Date: 20041004
Docket: T-675-01
Citation: 2004 FC 1360
BETWEEN:
DISNEY ENTERPRISES INC. BUENA VISTA HOME ENTERTAINMENT, INC.,
METRO-GOLDWYN-MAYER STUDIOS, INC., PARAMOUNT PICTURES
CORPORATION, TRISTAR PICTURES INC., UNIVERSAL CITY STUDIOS INC.,
WARNER BROS., a division of TIME WARNER ENTERTAINMENT CO., L.P.
and COLUMBIA TRISTAR HOME ENTERTAINMENT INC.
Plaintiffs
and
2631-5374 QUEBEC INC.
carrying on business as MULTIVIDÉO
and
CLAUDE RIVARD
Defendants
REASONS FOR JUDGMENT
HARRINGTON J.
[1] The plaintiffs are well-known American motion picture companies. After a movie is shown in theatres, it often is distributed in one fashion or another to the pay-per-view television market and then to the general public by way of videocassette recordings, DVD recordings and VCD recordings. The plaintiffs' intellectual property in their works are protected by law, including copyright and trade-mark.
[2] They accuse the defendants of "video piracy". They are said to have reproduced or duplicated the plaintiffs' movies and to have rented and sold these counterfeits to the general public without authorization and without licence.
[3] The plaintiffs submit that it is not necessary to go to trial. They say the outcome of a full-blown trial is a foregone conclusion. They seek summary judgment on the basis that the corporate defendant, Multividéo, pleaded guilty to three related criminal charges laid against it under the Copyright Act. This guilty plea should not only serve as an admission against it but also against Claude Rivard, its president, director and majority shareholder.
[4] The plaintiffs seek declarations that they are the holders of valid Canadian copyrights, that they have the exclusive right to the use throughout Canada of those registered copyrights; that the defendants' unauthorized activities constituted an infringement of their copyright rights and among other things constituted passing-off, unfair competition and resulted in depreciated goodwill. They also seek damages.
[5] The defendants do not in any way contest the validity of the plaintiffs' intellectual property claims. Multividéo says that all it did was repair videotapes of five movies which it had bought from an authorized distributor. However, it did plead guilty to three of five charges as part of a plea bargain which resulted in a fine of $3,000. Mr. Rivard denies that he himself was personally involved. No guilty plea was ever entered on his behalf and the criminal charges against him lie fallow. He adds that in any event the action as against him is time barred.
LAW OF SUMMARY JUDGMENTS
[6] Pursuant to Federal Court Rules 213 and following, a plaintiff may, at any time, bring on a motion for summary judgment on all or part of the claim. A defendant must put its best foot forward. It is not enough to rest on denials in the pleadings. The defendant must set out specific facts showing there is a genuine issue for trial. (Feoso Oil Ltd. v. Sarla (The), [1995] 3 F.C. 68 (FCA); Kanematsu GmbH v. Acadia Shipbrokers Ltd., [2000] 259 N.R. 201 (FCA)).
[7] If the facts are in dispute, or there are serious issues of credibility, the case should continue (Granville Shipping Co. v. Pegasus Lines Ltd., [1996] 2 F.C. 853).
PLAINTIFFS' CASE
[8] The cornerstone of plaintiffs' case is the criminal Court Brief, put together by the Royal Canadian Mounted Police. Various affidavits and items seized at Multividéo's premises indicate that sophisticated copying equipment was on the premises as well as counterfeit copies of some 78 movies, or so, as well as counterfeit cassette jackets. They claim intellectual property interests in nine of the movies.
[9] Five charges were laid against both Multividéo and its president, Mr. Rivard. They were each charged with offering for sale or rent, for commercial purposes, one counterfeit copy of each of five movies, The Blues Brothers, U.S. Marshals, Mr. Magoo, Hush, and The Horse Whisperer. These five are among the nine belonging to the plaintiffs.
[10] This is where matters get a bit murky. Multividéo admits that as part of a plea bargain it paid a total of $3,000 relating to three of the charges. It first said it pleaded guilty, but is now trying to backpedal a little. I will assume a guilty plea was entered. However, Multividéo says it does not know which three charges were involved. There does not appear to be any bad faith on its part. The counsel representing it on the criminal charges is not the counsel representing it now. Although these things must be a matter of public record, Multividéo itself, and its former counsel, do not appear to have proper records.
[11] The plaintiffs say that Mr. Rivard is jointly and severally liable as this is a perfect case in which to pierce the corporate veil. He was the alter ego or directing mind of Multividéo.
THE DEFENDANTS' CASE
[12] I have set out Multividéo's position in the paragraphs immediately preceding. Mr. Rivard denies doing anything other than repairing copies of the aforesaid movies which were bought from a legitimate dealer. Furthermore, in a declaration given to the RCMP, he said that he was only 50 per cent shareholder, that he had no idea how counterfeit films could have found their way into Multividéo's premises, and that counterfeit copies of jackets might have been provided by clients who rented the films. Multividéo had five employees.
[13] In an affidavit filed as part of the defendants' motion record, he emphasized that he had not entered a guilty plea to the criminal charges and that no judgment has been rendered against him.
[14] It is also to be noted that he was added as a co-defendant in this action more than three years after the alleged cause of action arose. He says the claim against him is prescribed. Since the whole cause of action arose in Québec, there is a three-year prescription in virtue of section 37 of the Federal Courts Act, and article 2925 of the Québec Civil Code.
[15] The plaintiffs answer this point by saying the action was taken against Multividéo in time and that under Québec law an action against one joint and several debtor interrupts prescription against the other. (c.c. Art. 2900)
ANALYSIS
[16] Since there is no dispute as to plaintiffs' intellectual property interests in all the movies identified in the statement of claim, I am prepared to so declare by way of summary judgment. However, the facts currently before the Court are not sufficiently clear to allow me to render a summary judgment on liability and damages. In addition, there are real credibility issues. The most the plaintiffs can say is that Multividéo pleaded guilty to offering for sale or lease one counterfeit copy of three movies. We do not know which movies they are, other than they are three out of a possible five, The Blues Brothers, U.S. Marshals, Mr. Magoo, Hush, and The Horse Whisperer.
[17] The question is whether a guilty plea in criminal proceedings constitutes an irrefutable admission in this case. The law is well stated in the 2nd edition of Sopinka, Letterman and Bryant, The Law of Evidence in Canada, at paragraph 6.305:
An admission may take many forms. A plea of guilty in a criminal proceeding or a proceeding arising out of the commission of a provincial offence is considered an admission which is admissible as such in a subsequent civil proceeding. As in the case of all admissions, except those known as "judicial or formal admissions", the party who made it may later lead evidence at trial to reveal the circumstances under which the admission was made in order to reduce its prejudicial effect. It should be noted that, before a plea of guilty is admissible in the subsequent civil action, the latter proceeding must have arisen out of the same or similar circumstances which formed the basis of the criminal charge.
[Footnotes omitted]
[18] This statement is in line with the decision of the Ontario Court of Appeal in Re Charlton, [1969] 1 O.R. 706 and the decisions of this Court in Prevost v. Canada (Employment and Immigration Commission), [1980] F.C. J. No. 1003 (Q.L.), Walsh J., and Arnold J. Hansen, et al. v. The Ocean Victoria Daichi Tanker K.K., et al., [1985] 1 F.C. 451, Muldoon J.
[19] As Muldoon J. put it:
However, an admission is not an abject confession, for those who plead guilty to secular offences may have motives and purpose other than clearing their consciences. But, this admission by the defendant ship of its having discharged a pollutant, oil, into Burrard Inlet while it does not of itself summarily win for the plaintiffs a conclusive judgment on liability, could furnish weighty and admissible evidence of negligence on the defendants' part at the trial of this action.
[20] Although the plaintiffs have made out a good prima facie case against Multividéo, I do not think it should be deprived of its day in Court as there are genuine issues with respect to the defence. There could also be a strain on the administration of justice. One is not likely, as part of a plea bargain, to plead guilty against a fine of $3,000 if it means paying the plaintiffs the damages they seek in this action, some $225,000, plus interest and costs.
[21] Apart from the fact that the form of the guilty plea and the identity of the three movies is not yet in evidence before this Court, but should and could be put in evidence, Multividéo's position that it was far cheaper to pay a $3,000 fine than to proceed to a full-blown trial is not far-fetched; after all, the stigma of a summary conviction on a corporation is not the same as on an individual.
[22] Even if I had found at this stage that Multividéo was liable, I would not have granted summary judgment against Mr. Rivard.
[23] The parties focused on article 317 of the Québec Civil Code which reads:
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In no case may a legal person set up juridical personality against a person in good faith if it is set up to dissemble fraud, abuse of right or contravention of a rule of public order.
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La personnalité juridique d'une personne morale ne peut être invoquée à l'encontre d'une personne de bonne foi, dès lors qu'on invoque cette personnalité pour masquer la fraude, l'abus de droit ou une contravention à une règle intéressant l'ordre public.
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[24] It is not necessary to consider the ancillary application of Québec law in the Federal Court at this stage. The law dealing with the liability of corporate officers and directors was recently reviewed by Mr. Justice Rouleau in Sunsolar Energy Technologies (S.E.T.) Inc. v. Flexible Solutions International, Inc., et al, 2004 FC 1205. He in turn based himself upon the decision of Mr. Justice LeDain in Mentmore Manufacturing Co. Ltd., et al v. National Merchandise Manufacturing Co. Inc., et al, (1978) 22 N.R. 161, (1978) 40 C.P.R. (2d) 164. The general rule is that it is not enough that an individual control the company and direct its operations. If the torturous act was done by a servant, a managing director is not personally liable unless he is privy to the act, in the sense that he ordered or procured the act be done. Mr. Rivard flatly denies personal involvement. His status within Multividéo does not preclude him from taking that position. His involvement is an open issue of fact yet to be determined.
[25] It is not necessary for me in the circumstances to consider Mr. Rivard's additional defence of prescription.
[26] As this case is already a specially-managed proceeding, the parties should seek fresh directions with a view of establishing a binding timetable for examinations for discovery and other steps necessary to bring the outstanding items to trial in the usual way.
[27] Costs shall be in the cause.
"Sean Harrington"
Judge
Montréal, Quebec
October 4, 2004
FEDERAL COURT
NAMES OF COUNSEL AND SOLICITORS OF RECORD
DOCKET: T-675-01
STYLE OF CAUSE: DISNEY ENTERPRISES INC. BUENA VISTA HOME ENTERTAINMENT, INC., METRO-GOLDWYN-MAYER STUDIOS, INC., PARAMOUNT PICTURES CORPORATION, TRISTAR PICTURES INC., UNIVERSAL CITY STUDIOS INC., WARNER BROS., a division of TIME WARNER ENTERTAINMENT CO., L.P. and COLUMBIA TRISTAR HOME ENTERTAINMENT INC.
AND
2631-5374 QUEBEC INC. carrying on business as
MULTIVIDÉO, and CLAUDE RIVARD
PLACE OF HEARING: MONTRÉAL, QUEBEC
DATE OF HEARING: AUGUST 30, 2004
REASONS FOR JUDGMENT : HARRINGTON J.
DATED: OCTOBER 4, 2004
APPEARANCES:
Daniel Ovadia FOR PLAINTIFFS
Dany Perras FOR DEFENDANTS
SOLICITORS OF RECORD:
Daniel Ovadia FOR PLAINTIFFS
Montréal, Quebec
Michelin & Associates FOR DEFENDANTS
Montréal, Quebec
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