Those fighting against the proliferation of counterfeit goods won a victory in Federal Court recently when a judgment of $380,000 was granted against two corporations and an individual found to be selling fake Chanel merchandise.
The judgment included $250,000 in punitive and exemplary damages against Annie Lam and her store Lam Chan Kee, a business that operated at the Pacific Mall in Markham, Ont.
The court rejected Lam’s submission the case should go to trial because of a credibility issue raised by contradictory affidavit evidence. Instead, the court found it had enough basis to grant judgment under summary trial procedure, which allows for a proceeding to be adjudicated faster on affidavit evidence and out-of-court cross-examinations.
“I definitely see it as a huge win under the summary trial rules,” says Karen MacDonald, a partner with Bull Housser & Tupper LLP in Vancouver who represented Chanel at trial in Chanel Ltd. v. Lam Chan Kee Company Ltd.
Affidavits from three witnesses were submitted from Lam’s side, essentially saying the business had been transferred, but the judge recognized there was no third-party documentation relating to the transfer.
Annie Lam and an accountant said Lam’s son Justin Lam was said to have obtained the business from his mother, but there was no corroborative evidence from financial institutions showing a transfer of money had occurred.
“We were quite excited the court was willing to apply a broad application of the summary trial procedures outside of the summary judgment rules,” says MacDonald. “If there is any whiff of credibility there is a line of Federal Court of Appeal cases that say you can’t decide it if credibility is an issue.”
While the judgment is not seen as “exceptional” in terms of the dollar amount — to MacDonald it’s the fact it will help prevent counterfeiters from putting in evidence and “shouting about credibility to stop you from getting a summary judgment.”
MacDonald was also involved in the first case under summary trial rules in B.C. which was also a counterfeiting case involving Louis Vuitton and Burberry.
“In that one, the defendants had shown up and defended themselves but they didn’t have any affidavit evidence,” says MacDonald.
In the Lam case, MacDonald put forward a Supreme Court of Canada decision — Hryniak v. Mauldin — that talks about proportionality, affordable access to justice, and the fact these kind of summary trial rules should be given a broad latitude and if a judge, in his or her discretion, feels they can grant judgment on the evidence before them they should be allowed to do so.
MacDonald says counterfeiting cases are “really death by a 1,000 cuts” and the difference between spending $100,000 or less on a summary trial versus going to a $300,000 or $400,000 full trial makes a huge difference in the ability to go after counterfeiters.
The counterfeiting business is being estimated at over a trillion dollars in global trade.
“It’s a huge global problem. The tools in Canada have not been great to go after counterfeiters — we had the Combating Counterfeit Products Act came into force on Jan. 1 of this year. It has some new provisions in it but they are still lacking,” she says.
MacDonald had hoped Justice Luc Martineau would have also addressed the issue of landlord liability when it comes to counterfeiters, but he did not.
“The court didn’t rule on it but when finding personal liability he did cite it as a factor in terms of finding she [Lam] was still involved in the business so it might open it [the issue] a crack,” says MacDonald.
Other jurisdictions such as the United States and some European countries have found liability for landlords where there is knowledge the activity is taking place.
“It’s in their control to stop it and they don’t do anything to stop it,” says MacDonald. “Flea markets are traditional places where that has been applied. It’s an interesting area that I think Canadian law will hopefully develop.”
MacDonald says there isn’t just one landlord to contact at the Pacific Mall in Markham.
“There isn’t one name we can go after to say ‘this activity is rampant throughout your mall can you please stop your tenants from doing this?’ Each unit is individually owned.”
Lam owned the premises from which the business was being operated.
“The argument being that even if there was this alleged transfer of the business to her children she was still responsible because she had knowledge the activity was taking place — it was her premises she could have told them to stop and she didn’t.”