Date: 20120614
Docket:
A-499-11
Citation: 2012 FCA 179
CORAM: SHARLOW
J.A.
PELLETIER J.A.
MAINVILLE
J.A.
BETWEEN:
SOCIETY OF COMPOSERS, AUTHORS AND
MUSIC PUBLISHERS OF CANADA
Appellant
and
IIC ENTERPRISES LTD.
C.O.B. AS CHEETAH'S NIGHTCLUB
Respondent
REASONS FOR JUDGMENT
SHARLOW J.A.
[1]
The
issue in this appeal is whether a collective society that elects statutory
damages under subsection 38.1(4) of the Copyright Act, R.S.C. 1985, c.
C-42, in respect of royalties owed in British Columbia is entitled to
prejudgment interest pursuant to subsection 1(1) of the Court Order Interest
Act, R.S.B.C. 1996, c. 79, from the date on which the royalties were
payable. A prothonotary and a judge of the Federal Court concluded that the
answer is no. I respectfully disagree, and would allow the appeal.
Facts
[2]
The
appellant Society of Composers, Authors and Music Publishers of Canada
(“SOCAN”) is a collective society. It owns or administers the right of public
performance in Canada, and the right to authorize such public performances, in
most popular works in current use in Canada. By virtue of a tariff
approved by the Copyright Board and published in the Canada Gazette
(“Tariff 3C”), SOCAN was entitled to collect royalties from licencees for
the calendar years 2005 to 2010. The royalties for each year were payable on
January 31 of the following year.
[3]
In
the years 2005 to 2010 inclusive, the respondent IIC Enterprises Ltd. (“IIC”)
was a licencee under Tariff 3C. It operated a nightclub in Kelowna, British
Columbia
called “Cheetah’s Nightclub” at which it presented to the public performances
of musical works by means of recorded music that included works in the SOCAN
repertoire. IIC paid part of the royalties due for 2005, and nothing for
subsequent years. As of February 1, 2011 its unpaid royalties totalled
$20,383.37.
[4]
On
February 23, 2011, SOCAN filed a statement of claim in the Federal Court
seeking judgment against IIC in the amount of the unpaid royalties, plus prejudgment
interest and costs. According to the statement of claim, the statutory basis
for the claim for unpaid royalties is subsection 68.2(1) of the Copyright
Act, which reads as follows:
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68.2 (1) Without
prejudice to any other remedies available to it, a collective society may,
for the period specified in its approved tariff, collect the royalties
specified in the tariff and, in default of their payment, recover them in a
court of competent jurisdiction.
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68.2 (1) La société de
gestion peut, pour la période mentionnée au tarif homologué, percevoir les
redevances qui y figurent et, indépendamment de tout autre recours, le cas
échéant, en poursuivre le recouvrement en justice.
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[5]
The statement of
claim also gives notice that SOCAN may elect in the alternative to claim
statutory damages under subsection 38.1(4) of the Copyright Act. To
understand that provision it is necessary to consider all of section 38.1 of
the Copyright Act, which reads as follows:
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38.1. (1) Subject to this
section, a copyright owner may elect, at any time before final judgment is
rendered, to recover, instead of damages and profits referred to in
subsection 35(1), an award of statutory damages for all infringements
involved in the proceedings, with respect to any one work or other subject-matter,
for which any one infringer is liable individually, or for which any two or
more infringers are liable jointly and severally, in a sum of not less than
$500 or more than $20,000 as the court considers just.
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38.1. (1) Sous réserve du
présent article, le titulaire du droit d’auteur, en sa qualité de demandeur,
peut, avant le jugement ou l’ordonnance qui met fin au litige, choisir de
recouvrer, au lieu des dommages-intérêts et des profits visés au paragraphe
35(1), des dommages-intérêts préétablis dont le montant, d’au moins 500 $ et
d’au plus 20 000 $, est déterminé selon ce que le tribunal estime équitable
en l’occurrence, pour toutes les violations — relatives à une oeuvre donnée
ou à un autre objet donné du droit d’auteur — reprochées en l’instance à un
même défendeur ou à plusieurs défendeurs solidairement responsables.
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(2) Where
a copyright owner has made an election under subsection (1) and the defendant
satisfies the court that the defendant was not aware and had no reasonable grounds to believe
that the defendant had infringed copyright, the court may reduce the amount
of the award to less than $500, but not less than $200.
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(2) Dans
les cas où le défendeur convainc le tribunal qu’il ne savait pas et n’avait
aucun motif raisonnable de croire qu’il avait violé le droit d’auteur, le
tribunal peut réduire le montant des dommages-intérêts préétablis jusqu’à 200
$.
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(3) Where
(a) there
is more than one work or other subject-matter in a single medium, and
(b) the
awarding of even the minimum amount referred to in subsection (1) or (2)
would result in a total award that, in the court’s opinion, is grossly out of
proportion to the infringement,
the
court may award, with respect to each work or other subject-matter, such
lower amount than $500 or $200, as the case may be, as the court considers
just.
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(3) Dans
les cas où plus d’une oeuvre ou d’un autre objet du droit d’auteur sont
incorporés dans un même support matériel, le tribunal peut, selon ce qu’il
estime équitable en l’occurrence, réduire, à l’égard de chaque oeuvre ou
autre objet du droit d’auteur, le montant minimal visé au paragraphe (1) ou
(2), selon le cas, s’il est d’avis que même s’il accordait le montant minimal
de dommages-intérêts préétablis le montant total de ces dommages-intérêts
serait extrêmement disproportionné à la violation.
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(4) Where
the defendant has not paid applicable royalties, a collective society
referred to in section 67 may only make an election under this section to
recover, in lieu of any other remedy of a monetary nature provided by this
Act, an award of statutory damages in a sum of not less than three and not
more than ten times the amount of the applicable royalties, as the court
considers just.
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(4) Si
le défendeur n’a pas payé les redevances applicables en l’espèce, la société
de gestion visée à l’article 67 — au lieu de se prévaloir de tout autre
recours en vue d’obtenir un redressement pécuniaire prévu par la présente loi
— ne peut, aux termes du présent article, que choisir de recouvrer des
dommages-intérêts préétablis dont le montant, de trois à dix fois le montant
de ces redevances, est déterminé selon ce que le tribunal estime équitable en
l’occurrence.
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(5) In
exercising its discretion under subsections (1) to (4), the court shall
consider all relevant factors, including
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(5) Lorsqu’il
rend une décision relativement aux paragraphes (1) à (4), le tribunal tient
compte notamment des facteurs suivants :
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(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.
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a) la bonne ou mauvaise foi
du défendeur;
b) le comportement des
parties avant l’instance et au cours de celle-ci;
c) la nécessité de créer un
effet dissuasif à l’égard de violations éventuelles du droit d’auteur en
question.
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(6) No
statutory damages may be awarded against
(a) an
educational institution or a person acting under its authority that has
committed an act referred to in section 29.6 or 29.7 and has not paid any
royalties or complied with any terms and conditions fixed under this Act in
relation to the commission of the act;
(b) an
educational institution, library, archive or museum that is sued in the
circumstances referred to in section 38.2; or
(c) a
person who infringes copyright under paragraph 27(2)(e) or section
27.1, where the copy in question was made with the consent of the copyright
owner in the country where the copy was made.
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(6) Ne
peuvent être condamnés aux dommages-intérêts préétablis :
a) l’établissement d’enseignement
ou la personne agissant sous l’autorité de celui-ci qui a fait les actes
visés aux articles 29.6 ou 29.7 sans acquitter les redevances ou sans
observer les modalités afférentes fixées sous le régime de la présente loi;
b) l’établissement d’enseignement,
la bibliothèque, le musée ou le service d’archives, selon le cas, qui est
poursuivi dans les circonstances prévues à l’article 38.2;
c) la personne qui commet
la violation visée à l’alinéa 27(2)e) ou à l’article 27.1 dans les cas
où la reproduction en cause a été faite avec le consentement du titulaire du
droit d’auteur dans le pays de production.
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(7) An
election under subsection (1) does not affect any right that the copyright
owner may have to exemplary or punitive damages.
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(7) Le choix fait par le demandeur en vertu du
paragraphe (1) n’a pas pour effet de supprimer le droit de celui-ci, le cas
échéant, à des dommages-intérêts exemplaires ou punitifs.
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[6]
As
SOCAN is a collective society, any election it wishes to make for statutory
damages must be made under subsection 38.1(4), which provides that the
statutory damages are “in lieu of any other remedy of a monetary nature under
the Copyright Act”. The Copyright Act provides for a number of
remedies “of a monetary nature” as that phrase is used in subsection 38.1(4).
One of them is subsection 68.2(1), the basis of SOCAN’s claim against IIC for
unpaid royalties.
[7]
IIC
was served with the statement of claim but did not file a notice of appearance.
For that reason, all proceedings in the Federal Court proceeded ex parte.
[8]
On
August 15, 2011, SOCAN filed a notice of motion seeking default judgment. In
the notice of motion, SOCAN stated that it elected to recover statutory damages
pursuant to subsection 38.1(4). It claimed statutory damages equal to seven
times the amount of unpaid royalties, plus prejudgment interest at an annual
rate of 3%, and costs of $3,000.
[9]
The
motion was heard by a prothonotary. He determined (2011 FC 1088) that IIC was
liable for the unpaid royalties in the amount claimed, and that SOCAN was
entitled to make an election under subsection 38.1(4). After considering the
relevant factors, he determined that a multiplier of six would be appropriate.
He also awarded costs totalling $3,360 (including HST), prejudgment interest at
the annual rate of 2.5% from February 23, 2011 (the date on which the statement
of claim was filed), and interest on the judgment at the annual rate of 3%.
[10]
The
prothonotary declined to award prejudgment interest from the date on which the
cause of action arose. He explains why at paragraphs 25 and 26 of his reasons:
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[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.
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[11]
The
prothonotary’s judgment is dated September 21, 2011 and reads as follows:
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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.
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[12]
SOCAN
appealed paragraph 2 of the judgment to a judge of the Federal Court pursuant
to Rule 51 of the Federal Courts Rules, SOR/98-106. The judge agreed
with the decision of the prothonotary and dismissed the appeal (2011 FC 1399).
SOCAN now appeals to this Court.
[13]
At
the hearing of this appeal, counsel for SOCAN was asked to provide further
written submissions on a number of points. Those submissions were received and
have been considered.
Analysis
[14]
SOCAN
argues that, by the combined operation of subsection 36(1) of the Federal
Courts Act, R.S.C. 1985, c. F-7, and subsection 1(1) of the Court Order
Interest Act, the prothonotary was obliged to award prejudgment interest on
the statutory damages for each of the years 2005 to 2010 inclusive as of the
date SOCAN’s cause of action for that year’s royalties arose.
[15]
SOCAN
submits that its cause of action for statutory damages arose in British
Columbia
on the same date as the cause of action for recovery of the unpaid royalties,
which for each year was February 1 of the following year, which is the day
after payment of the royalties was due. That is the date on which all of the
facts had occurred that entitled SOCAN to sue IIC for the unpaid royalties or
statutory damages: see Markevich v. Canada, 2003 SCC 9 at paragraph 27.
I agree, and I note that neither the prothonotary nor the judge in this case
said anything to the contrary.
[16]
According
to SOCAN’s calculation, the amount of prejudgment interest that should have
been awarded under subsection 1(1) of the Court Order Interest Act,
given the annual rate of 2.5% determined by the prothonotary, is $8,995.89. I
have no reason to doubt the correctness of SOCAN’s calculation, assuming
subsection 1(1) applies. I turn now to that issue.
[17]
I
note parenthetically that there is jurisprudence to the effect that at common
law, a court has the inherent jurisdiction to award prejudgment interest in
certain circumstances: see the discussion in Bank of America v. Mutual Trust
Co. [2002] 2 S.C.R. 601, 2002 SCC 43. In this case, however, SOCAN’s claim
for prejudgment interest is not based on the common law. It is based solely on
subsection 36(1) of the Federal Courts Act and subsection 1(1) of the Court
Order Interest Act. Therefore, its entitlement must be determined according
to those provisions only.
[18]
Section
36 of the Federal Courts Act deals with prejudgment interest on
judgments of the Federal Court. Subsection 36(1) provides that for a cause of
action that arises in a province, prejudgment interest is awarded in accordance
with the law of that province. For a cause of action that arises outside a
province or in more than one province, prejudgment interest is awarded in
accordance with subsections 36(2) to (5). Subsection 36(6) provides that
prejudgment interest cannot be awarded for a period prior to section 36 coming
into force. Subsection 36(7) provides that section 36 does not apply in respect
of a claim under or by virtue of Canadian maritime law.
[19]
In
this case the cause of action arose in British Columbia after
section 36 of the Federal Courts Act came into force, and does not
involve Canadian maritime law. Therefore, subsection 36(1) of the Federal
Courts Act applies. It reads as follows:
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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 proceedings in the
Federal Court of Appeal or the Federal Court in respect of any cause of
action arising in that province.
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36. (1) Sauf disposition
contraire de toute autre loi fédérale, et sous réserve du paragraphe (2), les
règles de droit en matière d’intérêt avant jugement qui, dans une province,
régissent les rapports entre particuliers s’appliquent à toute instance
devant la Cour d’appel fédérale ou la Cour fédérale et dont le fait
générateur est survenu dans cette province.
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[20]
SOCAN’s
cause of action is within the scope of subsection 36(1) of the Federal
Courts Act unless another Act of Parliament provides otherwise.
[21]
The
Copyright Act says nothing about prejudgment interest, and I have been
unable to find any other Act of Parliament that could possibly be interpreted
to preclude an award of prejudgment interest on a monetary award made under the
Copyright Act. It follows that in this case, subsection 36(1) of the Federal
Courts Act applies. SOCAN’s entitlement to prejudgment interest must be
determined by the law of British Columbia.
[22]
Prejudgment
interest is the subject of Part 1 of the Court Order Interest Act of British
Columbia.
Part I is not lengthy. It is quoted below (my emphasis):
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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.
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(2) Despite
subsection (1), if the order consists in whole or part of special damages,
the interest on those damages must be calculated from the end of each
6 month period in which the special damages were incurred to the date of
the order on the total of the special damages incurred
(a) in the 6 month period
immediately following the date on which the cause of action arose, and
(b) in
any subsequent 6 month period.
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(3) For
the purpose of calculating interest under subsection (2), and despite
subsection (2), if the date of the order occurs
(a) before a date 6 months
after the date on which the cause of action arose, or
(b) after
the end of a 6 month period but before the end of the subsequent 6 month
period,
interest
must be calculated from the date on which the special damages were incurred
to the date of the order.
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(4) If
part of an order represents income loss arising from personal injury or death
and one or more payments have been made before the date of the order to
replace, provide indemnification for, compensate for or protect against some
or all of the income loss or for any other purpose related to the income
loss, the amount of the income loss on which interest may be calculated under
this section must be reduced by the amount of each such payment as of the
date of the receipt of the payment.
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2.
The court must
not award interest under section 1
(a) on
that part of an order that represents pecuniary loss arising after the date
of the order,
(b) if
there is an agreement about interest between the parties,
(c) on
interest or on costs,
(d) if
the creditor waives in writing the right to an award of interest, or
(e) on
that part of an order that represents nonpecuniary damages arising from
personal injury or death.
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3.
If an order
is obtained by default under an Act or the Supreme Court Civil Rules, the
registrar of the court may exercise and carry out the powers and duties of
the court under this Part.
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4.
If a party
pays money into court in satisfaction of a claim and another party does not
accept the payment and obtains an order for an amount equal to or less than
that paid into court, the court must, despite section 1, award interest
only as if the date of payment into court had been the date of the order.
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5. Interest added to an order
for payment under this Part must be included in the order for enforcement
purposes.
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6. This Part does not apply to a cause of
action that arose before June 1, 1974.
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[23]
A
judgment for statutory damages under subsection 38.1(4) of the Copyright Act
is a “pecuniary judgment” within the meaning of that phrase as used in
subsection 1(1) of the Court Order Interest Act of British
Columbia.
It is well established by the jurisprudence of the British Columbia courts that
where subsection 1(1) applies, an award of prejudgment interest from the date
on which the cause of action arose is mandatory (subject to the exceptions in
subsection 1(2), subsection 1(4), or section 2): see, for example, Gould v.
Royal Trust Corp. of Canada, 2010 BCSC 16. None of the stated exceptions
apply in this case.
[24]
The
prothonotary construed SOCAN’s election for statutory damages in lieu of
judgment for unpaid royalties as implicitly including a waiver of its statutory
entitlement to prejudgment interest on unpaid royalties, which I assume was
intended to invoke paragraph 2(d) of the Court Order Interest Act.
Generally, a party is not taken to have waived a statutory entitlement in
writing unless the writing that is alleged to constitute the waiver is
explicit, or sufficiently explicit in its intent that it would be unreasonable
to characterize it as anything but a waiver of the statutory entitlement. Here,
the election for statutory damages is necessarily a waiver of the right to
judgment for unpaid royalties, but it cannot reasonably be taken as evidence of
an intention on the part of SOCAN to waive any other statutory entitlement. In
my view, the prothonotary erred in characterizing SOCAN’s election for
statutory damages as a waiver of its entitlement to prejudgment interest under
the Court Order Interest Act.
[25]
I
conclude that SOCAN is entitled in this case to prejudgment interest on the
statutory damages awarded by the prothonotary from the date on which the cause
of action arose. Under subsection 1(1) of the Court Order Interest Act,
the court has no discretion to choose any other period for which prejudgment
interest is payable.
[26]
The
use of a multiplier for statutory damages results in a judgment that exceeds
the amount of the royalties payable. From the point of view of a licencee under
Tariff 3C, that result may seem harsh, but it is the intended consequence of
the policy underlying subsection 38.1(4) of the Copyright Act. It may be
that in some circumstances, the mandatory addition of prejudgment interest to
the full amount of the statutory damages from the date on which the royalties
were payable represents an unreasonable windfall to the collective society and
a correspondingly undue burden on the debtor. However, there are two ways in
which the potential harshness of the lack of judicial discretion may be
alleviated.
[27]
First,
a defendant may have recourse to section 4 of the Court Order Interest Act.
It provides that in certain circumstances, a defendant may avoid prejudgment
interest by making a payment into court in satisfaction of the claim.
[28]
Second,
the court has the discretion to determine the appropriate rate of interest. In
that regard, the British Columbia courts have determined that subsection 1(1)
of the Court Order Interest Act requires prejudgment interest to be
awarded on punitive damages, but the judge has the discretion to set the
applicable rate of interest on the punitive damages at a nominal rate: see J.L.M.
v. P.H. (1998), 109 B.C.A.C. 165. By analogy, the court may exercise its discretion
to determine the rate of interest on statutory damages at an annual interest
rate that combines a normal rate of interest on the unpaid royalties, and a
lesser rate on the remainder.
[29]
In
this case, the prothonotary determined that the multiplier for the statutory
damages should be six, and that the annual rate of prejudgment interest should
be 2.5%. The record affords no basis upon which this Court would be justified
in changing either the multiplier or the rate of interest determined by the
prothonotary, and I would decline to do so.
[30]
As
mentioned above, SOCAN has determined that the amount of prejudgment interest
at an annual interest rate of 2.5% from the date the cause of action arose
would be $8,995.89. SOCAN is entitled to prejudgment interest in that amount.
Conclusion
[31]
For
these reasons, I would allow the appeal and set aside the judgment of the
Federal Court judge. Making the judgment that should have been made, I would
allow the Rule 51 appeal and vary paragraph 2 of the judgment of the
prothonotary so that it reads as follows:
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2.
The Defendant shall pay to the Plaintiff pre-judgment interest in the amount
of $8,995.89.
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[32]
SOCAN
has asked for costs in this Court and in the Federal Court. Generally, the
successful party in a proceeding in this Court is entitled to costs. However,
this appeal is unusual in that IIC has taken no part in the proceedings and the
principal objective of SOCAN in pursuing this appeal is
to establish a principle that will have
consequences in all of its claims arising in British Columbia. It has
succeeded in that objective but in the circumstances, I would award no costs.
“K.
Sharlow”
“I
agree
J.D. Denis Pelletier J.A.”
“I
agree
Robert M.
Mainville J.A.”
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