Date: 20110120
Docket: T-1394-09
Citation: 2011 FC 64
Ottawa,
Ontario, January 20, 2011
PRESENT: The Honourable Mr. Justice Zinn
BETWEEN:
SETANTA
SPORTS CANADA LIMITED
Plaintiff
and
GENTILE ENTERPRISES INC.
carrying on business as ACETI PIZZERIA & PASTA, and MATTEO GENTILE,
ROSEMARY GENTILE, and PETER GENTILE,
2033956 ONTARIO INC. carrying on business
as BRIGADOON RESTAURANT AND BAR,
JAMES WILLIAM SOMERVILLE (also known as BILL SOMMERVILLE),
1456161 ONTARIO INC. carrying on business
as CRABBY JOE’S TAP & GRILL, KIRNDIP PARMAR, RAJINDERPAL RAKHRA and
JATINDERJIT RAKHRA,
1382716 ONTARIO LIMITED carrying on
business as MATT & JOE’S RESTAURANT & NIGHTCLUB, MATTHEW ALBERT
LENTINI, and JOSEPH LENTINI,
1470325 ONTARIO INC. carrying on business
as THE BARLEY MOW PUB (also known as THE BARLEY MOW PUB (BARRHAVEN)), SEAN
BLACK, JASON CURRY,
DOUG DUNCAN and STEVE EDGETT,
1740028 ONTARIO INC. carrying on business
as J. WALTON HOUSE (also known as
J. WALTON HOUSE TAPS & GRILL), and
PAULDEEP SAWHNEY,
1557117 ONTARIO INC. carrying on business
as THE GO GO CLUB, and
DEMETROIS RINGAS,
1486046 ONTARIO LIMITED carrying on business as TWIG
& BERRIES, and
RICHARD A. KINGSLEY,
Defendants
(Ontario)
and
1010818 ALBERTA LIMITED carrying on
business as BOB THE FISH TAVERN, and ROBERT GOODWIN,
420854 ALBERTA LTD. carrying on business
as CHESTERMERE LANDING, and ZORICA BURCEVSKI, TRAJCE BURCEVSKI, NICOLA
BURCEVSKI,
ZLATAN BURCEVSKI and VESA BURCEVSKI,
Defendants
(Alberta)
and
UNITED HOSTS LTD. carrying on business as
LE VIEW POELE PUB, and BRUNO CYR, JAMES WHALEN and LAURA WHALEN carrying on
business as
ENDZONE SPORTS BAR
Defendants
(New Brunswick)
REASONS FOR ORDER AND ORDER
[1]
The
plaintiff in this action, Setanta Sports Canada Limited, is the exclusive
distributor, along with its partners, of sporting events including Ultimate
Fighting Championship (UFC) pay-per-view events broadcast in Canada, and it
holds all copyrights associated therewith.
[2]
The
defendants, James Whalen and Laura Whalen, carrying on business as Endzone
Sports Bar, seek an order, pursuant to Rule 399 of the Federal Courts Rules,
SOR/98-106, setting aside the Order for Default Judgment obtained against them
by the plaintiff.
[3]
Prior
to the Default Judgment issuing, these defendants never responded to or challenged
any of the proceedings in this action; in fact, they never communicated with
the plaintiff at all. The relevant facts leading up to the Order for Default
Judgment, briefly, are the following:
a.
UFC
96 was broadcast live via pay-for-view on March 7, 2009. Daniel Gallant, an
investigator for the plaintiff, attended at the Endzone Sports Bar in Moncton,
New Brunswick (Endzone), during the broadcast of UFC 96 and provided an
affidavit in which he attests that he “noted that there was advertising for the
event visible with a street sign, and that there were 25 to 30 people attending
to view the event when I entered.”
b.
These
defendants admit to having received correspondence from the plaintiff advising
them that they were not authorized to show UFC events and inviting them to contact
the plaintiff to resolve the issues surrounding its conduct. They were
informed that if the issues were not resolved it would result in legal action
being commenced. These defendants admit that they never responded to any of
this correspondence.
c.
UFC
100 was broadcast live via pay-for-view on July 11, 2009. Debbie Jefferson, an
investigator for the plaintiff, attended at Endzone during the broadcast of UFC
100 and provided an affidavit in which she attests that she “could see two of
the televisions, including a large screen T.V., showing the UFC 100 event with
approximately 12 patrons in attendance.”
d.
The
Statement of Claim issued by the plaintiff against these defendants was filed
in the Federal Court, in Toronto, on August 20, 2009.
The plaintiff subsequently filed a Notice of Motion, returnable on Monday,
August 31, 2009, for an interlocutory injunction. Affidavits of Service were
filed indicating that the Statement of Claim and Motion Record were served on James
Whalen and Laura Whalen carrying on businesses as Endzone Sports Bar on August
25, 2009, at the address of Endzone.
e.
Following
the hearing of the motion, on September 1, 2009, Justice Kelen issued an Order
enjoining these defendants from showing any UFC pay-per-view events without the
consent of the plaintiff and further ordered them to, within five days,
disclose the source, description, and means by which they accessed, showed,
exhibited or downloaded UFC matches or events. Affidavits of Service were
filed indicating that the Court Order was served on James Whalen and Laura
Whalen, carrying on businesses as Endzone Sports Bar, on September 10, 2009, at
the address of Endzone.
f.
The
plaintiff brought a motion for an Order for Default Judgment on June 21, 2010,
which was granted by Justice Campbell on June 28, 2010. The Order granted the
plaintiff a permanent injunction against these defendants from showing any UFC
pay-per-view events up to and including December 31, 2011, and ordered these
defendants to pay the plaintiff damages of $50,000.00 for infringement of
copyright and breaches of the Radiocommunication Act, R.S.C, 1985, c.
R-2, and costs of $1,500.00.
g.
James
Whalen admits that he was served with a copy of the Order for Default Judgment
on July 6, 2010.
h.
Upon
receipt of the Order for Default Judgment, these defendants then sought legal
advice and by Notice of Motion filed August 17, 2010, moved to set aside the Default
Judgment.
[4]
Rule
399 (1) of the Federal Courts Rules provides that “the Court may set
aside or vary an order that was made (a) ex parte ... if the party
against whom the order is made discloses a prima facie case why the
order should not have been made.” The test for setting aside a default
judgment is established in a long line of authorities, including the following
cited by the parties: Taylor Made Golf Co. Inc. et al. v 1110314 Ontario Inc.
(c.o.b. Selection Sales) (1998), 148 F.T.R. 212; Brilliant Trading Inc.
v Wong, 2005 FC 571; Fibremann Inc. v Rocky Mountain Spring (Icewater
02) Inc., 2005 FC 977; SEI Industries Ltd. v Terratank Environmental
Group, 2006 FC 218; Louis Vuitton Malletier S.A. v Yang (c.o.b. K2
Fashions), 2008 FC 45; Harley-Davidson Motor Co. v Bull Master Quebec
Inc., 2008 FC 835; to which I add my recent decisions in Calvin Klein
Trademark Trust v Beauchamp, 2010 FC 1107; Harley-Davidson Motor Company
Group, Inc. v Beauchamp, 2010 FC 1108; and Molson Canada 2005 v
Beauchamp, 2010 FC 1109 [Beauchamp decisions].
[5]
The
jurisprudence establishes that to be successful, these defendants must satisfy
the Court that:
a.
They
have a “satisfactory excuse,” a “reasonable explanation,” or “substantial
reasons” for their failure to file a defence;
b.
They
have a prima facie defence to the claim; and
c.
They
moved promptly to set aside the Default Judgment.
[6]
The
plaintiff concedes that the third part of this tripartite test has been met.
However, it argues that these defendants have failed to provide a reasonable
explanation for their failure to file a Statement of Defence and that they have
failed to establish a prima facie defence to the claim.
Explanation for Failure
to File a Statement of Defence
[7]
These
defendants admit to receiving cease and desist letters from the plaintiff, the
plaintiff’s Statement of Claim, the plaintiff's Motion Record seeking an
interim injunction, and the Order of this Court granting that interim
injunction and ordering these defendants to provide certain information;
however, they took no action following receipt of any of these. It was only
when served with the Order of this Court requiring them to pay to the plaintiff
$50,000.00 in damages that the seriousness of the legal process and its
significance was apparently brought home to them. They say that the plaintiff
has sued the wrong party. They say that the premises from which Endzone operates
is owned by 041441 N.B. Ltd., a company owned and operated by Laura Whalen, and
that 041441 leases those premises to The Press Box Inc. The Press Box Inc.
owns and operates Endzone.
[8]
The
explanation offered by these defendants for their failure to file a Statement
of Defence or to respond to any of the plaintiff’s letters, or Court documents with
which they were served, comes to this: they thought they were frivolous.
[9]
This
explanation is set out in the affidavit of James Whalen, in the following
paragraphs:
Laura Whalen and James Whalen
received several letters from the Plaintiff containing various frivolous
allegations, namely that illegal viewing of UFC matches was taking place at THE
PRESS BOX INC. bar. These were treated as frivolous, because the premises did
not even have the technical infrastructure to obtain a pay-per-view feed. The
bar contains only a basic cable feed. It does not have a functioning satellite
or any other hardware that would allow for the alleged illegal viewings to even
take place. To their knowledge there has never been an illegal showing of a
pay-per-view match at the premises as alleged by the Plaintiff.
Laura Whalen and James Whalen
treated all other documents, Statement of Claim, Notice of Motion etc., as
equally frivolous. They had been made aware of other similar frivolous cases
in New Brunswick which resulted in very costly
legal fees and were ultimately dropped. For example, the Grove Lounge, a bar
in Saint John New Brunswick, had spent nearly $8,000.00
to fight the same frivolous lawsuit brought by the same Plaintiff.
Given the above, James Whalen
and Laura Whalen erroneously thought that the frivolousness of the lawsuit
would not allow for it to result in an actual enforceable judgment with
financial consequences. An injunction is of no consequence as they have never
illegally shown the UFC matches and do not intend to in the future.
[10]
Counsel
for these defendants candidly acknowledged that he was unaware of any case
where a party had sought to set aside Default Judgment, having been made aware
of the action but failing to act, because it was thought to be frivolous. It was
submitted that these defendants are not sophisticated business people, that
they have a valid defence to the action, and that the interests of justice
demand that the judgment be set aside in order that they may defend the claims.
[11]
I
seriously doubt that viewing a legal action as frivolous can ever be said to be
a “satisfactory excuse,” a “reasonable explanation,” or “substantial reason”
for failing to file a defence to it. I concur with the view of Justice Gibson
in Brilliant Trading, above, that “while, at the level of principle, it
is reasonable that this Court should extend every consideration and leniency
rather than foreclose the right of a party to defend … that principle is
qualified by the ‘substantial reasons’, ‘satisfactory excuse’ or ‘reasonable
explanation’ element of the test.” There are decisions where a defendant’s
inaction has been characterized by the Court as willful blindness (see, for
example, Brilliant Trading, above), or where the defendant’s behaviour
indicated a casual disregard for the importance of the legal process (see, for
example, SEI Industries, above), and in those cases the relief sought
was not granted. In those circumstances the explanation offered was found not
to be reasonable.
[12]
In
my view, both descriptions accurately capture the actions of these defendants.
Mr. Whalen says that Endzone does not have the equipment to provide the UFC
pay-for-view satellite programming it is alleged to have shown and therefore he
thought the action was frivolous and there would be no “actual enforceable
judgment with financial consequences.” I do not accept this explanation; it
does not reasonably follow from the facts before me.
[13]
First,
the Statement of Claim contains the following paragraph which is both
capitalized and bolded:
IF YOU FAIL TO DEFEND THIS
PROCEEDING, JUDGMENT MAY BE GIVEN AGAINST YOU IN YOUR ABSENCE AND WITHOUT
FURTHER NOTICE TO YOU.
These defendants offer no explanation why
in the face of this warning they could think they would be immune from
judgment. They do not suggest how the Court would come to know that Endzone
did not have the necessary equipment to show the UFC events to its patrons given
that they failed to take the time and effort to inform the Court or the
plaintiff.
[14]
Second,
two affidavits have been filed by the plaintiff and served on these defendants;
the affidavits are from different witnesses who at different times attended at
Endzone and swore that UFC pay-per-view events were advertized at the bar and
were shown. These defendants offer no explanation as to how one could
reasonably believe, in the face of uncontradicted evidence, that the Court
would not grant judgment.
[15]
Third,
these defendants state that they formed the view that this action was
frivolous, in part because they knew of a similar claim made by the plaintiff against
the Grove Lounge in New Brunswick which had been discontinued after costing the
bar’s owners some $8,000.00 in legal fees. These defendants filed a copy of a
story from the CBC News website (last updated March 31, 2010) that sets out the
story.
[16]
The
action against Grove Lounge and others (Court File T-38-09) was commenced by
Statement of Claim filed January 9, 2009. Unlike these defendants, Grove
Lounge and its owners filed a defence to the claim. The Court’s record shows
that a Statement of Defence was filed by Grove Lounge on February 17, 2009, and
that the action as against it was discontinued by the plaintiff on March 19,
2010. No reason for the discontinuance is before the Court; however, even if
one were to assume that the Grove Lounge action was “frivolous” as these
defendants assert, that fact and the consequences to Grove Lounge could not
have been know by these defendants prior to March 19, 2010 when the action was
discontinued. By that date, seven months had elapsed since these defendants
had been served with the Statement of Claim and Motion Record and they had been
in default for six months in filing their defence. These defendants offer no
explanation how something they could not have known when they decided to ignore
the legal proceeding influenced that decision. This raises serious credibility
concerns relating to the affidavits filed by these defendants on this motion.
[17]
Even
if one were inclined to accept that an unsophisticated person might foolishly
form the view that demand letters, Statements of Claim, and motions for injunctive
relief were frivolous because there was no factual basis for them, one cannot
accept that explanation after the person has been served with a Court Order.
If not before, then if ever there would be a time when a reasonable person
would come to the view that he or she was wrong and the claim was not going to
go away simply by ignoring it, it is when a formal Court Order in the action is
served on him or her. I simply do not accept that any reasonable person could view
an Order of this Court as frivolous.
[18]
For
these reasons, I am not satisfied that these defendants have offered the Court
a reasonable explanation for their failure to file a Statement of Defence.
Prima Facie Defence
[19]
The
threshold for finding that these defendants have shown that they have a prima
facie defence is very low: Louis Vuitton Malletier, above. They
assert that no UFC pay-per-view programming was shown in the bar as they do not
have the necessary infrastructure so to do. That is a claim that is worthy of
investigation and I cannot find that it is without any merit.
[20]
These
defendants also assert that they are not properly named as defendants and that
the proper defendant in this case is The Press Box Inc., the corporate entity
that owns and runs the bar. The plaintiff filed evidence attesting to the
difficulty it had in finding out who was behind Endzone, as Endzone Sports Bar is
not registered as a business name in New Brunswick. It points out that in
every case where it was aware of a corporate entity behind the establishment
illegally showing UFC events, it named as a defendant the corporate entity as
the party carrying on the business as well as the individuals behind the
corporation. There are decisions where this Court has recognized that it may
be appropriate to pierce the corporate veil in cases involving alleged copyright
infringement: see Canadian Private Copying Collective v Fuzion Technology
Corp., 2006 FC 1284, aff’d 2007 FCA 335; Canadian Private Copying
Collective v J & E Media Inc., 2010 FC 102. However, whether the facts
at hand warrant the piercing of the corporate veil is an issue that is fact-dependant
and accordingly appears to me to be worthy of further examination. Therefore,
I cannot find that the defendants’ defence is without any merit.
[21]
Although
these defendants have met two of the three parts of the tri-partite test, the
jurisprudence requires that they must meet all parts if the Court is to set
aside the Default Judgment. Having failed to meet this burden, this motion is
dismissed, with costs payable to the plaintiff, which I fix at $2,500.00
inclusive of fees, disbursements, and taxes.
[22]
I
reiterate the comment I made in the Beauchamp decisions: “I concur
with the observation of Justice Cullen in UMACS of Canada v S.G.B. 2000 Inc.,
[1990] F.C.J. No. 1112, that ‘[p]eople in business in Canada should give
legal documents significantly more attention’ than the defendant did in these
cases; indeed significantly more attention than the defendant gave was
warranted over many months.”
ORDER
THIS COURT’S JUDGMENT
is that
the motion by the defendants James Whalen and Laura
Whalen, carrying on business as Endzone Sports Bar, for an Order, pursuant to
Rule 399 of the Federal Courts Rules, setting aside the Order for
Default Judgment obtained against them by the plaintiff is dismissed, with
costs payable by them to the plaintiff fixed at $2,500.00 inclusive of fees,
disbursements, and taxes.
“Russel W. Zinn”
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