COURT FILE NO.: CV-10-406342

DATE: 20140815

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Mars Canada Inc. / Plaintiff / Appellant

AND:

Bemco Cash & Carry Inc., GPAE Trading Corp. and Aizic Ebert / Defendants / Respondents

BEFORE: Justice Edward P. Belobaba

COUNSEL: J. Holloway and E. Udokang for the Appellant

P. Summers for the Respondents

HEARD: July 9, 2014

ENDORSEMENT

Appeal from a Master’s Order on Undertakings and Refusals

[1] This is an appeal by Mars Canada from Master McAfee's Order of December 11, 2013 directing that it answer certain questions asked during cross-examinations on affidavits that were filed by Mars Canada in support of its motion for partial summary judgment. Mars Canada says the Master erred in requiring answers to questions that were irrelevant, went beyond the proper scope of cross-examination on an affidavit or, more generally, offended the principle of proportionality.

[2] The appeal is dismissed. For the reasons set out below, I find no error in the Master’s analysis or application of the appropriate principles.

Background

[3] The dispute between the parties involves the issue of “grey market goods.” For years the defendants Bemco and GPAE purchased Mars chocolate bars in the U.S. and sold them in Canada. Mars Canada commenced litigation. The litigation was settled with two agreements, one executed by Bemco and the other by GPAE. The Settlement Agreements permanently prohibited the defendant companies from selling anywhere in Canada any Mars products obtained outside of Canada.

[4] Mars Canada has recently sued both companies again, as well as their owner, for allegedly breaching the Settlement Agreements. The defendants denied any such breaches and argued that, in any event, the Settlement Agreements were in restraint of trade and thus void as against public policy.

[5] Mars Canada then brought a motion for partial summary judgment on the breach of contract and punitive damages claims. It also asked that the question of damages/lost profits be determined by way of a reference. The defendants cross-examined on the affidavits filed by the plaintiff. The plaintiff refused to answer some of the questions. The defendants moved before Master McAfee for rulings on these refusals. The Master affirmed some of the refusals and ordered that others be answered. The latter rulings are the subject of this appeal. The plaintiff’s motion for partial summary judgment remains adjourned pending the outcome of this appeal.

[6] For ease of reference, I have attached an Appendix prepared by the plaintiff that sets out in the the 18 refusals and rulings that remain in issue. The questions and refusals are organized under the five categories used by the Master:[^1]

▪ Category 5: Production and packaging of Mars Canada's products

▪ Category 6: Trade-mark ownership, validity and enforceability

▪ Category 7: Damages

▪ Category 10: Product pricing

▪ Category 11: Complaints to the federal government

[7] The Master concluded that the questions under each of these categories were relevant to issues raised in the motion for summary judgment, and where the plaintiff refused on the basis that the witness did not have personal knowledge, the Master nonetheless required production noting that “[she] was not referred to any evidence that the information is not readily available or that it is unduly onerous to obtain the information.”

Positions of the parties

[8] The plaintiff says the Master erred on both relevance and proportionality and wrongfully concluded that the plaintiff was obliged to lead evidence that the requested information was not readily available or that its production would be unduly onerous. Speaking more broadly, the plaintiff says that the learned Master misunderstood the well-established bounds of proper cross-examination on affidavits and turned the plaintiff’s affiant into an agent for wide-ranging discovery.

[9] The defendants say the Master made no errors in her analysis or application of the appropriate principles. The impugned questions are relevant to the issues in the summary judgment motion, particularly to the many issues raised by the restraint of trade defence, and that any determinations by the Master about proportionality, which are decisions of mixed fact and law, should be accorded deference. Furthermore, say the defendants, the scope of cross-examination depends on the motion and on a summary judgment motion greater leeway should be permitted in light of the Supreme Court’s recent decision in 2014 SCC 7.[^2]

[10] In my view, the appeal can be decided in a relatively straight-forward fashion. I need not consider the implications of Hyrniak v Mauldin. It is sufficient for me to conclude that the learned Master did not err in her legal analysis or in her application of the appropriate principles. As I explain in more detail below, Master McAfee got it right on both relevancy and proportionality and also in her comments that the plaintiff has at least an initial obligation to explain why “the information is not readily available or that it is unduly onerous to obtain the information.”

Analysis

[11] There is no dispute about the applicable law. The standard of review on an appeal from a Master is the same standard that applies to appeals of interlocutory decisions of judges. On questions of law, the standard of review is correctness. On questions of fact, the standard is whether there was a palpable and overriding error. Questions of mixed fact and law lie along a spectrum.[^3]

[12] There is also no dispute about the fact that the Master conducted a lengthy two-and-a-half day hearing and released detailed reasons for her decision. The plaintiff maintains, nonetheless, that the Master was wrong on the core issues of relevance and proportionality.

[13] I am not persuaded by the plaintiff’s submissions.

(1) Relevance

[14] On a summary judgment motion, the relevance of a question is determined by the issues raised in the motion.[^4] Here, the plaintiff is moving primarily for the enforcement of the Settlement Agreements but the various defences at issue on the motion include the wide-ranging doctrine of restraint of trade.

[15] The case law is clear that restraint of trade (“ROT”) is a formidable and far-reaching doctrine. A judicial determination that a commercial agreement is in restraint of trade and thus void as against public policy is a determination that requires extensive evidence about the economic and social benefits and detriments of the impugned contractual provisions[^5] and depends on circumstances of “infinite variety surrounding every contract”.[^6]

[16] Once the defendants raise the ROT defence, particularly in the “grey market” context, and argue that the Settlement Agreements permanently bar the import of cheaper-priced chocolate bars whose sale would arguably benefit Canadian consumers and not harm the plaintiff or violate any of its legal rights (and should therefore be rendered void as against public policy), then it follows that a wide array of questions become relevant: about the inter-relationship between Mars Canada and the other Mars entities, such as Mars U.S., including details about any U.S.-based production and packaging of Mars Canada products; product pricing information; sales information, including historical sales records and information about sales losses; trade mark information, including information about their ownership, maintenance, transfer and assignments; whether the various trademarks are being used for valid purposes or simply for market protection and price control; information about trademark distinctiveness, which may include historical information about the transfer of trademarks between Mars and Mars Canada as well as their chains of title; and information about any complaints made by Mars Canada to federal packaging authorities about the grey market activities of the defendants or any other grey marketers. Questions about damages or losses sustained are relevant not only to the ROT analysis, but also because the plaintiff itself made damages an issue when it asked for summary judgment on its punitive damages claim[^7] and for a damages reference.[^8]

[17] The defendants rightly point out that ROT and trade mark defences in a grey market context raise a wide range of arguably relevant issues. The Master understood this and referred to some of the underlying caselaw, including the English Court of Appeal decision in Cripps[^9] that was approved by the Federal Court of Appeal in Smith & Nephew.[^10] She then proceeded to decide, in my view correctly, that the refused questions as set out under the five categories noted above (as further detailed in the Appendix) should be answered because they were relevant to the ROT and trade mark issues raised on the summary judgment motion.

[18] In sum, I am not persuaded that the Master erred on the basis of relevance.

(2) Proportionality

[19] The “common practice” on cross-examinations was recognized and approved by this court more than 30 years ago in Mutual Life v. Buffer Investments:[^11]

A cross-examination on a motion is not similar to discovery, and there is no provision in the rules that requires a party being cross-examined to obtain information … It is, however, common practice to ask for undertakings on such a cross-examination, and to receive undertakings that the party being cross-examined will inform himself and pass the information on to the other side. In my view the court has inherent jurisdiction to see that all relevant evidence is before it on a motion such as this, and so long as it is not unduly oppressive to order that the information be obtained.[^12]

[20] The court maintains inherent jurisdiction to ensure that all relevant evidence is produced “so long as it is not unduly oppressive to order that the information be obtained.” The only party before the court that can explain why obtaining the requested information would in fact be “unduly onerous” is the party that is being asked to produce this information, in this case the plaintiff, Mars Canada. If the defendants’ requests were indeed unreasonable because of logistical difficulities in accessing the information or its overall volume, the plaintiff should have made this clear to the Master. This was obviously not done in this case. Hence, the Master’s observations in several of the paragraphs in her reasons that she “was not referred to evidence that the information is not readily available or that it is unduly onerous to obtain the information.” I see no error, legal or factual, in this statement.

[21] The plaintiff, however, seizes on an obiter comment that was made by Justice Perell in Ontario v. Rothmans,[^13] that "a party who objects to giving an undertaking during a cross-examination for an application or motion because it would be unduly onerous to answer it should not be required to provide evidence of his or her search capabilities (or absence of them) on any subsequent refusals motion."[^14] But even if the objecting party is not required to provide evidence of its “search capabilities” at the refusals motion I note that Perell J. would still require the party to at least voice an initial objection during the cross-examination that the requested productions would indeed be unduly onerous. Having reviewed the relevant portions of the record, I can state that no such objections were made here. And, there is no suggestion that at the refusals motion the plaintiff tried to explain why some of the production requests were unduly onerous and that these explanations were unreasonably rejected by the Master.

[22] I am therefore not persuaded that the Master erred with regard to the proper scope of cross-examination or in the application of the principle of proportionality. In any event, the application of the proportionality principle was a matter within the Master’s discretion and should therefore be accorded considerable deference. In this case, the Master’s judgment calls about proportionality were at best questions of mixed law and fact (here, more fact than law) that can only be reversed on the basis of palpable error. I see no such error here.

Disposition

[23] The appeal from the Master is dismissed.

[24] Costs, as agreed to by counsel, are fixed at $16,500 all-inclusive, payable forthwith by the plaintiff, Mars Canada, to the defendants, Bemco, GPAE and Ebert.

Belobaba J.

Date: August 15, 2014

Appendix

Remaining undertakings and refusals on Ms. Hinton’s cross-examination of September 25th, 2012

Category 5: Production and packaging of Mars Canada's products

U/R No.

Page No.

Ques. No.

Undertaking/ Refusals

Mars Canada's Response

Master's Disposition

R. 16.

58

240

Is there any account that goes between Mars Canada and Mars, Incorporated in terms of the work that’s done, the manufacturing and the packaging, and what factors go into the consideration and cost?

Refusal maintained. Same reasoning as question 232.

To be answered.

R. 17.

59/60

244

For production of any written agreement between Mars Canada and Mars, Incorporated, or any other company in the Mars group of companies, that governs the manufacturing, the wrapping, and payment and accounting issues with respect to the production of the products Three Musketeers, M&M’s, Snickers, Milky Way and Twix.

Refusal maintained. Same reasoning as question 232.

To be answered.

Category 6: Trade-mark ownership, validity and enforceability

R/U No.

Page No.

Ques. No.

Undertaking/ Refusals

Mars Canada's Response

Master's Disposition

R. 19.

62/63

254

Production of all assignment documents beyond those assignment letters contained in the documents presented to the deponent.

Refusal maintained. See question 251.

To be answered.

R. 20.

63/64

256

Do you agree that the trademarks with respect to Twix, Mars, M&M’s, Snickers were assigned from Mars Limited and Mars, Incorporated to Mars Canada Limited in 1974?

Refusal maintained. See question 251. Moreover, the deponent has no personal information as to what transpired in 1974.

To be answered.

R. 21.

64

258

Production of any other documents that relate to the assignment of any trademarks for Mars, Twix, Three Musketeers, Milky Way, and Snickers to Mars Canada from either Mars Limited, Mars, Incorporated.

Refusal maintained. See question 251.

To be answered.

R. 22.

65/66

262

To produce, any registered user agreement relating to Mars Bars products and if those agreements were replaced at any point, what they were replaced by.

Refusal maintained. Same reasoning as question 251. Moreover, the registered user system was replaced many years ago by section 51 of the Trademarks Act.

To be answered.

R. 23.

67

264

Regarding registered user agreements, if they are not in existence, to produce what replaced them.

Refusal maintained. Same reasoning as questions 251 and 258. Moreover, Mars Canada is (and has been for many years) the acknowledged and registered owner of the asserted trade-marks and, unless and until the Federal Court orders otherwise, Mars Canada has the exclusive statutory right to use those trade-marks.

To be answered.

R. 24.

67/68/69

265

To advise whether Mars Canada or its predecessors in any way provided consideration, or paid for, any of the trademark assignments that they have registered.

Refusal maintained. Same reasoning as questions 251 and 258 and 264.

To be answered.

Category 7: Damages

U/R No.

Page No.

Ques. No.

Undertaking/ Refusals

Mars Canada's Response

Master's Disposition

U. 8.

88

325

To produce any document Mars intends to rely upon to support the fact that Mars has lost sales as a result of the Defendant’s activities.

For the purposes of the motion, Mars does not intend to rely on any such document.

To be answered in full

U. 9.

90

332

To produce any documentation regarding lost opportunities that Mars alleges arise from the Defendant's activities.

For the purposes of the motion, Mars does not intend to rely on any such document.

To be answered in full

R. 28.

91

339

To produce documentation that indicates a loss of market share by Mars in relation to Mars Bars, Twix Bars, M&M chocolates, Milky Way, Three Musketeers and Snickers chocolates, and production of all documentation relating to market share with respect to these products.

Refused. The determination of the quantum of damages is not relevant to the issues at motion.

To be answered.

R. 29.

92 and 93

342

Production of any documentation that relates to, in general, damaged relationship with customers due to customer complaints of grey market goods being in the Canadian market place, and any documentation, in particular, with respect to the Defendant’s activities regarding Mars’ damaged relationships with customers.

Refusal maintained. Same reasoning as question 339.

To be answered.

R. 30.

94

346

To produce any documentation that Mars Canada has that indicates any damages either over grey market goods, in general, or the Defendants in particular in relation to the allegation that damages have been suffered over a loss of control over use of the trademarks.

Refusal maintained. Same reasoning as question 339.

To be answered.

R. 31.

95

348

Production of any documentation that Mars Canada has that indicates any damages, in general, because of grey market goods being available in Canada and any documentation that depreciation of goodwill or trademark goodwill and documentation, in particular, with respect to the Defendant’s activities.

Refusal maintained. Same reasoning as question 339.

To be answered.

R. 32.

96

350

If there are any other damages that Mars are claiming other than as set out previously in the cross-examination, to provide any documentation that is the basis for any claim for damages.

Refusal maintained. Same reasoning as question 339.

To be answered.

Category 10: Product Pricing

U/R No.

Page No.

Ques. No.

Undertaking/ Refusals

Mars Canada's Response

Master's Disposition

R. 40.

133/134

485

For production of documentation that would indicate prices charged for Twix, Three Musketeers, Milky Way, Mars, Snickers bars and M&M chocolates from 2006 to 2012 by Mars Canada and the prices charged in the U.S. for similar products from 2006 to 2012.

Refused. Not relevant. See response to Question 451.

To be answered for Mars Canada only (with a caveat that a confidentiality order be agreed upon).

Category 11: Complaints to the Federal Government

U/R No.

Page No.

Ques. No.

Undertaking/ Refusals

Mars Canada's Response

Master's Disposition

R. 38.

131

475

Has Mars Canada made any complaints to the Canadian government with respect to the packaging as per Exhibit 4, i.e., lack of French, weights and measures and nutritional information insofar as such relates to the Defendants.

Refusal maintained. Question not relevant to the issues on motion.

To be answered.

R. 39.

31

476

Regarding the type of refusal mentioned in question 475, has Mars made any similar complaints with respect to other alleged grey marketers.

Refusal maintained. Question not relevant to the issues on motion.

To be answered.

[^1]: The four refusals under Category 2, “Management of Mars US “global” website and policies of other non-party Mars entities” were recently answered by the plaintiff and are not part of this appeal.

[^2]: 2014 SCC 7, [2014] 1 S.C.R. 87.

[^3]: Zeitoun v. Economical Insurance Group, 2009 ONCA 415 at para. 1, aff'g 2008 20996 (ON SCDC), [2008] O.J. No. 1771 at paras 40-42 (Div. Ct.); Nash Estate v. Schell Estate, 2013 ONSC 4813 at paras. 11-12 (Div. Ct.); and Housen v. Nikolaisen, 2002 SCC 33 at paras 8 and 10.

[^4]: Hoolans v. Van Loon, [2003] O.J. No. 1256 at paras. 6 and 12 (Div. Ct.).

[^5]: Fridman, The Law of Contracts in Canada, (5th edition) at 395; Stephens v. Gulf Oil Canada Ltd. (1975), 1975 711 (ON CA), 11 O.R. (2d) 129 at 149 (C.A.).

[^6]: Tank Lining Corp. v. Dunlop Industrial Ltd., (1982), 40 O.R. (2d) at 222 (C.A.)

[^7]: As the Federal Court of Appeal noted in Apotex Inc. v. Merck & Co., 2003 FCA 291, [2003] F.C.J. No. 1034 at para. 34, it is “impossible” to decide if punitive damages are warranted until compensatory damages have been determined.

[^8]: Although I must add that, strictly speaking, there is no basis for the plaintiff’s request for a damages reference because no such claim was made by the plaintiff in its pleadings. See Rule 20.01(1).

[^9]: Revlon Inc. and others v. Cripps & Lee Ltd. and others, [1980] F.S.R. 85 (Eng. C.A.).

[^10]: Smith & Nephew Inc. v. Glen Oak Inc., 1996 4065 (FCA), [1996] 3 F.C. 565 (Fed. C.A.).

[^11]: Mutual Life Assurance Co. of Canada v. Buffer Investments, (1985) 1985 1940 (ON SC), 52 O.R. (2d) 335 (H.C.J.).

[^12]: Ibid., at 336.

[^13]: Ontario v. Rothmans Inc., 2011 ONSC 2504.

[^14]: Ibid., at para. 168.