Date: 20020611
Docket: T-2513-97
Neutral Citation: 2002 FCT 657
BETWEEN:
SOCIETY OF COMPOSERS, AUTHORS
AND MUSIC PUBLISHERS OF CANADA
Plaintiff,
- and -
1007442 ONTARIO LTD.,
carrying on business as I DON KNOWS
and CRYSTAL B. MOREY
Defendants.
REASONS FOR ORDER
KELEN J.:
[1] This is a motion by the plaintiff for summary judgment pursuant to Rules 213(1) and 216(a) of the Federal Court Rules, 1998 SOR/98-106. The issues are:
- · whether the defendant Morey is personally liable for the infringement of copyright by the defendant corporation, which operated an exotic dancing club and failed to pay royalties to the applicant for the use of the recorded music which accompanied the dancing; and,
- · whether there is a genuine issue for trial in the originating matter such that summary judgment is not appropriate.
[2] The corporate defendant 1007442 Ontario Ltd., carrying on business as "I Don Knows", consents to summary judgment. Accordingly, the Court will issue, on consent, summary judgment against the corporate defendant. The following reasons are restricted to the motion for summary judgment against the defendant Crystal B. Morey in her personal capacity.
FACTS
[3] The plaintiff Society of Composers, Authors and Music Publishers of Canada ("SOCAN") is a not-for-profit federal corporation which carries on the business of granting licenses for the public performance and communication to the public of "dramatico-musical" and musical works.
[4] The defendant 1007442 Ontario Ltd. is an Ontario corporation which operated an exotic dancing club in Etobicoke, Ontario under the name "I Don Knows" from 1993 through September 1997.
[5] The defendant Morey was at all material times the president, director, owner and operator of the corporation 1007442 Ontario Ltd.
[6] The plaintiff commenced the originating action against the defendants for:
- · non-payment of the appropriate royalty tariffs as required by the Copyright Act;
- · failure to obtain the necessary consent or licenses; and,
- · copyright infringement by way of the use of copyrighted material as an integral part of musical performances (exotic dancing), in public, for profit, without payment of the appropriate tariffs, contrary to sections 3, 27 and 67.3 of the Copyright Act during a period of time from 1993 to September 1997.
[7] The plaintiff SOCAN seeks:
- · a declaration that the defendants have infringed its copyrights;
- · damages, including exemplary damages, for copyright infringement;
- · an account of profits made by the defendants through their infringement and the award of such profits to the plaintiff; and,
- · injunctions restraining the defendants for allowing performances on their premises or maintaining a premises for performance of musical works in which the plaintiff owns the performing rights.
[8] In the alternative, the plaintiff seeks an Order pursuant to Rules 218 of the Federal Court Rules, 1998 specifying such material facts as are not in dispute and defining the issues to be heard at trial.
[9] The plaintiff submits that the defendants authorized or caused to be publicly performed musical works thereby infringing on the plaintiff's copyrights and other rights under the Copyright Act. The plaintiff made several attempts to inform the defendants, who did not take steps to obtain licensing or cease the performances.
LAW AND JURISPRUDENCE ON SUMMARY JUDGMENT
[10] Rules 213-216 of the Federal Court Rules, 1998, read in part, as follows:
Summary Judgment
Where available to plaintiff
213. (1) A plaintiff may, after the defendant has filed a defence, or earlier with leave of the Court, and at any time before the time and place for trial are fixed, bring a motion for summary judgment on all or part of the claim set out in the statement of claim.
[...]
Mere denial
215. A response to a motion for summary judgment shall not rest merely on allegations or denials of the pleadings of the moving party, but must set out specific facts showing that there is a genuine issue for trial.
Where no genuine issue for trial
216. (1) Where on a motion for summary judgment the Court is satisfied that there is no genuine issue for trial with respect to a claim or defence, the Court shall grant summary judgment accordingly.
(2) Where on a motion for summary judgment the Court is satisfied that the only genuine issue is
(a) the amount to which the moving party is entitled, the Court may order a trial of that issue or grant summary judgment with a reference under rule 153 to determine the amount; or
(b) a question of law, the Court may determine the question and grant summary judgment accordingly.
(3) Where on a motion for summary judgment the Court decides that there is a genuine issue with respect to a claim or
Jugement Sommaire
Requête du demandeur
213. (1) Le demandeur peut, après le dépôt de la défense du défendeur - ou avant si la Cour l'autorise - et avant que l'heure , la date et le lieu de l'instruction soient fixés, présenter une requête pour obtenir un jugement sommaire sur tout ou partie de la réclamation contenue dans la déclaration.
[ ... ]
Réponse suffisante
215. La réponse à une requête en jugement sommaire ne peut être fondée uniquement sur les allégations ou les dénégations contenues dans les actes de procédure déposés par l requérant. Elle doit plutôt énoncer les faits précis démontrant l'existence d'une véritable question litigieuse.
Absence de véritable question litigieuse
216. (1) Lorsque, par suite d'une requête en jugement sommaire, la Cour est convaincue qu'il n'existe pas de véritable question litigieuse quant à une déclaration ou à une défense, elle rend un jugement sommaire en conséquence.
(2) Lorsque, par suite d'une requête en jugement sommaire, la Cour est convaincue que la seule véritable question litigieuse est :
a) le montant auquel le requérant a droit, elle peut ordonner l'instruction de la question ou rendre un jugement sommaire assorti d'un renvoi pour détermination du montant conformément à la règle 153;
b) un point de droit, elle peut statuer sur celui-ci et rendre un jugement sommaire en conséquence.
defence, the Court may nevertheless grant summary judgment in favour of any party, either on an issue or generally, if the Court is able on the whole of the evidence to find the facts necessary to decide the questions of fact and law.
(4) Where a motion for summary judgment is dismissed in whole or in part, the Court may order the action, or the issues in the action not disposed of by summary judgment, to proceed to trial in the usual way or order that the action be conducted as a specially managed proceeding.
(3) Lorsque, par suite d'une requête en jugement sommaire, la Cour conclut qu'il existe une véritable question litigieuse à l'égard d'une déclaration ou d'une défense, elle peut néanmoins rendre un jugement sommaire en faveur d'une partie, soit sur une question particuliére, soit de façon générale, si elle parvient à partir de l'ensemble de la preuve à dégager les faits nécessaires pour trancher les questions de fait et de droit.
(4) Lorsque la requête en jugement sommaire est rejetée en tout ou en partie, la Cour peut ordonner que l'action ou les questions litigieuses qui ne sont pas tranchées par le jugement sommaire soient instruites de la manière habituelle ou elle peut ordonner la tenue d'une instance à gestion spéciale.
[11] In the matter of Granville Shipping Co. v. Pegasus Lines Ltd. S.A., [1996] 2 F.C. 853 (F.C.T.D.), affirmed in the Federal Court of Appeal's decision in ITV Technologies Inc. v. WIC Television Ltd., 2001 FCA 11, [2001] F.C.J. No. 400 (F.C.A.), Tremblay-Lamer J. included in the decision a detailed discussion of the jurisprudence and set out the general principles applicable to a motion for summary judgment at paragraph 8:
I have considered all of the case law pertaining to summary judgment and I summarize the general principles accordingly:
1. the purpose of the provisions is to allow the Court to summarily dispense with cases which ought not proceed to trial because there is no genuine issue to be tried (Old Fish Market Restaurants Ltd. v. 1000357 Ontario Inc. et al., [1994] F.C.J. No. 1631, 58 C.P.R. (3d) 221 (T.D.));
2. there is no determinative test [...] but Stone J.A. seems to have adopted the reasons of Henry J. in Pizza Pizza Ltd. v. Gillespie [(1990), 75 O.R. (2d) 225 (Gen. Div.)].
It is not whether a party cannot possibly succeed at trial, it is whether the case is so doubtful that it does not deserve consideration by the trier of fact at a future trial;
3. each case should be interpreted in reference to its own contextual framework
[...];
4. provincial practice rules (especially Rule 20 of the Ontario Rules of Civil Procedure, [R.R.O. 1990, Reg. 194]) can aid in interpretation [...];
5. this Court may determine questions of fact and law on the motion for summary judgment if this can be done on the material before the Court [...];
6. on the whole of the evidence, summary judgment cannot be granted if the necessary facts cannot be found or if it would be unjust to do so [...] ;
7. in the case of a serious issue with respect to credibility, the case should go to trial because the parties should be cross-examined before the trial judge [...]
The mere existence of apparent conflict in the evidence does not preclude summary judgment; the court should take a "hard look" at the merits and decide if there are issues of credibility to be resolved.
[12] Regarding Rule 216, in F. Von Langsdorff Licensing Ltd. v. S.F. Concrete Technology, Inc., [1999] F.C.J. No. 526 (F.C.T.D.) Evans J. (as he then was) held:
[para 10] However, a motion for summary judgment is not appropriate for deciding questions of fact that turn on credibility, or that require the kind of weighing and assessing of conflicting evidence that is properly the province of the trial judge. The applicable principles are usefully set out in Granville Shipping Co. v. Pegasus Lines Ltd. S.A. (1996) 111 F.T.R. 189, 192-193 (F.C.T.D.).
[13] Finally, in Pallmann Maschinenfabrik GmbH. Co. KG v. CAE Machinery Ltd., [1995] F.C.J. No. 898 (F.C.T.D.), Teitelbaum J. held:
[para 44] Therefore, summary judgment should not be granted on an issue where either on the whole of the evidence the judge cannot find the necessary facts or it would be unjust to do so. I am of the view that summary judgment should only be granted in circumstances where the facts are clear.
[14] In view of the case law, the test for summary judgment is clear: based on the evidence, has the plaintiff shown that the defendant has no genuine issue for trial?
ANALYSIS
Personal Liability of Directors and Officers
[15] At issue in this matter is whether or not the defendant Morey, as director and officer of the defendant corporation at the relevant times, is separately and independently liable for the acts of infringement that provide the basis for this matter. The defendant corporation has consented to summary judgment against it.
[16] The defendant Morey was the director and principal officer at the relevant times. The question before this Court is whether, in finding for summary judgment against the defendant corporation, is it reasonable and appropriate to also find summary judgment against the defendant Morey?
[17] Both parties rely upon Mentmore Manufacturing Co. v. National Merchandise Manufacturing Co. (1978), 40 C.P.R. (2d) 164 (F.C.A.) per Le Dain J. where the Court recognized these principles:
- 1. that an incorporated company is separate and distinct in law from its shareholders, directors and officers;
- 2. that a company is intended to have a limited liability; and,
- 3. that a director or officer of a corporation is not personally liable for actions in the ordinary course of his or her duties as a director or officer.
However, the Court will find a director or officer liable for a "deliberate, willful and knowing pursuit of a course of conduct that was likely to constitute infringement or reflected an indifference to the risk of it". Mr. Justice Le Dain held at pages 171 to 174:
What is involved here is a very difficult question of policy. On the one hand, there is the principle that an incorporated company is separate and distinct in law from its shareholders, directors and officers, and it is in the interests of the commercial purposes served by the incorporated enterprise that they should as a general rule enjoy the benefit of the limited liability afforded by incorporation. On the other hand, there is the principle that everyone should answer for his tortious acts. [...] It would render the offices of director or principal officer unduly hazardous if the degree of direction normally required in the management of a corporation's manufacturing and selling activity could by itself make the director or officer personally liable for infringement by his company.
This is a principle that should apply, I think, not only to the large corporation but also to the small, closely held corporation as well. There is no reason why the small, one-man or two-man corporation should not have the benefit of the same approach to personal liability merely because there is generally and necessarily a greater degree of direct and personal involvement in management on the part of its shareholders and directors. This view finds support, I believe, in the cases. It has been held that the mere fact that individual defendants were the two sole shareholders and directors of a company was not by itself enough to support an inference that the company was their agent or instrument in the commission of the acts which constituted infringement or that they so authorized such acts as to make themselves personally liable: see British Thompson-Houston Co., Ltd. v. Sterling Accessories, Ltd. (1924), 41 R.P.C. 311; Prichard & Constance (Wholesale), Ltd. v. Amata, Ltd. (1924), 42 R.P.C. 63. It is the necessary implication of this approach, I think, that not only will the particular direction or authorization required for personal liability not be inferred merely from the fact of close control of a corporation but it will not be inferred from the general direction which those in such control must necessarily impart to its affairs. I, therefore, have no difficulty in concluding, with respect, that the learned trial Judge was correct in holding that the fact "Goldenberg and Berkowitz imparted the practical, business, financial and administrative policies and directives which ultimately resulted in the assembling and selling of some goods (in National's overall stock of goods) which I have found infringed the plaintiffs' rights" was not by itself sufficient to give rise to personal liability.
What, however, is the kind of participation in the acts of the company that should give rise to personal liability? It is an elusive question. It would appear to be that degree and kind of personal involvement by which the director or officer makes the tortious act his own. It is obviously a question of fact to be decided on the circumstances of each case. I have not found much assistance in the particular case in which Courts have concluded that the facts were such as to warrant personal liability. But there would appear to have been in these cases a knowing, deliberate, wilful quality to the participation: see, for example, Reitzman v. Grahame-Chapman & Derustit Ltd. (1950), 67 R.P.C. 178 [Footnote 1] ; Oertli AG. v. E.J. Bowman (London) Ltd. et al., [1956] R.P.C. 282 [Footnote 2] ; Yuille v. B. & B. Fisheries (Leigh), Ltd. and Bates, [1958] 2 Lloyd's Rep. 596; Wah Tat Bank Ltd. et al. v. Chan Cheng Kum, [1975] A.C. 507 (P.C.).
[...]
I do not think we should go so far as to hold that the director or officer must know or have reason to know that the acts which he directs or procures constitute infringement. [...] But in my opinion there must be circumstances from which it is reasonable to conclude that the purpose of the director or officer was not the direction of the manufacturing and selling activity of the company in the ordinary course of his relationship to it but the deliberate, wilful and knowing pursuit of a course of conduct that was likely to constitute infringement or reflected an indifference to the risk of it. The precise formulation of the appropriate test is obviously a difficult one. Room must be left for a broad appreciation of the circumstances of each case to determine whether as a matter of policy they call for personal liability...]
[emphasis added]
[18] The test set out in Mentmore and subsequent jurisprudence have been summarized and applied in the decision of Gibson J. in Baker Petrolite Corp. v. Canwell Enviro-Industries Limited, [2001] F.C.J. No. 1256, 2001 FCT 889 (F.C.T.D.):
¶ ¶ 175 In Paula Lishman [(1997), 72 C.P.R. (3d) 214 (F.C.T.D.). ], Mr. Justice Rothstein, then of the Trial Division of this Court, considered the issue of personal liability of a director against the test for personal liability prescribed by Mentmore. He wrote at page 223:
There has been dishonesty exhibited by Mr. Iwata as a course of conduct with respect to the acquisition of garments from the plaintiffs, the manufacture of garments through Erom Roche Inc. that infringed the plaintiffs' patent and the sale of garments in Japan. There has been a deliberate attempt to strip Erom Roche Inc. of assets to render any judgment obtained by the plaintiffs uncollectible.
Given the deceptive and deliberately reckless behaviour Mr. Iwata has shown with regard to the plaintiffs and the infringement, it is clear that his conduct cannot be justified as merely directing the manufacturing and selling activity of Erom Roche Ltd. in the ordinary course of his relationship to it as a director. Rather, he engaged in the wilful and knowing pursuit of a scheme that constituted infringement and that reflected an indifference to the risk of it. Therefore, on the principles set out in Mentmore, I find that his participation in the infringing acts of Erom Roche give rise to personal liability on his account.
¶ ¶ 176 In Ital-Press Ltd. v. Sicoli [(1999), 86 C.P.R. (3d) 129 (F.C.T.D.).], I reached a similar conclusion to that of Mr. Justice Rothstein. At page 146 of the reasons, I noted:
I found the testimony of Mrs. Sicoli, to reflect arrogance, disrespect for the process of the Court and evasiveness. Like her son, she appeared to ensure that she was in a position to testify only to that which was in the interests of herself and the corporations that are co-defendants and of which I conclude that she is the directing mind.
At page 177, I concluded:
Against the formulation of the test set out in Mentmore, I am satisfied that the evidence before me demonstrates that Mrs. Sicoli, the directing mind behind the enterprises of the corporate defendants throughout the period that is relevant for the purposes of this matter, and apparently, also at the relevant times, the sole director and shareholder of the corporate defendants, reflected, at the very least, an indifference to the risk that the course of conduct on which the corporate defendants engaged was likely to constitute infringement of copyright or, in turn, reflected an indifference to the risk of the copyright infringement that I have found took place. In the circumstances, I find Mrs. Sicoli personally liable for the infringement, ... .
My decision in Ital-Press is currently under appeal.
[said appeal has not proceeded as of the time of the present decision]
¶ ¶ 177 It is worth noting certain of the language used in the foregoing citations. Mr. Justice Rothstein referred to "dishonesty", to a "deliberate attempt to strip [a corporation] of assets to render any judgment ... uncollectible", to "deceptive and deliberately reckless behaviour" and to "willful and knowing pursuit of a scheme that constituted infringement and that reflected an indifference to the risk of it". In Ital-Press, having had the opportunity to view the individual in question as a witness, to observe her conduct and demeanor and to consider her responses to questions, I reflected negatively on her testimony. I found on her part "... an indifference to the risk that the course of conduct on which the corporate defendants engaged was likely to constitute infringement or ... reflected an indifference to the risk".
¶ ¶ 178 By contrast, Mr. Justice MacKay of this Court, in Monsanto Canada Inc. et al v. Percy Schmeiser and Schmeiser Enterprises Ltd., [2001] F.C.J. No. 436 (F.C.T.D.)], wrote at paragraphs 143 to 145:
While Mr. Schmeiser is a defendant in this action it is urged for the defendants that since the farming operations were legally those of the corporate defendant, it alone should be liable in any relief awarded and Mr. Schmeiser should not be personally liable. For the plaintiffs it is urged that payments for the canola from the 1998 crop were made to and in the name of Percy Schmeiser, not to the company. Further, the plaintiffs rely
upon authorities which deal with the issue of the personal liability of a director for infringing acts done in the name of a corporation.
My reading of those cases is that it is exceptional when a director is held personally liable, at least in damages or monetary awards in these circumstances. In Mentmore ... , Le Dain J.A. for the Court of Appeal, upheld a decision to assign no personal liability to a director whose conduct could not reasonably be said to be outside the normal relationship of the director to his company, and otherwise so deliberate as to cause, or entirely indifferent to the risk of, infringement. In Lishman, ... Mr. Justice Rothstein, then of this Court, held a director personally liable where his conduct exhibited dishonesty and an attempt to strip the corporate party of assets that might otherwise satisfy any judgment that might be rendered.
I am not persuaded that Mr. Schmeiser's conduct, though deliberate and however uncooperative it appeared to the plaintiffs, was such that personal liability in regard to damages or interest is here warranted. Of course any claim to profits could only be in relation to the corporate defendant. As for the other orders here authorized, i.e. the injunction, the order for delivery up, should be directed to both defendants. Mr. Schmeiser is the directing mind and the active director of Schmeiser Enterprises. He may be made responsible for carrying out those orders. Judgment for damages or recovery of profits will be awarded against Schmeiser Enterprises only.
No authority for the sentence that I have highlighted in the foregoing quotation is cited by Mr. Justice Mackay. I have some difficulty understanding the rationale for the sentence, particularly in cases where, as here, an accounting of profits has been opted for in lieu of, not in addition to, damages. I note that in Paula Lishman, the plaintiffs had elected for an accounting of profits and that would appear not to have inhibited Justice Rothstein in finding personal liability on the part of a director.
¶ ¶ 179 I have earlier noted that in Ital-Press, I had the advantage of having the individual against who I found personal liability appear before me as a witness. That appearance was a significant factor influencing my decision to find personal liability. Here, Mr. Titley did not appear as a witness. There was no evidence before me on which I could conclude, as did Mr. Justice Rothstein in respect of the individual that he found to be personally liable, that there was dishonesty on the part of Mr. Titley. Equally, there was no evidence before me on which I could conclude that Mr. Titley's practice of ensuring the payment of large bonuses to himself constituted a deliberate attempt to render any judgment against Canwell
uncollectible. The only evidence before me as to Mr. Titley's possible intent was in no sense offensive. That evidence was to the effect that, like many others, he and Canwell were acting on professional advice and within the law to minimize income tax liability. There was no evidence of deception on the part of Mr. Titley. There was no evidence on his part of deliberate and reckless behaviour. What there might have been was evidence of a wilful and knowing pursuit of a scheme that
constituted infringement or that reflected an indifference to the risk of infringement, albeit Mr. Titley might reasonably have had professional advice as to the validity or invalidity of the Patent contrary to what I have here found.
[emphasis added]
[19] The Court derives from the jurisprudence that the appropriate test in cases such as this lies in analysis of the conduct of the personal defendant, to determine whether or not her actions can be characterized as dishonest, "deceptive and deliberately reckless behaviour", or indifference to the obvious consequences of her actions, such that a finding of personal liability is appropriate.
Music as an integral part of the performance
[20] The plaintiff submits that Tariff 3.B, a set of tariffs or royalties on recorded music certified by the Copyright Board under the Copyright Act, applies mainly to establishments whose form of entertainment is "erotic dancing". Licenses are granted under Tariff 3.B to allow performances of SOCAN copyrighted works in adult entertainment establishments.
[21] In view of the existence and ongoing enforcement of this tariff, the plaintiff submits that the defendant, as the operator of a club specifically contemplated by the tariff, was liable to obtain the proper license and pay the appropriate fees. This is alleged to be applicable regardless of whether a cover charge is in place, or if, as the defendants have alleged, the business makes a profit from the sale of beverages and food to the patrons. However, Tariff 3.B assumes the dancers are paid "compensation for entertainment". The evidence at the club in question is that the dancers are not paid by the defendants for performing on stage. Rather, the dancers seek a small fee (said to be $5) from individual patrons for dancing at the patron's table. The $5 fee for the "table dance" is kept by the dancer. In this way, the dancers operate as independent contractors, not employees of the defendants. Accordingly, the defendant Morey alleges that she did not believe the royalty payments were applicable to her club because the dancers were not paid compensation by the club.
Copyright Board Decision on Royalties for Exotic Dance Clubs
[22] The Copyright Board in Re Statement of Royalties to be collected for Performance or Communication by Telecommunication, in Canada, of Musical or Dramatico-Musical Works in 1994, 1995, 1996 and 1997 dated September 20, 1996 71 C.P.R. (3d) 196 considered the tariff or royalties for such clubs. In that case the Ontario Adult Entertainment Bar Association, and others objected to proposed Tariff 3.B rate increases for 1995. The Board held at page 201:
Tariff 3.B applies mostly to establishments whose form of live entertainment is erotic dancing. Performers, both on stage and at tables, dance to music that has been selected either by the person who is performing on the stage or by a third party, usually a disc jockey.
There are three categories of dancers. Freelancers receive no money from the club operator; they are only paid by patrons for their performances at tables. Scheduled dancers receive a payment per shift as well as payments from patrons for their performances at tables. Feature attractions are paid by the club; some, but not all, do table dancing.
The participants agree that SOCAN has encountered serious problems in enforcing Tariff 3.B. Clubs have challenged the amounts being claimed asking, among other things, discounts to account for the amount of music being played from gramophones.
[23] After outlining the facts, the Copyright Board held that Tariff 3.B could be improved. This finding underscores the defendant's contention that she did not pay the royalties because the question of liability under Tariff 3.B was in question and being challenged. The Copyright Board held at page 203:
[...] it becomes imperative to devise a tariff that increases the chances that club owners will comply with the tariff.
For these reasons, adult entertainment clubs should pay royalties according to a different tariff formula, with a rate base that will not be open to confusion, misinterpretation or avoidance [...]
That tariff formula should be based on data that is readily available, be readily understood and verified, be easy to administer, and not be easy to circumvent [...] These objectives can be reached by setting a price per seat, per day.
Accordingly, the Copyright Board, on September 20, 1996 certified a new tariff, Tariff 3.C, to be in effect for 1995 for exotic dance clubs.
[24] The relevance of this Copyright Board decision is that it corroborates the evidence of the personal defendant Morely that the royalties were not paid because there was confusion as to whether the regular tariff, Tariff 3.B, was applicable to her club. The Copyright Board recognized this confusion, recognized that Tariff 3.B may not be applicable to clubs that do not pay the dancers,
and that a new tariff, Tariff 3.C, would be certified as applicable.
Defendant's Knowledge of Decision
[25] This decision on September 20, 1996 was not communicated to the defendant Morey until some time in 1997, according to her evidence. At cross-examination the defendant Morey testified that prior to 1997, she believed that SOCAN royalty fees were based on the dancers' payroll and that this tariff did not apply since she did not have a payroll. She also testified, as found at pages 8 to 10 of the cross-examination held March 4, 2002, to her belief that at some point there would be a decision on this subject by the Courts, and that at the relevant times, the applicability of the fees was unresolved.
[26] The defendant Morey further testified on cross-examination that she did not know that royalties were required to be paid by her club. She thought that the royalties were paid by the company providing the disc jockey services. Her understanding changed in 1997 when she was informed that the tariffs had changed. When questioned she said: [It was in] "September/October of 1997 that I knew through my knowledge that the tariffs had changed, that there was - that this now did apply to the business at the time". (Question 94, page 18.)
[27] The test set out in Mentmore,supra. and applied in Baker Petrolite, supra. depends upon the Court finding that the director, officer or shareholder acted in "an intentionally dishonest" way to "deliberately cause the company to act illegally, to deceive or to be deliberately reckless, or to willfully and knowing pursue a scheme that constituted an infringement or reflected an indifference to the risk of it". In Ital-Press,supra. Mr. Justice Gibson stated that "he had the advantage of having the individual against whom I found personal liability appear before me as a witness. That appearance was a significant factor influencing my decision to find personal liability".
[28] In the case at bar, there is clear evidence of uncertainty with respect to the applicability of Tariff 3.B to certain adult entertainment establishments which do not pay compensation for the entertainment. That uncertainty was only resolved on September 20, 1996 when the Copyright Board handed down its decision. It is reasonable to assume that the impact of that decision would not be known immediately upon its issuance.
[29] Accordingly, it is beyond the purview of a motion for summary judgment to evaluate the impact of the Copyright Board's decision and any resulting liability to a corporate director. The evidence of defendant Morey must be assessed by a Trial Judge in order to determine the issue of her personal liability in this case.
Conclusion
[30] The principle that an incorporated company is a separate entity from its directors and officers is sacrosanct in the common law. Before the Court will pierce the corporate veil and hold a director personally liable for actions taken in their capacity as a representative of a corporation, questions of fact and credibility must be decided.
[31] Before this Court is prepared to make findings of fact and credibility, the Court would benefit from viva voce evidence. In Ital-Press, supra, Gibson J. had "...the advantage of having the individual against who I found personal liability appear before me as a witness.". This shows that a higher form of evidence is required to come to a finding of personal liability of a director or officer than can be presented in a motion for summary judgment.
[32] As Mr. Justice Evans held in F.Von Langsdorff Licensing Ltd., supra.:
[...] A motion for summary judgment is not appropriate for deciding questions of fact that turn on credibility, or that require the kind of weighing and assessing of conflicting evidence that is properly the province of the Trial Judge.
In this case I agree. There is a genuine issue for trial. Rule 216 of the Federal Court Rules, 1998 provides that a motion for summary judgment is only appropriate when there is no genuine issue for trial. Accordingly, in the case at bar, the motion for summary judgment against the personal defendant Morey is dismissed.
[33] The parties have agreed on many of the facts including that music is an integral part of the entertainment conducted at the club and that royalties are payable. The primary issue for the Trial Judge to determine is whether the conduct of the defendant Morey during the material time period was such as to make her personally liable for copyright infringement.
Subsection 27(5) of the Copyright Act
[34] The plaintiff also contends that subsection 27(5) of the Copyright Act imposes a personal liability upon the defendant Morey. Subsection 27(5) applies to any person who permits a place of entertainment to be used for the performance in public for work without the consent of the owner of the copyright subject to two qualifications:
i. the public performance was for the profit of the person; and,
ii. the person had no reason to suspect that the performance would be an infringement of copyright (emphasis added).
[35] Subsection 27(5) of the Copyright Act reads:
Public performance for profit
27. [...]
(5) It is an infringement of copyright for any person, for profit, to permit a theatre or other place of entertainment to be used for the performance in public of a work or other subject-matter without the consent of the owner of the copyright unless that person was not aware, and had no reasonable ground for suspecting, that the performance would be an infringement of copyright.
Représentation dans un but de profit
27. [...]
(5) Constitue une violation du droit d'auteur le fait, dans un but de profit, de permettre l'utilisation d'un théâtre ou d'un autre lieu de divertissement pour l'exécution en public d'une oeuvre ou de tout autre object du droit d'auteur sans le consentement du titulaire du droit d'auteur, à moins que la personne qui permet cette utilisation n'ait ignoré et n'ait eu aucun motif raisonnable de soupçonner que l'exécution constituerait une violation du droit d'auteur.
[36] As stated above, the defendant claims to have a reasonable basis for suspecting that her club was not covered by Tariff 3.B, and that until the decision of the Copyright Board on September 20, 1996, Tariff 3.C was also in question. As well, it could be argued that the defendant Morey did not permit the public performance for profit for herself, but for her corporation and she was acting in the normal scope of her duties as an officer of the company by permitting the playing of music for profit of the company. In this sense, the company is responsible and it was the company that was infringing the copyright.
[37] PROCAN v. Lion D'or (1981), Ltée (1987), 17 C.P.R. (3d) 542 (F.C.T.D.) per Strayer J. (as he then was) found an individual defendant responsible for the management of a cabaret and for the music played there. The Court held the personal defendant liable for failure to pay the royalties. However, the comments of Justice Strayer are obiter in that the action was dismissed because the plaintiff did not establish its title to the musical works. It is also important to note that in the PROCAN case, the personal defendant chose not to testify, and the Court found his failure to testify an implication of his responsibility. In the case at bar, the defendant Morey has testified at discovery, in her affidavit, and at the cross-examination of her affidavit.
[38] Accordingly, this motion for summary judgment against the personal defendant Crystal B. Morey is dismissed with costs in the cause.
[39] This motion for summary judgment was scheduled for March 12, 2002 but was adjourned upon motion on behalf of the defendants for an order extending the time to file reply material for the summary judgment hearing. The Court conducted a teleconference with counsel for the parties on March 8, 2002 and ordered that the costs of the defendants' motion for the extension of time would be reserved to the Judge hearing the motion for summary judgment. In view of the time
required to deal with the motion extending the time and the delay of the hearing of the motion for summary judgment, it is appropriate that costs be awarded to the plaintiff payable by the defendants in any event of the cause. These costs are fixed in the lump sum of $1,000.00.
(signed) Michael A. Kelen _________________________
JUDGE
OTTAWA, ONTARIO
JUNE 11, 2002
FEDERAL COURT OF CANADA
TRIAL DIVISION
NAMES OF COUNSEL AND SOLICITORS OF RECORD
DOCKET: T-2513-97
STYLE OF CAUSE: SOCIETY OF COMPOSERS, AUTHORS
AND MUSIC PERFORMERS OF CANADA
Plaintiff
- and -
1007442 ONTARIO LTD.,
carrying on business as I DON KNOWS
And CRYSTAL B. MOREY
Defendants
PLACE OF HEARING: Toronto, Ontario
DATE OF HEARING: May 29, 2002
REASONS FOR ORDER
AND ORDER OF: THE HONOURABLE MR. JUSTICE KELEN
DATED: June 11, 2002
APPEARANCES:
Mr. Kelly Gill FOR THE PLAINTIFF
Ms. Colleen Stanley
Mr. Constantine Alexiou FOR THE DEFENDANTS
SOLICITORS OF RECORD:
Ms. Anne M. Godbout FOR THE PLAINTIFF
Ms. Colleen M.P. Stanley
Ms. Lisa D. Trabucco
Society of Composers, Authors
and Music Publishers of Canada
Drudi, Alexiou, Sutherland FOR THE DEFENDANTS
Vaughan, Ontario