Date: 20100910
Docket: T-219-08
Citation: 2010
FC 905
Ottawa, Ontario,
September 10, 2010
PRESENT: The Honourable Madam Justice Mactavish
BETWEEN:
SOCIETY OF COMPOSERS, AUTHORS
AND
MUSIC PUBLISHERS OF CANADA
Plaintiff
and
564163 ONTARIO LIMITED,
c.o.b. as STUDIO 4 TAVERN, a.k.a. STUDIO
4
Defendant
T-221-08
AND
BETWEEN:
SOCIETY OF COMPOSERS, AUTHORS AND
MUSIC PUBLISHERS OF CANADA
Plaintiff
and
101511 ONTARIO LIMITED,
c.o.b. as CLUB T-ZER’S
Defendant
REASONS FOR ORDER AND ORDER
[1]
The defendants in
these two actions seek to set aside default judgments granted by this Court on
January 22, 2009. For the reasons that follow, I find that the defendants have
not satisfied the applicable test so as to entitle them to have the judgments
set aside. Consequently, the motions will be dismissed.
Background
[2]
The Society of
Composers, Authors and Music Publishers of Canada (“SOCAN”) is a not-for-profit
corporation which grants licences for the public performance of dramatico-musical
and musical works. SOCAN commenced these actions in February of 2008 seeking
the recovery of unpaid royalties for a period commencing in 2004 under Tariff
3C, or, alternatively, statutory damages pursuant to section 38.1(4) of the Copyright
Act R.S.C. 1985, c. C-42.
[3]
Action number
T-219-08 was commenced against 564163 Ontario Limited, c.o.b. as Studio 4
Tavern, a.k.a. Studio 4. Action number T-221-08 was commenced against 1015111
Ontario Limited, c.o.b. as Club T-Zers. Both defendants carry on business as
adult entertainment clubs, and Peter Barth is the President of both companies.
[4]
These are not the
first claims brought by SOCAN against the defendants. Actions for copyright
infringement were brought against each of the corporate defendants and against
Mr. Barth personally in the mid-1990’s. These actions were based upon the
defendants’ alleged use of SOCAN’s musical works without the necessary
licences. The actions were resolved when the defendants to those actions
consented to judgments in favour of SOCAN.
[5]
The statements of
claim in the two current actions were served on the defendants on February 19,
2008. On March 19, 2008, the defendants endeavoured to file statements of
defence with the Court. The Court refused to accept the documents for filing as
they were signed by a paralegal and not by a solicitor representing the
corporations, as is required by Rule 120 of the Federal Courts Rules.
[6]
Counsel acting for
the defendants made a further attempt to file statements of defence on December
23, 2008. On January 2, 2009, the case-management Prothonotary issued a
direction advising counsel that the Statements of Defence were filed out of
time, and that the defendants would either have to bring motions for an
extension of time or obtain the consent of the plaintiff to the late filing.
The case-management Prothonotary further directed that a case conference be
convened at the earliest date convenient to both counsel.
[7]
In the meantime, on
December 18, 2008, the plaintiff had brought ex parte motions for
default judgment in both actions. Default judgment was granted in each case on
January 22, 2010.
[8]
Motions to set aside
these judgments were filed with the Court on July 12, 2010. SOCAN filed
responding motion records on July 16, 2010. On July 27, 2010, the Court set
these motions down to be heard on August 23, 2010. On Wednesday, August 18,
2010, the defendants served supplementary motion records on the plaintiff
including an additional affidavit. SOCAN objects to the admission of this
additional material. Thus the first issue for the Court is to determine
whether this document should be accepted.
Should the
Court Allow the Filing of the Supplementary Motion Record?
[9]
The parties agree
that the test to be applied in these circumstances is that articulated by the
Federal Court of Appeal in Atlantic Engraving Ltd. v. Lapointe Rosenstein,
[2002] F.C.J. No. 1782. That is, the Court may allow the filing of additional
affidavit material if the following requirements are met:
i) The evidence to be adduced will serve
the interests of justice;
ii) The evidence will assist the Court;
and
iii) The evidence will not cause
substantial or serious prejudice to the other side: at para. 8.
[10]
In addition, the
party seeking leave to file additional material must show that the evidence
sought to be adduced was not available prior to the cross-examination of the
opponent's affidavits. Parties should not be allowed to split their case, and
should instead be required to put their best foot forward at the first opportunity:
Atlantic Engraving at para. 9.
[11]
I note that Atlantic
Engraving involved an application rather than a motion. However, in Fibremann
Inc. v. Rocky Mountain Spring (Icewater 02) Inc., [2005] F.C.J. No. 1238,
the Court held that the same test should be applied on motions: see para. 12.
[12]
Moreover, in Pfizer
Canada Inc. v. Canada (Minister of Health), [2006] F.C.J. No. 1243, the
Court held that even if cross-examinations have not taken place, a party
seeking to adduce additional evidence may still need to show that its evidence
was not available at some other earlier date (such as at the time of filing its
first affidavit evidence): at para. 20.
[13]
In this case, the
supplementary evidence sought to be adduced is an affidavit from a legal
assistant in the office of counsel for the defendants. Attached as exhibits to
this affidavit are monthly statements or invoices for royalty charges issued by
SOCAN to “Arzac Tavern Limited - Jason’s”. According to the affidavit,
“Jason’s” is “a comparably sized establishment to that of the defendant[s]
located in the City of Windsor”.
[14]
In my view, the
evidence sought to be adduced will serve neither the interests of justice nor
will it assist the Court. The invoices in question relate to a different
establishment which, on the face of the documents, is subject to a different
Tariff (Tariff 3B in the case of Jason’s, rather than Tariff 3C in the case of
the defendants). As such, the documents have little or no probative value in
this case.
[15]
Moreover, the
defendants have not provided any evidence explaining why this information could
not have been obtained earlier, with the exercise of reasonable diligence. I
note that Mr. Barth’s affidavits in support of the motions were sworn in
February of 2010, although the motions to set aside the default judgments were
not brought until July 12, 2010. The supplementary affidavits were not served
until August 18, 2010.
[16]
As a result, I am not
prepared to exercise my discretion to allow for the filing of the additional
affidavit material.
[17]
Before leaving this
issue, I would also note that nothing in the supplementary affidavits would
have changed the outcome of the motions to set aside the default judgments.
This is because the affidavits provide neither an explanation for the defendants’
failure to file a statement of defence nor a reason why defendants have not
brought these motions within a reasonable time.
Should the
Default Judgments be set Aside?
[18]
Rule 399(1) of the Federal
Courts Rules provides that, on motion, the Court may set aside an order
that was made ex parte if the party against whom the order was made
discloses a prima facie case why the order should not have been made.
[19]
The parties are also
in agreement as to the test to be applied on a motion to set aside a default judgment.
As stated in cases such as SEI Industries Ltd. v. Terratank Environmental
Group, [2006] F.C.J. No. 271, Taylor Made Golf Co. Inc. et al v. 1110314
Ontario Inc. (1998), 148 F.T.R. 212 and Brilliant Trading Inc. v. Tung
Wai Wong and Zhen Hing Enterprise Ltd., [2005] F.C.J. No. 706, 2005 FC 571,
the following issues must be considered:
1. Does the defendant have a reasonable
explanation for its failure to file a statement of defence?
2. Does the defendant have a prima
facie defence on the merits to SOCAN's claim? and
3. Has the defendant brought this motion
within a reasonable time?
[20]
The three elements of
the test are conjunctive. That is, the defendants must satisfy the Court that
all three parts of the test have been met: see Contour Optik Inc. v. E'lite
Optik, Inc., [2001] F.C.J. No. 1952 at para. 4.
[21]
Dealing with the
first element of the test, as was noted earlier, the statements of claim in the
two actions were served on the defendants on February 19, 2008. The defendants
endeavoured to file statements of defence with the Court within the time period
contemplated by the Federal Courts Rules, but the documents were
not accepted for filing as they were signed by a paralegal. Mr. Barth
acknowledges that this occurred in his affidavit, and does not suggest that he
was not made aware of this in March of 2008.
[22]
On April 15, 2008,
counsel for SOCAN wrote to Mr. Barth on behalf of the defendants asking him to
inform SOCAN when the defendants had retained counsel, and when the defendants
anticipated being in a position to deliver statements of defence. Mr. Barth
does not deny receiving this letter.
[23]
Correspondence to
SOCAN from the paralegal dated May 5, 2008 advises that Mr. Barth was out of
the country, and would be retaining counsel on his return to Canada on May 25, 2008. The correspondence makes it clear that
the paralegal was not retained in these matters, and was writing to counsel for
SOCAN as a courtesy to Mr. Barth.
[24]
On June 30, 2008,
counsel for SOCAN wrote to Mr. Barth in his capacity as President of the two
defendants, reminding him that the companies were in default of filing
statements of defence and cautioning him that SOCAN may take default
proceedings against the companies. Once again, Mr. Barth has not denied
receiving this letter in his affidavit.
[25]
A further letter was
received by counsel for SOCAN from the paralegal later that same day. The
paralegal reiterates that he was not retained by the defendants, and states
that Mr. Barth was again out of the country, and would be returning on July 21,
2008.
[26]
It appears from the
record that the defendants did not retain counsel until December of 2008, the
same month in which SOCAN brought its motions for default judgment. While it
appears that problems were subsequently encountered with the defendants’
counsel, who was very ill at the time, these problems do not explain or excuse
the defendants’ inaction between March and December of 2008.
[27]
The only explanation
provided by the defendants for their failure to file statements of defence at
any time between March of 2008 and December of 2008 is the statement in Mr.
Barth’s affidavit that “The defendant[s’] agent … thereafter repeatedly
communicated with the Plaintiff’s solicitor between April and October, 2008 in
an effort to reach an amicable settlement without need for further litigation
…”.
[28]
The affidavit of
Sakina Virjee filed by SOCAN in opposition to the motion denies that any such
settlement discussions took place.
[29]
I prefer the evidence
of Ms. Virjee to that of Mr. Barth, as it is more consistent with the
contemporaneous documentary record. It is clear from the correspondence to and
from SOCAN’s counsel that Mr. Barth was aware of the fact that the defendants’
statements of defence had not been accepted for filing by the Court, and that the
companies needed to retain legal counsel in this regard. It is equally clear
that the paralegal was not retained to represent the defendants in this
matter. Moreover, SOCAN was pressing the defendants to file their statements
of defence.
[30]
Tellingly, while Mr.
Barth asserts that settlement discussions were ongoing between the defendants’
paralegal and SOCAN between April and October of 2008, he has not produced a
single letter or email to support this position. Even more importantly, the
defendants have not provided an affidavit from the paralegal to this effect.
[31]
Consequently, I find
that the defendants in these actions have not provided a reasonable explanation
for their failure to file statements of defence in a timely manner.
[32]
I am also not
persuaded that the defendants brought these motions within a reasonable time.
It is clear from the documentary record that the defendants were made aware of
the fact that default judgments had been obtained against them by October 7,
2009, at the latest, in the case of Studio 4, and by November 24, 2009 in the
case of Club T-Zers.
[33]
By November 24, 2009,
the defendants had retained counsel and there were some settlement discussions
between the parties. A settlement proposal was provided to the defendants by
SOCAN on December 3, 2009. Despite repeated requests for a response, the
defendants never provided a substantive response to this proposal.
[34]
Mr. Barth deposes
that upon it becoming clear that settlement was not possible, which he says
occurred in January of 2010, the defendants took immediate steps to retain
their current counsel to bring motions to have the default judgments set aside.
[35]
By February of 2010,
the defendants had retained litigation counsel to bring these motions. As was
noted earlier, Mr. Barth’s supporting affidavits were sworn on February 27,
2010. There is no evidence before me as to why the motions were not brought on
for hearing at that time. Indeed, the motions to set aside the default
judgment were not filed with the Court until July 12, 2010. Clearly, the
defendants have not brought these motions within a reasonable time.
[36]
Having failed to
satisfy either the first or third elements of the test, the defendants’ motions
are dismissed, with costs of both motions fixed in the total amount of $1,500.
A copy of these reasons should be placed on each Court file.
ORDER
THIS COURT ORDERS that the motions are dismissed,
with costs fixed in the amount of $1,500.
“Anne
Mactavish”
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