Passing off

Case Note: Westin License Co. v Westin Construction Ltd.

John Lambert
Oct 1997

This case note originally appeared on the Lancaster Buildings website

This was an application by the well-known Westin hotel chain for an interlocutory injunction to restrain the defendants until trial from infringing the plaintiff's trade marks, using their corporate names as trade names or corporate names in association with their businesses, using any trade name, corporate name or trade mark comprising the word "Westin" or any colourable imitation thereof in association with their businesses, and, directing public attention to their services or businesses in such a way as to cause or be likely to cause confusion between their services or businesses and the services or businesses of the plaintiff.  The facts of this case are not remarkable and the application would probably have been decided the same way in England.    What is notable is the very clear and thorough analysis of the relevant principles by the judge and that neither party referred to the Series 5 line of cases from England.

Facts
The plaintiff was the successor in title to the oldest hotel management  company in North America. It was a major global hotel chain with 110 hotels and related commercial properties in 23 countries, including 9  hotels in Canada. It had registered several trade marks in Canada and many other countries, all of which included the word "Westin", its predecessor the Westin Hotel Company, and had engaged in substantial marketing activities to promote those trade marks. Its world-wide advertising expenditure between 1991 and 1996 exceeded US$100 million including several million dollars spent in Canada. The marks are used in brochures and other promotional materials such as hotel signs, menus, and soap wrappers. There is a central reservation system with a free-phone number and corporate sales offices around the world. The marks appear in many travel and accommodation guides. They are used for such special facilities as an executive club and guest recognition programme for regular customers of which there are  77,500 members (9,600 of them in British Columbia).  The plaintiff had been expanding, averaging two new hotels a month since 1995.     
In December 1996 an employee of the Westin Bayshore hotel noticed advertisements in the Sing Tao Daily News for a "Westin Business Park" developed by the defendant Westin Construction Ltd. Similar advertisements appeared in the May and June 1997 issues of the same publication.  The plaintiff subsequently discovered a number of companies incorporated in the Westin name by one Thomas C. Leung ("Mr. Leung"). On February 25, 1997, the Vancouver Sun business section carried a feature article about a new shopping centre development by the first defendant which was referred to twice in the article simply as "Westin."  In July 1997, the Vancouver Magazine contained an article which mentioned an hotel project in which that company was involved.      In his affidavit, Mr. Leung deposed that he chose the name "Westin" as a contraction of "Western International," to indicate his international clientele, and location in Western Canada. He had built up a very substantial property and construction business over 12 years, his companies had been associated with several major projects in British Columbia and were well known to local officials. He admitted that he intended to develop a mixed residential and commercial development that would include a hotel and entertainment complex but denied that any of his companies would build or operate it and there was no reason to suppose that it would be associated with the plaintiff chain.

Decision
Cohen J dismissed the application with costs. The Canadian Supreme Court had adopted a three-stage test for considering an application for either a stay or an interlocutory injunction:

	a preliminary assessment must be made of the merits of the case to ensure that there is a serious issue to be tried.
	the court must determine whether the applicant would suffer irreparable harm if the application were refused; and
	an assessment must be made as to which of the parties would suffer greater harm from the granting or refusal of the remedy pending a decision on the merits.

The learned judge had no doubt that there was a serious question to be tried but was not persuaded that the plaintiff had established that it would suffer irreparable harm were an injunction to be refused or that the balance of convenience favoured it. As to the first stage, the Supreme Court of Canada had indicated in in RJR - MacDonald Inc. v. Canada [1994] 1 SCR. 311 that the issue of whether there is a serious question to be tried:

"should be determined by a motions judge on the basis of common sense and an extremely limited review of the case on the merits."

Sopinka and Cory JJ. said in that case that:

"A motions court should only go beyond a preliminary investigation of the merits when the result of the interlocutory motion will in effect amount to a final determination of the action, or when the constitutionality of a challenged statute can be determined as a pure question of law.      Instances of this sort will be exceedingly rare.  Unless the case on the merits is frivolous or vexatious, or the constitutionality of the statute is a pure question of law, a judge on a motion for relief must, as a general rule, consider the second and third stages….."

There was certainly an issue to be tried on both trade mark infringement and passing-off. Thus Cohen J proceeded to the second stage.    

He directed himself that in RJR -MacDonald, Sopinka and Cory JJ had emphasized that the adjective "irreparable" referred to the nature of the harm rather than its magnitude.     The first step is to examine the adequacy of damages as a remedy for the respective parties.     In most cases, an interlocutory injunction should not be granted unless there is doubt whether damages would be an adequate remedy.  In other words, it must be shown that the applicant may suffer irreparable harm in the sense that:

"the remedy by damages is not such a compensation as will in effect, though not in specie, place the parties in the position in which they formerly stood."

Unsurprisingly, the plaintiff said that if unauthorized parties were allowed to use the Westin  mark there was a real risk of harm to the goodwill and reputation attached to the marks as established by the plaintiff over several decades.      In his lordship's view that evidence did not go far enough.  In Greystone Capital Management v. Greystone Properties Ltd. (1996), 64 C.P.R. (3d) 496 (B.C.S.C.), at p. 505, Callaghan J had observed that the standard of proof that the applicant for an interlocutory injunction must meet is that the evidence of irreparable harm must be clear and not speculative. Further, the plaintiff had delayed in making this application which cast doubt on his contention.    On the 24th January 24, 1997 the plaintiff asked for undertakings which Mr. Leung refused to give.  The letter before action was sent on the 26th February 26, 1997. The writ and statement of claim were issued on the 5th June, 1997.  It was only at a case management conference held on the 8 Jan 1998 that the plaintiff's counsel informed the court that he had received instructions to apply for an interlocutory injunction.  The defendants, on the other hand, contended that they would suffer irreparable harm if forced to change their corporate names. in that their existing reputation built up over 12 years with investors and municipal officials would be lost, with no way of calculating the resulting damage.  The balance of convenience favoured the status quo that had existed for 12 years with the plaintiff operating in the hotel business and the defendants in the real estate business.

Important