Pleading Is Not Proving: Federal Court Cautions That Default Judgment Is Not Automatic

The Federal Court of Canada’s recent decision in McDowell v. A Drip of Honey, 2024 FC 453, per Justice Zinn, serves as a cautionary tale that while motions for default judgment may go unopposed, they will not be granted automatically. Plaintiffs seeking remedies from the Federal Court must follow the Federal Courts Rules, prove their case, and ensure that they have filed sufficient evidence to establish their claims for relief on a balance of probabilities. Even on unopposed motions, the Court will not assume that the Plaintiff is entitled to judgment and any remedies sought.

Background

This decision involved an ex parte motion for default judgment brought by the Plaintiff, who owns a Toronto-based women’s fashion boutique called HONEY. The Plaintiff owns multiple trademark registrations in Canada, including for the word HONEY in connection with a wide range of apparel. The Defendant, another such boutique operating under the name A DRIP OF HONEY, owned no registrations and was using the name A DRIP OF HONEY, as well as the designs shown below:

The Defendant received a cease-and-desist letter from the Plaintiff demanding that it cease all use of the mark HONEY. However, the Defendant failed to respond to the Plaintiff’s letter despite the Plaintiff’s repeated attempts at establishing contact. The Plaintiff then brought its ex parte motion under Rule 369 of the Federal Courts Rules, seeking an order for default judgment.

In the underlying action, the Plaintiff alleged that the Defendant infringed the Plaintiff’s registered trademarks under sections 19 and 20 of the Trademarks Act, engaged in passing off contrary to sections 7(b) and 7(c) of the Act, and depreciated the value of the goodwill attaching to the Plaintiff’s marks under section 22 of the Act.  The Plaintiff sought interlocutory and permanent injunctions, as well as a delivery up of all offending material.

The Defendant failed to file a statement of defence or any other response and did not participate in the proceeding.  While the Plaintiff’s motion record totalled 681 pages, the Court noted deficiencies such as citations of incorrect legal tests and legal framework. The Plaintiff also provided no basis for the remedies sought.

The Plaintiff’s motion raised two issues: first, whether the motion for default judgment was properly brought before the Court, and second, whether the Plaintiff had proved its entitlement to the relief sought.

Procedure on Motions for Default Judgment

Motions for default judgment are a matter of the Court’s discretion and require the moving party to establish not only that the defendant is in default of filing a statement of defence, but also that the moving party’s claims are sufficiently supported. In particular, the moving party bears the burden of supporting its claims on a balance of probabilities with what Justice Zinn stated must be “sufficiently clear, convincing, and cogent evidence” (at para 22). Here, the Court easily found the Defendant in default given that nothing had been filed in response to the proceedings. Having reached this conclusion, the Court then turned to the substantive aspects of the motion and the Plaintiff’s claims.

Infringement, Passing off, and Depreciation of Goodwill

Justice Zinn quickly dismissed the claim based on section 19 of the Trademarks Act as none of the Defendant’s marks were identical to the Plaintiff’s marks. Infringement under section 20 however was found as there was a likelihood of confusion under section 6(5) of the Act. Justice Zinn found a strong resemblance between the parties’ marks, expressing the view that the word HONEY was the dominant element of the marks. He also noted that the evidence showed Plaintiff’s marks had been in use in Canada continuously since 2003 and pointed to the overlap in the associated goods and services and the channels of trade.

The Court grappled to some extent with the issue of whether the evidence supported the Plaintiff’s passing off claims. To succeed on a passing off claim, a Plaintiff must demonstrate that it had a valid and enforceable trademark before the Defendant began the impugned activities. In this case, the Plaintiff made no submissions regarding the date on which the Defendant began its activities. However, the Court was willing to look to the motion record, which revealed that the Defendant created its Facebook page in 2020, suggesting on a balance of probabilities that the Defendant did not begin operations until then. The Plaintiff also made no submissions on the issue of actual or potential damages, but Justice Zinn accepted that mere loss of control over the Plaintiff’s mark can be sufficient to meet this requirement. While the passing off claim under section 7(b) was made out, the Court dismissed the Plaintiff’s claim under section 7(c), as there was no evidence that the Defendant engaged in “reverse passing-off”.

With respect to depreciation of goodwill, Justice Zinn was not convinced that the Defendant’s activities depreciated the goodwill attaching to the Plaintiff’s marks due to the lack of evidence that the Defendant used the Plaintiff’s marks.

Damages, Remedies, and Costs

Justice Zinn pointed out that the Plaintiff provided no explanation or support for her claim of $150,000 in damages, except to state that the Defendant’s delay in defending the proceeding was unjustified. He awarded nominal damages in the amount of $10,000, citing courts’ inclinations to award such damages where the failure to defend an action frustrates the plaintiff’s efforts to prove actual damages and accepting that there was evidence of at least some harm to the Plaintiff’s marks in the present case. Justice Zinn also granted a permanent injunction and a delivery up order.

On the issue of costs, Justice Zinn emphasized that the Plaintiff provided no bill or breakdown of costs to support her claim for $75,000. He found no evidence of reprehensible, scandalous, or outrageous conduct by the Defendant, noting that merely being in default fails to meet these standards. Accordingly, the Plaintiff was awarded no costs.

Key Takeaways

The Court’s decision on this motion warns litigants that the Court is not a substitute for the Plaintiff’s counsel on a motion for default judgment. Robust evidence and submissions are required to secure both default judgment and any remedies sought. While Justice Zinn still found in favour of the Plaintiff in more than one instance where evidence or support was lacking, he called the Plaintiff’s submissions “largely disorganized” and “unhelpful” and was initially inclined to dismiss the motion outright. To avoid frustrating the Court, moving parties are reminded to adhere to the Court’s procedural rules, file probative evidence supporting each of the issues on the motion, draw the Court’s attention to key pieces of evidence, and include a breakdown of any cost sought.