A recent decision of the Federal Court emphasizes that
defendants bear a significant burden in setting aside default
judgments that arise because the defendant has simply failed to
file a statement of defence within the allotted period of time.
InMolson Canada 2005 (An Ontario
General Partnership) and Coors Brewing Company v. Drake J.
Beachamp, the defendant was the owner and
operator of a leather retail business, selling purses, belts, belt
buckles and wallets from kiosks at shopping malls and special
events. Molson commenced an action against the defendant, claiming
that he sold counterfeit product bearing its unauthorized
trademark. The defendant failed to file a statement of defence, and
default judgment was accordingly granted against him. The judgment
ordered the defendant to deliver up all counterfeit goods, and also
ordered that general damages, punitive damages, and costs be paid
The defendant subsequently brought a motion to set aside the
default judgment. The Federal Court found that the defendant was
required to satisfy the established tri-partite test that:
He had a reasonable explanation for his failure to file a
Statement of Defence;
He had a prima facie defence on the merits to the claim;
He moved promptly to set aside the Default Judgment.
As to the first prong of the test, the defendant asserted that
his father suffers from a psychological disability, and tore up the
statement of claim before he had a chance to read it. The Court,
however, did not accept this argument, finding that the document
could not have been shredded to the point where the defendant could
not determine what it was. Instead, the defendant's
previous failure to respond to cease and desist letters was
evidence of wilful blindness, not the "comedy of
errors" as was submitted by counsel. It was only when the
defendant's goods were seized that the seriousness of the
situation required him to respond by bringing the motion to set
aside default judgment.
As to the second prong of the test, the defendant merely
asserted that the trademarked goods were, to the best of his
knowledge, not counterfeits. The defendant failed to offer any
evidence to show that this defence had merit, such as an affidavit
from a supplier attesting that the goods were manufactured under
license. As a result, the defendant's bare assertion did
not even meet the low threshold for showing that a prima facie
defence was available.
Although the Court was prepared to accept that the defendant met
the third prong of the test by moving promptly when his goods were
seized, because the defendant did not satisfy the Court as to each
aspect of the test for setting aside default judgment, the
defendant's motion was dismissed and default judgment
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$314,000 in damages, $66,000 in costs at first instance, plus solicitor-client costs on the appeal (which was found to be "without merit"). In Lam v. Chanel S. de R.L., 2017 FCA 38, the Federal Court of Appeal confirmed these awards for four instances of selling counterfeit CHANEL goods at a Toronto-area mall between 2011 and 2013
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