Irreparable harm must be demonstrated in injunction cases

In Hyundai Auto Canada v Cross Canada Auto Body Supply (West) Limited (2008 FCA 12, January 10 2008), the Federal Court of Appeal has confirmed that, in the absence of clear evidence of irreparable harm which cannot be compensated in damages, the courts will refuse to grant interlocutory injunctions.

Hyundai Auto Canada is a division of California-based Hyundai Motor America, a wholly-owned subsidiary of the Hyundai Motor Company, which is based in Korea. Hyundai Auto Canada is the owner of the Canadian registration for the trademark HYUNDAI. All Canadian sales of HYUNDAI-branded vehicles are made through Hyundai Auto Canada, but the vehicles are manufactured by Hyundai Motor Company. Cross-Canada Auto Body Supply (West) Limited is a reseller of automotive parts and accessories, including parts for Hyundai automobiles.

Hyundai Auto Canada brought an action for trademark infringement and passing off against Cross Canada. Hyundai alleged that Cross Canada was importing and selling automobile parts that bore Hyundai's trademarks, but were not sold by Hyundai. In its defence, Cross Canada attacked the validity of the HYUNDAI trademark. It also asserted that the HYUNDAI-branded parts that it was offering for sale were genuine parts which it had acquired in Canada from a single supplier (whom it refused to name).

Hyundai brought a motion seeking an interlocutory injunction to restrain Cross Canada from using the HYUNDAI trademark. Hyundai adduced no evidence that the parts offered for sale by Cross Canada were not genuine Hyundai parts, or that they were defective or inferior. In fact, Cross Canada provided evidence that the parts were made by the same company that supplied Hyundai. Hyundai nonetheless argued that the conduct of Cross Canada was likely to cause confusion in Canada between Cross Canada's products and those of Hyundai.

The Federal Court applied the three-part test set out by the Supreme Court for determining whether an interlocutory injunction should be granted. Under RJR - MacDonald Inc v Canada (Attorney General) ([1994] 1 SCR 311), the plaintiff must demonstrate that:

• 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.

The court refused to grant the injunction, finding that the evidence as to irreparable harm was speculative. It concluded that Hyundai had not demonstrated that it would suffer irreparable harm that could not be compensated by damages if the injunction was refused (for further details please see "Evidence required for injunction cannot be speculative"). Hyundai appealed.

A unanimous panel of the Federal Court of Appeal affirmed the lower court's decision and denied Hyundai's appeal. The Federal Court of Appeal confirmed its previous jurisprudence that, in order to obtain an interlocutory injunction against the use of a trademark, a plaintiff must demonstrate clearly that it will otherwise suffer irreparable harm. It is insufficient to allege that irreparable harm might or could occur. Moreover, the court confirmed that the plaintiff must suffer irreparable harm that cannot be compensated by an award of damages.

Antonio Turco, Blake Cassels & Graydon LLP, Toronto