A-692-86
Algonquin Mercantile Corporation (Appellant)
(Plaintiff)
v.
Dart Industries Canada Limited (Respondent)
(Defendant)
INDEXED AS: ALGONQUIN MERCANTILE CORP. V. DART INDUS
TRIES CANADA LTD.
Court of Appeal, Heald, Hugessen and Mac-
Guigan JJ. — Toronto, May 25, 26, 27, 28, 29;
Ottawa, June 17, 1987.
Federal Court jurisdiction — Trial Division — Statutory
authority to award interest on damages sustained as result of
interlocutory injunction — Damages and interest sought, as
required by s. 20 Federal Court Act, "under authority of Act
of Parliament", here Industrial Design Act — Injunction and
undertaking to pay damages equitable remedies acting in aid
of law — Provincial legislation applicable to award of pre-
and post-judgment interest.
Equity — Pre-judgment interest — Time having come to
align equity and law, in light of legislative trend in Canada
towards allowing pre-judgment interest — Trend reflecting
current public policy — Such reinterpretation of common law
in accord with authorities — No need for Court to await
federal legislation.
Practice — Interest — Interlocutory injunction — Under
taking to pay damages — Jurisdiction to award interest found
in s. 20 Federal Court Act — Damages and interest remedies
sought under Act of Parliament, here Industrial Design Act
Undertaking and interlocutory injunction equitable remedies
applied in aid of statute — Defendant entitled to full compen
sation, including interest — Time having come to align law
and equity given legislative trend in Canada towards allowing
pre-judgment interest — Application of provincial legislation
to determine amount of pre- and post-judgment interest.
Practice — Costs — Application to increase party and party
costs on basis of new taxation R. 344 dismissed — New
taxation Rules not applicable where R. 346.1(2) notice filed.
Industrial design — Electric griddle — Infringement pro
ceedings — Plaintiff granted interlocutory injunction —
Undertaking to pay damages — Losing case — Assessment of
defendant's damages — "Cannibalization" — Appeal by
plaintiff to increase effect thereof from 15% to 35% dismissed
— Evidence conflicting — Wrong for Trial Judge to substitute
own opinion for that of Prothonotary who concluded to
absence of "cannibalization" — Cross-appeal allowed.
This is an appeal from a decision of Addy J. which confirmed
all but one of the findings made by the Prothonotary on a
reference to determine damages. The reference was ordered by
Mahoney J. after he had dismissed plaintiffs action under the
Industrial Design Act and dissolved an interlocutory injunction
in plaintiffs favour which had prevented defendant from mar
keting its small appliance "Family Griddle with Warmer" in
competition with plaintiffs "Breakfast Nook". Plaintiff had
given the usual undertaking to pay damages in being granted
the interlocutory injunction.
In his report, the Prothonotary did not recommend any
reduction of defendant's damages due to "cannibalization",
being of the view that the circumstances of the case did not
demonstrate the existence of such a phenomenon. Addy J.
found that there had been no evidence that "cannibalization"
would not have occurred. He assessed its effect as being 15% of
the defendant's actual sales of flat griddles during the year of
injunction and the year following and reduced the defendant's
damages accordingly. The appellant supports Addy J.'s findings
of "cannibalization" but seeks to increase its effect from 15% to
35%. The defendant cross-appeals to have the findings of the
Prothonotary restored. With respect to the question of interest,
the appellant argues that Addy J. erred in awarding pre-judg
ment interest on the basis of section 36 of the Ontario Judica
ture Act, and post-judgment interest pursuant to section 137 of
the Courts of Justice Act of Ontario.
Held, the appeal should be dismissed and the cross-appeal
allowed. The award of the referee should be restored together
with pre- and post-judgment interest thereon as awarded by the
Trial Judge.
It was for the plaintiff to establish the existence of "cannibal-
ization" not for the defendant to show that it would not have
occurred. The evidence on the issue was conflicting. In those
circumstances, it was wrong for the Trial Judge to substitute
his view as to the probabilities of the existence of "cannibaliza-
tion" for that of the Prothonotary. The cross-appeal should
therefore succeed and the figure for lost sales for the year of
the injunction and the following year should be restored to that
found by the Prothonotary.
The question, whether the Federal Court has statutory au
thority to award interest, should be answered in the affirmative.
Section 20 of the Federal Court Act confers upon the Trial
Division concurrent jurisdiction in cases where a remedy is
sought under an Act of Parliament respecting any industrial
design. The plaintiff sought its interlocutory injunction under
the Industrial Design Act. Since the granting of the interlocu
tory injunction was conditional upon the plaintiff's undertaking
to abide by any order the Court might make as to damages, it
follows that the undertaking to pay damages has the same
relationship to the Industrial Design Act as the injunction
itself. Damages, including interest, are thus, as required by
section 20, remedies sought "under the authority of' an Act of
Parliament. Equity, invoked in both the injunction and the
undertaking, operates in a statutory context, acting in aid of the
law.
The Trial Judge's view that the issue of pre-judgment inter
est was to be governed by law rather than equity, could not be
agreed with. Pre-judgment interest was required to compensate
the defendant in respect of the loss it has sustained by reason of
the injunction. The logic of the undertaking is for full compen
sation, which includes interest. The position adopted by a
majority of Canadian common law jurisdictions towards the
awarding of pre-judgment interest shows that "the time has
come to align law and equity in this respect". This legislative
trend represents current public policy, and this Court need not
await a similar legislative initiative at the federal level to put an
end to a judge-made limitation on the awarding of interest.
Such a reinterpretation of the common law conforms with the
Supreme Court of Canada decision in Lewis v. Todd and
McClure where interest was seen as part of the award, and with
the recent decision of this Court in Canadian Broadcasting
Corp. v. C.U.P.E.
There being no provision in the Federal Court Act as to the
rate of pre-judgment interest, it is necessary to rely on provin
cial law. The Trial Judge correctly looked to section 36 of the
Ontario Judicature Act when he awarded pre-judgment inter
est from the time the interim injunction was granted until the
date of the judgment, at the rate provided for in that section.
The Trial Judge also correctly applied section 137 of the
Ontario Courts of Justice Act to determine the amount of
post-judgment interest. Section 40 confers full judicial discre
tion as to post-judgment interest. Recourse to section 3 of the
Interest Act is not necessary if "otherwise ordered by the
Court" within the meaning of section 40. Moreover, the liberal
interpretation given by the Supreme Court of Canada to section
3 authorizes a federally created court to apply a provincially
legislated law on interest.
The defendant's application for an increase in respect of
party-and-party costs based on new taxation Rule 344 had to
be dismissed. The new taxation Rules do not apply when,
within 90 days of their coming into force, a party to a proceed
ing commenced before that day files a notice that costs shall be
determined without reference to the new rules: Rule 346.1(2).
The plaintiff had filed such a notice within the transition
period. The defendant can, however, have recourse to Rule
344(7), as it read prior to April 2, 1987, which permits a
successful party to seek special directions as to costs within the
delays prescribed by Rule 337(5).
STATUTES AND REGULATIONS JUDICIALLY
CONSIDERED
Courts of Justice Act, S.O. 1984, c. 11, s. 137.
Federal Court Act, R.S.C. 1970 (2nd Supp.), c. 10, ss.
20, 40, 44.
Federal Court Rules, C.R.C., c. 663, RR. 337(2)(b),(5),
344 (as am. by SOR/87-221, s. 2), (7), 346.1(2) (as
added by SOR/87-221, s. 4), Tariff B (as am. idem, s.
8), s. 1 (1)(h),(i)•
Industrial Design Act, R.S.C. 1970, c. I-8.
Interest Act, R.S.C. 1970, c. I-18, s. 3.
Judicature Act, R.S.O. 1980, c. 223, s. 36.
CASES JUDICIALLY CONSIDERED
APPLIED:
Lewis v. Todd and McClure, [1980] 2 S.C.R. 694;
Canadian Broadcasting Corp. v. C.U.P.E., [1987] 3 F.C.
515 (C.A.); Bensol Customs Brokers Ltd. v. Air Canada,
[1979] 2 F.C. 575 (C.A.); R. v. Montreal Urban Com
munity Transit Commission, [1980] 2 F.C. 151 (C.A.);
Prince Albert Pulp Co. Ltd. et al. v. The Foundation
Company of Canada, Ltd., [1977] I S.C.R. 200; British
Pacific Properties Ltd. v. Minister of Highways and
Public Works, [1980] 2 S.C.R. 283; (1980), 33 N.R. 98.
CONSIDERED:
Hoffmann-La Roche (F) & Co AG v Secretary of State
for Trade and Industry, [1974] 2 All ER 1128 (H.L.);
The Pacifico v. Winslow Marine R. & Shipbuilding Co.,
[1925] 2 D.L.R. 162 (Ex. Ct.).
REFERRED TO:
American Cyanamid Co. v. Ethicon Ltd., [1975] A.C.
396 (H.L.); Delap v. Robinson et al. (1898), 18 P. R. 231
(Ont.); Teledyne Industries, Inc. et al. v. Lido Industrial
Products Ltd. (1982), 68 C.P.R. (2d) 204 (F.C.T.D.).
AUTHORS CITED
McGregor, H. McGregor on Damages, 13th ed. London:
Sweet & Maxwell Limited, 1972.
Saxe, D. "Judicial Discretion in the Calculation of Pre
judgment Interest" (1985-86), 6 Advocate's Q. 433.
COUNSEL:
Ronald E. Dimock and Gordon J. Zimmer-
man for appellant (plaintiff).
George A. Macklin, Q.C. and Anthony G.
Creber for respondent (defendant).
SOLICITORS:
Sim, Hughes, Dimock, Toronto, for appellant
(plaintiff).
Gowling & Henderson, Ottawa, for respon
dent (defendant).
The following are the reasons for judgment
rendered in English by the Court
This is an appeal from a decision of Addy J.
([1987] 2 F.C. 373 (reported as abridged); (1986),
12 C.P.R. (3d) 289) which confirmed (save in one
respect) findings made by Preston, Prothonotary,
on a reference to determine damages. The refer
ence was ordered by Mahoney J. [[1984] 1 F.C.
246] after he had dismissed plaintiffs action under
the Industrial Design Act' and dissolved an inter
locutory injunction which plaintiff had obtained a
little over a year earlier (March 12, 1982). The
effect of that injunction had been to prevent
defendant from marketing its new product, a home
appliance known as the Family Griddle With
Warmer ("FGWW"), in competition with the
plaintiff's product, the Breakfast Nook ("BN").
At the time the interlocutory injunction was grant
ed, plaintiff had given the usual undertaking to
pay damages and this was the foundation for the
reference ordered by Mahoney J. when he dis
solved the injunction.
In his report ((1985), 8 C.P.R. (3d) 1), Preston,
Prothonotary, exhaustively reviewed all the evi
dence he had heard and found, amongst other
things, that during the time the injunction was in
force defendant had suffered lost sales of 30 000
units of the FGWW; he further found that the
effects of the injunction continued for about a year
after it had been dissolved and estimated defen
dant's further losses during that period at 20 000
' R.S.C. 1970, c. I-8.
units. While those findings were vigourously
attacked by plaintiff on the present appeal, we did
not find it necessary to call on defendant to
respond. The findings of Preston, Prothonotary,
were carefully reviewed by Addy J. and were
confirmed by him. There was evidence to support
them. We sit now as a second appellate court faced
with concurrent findings of facts in the courts
below. The most that plaintiff has been able to
show are certain minor anomalies or inconsisten
cies in Preston, Prothonotary's findings; that is
almost inevitable in a case such as this, where one
is attempting to reconstruct the variables of a
hypothetical situation in a field as complex as the
marketing of consumer products. It would take far
more to persuade us to intervene, and we decline to
do so.
In another part of his report, Preston, Prothono-
tary, refused to recommend any reduction in the
amount of defendant's damages due to "substitu-
tion" or "cannibalization". That is the phenome
non whereby the sales of a new product are, to a
greater or lesser extent, made at the expense of
lost sales of an existing product from the same
manufacturer. In concrete terms, in the present
case it would mean that sales that the defendant
would have made of its new FGWW in the year of
the injunction and the year following would have
displaced some of the sales it, in fact, made in
those years of its older, flat griddle lines.
In his report, Preston, Prothonotary, said [at
page 37]:
Also, during the injunction, it was stated that the sale of
West Bend's [defendant] other griddles were stronger than
would have been the case if the FGWW had been on the
market in 1982. The theory of cannibalization or draw in my
view is not appropriate. The buyer in the market-place is
looking for either a flat griddle or a griddle with a warming
device. In 1982, the evidence shows, that a buyer intent on
purchasing a griddle with warmer was not interested in the
West Bend line of griddles without a warming device.
In the judgment now under appeal, Addy J.
disagreed. After reviewing all the evidence, he said
[at page 308 C.P.R.]:
To summarize: There is no direct factual evidence nor any
unqualified opinion evidence to the effect that "cannibaliza-
tion" would not have occurred, the defendant's expert, Dr.
Tigert, admitted that it could have occurred at the levels of
both retailers and individual buyers and all other evidence on
the subject points to the probability of its existence.
He then went on to assess the effect of cannibal-
ization as being fifteen per cent of the defendant's
actual sales of flat griddles during the year of the
injunction and the year following and, after the
appropriate calculations, reduced defendant's
damages accordingly.
On the appeal, the plaintiff supports Addy J.'s
findings of cannibalization but seeks to increase its
effect from fifteen per cent to thirty-five per cent.
The defendant cross-appeals and asks that we
restore the findings of Preston, Prothonotary.
With great respect, we think the Trial Judge has
committed an error in principle and that the cross-
appeal must therefore succeed. The existence of
the phenomenon of cannibalization is not self-evi
dent. Indeed, on an a priori basis it seems at least
as likely that any loss of defendant's flat griddle
sales had taken place by "draw" in favour of
plaintiff's BN, which had been successful on the
market since 1979 and that, if the FGWW had
been sold as planned in 1982, it would have
impacted primarily on the BN. Be that as it may,
however, the existence of cannibalization was a
question which was introduced into the debate as a
result of plaintiff's allegations. Accordingly, it was
for plaintiff to prove it, not for defendant to show,
as the Trial Judge said, that it "would not have
occurred". The evidence on the point was conflict
ing and, in those circumstances, we think it was
wrong for Addy J. to substitute his view on the
probabilities for that which had been reached by
Preston, Prothonotary. The cross-appeal should
therefore succeed and the figure for lost sales for
the year of the injunction and the year following
should be restored to that found by Preston,
Prothonotary.
By agreement of counsel all questions on inter
est before the Prothonotary were deferred for
argument. On these questions, then, there is only
the decision of the Trial Judge. Addy J. held that
pre-judgment interest should be awarded, and he
determined that the proper amount of pre-judg
ment interest was $379,096.43. He calculated
post-judgment interest from the date of judgment
on the total of the damages plus the pre-judgment
interest and costs since they all constitute money
owing under an order, with the rate to be fixed in
accordance with section 137 of the Courts of
Justice Act, 1984, of Ontario. 2
The plaintiff argued that the Trial Judge erred
in awarding any pre-judgment interest since (a)
the undertaking and subsequent court orders only
provided for the payment of damages; (b) this
Court has no jurisdiction to apply section 36 of the
Ontario Judicature Act; 3 (c) section 36 of the
Judicature Act by its terms does not apply in this
case.
He also argued that, if pre-judgment interest
can be awarded at all, the Trial Judge erred by
awarding interest prior to the date damages and
interest were claimed and by selecting an inappro
priate rate pursuant to section 36 of the Ontario
Judicature Act.
He further contended that the Trial Judge erred
in awarding post-judgment interest pursuant to the
Ontario Courts of Justice Act and also in setting
an excessive rate of post-judgment interest.
The first question to arise is whether the Federal
Court has jurisdiction to consider the awarding of
interest in such a case. Section 20 of the Federal
Court Act 4 provides that the Trial Division has
concurrent jurisdiction with the provincial courts
in matters of industrial design. The relevant part
2 S.O. 1984, c. 11.
3 R.S.O. 1980, c. 223.
4 R.S.C. 1970 (2nd Supp.), c. 10.
of section 20 reads as follows:
20. The Trial Division ...
... has concurrent jurisdiction in all other cases in which a
remedy is sought under the authority of any Act of the Parlia
ment of Canada or at law or in equity, respecting any ...
industrial design.
The plaintiff sought its interlocutory injunction
under the Industrial Design Act, as is clear from
paragraph 4 of its statement of claim (Appeal
Book, page 2):
By virtue of the registration of said Industrial Design, and the
provisions of the Industrial Design Act R.S.C. 1970, c. I-8 for a
period of (5) years from February 11, 1980 to February 11,
1985 and upon renewal for a further five years thereafter, the
Plaintiff has the exclusive right in Canada to apply, for the
purposes of sale, the industrial design to a cooking apparatus
and to publish, sell or expose for sale or use, a cooking
apparatus incorporating or having applied thereto the said
industrial design and to restrain others from applying the said
industrial design, or a fraudulent imitation thereof to a cooking
apparatus and from selling or exposing for sale or using the
same. [Emphasis added.]
The plaintiff's undertaking to abide by any
order the Court might make as to damages was
nothing less than a condition of the granting of the
interlocutory injunction, as appears from the order
of Collier J. of March 12, 1982, granting the
injunction:
ORDER:
1. The plaintiff, having undertaken to abide by any order
this Court may make as to damages, in case it should
afterwards be of the opinion the defendant has by reason of
this order, sustained damages which the plaintiff ought to
pay
(a) The defendant, by itself, or its officers, servants, work
men, agents and employees, is hereby restrained, until the
trial of this action, or until further order, from
(i) manufacturing, using, exposing or offering for sale a
combination griddle and oven incorporating or having
applied thereto the industrial design of Registration No.
46557, or any imitation thereof.
(ii) manufacturing, using, exposing or offering for sale
and selling a combination griddle with warmer exemplified
by the griddle with warmer in the photograph as shown in
Schedule "B" of the Statement of Claim in this action.
2. The costs of this motion are in the cause. [Emphasis
added.]
Such a practice is exactly that set out by Lord
Diplock in Hoffmann-La Roche (F) & Co AG y
Secretary of State for Trade and Industry, [ 1974]
2 All ER 1128 (H.L.), at pages 1149-1150:
The practice of exacting an undertaking as to damages from
a plaintiff to whom an interim injunction is granted originated
during the Vice-Chancellorship of Sir James Knight Bruce who
held that office from 1841 to 1851. At first it applied only to
injunctions granted ex parte, but after 1860 the practice was
extended to all interlocutory injunctions. By the end of the
century the insertion of such an undertaking in all orders for
interim injunctions granted in litigation between subject and
subject had become a matter of course.
The advantages of this practice in any suit for the protection
or enforcement of personal or proprietary rights are plain
enough. An interim injunction is a temporary and exceptional
remedy which is available before the rights of the parties have
been finally determined and, in the case of an ex parte injunc
tion even before the court had been apprised of the nature of
the defendant's case. To justify the grant of such a remedy the
plaintiff must satisfy the court first that there is a strong prima
facie case that he will be entitled to a final order restraining the
defendant from doing what he is threatening to do, and second
ly that he will suffer irreparable injury which cannot be com
pensated by a subsequent award of damages in the action, if the
defendant is not prevented from doing it between the date of
the application for the interim injunction and the date of the
final order made on trial of the action. Nevertheless, at the
time of the application it is not possible for the court to be
absolutely certain that the plaintiff will succeed at the trial in
establishing his legal right to restrain the defendant from doing
what he is threatening to do. If he should fail to do so the
defendant may have suffered loss as a result of having been
prevented from doing it while the interim injunction was in
force; and any loss is likely to be damnum absque injuria for
which he could not recover damages from the plaintiff at
common law. So unless some other means is provided in this
event for compensating the defendant for his loss there is a risk
that injustice may be done.
It is to mitigate this risk that the court refuses to grant an
interim injunction unless the plaintiff is willing to furnish an
undertaking by himself or by some other willing and respon
sible person—
'to abide by any order the Court may make as to darhages in
case the Court shall hereafter be of opinion that the Defen
dant shall have sustained any damages by reason of this
order [sc the interim injunction] which the Plaintiff ought to
pay.'
The court has no power to compel an applicant for an interim
injunction to furnish an undertaking as to damages. All it can
do is to refuse the application if he declines to do so. The
undertaking is not given to the defendant but to the court itself.
Non-performance of it is contempt of court, not breach of
contract, and attracts the remedies available for contempts; but
the court exacts the undertaking for the defendant's benefit.
(Since the House of Lords decision in American
Cyanamid Co. v. Ethicon Ltd., [1975] A.C. 396,
at pages 407-408, it has been generally considered
that the prima facie case required of a plaintiff for
an interim injunction might be somewhat less than
strong, but such a lessening in the strength of the
plaintiff's case only increases the importance of
the undertaking as to damages.)
The plaintiff argued that, since the undertaking
was thus given to the Court rather than to the
defendant, and since non-performance would have
been contempt of court rather than breach of
contract, it was not given pursuant to any statute,
and that accordingly there was no statutory au
thority as required by section 20 of the Federal
Court Act.
It is true that the undertaking is not a contract,
but it is, as Boyd C. stated in Delap v. Robinson et
al. (1898), 18 P. R. 231 (Ont.), "the price of an
interlocutory injunction .... a condition of grant
ing an injunction." It therefore has the same rela
tionship to the Industrial Design Act as the injunc
tion itself, which was sought by the plaintiff, in the
words of his statement of claim, "by virtue of ...
the provisions of the Industrial Design Act". Dam
ages, including interest to the extent appropriate,
are thus, as required by section 20, remedies
sought "under the authority of" an Act of the
Parliament of Canada. Equity, invoked in both the
injunction and the undertaking, may be said to
operate in a statutory context, acting in aid of the
law. The fact that, in the event of default, a court
may have to fall back on its inherent powers to
enforce the undertaking may be an exercise in
necessity, in order to maintain the rule of law, but
cannot be taken to deprive undertakings as to
damages in their normal interpretation of their
statutory reference.
With threshold jurisdiction established under
section 20 of the Federal Court Act, the next
question is as to whether interest may be awarded
on the damages from the time the interim injunc
tion was obtained.
The Trial Judge was of the view that this ques
tion must be governed by law rather than by
equity, supra, at pages 397 F.C.; 316 C.P.R.:
It seems clear however in the case at bar that principles of
equity are not involved. The payment or non-payment of inter
est remains entirely a question of law, since the damages arise
out of an undertaking. The mere fact that the undertaking did
not constitute a true contract at law or that it related to the
granting of an interlocutory injunction which is an equitable
remedy, does not, in my view, change the essential element that
the damages are directly attributable to a formal promise and
not to any equitable principle and that they are to be calculated
as if they were being granted upon a contract to indemnify (see
Hoffman-LaRoche (F) & Co AG v. Secretary of State for
Trade and Industry ([1974] 2 All E.R. 1128 (H.L.))).
However, this is not so obvious to us. The injunc
tion itself is not provided for by the Industrial
Design Act, but only by section 44 of the Federal
Court Act. Yet it was, we think rightly, said by the
plaintiff to be sought "by virtue of ... the provi
sions of the Industrial Design Act" because it was
applied, as equitable relief, in aid of the statute.
The same would appear to be true of the
undertaking.
In equity there is no doubt that pre-judgment
interest can be awarded. In fact, admiralty law
took its rule awarding pre-judgment interest
directly from equity. As it was put by McLean J.
in The Pacifico v. Winslow Marine R. & Ship
building Co., [1925] 2 D.L.R. 162 (Ex. Ct.), at
page 167:
The principle adopted by the Admiralty Court in its equitable
jurisdiction, as stated by Sir Robert Phillimore in The North-
umbria (1869), 3 A. & E. 5, and as founded upon the civil law,
is that interest was always due to the obligee when payment
was delayed by the obligor, and that, whether the obligation
arose ex contractu or ex delicto. It seems that the view adopted
by the Admiralty Court has been, that the person liable in debt
or damages, having kept the sum which ought to have been
paid to the claimant, ought to be held to have received it for the
person to which the principal is payable. Damages and interest
under the civil law is the loss which a person has sustained, or
the gain he has missed.
It has been generally thought that there was
only a very limited right at common law to interest
as damages, principally in relation to liquidated
damages. McGregor on Damages, 13th ed., 1972,
at page 318, paragraph 435, puts it this way:
Today's overall position is therefore this. Statute apart, there
is a right at common law to interest as damages in a very
limited range of contractual claims, primarily connected with a
failure to pay money, and also generally in claims in Admiralty;
in addition, statute now requires the court to award interest as
damages in claims arising out of personal injury and wrongful
death. In all other cases resort must be made to the general
discretionary power to award interest which statute has con
ferred on the courts, a discretionary power which may be due
for more frequent exercise now that the awarding of interest, by
being made mandatory in a central area of litigation, has
achieved a greater degree of prominence in the lives of the
courts.
It appears to us that, even if the question were
to be considered at common law rather than in
equity, there is in the case at bar an intermediate
situation where pre-judgment interest is required
to compensate or make the defendant whole from
the loss it has suffered by reason of the injunction.
The logic of the undertaking is for full compensa
tion, which must needs include interest.
Moreover, we believe the time has come to align
law and equity in this respect, especially in the
light of the inexorable movement in Canadian
jurisdictions to pre-judgment interest. As Dianne
Saxe has recently written, "Judicial Discretion in
the Calculation of Prejudgment Interest" (1985-
86), 6 Advocate's Q. 433, at page 443:
In the majority of Canadian common law jurisdictions pre
judgment interest is no longer a privilege but a right. Judicial
discretion in the awarding of interest must now be used to tailor
interest awards to a plaintiff's true loss ....
We take this legislative tide to be a faithful
representation of current public policy, and we see
no reason why this Court must await a similar
legislative initiative at the federal level to put an
end to a judge-made limitation on the awarding of
interest which is clearly no longer seen to be good
public policy. We believe such a reinterpretation of
the common law is in accord with the concept
recognized by the Supreme Court of Canada in
Lewis v. Todd and McClure, [1980] 2 S.C.R. 694,
at page 717, of interest as part of the award. It is
also in keeping with this Court's recent decision in
Canadian Broadcasting Corp. v. C.U.P.E., [1987]
3 F.C. 515 (C.A.).
There is, of course, no provision in the Federal
Court Act as to the rate of pre-judgment interest,
and for that it is necessary to have recourse to
provincial law. Such a proceeding has been
specifically approved by this Court: Bensol Cus
toms Brokers Ltd. v. Air Canada, [1979] 2 F.C.
575 (C.A.); R. v. Montreal Urban Community
Transit Commission, [1980] 2 F.C. 151 (C.A.).
Addy J. therefore correctly looked to section 36 of
the Ontario Judicature Act.
It may be that the defendant would be better off
to claim for interest in equity, which Addy J.
believed in Teledyne Industries, Inc. et al. v. Lido
Industrial Products Ltd. (1982), 68 C.P.R. (2d)
204 (F.C.T.D.), at page 223, would be the going
rate compounded semi-annually or annually. But,
since it did not cross-appeal on the matter, it
cannot now seek recovery on that basis.
In our view Addy J. in the case at bar correctly
interpreted section 36 of the Judicature Act as to
the time of commencement, the period of calcula
tion and the rate itself, supra, at pages 397-400
F.C.; 316-318 C.P.R.:
The action for infringement of design was instituted by the
plaintiff on the 9th of February 1982. However, the defendant's
right to or claim for damages did not originate or arise at that
time. Indeed, the right never existed at all until the undertaking
was given by the plaintiff and the damages only began to arise
at that time by reason of the imposition of the interlocutory
injunction. Furthermore, it seems that the right is not based on
the action at all but merely on the undertaking which was given
in the course of the action. When applying paragraph 36(3)(a)
to the facts of the case, it does not matter whether we consider
that the prime rate should be that of the month immediately
preceding the action, that is January 1982, or of the month
immediately preceding the undertaking, that is February 1982,
because in each case the prime rate was 16.5%. This should
therefore be considered the governing rate.
As to the period of calculation, since the damages are clearly
unliquidated, the date that the undertaking requested by the
defendant and imposed by the Court, namely the 12th of
March 1982, must be regarded as the date for which the
interest is to run in accordance with subparagraph 36(3)(b)(ii).
It is true that no written notice of the claim was given to the
plaintiff at the time, but the formal undertaking of that party
given to the Court and the acceptance of that undertaking by
the Court as a pre-condition to granting the injunction must
necessarily be considered a much more solemn, formal and
effective notice of the defendant's claim than any mere written
notice could ever be.
The injunction remained in place from the 12th of March
1982, until the 28th of March 1983. There was of course no
damage at the outset of that period: it accumulated throughout,
until it attained, on the last day, a total of $365,438. Consider
ing the provisions of subsection 36(6), I consider that it would
be just in those circumstances to strike an average and apply 1 / 2
of the governing rate, that is 8.25%, to the full amount of
$365,438 for the period ending on the 28th of March 1983.
Thereafter the full rate of 16.5% should apply on that loss until
my judgment is rendered in this matter and post-judgment
interest rates are applied. Similarly for the sum of $256,468.75,
being the post-injunction damages incurred during the period
which was limited to one year by the referee, that is the 28th of
March 1983 until the 28th of March 1984, the damage should
be averaged by applying ' of the rate for the whole of that
period. Thereafter the rate of 16.5% would prevail on that
amount until judgment.
The freight and advertising charges of $1,097 which were
due from the 31st of March 1982 will bear interest from that
date at 8.25% to the date of judgment. I have deliberately
treated this last mentioned amount, which in fact represents
special damages, without applying either the full rate of inter
est nor the method of calculation provided for in subsections
(3) and (4) of section 36 of the Ontario Judicature Act [R.S.O.
1980, c. 223] in view of the fact that the amount was fully
agreed upon and also, constitutes an extremely minimal amount
having regard to the total amount of general damages involved.
The next issue concerns post-judgment interest,
on which section 40 of the Federal Court Act
provides:
40. Unless otherwise ordered by the Court, a judgment,
including a judgment against the Crown, bears interest from
the time of giving the judgment at the rate prescribed by
section 3 of the Interest Act.
Section 3 of the Interest Act' in turn provides:
3. Except as to liabilities existing immediately before the 7th
day of July 1900, whenever any interest is payable by the
agreement of parties or by law, and no rate is fixed by such
agreement or by law, the rate of interest shall be five per cent
per annum.
The courts have given a liberal interpretation to
section 3. In Prince Albert Pulp Co. Ltd. et al. v.
The Foundation Company of Canada, Ltd.,
[1977] 1 S.C.R. 200, at page 211, Martland J.
said for the Court:
It would appear to me that s. 3 is intended to apply where
parties to an agreement have stipulated for the payment of
interest, but no rate has been provided for, or where by law it is
directed that interest be paid, but no rate has been set. The
Toronto Railway case [[1906] A.C. 117], decided that a Court
may allow interest where payment of a just debt has been
improperly withheld, and it is fair and equitable that the debtor
should make compensation by payment of interest, "at such
rate as the Court may think right". Where a Court, in its
judgment, has awarded interest on this principle, the rate which
it fixes is payable by law and the rate is fixed by law. In such a
case the section would not be applicable.
A similar view was expressed by Laskin C.J. for
the Court in British Pacific Properties Ltd. v.
Minister of Highways and Public Works, [1980] 2
S.C.R. 283, at pages 289-290; (1980), 33 N.R. 98,
at page 104:
I find no reason to distinguish an award of interest at a
specified rate made by a trial judge acting under statutory
authority and an award of interest at a specified rate made by
arbitrators in fixing compensation for expropriated land pursu
ant to statutory authority. In both cases, the interest is payable
by law and the rate is fixed by law, so as to escape the limited
rate prescribed by s. 3 of the Interest Act. Whether a statute
under which interest is payable (as, for example, upon an
award of compensation or in respect of a debt), itself prescribes
the rate or remits the award and the rate to a judge or to an
adjudicator or adjudicative agency or provides a rate formula,
the rate arises under law and is, accordingly, fixed by law. I
would apply a liberal construction to the words "fixed by law"
so as to embrace the establishment of a rate of interest by
virtue of a statute or under its provisions when the resulting
rate is a binding one upon those affected by it. I would regard s.
3 of the Interest Act as applicable only when there is no
5 R.S.C. 1970, c. I-18.
provision made in an applicable statute or in an agreement and
no mechanism is provided by which a rate can be fixed.
The result of these cases is that section 3 of the
Interest Act does not limit statutorily established
judicial discretion with respect to post-judgment
interest. Given the Supreme Court's liberal inter
pretation of the provision, it should not matter if it
is a federally created Court applying a provincially
legislated law on interest. This suffices with
respect to any constitutional argument.
With regard to the interpretation of section 40
of the Federal Court Act, the wording of that
section itself establishes full judicial discretion as
to post-judgment interest; a recourse to section 3
of the Interest Act is not necessary if "otherwise
ordered by the Court". We believe Addy J. had it
right when he said, supra, at pages 401-402 F.C.;
319 C.P.R.:
In my view, section 40 of the Federal Court Act merely governs
where the Court has not chosen to set any post-judgment
interest. Where, however, it has decided to do so, then it may
apply the regular post-judgment rate of the province whose
laws govern the liability and, in addition, the court in such
cases should normally apply that rate unless some particular
circumstances exist which would justify a variation from the
statutorily fixed provincial rate. This principle applies a fortiori
where the case is one where the Federal Court and the appro
priate Provincial Court share concurrent jurisdiction over the
subject matter, in order, as previously stated, to avoid appli
cable substantive law from being determined by the choice of
tribunal.
The learned Trial Judge was therefore correct in
our view in turning for guidance to the relevant
provincial law, in this instance section 137 of the
Courts of Justice Act, 1984, of Ontario, and also
in his interpretation of that law.
In sum, we would not vary the Trial Judge's
award with respect to either pre-judgment or post-
judgment interest.
At the conclusion of the hearing of this appeal,
counsel for the defendant made an application for
an increase in respect of party-party costs. He
submitted that pursuant to the provisions of new
taxation Rule 344 6 (effective April 2, 1987 [SOR/
87-221, s. 2]) the Court would be justified, in the
circumstances of this case, in exercising the discre
tion vested in it by directing the taxing officer to
substantially increase the amounts specified in
Tariff B [SOR/87-221, s. 8] with respect to the
preparation for the hearing in the Court of Appeal
(new Tariff B—item 1(1) (h)) and with respect to
conduct of the hearing in the Court of Appeal
(new Tariff B—item 1(1)(i)).
6 Rule 344. (1) The Court shall have full discretionary
power over payment of the costs of all parties involved in any
proceeding, the amount and allocation of those costs and
determining the persons by whom they are to be paid.
(2) Costs may be awarded to or against the Crown.
(3) In exercising its discretionary power pursuant to subsec
tion (1) the Court may consider
(a) the result of the proceeding;
(b) the amounts claimed and the amounts recovered;
(c) the importance of the issues;
(d) the apportionment of liability;
(e) any confession of judgment under Rule 405 and the
amount thereof;
(f) any payment of money into Court under Rules 441 et seq
and the amount of that payment;
(g) any offer of settlement made in writing;
(h) any offer of contribution made pursuant to Rule 1732
that is brought to its attention pursuant to a reserved right to
do so;
(i) the volume of work;
(j) the complexity of the issues;
(k) the conduct of any party that tended to shorten or to
lengthen unnecessarily the duration of the proceeding;
(1) the denial of or the neglect or refusal of any party to
admit anything that should have been admitted;
(m) whether any stage in the proceedings was,
(i) improper, vexatious, or unnecessary, or
(ii) taken through negligence, mistake or excessive
caution;
(n) whether or not two or more parties should be allowed
more than one set of costs, where they defended the proceed
ing by different counsel or where, although they defended the
proceeding by the same counsel, they separated their defence
unnecessarily;
(o) whether two or more parties, represented by the same
counsel, initiated separate proceedings unnecessarily; and
(p) any other matter relevant to the question of costs.
In support of this request, counsel submitted
that paragraphs (a),(b),(c),(e),(i) and (j) of Rule
344(3) were relevant to this appeal and a consider
ation of these circumstances by the Court would
justify a substantial increase in items 1(1)(h) and
1(1) (1) in new Tariff B referred to supra.
Counsel for the plaintiff, however, referred to
the provisions of Rule 346.1(2) (also effective
April 2, 1987 [SOR/87-221, s. 4]) which reads:
Rule 346.1 .. .
(2) The new taxation rules do not apply where, within 90
days after the coming into force of the new taxation rules, any
party to a proceeding commenced before that day files with the
Court a notice that the costs shall be determined without
reference to the new taxation rules.
As noted, supra, the new taxation rules came into
force on April 2, 1987. We are advised by the
Registry that counsel for the plaintiff filed the
notice contemplated by Rule 346.1(2) supra, on
June 2, 1987. Since that notice was filed well
within the transition time period set out in Rule
346.1(2) supra, it follows that the costs herein fall
to be determined without reference to the new
taxation Rules.
Counsel for the defendant submitted further,
however, that even under the old Rules respecting
costs, the defendant was entitled to increased costs.
In our view, the proper procedure in such circum
stances would be to follow the provisions of subsec
tion (7) of Rule 344 as it read prior to April 2,
1987:
Rule 344. .. .
(7) Any party may
(a) after judgment has been pronounced within the time
allowed by Rule 337(5) to move the Court to reconsider the
pronouncement, or
(b) after the Court has reached a conclusion as to the
judgment to be pronounced, at the time of the return of the
motion for judgment,
whether or not the judgment includes any order concerning
costs, move the Court to make any special direction concerning
costs contemplated by this Rule, including any direction con
templated by Tariff B, and to decide any question as to the
application of any of the provisions in Rule 346. An application
under this paragraph in the Court of Appeal shall be made
before the Chief Justice or a judge nominated by him but either
party may apply to a Court composed of at least three judges to
review a decision so obtained.
Having regard to the provisions of that subsec
tion, we see no reason why the normal practice
should not be followed in this appeal. That prac
tice permits a successful party, if so advised, to
seek special directions with respect to costs pursu
ant to Rules 344(7) and 337(5) and within the
time delays prescribed by Rule 337(5).
For all of the above reasons, the appeal of the
plaintiff should be dismissed with costs while the
cross-appeal of the defendant should be allowed
with costs and the award of the referee restored
together with pre- and post-judgment interest
thereon as awarded by the Trial Judge. Pursuant
to Rule 337(2)(b), counsel for the defendant may
prepare a draft of an appropriate judgment to
implement the Court's conclusions herein and
move for judgment accordingly.
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.