Docket: T-308-11
Citation: 2011 FC 1088
Vancouver, British Columbia, September
21, 2011
PRESENT: Roger R. Lafrenière, Esquire
Prothonotary
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
[1]
The
Plaintiff, Society of Composer, Authors and Music Publishers of Canada (SOCAN) has
brought an ex parte motion pursuant to Rules 210 and 369 of the Federal
Courts Rules for the following relief:
(a)
default
judgment pursuant to Rule 210 against the Defendant in accordance with the
draft Judgment attached as Schedule “A” to the Notice of Motion;
(b)
costs
of this motion fixed in the amount of $3,000, or in such other amount as this
Court may deem just; and
(c)
such
further and other relief as this Honourable Court may deem just.
Nature of SOCAN’s
claim against the Defendant
[2]
SOCAN
is a not-for-profit corporation, as well as a collective society under s. 67 of
the Copyright Act. It carries on the business of granting licences for
the public performance and communication to the public by telecommunication in Canada of
dramatico-musical and musical works. The approved royalties or fees that SOCAN
is entitled to collect for the performance in public of musical works by means
of performers in person have been approved by the Copyright Board in accordance
with the Copyright Act and are published each year in the Canada Gazette
as Tariff 3C.
[3]
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.
[4]
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 the Tariff 3C to publicly perform SOCAN’s musical works at the nightclub.
[5]
On
October 27, 2005, the Defendant reported to SOCAN that for the year 2005 the
estimated number of days the nightclub was open was 114 days and that it’s
authorized seating and standing capacity was 232. The Defendant also reported
that for 2006, the estimated number of days the club would be open was 312
days, with the same seating capacity.
[6]
Based
on the Tariff 3C, the provisions of s. 68.2(3) of the Copyright Act, and
the estimated figures provided by the Defendant in 2005 and 2006, the total
amount of the provisional licence fees owed by the Defendant for the years 2005
to 2011 is $21,628.54. SOCAN claims that the Defendant has to date only paid
$1,245.18 to account for the provisional fees for 2005 and failed to report any
data since October 2005.
[7]
SOCAN
alleges that despite repeated requests, the Defendant has refused to pay the
outstanding fees owed and report all relevant figures.
[8]
In
the prayer for relief, SOCAN seeks judgment against the Defendant in the amount
of $20,383.36, which represents the balance of the estimated royalties due
under Tariff 3C, or in the alternative, an award of statutory damages pursuant
to s. 38.1(4) of the Copyright Act in the sum of not less than three and
not more than ten times the amount of estimated royalties on any additional
royalties found to be payable pursuant to an accounting and audit.
Motion for
Default Judgment
[9]
On a motion for default
judgment, the Court has two questions before it; first, is the defendant in
default, and second, is there evidence to support the plaintiff’s claim: Chase
Manhattan Corp v 3133559 Canada Inc 2001 FCT 895.
[10]
With
respect to the first question, the Plaintiff must establish that the Defendant
was personally served with the Statement of Claim and that the deadline for
service and filing of a statement of defence has expired.
[11]
Rule
130(1) of the Federal Courts Rules provides various methods to effect
personal service on a corporation, including in the manner provided before a
superior court in the province in which the service is being effected. Rule
4-3(2)(b)(iv) of the British Columbia Supreme Court Civil Rules allows
for service in the manner provided by the Business Corporations Act,
which in turn allows service of a record by mailing it by registered mail to
the mailing address shown for the registered office of the company in the
company register.
[12]
Based
on the Affidavit of Service of Jennifer Lundeen sworn March 17, 2011, a copy of
the Statement of Claim was sent by registered mail to the mailing address of
the Defendant’s registered office. A person named Dharampal Singh acknowledged
receipt of the item on March 4, 2011. I am therefore satisfied that personal
service of the Statement of Claim was effected on the Defendant.
[13]
Since
there is no record of a statement of defence being filed within the time
provided in Rule 204, or any request for an extension of time, I conclude that
the Defendant is in default.
[14]
With
regard to the second question, the evidence submitted on this motion
establishes that SOCAN owns and/or administers the right of public
performance in Canada, and the right to authorize and permit such
public performance in virtually all popular musical works in current use in Canada. Copyright
subsists in Canada in SOCAN’s
musical works.
[15]
The Defendant was
licensed by SOCAN under Tariff 3C (Adult Entertainment Clubs) for the public
performance of the Plaintiff’s musical works at the Cheetah’s Nightclub for the
years 2005 and 2006. SOCAN has established, on the balance of probabilities,
that the Defendant remained open for business from 2005 to the date of issuance
of the Statement of Claim (Claim Period), and beyond, except for a temporary
period for renovations in 2007. The Defendant has throughout the Claim Period
presented, authorized and permitted performances in public of SOCAN’s musical
works at the nightclub by means of recorded music, but failed to pay
provisional licence fees under Tariff 3C for the years 2006 to 2011, inclusive.
[16]
The
Plaintiff has made reasonable assumptions regarding the number of days that the
nightclub was open during the Claim Period, relying on the estimated number of
days reported by the Defendant for the year 2006. In the circumstances, I am
satisfied that the Defendant owes the Plaintiff $20,383.36 for its outstanding
provisional licence fees, including the applicable taxes, under Tariff 3C.
Statutory Damages
[17]
Under
s. 38.1(4) of the Copyright Act, a collective society referred to in section 67 can
elect, in
lieu of any other remedy of a monetary nature provided by the Act, to recover
an amount of statutory damages in a sum of not less than three and not more
than ten times the amount of the applicable royalties owing. SOCAN made such an
election and seeks an order to recover an award of statutory damages in a sum
of seven times the amount of applicable royalties.
[18]
In
exercising its discretion under s. 38.1(4) of the Copyright Act, the Court is required
to consider all relevant factors, including: (a) the good faith or bad faith of
the defendant; (b) the conduct of the parties before and during the
proceedings; and (c) the need to deter other infringements of the copyright in
question.
[19]
SOCAN
has identified a number of factors that would justify granting an award of
statutory damages in excess of the prescribed minimum. First, the Defendant has
displayed a complete disregard for the terms of its licence with the Plaintiff
over an extended period of time. Second, the Defendant has brazenly continued
to advertise and publicly perform SOCAN’s musical works at the nightclub.
Third, the Defendant has repeatedly ignored SOCAN’s letters, calls and visits,
and evaded service of documents. Fourth, the Defendant has continued its
infringing activities after notice of the present action was given. I find the Defendant’s
conduct clearly demonstrates bad faith both before and during the proceedings.
[20]
Although
the Defendant’s conduct is deserving of sanction, the Court is required to
relate the facts of the particular case to the underlying purpose of statutory
damages. It must ask itself how the award of
statutory damages would further one or other of the objectives of the law and
what is the lowest award that would serve the
purpose. Any higher award
would not be justified.
[21]
Taking
into account the factors listed above, and the absence of any mitigating
circumstances, I conclude that an award of statutory damages of six times the
outstanding licence fees is appropriate in this case. The substantial award
should serve as sufficient deterrent
to the Defendant, as well as to others, who seek to profit from the Plaintiff’s
musical works with impunity. It will be a reminder to all licensees of the
potentially serious consequences of non-compliance with the annual reporting
requirements and non-payment of the applicable licence fees under Tariff 3C.
Damages available to copyright holders under the Copyright Act serve an
important function and should not be treated as just another cost of doing
business.
Pre-Judgment
Interest
[22]
SOCAN
seeks pre-judgment interest from the date the cause of action arose, rather
than the date of the Statement of Claim.
[23]
Section
36(2) of the Federal Courts Act provides for pre-judgment interest as
follows:
Prejudgment Interest – cause of action
within province:
36 (1) Except as otherwise
provided in any other Act of Parliament, and subject to subsection (2), the
laws relating to prejudgment interest in proceedings between subject and
subject that are in force in a province apply to any proceeds in the Federal
Court of Appeal or the Federal Court in respect of any cause of action arising
in that province.
[24]
Since
the cause of action in this proceeding arose in British Columbia, the
applicable law governing the calculation of pre-judgment interest is the Court
Order Interest Act, RSBC 1996 Chapter 79.
Court Order Interest:
1 (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.
[25]
According
to SOCAN, the cause of action for each year’s licence fees arose on February 1
of each year because the provisional licence 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 licence fees, and any interest that may have accrued.
In short, SOCAN
can’t have
its cake and eat it too.
[26]
In
any event, I am not prepared to grant pre-judgment interest before the issuance
of the Statement of Claim for the following reasons. First, SOCAN has failed to
establish any contractual or statutory right to charge interest on outstanding licence
fees. Second, there has been substantial delay by SOCAN in bringing the present
action to recover license fees dating back to 2006. Third, the claim for statutory
damages was first made and only crystallized when the proceeding was instituted.
JUDGMENT
THIS COURT
ORDERS AND ADJUDGES that:
1.
The
Defendant shall pay to the Plaintiff statutory damages in accordance with the Copyright
Act, in the amount of $122,300.22, which is six times the provisional
licence fees of $20,383.37 (including GST/HST) owed by the Defendant to the
Plaintiff under Tariff 3C for the years 2005 through to 2011.
2.
The
Defendant shall pay to the Plaintiff pre-judgment simple interest at the rate
of 2.5% on the amount referred to in paragraph 1 above, from February 23, 2011
to the date of judgment.
3.
The
Defendant shall pay to the Plaintiff forthwith its costs of this motion, hereby
fixed in the amount of $3,000.00 plus HST, being the total amount of $3,360.00.
4.
This
Judgment shall bear interest at the rate of 3.0% per annum from its date.
“Roger R. Lafrenière”
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