Canada: Quebec Superior Court Declines To Issue A Norwich Order To Identify The Supplier Of Grey Market Perfumes

In a recent judgment, the Quebec Superior Court denied a request for an order against a wholesaler/retailer to identify the suppliers of branded products obtained via parallel importation and sold in Quebec without the brand owner's authorization. The brand owner sought the information in order to sue the products' suppliers.

Coty Inc., a manufacturer of branded perfumes, alleged wholesaler/retailer Costco Wholesale Canada Ltd. was selling genuine Coty-branded products without authorization and at a much lower price. Coty had not authorized Costco to distribute or sell these products. Coty brought a motion before the Quebec Superior Court seeking a so-called Norwich order that would require Costco to disclose the identity of its suppliers of Coty products. The suppliers of Costco obtained these branded products through legitimate commercial channels via parallel importation (grey market).

Coty argued it needed a Norwich order¹ to learn the identity of the Costco suppliers because the suppliers had breached their contractual obligations that prevented the resale of Coty products, so that Coty could institute legal proceedings against them.

The judgment in Coty Inc v Costco Wholesale Canada Ltd dismissed the application on the grounds that the requirements for a Norwich order were not met.

Norwich orders

A Norwich order is a type of pre-trial discovery that allows, among other things, a plaintiff rights-holder to identify wrongdoers who the plaintiff would otherwise be unable to identify. The Supreme Court of Canada had identified five elements that must be satisfied to obtain a Norwich order.²

• a bona fide claim against the unknown alleged wrongdoer;
• the person from whom discovery is sought must be in some way involved in the matter under dispute – he must be more than an innocent bystander;
• the person from whom discovery is sought must be the only practical source of information available to the applicant;
• the person from whom discovery is sought must be reasonably compensated for his expenses arising out of compliance with the discovery order in addition to his legal costs; and
• the public interest in favour of disclosure must outweigh the legitimate privacy concerns.

Application of the test

The Quebec Superior Court found that Coty failed to satisfy four elements in the test for a Norwich order, and declined to consider the last factor.

First, Coty failed to establish a bona fide claim against its unknown distributors who allegedly breached their exclusive distribution contracts with Coty, as it was unable to show that the existence of such distributors was more than a hypothesis. Moreover, the evidence before the court showed the Coty products sold by Costco originated from Brazil where 2.5 million home salespersons would not have any agreement restricting their sale of Coty products.

Second, Coty did not demonstrate that Costco was involved in Coty's dispute with the unknown distributors, and that Costco was not an innocent bystander. Even assuming Coty could make a bona fide claim of contractual breach, the court found that Costco's purchase and resale of Coty products did not facilitate such a breach. Costco was not prohibited from selling Coty products as there was no contract between Coty and Costco that would restrict Costco. Resale by Costco of genuine Coty products was not prohibited by the Trademarks Act or the Copyright Act.

Third, the court was not satisfied that Costco was the only practical source of information available because Coty had not made reasonable efforts to contact the distributors or retailers believed to be in breach of their contracts. The court was critical of Coty's failure to ensure that contracts were in place with all distributors to prevent them from reselling Coty products, and the inability of Coty's product tracking system to identify distributors who had resold a Coty product.

Fourth, Coty did not establish that the public interest in disclosure takes precedence over Costco's legitimate privacy concerns. The court noted the law's reluctance to impose restrictions on freedom of trade of genuine products that were lawfully obtained and sold after Coty had already received the sale price. As such, ordering Costco to disclose the identity of its suppliers would infringe Costco's freedom in commercial matters and violate its right to privacy.

In light of its findings on these four elements of the test, the court stated it was not necessary to look at the fifth element of whether Costco would be reasonably compensated for its expenses and legal costs.

Importation of Norwich orders into the civil law

In parenthetical remarks, the court wondered whether a Norwich order, imported from the common law, is consistent with civil law traditions, noting it was not incorporated into the provisions of the new Quebec Code of Civil Procedure regarding pre-trial examinations of third parties. However, the court did not explore this further because none of the parties challenged the existence of this remedy or the elements of its test.

Footnotes

1 This type of order, also known as an equitable bill of discovery, originates from a judgment of the House of Lords in Norwich Pharmacal Co v Customs and Excise Commissioners, [1973] 2 All ER 943.

2 Rogers Communications Inc v Voltage Pictures, LLC, 2018 SCC 38 at para 18.

Originally published 25 August, 2020

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