Docket: T-308-11
Citation: 2011 FC 1399
Ottawa, Ontario, December 1,
2011
PRESENT: The Honourable Mr. Justice Lemieux
BETWEEN:
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SOCIETY OF COMPOSERS, AUTHORS AND MUSIC
PUBLISHERS OF CANADA
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Plaintiff
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and
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IIC ENTERPRISES LTD. C.O.B. AS
CHEETAH'S NIGHTCLUB
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Defendant
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REASONS FOR JUDGMENT AND
JUDGMENT
I. Introduction
and Background Facts
[1]
The
Society of Composers, Authors and Music Publishers of Canada (SOCAN) appeals,
by ex-parte motion, pursuant to section 51 of the Federal Courts Act
(R.S.C., 1985, c. F-7) (the Act), the September 21, 2011 Order of
Prothonotary Lafrenière (the Prothonotary) who, on an ex-parte motion
for default judgment, refused to grant the Plaintiff pre-judgement interest
from the date on which the Plaintiff’s cause of action arose, i.e. on February
1, 2005, in accordance with the Court
Order Interest Act, RSBC 1996
Chapter 79 (BC Act). The Prothonotary did award SOCAN pre-judgment
interest from February 23, 2011, the date of the issuance of the Statement of
Claim, to the date of judgment, September 11, 2011.
[2]
Section
36 of the Act deals with which law governs matters related to
pre-judgment interest. It contemplates two situations in Federal Courts proceedings
where subject and subject parties are engaged (to the exclusion of the Crown
where that matter is dealt with under the Crown Liability and Proceedings
Act (R.S.C., 1985, c. C-50).
[3]
The
first situation is where the cause of action of a Federal Courts proceeding
arises in a single province. As will be seen, the single province here is British Columbia. In such a
case, subsection 36(1) tells us that, except as is provided in any other Act
of Parliament and subject to subsection (2) the law relating to
pre-judgment interest in force in that province applies.
[4]
The
second situation occurs where the cause of action arises outside a province or
in respect of causes of action arising in more than one province. In such
cases sub-sections 36(2) to 36(7) guide the Federal Courts how to award
pre-judgment interest.
[5]
The
Prothonotary offered two reasons for not granting pre-judgment interest reaching
back to the date the cause of action arose.
[6]
First,
SOCAN as a collective society under the Copyright Act (R.S.C., 1985, c.
C-42) could and did elect to recover an amount statutory damages spelled out in
subsection 38.1(4) of that Act in a sum of not less than three or not more than
ten times the amount of applicable royalties owing and this “in lieu of any
other remedy of a monetary nature” provided for in the Copyright Act.
[7]
Second,
(a) SOCAN had failed to establish any contractual or statutory right to charge
interest on outstanding licence fees; (b) SOCAN substantively delayed its
efforts to recover outstanding license fees dating back to 2006; and (3) SOCAN
had only elected for statutory damages when it commenced this action in
February of this year.
[8]
SOCAN
claims the Prothonotary erred in not awarding it pre-judgment interest from the
date the cause of action arose in 2005. It argues the Prothonotary had no
discretion under the BC Act in granting or denying pre-judgment interest
on a cause of action that arose in British Columbia and that such interest
must be awarded from the date the cause of action arose.
[9]
Section
1 of the BC Act reads:
(1) Subject
to section 2, a court must add to a pecuniary judgment an amount of
interest calculated on the amount ordered to be paid at a rate the court
considers appropriate in the circumstances from the date on which the cause of
action arose to the date of the order.
[Emphasis added]
[10]
Section
2 of that Act reads:
The court must not award interest
under section 1
…
(b) if
there is an agreement about interest between the parties,
…
(d) if
the creditor waives in writing the right to an award of interest, …
[Emphasis added]
[11]
As
is well known, SOCAN is a collective society under section 67 of the Copyright
Act; it is authorized to grant licences for the public performance in Canada of musical
works and to collect, pursuant to such licences, royalties or fees sanctioned
by the Copyright Board.
[12]
The
Defendant, IIC Enterprises Ltd., carries on the business of an adult
entertainment club known as Cheetah’s Nightclub in the city of Kelowna, British
Columbia,
where it presents to the public performances of musical works by means of
recorded music. Since 2005, the Defendant has been licensed by SOCAN under
Tariff 3C to publicly perform SOCAN’s musical works at the nightclub.
[13]
Tariff
3C requires a licensee to report applicable figures annually to SOCAN and
authorizes SOCAN or its agent to examine the licensee’s books and records at
any time during normal hours to verify the fees payable by the licensee.
[14]
The
Defendant reported to SOCAN for the years 2005 and 2006 the estimated number of
days the nightclub was open and its authorized seating and standing capacity, but
has failed to report any data since. Based on the estimated data provided
for these two years, the total amount of the provisional license fees owed by
the Defendant for the years 2005 to 2011 is $21,628.54 with GST/HST of
which $20,383.37 is outstanding. SOCAN’s Statement of Claim was filed on
February 23, 2011.
[15]
In
its prayer for relief, SOCAN claimed, as noted, without prejudice to any other
remedies available to it, against the Defendant the amount of $20,383.37, which
represents the balance of the estimated royalties (license fees) due
under Tariff 3C, a full and complete accounting of all such royalties due and
any additional royalties found payable pursuant to the audit. In the
alternative, SOCAN sought an award of statutory damages in respect of unpaid
estimated royalties on any additional royalties found to be payable pursuant to
the audit. It also specifically claimed pre-judgment interest and
post-judgment interest. The claim for pre-judgment interest was $8,858.22.
[16]
In
terms of the specific election for statutory damages, that election was made in
paragraph 8 of SOCAN’s notice of motion for default judgment dated August 12,
2011. Moreover, the specific amount of statutory damages claimed is contained
in the draft judgment. In that document, SOCAN claimed the amount of
$142,683.52 which is seven times the provisional license fees of $20,383.36
(including GST/HST) owed by the Defendant under Tariff 3C for the years 2005
through to 2011. That draft judgment also provided for the payment of
statutory damages in the amount of seven times any additional license fees
found payable after audit.
II. The
Prothonotary’s Decision
[17]
The
central findings made by the Prothonotary were:
1.
Having
been served personally, the Defendant was in default by failing to file a
statement of defence.
2.
On
the balance of probabilities, the Defendant continued to operate its nightclub
from 2005 to 2011 during which SOCAN’s musical works were performed.
3.
Based
on SOCAN’s reasonable assumptions, the Defendant owes SOCAN $20,383.37 for
outstanding unpaid provisional license fees.
4.
Taking
into account prescribed factors of: (a) the good or bad faith of the Defendant;
(b) the conduct of the parties before and during the proceedings; (c) the need
to deter other infringements of the copyright in question; and (d) no
mitigating factors in favour of the Defendant, SOCAN was awarded statutory
damages of six times the outstanding provisional license fees, namely,
$122,300.22 for the years 2006 to 2011.
5.
He
did not order a further audit to determine if there might be additional license
fees payable during the period 2006 to 2011 inclusive and, as a consequence,
did not order the payment of any additional statutory damages which might arise
therefrom.
6.
Specifically,
he determined the amount of statutory damages were warranted at the level he
set because of the Defendant’s bad faith having (1) displayed a complete
disregard for the terms of his license with the Plaintiff over an extended
period of time, (2) he brazenly continued to advertise and publicly perform
SOCAN’s works, (3) he ignored and evaded service of documents; (4) he continued
his activities after notice of the present action.
[18]
The
Prothonotary placed great weight on the need to deter other infringements of
the copyright in question.
[19]
As
noted, he denied SOCAN’s request for pre-judgment interest. He did so for the
reasons expressed in paragraph 25 of his Reasons for Order. He wrote:
According to SOCAN, the cause of action
for each year’s license fees arose on February 1 of each year because the
provisional license fees for each year were due on January 31 of that year, but
not paid. While that may be, statutory damages are awarded “in lieu of any other remedy of a monetary
nature” provided by the Copyright Act. By electing statutory damages,
SOCAN has essentially waived its right to pursue its claim for provisional
license fees, and any interest that may have accrued. In short, SOCAN can’t have its cake and eat it too.
[Emphasis added]
[20]
At
paragraph 26 of his Reasons, he set out the second basis for denying
pre-judgment interest from the time the cause of action arose. Those reasons
have previously been recorded at paragraph 7 above.
III. Discussion
and Conclusion
[21]
This
is an appeal from the Prothonotary’s decision. The standard of review in
respect of discretionary orders of a Prothonotary is well settled (See
paragraph 19 of Justice Décary’s decision in Merck & Co., Inc. v
Apotex Inc.,
2003 FCA 488, [2004] 2 FCR 459).
[22]
The
question arises in this case if the Prothonotary’s decision was a discretionary
decision where he had latitude to award pre-judgment interest from the date the
cause of action arose or not or whether, as argued by counsel for SOCAN, he had
no discretion but to award pre-judgment interest from the date the cause of
action arose because the matter must be decided under British Columbia law and
that law requires the award on that basis.
[23]
In
my view the central question is a question of law; the standard of review is
correctness. See Merck & Co. v Nu-Pharm Inc., 2006 FC 853 paras 26 –
34.
[24]
I
am prepared to accept that the caselaw in BC is to the effect that under the BC
Act a judge must award pre-judgment interest from the date the cause
of action arose.
[25]
However,
the proceeding at hand is in the Federal Court and is governed by the Federal
Courts Act.
[26]
While
counsel for SOCAN is correct to say that under section 36(1) of the Federal Courts
Act, Federal law provides that in the case where the cause of action arose
in one province as it did here, the law of that province applies.
[27]
However,
Parliament was clear in section 36(1) of the Federal Courts Act in making that
requirement subject to “Except as otherwise provided in any other Act of
Parliament.”
[28]
The
Copyright Act, in terms of remedies, provides for a number of options
including ordinary damages, statutory damages, account of profits, putative
damages and interest. Section 38 of that Act has a number of provisions. One
deals specifically with collectives such as SOCAN. It speaks to the award of
statutory damages over a certain range geared to unpaid applicable royalties “in
lieu of any other remedy of a monetary nature provided by this Act.”
[29]
The
Prothonotary reasoned that by electing for statutory damages SOCAN has elected
not to pursue its claim for unpaid provincial license fees and, as a necessary
consequence, pre-judgment interest on that sum. In my view, the Prothonotary’s
reasoning is compelling and fits with the purpose for which the election was
granted by Parliament to collective societies. See Telewizja Polsat S.A. v
Radiopol Inc.,
2006 FC 584, [2007] 1 FCR 444.
JUDGMENT
THIS COURT’S JUDGMENT
is that
this appeal is dismissed.
“François
Lemieux”
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