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Synergism Arithmetically Compounded Inc. v. Parkwood Hills Foodland Inc. Statutes, Regulations and Rules Cited: Bankruptcy Act, R.S.C. 1985, c. B-3, ss. 69(2), 69.3(2), 71(2), 128(3). Personal Property Security Act, R.S.O. 1990, c. P.10, s. 63(4). Trade-marks Act, R.S.C. 1985, c. T-13, ss. 19, 22. Counsel:
1 MÉTIVIER J.:— In April of 1995, the parties to this action entered into a Franchise Agreement by which the first defendant became the franchisees of a food outlet known as "Fat Albert's". The second and third defendants were guarantors. By early 1996, they amended the Agreement and granted a sub-franchise, a sports bar "Ralph's", to the numbered company defendant, owned and controlled by Albert Ayoub, the last-named defendant. Description of Parties 2 The plaintiff is a corporation owned by Ralph Tannis, which currently owns and operates a franchise operation in which outlets are licensed to sell the pizzas and subs which, by way of various corporate guises, Mr. Tannis has been selling in the Ottawa area for approximately 30 years. These outlets have been known as Fat Albert's. The franchise also licenses Ralph's, a sports bar, where the patrons can watch various sports events on TVs and where promotions and advertisements feature various sports events. 3 The defendants, Eli Saikaley and George Saikaley, are the owners of a convenience store by way of their corporate entity, the defendant Parkwood Hills Foodland Inc. They had had a deli counter in their convenience store for some time and the Franchise Agreement in April of 1995 authorized them to offer for sale the submarines and pizzas of the franchiser known as Fat Albert's. 4 They felt they were particularly well situated for this kind of food outlet, since they are located directly across the street from a high school. 5 The numbered company defendant is an entity owned by the last named defendant, Albert Ayoub, which operated a bar authorized by way of a Sub-Franchise Agreement derived from the "Saikaley" franchise. The bar was opened in February of 1996, several months after the pizza and sub-franchise outlet. As noted above, the bar franchise was granted to the first named defendants, the Saikaleys and Parkwood Hills, and they, by way of a Sub-Franchise Agreement, licensed Mr. Ayoub to run the bar, known as Ralph's Sports Bar. 6 The intention of the franchisee and Sub-franchisee was to mutually benefit from the fact that the bar would not be required to operate a kitchen but would access the food from Fat Albert's, while that enterprise would have access to food sales from the bar. The bar is located immediately beside the convenience store, and the kitchen was positioned between the two franchise outlets. Background 7 The parties agree that the economic realities of the times were such that many restaurants and fast food outlets were experiencing significant financial difficulties in the years surrounding the events which form the basis of this lawsuit. 8 The defendants suggest that the plaintiff misled them because they believed that his company and the outlets were financially viable and that their enterprise would be successful. 9 I have found as a fact that these businessmen entered into a legal agreement, with independent legal counsel, and are taken to have assumed the risks inherent therein. In any case, the defence does not rest on any representations made. 10 It is common ground that the defendant, Parkwood Hills Foodland Inc., and Eli and George Saikaley paid the initial franchise fee, then paid all or most of the required payments for a time; and then fell into arrears. There is much dispute about the exact nature and amount of these arrears, but it is undisputed, that at a particular time the Saikaley brothers stopped paying some of their fees. One of their most serious complaints was that the fees they were obliged to pay pursuant to the Franchise Agreement for media, were not being properly utilized, nor did they receive an accounting of these, even when they began to raise objections and questions. Franchise Agreement 11 The Franchise Agreement is fairly straightforward. It sets out that the franchiser is basically in complete control of every significant decision. It provides that the franchiser can decide if and when and how he will advertise. Further, the agreement sets out that the franchiser can control the quality of his product by insisting on compliance with his methods of assembling pizzas and subs, the use of ingredients that he dictates, and he can change the menu or not as he sees fit. With respect to the sports bar, all franchisees share in the promotions and the advertising. 12 In exchange, the franchisee is able to sell products that already have a market recognition by their name, their taste, and quality, and to share in the benefits of franchiser communal advertising. The franchiser has borne the risk and expense of the development of the product and the establishment of the recognition factors. The signage, the designs, the colours are all those which the franchiser controls and has established. Pursuant to the Franchise Agreement, franchisees are to be trained and supported by head office; their supplies are to be available at a volume price at designated suppliers. The franchiser frequently gets a rebate on the goods supplied. The franchisee (and the sub-franchisee) also obtains the benefit of advertising and promotions put in place by the franchiser. 13 The names of some of the subs or pizzas, as well as the names of Fat Albert's or Ralph's Sports Bar, are registered as trademarks but the franchisees are authorized to use these. 14 In return, the franchisees are to pay royalties and fees as agreed in the Franchise Agreement. In this case, the franchisees for Fat Albert's agreed to pay 5% for royalties, 3% as human resources fees, and .03% for joint media fees. These initial fees were re-negotiated to provide for 3% royalty fees but for the first year only. There was as well, a one-time initial "buy-in" fee. Second Agreement 15 The Saikaley brothers, shortly after opening their Fat Albert's franchise, became aware that a space in the building beside them was coming available. They immediately moved to secure it, as they wished to ensure that there was no competition in such close quarters. As well, they had a plan by which they could increase their sale of food. They were of the view that a Ralph's Sports Bar would be a good ally. The evidence is that after securing the lease, they then felt under considerable pressure to induce someone to invest in such an enterprise, as they had no personal interest, time or money to do so themselves. They were able to interest Mr. Ayoub in the project. It is clear that from the inception of these discussions, he would have been happier to open his own bar, but he did think it made sense to have access to his prospective neighbour's kitchen. 16 The franchisees of Fat Albert's, bound by their contract, were not in a position to deviate from their Franchise Agreement, and provide a Fat Albert's kitchen, for any other enterprise than a Ralph's Sports Bar. The solution was to enter into an amendment to the Franchise Agreement to extend the franchise so that they would become the sub-franchiser of the Ralph's Sports Bar franchise and to authorize Mr. Ayoub's company, 1155295 Ontario Ltd., as sub-franchisee, with Mr. Ayoub as guarantor. They thus amended the original Franchise Agreement. 17 The amendment and the Sub-Franchise Agreement were entered into on February 7, 1996. The numbered company became the sub-franchisee. Mr. Ayoub signed the Sub-Franchise Agreement as guarantor. 18 Difficulties over payments surfaced immediately. Mr. Ayoub did not pay the entire initial franchise fee, as required, notwithstanding significant concessions from Mr. Tannis, representing the franchiser company. Mr. Ayoub resisted and delayed signing the Agreement and refused to sign a General Security Agreement, or a Management Agreement. 19 The renovations to his space, for which he was responsible, took much longer than anticipated, and when these were completed, the sports bar had missed the market's biggest sports event of the year, the Super Bowl. All the Ralph's Sports Bars were involved in joint advertising, coupled with games, draws, and various promotions revolving around this event. Failing to open prior to this time, then, meant that the bar missed a very significant marketing boost and correspondingly, it is assumed, missed sales which could be generated from that advertising and promotion. The evidence of Mr. Tannis was that this period, leading up to the Super Bowl, marks the highest sales point in the year in these Ralph's Sports Bar establishments. 20 Mr. Ayoub made it clear that the company he controlled was a reluctant sub-franchisee. Having entered into this contract, with independent legal advice, he nevertheless challenged most of the rules by which he had agreed to operate his business and failed to meet many, if not most, of his obligations. 21 His reluctance to enter into the original Agreement and his wish to have another kind of a bar does not, in the absence of any other factor, and in the presence of his legal and contractual obligations, provide him with any legal excuse for so doing. Events Leading to Lawsuit 22 The economic realities of the mid 90's, when the Franchise and Sub-Franchise Agreements were entered into, were such that the restaurant business went through what Mr. Patterson, a defence witness, and Mr. Tannis, the plaintiff, described as "very tough times". 23 Mr. Tannis testified that financial institutions refused to lend money to restaurants, so financing became almost impossible. Many of the franchisees were experiencing serious difficulties, some franchises were given up, other franchisees went bankrupt. Payments to the franchiser from some franchisees became irregular. In some cases, special arrangements were made by him with the particular franchisee; in some cases, some payments were deferred; and, in others, some other accommodations were made by the franchiser. As head tenant on the leases for the various franchise locations, Mr. Tannis and his company began to be unable to make their payments on the rent or other of their obligations, unless and until the franchisees made their payments. Many of the franchises were in such deep trouble, that the corporation knew that it could not carry on if it carried the "sinking ships". The evidence was that time and effort were put into developing a business plan which would effectively re-organize the company, by cutting out the deadwood, and moving forward with only those stores which were felt to be viable. 24 This business plan was known to some of the franchisees. Before it could be put in place, but at the eleventh hour, for reasons not altogether clear, the evidence of Mr. Tannis is that the corporation and Mr. Tannis, personally, found themselves without the services of the lawyer and the accountant with whom these plans had been made. A newly retained trustee in bankruptcy recommended a different course of action, and a notice of the intention to file a proposal to creditors (N.O.I.) was given on August 30, 1996. 25 Word of this began to spread and the franchisees became alarmed. The evidence of the defendants is that they experienced problems with credit, but I find as a fact no one was affected in more than a momentary and transitory way. 26 The plan to effect a corporate reorganization remained in place. An earlier General Security Agreement, which had pledged all the assets of Fat Albert's & Ralph's Inc., to the Royal Bank of Canada, was assigned to Ralph Tannis personally and to his new company entity, the plaintiff, Synergism Arithmetically Compounded Inc. ("Synergism"). Synergism thus became the owner of all the assets, including the trademarks. The trustee gave evidence that he never took possession of these assets because the debts secured by the Security Agreement far outstripped the value of the assets. His evidence was that the debts were approximately $250,000 and the assets were valued roughly at $38,000. The assignee of the Security Agreement served notice of intention to enforce the security on December 20, 1996 to be effective February 3, 1997. 27 The notice to enforce the security was given on August 16, 1996, well before the notice of intention to file a proposal. The effect of it was to pass ownership of the assets of Fat Albert's & Ralph's Inc. to Synergism, the current corporate plaintiff. 28 The franchisees attack the bankruptcy documents on the basis that there is no value shown for either the goodwill or the trademarks of the franchises. I find that nothing turns on this. The evidence of the trustee in bankruptcy was that he had been given all the information as to the existence of the trademarks. He was not able to clarify why he had not inserted a value for these in the documents, but presumed it was because it did not matter, since the owner by use or registration was taking these over in another corporate form, as "Synergism Arithmetically Compounded Inc." 29 The evidence of Ralph Tannis, speaking for the corporate plaintiff, and that of the Saikaley brothers, begins to diverge at this point. 30 Where I must choose between the credibility of the defendant franchisees and that of the plaintiff franchiser, I prefer the plaintiff's evidence and find it more reliable and trustworthy. It was consistent with the documents, and consistent within itself, and it was reasonable in terms of business practices and decisions. The defendants' evidence was none of these. In particular, although numerous allegations were made, not one piece of documentary evidence supported the defendants' allegations. 31 Mr. Tannis testified that he began discussions with Mr. George Saikaley in September 1996, as to his new business plan when he discussed the need to get new franchisees, and asked him if he might be interested. Together they drove by a variety of sites being considered for opening new Fat Albert's locations. 32 Mr. Saikaley reconstructs the same events, but situates them in November, and testified that this came about as a result of his own initiative in suggesting certain new outlets. 33 As stated above, I prefer the evidence of Mr. Tannis. It is more coherent and sensible. Thus, I find Mr. Saikaley knew in early September of the plan to file a proposal and have a new company take over all the assets of both "Fat Albert's" and "Ralph's". 34 On September 24, 1996, as part of the bankruptcy, the trustee filed a document in which he asserts "given the breaches of the Franchise Agreement by the debtor, the franchisees may be in a position to rescind the Agreements and curtail royalty payments". Mr. Rozon, the trustee, could not assist us with why he had included that statement. I find that this statement has no effect at law. 35 It is however possible, that, the franchisees, having seen this paragraph, may have seized on it as entitling them to resist making their payments as they were contractually obliged to do. In any case, as of August 1996, the Saikaley brothers had begun withholding certain of their fees. 36 Meanwhile, Mr. Ayoub was not in substantial compliance with many of his financial obligations pursuant to the Franchise Agreement. By May 27, 1996, Mr. Ayoub was in arrears of approximately $3,500. After the bankruptcy, he made no further payments. 37 After the bankruptcy proceedings were initiated and carried on, the parties proceeded much as before while the corporate re-organization took place. However, franchisee dissatisfaction and the withholding of certain fees continued. 38 On October 3, 1997, the plaintiff terminated the Franchise Agreement and subsequently brought this lawsuit. 39 In contravention of the Franchise Agreement, the defendants did not immediately remove their signage. They continued to use trade names on cash register slips, and new menus bore the words "Formerly Fat Albert's". Further, the first three named defendants attempted to register as their own trademarks the names of six pizzas which had formerly been trademarks belonging to and used by the plaintiff's corporate predecessors and/or Ralph Tannis, the controlling mind of all such companies. The registration for some of these trademarks had been expunged as a result of their non-renewal. Other registrations had remained current. 40 The plaintiff claims:
1. Damages for Breach of Contract 41 The defendants raise defences to this claim based on the following:
42 The new company, the current plaintiff, was a secured creditor who received an assignment of the General Security Agreement originally held by the Royal Bank, including all contractual rights and insurance claims and all goodwill as well as "all deeds, documents" and "all patents, trademarks, copyright and other industrial property" (General Security Agreement, 30 October 1990, 1(a)(iv), (v)). 43 The defendants submit that to hold security does not amount to holding title. Further, it is submitted that there is no evidence of Synergism's taking possession of the assets and that, in any case, Synergism can acquire no more rights then those enjoyed by the Royal Bank. Any title to assets, this submission sets out, must come from the trustee in bankruptcy in whom the assets came to rest. Further, it is submitted that no notice was provided pursuant to s. 63(4) of the Personal Property Security Act, R.S.O. 1990, c. P.10. 44 The evidence of the defence witness, Daniel Rozon, was unequivocal. Throughout the proposal period, Fat Albert's & Ralph's Inc. continued to operate the franchise chain under the control of Synergism and Ralph Tannis personally, both of whom were secured creditors. Mr. Rozon further confirmed that Ralph Tannis and Synergism, who received all the assets of Fat Albert's & Ralph's Inc. at the time of the assessment, never relinquished possession and control of these. Clearly, these included the franchise chain and the Franchise Agreements as well as all other assets. 45 On November 15, 1996, Fat Albert's & Ralph's Inc. were deemed bankrupt due to their failure to make a proposal to their creditors-notice of which had been given on August 30, 1996. A contributing factor to this inability was the accumulating arrears and withholding of fees by the defendants, among others. 46 Because of the imbalance of debts as to unsecured assets, the trustee took the position that there was no equity available to unsecured creditors. He disclaimed any interest in any possible equity for the benefit of these unsecured creditors. Section 71(2) of the Bankruptcy Act, R.S.C. 1985, c. B-3 [hereinafter Bankruptcy Act], provides that the property of the bankrupt vests in the trustee "subject to the rights of secured creditors". The only way a trustee could acquire assets subject to security was if the trustee redeemed the assets by buying them from the secured creditor, s. 128(3). This did not happen. 47 Since the secured creditor here dealt with his security before any N.O.I. (see Bankruptcy Act, s. 69(2)) and since s. 69.3(2) of the Bankruptcy Act provides that the usual bankruptcy stay does not apply to prevent a secured creditor from dealing with his security in any case-it is clear that the bankruptcy had no effect on the transfer of all assets to the secured creditor. 48 The assets never vested in, nor ever became the property of the trustee. 49 The defendants further submit that no notice was received. In the Personal Property Security Act, R.S.O. 1990, s. 63(4), notice is required before foreclosing on other creditors. There was no "foreclosing" here. The franchisees are not creditors and I reject this submission out of hand. 50 It is important to note that throughout these events, the defendants were aware sometimes in a general way, sometimes in a more detailed way, of what was transpiring. On November 11, 1996, a meeting was held in which Ralph Tannis announced the impending bankruptcy of his company and advised that while a new company would take over the franchise chain, the franchisees would not notice any changes since all of these would be "technical". Conclusion re Lack of Privity 51 I accept in fact and in law that Synergism validly acquired rights in and to trademarks, all intellectual property, the Franchise Agreements, and the right to sue thereon. 2. Fundamental Breach 52 I turn now to the defendants' second defence, that of a fundamental breach of contract by the plaintiff. The submission is that the bankruptcy was in and of itself a fundamental breach. 53 The authorities relied on by defendants and the post-bankruptcy conduct of the defendants contradict their submission that the franchisees were able to consider their Franchise Agreements null and void because of the bankruptcy. 54 Neither the Franchise Agreement, nor any of the authorities suggest that a bankruptcy terminates a franchise. The decision, Re Thomson Knitting Co. Ltd. (1924), 27 O.W.N., 167; 56 O.L.R. 625 at 628 (Ont. C.A.), confirms that a contract is not cancelled merely because of a bankruptcy. Section 14.12 specifically provides for the bankruptcy of the franchiser and continuing franchise agreements. This section states as follows:
55 I have dealt earlier with the submission as to whether the property here had vested in the trustee in bankruptcy. Even where property or a contract has vested in a trustee and the trustee fails to notify the other party of the trustee's intention to enforce the contract, the effect is merely to create an election to treat the contract as at an end. 56 Here the defendants did not do so. For some 13 months, they viewed themselves as franchisees; they expected, requested, and received the franchiser's services; they argued over advertisements, requested bags and uniforms, participated in the making of a television commercial, and requested and had meetings with their "usual" contact, the franchiser representative, Mr. Ralph Tannis. They were not unprepared to take whatever advantage they could of the financial difficulties of the franchiser, and in this context, attempted to unilaterally "renegotiate" the terms of the Franchise Agreement. They withheld certain "media" payments, despite the clear terms of the Franchise Agreement but failed to put the money into a trust account as they indicated they would. 57 Mr. Tannis, now head of Synergism, was consistent. While he granted some concessions to some franchisees, throughout these events, he relied on the Agreement, and advised of this. Mr. Ayoub testified that in 1997, Mr. Tannis had reminded him that "we have a signed Agreement". The franchiser therefore did not, at any time, waive any terms of the Franchise Agreement. Indeed, the Agreement contains a specific non-waiver provision, clause 18.04:
58 In further support of their assertion of a fundamental breach by the plaintiff, the defendants allege that the plaintiff failed to provide adequate media advertising, and further failed to provide adequate training. 59 With respect to the media, it is clear from the Franchise Agreement that this is wholly and completely at the discretion of the franchiser. The defendant made much of the changes to the format used but while they may have preferred the old format, they had no "right" to any control.
60 The controversy regarding the advertising is, in my respectful opinion, a red herring. The franchisees claimed that they had come to expect a certain form of radio advertising which, by all accounts had been successful and which, after it was terminated, somehow became a major focus of the franchisees' discontent. 61 No evidence to the contrary having been led, I accept Mr. Tannis' evidence that that particular format had become unavailable to him by virtue of its greatly increased cost when the program was syndicated nationally. It was eminently sensible for a franchiser with a local market to be unable and unwilling to participate in advertising at a national level. 62 I find as a fact that the advertising and use of media fees was adequate and reasonable in the circumstances. 63 With respect to adequate training, I also find this allegation to be without merit. On the evidence even of the defence, as well as on the basis of photos and other evidence of the plaintiff, there was adequate and reasonable training and supervision. Conclusion re Fundamental Breach 64 This leaves the only fundamental breach to be that of the defendants, who failed to observe their obligations pursuant to the contract when they did not pay their required fees. The defendants, in any case, never repudiated the contract as they continued to operate as franchisees, thus affirming the Franchise Agreement, and merely attempted to unilaterally renegotiate terms more beneficial to them. 65 A telling example of this affirmation of the contract now being impugned is the motion to enforce the arbitration clause of the Franchise Agreement brought by the defence before the trial. 66 The defence of fundamental breach by the plaintiff therefore fails. Infringement of Trademarks 67 The plaintiff claims damages for the infringement resulting from the use of the trade names after the termination of the Franchise Agreement on October 3, 1997. The evidence on this point includes the signage -- left up for a month; and the menus with "Formerly Fat Albert's" -- in place until at least April 1999. 68 Beyond this, the plaintiff claims damages for breach of contract, as well as infringement because the defendant applied for six trademarks, identifying names of particular pizzas, which had been used by the plaintiff and predecessor corporate entities. This, it is alleged, is in direct breach of section 14.02 of the Franchise Agreement which provides:
69 The defence is that the Fat Albert's & Ralph's Inc. was not the registered owner of these trademarks, because they were expunged in 1998, and there was no evidence of their use by Synergism since 1997. 70 At most, it is submitted, for a time there were merely competing claims. 71 On the first day of trial, counsel for the defendants advised that the defendants would not be pursuing these applications for registration. 72 The purpose of trademark registration is to avoid confusion. At the same time, the trademark law has codified certain rights held at common law with the aim of precluding unfair competition, thus helping to keep order in the marketplace. (McCabe v. Yamamoto & Co. (America) Inc. et al. (1989), 23 C.P.R. (3d) 498 at 504.) 73 The Franchise Agreement, in this case, details carefully, as shown in section 14.02 above, the exclusive right of the franchiser to the trademarks, which the Agreement licenses the franchisees to use. 74 The use of a trademark is all important. Prior use will defeat an application. In this case, Synergism has prior rights to all trademarks in question, based on previous use by its predecessor in title. This is so even though the registrations for the trademarks in question were expunged as a result of non-renewal. Failure to renew registration cannot be regarded as abandonment of the trademark, as long as use is maintained. (White Consolidated Industries, Inc. v. Beam of Canada Inc. (1991), 39 C.P.R. (3d) 94 at 109.) 75 Nothing turns on the changes in corporate entities, all owned and controlled by Ralph Tannis. Where there is a close corporate nexus between the owner of a trademark and the user, a license is implied and such use would not result in non-distinctiveness. (See: Trade-marks Act, R.S.C. 1985, c. T-13 [hereinafter Trade-marks Act], s. 50. Gray Rocks Inn Ltd. v. Snowy Eagle Ski Club Inc. (1971), 3 C.P.R. (2d) 9 at 20. See also: Marchands Ro-Na Inc. v. Tefal S.A. (1981), 55 C.P.R. (2d) 27 at 33.) 76 Here there was a clear, written license between the plaintiff's predecessor in title and the defendants herein. The Agreement set out in sections 13.00 and 14.00 that the trademarks were owned by the licensor and no rights in the trademarks were being granted or could be obtained by the licensees. Conclusion re Infringement 77 The defendants' position that there was no confusion caused by virtue of their use of "Formerly Fat Albert's" is not persuasive. The only purpose of such a description could be to rely on the link to the registered trademark in order to derive benefit from it. This is a clear infringement as well as a breach of the contractual relation. 78 There is no merit to the defendants' claims that the plaintiff's failure to maintain all of its trademark registrations somehow obviated their rights. Rights flow from use and not necessarily from registration (Kabushiki Kaisha Edwin v. S.D.B. Design Group Inc. (1986) 9 CPR (3d) 465 at 468), which merely affords rights of exclusivity on the trademark throughout Canada. 79 The continued use, after revocation of the license, of "Fat Albert's" on the menus and on cash register tapes, is an infringement of the Trade-marks Act, s. 19. The use of the term "Formerly Fat Albert's" is an infringement under the Trade-marks Act, sections 19 and 22. (See: Cheerio Toys & Games Limited v. Samuel Dubiner, [1966] S.C.R. 206, (SCC) 32 Fox Patent Cases 37 at 47.) 80 I find that the defendants' use of the trademark after notice of termination was neither "innocent nor accidental". The plaintiff's mark is well known, and harm was therefore caused by the mark's ongoing use in contravention of contract and law, which caused a loss in its value as a unique distinguishing mark. 81 This defence of mere competing claims must fail, as it has no merit in fact or law. Punitive Damages 82 The plaintiff seeks punitive damages for the following reasons. Not only did these defendants seek to register the trademarks, but they also told the owner to stop using the trademarks in letters of February 7 and March 3, 1998. Then, on April 3, 1998, they wrote to other franchisees advising that they themselves would be receiving the registration for these trademarks. 83 The plaintiff finds this conduct so offensive as to warrant punitive damages. 84 While the defendant's application for registration shows a misunderstanding or misapplication of trademark law, and a rather high-handed approach, this was, in itself, not of such a nature or quality as to attract punitive damages. 85 A proper case for exemplary damages is one where the conduct is in flagrant and arrogant disregard of the plaintiff's rights. (See, for example, Pro Arts, Inc. v. Campus Crafts Holdings Ltd. (1980), 50 CPR (2d) 230 at 252 (Ont. H.C.J.)). The conduct must be so egregious as to call for more than the simple finding of infringement of trademark or breach of contract that I have made in this case. Exemplary damages are indicated where, inter alia, there has been a calculated, deliberate and conscious breaking of the law. Such damages must be justified by clear evidence of "a cynical disregard for another's rights, accompanied by a truculent breach of the law as to those rights, all in furtherance of one's own aspirations". (Gould J. in Johnston Terminals & Storage Ltd. et al. v. Miscellaneous Workers, Wholesale & Retail Delivery Drivers & Helpers Local Union No. 351 et al. (1975), 61 D.L.R. (3d) 741 at 748-9 (B.C. S.C.)). 86 While there is no prohibition in the Trade-marks Act to an award of punitive damages, there are here few of the circumstances which would lead to their award. In my view, the damages award, together with an appropriate costs award, will appropriately compensate the plaintiff in these circumstances. Final Conclusions 87 To summarize, I find that the plaintiff is the proper party before the court, and that the bankruptcy has not had any effect on the Franchise Agreement. Based on the evidence and the law, the plaintiff is entitled to damages for breach of contract and infringement of trademark rights. The royalty fees to be paid as damages should be calculated to the end of the term of the Franchise Agreement on April 3, 2000. 88 I do not find this to be a case for an award of punitive damages. 89 The judgment of Mr. Justice Chadwick can now be enforced, and the stay is hereby lifted, no set-offs against these amounts having been claimed at trial. 90 The plaintiff also seeks an injunction pursuant to the terms of the Franchise Agreement by which the defendant would be restrained for 18 months from "carrying on any restaurant or prepared food business similar to any business carried on by Fat Albert's", pursuant to section 18.10(2) of the Franchise Agreement. The evidence has conclusively established the contract and its breach. I see no reason why this term of the contract should not be also enforced. 91 I order that the defendants be so enjoined and restrained for a period of 18 months from this date. 92 Finally, the plaintiff seeks an injunction preventing the defendants from "engaging directly or indirectly in any restaurant or prepared food business which is the same or similar to any business carried on by Fat Albert's & Ralph's Inc. restaurants" for a period of 18 months calculated from the date of this judgment. The Franchise Agreement is clear on this point. 93 The injunction is granted. 94 The plaintiff shall have 15 days from this date to make written submissions as to costs. The defendants shall then have 10 days to respond. If a reply is required, it is to be submitted within 3 days. MÉTIVIER J. |
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