Docket: T-662-16
Citation: 2017 FC 130
Ottawa, Ontario, February 2, 2017
PRESENT: The Honourable Mr. Justice Boswell
|
PROPOSED
CLASS PROCEEDING
|
|
BETWEEN:
|
|
VOLTAGE
PICTURES, LLC,
COBBLER NEVADA,
LLC,
PTG NEVADA,
LLC,
CLEAR SKIES
NEVADA, LLC,
GLACIER
ENTERTAINMENT S.A.R.L.
OF LUXEMBOURG,
GLACIER FILMS
1, LLC, AND
FATHERS &
DAUGHTERS NEVADA, LLC
|
|
Applicants
|
|
and
|
|
ROBERT SALNA,
PROPOSED REPRESENTATIVE RESPONDENT ON BEHALF OF A CLASS OF RESPONDENTS
|
|
Respondents
|
ORDER AND REASONS
[1]
The Applicants have initiated a proposed class
proceeding claiming, amongst other things, declaratory and injunctive relief
against the Proposed Representative Respondent, Robert Salna, on behalf of a
class of Respondents. It is alleged that Mr. Salna (and others like him) has
engaged in illegal file sharing over the Internet, and thereby infringed the
Applicants’ copyrights in several films.
[2]
The Applicants propose to have this matter
certified as a so-called “reverse” class action
in accordance with Part 5.1 of the Federal Court Rules, SOR/98-106. Towards
that end, a motion for certification of this proceeding as a class proceeding
has been scheduled for next June. As of the date of this Order though, the
Applicants have not served and filed their motion for certification. In the
meantime, Mr. Salna has brought a motion seeking an Order requiring the
Applicants to pay security for costs in respect of their intended motion for
certification, without prejudice to him moving for further security in the
event certification is granted.
[3]
For the reasons that follow, I have determined
that the Applicants must give security for Mr. Salna’s costs in the amount of $75,000.00.
I have further determined that Mr. Salna is entitled to his costs in respect of
this motion in a lump sum amount of $750.00 (inclusive of any taxes or
disbursements).
I.
Issues
[4]
This motion raises two main issues:
1.
Should the Applicants pay security for costs in
respect of their intended motion for certification?
2.
If so, what is an appropriate amount of security
for costs?
II.
Analysis
A.
Should the Applicants pay security for costs in
respect of their intended motion for certification?
[5]
In the context of a class proceeding, the
general rule is that no costs may be awarded against any party to a motion for
certification of a proceeding as a class proceeding. In this regard, Rule
334.39 provides that:
|
No costs
|
Sans dépens
|
|
334.39 (1) Subject to subsection (2),
no costs may be awarded against any party to a motion for certification of a
proceeding as a class proceeding, to a class proceeding or to an appeal
arising from a class proceeding, unless
|
334.39 (1) Sous réserve du paragraphe (2), les dépens ne sont adjugés contre
une partie à une requête en vue de faire autoriser l’instance comme recours
collectif, à un recours collectif ou à un appel découlant d’un recours
collectif, que dans les cas suivants :
|
|
(a) the conduct of the party unnecessarily lengthened the duration of
the proceeding;
|
a) sa conduite a eu pour effet de prolonger
inutilement la durée de l’instance;
|
|
(b) any step in the proceeding by the party was improper, vexatious
or unnecessary or was taken through negligence, mistake or excessive caution;
or
|
b) une mesure prise par elle au cours de
l’instance était inappropriée, vexatoire ou inutile ou a été effectuée de
manière négligente, par erreur ou avec trop de circonspection;
|
|
(c) exceptional circumstances make it unjust to deprive the
successful party of costs.
|
c) des circonstances exceptionnelles font en
sorte qu’il serait injuste d’en priver la partie qui a eu gain de cause.
|
|
Individual claims
|
Réclamations individuelles
|
|
(2) The
Court has full discretion to award costs with respect to the determination of
the individual claims of a class member.
|
(2) La Cour a le pouvoir discrétionnaire
d’adjuger les dépens qui sont liés aux décisions portant sur les réclamations
individuelles de membres du groupe.
|
[6]
This Rule, however, is not engaged at this stage
of this proceeding because no notice of motion for certification has been
served and filed under Rule 334.15. In Pearson
v Canada, 2008 FC 1367 at para 52, [2008] FCJ No 1797, where a motion to strike a statement of claim
had been brought before the action had been certified, the Court determined that:
“The class action rules and concepts such as
one-way costs, even if applicable at a later stage, are not yet engaged.”
To similar effect is the decision in Campbell v. Canada (Attorney General),
2012 FCA 45, [2013] 4 FCR 234 [Campbell], where Justice Pelletier
observed as follows:
[34] Presumably,
an order for costs made against a party to a proposed class proceeding prior to
that person becoming a party to a certification motion would not be affected by
Rule 334.39(1) but that is not a question which arises on these facts. It is
therefore not one which we have to answer.
…
[45] I believe that the construction of
Rule 334.39(1) that gives fullest effect to the intention of the Rules
Committee is to have the “no costs” rule apply as soon as the parties to the
action are made parties to the certification motion. While this still leaves room
for the possibility of an award of costs in relation to a step undertaken after
the issuance of the statement of claim but prior to the service and filing of
the certification motion, the scope for costs orders is reduced to a minimum,
having regard to the wording of Rule 334.39(1) itself. If one assumes that the
bringing of the motion for certification will follow the issuance of the
statement of claim without delay, the risk to representative plaintiffs would
appear to be minimal.
[7]
It should be noted that the Federal Court of
Appeal’s observations in Campbell were made in the context of an action where
the certification motion had been served and filed but was never heard because
the Plaintiffs discontinued the proposed class proceeding. In the present
circumstances, no certification motion has as yet been served and filed and,
unlike the case in Campbell where the proposed class proceeding involved
a class of plaintiffs, the proposed class in this proceeding involves a class
of respondents.
[8]
It should also be noted that there are no rules
in the Federal Courts Rules regulating the order in which certification
and other motions, such as a motion for security for costs, must be heard and
determined. And as explained above, until a motion for certification is served
and filed, Mr. Salna is not yet a party to any certification motion and,
consequently, is not affected by Rule 334.39(1). It is therefore my view that Rule
334.39(1) does not prevent Mr. Salna from bringing the present motion. To be
clear, Mr. Salna’s success in the present motion would only require the
Applicants to post security for costs; it is not and would not be determinative
of whether at some later stage of this proceeding Mr. Salna will be affected by
Rule 334.39(1). In my view, Mr. Salna would be subject to the provisions of
this Rule if and when the Applicants serve and file their motion for
certification and when that motion is heard and determined. Any determination as
to whether Mr. Salna is entitled to costs, in light of Rule 334.39(1), should be
made at that time.
[9]
As to the question of whether the Applicants should
pay security for costs in respect of their intended motion for certification,
this involves consideration of Rule 416(1), which provides in relevant part as
follows:
|
Where security available
|
Cautionnement
|
|
416 (1) Where, on the motion of a
defendant, it appears to the Court that
|
416 (1)
Lorsque, par suite d’une requête du défendeur, il paraît évident à la Cour
que l’une des situations visées aux alinéas a) à h) existe, elle peut
ordonner au demandeur de fournir le cautionnement pour les dépens qui
pourraient être adjugés au défendeur :
|
|
(a) the plaintiff is ordinarily resident outside Canada,
|
a) le demandeur réside habituellement hors
du Canada;
|
|
(b) the plaintiff is a corporation, an unincorporated association or
a nominal plaintiff and there is reason to believe that the plaintiff would
have insufficient assets in Canada available to pay the costs of the
defendant if ordered to do so,
|
b) le demandeur est une personne morale ou
une association sans personnalité morale ou n’est demandeur que de nom et il
y a lieu de croire qu’il ne détient pas au Canada des actifs suffisants pour
payer les dépens advenant qu’il lui soit ordonné de le faire;
|
|
…
the Court may order the plaintiff to give security for the
defendant's costs.
|
…
|
[10]
The Applicants have admitted that they are not ordinarily
resident in Canada and also that they do not have significant assets in Canada.
This being so, Mr. Salna is, on first impression, entitled to the requested
Order. However, it should be noted that an order for security for costs is not
automatic and that the Court retains a discretion to deny a motion for such an order
(see: e.g., Pembina County Water Resource District v Manitoba, 2005 FC
1226 at para 14, 142 ACWS (3d) 394).
[11]
In the context of this proceeding, Mr. Salna’s
motion should be granted given the Applicants’ admissions as noted above and because
there is no evidence as to the Applicants’ ability or inability to satisfy a
costs award or as to whether they would be hindered or forestalled in advancing
their proposed class proceeding to the certification stage. It should also be
granted in view of the novel nature of the proposed class proceeding and because,
absent the requested Order, there is a possibility that Mr. Salna may resile
from being the Proposed Representative Respondent.
B.
What is an appropriate amount of security for
costs?
[12]
Mr. Salna proposed at the hearing of this motion
that the amount of security should be fixed in amount equivalent to those costs
which would be incurred on a full indemnity basis up to and including the intended
motion for certification and that, despite Rule 334.39, he would be entitled to
costs if he successfully defended such motion. This amount is estimated to be
$141,930.75.
[13]
Although the Applicants opposed Mr. Salna’s
motion, they suggested that in the event security was ordered an appropriate
amount would be a total of $32,191.55, having regard to Column III of Table B
of the Federal Courts Rules. They also submitted that the amount
proposed by Mr. Salna was excessive and improper, especially if the Canadian
Internet Policy and Public Interest Clinic seeks and is granted status as an
intervener on the intended motion for certification.
[14]
The determination of the quantum of security for
costs is a discretionary decision, having regard to the reasonable amount of
costs that might be awarded. As stated by this Court in Bodum USA, Inc v
Trudeau Corporation (1889) Inc, 2012 FC 240, [2012] FCJ No 268:
[19] … It is well established that the
amount of security for costs must correspond to the probable costs to which the
defendant would be entitled, should it be successful in defending the action
brought against it. While security for costs is an indemnity and ought not be
illusory, it must also not be oppressive so as to prevent a plaintiff from
bringing a lawsuit. The amount of security is at the discretion of the Court,
bearing in mind the draft bill of costs while also taking into account any
reductions that might be made on a taxation. …
[15]
In my view, a reasonable amount for security for
costs at this stage of the proceeding is $75,000.00, based on the assumption
that the intended motion for certification will be served and filed and the
motion heard later this year. This amount may be paid into Court in cash or by
way of a banker’s draft issued by a Canadian bank listed in Schedule I of the Bank
Act, S C 1991, c 46; it may also be paid by way of an irrevocable
letter of credit issued by such a bank in form and substance satisfactory to
Mr. Salna.
[16]
In fixing this amount, I have considered that
there is at least a possibility, but not necessarily any probability, that
costs might be awarded under Rule 334.19 whether this proceeding becomes
certified as a class proceeding or not. I have also considered that this amount
is in no way determinative or suggestive of what costs, if any at all, might be
appropriate if and when the present proceeding is or is not certified. Lastly,
I note that either the Applicants or Mr. Salna are at liberty to bring a motion
to vary the amount of security for costs at some later stage of this proceeding
should there be sufficient reason for so doing.
III.
Conclusion
[17]
Mr. Salna’s motion is allowed for the reasons
and on the terms as stated above. Mr. Salna is awarded his costs in respect of
this motion in a lump sum amount of $750.00 (inclusive of any taxes or
disbursements) in any event of the cause.
Email this Content