John A. MacDonald, Railquip Enterprises Ltd.
(Appellants)
v.
Vapor Canada Limited (Respondent)
and
Attorney General of Canada, Attorney General
of the Province of Quebec (Intervenants)
Court of Appeal, Jackett C.J., Thurlow J. and
Choquette D.J.—Montreal, September 19, 20,
21 and 22, 1972.
Constitutional law—Trade and Commerce—Jurisdiction—
Trade Marks Act, R.S.C. 1970, c. T-10—Whether intra
vires—Practice contrary to honest industrial or commercial
usage—Trade Marks Act, s. 7—Whether cause of action—
Jurisdiction of Federal Court.
M signed an agreement on entering the employ of Vapor
Canada Ltd. that he would not divulge any information he
acquired by reason of his employment. He was in the
company's employ for almost ten years, ending up as a
vice-president. Near the end of his employment he par
ticipated in the preparation of a bid by the company to
supply 500 box car heater assemblies to the C.N.R. In May
1971, two weeks after he ceased work for the company, he
submitted a tender through appellant company, whose
incorporation he had caused and which he controlled, to
supply box heaters to the C.N.R., and an order for 150
heater assemblies was obtained. In preparing the tender M
made use of knowledge acquired as an employee of Vapor
Canada Ltd. of the figures on which its tender was based,
and made use of other confidential information obtained
during his employment with Vapor Canada Ltd., and in
addition took from that company's possession a number of
its documents bearing on the matter. Vapor Canada Ltd.
sued for damages and an injunction, and obtained an inter
locutory injunction pending trial of the action.
Held, an appeal by M and appellant company must be
dismissed.
1. Appellants contravened section 7(e) of the Trade
Marks Act, R.S.C. 1970, c. T-10, which prohibits any act or
business practice contrary to honest industrial or commer
cial usage in Canada: appellant company by using business
information obtained for it from a former employee of a
competitor in breach of his confidential relationship with
the competitor, and M when, as that company's directing
mind, he caused it to contravene section 7(e). Breeze Corp.
v. Hamilton Clamp & Stampings Ltd. (1962) 37 C.P.R. 153;
Clairol International Corp. v. Thomas Supply and Equip
ment Co. [1968] 2 Ex.C.R. 552, referred to. By virtue of
section 55 of the Trade Marks Act the Trial Division has
jurisdiction to entertain an action for breach of section 7.
2. The Trade Marks Act as a law of general application
regulating standards of business conduct in Canada is a
valid exercise of Parliament's legislative jurisdiction under
section 91(2) of the British North America Act to make
laws regulating trade and commerce. Citizens Insurance Co.
v. -.Parsons (1881) 7 App. Cas. 96; Dominion Trade and
Industry Commission [1937] A.C. 405; Reference re Alberta
Statutes [1938] S.C.R. 100; Board of Commerce Reference
[1922] 1 A.C. 191; Reference re The Natural Products
Marketing Act, 1934 [1936] S.C.R. 398.
APPEAL from Walsh J. (unreported) granting
interlocutory injunction.
J. Nelson Landry and Malcolm E. McLeod
for appellants.
Redmond Quain, Q.C., and H. C. Salman for
respondent.
G. W. Ainslie, Q.C., and A. P. Gauthier for
Attorney General of Canada.
A. Geoffrion, Q.C., for Attorney General of
the Province of Quebec.
JACKETT C.J.—This is an appeal from a
judgment' of the Trial Division dated April 19,
1972, whereby the appellants were restrained,
inter alia, from .. .
(2) using for their own personal benefit or divulging to
any unauthorized person any confidential information or
knowledge acquired by reason of the employment with
[the respondent] of [the appellant] MacDonald, or making
any tenders for the manufacture or sale of products in
respect of which such confidential information acquired
by MacDonald is used or useful;
(3) using any plans, specifications, reports, letters or
other documents belonging to [the respondent] for their
own purposes or conniving with any employee of [the
respondent] to obtain any such plans, specifications, let
ters or other documents; ...
and were required to deliver up forthwith to the
respondent any plans, specifications, reports,
letters or other documents belonging to the
respondent, including all copies or reproduc
tions made from such documents belonging to
the respondent, as may be in their possession.
After the appeal was launched, the appel
lants, as the basis for an order dispensing with
the printing of the evidence on which the judg
ment appealed against was founded, undertook
to this Court that they would not base their
appeal on anything other than the following
grounds:
1. that all or part of the judgment appealed from should
be quashed because there is no statute giving or purport
ing to give, the Federal Court of Canada the jurisdiction
to make it; and
2. as to all or some part of the judgment appealed from,
if there is a statute that gives or purports to give, the
Federal Court of Canada jurisdiction to make it, that
statute is, to that extent, beyond the powers of the
Parliament of Canada;
By their Memorandum of Fact and Law, the
appellants attack the portion of the judgment
appealed against that is referred to above on the
following grounds:
1) that the said parts of the judgment appealed from
should be quashed because there is no statute giving or
purporting to give the Federal Court of Canada the juris
diction to make it; and
2) that as to the said parts of the judgment appealed
from, if there is a statute that gives or purports to give the
Federal Court of Canada jurisdiction to make it, that
statute is, to that extent, beyond the powers of the
Parliament of Canada.
The facts, as they must be accepted for the
purposes of this appeal, may be stated quite
simply?
The respondent has been in the heating equip
ment business for several years and the appel
lant MacDonald worked for the respondent and
a predecessor company for almost 10 years
ending up as a vice-president of the respondent.
When he entered into the employ of the pre
decessor company, - MacDonald signed an agree
ment, the preamble of which reads in part as
follows:
... realizing that, by virtue of my said employment, I will
be in a position to acquire, by observation and communica
tion, vital and confidential information regarding the con
structions and principles embodied in—and the problems
dealt with in the production of—the devices and structures
made, sold, developed or used by this company in connec
tion with its business during the term of my employment;
and paragraph 5 of which reads:
I will not divulge to any unauthorized person any infor
mation or knowledge acquired by reason of my employment
by the company.
While still in the respondent's employ, Mac-
Donald caused the appellant Railquip Enter
prises Ltd. to be incorporated and he has con
trolled Railquip at all relevant times.
During the last part of his period of employ
ment with the respondent, MacDonald par
ticipated in the preparation of a bid made by the
respondent to supply 500 box car heater assem
blies to the Canadian National Railway Compa
ny. MacDonald ceased to work for the respond
ent on April 15, 1971, and, on May 1, 1971, he
submitted a tender, presumably in Railquip's
name, to supply box car heaters to Canadian
National, and as a result of that tender, Railquip
obtained an order for 150 heater assemblies. In
preparing the tender in question MacDonald
made use of knowledge, which he acquired as
an employee of the respondent, of the figures
on which the respondent's tender was based. To
prepare those figures had taken considerable
work on the part of the respondent's
employees. In connection with this bid by the
corporation that he controlled, MacDonald also
made use of and disclosed other confidential
information acquired during the course of his
employment with the respondent. In addition,
he took from the respondent's possession a
number of documents belonging to the respond
ent that bore on the matter.
On the above facts, which are not in dispute
on this appeal, the trial judge found that there
had been a breach by the appellants of section
7(e) of the Trade Marks Act, which reads:
7. No person shall
(e) do any other act or adopt any other business practice
contrary to honest industrial or commercial usage in
Canada.
and decided that it was a case for the part of the
relief granted by the judgment appealed against
that has already been summarized under section
53 of the Trade Marks Act, which reads as
follows:
53. Where it is made to appear to a court of competent
jurisdiction that any act has been done contrary to this Act,
the court may make any such order as the circumstances
require including provision for relief by way of injunction
and the recovery of damages or profits, and may give
directions with respect to the disposition of any offending
wares, packages, labels and advertising material and of any
dies used in connection therewith.
The Trial Division has jurisdiction to enter
tain an action for breach of section 7 by virtue
of section 55 of the Trade Marks Act as amend
ed by section 64(2) of the Federal Court Act,
read with section 26(1) of the latter Act. Those
provisions read as follows:
55. The Federal Court of Canada has jurisdiction to
entertain any action or proceeding for the enforcement of
any of the provisions of this Act or of any right or remedy
conferred or defined thereby.
26. (1) The Trial Division has original jurisdiction in
respect of any matter, not allocated specifically to the Court
of Appeal, in respect of which jurisdiction has been con
ferred by any Act of the Parliament of Canada on the
Federal Court, whether referred to by its new name or its
former name.
In effect, as I understand it, the appellants'
position on this appeal is that the Trial Division
had no jurisdiction to deliver the judgment
appealed from because
(a) section 7(e) does not apply to the facts as
found by the Trial Division, and
(b) alternatively, if section 7(e) does apply to
those facts, it is ultra vires the Parliament of
Canada. 3
I shall consider first whether, on the facts as
found by the Trial Division, the appellants have
contravened section 7(e). 3 A
Section 7 is found in a statute the long title of
which is An Act Relating to Trade Marks and
Unfair Competition, and is found in a part of
that statute headed Unfair Competition and
Prohibited Marks. In this context, section 7,
after prohibiting certain classes of act, all of
which are obviously prohibited as constituting
"unfair competition", prohibits "any other
act ... contrary to honest industrial or commer
cial usage in Canada". It has been common
ground on this appeal that a business man, in
Quebec as well as in the common law prov
inces, is, quite apart from statute, liable to dam
ages and an injunction if he embarks on a
course of using in his business information that
has been obtained for him from a competitor by
an employee of that competitor in contraven
tion of the employee's contract of employment
with that competitor . 4 That being so, in my view
it must be "contrary to honest industrial or
commercial usage in Canada", in the absence of
evidence to the contrary, to use information so
obtained in that way and it is, therefore, con
trary to section 7(e) of the Trade Marks Act to
do so. 5
This is not a novel view of section 7(e). Not
only did Donnelly J., in Breeze Corp. v. Hamil-
ton Clamp & Stampings Ltd. (1962) 37 C.P.R.
153, hold that the use of confidential and tech
nical information for purposes other than that
for which it was disclosed constituted an act
contrary to honest industrial or commercial
usage in Canada as those words are used in
section 7(e), but my brother Thurlow, while
discussing the ambit of section 7(e) in Clairol
International Corp. v. Thomas Supply and
Equipment Co. [1968] 2 Ex.C.R. 552 said,
"Acts or conduct involving some breach of
trust or confidence may well be considered to
fall within that purview" and, in the 3rd edition
of Fox on The Canadian Law of Trade Marks
and Unfair Competition 1972, at page 652, after
section 7(e) is quoted, the following statement
appears:
Obviously the improper communication of confidential
information and trade secrets will fall within that
prohibition... .
In the absence of some convincing reasoning
or authoritative or persuasive authority to the
contrary, I am of opinion that the corporate
appellant contravened section 7(e) when it used
in its business information obtained for it from
a former employee of a competitor in breach of
the former employee's confidential relationship
with that competitor6 I am further of opinion
that the appellant MacDonald contravened sec
tion 7(e) when, as the directing mind of the
corporate appellant, he caused the corporate
appellant to be in contravention of that
provision?
There remains on this branch of the case to
deal with the question of documents. In my
view, section 7(e) applies to the obtaining and
use of documents that have been wrongfully
purloined from a competitor in exactly the same
way as it applies to the obtaining and use of
confidential information. The wording and spirit
of section 7(e) apply equally to the one as to the
other.
My conclusion is, therefore, that the Trial
Division was correct in holding that the appel
lants were in contravention of section 7(e) in
connection with both the confidential informa
tion and the documents.
I turn now to the question whether section
7(e) is a valid exercise of Parliament's legisla
tive powers.
The primary question is whether the Trade
Marks Act, as a whole, is a valid exercise of
Parliament's legislative powers. If the answer to
that question were in the negative, the further
question that would arise is whether section 7,
or section 7(e), is severable from the rest of the
statute and, taken by itself, is a valid exercise of
Parliament's legislative powers.
In my view, while other questions have been
raised, the real question to be decided in this
case is whether the Trade Marks Act is a "law"
in relation to a "matter" coming within the class
of subjects set out in section 91(2) of the Brit-
ish North America Act, 1867, "The Regulation
of Trade and Commerce", in which event it is a
valid exercise of Parliament's powers, or wheth
er it is a "law" in relation to a "matter" that
does not come within that class of subjects, in
which event it is a law in relation to a "matter"
coming within the class of subjects set out in
section 92(13) of the Act, "Property and Civil
Rights in the Province", or is a law in relation to
a matter coming within the class of subjects set
out in section 92(16), "... Matters of a merely
local or private nature in the Province". Those
provisions read, in so far as relevant, as
follows:
91. It shall be lawful for the Queen, by and with the
Advice and Consent of the Senate and House of Commons,
to make Laws for the Peace, Order, and good Government
of Canada, in relation to all Matters not coming within the
Classes of Subjects by this Act assigned exclusively to the
Legislatures of the Provinces; and for greater Certainty, but
not so as to restrict the Generality of the foregoing Terms
of this Section, it is hereby declared that (notwithstanding
anything in this Act) the exclusive Legislative Authority of
the Parliament of Canada extends to all Matters coming
within the Classes of Subjects next herein-after enumerat
ed; that is to say,-
2. The Regulation of Trade and Commerce.
And any Matter coming within any of the Classes of Sub
jects enumerated in this Section shall not be deemed to
come within the Class of Matters of a local or private
Nature comprised in the Enumeration of the Classes of
Subjects by this Act assigned exclusively to the Legisla
tures of the Provinces.
92. In each Province the Legislature may exclusively
make Laws in relation to Matters coming within the Classes
of Subjects next herein-after enumerated; that is to say,-
13. Property and Civil Rights in the Province.
16. Generally all Matters of a merely local or private
Nature in the Province.
Applying well established principles concern
ing the interpretation of sections 91 and 92,
even though the Trade Marks Act is, otherwise,
a "law" in relation to a "matter" falling within
section 92(13) or section 92(16), if it is a "law"
in relation to a "matter" falling within section
91(2), that "matter" is to be regarded as not
falling within either section 92(13) or section
92(16). (See Reference re Alberta Statutes
[1938] S.C.R. 100, per Duff C.J.C. at page 115.)
To decide whether the "matter" of a "law" is
in "pith and substance" a matter falling within
section 91(2) requires a chronological review of
the more important decisions even though, in
the result, few of them will bear on the problem
in hand. I have attempted such a review as a
background for my consideration of the ques
tion whether the Trade Marks Act is in relation
to a "matter" falling within section 91(2), and I
propose to attach a copy of it to these reasons,
before I deposit them in the Registry, for such
use as it may be in understanding my reasoning
on this branch of the appeal.
Before examining the Trade Marks Act to
form a judgment as to its "pith and substance",
it is, in my view, important to have in mind that,
at common law, apart from statute, trade marks
have their origin in the tort of passing off. The
fundamental rule was that no man has the right
to put up his goods for sale as the goods of a
rival trader. Using the trade marks with which
the rival trader marked his wares to enable the
purchasing public to distinguish them from
those of others was one way of committing the
tort of passing off. Gradually this protection
afforded to the user of a trade mark by way of
the tort of passing off crystallized into the
recognition of the trade mark as a property
belonging to the trader who had so used it that,
in the minds of the purchasing public, it distin
guished the wares to which he attached it from
the wares to which it was not attached. (The
Leather Cloth Co. v. American Leather Cloth
Co. (1863) 4 DeG.J. & S. 136, per Lord West-
bury L.C., and (1865) 11 H.L.C. 523 (H.L.);
Singer Manufacturing Co. v. Loog (1882) 8
App. Cas. 15, per Lord Blackburn at pages 29
et seq.; Somerville v. Schembri (1887) 12 App.
Cas. 453.) The general rule against "passing
off" gave rise to problems that resulted in regis
tration schemes created by statute as well as
statutory modifications in the substantive rights
arising therefrom.
Examining the Trade Marks Act in the light
of this background, it will be seen that, when
the "Interpretation" provisions (sections 1 to 6)
are put to one side, it consists of
(a) certain general rules under the heading
"Unfair Competition and Prohibited Marks"
(sections 7 to 11);
(b) a registration system for trade marks
(sections 12 to 46) and a related scheme of
registered users (section 49);
(c) certain modifications in the general law of
trade mark (sections 47, 48, 50 and 51);
(d) ancillary provisions (legal proceedings,
etc.).
The statute is therefore a law that, "in pith and
substance", creates
(a) a set of general rules applicable to all
trade and commerce in Canada, including a
statutory version of the common law rule
against passing off, and
(b) a registration system for trade marks.
The other provisions of the statute are all inci
dental to those principal parts of the law.
What has to be determined on this branch of
this case is whether Parliament had power to
create those general rules for the regulation of
trade and commerce in Canada. Those rules are
contained in the following portion of the
statute:
UNFAIR COMPETITION AND PROHIBITED MARKS
7. No person shall
(a) make a false or misleading statement tending to dis
credit the business, wares or services of a competitor;
(b) direct public attention to his wares, services or busi
ness in such a way as to cause or be likely to cause
confusion in Canada, at the time he commenced so to
direct attention to them, between his wares, services or
business and the wares, services or business of another;
(c) pass off other wares or services as and for those
ordered or requested;
(d) make use, in association with wares or services, of
any description that is false in a material respect and
likely to mislead the public as to
(i) the character, quality, quantity or composition,
(ii) the geographical origin, or
(iii) the mode of the manufacture, production or
performance
of such wares or services; or
(e) do any other act or adopt any other business practice
contrary to honest industrial or commercial usage in
Canada.
8. Every person who in the course of trade transfers the
property in or the possession of any wares bearing, or in
packages bearing, any trade mark or trade name, shall,
unless before the transfer he otherwise expressly states in
writing, be deemed to warrant, to the person to whom the
property or possession is transferred, that such trade mark
or trade name has been and may be lawfully used in
connection with such wares.
9. (1) No person shall adopt in connection with a busi
ness, as a trade mark or otherwise, any mark consisting of,
or so nearly resembling as to be likely to be mistaken for
(a) the Royal Arms, Crest or Standard;
(b) the arms or crest of any member of the Royal Family;
(c) the standard, arms or crest of His Excellency the
Governor General;
(d) any word or symbol likely to lead to the belief that
the wares or services in association with which it is used
have received or are produced, sold or performed under
royal, vice-regal or governmental patronage, approval or
authority;
(e) the arms, crest or flag adopted and used at any time
by Canada or by any province or municipal corporation in
Canada in respect of which the Registrar has at the
request of the Government of Canada or of the province
or municipal corporation concerned, given public notice
of its adoption and use;
(f) the heraldic emblem of the Red Cross on a white
ground, formed by reversing the federal colours of Switz-
erland and retained by the Geneva Convention for the
Protection of War Victims of 1949, as the emblem and
distinctive sign of the Medical Service of armed forces
and used by the Canadian Red Cross Society; or the
expression "Red Cross" or "Geneva Cross";
(g) the heraldic emblem of the Red Crescent on a white
ground adopted for the same purpose as specified in
paragraph (f) by a number of Moslem countries;
(h) the equivalent sign of the Red Lion and Sun used by
Iran for the same purpose as specified in paragraph (f);
(i) any national, territorial or civic flag, arms, crest or
emblem, or official control and guarantee sign or stamp,
notice of the objection to the use of which as a commer
cial device has been received pursuant to the provisions
of the Convention and publicly given by the Registrar;
(j) any scandalous, obscene or immoral word or device;
(k) any matter that may falsely suggest a connection with
any living individual;
(1) the portrait or signature of any individual who is living
or has died within the preceding thirty years;
(m) the words "United Nations" or the official seal or
emblem of the United Nations;
(n) any badge, crest, emblem or mark
(i) adopted or used by any of Her Majesty's Forces as
defined in the National Defence Act,
(ii) of any university, or
(iii) adopted and used by any public authority in
Canada as an official mark for wares or services,
in respect of which the Registrar has, at the request of
Her Majesty or of the university or public authority as
the case may be, given public notice of its adoption and
use; or
(o) the name "Royal Canadian Mounted Police" or
"R.C.M.P." or any other combination of letters relating to
the Royal Canadian Mounted Police, or any pictorial
representation of a uniformed member thereof.
(2) Nothing in this section prevents the use as a trade
mark or otherwise, in connection with a business, of any
mark described in subsection (1) with the consent of Her
Majesty or such other person, society, authority or organi
zation as may be considered to have been intended to be
protected by this section.
10. Where any mark has by ordinary and bona fide com
mercial usage become recognized in Canada as designating
the kind, quality, quantity, destination, value, place of origin
or date of production of any wares or services, no person
shall adopt it as a trade mark in association with such wares
or services or others of the same general class or use it in a
way likely to mislead, nor shall any person so adopt or so
use any mark so nearly resembling such mark as to be likely
to be mistaken therefor.
11. No person shall use in connection with a business, as
a trade mark or otherwise, any mark adopted contrary to
section 9 or 10 of this Act or contrary to section 13 or 14 of
the Unfair Competition Act, chapter 274 of the Revised
Statutes of Canada, 1952.
This portion of the Trade Marks Act is cer
tainly a law regulating trade and is therefore a
law in relation to a matter coming within the
words of section 91(2) of the British North
America Act—"The Regulation of Trade and
Commerce"—if those words are taken in their
unlimited sense uncontrolled by the context and
other parts of the British North America Act.
(Cf. Citizens Insurance Co. v. Parsons (1881) 7
App. Cas. 96, per Sir Montague Smith at page
112.) It has, however, been determined that the
words "Regulation of Trade and Commerce"
were not used in such an unlimited sense,
because, so it has been reasoned,
(a) the collocation of section 91(2) with
classes of subjects of national and general
concern affords an indication that regulations
relating to general trade and commerce were
intended, and
(b) if the words had been intended to have
full scope, the specific mention of such heads
as banking, weights and measures, bills of
exchange and promissory notes, interest and
bankruptcy, and insolvency would have been
unnecessary.
This was laid down in Citizens Insurance Com
pany of Canada v. Parsons (1881) 7 App. Cas.
96 at pages 112 et seq. and has been acted upon
ever since. There has never been any doubt that
section 91(2) includes the regulation of interna
tional trade and interprovincial trade. (See
Murphy v. C.P.R. [1958] S.C.R. 626, Caloil Inc.
v. Attorney General of Canada [1971] S.C.R.
543, and Attorney General of Manitoba v.
Manitoba Egg and Poultry Association [1971]
S.C.R. 689.) On the other hand, it has been
established that it does not extend to the regula
tion of the contracts of a particular trade in a
province, to the regulation, by a licensing
system or otherwise, of the operations of a
particular trade in a province, or to the regula
tion of the relations of masters and servants.
(See review of authorities by Duff C.J.C. in
Reference re Alberta Statutes [1938] S.C.R. 100
at pages 118-119; and Reference as to the Valid
ity of section 5(a) of The Dairy Industry Act
[1949] S.C.R. 1; [1951] A.C. 179.) In addition,
it may be said that, whenever the ambit of
section 91(2) has been discussed in a general
way, it has been recognized that it did, or might,
authorize Parliament to make laws for the gen-
eral regulation of trade affecting the whole
country . 8
It is this latter aspect of section 91(2) that has
to be considered in connection with the Trade
Marks Act. This appeal makes it necessary to
attempt to reach some conclusion as to the
ambit of Parliament's powers to make laws for
the general regulation of trade affecting the
whole country.
In the first place, there is little help to be
obtained from actual decisions . 9 The ambit of
Parliament's power to make laws under section
91(2) for the general regulation of trade affect
ing the whole country has not been the subject
of decisions of which I am aware except for the
decision of the Privy Council on the Dominion
Trade and Industry Commission Reference
(Attorney-General for Ontario v. Attorney-Gen
eral for Canada) [1937] A.C. 405, where it was
held that it was competent to Parliament under
section 91(2) to create a national trade mark
known as the "Canada Standard", and the deci
sion of the Supreme Court of Canada on the
same reference ([1936] S.C.R. 379) where the
trade and commerce power was linked with the
criminal law power as authority for Parliament
to enact provisions concerning the investigation
of matters relating to commodity standards. On
the other hand, as far as I am aware, there are
no decisions holding that attempts by Parlia
ment to make trade and commerce laws were
bad except where such laws purported to regu
late local forms of trade in a province or the
employer-employee relationship.
In so far as judicial expression of opinion is
concerned, there is no definitive statement of
which I am aware that can be used to solve the
problem raised by this appeal. There are, how
ever, two very significant opinions expressed in
the relevant authorities. The first of these two
opinions occurs in the Reference re Alberta
Statutes [1938] S.C.R. 100, where Duff C.J.C.
and Davis J. expressed the view that legislation
creating a new system of "credit" to be used as
a means of exchange, in lieu of bank credit, was
trade and commerce legislation. The second
opinion to which I refer occurs in the Dominion
Trade and Industry Commission Reference
[1937] A.C. 405 where Lord Atkin, delivering
the opinion of the Privy Council, expressed the
opinion that section 91(2) was an obvious
source of authority for Parliament to enact the
Trade Marks and Designs Act, R.S.C. 1927,
chapter 201. This latter expression of opinion is
sufficiently important for present purposes to
warrant quoting the passage in question, viz.:
There exists in Canada a well established code relating to
trade marks created by Dominion statutes, to be found now
in the Trade Marks and Designs Act, R.S.C., 1927, c. 201,
amended by S.C., 1928, c. 10. It gives to the proprietor of a
registered trade mark the exclusive right to use the trade
mark to designate articles manufactured or sold by him. It
creates, therefore, a form of property in each Province and
the rights that flow therefrom. No one has challenged the
competence of the Dominion to pass such legislation. If
challenged one obvious source of authority would appear to
be the class of subjects enumerated in s. 91(2), the Regula
tion of trade and commerce, referred to by the Chief
Justice. There could hardly be a more appropriate form of
the exercise of this power than the creation and regulation
of a uniform law of trade marks. [Page 417]
There is, in addition, a suggestion in the Board
of Commerce case ([1922] 1 A.C. 191 at pages
200-01) that Parliament may make laws for the
gathering of statistics.
I find some further help of a more general
character in the judgment of Duff C.J.C. in the
Reference re The Natural Products Marketing
Act, 1934, [1936] S.C.R. 398 where, at page
412, after indicating that the enactments there
in question were bad because they extended to
"the regulation of trade which is exclusively
local and of traders and producers engaged in
trade which is exclusively local", he said:
It should also be observed that these enactments operate
by way of the regulation of dealings in particular commodi
ties and classes of commodities. The regulations contem
plated are not general regulations of trade as a whole or
regulations of general trade and commerce within the sense
of the judgment in Parson's case.
To summarize the result of the authorities as
I understand them, there has been removed
from the prima facie ambit of the "Regulation
of Trade and Commerce" entrusted to Parlia
ment by section 91(2)
(a) the regulation of dealings in particular
commodities or classes of commodities in
local trade in a province,
(b) the regulation of the contracts of a local
trade in a province, and
(c) the regulation of the employer-employee
relationships in local trade in a province;
while, on the other hand, it would appear that
what is left to Parliament to regulate (in addi
tion to international trade and interprovincial
trade), as being general regulations of trade as a
whole or regulations of general trade and com
merce, includes
(a) the creation of a national mark to be used
in trade to indicate standards, and the control
of the use thereof,
(b) a system of trade marks,
(c) a system of credits to be used in lieu of
bank credit,
(d) commodity standards, and
(e) statistics.
Against the background of these authorities,
my conclusion is that a law laying down a set of
general rules as to the conduct of business men
in their competitive activities in Canada is a law
enacting "regulations of trade as a whole or
regulations of general trade and commerce
within the sense of the judgment in Parsons
case". From this point of view, I can see no
difference between the regulation of commodity
standards and a law regulating standards of
business conduct; and, in my view, if there is
anything that can be general regulation of trade
as a whole it must include a law of general
application that regulates either commodity
standards or standards of business conduct.
In my opinion the Trade Marks Act, as a
whole, is a law of general application regulating
standards of business conduct in Canada and is,
therefore, within the powers conferred on Par
liament by section 91(2) of the British North
America Act, 1867. It is therefore unnecessary
for me to consider the other grounds advanced
for supporting the validity of section 7(e).
I am therefore of opinion that the Trial Divi
sion had jurisdiction to give the relief which, as
I read the reasons for judgment delivered by
Walsh J., it was intended to give. However,
having regard to the further light thrown on the
ambit of section 7(e) as a result of the attack
that has been made somewhat belatedly on its
validity, I am of opinion that certain changes
should be made in the wording of the judgment
appealed from to ensure that it does not go
further than section 7(e) authorizes. In my opin
ion, therefore, the appeal should be allowed and
the judgment appealed from should be amended
(1) by deleting the paragraph numbered 2
therein and substituting therefor the following
paragraph:
2. Using in the business of Railquip Enterprises Ltd.,
or in any other business in which either of them may be in
any way associated or concerned, either by communica
tion to third persons or otherwise, any confidential infor
mation or knowledge acquired by reason of the employ
ment with plaintiff of defendant MacDonald, or making
any tenders for the manufacture or sale of products in
respect of which such confidential information acquired
by MacDonald is used or useful;
(2) by deleting the paragraph numbered 3
therein and substituting therefor the following
paragraph:
3. Using in the business of Railquip Enterprises Ltd.,
or in any other business in which either of them may be in
any way associated or concerned, any plans, specifica
tions, reports, letters or other documents belonging to
plaintiff acquired by reason of the employment with the
plaintiff of defendant MacDonald or conniving with any
employee of plaintiff to obtain any such plans, specifica
tions. letters or other documents;
and
(3) by deleting the unnumbered paragraph
immediately following the paragraph numbered
4, and by substituting therefor the following
paragraph:
Defendants John A. MacDonald and Railquip Enter
prises Ltd. are required to deliver up forthwith to the
plaintiff all plans, specifications, reports, letters and other
documents belonging to the plaintiff that are in his or its
possession as a result of having been acquired for use in
the business of Railquip Enterprises Ltd. by reason of the
employment with the plaintiff of the defendant Mac-
Donald and all copies or reproductions of any such docu
ments that are in his or its possession.
Having regard to all the circumstances, I am
of opinion that the costs of this appeal should
follow the event of the cause.
* * *
THURLOW J.—I concur.
* * *
CHOQUETTE D.J.—I concur.
This judgment was called an "order" but, under the
Federal Court Act, the more appropriate term is "judg-
ment". See, for example, section 27 of that Act.
2 While I state the facts categorically, it must be recog
nized that it is only for the purposes of this appeal. There is
no attack at this stage on the Trial Division's findings of
fact. When the matter comes to trial, if it does, the facts will
be determined on whatever evidence is then available.
3 No question is raised on this appeal as to whether,
assuming the Court's jurisdiction in the matter, the relief
granted was authorized by section 53. I express no opinion
on that question.
3A On my view of the matter, it is not necessary to
consider the rule that requires an ambiguous statute to be
interpreted so as to fall within Parliament's powers, if such
an interpretation is open on the wording of the statute.
4 See authorities cited in chapter XIII of Fox, The
Canadian Law of Trade Marks and Unfair Competition, 3rd
edition, at pages 652 et seq.
5 While I have no doubt about its application in this case,
I find the language of section 7(e) difficult to analyze. What
follows in this footnote is a tentative view that I have
formed and that I express in the full realization that more
mature consideration may result in a different appreciation
of it.
When one looks at the language of the prohibition con
tained in section 7(e), one finds that it reads:
No person shall ... do any ... act or adopt any .. .
business practice contrary to honest industrial or com
mercial usage in Canada.
Taking the latter part of the clause first, it would seem that
the words "honest industrial or commercial usage in Cana-
da" must mean that which it is usual for honest business
men in Canada to do in carrying on their industrial or
commercial operations. If that is the correct view as to the
meaning of that part of the clause, then the clause as a
whole must mean that no person shall do any act or adopt
any business practice in carrying on his industrial or com
mercial operation if such act or practice is "contrary to"
that which honest business men in Canada usually do, or, to
put it another way, an act or practice in the carrying on of
an industrial or commercial operation is prohibited if it
would be unacceptable to an honest business man in
Canada. Put that way, section 7(e) prohibits, apart from
very exceptional circumstances, any act or business prac
tice, in the course of an industrial or commercial operation,
that involves a breach of the law either civil or criminal
because any such act or practice would, I should have
thought, be unacceptable to an honest business man in
Canada. (This is the category of matter that is involved in
the present appeal.) Section 7(e) would also, on this view,
extend to acts or practices that do not otherwise involve
illegality provided that they would be unacceptable to
honest business men in Candid. (An example of such a case
is the dishonest conduct dea't with by Noël J., as he then
was, in Therapeutic Research v. Life Aid (1969) 56 C.P.R.
149.)
Looking at section 7 from the point of view of the
ejusdem generis rule, it seems to me that Parliament has so
worded section 7(e) as to define explicitly the common class
into which all the paragraphs of section 7 fall. All the acts
or practices prohibited by section 7 are acts or practices
that are "contrary to honest industrial or commercial usage
in Canada". It does not seem to me that, having regard to
the express statement of this common class, section 7 is
open to an interpretation that would imply an additional
class of a more limited nature as a limitation on the ambit of
section 7(e). Moreover, I do not think that this view differs
in substance from that adopted by Schroeder J.A. in Eldon
Industries Inc. v. Reliable Toy Co. (1967) 48 C.P.R. 109. In
any event, I should have thought that it would have resulted
in the same decision in that case for, in the absence of
evidence of some "usage" to the contrary, there would
seem to be no reason why an honest business man would
not take advantage of a design or an invention open to
public view when, having regard to the conditions estab
lished by Parliament for the existence of monopoly rights,
such design or invention is in the public domain. As far as I
know, our law still favours competition.
It has been established by S. & S. Industries Inc. v.
Rowell [1966] S.C.R. 419, that section 7 is not restricted to
a prohibition of things that are otherwise illegal.
It seems to me that the appropriate sense of "usage" as
found in section 7(e) is sense numbered one in the Shorter
Oxford English Dictionary: "Habitual use, established prac
tice, customary mode of action, on the part of a number of
persons".
e Experience will probably establish the limits of the
prohibition contained in section 7(e). For example, it will
probably be interpreted as a regulation of "business" as
"business" and not as a "regulation of contracts". (Com-
pare Reference re Ontario Farm Products Marketing Act
[1957] S.C.R. 198, per Kerwin C.J.C., at pages 204-05.)
7 It is important to make a distinction here between this
rule of unfair competition, which relates to acts committed
by the business man in the course of his business, and the
contractual relation between the competitor and the disloyal
employee. In my view, section 7(e) applies to the unfair
competition and operates against the corporate business
man who is guilty of it as well as to the directing mind
(officer or shareholder) who causes the corporation to do
the forbidden act. On the other hand, in my view, section
7(e) has no application to the conduct of the disloyal
employee as employee. If, therefore, an employee divulged
confidential information to a competitor of his employer but
took no part in the competitor's business operations, section
7(e) could not, as I see it, be invoked by the employer
against such employee. Section 7(e), like the rest of section
7, is restricted to acts of unfair competition and does not
govern employer-employee relations.
s This statement should be qualified by recalling the deci
sions that threw doubt on the efficacy of section 91(2) to
authorize, by itself, laws that might otherwise fall within
section 92(13) or (16). This doubt seems to have been put to
rest by subsequent decisions. See Proprietary Articles Trade
Association v. Attorney General for Canada [1931] A.C.
310, per Lord Atkin at page 326, Reference re Alberta
Statutes [1938] S.C.R. 100, per Duff C.J.C. at pages 120-21,
and Reference re Ontario Farm Products Marketing Act
[1957] S.C.R. 198, per Kerwin C.J.C. at pages 204-05.
9 I use the word "decisions" to include advisory opinions
expressed by a court pursuant to statutory references.
You are being directed to the most recent version of the statute which may not be the version considered at the time of the judgment.