Evidence required for injunction cannot be speculative

In Hyundai Auto Canada v Cross Canada Auto Body Supply, the Federal Court has reaffirmed the extreme difficulty in obtaining an interlocutory injunction. In obiter, the court stated that even in cases of blatant infringement, irreparable harm must be shown to be non-speculative.

The plaintiff, Hyundai Auto Canada, is a division of Hyundai Motor America, a California Corporation. It imports Hyundai automobiles and parts from Korea and the United States. It sells automobiles, parts and accessories through a network of franchise automobile dealers in Canada and has been doing so since January 1984. It owns the registered trademark HYUNDAI as well as other related registrations.

Cross Canada Auto Body Supply (Cross Canada) sells parts for Hyundai automobiles. These parts or their packaging bear the HYUNDAI trademark. It stated that these are genuine parts which it acquires in Canada from a single supplier who it refused to name.

Cross Canada first received a letter dated January 22 2004 from Hyundai alleging that Cross Canada was infringing Hyundai's trademark and demanding that Cross Canada cease to sell automotive parts and accessories bearing the registered trademarks. On May 25 2005 Hyundai commenced the present action. On July 31 2006 Hyundai brought a motion for an interlocutory injunction.

Cross Canada filed a statement of defence in which it made the usual counterclaim that Hyundai's trademark was invalid, and brought a separate Federal Court action for the expungement of five registered trademarks of Hyundai including the trademark HYUNDAI.

The Federal Court requires exceptionally clear and compelling evidence that a plaintiff will suffer irreparable harm, and not that it might or could suffer irreparable harm if an interlocutory injunction is not granted, even in the face of blatant infringement. In this case, Hyundai alleged that Cross Canada would damage the goodwill of Hyundai, and that Cross Canada's auto parts and accessories would not have the warranty protection Canadian consumers would normally expect. Hyundai stated that it could not ensure that automobiles, parts and accessories marked with the HYUNDAI trademark by Cross Canada will conform to Canadian automobile safety standards, and that Cross Canada's lack of expertise may result in potential safety risks since such parts and accessories may not conform to Canadian automobile safety standards and will undoubtedly not conform to its specifications. Hyundai alleged that this would negatively impact on its reputation and goodwill in the Canadian market and its trademark HYUNDAI.

Hyundai further alleged that the damage to its goodwill and its trademark HYUNDAI from Cross Canada's actions will be very real and that there is no way to measure and quantify the loss of goodwill, and in particular the loss of customers as a result of such sales. Hyundai alleged that the impact on its reputation and goodwill, although not quantifiable, could be very serious.

The proper test in Canada for determining whether an interlocutory injunction should be granted is the presence of all of the following three elements:

• there is a serious question to be tried in the main action;
  
  
• in the absence of an interlocutory injunction the plaintiff will suffer irreparable harm; and
  
  
• the balance of convenience as between the parties favours the grant of an injunction against the defendant.

There was no dispute that there was a serious issue to be tried. However, with respect to the issue of irreparable harm, the Federal Court held that Hyundai's evidence was essentially speculative.

First, Cross Canada demonstrated that there was warranty protection for the products. Second, Hyundai had possession of some products sold by Cross Canada since 2003, and yet there was no evidence that any of the parts had been found defective or unsafe. On the other hand, evidence from Cross Canada was to the effect that the parts were made by the same company that supplies Hyundai. The court concluded that it was pure speculation that the parts being sold by Cross Canada are inferior and will damage the goodwill attributed to the HYUNDAI trademark. Moreover, Hyundai did not produce any evidence of confusion on the part of any customer of Cross Canada in respect of parts sold by Cross Canada.

In addition, Cross Canada pleaded invalidity of Hyundai's trademark and has also launched expungement proceedings to have it and other trademarks expunged. In these circumstances, the court cannot make a finding of irreparable harm because there is a challenge to the very right which Hyundai is asserting.

Hyundai was also denied an interlocutory injunction on account of delay.

John Macera, Macera & Jarzyna - Moffat & Co, Ottawa