T-271-77
Lex Tex Canada Limited (Plaintiff)
v.
Highland Mills Limited and Textilwerke Deggen-
dorf G.M.B.H. (Defendants)
Trial Division, Mahoney J.—Ottawa, September
13, 15 and 20, 1977.
Practice — Service without order on company resident
outside Canada pursuant to Rule 310(2) — Service effected on
Canadian sales agent — Motion for order to declare service
invalid — Conditions of Rule not established in evidence —
Order granted — Federal Court Rule 310(2).
In an action for patent infringement, defendant Deggendorf
entered a conditional appearance for the purpose of objecting to
service on it of the statement of claim and moves for an order
declaring that service invalid. Service had been effected on
Deggendorf, a company resident in Germany, pursuant to Rule
310(2) by serving the statement of claim on Highland Mills
Limited, a Canadian company and Deggendorfs exclusive sales
agent in Canada. Deggendorf entered all contracts in Europe,
and shipped all goods f.o.b. the European point of export,
without assuming any responsibility for clearing Canadian
customs.
Held, the application is granted. Rule 310(2) is an exception
al provision allowing for substitutional service without an order
in circumstances where a court ordinarily would exercise its
jurisdiction to grant an order for substitutional service. A
plaintiff who elects to avail himself of this Rule must meet the
conditions prescribed. On the evidence, Deggendorf did not
enter into contracts or business transactions in Canada in the
ordinary course of its business, and therefore is not one on
whom service can be effected under Rule 310(2).
APPLICATION.
COUNSEL:
Bruce Morgan for plaintiff.
Nicholas H. Fyfe for defendant Textilwerke
Deggendorf G.M.B.H.
SOLICITORS:
Gowling & Henderson, Ottawa, for plaintiff.
Smart & Biggar, Ottawa, for defendant Tex-
tilwerke Deggendorf G.M.B.H.
The following are the reasons for order ren
dered in English by
MAHONEY J.: This is an action for patent
infringement. The second named defendant, here-
inafter called "Deggendorf ', has, by leave, entered
a conditional appearance for the purpose of object
ing to the service on it of the statement of claim
herein and moves for an order declaring said ser
vice invalid and of no effect. Service was effected
pursuant to Rule 310(2) by serving the statement
of claim on the first named defendant, hereinafter
called "Highland". Judgment in default of defence
has been entered against Highland.
Rule 310(2) provides:
Rule 310. .. .
(2) Where a person resident outside Canada who, in the
ordinary course of his business, enters into contracts in Canada
or enters into business transactions in Canada (as, for example,
when a carrier receives goods in Canada for transport to some
place outside Canada) and, in that connection, regularly makes
use of the services of a person or persons resident in Canada, is
sued in respect of any cause of action arising out of such a
contract or transaction, personal service of the statement of
claim or declaration or other document in the action upon any
such person whose services the defendant actually made use of
in connection with the contract or transaction in question shall
be deemed to be personal service on the defendant as though an
order had been duly made for substitutional service in that
manner in the particular case.
The evidence as to the relationship between
Deggendorf and Highland, introduced by affidavit,
is contained in a cross-examination on an affidavit
of an officer of Highland and the examination for
discovery of the same officer in another infringe
ment action involving a different plaintiff, repre
sented by the same counsel, and the same defend
ants. Service of the statement of claim on
Deggendorf in that action is said to have been
effected under Rule 310(2) with no objection
taken by Deggendorf.
Deggendorf manufactured textured yarns in the
Federal Republic of Germany. The method by
which they were produced and the apparatus on
which they were produced are alleged to infringe
the plaintiff's Canadian patent No. 624,592. The
infringement alleged to have been committed by
Deggendorf is "selling in Canada through its
agent", Highland, such textured yarns.
Highland was Deggendorf s exclusive sales
agent in Canada. Their arrangement embraced
three modes of sale to the Canadian users of the
yarns.
1. Highland solicited orders which were submit
ted to Deggendorf for acceptance.
2. Highland purchased yarns from Deggendorf
for resale.
3. When an established customer purchased
yarns direct from Deggendorf, Highland was
paid a commission.
On the evidence before me, it appears that all
contracts entered into by Deggendorf for the sale
of the yarns were made outside Canada. All ship
ments were f.o.b. the European point of export.
Canadian customs clearance was the responsibility
of the customer. Highland arranged clearance in
the case of yarns bought by it but had nothing to
do with clearing goods sold to other customers.
Title to the yarns appears to have passed from
Deggendorf in Europe.
Rule 310(2) is an exceptional provision. It per
mits substitutional service without an order. It
prescribes conditions upon which a court would
ordinarily exercise its jurisdiction to grant an order
for substitutional service. Those conditions must
be met by a plaintiff who elects to avail himself of
the Rule. It may be that, at a later stage in the
proceedings, the conclusion I have reached will be
proved to have been wrong but, on the present
evidence, 1 have no doubt that Deggendorf did not,
in the ordinary course of its business, enter into
contracts or business transactions in Canada and,
thus, is not a person upon whom service can be
effected under Rule 310(2).
I likewise have no doubt that Deggendorf has
been fully aware of the action and that the service
so effected did bring the action to its attention. In
this connection, I should note that the action was
commenced in January of this year and the pur
ported service effected in March. The time ele
ment is such that the principle enunciated by
Thurlow J., as he then was, in Iwai & Co. Ltd. v.
The Panaghia' is not in play. There the service
had been effected in May 1955, default judgment
had been entered in March 1957, and the motion
to set aside the service was brought in October
1958.
ORDER
The application of the defendant, Textilwerke
Deggendorf G.M.B.H., is granted without costs
and the service of the statement of claim herein on
it is declared to have been invalid and of no effect.
I [1962] Ex.C.R. 134.
You are being directed to the most recent version of the statute which may not be the version considered at the time of the judgment.