Long Shong Pictures (H.K.) Ltd. v. Ntc Entertainment Ltd., docket T-931-99

Date: 20000505

Docket: T-931-99

Ottawa, Ontario, this 5th day of May, 2000

PRESENT:      THE HONOURABLE MR. JUSTICE JOHN A. O"KEEFE

BETWEEN:

LONG SHONG PICTURES (H.K.) LTD. and

L.S. ENTERTAINMENT GROUP INC.

Plaintiffs

- and -

NTC ENTERTAINMENT LTD. and

NORASIA TRADING CORPORATION and

JOHN DOE and JANE DOE and ALL OTHERS KNOWN AND UNKNOWN

TO THE PLAINTIFFS WHO INFRINGE COPYRIGHTS IN THE FILMS

Defendants

REASONS FOR ORDER AND ORDER

O"KEEFE J.

[1]      This motion is in response to the Order of Prothonotary Lafrenière dated October 18, 1999 wherein he did order that Melody Min Lu appear before a judge:

. . . to hear proof of Melody Min Lu"s contempt of court, namely that she has knowingly disobeyed, or aided and abetted the defendant Norasia Trading Corporation in disobeying, or expressly or impliedly or authorized Norasia Trading Corporation to disobey, or was negligent in not ensuring that Norasia Trading Corporation obeyed, or failed to take the necessary steps to ensure that Norasia Trading Corporation obeyed, the order of the Honourable Mr. Justice McKeown made on 21 June 1999, which disobedience consists of Norasia Trading Corporation selling on 04 July 1999 infringing copies of three Films " being "Four Chefs and a Feast", "Severely Rape", and "Where a Good Man Goes" " that the Honourable Mr. Justice McKeown"s order enjoined Norasia Trading Corporation from selling.

2. THIS COURT ORDERS that Melody Min Lu be prepared at the time and place stipulated to present any defence to the charges that she may have.

Background

[2]      The underlying action in the case at bar is a claim for copyright infringement and

a permanent prohibitory injunction. The principal plaintiff in this matter is L.S. Entertainment Group Inc. ("LS"). LS is the holder of a license from Long Shong Pictures (H.K.) Ltd. to import and copy various Asian language feature films. The copyright is registered with the Canadian Intellectual Property Office. Long Shong Pictures (H.K.) Ltd. is listed as a plaintiff since this is required by section 36(2) of the Copyright Act, R.S.C. 1985, c. C-42, but is not taking any further part in this litigation. LS imports the films in video compact disk (VCD) format and reproduces the films into VHS format for sale to retail video stores in Canada.

[3]      The defendant, Norasia Trading Corporation ("Norasia") is an operator of a retail

video store which specializes in Asian language films. The plaintiff discovered that pirated copies of the films in which they claim copyright were being sold and rented out of Norasia"s store. After repeated verbal and written warnings to cease and desist this activity, the plaintiff commenced this action.

[4]      Melody Min Lu is a 50% owner of Norasia and is a director of the corporation and

the senior management officer for the company in Ontario. Norasia is incorporated pursuant to the laws of the Province of British Columbia and is licensed to carry on business in Ontario.

[5]      By an Order of McKeown J. made on June 21, 1999, the various defendants were

ordered, in part, as follows:                 

32. THIS COURT ORDERS that an interim injunction is hereby granted restraining the defendants from, directly or indirectly, performing the following acts:

(a) infringing copyright in the Films,

(b) importing, buying, reproducing, exhibiting, or distributing, or selling, leasing, renting, or otherwise disposing of, or offering to sell, lease, rent, or dispose of, any of the Films or any copy of any of the Films, and

(c) ordering, abetting, authorizing, or assisting others to do the acts described in subparagraph 32.(b) of this Order.

[6]      On June 26, 1999 the Order was executed at Norasia"s place of business and 145

copies of movies that were referred to in the Order were seized and removed. The terms of the Order were explained to Philip Chung, an individual having responsibility for the place of business, in Cantonese by an intepreter. Mr. Chung also spoke to a lawyer at the time in English. As well, a telephone call was placed to Ms. Lu.

[7]      On July 4, 1999, the plaintiff"s agent, Donald Bruce McBean, a private

investigator, visited Norasia"s video store and purchased three of the movies to which the Order of McKeown J. applied. The titles of the disks were "Where a Good Man Goes", "Severely Rape", and "Four Chefs and a Feast". Mr. McBean"s testimony was that he did not check the 12 titles in total that were found at Norasia on this date to determine that all 12 were on the prohibited list. That was checked by his associates. He only checked the four titles and one of the four was ultimately not included.

[8]      On July 5, 1999 Madame Justice Reed of this Court ordered that the parts of

McKeown J."s Order that are relevant to this motion be continued in force.

[9]      On August 14, 1999 Mr. McBean again visited the Norasia store and purchased

one video that was on the prohibited list and it was entitled, "Your Place or Mine".

[10]      There was also a visit to Norasia"s store by Alice Cheng on June 27, 1999 when

she allegedly saw some titles during her casual inspection, that were on the prohibited list.

[11]      On October 18, 1999, the plaintiff filed this motion for a hearing requiring

Melody Lin Lu to appear to show cause why she should not be found in contempt of Court.

Issue

[12]      Is Melody Min Lu, in her capacity as director and/or manager of Norasia, guilty of

contempt of Court?

Law

[13]      The motion for the contempt Order was made pursuant to Rule 466(b) of the

Federal Court Rules, 1998:

Contempt 466. Subject to rule 467, a person is guilty of contempt of Court who (a) at a hearing fails to maintain a respectful attitude, remain silent or refrain from showing approval or disapproval of the proceeding; (b) disobeys a process or order of the Court;

Outrage 466. Sous réserve de la règle 467, est coupable d'outrage au tribunal quiconque : a) étant présent à une audience de la Cour, ne se comporte pas avec respect, ne garde pas le silence ou manifeste son approbation ou sa désapprobation du déroulement de l'instance; b) désobéit à un moyen de contrainte ou à une ordonnance de la Cour;

[14]      Rules 467, 469, 470 and 472 also concern contempt hearings. These Rules

read as follows:

Right to a hearing 467. (1) Subject to rule 468, before a person may be found in contempt of Court, the person alleged to be in contempt shall be served with an order, made on the motion of a person who has an interest in the proceeding or at the Court's own initiative, requiring the person alleged to be in contempt (a) to appear before a judge at a time and place stipulated in the order; (b) to be prepared to hear proof of the act with which the person is charged, which shall be described in the order with sufficient particularity to enable the person to know the nature of the case against the person; and (c) to be prepared to present any defence that the person may have. Ex parte motion (2) A motion for an order under subsection (1) may be made ex parte. Burden of proof (3) An order may be made under subsection (1) if the Court is satisfied that there is a prima facie case that contempt has been committed. Service of contempt order (4) An order under subsection (1) shall be personally served, together with any supporting documents, unless otherwise ordered by the Court. Burden of proof 469. A finding of contempt shall be based on proof beyond a reasonable doubt. Evidence to be oral 470. (1) Unless the Court directs otherwise, evidence on a motion for a contempt order, other than an order under subsection 467(1), shall be oral. Testimony not compellable (2) A person alleged to be in contempt may not be compelled to testify. Penalty 472. Where a person is found to be in contempt, a judge may order that

(a) the person be imprisoned for a period of less than five years or until the person complies with the order; (b) the person be imprisoned for a period of less than five years if the person fails to comply with the order; (c) the person pay a fine; (d) the person do or refrain from doing any act; (e) in respect of a person referred to in rule 429, the person's property be sequestered; and (f) the person pay costs.

Droit à une audience 467. (1) Sous réserve de la règle 468, avant qu'une personne puisse être reconnue coupable d'outrage au tribunal, une ordonnance, rendue sur requête d'une personne ayant un intérêt dans l'instance ou sur l'initiative de la Cour, doit lui être signifiée. Cette ordonnance lui enjoint: a) de comparaître devant un juge aux date, heure et lieu précisés; b) d'être prête à entendre la preuve de l'acte qui lui est reproché, dont une description suffisamment détaillée est donnée pour lui permettre de connaître la nature des accusations portées contre elle; c) d'être prête à présenter une défense. Requête ex parte (2) Une requête peut être présentée ex parte pour obtenir l'ordonnance visée au paragraphe (1). Fardeau de preuve (3) La Cour peut rendre l'ordonnance visée au paragraphe (1) si elle est d'avis qu'il existe une preuve prima facie de l'outrage reproché. Signification de l'ordonnance (4) Sauf ordonnance contraire de la Cour, l'ordonnance visée au paragraphe (1) et les documents à l'appui sont signifiés à personne. Fardeau de preuve 469. La déclaration de culpabilité dans le cas d'outrage au tribunal est fondée sur une preuve hors de tout doute raisonnable. Témoignages oraux 470. (1) Sauf directives contraires de la Cour, les témoignages dans le cadre d'une requête pour une ordonnance d'outrage au tribunal, sauf celle visée au paragraphe 467(1), sont donnés oralement. Témoignage facultatif (2) La personne à qui l'outrage au tribunal est reproché ne peut être contrainte à témoigner. Peine 472. Lorsqu'une personne est reconnue coupable d'outrage au tribunal, le juge peut ordonner: a) qu'elle soit incarcérée pour une période de moins de cinq ans ou jusqu'à ce qu'elle se conforme à l'ordonnance; b) qu'elle soit incarcérée pour une période de moins de cinq ans si elle ne se conforme pas à l'ordonnance; c) qu'elle paie une amende; d) qu'elle accomplisse un acte ou s'abstienne de l'accomplir; e) que les biens de la personne soient mis sous séquestre, dans le cas visé à la règle 429; f) qu'elle soit condamnée aux dépens.

Analysis

[15]      In this motion, it is not the person to whom the injunction or Court Order was

directed (Norasia) that is the subject of the contempt application, but it is the director and managing mind of Norasia--Ms. Lu. This Court and other Courts have held that persons such as Ms. Lu can be held in contempt of a court Order in which they are not named. In MacMillan Blodel Ltd. v. Simpson, [1996] 2 S.C.R. 1048 McLachlin J. (as she then was) stated at page 1064:

It may be confidently asserted, therefore, that both English and Canadian authorities support the view that non-parties are bound by injunctions: if non-parties violate injunctions, they are subject to conviction and punishment for contempt of court. The courts have jurisdiction to grant interim injunctions which all people, on pain of contempt, must obey. The only issue " and one which has . . .

[16]      In the case before me, there is no doubt that Ms. Lu is bound by the Order issued by Mr. Justice McKeown on June 21, 1999 which order was made into an interlocutory injuction by Madame Justice Reed on July 5, 1999.

[17]      It was not in issue before me that Ms. Lu had at the relevant time, notice of the

Orders.

[18]      The burden of proof in contempt cases is that a finding of contempt must be based

on proof beyond a reasonable doubt (see Rule 469, Federal Court Rules, 1998). This is not surprising as an allegation of contempt is a very serious matter. Sopinka J. stated in Bhatnager v. Canada (M.E.I.), [1990] 2 S.C.R. 217 at page 224:

It is well to remember at the outset that an allegation of contempt of court is a matter of criminal (or at least quasi-criminal) dimension: see [1953] 1 S.C.R. 516">Poje v. Attorney General for British Columbia, [1953] 1 S.C.R. 516, per Kellock J., at pp. 517-18; and In re Bramblevale Ltd., [1970] Ch. 128 (C.A.), per Lord Denning, M.R., at p. 137. In the present case, a finding of guilt could have subjected the appellants to a fine of as much as $5,000 and the possibility of imprisonment to a maximum of one year: see Rule 355(2). It is necessary, therefore, that the constituent elements of contempt be proved against the appellants, and proved beyond a reasonable doubt.

The standard of proof is similar to that applicable in criminal matters.

[19]      As well, the burden to prove all of the elements of contempt is on the applicant.

[20]      A Court will only punish for contempt if it is satisfied that:

1.      The terms of the Order are clear;

2.      The person (defendant) has had proper notice of the terms of the Order; and

3.      The breach of the terms of the Order has been proven beyond a reasonable doubt.

It is only point 3. that the Court must deal with in this motion.

[21]      With respect to the standard of intention required to breach an Order, Denault J.

stated in Nintendo of America Inc. v. 798824 Ontario Inc. (1991) 34 C.P.R. (3d) 559 (F.C.T.D.) at page 562:

The standard of proof required for a finding of contempt of court is that a court order must have been breached beyond a reasonable doubt by the party against whom the order was issued. The standard of intention required for breach of the order is knowledge of the reasons for order and contravention of the order: Canada Metal Co. v. Canadian Broadcasting Corp. (No. 2) (1974), 48 D.L.R. (3d) 641, 19 C.C.C. (2d) 218, 4 O.R. (2d) 585 (H.C.J.); affirmed 65 D.L.R. (3d) 231, 29 C.C.C. (2d) 325, 11 O.R. (2d) 167 (C.A.) Direct intention to disobey the order is not required, and "it is no defence for a company to show that its officers were unaware of the terms of a court order, or that they failed to realize that they were in breach of the order": Baxter Travenol Laboratories of Canada, Ltd. v. Cutter (Canada) Ltd. (1984), 1 C.P.R. (3d) 433 at p. 441, 14 D.L.R. (4th) 641, [1986] 1 F.C. 497 at p. 509.

The same general positions were stated in Penthouse International Ltd. v. 163564 Canada Inc. (1995) 63 C.P.R. (3d) 328 (F.C.T.D.).

[22]      In the case before this Court, there is no evidence that Ms. Lu herself

did anything to breach the Order of the Court. Thus, the plaintiffs are relying on the fact that she is the sole officer and director of Norasia in Ontario and is referred to as the owner. Therefore, she is guilty of contempt of the Order as she aided and abetted a party to disobey the Order, or in the alternative, she was negligent and reckless in the steps taken to ensure that Norasia complied with the Order.

[23]      The law with respect to the holding in contempt of officers and directors of a

corporation is summarized by O"Leary J. in Canada Metal Co. Ltd. et al v. Canadian Broadcasting Corp. et al (No. 2) (1975) 4 O.R. (2d) 585 at pages 604-605 (Ont. H.C.J.) when he stated:

The applicants have submitted that where a corporation violates an injunction, the directors and officers of the corporation can be held in contempt of Court and can be attached or otherwise punished for the contempt, without any proof that the particular directors or officers proceeded against did or failed to do anything that was responsible for the said violation. I am unable to agree with that submission. I am not saying that before an officer or director can be committed for a contempt committed by the corporation that it must be shown that the officer aided or abetted the contempt. It may well be that the director or officer could be held in contempt, even though his role in the matter was purely passive: see Biba Ltd. v. Stratford Investments Ltd., [1972] 3 All E.R. 1041, and Glazer v. Union Contractors Ltd. and Thornton (1961), 129 C.C.C. 150, 26 D.L.R. (2d) 349. Further, the violation of the injunction may give rise in some cases to a presumption that the director or officer did or failed to do something that caused the breach, and may put that officer or director on his defence. Where, however, it is clear on the evidence that the director or officer did all he could to ensure that the injunction would be abided by and where the breach occurred without fault on the part of the director or officer, then I am unable to see how that director or officer can be punished for contempt of Court.

[24]      Melody Lin Lu testified before me and her testimony was to the effect that she

told Philip Chung, who was the manager of the Norasia store, not to sell any of the prohibited titles and to be careful that none slipped through the cracks. She stated she did this on June 26, 1999. Her explanation with respect to the prohibited titles that were found and bought in the Norasia store was that they must have been returns made by customers that slipped by Mr. Chung. She also testified that she was angry with Mr. Chung when she learned of the prohibited titles being in the store and that the prohibited titles were sold.

[25]      The evidence given by Ms. Lu was, in part, as follows at page 174 of the hearing

transcript:

Q. When Norasia was served the Anton Piller order on June 26th, what did you do?

A. I received that order that day and I looked through from the list and I went to all of my store to discuss with some Norasia staff about it and the inappropriate selling of those copies on our shelf, and I told the staff to not sell them anymore.

Q. Okay. Now, did you at that time find any copies? When you went to tell them, "You can"t sell them in the store," were they all gone?

A. They are all gone.

Q. Okay. In particular, who is the staff person at the 550 Highway 7 store? Who was the one in charge there?

A. Philip Chung.

Q. Did you in particular tell him, as well?

A. Yes.

Q. Okay. And did you provide him with anything?

A. Yeah. The list, and I let him took a look at it and I believe he understand what that meant.

Page 177 of the transcript:

Q. Going back to Philip Chung, was he the only employee at that store on those relevant dates, July the 4th and August 14th?

A. Yes. And do you want to know what"s his duties?

Q. That was my next question, actually. What are his duties? What did he do at the stores?

A. Okay. His duties are dealing with customers, re-shelve the stock and taking care of the each day sales.

Page 178-79 of the transcript:

Q. Okay, okay. The Anton Piller order; you did have a copy of that?

A. Yeah.

Q. Okay. And what I"m getting at is, did you discuss it in detail?

A. Yes. I told him not to sell them anymore.

Q. Okay.

A. Yeah.

Q. All right.

A. And be very careful if there"s any copies is being, might be slipped from the crack or by any reason; I don"t know.

Q. Okay. What was his response? What did he say when you said, you know, "Don"t sell these anymore?" What was his response?

A. He said okay, he will follow.

And at pages 195-96 of the transcript:

Q. When you spoke to him later on as a result of receiving these orders and realizing that four of them slipped through the cracks, what was his reaction?

A. Well, I really had a big argument with him, say, "Why is that happening? I told you so many times. Why not you be careful about it?" And he said, you know, he"s sorry about that.

Q. Okay. After you received the orders that showed these four titles had been sold to Mr. McBean or whomever, did you do anything at that point, besides talking to Mr. Chung and having a conversation with him? Did that cause you to make any further searches in your stores?

A. Yes. I went to Norasia and looked through all the places that could be hiding any piece of paper and I looked through it and I couldn"t find anything.

Q. Okay. So did you make any searches of your store of Norasia "

A. Yes.

Q. " to find out if there were, look, any of those titles "

A. Yeah.

Q. " and to discover any titles?

A. (Nodding head)

Q. And what did you find?

With respect to the speculation that the reason that the titles were on the shelves

were due to returns, Ms. Lu forthrightly testified that she forgot to tell Mr. Chung to watch out for returns specifically. Ms. Lu admitted that she forgot to specifically tell Mr. Chung to watch that returns did not get restocked.

[26]      I observed the demeanor of Ms. Lu during the giving of her oral testimony and I

found her to be a credible witness.

[27]      The evidence adduced indicates clearly that this is not a situation where a director

or officer did nothing when the company, for which he or she is responsible, was served with an Order. In fact, Ms. Lu went to Philip Chung, the person in charge at the Norasia store and told him not to sell any more copies of the prohibited movies: What more could she do? The law of contempt does not require directors to be insurers nor does it require them to stand over the shoulders of every employee and supervise them when the employee is the person in charge of the place of business. The breach of the Order occurred because Philip Chung, contrary to Ms. Lu"s directions, sold the prohibited films. I do not consider Ms. Lu"s failure to specifically caution Mr. Chung vis a vis returns to be fatal to her " she clearly explained the Order to him and the importance of adhering to it. In the circumstances, Ms. Lu cannot be found in contempt of the Order of McKeown J. There was no indication in the evidence before me that she knew that these sales took place until she received the Order regarding the show cause hearing from this Court.

[28]      In the circumstances of this case, I am not satisfied beyond a reasonable doubt

that Ms. Lu was in contempt of the Court Order of McKeown J. dated June 21, 1999. There is not evidence that would satisfy me beyond a reasonable doubt that Ms. Lu has:

. . . knowingly disobeyed, or aided and abetted the defendant Norasia Trading Corporation in disobeying, or expressly or impliedly or authorized Norasia Trading Corporation to disobey, or was negligent in not ensuring that Norasia Trading Corporation obeyed, or failed to take the necessary steps to ensure that Norasia Trading Corporation obeyed, the order of the Honourable Mr. Justice McKeown made on 21 June 1999 . . .

In fact, the evidence is that Ms. Lu instructed Philip Chung not to do anything to disobey the Order.

[29]      It should be pointed out that although the evidence led before me related to

activity on dates other than July 4, 1999, the only activity that the Order of Prothonotary Lafrenière called upon Ms. Lu to answer for was the sale made by Norasia on July 4, 1999.

[30]      Melody Min Lu shall have her costs of this motion.

ORDER

[31]      IT IS HEREBY ORDERED that Melody Min Lu is not guilty of contempt of

Court.

[32]      IT IS FURTHER ORDERED that Melody Min Lu shall have her costs of the

motion.

                                     "John A. O"Keefe"

                                     J.F.C.C.

Ottawa, Ontario

May 5, 2000