Cadbury Schweppes Inc. et al. v. FBI Foods Ltd. et al., (1999) 235 N.R. 30 (SCC)

• Judge: Iacobucci, Major, Bastarache and Binnie, JJ.
• Court: Supreme Court (Canada)
• Case Date: January 28, 1999
• Jurisdiction: Canada (Federal)
• Citations: (1999), 235 N.R. 30 (SCC);[1999] SCJ No 6 (QL);85 ACWS (3d) 166;167 DLR (4th) 577;1999 CanLII 705 (SCC);JE 99-317;[1999] 5 WWR 751;59 BCLR (3d) 1;235 NR 30;AZ-99111005;[1999] 1 SCR 142;83 CPR (3d) 289;42 BLR (2d) 159;191 WAC 161;117 BCAC 161

Cadbury Schweppes Inc. v. FBI Foods (1999), 235 N.R. 30 (SCC)

MLB Headnote and full text

[French language version follows English language version]

[La version française vient à la suite de la version anglaise]

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Temp. Cite: [1999] N.R. TBEd. JA.015

FBI Foods Ltd. - Les Aliments FBI Ltée, FBI Brands Ltd. - Les Marques FBI Ltée, and Lawrence Kurlender (appellants) v. Cadbury Schweppes Inc., and Cadbury Beverages Canada Inc./Breuvages Cadbury Canada Inc. (respondents)

(25778)

Indexed As: Cadbury Schweppes Inc. et al. v. FBI Foods Ltd. et al.

Supreme Court of Canada

L'Heureux-Dubé, Gonthier, McLachlin,

Iacobucci, Major, Bastarache

and Binnie, JJ.

January 28, 1999.

Summary:

The defendants manufactured and marketed the plaintiffs' "Clamato juice" under licence in Canada. When the licence was terminated on 12 months' notice, the defendant used confidential information as to ingredients and production processes to develop and market a similar, competing juice. The plaintiffs sued the defendants for damages for breach of confidence and sought injunctive relief. The trial judge found the defendants liable for breach of confidence for misusing confi­dential information, but denied injunctive relief. Damages were assessed as the cost of hiring a consultant to develop the competing product in-house without using the confi­dential information (later assessed at $29,761.20). The plaintiffs appealed against damages and the denial of an injunction. The defendants cross-appealed against liability.

The British Columbia Court of Appeal, in a judgment reported 79 B.C.A.C. 56; 129 W.A.C. 56, allowed the plaintiffs' appeal respecting damages, and granted a permanent injunction against all defendants. The court rejected the "consulting fee" valuation of damages. Damages equalled the profits the plaintiffs would have made, in the 12 month period following termination, had they (instead of the defendants) sold the volume that was marketed by the defendants (i.e., lost profits on assumed sales). The court dismissed the defendants' cross-appeal against liability. Liability for breach of confidence was no longer in issue. The sole issues on the defendants' appeal and the plaintiffs' cross-appeal was the appropriate assessment of damages and whether a per­ma­nent injunction should issue. The defend­ants submitted that the plaintiffs should receive zero damages, as the defendants were not an insurer of the plaintiffs' profits in the 12 month period. The plaintiffs sub­mitted that damages for lost profits should not be limited to 12 months.

The Supreme Court of Canada allowed the defendants' appeal. The Court of Appeal was correct to focus on the financial position of the plaintiffs, but assessing damages as if the defendants' sales were the plaintiffs' sales was not supportable because of a number of unjustified assumptions. The court directed a reference to determine the actual loss at­tributable to the breach of confidence sus­tained by the plaintiffs in the 12 month period following termination of the licence. The court dismissed the plaintiffs' cross-appeal limiting compensation to 12 months. The court held that the trial judge was cor­rect to deny a permanent injunction.

Equity - Topic 3905

Fiduciary or confidential relationships - Breach of confidence - Remedies - Dam­ages - The defendants manufactured the plaintiffs' product (Clamato juice) under licence - Following notice of termination of the licence, the defendants misused confidential information to develop and market a similar, competing product, there­by committing a breach of confidence - The confidential information was "noth­ing very special" and, but for the misuse of the confidential information, the defen­dants could have developed and marketed their competing product within 12 months - At issue was the appropriate measure of com­pensation - The Supreme Court of Canada held that the appropriate measure of com­pensation, to be assessed by a ref­eree, was the value to the plaintiffs of the lost mar­ket opportunity, particularly the lost ad­vantage of marketing its product free from competition from the defendants for the 12 month period it would have taken the defendants to develop and mar­ket their product - See paragraphs 19 to 100.

Equity - Topic 3905

Fiduciary or confidential relationships - Breach of confidence - Remedies - Dam­ages - The Supreme Court of Canada stated that "having regard to the evolution of equitable principles apparent in the case law, we should clearly affirm that, in this country, the authority to award financial compensation for breach of confidence is inherent in the exercise of general equi­table jurisdiction and does not depend on the niceties of Lord Cairns' Act or its statutory successors. This conclusion is fed, as well, by the sui generis nature of the action. The objective in a breach of confi­dence case is to put the confider in as good a position as it would have been but for the breach. To that end, the court has ample jurisdiction to fashion appropriate relief out of the full gamut of available remedies, including appropriate financial compensation." - See paragraph 61.

Equity - Topic 3906

Fiduciary or confidential relationships - Breach of confidence - Remedies - Gen­eral - The Supreme Court of Canada stated that "whether a breach of confidence in a par­ticular case has a contractual, tortious, proprietary or trust flavour goes to the appropriateness of a particular equi­table remedy but does not limit the court's jurisdiction to grant it" - See paragraph 26.

Injunctions - Topic 7129

Particular matters - Particular interests protected - Confidential information - The defendants manufactured the plaintiffs' product (Clamato juice) under licence - Following notice of termination of the licence, the defendants misused confi­dential information to develop and market a similar, competing product, thereby committing a breach of confidence - The confidential information was "nothing very special" and, but for the misuse of the confidential information, the defendants could have developed and marketed their competing product within 12 months - The plaintiffs delayed for years before bringing the action - In the meantime, the de­fendants conducted themselves in partial reliance on such inactivity - The Supreme Court of Canada restored the trial judge's decision denying the plaintiffs injunctive relief in addition to compensation - Con­sidering (1) the delay coupled with the defendants change in circumstances, (2) the fact that the confidential information was "nothing very special" and (3) the adequacy of a monetary remedy, an in­junc­tion was inappropriate - See para­graphs 78 to 89.

Cases Noticed:

International Corona Resources Ltd. v. LAC Minerals Ltd., [1989] 2 S.C.R. 574; 101 N.R. 239; 36 O.A.C. 57; 61 D.L.R.(4th) 14; 35 E.T.R. 1; 44 B.L.R. 1, consd. [para. 14].

Seager v. Copydex Ltd., [1967] 2 All E.R. 415 (C.A.), refd to. [para. 17].

Coco v. Clark (A.N.) (Engineers) Ltd., [1969] R.P.C. 41 (Ch. D.), refd to. [para. 17].

Aquaculture Corp. v. New Zealand Green Mussel Co., [1990] 3 N.Z.L.R. 299 (C.A.), refd to. [para. 25].

K.M. v. H.M., [1992] 3 S.C.R. 6; 142 N.R. 321; 57 O.A.C. 321; 96 D.L.R.(4th) 289, refd to. [para. 26].

Pre-Cam Exploration & Development Ltd. v. McTavish, [1966] S.C.R. 551, refd to. [para. 26].

Apotex Fermentation Inc. et al. v. Novo­pharm Ltd. et al. (1998), 129 Man.R.(2d) 161; 180 W.A.C. 161; 80 C.P.R.(3d) 449 (C.A.), refd to. [para. 27].

Ben-Israel v. Vitacare Medical Products Inc. et al. (1997), 45 O.T.C. 81; 78 C.P.R.(3d) 94 (Gen. Div.), refd to. [para. 27].

Attorney General v. Guardian Newspapers Ltd. (No. 2), [1990] 1 A.C. 109 (H.L.), refd to. [para. 27].

Seager v. Copydex Ltd. (No. 2), [1969] 2 All E.R. 718 (C.A.), refd to. [para. 28].

Frame v. Smith and Smith, [1987] 2 S.C.R. 99; 78 N.R. 40; 23 O.A.C. 84; 42 D.L.R.(4th) 81; 9 R.F.L.(3d) 225, refd to. [para. 30].

Hodgkinson v. Simms et al., [1994] 3 S.C.R. 377; 171 N.R. 245; 49 B.C.A.C. 1; 80 W.A.C. 1; [1994] 9 W.W.R. 609; 22 C.C.L.T.(2d) 1; 117 D.L.R.(4th) 161, refd to. [para. 30].

337965 B.C. Ltd. v. Tackama Forest Products Ltd. (1992), 91 D.L.R.(4th) 129 (B.C.C.A.), refd to. [para. 36].

BG Checo International Ltd. v. British Columbia Hydro and Power Authority, [1993] 1 S.C.R. 12; 147 N.R. 81; 20 B.C.A.C. 241; 35 W.A.C. 241, refd to. [para. 36].

R. v. Stewart, [1988] 1 S.C.R. 963; 85 N.R. 171; 28 O.A.C. 219, refd to. [para. 40].

E.I. Du Pont de Nemours Powder Co. v. Masland (1917), 244 U.S. 100 (Sup. Ct.), refd to. [para. 41].

Moorgate Tobacco Co. v. Morris (Philip) Ltd. (1984), 156 C.L.R. 414 (Aust. H.C.), refd to. [para. 42].

Federal Commissioner of Taxation v. United Aircraft Corp. (1943), 68 C.L.R. 525 (Aust. H.C.), refd to. [para. 42].

Macri v. Miskiewicz (1991), 39 C.P.R.(3d) 207 (B.C.S.C.), varied (1993), 31 B.C.A.C. 42; 50 W.A.C. 42; 50 C.P.R.(3d) 76 (C.A.), refd to. [para. 42].

Boardman v. Phipps, [1967] 2 A.C. 46 (H.L.), refd to. [para. 45].

Keene, Re, [1922] 2 Ch. 475 (C.A.), refd to. [para. 45].

Smith Kline & French Laboratories Ltd. et al. v. Canada (Attorney General), [1987] 2 F.C. 359; 78 N.R. 30 (F.C.A.), refd to. [para. 46].

Guerin v. Canada, [1984] 2 S.C.R. 335; 55 N.R. 161; [1985] 1 C.N.L.R. 120, refd to. [para. 50].

Canson Enterprises Ltd. et al. v. Boughton & Co. et al., [1991] 3 S.C.R. 534; 131 N.R. 321; 6 B.C.A.C. 1; 13 W.A.C. 1; 85 D.L.R.(4th) 129; [1992] 1 W.W.R. 245; 61 B.C.L.R.(2d) 1, refd to. [para. 50].

Mouat v. Clark Boyce, [1992] 2 N.Z.L.R. 559, revd. [1993] 4 All E.R. 268 (P.C.), refd to. [para. 50].

Collins (J.G.) Insurance Agencies Ltd. v. Elsley's Estate, [1978] 2 S.C.R. 916; 20 N.R. 1, refd to. [para. 51].

ICAM Technologies Corp. et al. v. EBCO Industries Ltd. (1991), 36 C.P.R.(3d) 504 (B.C.S.C.), affd. (1993), 36 B.C.A.C. 298; 58 W.A.C. 298; 52 C.P.R.(3d) 61 (C.A.), refd to. [para. 52].

Ontex Resources Ltd. v. Metalore Resources Ltd. (1993), 63 O.A.C. 258; 13 O.R.(3d) 229 (C.A.), refd to. [para. 52].

655 Developments Ltd. v. Dawe (Chester) Ltd. et al. (1992), 97 Nfld. & P.E.I.R. 247; 308 A.P.R. 247; 42 C.P.R.(3d) 500 (Nfld. S.C.), refd to. [para. 52].

Argyll (Duchess) v. Argyll (Duke), [1967] Ch. 302, refd to. [para. 53].

Nichrotherm Electrical Co., Cox (A.G.), Drew (A.E.) and Francis (E.G.) v. Percy (J.R.) and Harvey (G.A.), [1957] R.P.C. 207 (C.A.), refd to. [para. 58].

English v. Dedham Vale Properties Ltd., [1978] 1 W.L.R. 93 (Ch. D.), refd to. [para. 58].

Malone v. Commissioner of Police of the Metropolis (No. 2), [1979] 2 All E.R. 620 (Ch. D.), refd to. [para. 58].

Pharand Ski Corp. v. Alberta (1991), 116 A.R. 326; 80 Alta. L.R.(2d) 216 (Q.B.), refd to. [para. 58].

Nocton v. Ashburton, [1914] A.C. 932 (H.L.), refd to. [para. 59].

Recovery Production Equipment Ltd. v. McKinney Machine Co. (1998), 223 A.R. 24; 183 W.A.C. 24 (C.A.), refd to. [para. 60].

Treadwell v. Martin (1976), 13 N.B.R.(2d) 137; 13 A.P.R. 137; 67 D.L.R.(3d) 493 (C.A.), refd to. [para. 60].

Planon Systems Inc. v. Wade (Norman) Co. (1998), 74 O.T.C. 1 (Gen. Div.), refd to. [para. 60].

Z Mark International Inc. v. Leng Novak Blais Inc. et al. (1996), 12 O.T.C. 33 (Gen. Div.), refd to. [para. 60].

United Scientific Holdings Ltd. v. Burnley Borough Council; Cheapside Land De­velopment Co. v. Messels Service Co., [1978] A.C. 904 (H.L.), refd to. [para. 61].

Interfirm Comparison (Australia) Pty. Ltd. v. Law Society of New South Wales, [1977] R.P.C. 137 (N.S.W.S.C.), refd to. [para. 65].

Terrapin Ltd. v. Builders' Supply Co. (Hayes) Ltd., [1967] R.P.C. 375 (Ch. D.), refd to. [para. 67].

Santé Naturelle ltée v. Produits de Nu­trition Vitaform Inc. (1985), 5 C.P.R.(3d) 548 (Que. S.C.), refd to. [para. 67].

Montour ltée v. Jolicouer (1988), 19 C.I.P.R. 25 (Que. Sup. Ct.), refd to. [para. 67].

Matrox Electronic Systems Ltd. v. Gaudreau, [1993] R.J.Q. 2449 (Que. Sup. Ct.), refd to. [para. 67].

Dowson & Mason Ltd. v. Potter, [1986] 2 All E.R. 418 (C.A.), refd to. [para. 68].

Rainbow Industrial Caterers Ltd. et al. v. Canadian National Railway Co. et al., [1991] 3 S.C.R. 3; 126 N.R. 354; 3 B.C.A.C. 1; 7 W.A.C. 1, refd to. [para. 73].

Chaleur Silica Inc. v. Lockhart et al. (1990), 108 N.B.R.(2d) 366; 269 A.P.R. 366 (Q.B.), refd to. [para. 73].

Saltman Engineering Co., Ferotel and Monarch Engineering Co. (Mitchum) v. Campbell Engineering Co. (1948), 65 R.P.C. 203 (C.A.), refd to. [para. 75].

Institut national des appellations d'origine des vins et eaux-de-vie v. Andres Wines Ltd. (1987), 40 D.L.R.(4th) 239 (Ont. H.C.), affd. (1987), 71 D.L.R.(4th) 575 (C.A.), leave to appeal refused, [1991] 1 S.C.R. x; 130 N.R. 320; 46 O.A.C. 320, refd to. [para. 81].

Stevenson Jordan & Harrison Ltd. v. Mac­Donald & Evans (1951), 69 R.P.C. 10 (C.A.), refd to. [para. 82].

Shelfer v. London (City) Electric Lighting Co., [1895] 1 Ch. 287 (C.A.), refd to. [para. 84].

Schauenburg Industries Ltd. v. Borowski (1979), 101 D.L.R.(3d) 701 (Ont. H.C.), refd to. [para. 88].

Robb v. Green, [1895] 2 Q.B. 1, refd to. [para. 92].

United Horse-Shoe and Nail Co. v. Stewart (1888), 13 App. Cas. 401 (H.L.), refd to. [para. 99].

Wood v. Grand Valley Railway Co. (1915), 51 S.C.R. 283, refd to. [para. 99].

Penvidic Contracting Co. v. International Nickel Co. of Canada, [1976] 1 S.C.R. 267; 4 N.R. 1, refd to. [para. 99].

Canson Enterprises Ltd. et al. v. Boughton & Co. et al. (1992), 72 B.C.L.R.(2d) 207 (B.C.S.C.), affd. (1995), 63 B.C.A.C. 209; 104 W.A.C. 209; 11 B.C.L.R.(3d) 262 (C.A.), refd to. [para. 101].

Authors and Works Noticed:

American Law Institute, Restatement (Third) of Unfair Competition (1993), c. 4, p. 516, s. 45 [para. 94].

Birks, Peter, The Remedies for Abuse of Confidential Information, [1990] Lloyd's Mar. & Com. L.Q. 460, pp. 464, 465 [para. 25].

Capper, David, Damages for Breach of the Equitable Duty of Confidence (1994), 14 Legal Stud. 313, p. 314 [para. 57].

Chomecek, M., and McCormack, S.C., World Intellectual Property Guidebook: Canada (1991), p. 3-27 [para. 47].

Davies, J.D., Duties of Confidence and Loyalty, [1990] Lloyd's Mar. & Com. L.Q. 4, pp. 5 [para. 24]; 7 [para. 30].

Gurry, Francis, Breach of Confidence (1984), pp. 82 [para. 75]; 161, 162 [para. 31].

McCamus, J.D., Equitable Compensation and Restitutionary Remedies: Recent Developments, Special Lectures of the Law Society of Upper Canada 1995: Law of Remedies: Principles and Proofs, p. 295 [para. 58].

North, P.M., Breach of Confidence: Is There a New Tort? (1972), 12 J.S.P.T.L. 149, pp. 163 to 165 [para. 49].

Sharpe, Robert J., Injunctions and Specific Performance (2nd Ed. 1992) (1998 Looseleaf Update) (Release No. 6), paras. 1.840 [para. 81]; 1.870 [para. 82].

Tsaknis, Leo, The Jurisdictional Basis, Elements and Remedies in the Action for Breach of Confidence - Uncertainty Abounds (1993), 5 Bond L. Rev. 18, pp. 46 to 47 [para. 60].

United Kingdom, Law Commission, Breach of Confidence (1974), Working Paper No. 58, p. 11 [para. 28].

United Kingdom, Law Commission, Report on a Federance under s. 3(1)(e) of the Law Commission Act 1965 (1981), Cmnd. 8388, p. 151, para. 6.015 [para. 49].

Weinrib, Arnold S., Information and Prop­erty (1988), 38 U.T.L.J. 117, generally [para. 40].

Counsel:

Michael P. Carroll, Q.C., Peter G. Voith and Monika B. Gehlen, for the appel­lants;

Jack Giles, Q.C., and David T. Woodfield, for the respondents.

Solicitors of Record:

Davis & Co., Vancouver, British Columbia, for the appellants;

Farris, Vaughan, Wills & Murphy, Vancouver, British Columbia, for the respondents.

This appeal and cross-appeal were heard on April 30, 1998, before L'Heureux-Dubé, Gonthier, McLachlin, Iacobucci, Major, Bastarache and Binnie, JJ., of the Supreme Court of Canada.

On January 28, 1999, Binnie, J., delivered the following judgment in both official languages for the Supreme Court of Canada.