Federal Court Decisions

     T-323-97

BETWEEN:

     HAVANA HOUSE CIGAR & TOBACCO

     MERCHANTS LTD., EMPRESA CUBANA DEL TABACO

     trading as CUBATABACO and HABANOS S.A.

    

     Plaintiffs

     - and -

     MARINO NAEINI carrying on business as

     PACIFIC TOBACCO & CIGARS and OREX COMMUNICATIONS LTD.

     carrying on business as PACIFIC TOBACCO & CIGARS

    

     Defendants

     REASONS FOR ORDER

JEROME, A.C.J.:

     This motion, brought by the plaintiffs, for an Order reversing the Order issued by Associate Senior Prothonotary Giles dated June 2, 1997, came on for hearing before me at Toronto, Ontario, on June 9, 1997. At the close of oral argument, I took the matter under reserve and indicated that written reasons would follow.

     Upon being served with the Statement of Claim by the plaintiffs, the defendants prepared a Statement of Defense and Counterclaim which asserted that the plaintiffs had acted contrary to section 45 of the Competition Act and were therefore liable in damages pursuant to section 36 of that Act. The plaintiffs brought a motion to strike the references to the Competition Act in the defendants' pleadings on the grounds that such breach amounted to a criminal act and that no criminal proceedings having been initiated, it was improper for the Court to entertain such arguments. Associate Senior Prothonotary Giles dismissed that motion in these terms:

Section 36 of the Competition Act read with section 45 creates a civil cause of action for which a prior criminal conviction is not a prerequisite. Therefore claims based on [the] Competition Act in paragraphs 26, 28, 29 and 30(c) may remain in the pleading.

The issue argued before me was whether section 36 of the Competition Act permits a party to pursue a civil action for breach of section 45, independent of any criminal proceedings.

     The relevant provisions of the legislation state:

36. (1) Any person who has suffered loss or damage as a result of

(a) conduct that is contrary to any provision of Part VI, or

(b) the failure of any person to comply with an order of the Tribunal or another court under this Act,

may, in any court of competent jurisdiction, sue for and recover from the person who engaged in the conduct or failed to comply with the order an amount equal to the loss or damage proved to have been suffered by him, together with any additional amount that the court may allow not exceeding the full cost to him of any investigation in connection with the matter and of proceedings under this section.

(2) In any action under subsection (1) against a person, the record of proceedings in any court in which that person was convicted of an offence under Part VI or convicted of or punished for failure to comply with an order of the Tribunal or another court under this Act is, in the absence of any evidence to the contrary, proof that the person against whom the action is brought engaged in conduct that was contrary to a provision of Part VI or failed to comply with an order of the Tribunal or another court under this Act, as the case may be, and any evidence given in those proceedings as to the effect of those acts or omissions on the person bringing the action is evidence thereof in the action.

(3) For the purposes of any action under subsection (1), the Federal Court is a court of competent jurisdiction.

Part VI

45. (1) Every one who conspires, combines, agrees or arranges with another person

(a) to limit unduly the facilities for transporting, producing, manufacturing, supplying, storing or dealing in any product,

(b) to prevent, limit or lessen, unduly, the manufacture or production of a product or to enhance unreasonably the price thereof,

(c) to prevent or lessen, unduly, competition in the production, manufacture, purchase, barter, sale, storage, rental, transportation or supply of a product, or in the price of insurance on persons or property, or

(d) to otherwise restrain or injure competition unduly,

is guilty of an indictable offence and liable to imprisonment for a term not exceeding five years or to a fine not exceeding ten million dollars or to both.

The plaintiffs submitted that the words, "conduct that is contrary to any provision of Part VI," at section 36 and the focus in Part VI on indictable offenses, necessarily means that section 36 is not an independent cause of action and that no relief can be sought pursuant to that section in the absence of prior or concurrent criminal proceedings. Counsel for the plaintiffs asserted that since section 45 deals with criminal activity, a Court cannot find that there has been conduct contrary to that section unless there has been a conviction.

     Counsel for the defendants submitted that section 36 does not require that there have been a criminal conviction, and relied on two cases to support this argument. In General Motors of Canada Limited v. City National Leasing, [1989] 1 S.C.R. 641, the Court was called upon to determine the constitutional validity of section 36 and in so doing dealt with whether the civil remedy required a prior criminal conviction. Chief Justice Dickson, writing for a unanimous Court, reviewed the entire Act and found that it contained civil, administrative, and criminal sanctions intended to deter anti-competitive behaviour. He noted that the predecessor legislation contained only criminal sanctions and that the civil and administrative provisions were introduced in order to reduce the Competition Act's reliance on the criminal law to advance its goals. The Chief Justice then quoted from Mr. Justice MacGuigan's reasons in a companion case (Pilote Ready Mix Inc. et al. v. Rocois Construction Inc., (1985) 8 C.P.R. (3d) 145) to the effect that the Act creates, "a more complete and more effective system of enforcement in which public and private initiative can both operate to motivate and effectuate compliance." Thus, the former Chief Justice recognized that the Competition Act had evolved past the time when competition law relied heavily on criminal law to a point where civil actions could be instituted to achieve similar policy objectives.

     Although Mr. Justice Dickson did not state clearly that one could pursue an independent civil action pursuant to section 36, his approval of the reasons of Mr. Justice MacGuigan in Pilote Ready Mix, supra, suggests as much. Mr. Justice MacGuigan was less ambiguous when he wrote:

[t]his section gives any person who has suffered injury as a result of the commission of an act proscribed by Part V [now Part VI] the right to institute, independently of any criminal proceedings, an action in the Federal Court for compensation against the perpetrators of any such act. ( supra at 154)

                                     [emphasis added]

Thus, it is clear that the Federal Court of Appeal has considered the very issue which is before me in this case, and that it has pronounced itself convincingly. I see no reason to distinguish the cases referred to above from the case at bar.

     Counsel for the plaintiffs further submitted that subsection 67(3) of the Competition Act gives jurisdiction over proceedings held pursuant to Part VI to superior courts of criminal jurisdiction, that the Federal Court is not such a court, and that this Court is thereby unable to determine the issues which arise under sections 36 and 45. In my view, that argument is inconsistent with a plain reading of the statute. Section 67 clearly deals with the procedure to follow with respect to the criminal sanctions contained in the Act. A procedure pursuant to section 36, although it makes reference to section 45, is a civil remedy and is therefore not subject to section 67. In addition, subsection 36(3) quite clearly states that the Federal Court has jurisdiction over matters arising pursuant to subsection 36(1). Therefore, this argument of the plaintiffs must fail.

     For the reasons outlined above, I see no reason to overturn the decision of Associate Senior Prothonotary Giles contained in his Order of June 2, 1997. This motion is dismissed.

O T T A W A

September 25, 1997                      "James A. Jerome"

                             A.C.J.