By May M. Cheng and Farai Munyurwa

This article was originally published on Law360 Canada on July 17, 2025, 10:58 AM EDT .
You can read the original article here.

The decision in Toyota Jidosha Kabushiki Kaisha (c.o.b. Toyota Motor Corp.) v. Marrand Auto Inc., 2025 FC 1105, issued on June 18, 2025, by Justice Janet Fuhrer, upheld a decision by Associate Judge Trent Horne that barely allowed the claim to survive a motion to strike. The decision appealed from had struck out the entire amended statement of claim with leave to amend only the claims advanced under paras. 7(b) and 22 of the Trademarks Act (TMA).The remaining claims under the Competition Act and s. 7(c) of the TMA were struck without leave to amend (see decision appealed from at Toyota Jidosha Kabushiki Kaisha (c.o.b. Toyota Motor Corp.) v. Marrand AutoInc., [2024] F.C.J. No. 2505.)

Justice Fuhrer makes the following query at the outset of her appeal decision on the motion to strike: “When is a TOYOTA bumper no longer a TOYOTA brand product? When it is damaged during shipment by a grey marketer, according to the Plaintiffs. Not so fast, says the Defendant.”

For those around long enough to recall the unsatisfying Supreme Court of Canada’s decision in Consumers Distributing Co. v. Seiko Time Canada Ltd., [1984] S.C.J. No. 27, where the court elected not to determine whether grey market goods could be deemed inferior when sold without the manufacturer’s warranty, this case raises the spectre of a definitive ruling on this elusive topic that has not been the subject of a decision in the 40 years since.

It should be remembered that in Seiko, Consumers Distributing was supplying a warranty card and made clear to customers that it was not an authorized dealer, so there were no false and misleading statements by the distributor as to the provenance of the goods, which were admitted to be genuine but simply diverted goods, and there was in fact a warranty provided, so this made it more difficult to allege inferiority based on lack of a warranty.

Justice Fuhrer’s decision is a terrific read as a definitive current summary of the legal elements required to establish a passing-off action, which she concludes very much still requires “use.” On this point, Justice Fuhrer found a palpable, but not overriding, error in Associate Judge Horne’s analysis. She nevertheless disagrees with Associate Judge Horne that any case law supports the proposition that passing off can be claimed in the absence of use and firmly makes the case with reference to a number of recent decisions including Justice Glennys McVeigh’s recent decision in 2K4 Inc. (c.o.b. Indican Pictures) v. Indiecan Entertainment Inc., 2025 FC 20 at para. 127. The result is an error that is palpable, but not overriding, in Justice Fuhrer’s estimation.

The court’s analysis concerning the legality of grey market goods remains the same as determined by Justice Nicholas McHaffie in the earlier decision of TFI Foods Ltd. v. Every Green International Inc., 2021 FC 241 at para. 50, which clearly states that “the sale in Canada of grey market goods does not, in itself, constitute passing off.” However, the TFI Foods decision did not decide the question left unanswered by Seiko because the conduct complained of was material misrepresentations as to being an “authorized distributor in Canada” for the grey goods. The interlocutory injunction and subsequent summary judgment granted in the TFI Foods case were limited to holding these were actionable false representations as to the status of the distributor. There was no allegation of lack of warranty or inferior quality of the goods arising from their grey goods status.

In this case, the defendant, Marrand Auto Inc., a reseller of grey market automobile components, was sued by a number of Toyota entities in Canada (collectively, “Toyota”) after a shipment of automotive parts bearing TOYOTA trademarks was detained by the Canada Border Services Agency.
Toyota inspected the goods and determined they were not counterfeit, but it claimed the parts were:

• “Unauthorized,” as they lacked Toyota’s standard warranty;
• Not sourced through authorized dealers; and
• Damaged during shipment, allegedly compromising consumer safety.

If these allegations can be shown to be true in Marrand, the question remains as to whether this is merely allowed as part of the sale of diverted goods or whether this scenario presents sufficient concerns that courts will intervene to prevent the sale of grey goods. The case also has implications for “upcycled” goods that may also fall under the same shadow for no longer having the warranty of the original seller and which may be damaged during refurbishment.

While finding that Seiko differs factually from the case in Marrand, Justice Fuhrer indicated that Associate Judge Horne did not err in refusing to conclude that the current claim is doomed to fail, even in the absence of false or misleading representations by the defendant about the grey goods. Further, the s. 22 TMA claim concerning potential depreciation of goodwill remains arguable on the principle that the sale of damaged merchandise could be treated differently than a simple resale.

In the result, the Marrand case was allowed to proceed, and a fresh Amended Statement of Claim
had already been served at the time the appeal was argued. This case will be one to follow on
whether the law on grey goods is modified to allow manufacturers to take a harder line on diverted
goods that are nevertheless genuine. We have waited a whole 40 years, but it may finally be time for
the courts to revisit Seiko.