The claims of BIF will be dismissed.

[111] In relation to costs, I urge the parties to resolve that issue by agreement. If they are unable to do so, they may make written submissions as follows:

(a) The plaintiffs shall serve their bill of costs on the defendants, accompanied by written submissions within thirty days of the release of these reasons.

(b) The defendants shall serve their response on the plaintiffs within twenty days thereafter.

(c) The plaintiffs shall serve their reply, if any, within fifteen days thereafter.

(d) In all cases, the written submissions shall be limited to three pages, plus bills of costs. I expressly invite the defendants to submit the bill of costs they would have tendered on the plaintiffs if they had been successful in the action.

(e) I direct that counsel for the plaintiffs shall collect copies of all parties' submissions and arrange to have that package delivered to me in care of Judges' Administration, Room 170 at 361 University as soon as the final exchange of materials has been completed. To be clear, no materials should be filed individually: rather, counsel for the plaintiffs will assemble a single package for delivery as described above.

___________________________ Stinson J.

Released: March 25, 2014

COURT FILE NO.: CV-10-395577
DATE: 20140325

ONTARIO
SUPERIOR COURT OF JUSTICE

BETWEEN:

BEDESSEE IMPORTS LTD. and BEDESSEE IMPORTS INC.
Plaintiffs

– and –

K M IMPORTS INC. and KHALIL MOHAMMED
Defendants

REASONS FOR JUDGMENT

Stinson J.

Released: March 25, 2014