Date: 20101029
Docket: T-546-09
Citation: 2009
FC 1277
Ottawa, Ontario,
October 29, 2010
PRESENT: The Honourable Madam Justice Simpson
BETWEEN:
CANADIAN
PRIVATE COPYING COLLECTIVE (CPCC)
Applicant
and
DATA
MEDIA PRODUCTS INC.
Respondent
AMENDED REASONS FOR ORDER AND
ORDER
(SEE RELATED ORDER OF THIS
DATE)
[1]
The Canadian Private
Copying Collective (CPCC) brings this application under subparagraph
34(4)(c)(i) and section 88 of the Copyright Act, R.S.C. 1985, c. C-42
(the Act) for unpaid levies, audit costs, interest and a statutory penalty
against Data Media Products Inc. (the Respondent). The Respondent has not filed
any material and was not represented at the hearing of this application.
[2]
The
Respondent is an importer and seller of blank audio recording media (Blank
Media). Levies are payable on the sale or other disposition of Blank Media at a
rate set in a tariff certified by the Copyright Board of Canada. The applicable
tariffs in this case are the Private Copying Tariff, 2005-2007 and the Private
Copying Tariff, 2008-2009 (the Tariffs). The applicable levies are $0.21
per unit of Blank Media sold in 2007 or 2008, and $0.29 per unit sold in 2009.
[3]
The
CPCC commissioned an audit of the Respondent (the Audit) covering the period
March 1, 2007 to February 29, 2008 (the Audit Period). The Audit
revealed that the Respondent had underreported its sales of Blank Media by
approximately 18% and had therefore underpaid its levies. After the Respondent
failed to respond to repeated demands for payment, the CPCC commenced the
present application on April 6, 2009.
SERVICE
[4]
Subsection
130(1) of the Federal Courts Rules, SOR/98-106 allows service on a
corporation in the manner provided for by the rules of the superior court in the
province in which service is being effected. In this case, the relevant
province is Ontario. Rule
16.03(6) of Ontario’s Rules
of Civil Procedure, R.R.O. 1990, Reg. 194 provides that where the head
office, registered office or principal place of business of a corporation
cannot be found at the last address recorded with the Ministry of Consumer and
Commercial Relations, service may be made by mailing a copy of the document to
the corporation at that address.
[5]
I
am satisfied that an Ontario Corporation Profile Report from the Ministry of
Government Services (the successor to the Ministry of Consumer and Commercial
Relations) records 959 Gana Court, Mississauga, Ontario as the Respondent’s
last address. I am also satisfied, based on the evidence of the applicant’s
investigator, that the Respondent’s principal place of business cannot be found
at that address and that the CPCC mailed a copy of the Notice of Application to
that address. For these reasons, I have concluded that the Respondent has been under
served the Ontario Rules.
LEVIES AND INTEREST
THEREON
[6]
It
is noteworthy that under subsection 82(1) of the Act, the levy is payable on the
sale or other disposition of Blank Media. Therefore, the CPCC must prove that
sales or dispositions have taken place in order to justify the imposition of
levies.
[7]
Interest
is payable on unpaid levies pursuant to section 12 of the Tariffs. It accrues
from the day the units of Blank Media were disposed of or sold. Interest is to
be calculated daily at a rate equal to one per cent plus the Bank Rate
published by the Bank of Canada that was applicable on the last day of the
previous month. Interest does not compound.
[8]
At
all material times, the Bank Rate published by the Bank of Canada varied
between 0.5% and 4.75%. Accordingly, the interest rate to be applied to the
unpaid levies ranges from 1.5% to 5.75%.
[9]
DELETED
[10]
There
is an issue about the calculation of interest in circumstances in which the
evidence shows that sales or dispositions have occurred in a certain period of
time but exact sale dates are not known. One method of calculation was adopted
by Prothonotary Lafrenière in Canadian
Private Copying Collective v. Pacific Royal Enterprises Ltd. et al. in an
order made on March 6, 2009. Therein he said that interest should be calculated
by pro-rating the unpaid levies equally over the reporting period and
calculating interest on those pro-rated levies. I am asked to use this
methodology. However, I am not persuaded that pro-rating is the proper
approach. In my view subsection 82(1) of the Act makes it clear that the levy
is only payable “. . . on selling or otherwise disposing of . . .” Blank Media
in Canada. In the
circumstances of this case the only date on which it can be said with certainty
that all the Blank Media were sold is the last day of the reporting period.
Accordingly I have concluded in paragraph 11(2)(ii) and subsection 11(3) that
interest should be calculated from that date.
[11]
The
Applicant claims levies plus interest on the following units:
1. 28,615 units.
These units were sold during the Audit Period and sales dates given in the Audit
can be used to calculate interest. The applicable levy was $0.21 per unit.
Accordingly, levies plus interest will be awarded for these units.
2. 51,245 units.
These units were in the Respondent’s inventory at the end of the Audit Period.
This number must be broken into the following three sections:
i.
10,600
units. These units were actually sold in 2008 after the Audit Period. Sales
dates are available for calculating interest, and the applicable levy was $0.21
per unit. Levies plus interest will be awarded for these units.
ii.
11,775
units. These units were actually sold in 2008 after the Audit Period and the
applicable levy was $0.21 per unit. However, precise sales dates are not
available for calculating interest. The evidence shows that these units may
have been sold any time between the end of the Audit Period and the end of
2008. Accordingly, levies will be awarded for these units, but interest will be
calculated as if all the sales were made on December 31, 2008.
iii.
28,870
units. The evidence in this case is not sufficient to establish a levy
obligation. Accordingly, no levy is awarded for these units.
3. 310 units.
These units were also in the Respondent’s inventory at the end of the Audit Period.
They were sold in 2009 and the applicable levy was $0.29 per unit. However,
precise sales dates are not available for calculating interest. The evidence
shows that these units may have been sold any time between February 1, 2009 and
April 21, 2009. Accordingly, levies will be awarded for these units, but
interest will be calculated as if all the sales were made on April 21, 2009.
AUDIT COSTS AND INTEREST
THEREON
[12]
Subsection
9(3) of the Tariffs provides that the CPCC can recover reasonable audit costs
from a seller of Blank Media if the audit discloses that the seller has
understated amounts due to the CPCC by more than 10%. The Audit disclosed that
the Respondent had understated amounts due to the CPCC by approximately 18%.
Accordingly, the CPCC will be awarded its audit costs.
[13]
Interest
is payable on unpaid audit costs pursuant to section 12 of the Tariffs and is
calculated in the same manner as interest on unpaid levies. Sentence Deleted.
Interest begins to accrue on the day on which the audit costs are due to the
CPCC. According to subsection 9(3) of the Tariffs, the audit costs are due 30
days after their payment is demanded.
[14]
The
CPCC demanded audit costs in the amount of $6,309.61 on July 2, 2008, so
interest on this amount began to accrue on August 2, 2008.
[15]
In
a letter dated September 2, 2008, the CPCC warned the Respondent that if it did
not pay outstanding levies, interest, and $6,309.61 in audit costs by September
17, 2008, the CPCC would demand the full audit costs of $9,846.23. However, it appears
from the record that the CPCC never wrote again to demand the full amount. CPCC
asserts and I accept that filing this application on April 6, 2009
constituted a demand for payment of the full amount. Accordingly, while the
full audit costs of $9,846.23 will be awarded to the CPCC, interest will be
awarded as follows:
(i) on $6,309.61
from August 2, 2008 to May 6, 2009
(ii) on $9,846.23
from May 6, 2009 to the date of this order
PENALTY
[16]
The
Applicant seeks a statutory penalty of five times the amount of the unpaid
levies, which is the maximum penalty allowed under subsection 88(2) of the Act.
[17]
Having
taken into account the considerations listed in subsection 88(4) of the Act, I
am not satisfied that the maximum penalty is appropriate in this case. However,
in view of the Respondent’s material under-reporting of sales and the need for
deterrence, a penalty of two times the amount of the unpaid levies will be
imposed.
COSTS
[18]
Litigation
costs will be awarded in the amount of $2,000.
ORDER
THIS COURT ORDERS that
1. The
Respondent shall pay to the CPCC:
(a)
unpaid levies in the amount of $10,797.80;
(b) interest on unpaid levies in the
amount of $431.79 as of December 16, 2009;
(c)
the CPCC’s audit costs in the amount of $9,846.23;
(d)
interest on audit costs in the amount of $243.12 as of December 16, 2009
as
required by the Act and the Tariffs.
2. The Respondent shall pay to the
CPCC a penalty in the amount of $21,595.60 pursuant to subsection 88(2) of the
Act, which is equal to two times the amount of the unpaid levies required to be
paid by the Respondent pursuant to paragraph 1(a) above;
3. The Respondent shall comply with
the reporting requirements and with the payment and reporting calendar set out
in paragraph 82(1)(b) of the Act and the Tariffs for so long as the Respondent
remains a manufacturer or importer subject to the provisions of Part VIII of
the Act and the Tariffs;
4. The Respondent shall pay to CPCC
the costs of this Application forthwith in the amount of $2,000. This amount
includes all applicable goods and services taxes.
Sandra
J. Simpson
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