Date: 19990428
Docket: T-686-99
BETWEEN:
WIC PREMIUM TELEVISION
Plaintiffs
- and -
ROY LEVIN a.k.a.ROY LEVINE, JOHN DOE,
JANE DOE and ANY OTHER PERSON OR PERSONS FOUND ON THE PREMISES OR IDENTIFIED AS WORKING AT THE PREMISES AT 1830 DUBLIN AVENUE, WINNIPEG, MANITOBA WHO OPERATE OR WORK FOR BUSINESSES CARRYING ON BUSINESS UNDER THE NAME AND STYLE OF 'STARLINK', 'STARLINK INC.', 'STARLINK CANADA', 'STARLINK MANITOBA', OR ONE
OR MORE OF THEM
Defendants
REASONS FOR ORDER
SHARLOW J.:
[1] The Plaintiff alleges that it is being damaged by certain illegal acts of the Defendant and wants the Defendant restrained.
[2] The Plaintiff's first step was to apply ex parte for an order under Rule 377, an Anton Piller order. The application was granted on April 19, 1999 by the Motions Judge on that day, to be considered for confirmation on April 26, 1999. That motion is before me. The order was executed on April 21, 1999. The Defendant has made a motion to have the Anton Piller order set aside, and all of the seized material restored to the Defendant at the Appellant's cost.
[3] In both of these motions, I am required to reconsider the application for the Anton Piller order de novo as to the facts and law: Pulse Microsystems Ltd. v. SafeSoft Systems Inc. (1996), 67 C.P.R. (3d) 202 (Man. C.A.).
[4] An Anton Piller order is issued to ensure the preservation of documents that are the subject matter of a cause of action. It takes its name from Anton Piller KG v. Manufacturing Processes Ltd., [1976] 1 All ER 779 (C.A.). The plaintiff in that case believed the defendants were breaching the plaintiff's copyright and that the defendants, if notified in advance, would destroy relevant documents or send them out of the jurisdiction so that they would not exist when the action reached the stage of examination for discovery. The Court of Appeal held that the court had the jurisdiction to make an order, on the ex parte application of the plaintiffs, compelling the defendant to permit the plaintiff to inspect its premises and remove documents, or copies of them. On page 784, Ormrud L.J. laid out the conditions that must be met by the plaintiff:
| First, there must be an extremely strong prima facie case. Secondly, the damage, potential or actual, must be very serious for the plaintiff. Thirdly, there must be clear evidence that the defendants have in their possession incriminating documents or things, and that there is a real possibility that they may destroy such material before any application inter partes can be made. |
[5] In this case, counsel for the Defendant concedes that the first condition has been met, but he argues that there is insufficient evidence to establish the second or third conditions and therefore the order should be set aside.
The first condition -- prima facie case
[6] Even though the existence of a prima facie case is conceded, it is useful to review the evidence to put the issues in perspective.
[7] In support of the Plaintiff's original application, the affidavit of Luther Haafe sworn April 15, 1999, was filed. It describes the business of the Plaintiff and the basis for its claim that the Defendant's activities are causing the Plaintiff harm.
[8] According to Mr. Haafe's affidavit, the Plaintiff carries on a business in Canada described as a "programming distribution undertaking", for which it has a licence from the Canadian Radio-Television and Telecommunications Commission (CRTC). Among the programming services the Plaintiff offers is Superchannel, which is described as a premium commercial free service which includes movies and special events. Generally, the Plaintiff is either the exclusive licensee or the only licensee of this programming in Western Canada. This programming is distributed to cable television providers and the only two CRTC licensed "direct to home" (DTH) undertakings, Star Choice and ExpressVu. As I understand it, the DTH business operates in competition with the cable companies. Programs are transmitted in the form of encrypted signals from a satellite to customers who have their own satellite dishes and decoding devices.
[9] Mr. Haafe also says that there are corporations who are licensed by United States authorities to carry on DTH undertakings in the United States. For example, United States Satellite Broadcasting Company (USSB) and Echostar Communications Corporation (Echostar) are DTH broadcasters. They transmit encrypted signals for the channels known as HBO and Showtime which, according to Mr. Haafe, offer programming that is virtually the same as that offered by Superchannel. Neither USSB nor Echostar have a Canadian broadcasting licence.
[10] There is no evidence as to the degree of similarity between the actual content of the programming of HBO and Showtime in the United States and Superchannel in Canada. I take it that when Mr. Haafe says the programming of HBO and Showtime is "virtually the same" as that of Superchannel, he does not mean that HBO and Showtime necessarily broadcast the same movies as Superchannel, but rather that HBO and Showtime offer what may be described as "commercial free programming consisting of movies and special events."
[11] Against this factual background, it is necessary to consider some statutes. It is now established that anyone in Canada who decodes encrypted signals from a broadcaster that does not have the lawful right to transmit those signals in Canada is breaching paragraph 9(1)(c) of the Radiocommunication Act. That proposition apparently was in doubt before the decision of Gibson J. in Expressvu Inc. et al v. NII Norsat International Inc., [1998] 1 F.C. 245 (affirmed (1997), 222 N.R. 213 (F.C.A.)).
[12] Paragraph 10(1)(b) of the Radiocommunication Act makes it an offence for any person, without lawful excuse, to offer for sale or possess any equipment under circumstances that give rise to a reasonable inference that the equipment has been used, or is or was intended to be used, for the purpose of contravening section 9.
[13] Subsection 18(1) of the Radiocommunication Act provides a statutory cause of action by a licensed broadcaster for loss or damage caused by conduct that is contrary to paragraph 9(1)(c) or 10(1)(b). It follows that if the Plaintiff has suffered loss or damage because of the acts of the Defendant that contravene those provisions, and the Defendant has no lawful excuse or defence, the Plaintiff may claim damages or "obtain such other remedy, by way of injunction, accounting or otherwise, as the court considers appropriate."
[14] There is evidence that the Defendant sells equipment, the only purpose of which is to decode encrypted signals from such United States broadcasters as USSB and Echostar. That meets the description in paragraph 10(1)(b) of the Radiocommunication Act, assuming no lawful excuse. Therefore, there is a prima facie case that the Defendant is or has been doing the acts described in paragraph 10(1)(b). That, with subsection 18(1), is sufficient to establish the prima facie case conceded by counsel for the Defendant.
Serious damage to the Plaintiff
[15] With respect to the second condition, serious damage to the Plaintiff, it is necessary to consider paragraph 24 of the affidavit of Mr. Haafe, which reads as follows:
| Because the plaintiffs (sic) has [a] broadcasting licence as a programming distribution undertakings (sic) in Western Canada and the commercial licences from copyright holders set out above, the continued operations of the defendants will cause irreparable damage that cannot be fully compensated by damages that the Court might award. This is because some of the damages being sustained by the plaintiff are loss of reputation and goodwill which are difficult to accurately quantify. |
[16] This is the only evidence that speaks directly to second condition. To take this evidence as proof of the second condition, it is necessary to infer two things. First, it is inherent in the Plaintiff's broadcasting licence and copyright licences that the Plaintiff must necessarily be damaged by anyone whose business consists of facilitating access to encrypted signals from foreign based broadcasters who have no Canadian licence. Second, the Defendant's activities are of such a nature and scale as to cause harm that can fairly be described as "serious." The question is whether those inferences can properly be made.
[17] In support of its position that this evidence establishes the requisite degree of damage, the Plaintiff cites the trial decision in Expressvu. One of the plaintiffs in that case was a corporation that had received a licence for a DTH broadcasting undertaking (the same kind of licence as the Plaintiff in this case) but had not yet commenced operations. The others were distributors of television subscription programming, apparently through cable, and had copyright licences that I assume were like those of the Plaintiff in this case. The defendants were in the business of selling satellites and decoders for encrypted signals from United States broadcasters, a business similar to the one the Defendant is alleged to carry on. The plaintiffs commenced an action for an injunction and damages. The defendants applied for summary dismissal on the basis that the plaintiffs had not disclosed a cause of action. The defendants were not successful and the plaintiffs were granted the injunction.
[18] The Plaintiff in this case argues that if an injunction was appropriate in Expressvu, it must follow that an Anton Piller order is appropriate here. I do not agree.
[19] The defendants in Expressvu had argued, among other things, that the plaintiffs could not rely on section 18 of the Radiocommunication Act because they had not established that they had suffered loss or damage as a result of the conduct of the defendants. Gibson J. rejected that argument. In the case of the licensed broadcaster that had yet to commence its business he said, at pages 271-272:
| There is no evidence before me that would indicate that ExpressVu does not continue to intend to take advantage of the licence granted to it. While it prepares to do so, the activities of Norsat, the retailers to whom it sells, the purchasers from those retailers and those who facilitate those purchasers in activating their decoders continue to occupy an increasing share of the Canadian market for DBS services. While some of those who subscribe to United States originated services through the activities of Norsat and others might also subscribe to or even switch to ExpressVu's service when it is available, I am prepared to assume that not all will do so, as long as they are allowed to continue to receive the United States originated services. While the quantification of ExpressVu's loss or damage might be very difficult, that is not the issue. I am prepared to conclude that ExpressVu has suffered loss or damage and will continue to do so unless present practices are dramatically altered. |
[20] With respect to the other plaintiffs, he said, at page 272:
| ... the evidence before me shows that they have suffered some loss or damage by reason of the fact that programming to which they have exclusive rights in all or part of Canada by virtue of licences from copyright holders is being received and viewed in Canada without their authorization. |
[21] I think these conclusions do not assist the Plaintiff in this case. Gibson J. was considering whether the plaintiffs had suffered any loss or damage, which is the test in section 18 of the Radiocommunication Act, and he was considering that question in the context of a case where the defendants had admitted the essential facts in order to raise a point of law. By contrast, in this case, the Plaintiff is not asking simply for an order based on admitted facts to stop the Defendant from carrying on an activity found to be unlawful. The Plaintiff wants an order for a pre-trial remedy in the context of disputed facts, where the remedy has the capacity for a total disruption of the Defendant's affairs. It is the nature of this extraordinary remedy that mandates the requirement of "very serious damage," not just "some damage."
[22] It is worth noting also that in ExpressVu, in the case of the plaintiff that had not yet commenced to carry on its broadcasting business, there apparently was evidence of the market share being taken up by the illegal activities. In the case of the plaintiffs who were already carrying on their broadcasting business, there apparently was evidence that programming that had been exclusively licensed to the plaintiffs was being received and viewed in Canada without their authorization, thus depriving them of the fees they could have earned by broadcasting that very programming.
[23] In this case there is no evidence of market share, not even an estimate of the volume of business the Defendant may have. Nor is there evidence of even a single movie or special event licensed to the Plaintiff that might have flowed through a device sold by the Defendant and that might have been seen by a viewer in the Plaintiff's market in Western Canada. Ultimately, the Plaintiff may prove its claim for a remedy under section 18 of the Radiocommunication Act. But the test for an Anton Piller order is not simply the existence of a cause of action and some damages. There must be evidence of serious damage.
[24] I agree with counsel for the Defendant that there is no evidence that the acts of the Defendant have caused or may cause the Plaintiff to suffer serious damage. Thus, the second condition is not met. That is sufficient to deny the application for an order to continue the Anton Piller order.
The third condition -- likelihood that records will be destroyed
[25] I will also consider the argument of the Defendant that there is no evidence that the third condition was met. This requires evidence that the Defendant has documents that will assist in proving the Plaintiff's claim, and that there is a real possibility that it may destroy such material before any application inter partes can be made.
[26] In my view, the same evidence that establishes the prima facie case of the unlawful activities of the Defendant is evidence of the existence of incriminating documents in the Defendant's possession.
[27] However, the evidence that the Defendant might destroy the documents, given a chance, is a different matter. Counsel for the Defendant argues that the Plaintiff's evidence relating to the third condition is based almost wholly on the opinions expressed in affidavits and does not constitute positive evidence that the Defendant is likely to destroy the evidence. He cites Chin-Can Communication Corp. v. Chinese Video Centre Ltd. (1983), 70 C.P.R. (2d) 184 (F.C.T.D.), in which Addy J. said that it was not enough for a plaintiff to state only his belief that the only way the material will be recovered is by an Anton Piller order. Counsel for the Defendant compares the Plaintiff's evidence to that.
[28] I do not see this issue in quite the same light. I summarize the Plaintiff's position as follows. The Defendant sells decoders for encrypted signals transmitted by United States broadcasters who are not licensed to transmit in Canada. The decoders must be acquired from the United States broadcasters, and that requires first subscribing for their services. Thus, the business of the Defendant also includes selling such subscriptions. However, the United States broadcasters will not knowingly take subscriptions from Canadian customers. In order to fool the United States broadcasters, persons who are selling Canadian subscriptions submit them under fictitious names with false United States addresses. If the Defendant is selling decoders, it is probably selling subscriptions like this as well. If that is so, the only practical way to keep track of these subscriptions and match the real names and fictitious names with all the related information from the United States broadcasters, is to keep business records on computers. The Defendant uses computers in its business. Computer records can be destroyed easily and quickly. The Defendant must be taken to be aware that its activities are illegal and could result in penalties. If the Defendant is given advance notice of the Plaintiff's claim, the Defendant has both the incentive and the means to destroy its business records too quickly for the Plaintiff to retrieve them. Therefore, it should be inferred that the Defendant is likely to do just that if the Anton Piller order is not granted or continued.
[29] Evidence of the facts referred to in this summary can be found in the affidavit of Mr. Haave. There is some evidence touching on these points in the other affidavits, but they neither enhance nor derogate from the Plaintiff's position on the third condition and I have ignored them. The inferences in this summary are just that, and must be assessed as a matter of reason.
[30] In my view, the factual evidence is adequate and the reasoning bears scrutiny. Thus, it follows that I find the third condition has been met.
Other evidence adduced by the Plaintiff
[31] Counsel for the Defendant was critical of the evidence submitted by the Plaintiff that was intended to paint a picture of the Defendant as operating a transient and clandestine business, and therefore an illegal business. It was suggested that this material was intentionally pejorative, and adduced solely in order to give an unfair picture of the Defendant and its business. He also suggested that the real motivation of the Plaintiff in seeking the Anton Piller order was to destroy the Defendant's business, not to get evidence of a bona fide claim, but there is no evidence on this point.
[32] The affidavits of the investigators hired by the Plaintiff suggested that persons carrying on an unlawful business typically have impermanent premises, conceal the identities of the people who work for them, use many different business names, and are not listed in typical government registries of businesses or companies. These investigators claimed to find these indicia in the Defendant's operation. Some of their evidence apparently was intended to reflect negatively on the Defendant's credit rating, and it was suggested that this evidence could not have been obtained except in contravention of Manitoba law.1
[33] The Plaintiff also adduced evidence of a name search based on some variants of the word "starlink." This was intended to demonstrate either the lack of corporate presence or frequent name changes. However, the Defendant adduced evidence of its own name search that seemed to establish the opposite. The discrepancy was never explained to my satisfaction.
[34] In argument before me, Plaintiff's counsel confirmed his reliance on the material in the investigators' affidavits, referring to it as the "smell test" that experienced investigators are accustomed to employing in such matters. He said that the investigators started the investigation with the knowledge that the Defendant was carrying on an illegal business, and were looking for confirmation. Responding to this material, much of the Defendant's evidence was adduced to show that the investigators were simply wrong on some of the facts they relied upon in reaching their conclusion, and that their reasoning and investigations were substantially flawed.
[35] In my view, the affidavits of the Plaintiff's investigators do not display the degree of objectivity that might have lent them credibility, and in some respects draw unreasonable inferences. For example, one of the investigators found it significant that when he went to the Defendant's premises posing as a customer, the Defendant's employees did not tell him their names although he told them his. I see no logic there. It was apparently significant to one investigator that there were no pictures on the walls of the Defendant's place of business, only posters, and that the furniture was cheap looking and the premises were untidy. That was supposed to prove transience, although it is equally consistent with a modest business. The unreliability of these affidavits is confirmed by the explanation of Plaintiff's counsel as to the approach the investigators took to their task.
[36] This evidence apparently was adduced to establish the third condition, as evidence of the tendency of the Defendant to destroy records. I do not think it is capable of proving that. However, there is other evidence that proves that condition even if the opinions and other questionable evidence of the investigators is disregarded.
Conduct of Counsel for the Plaintiff
[37] Counsel for the Defendant went so far as to argue that in the initial hearing on April 19, 1999, counsel for the Plaintiff failed in his duty to present the Motions Judge with a balanced, dispassionate picture of the evidence, and that this alone should justify setting the Anton Piller order aside. Defendant's counsel points out that the suggestions of impermanence and clandestine operations are belied by material in the Plaintiff's own record, an excerpt from the Defendant's website, that the Defendant had been in business for at least two years and advertised its business name and the address where it carries on business. Similarly, the suggestion that there was a practice of concealing the identities of the principals was belied by material in the Plaintiff's own record that Mr. Levin, the principal, personally signs invoices with his own name.
[38] I do not know whether or not counsel for the Plaintiff presented these facts fairly at the initial hearing. Assuming he did not, I am not sure anything turns on it. These points appear to be addressed to the third condition for the Anton Piller order. Their omission may be irrelevant because that condition was established by other means.
Other issues
[39] Some preliminary matters that were raised at the hearing should be noted.
[40] The Defendant applied for an order abridging the time to file its material in response to the motions to be heard on April 26, 1999. There were some issues of service that ultimately were resolved, and I have granted that application.
[41] The motion for review of the execution of the Anton Piller order had been set down for April 26, 1999, but was adjourned to permit cross-examination on affidavits.
[42] I have ordered the Plaintiff to give the Defendant the videotape of the execution of the order.
[43] The Plaintiff applied at the hearing for a permanent injunction against the Defendant. I have not considered that application. At this stage of the proceedings I see no reason to deal with an application for injunction made without advance notice to the Defendant. The Plaintiff is free to bring such an application for an injunction upon proper notice.
Conclusion
[44] The application for an order continuing the Anton Piller order issued April 19, 1999, is denied and the order is set aside. The Plaintiff will restore all the seized material to the Defendant, and at its own cost will effect any necessary reinstallation of the seized material.
[45] Subject to further order of this Court, the Plaintiff will ensure that all information obtained in the seizure is kept confidential.
[46] The Defendant has asked for solicitor and client costs. In the circumstances of this case, the matter of costs should be left for determination by the trial judge.
Karen R. Sharlow
Judge
Ottawa, Ontario
April 28, 1999
__________________1I assume this is a reference to the Personal Investigations Act , R.S.M. 1987, Ch. P34.