Date: 19980608
Docket: T-2374-96
BETWEEN:
SOCIETY OF COMPOSERS, AUTHORS AND
MUSIC PUBLISHERS OF CANADA
Plaintiff
- and -
2971977 MANITOBA LTD., carrying on business as
TOWERS HOTEL, and JOE LEDUCHOWSKI
Defendants
REASONS FOR REPORT ON REFERENCE
G.M. SMITH,
REFEREE
[1] This Reference stems from a Judgment rendered on March 6, 1997, in default of any Defence by the Defendants, which found the Defendants to have infringed the Plaintiff's copyright, during the years 1993 through 1997, in musical works in which the Plaintiff owns the right to perform in public.
[2] The Court's Judgment ordered the Defendants to pay to the Plaintiff damages arising from the infringement and further directed that there be a reference to determine the amount of such damages, including such exemplary damages, if any, as may seem appropriate to the referee. The Defendants were also ordered to pay to the Plaintiff the profits made by the Defendants arising from the infringement, again to be determined on the reference, as well as pre-judgment and post-judgment interest and costs.
[3] In preparation for the reference, the Court directed the parties to file and serve Statements of Issues. The Defendants were also required to serve on the Plaintiff an affidavit listing all documents relevant to the issues of this reference such as financial statements, general ledgers, performer and agency contracts and other documents as may be requested by the Plaintiffs for the years in question. The Court further specified that if the Defendants were in default of the requirement to file the required documents, the Plaintiff would be entitled, upon ex parte application if it wished, to a reference hearing in Toronto which could be held without notice to the Defendants. The referee would thereupon determine the amounts awarded by the Court on the basis of affidavit evidence filed by the Plaintiff.
[4] In accordance with the Court's instructions, the Plaintiff's Statement of Issues and a copy of the Court's Judgment were duly served on the Defendants. The Defendants nevertheless continued their inaction in response to the Court's order and the Plaintiff was forced to move the Court again in October, 1997 for a further order that the Plaintiff be permitted to proceed to the reference on an ex parte basis. The Court's order granting this motion also appointed me as referee in this matter.
[5] At the Plaintiff's request, I fixed the ex parte hearing of the reference for May 1, 1998 by teleconference. Mark F. Walker appeared on behalf of the Plaintiff and relied on the Court record and the affidavit of Daniel Stupich, sworn on February 26, 1998 and filed with the Court on April 3, 1998, in support of Plaintiff's contentions. Written representations further addressing the issue of profits arising from background music and submitting the Plaintiff's position on the matter of costs were later filed on May 15, 1998.
[6] The Plaintiff, the Society of Composers, Authors and Music Publishers of Canada (hereinafter referred to as SOCAN), is a not for profit corporation established under the laws of Canada. Acting on behalf of authors, composers and music publishers, it carries on the business of granting licences for the public performance and communication to the public by telecommunication in Canada of dramatico-musical and musical works. It also collects royalties for the use of musical works for which it owns or controls the performing rights. SOCAN is the only performing rights society authorized by the Copyright Board of Canada to issue licences and to collect licence fees from parties wishing to perform copyright musical works in public in Canada. The tariffs and fees are authorized by Section 67 through Section 67.2 of the Copyright Act, R.S.C. 1985, Chapter C-42. The Copyright Board publishes each year in the Canada Gazette a statement of the royalties which the Society of Composers may collect. These are in the form of tariffs.
[7] The Plaintiff has represented that, had the Defendants obtained a licence from SOCAN, the fees or royalties which the Plaintiff would be entitled to collect are pursuant to Tariffs 3A, 3B, 15A and 18. Those fees are payable on or before January 31 of each year and relate to activities of live performances, live performances of which music forms an integral part, recorded background music and recorded music for dancing.
[8] Now, in attempting to determine the damages and profits that I would recommend to the Court be awarded against the Defendants, I find myself in a difficult position because of the absence of representation on behalf of the Defendants. Worse yet is the fact that the Plaintiff has not had access to the Defendants' records for this purpose. To what extent, therefore, can I be sure that the evidence proffered by the Plaintiff is realistic and accurate in the circumstances of the Defendants' business and what then should be the degree of reliance on that evidence ?
[9] At the hearing of this reference, counsel for the Plaintiff referred to Performing Rights of Canada Ltd. v. 497227 Ontario Ltd. (1986) 11 C.P.R. (3d) 289, Alma Veneer Felt Company Ld. v. Fisher (1896) 14 R.P.C. 159 and Wood v. Grand Valley Railway Co. (1915) 22 D.L.R. 614 in support of his contention that, due to the Defendants' own reticence, I am left to calculate those amounts in a "best as I can" manner.
[10] In the Alma Veneer case (supra), Lord Justice Lindley referred to the principle that the court will do the best that it can and leave the wrong-doer to suffer any injustice:
| What are you to do ? Are you to say to a Plaintiff who is entitled to a royalty, "Because we cannot find it out, owing to "the omission of duty on the part of the Defendant, we will give you "nothing," or are we to say that we will do the best we can, and leave the wrong-doer to suffer if injustice is really done ? The latter has always been the principle upon which the Court has proceeded. (page 167). |
[11] I agree with the Plaintiff's view on this point, especially so in view of the Supreme Court of Canada's ruling in the Wood case (supra) which essentially confirmed the principle postulated by counsel and decided, furthermore, that a tribunal's conclusion to "do the best it can" in estimating damages will not be set aside even if it is a matter of guess work.
[12] As mentioned earlier, the Plaintiff relied on the affidavit of Daniel Stupich, a field representative employed by the Plaintiff who visited the Defendants' premises to prepare performance logs of the music being used and to report on the characteristics of the Defendants' establishment which may be pertinent to a determination of the damages and profits due. I am confident that the expertise gained by the Plaintiff's representative in his dedicated field of investigation has led to fully relevant evidence about the Defendants' business and plausible calculations about the revenues, expenses and profits which were likely incurred.
Tariff 3A
[13] The evidence of Daniel Stupich is that the Defendants allowed the performance of the Plaintiff's musical works by means of live entertainment at least 2 days per week for a total of 40 weeks in each of the years 1993 through 1997 and throughout 1998 to the date of the reference. The Plaintiff further adduced evidence suggesting that the entertainment expenses for each of those years 1993 through 1997 were at least $32,000.00 and that the same would apply to the year 1998.
[14] It was therefore calculated, as appears in the affidavit of Stupich, that the licence fees, including GST charges, due and owing the Plaintiff pursuant to Tariff 3A for those years are as follows:
Year Licence Fees GST Total
1993 $832.00 $58.24 $ 890.24
1994 $864.00 $60.48 $ 924.48
1995 $896.00 $62.72 $ 958.72
1996 $928.00 $64.96 $ 992.96
1997 $960.00 $67.20 $1,027.20
1998 $960.00 $67.20 $1,027.20
$5,820.80
I recommend that these amounts as represented by the Plaintiff be awarded for fees under Tariff 3A, with the exception of the amount of $1,027.20 for the year 1998 for the reason which follows.
[15] In its Judgment, the Court found "[t]hat the Defendants have infringed the Plaintiff's copyright in musical works in which the Plaintiff owns the right to perform in public during the years 1993 through 1997, inclusive" (my underline). The Court then proceeded to direct that the Defendants pay to the Plaintiff damages and profits in connection with the years stipulated. While I am confident that the Court's direction for this reference encompasses the full calendar year of 1997, even though the Court's Judgment was rendered in mid-1997 (March 6, 1997 to be exact), I do not believe that it can be interpreted as extending to the year 1998. I have applied this view regarding the prohibition against including the year 1998 throughout my determination below of the amounts owing to the Plaintiff without repeating this reasoning.
Tariff 3B
[16] The Plaintiff further evinces that the Defendants allowed the performance of the Plaintiff's musical works by means of live performances of which recorded music forms an integral part at least one occasion during the year 1994 and "that the Defendants' entertainment expenses for that occasion were less than $3,000.00." I therefore determine the licence fee due to the Plaintiff pursuant to Tariff 3B is $60.00 plus $4.20 for GST.
Tariff 15A
[17] As to the performance of musical works by means of recorded background music, it is Plaintiff's position that this took place for 12 months each year during 1993 through 1997. Based on 2,000 square feet as the estimated area of the Defendants' premises, it is further determined that the following amounts are due the Plaintiff for licence fees pursuant to Tariff 15A, plus GST charges:
Year Licence Fees GST Total
1993 $219.20 $15.34 $ 234.54
1994 $219.20 $15.34 $ 234.54
1995 $219.20 $15.34 $ 234.54
1996 $219.20 $15.34 $ 234.54
1997 $219.20 $15.34 $ 234.54
$1,172.70
Tariff 18
[18] The Court has further adjudged that the Defendants allowed the performance of the Plaintiff's musical works by means of recorded music for dancing. According to the Plaintiff's representative, this took place at least 1-3 nights per week for more than 6 months in each of the years 1993 through 1997. The estimated patron capacity of the Defendants' premises is 143 persons. I agree with the Plaintiff's evidence on this activity and find that Tariff 18 licence fees and GST charges in the following amounts are due against the Defendants:
Year Licence Fees GST Total
1993 $358.11 $25.07 $ 383.18
1994 $371.89 $26.03 $ 397.92
1995 $385.66 $27.00 $ 412.66
1996 $399.42 $27.96 $ 427.38
1997 $413.20 $28.92 $ 442.12
$2,063.26
[19] In accordance with the Court's Judgment, and based on the total general damages of $8,093.76 recommended above, I further determine that the amount of $749.40 is owing to the Plaintiff for pre-judgment interest calculated at the rate of 4.5% per annum from February 1st of each respective year for the years 1993 to date of Judgment on March 6, 1997.
Profits
[20] In the affidavit of Daniel Stupich, it was further estimated that, in general, the entertainment expenses of establishments such as the Defendants are 25% of its gross revenue. Given entertainment expenses of $32,000.00 for each of the years 1993 through 1997, as estimated above with respect to licence fees pursuant to Tariff 3A, it is quite conceivable that the Defendants' gross revenue for each of those years was $128,000.00. Deducting operating expenses of $111,360.00 for items such as the purchase of beer and liquor, wages and benefits, spillage and waste, bar supplies, and dishware, the Plaintiff further estimates that the Defendants' net profits for each of the years 1993 through 1997 was $16,640.00.
[21] It is also the evidence of Mr. Stupich, based on his observations, that live performances were presented at the Defendants' premises at least 35.48% of the total operating hours for each of the years 1993 through 1997. The profits arising from the infringing live performances for each of those years are therefore at least 35.48% of the net profits per year of $16,640.00. This approach seems logical and realistic, again in these rough and ready circumstances, and I therefore find that the profits arising from the infringing live performances for the years of 1993 through 1997, inclusive, should be awarded to the Plaintiff in the amount of $29,519.36.
[22] The Plaintiff did not ask for a separate calculation of profits arising from the infringement by means of live performances of which recorded music forms an integral part. I therefore make no recommendation that profits be awarded for this item in respect of Tariff 3B.
[23] The Plaintiff is unable to quantify the profits arising from performances of music by means of recorded music for dancing because, as counsel explained, the Plaintiff's experience with this relatively new area in the use of music has been limited. I can only agree, however, with counsel's assumption that, from an obviously practical and business point of view, performances of music by means of recorded music for dancing must have a lucrative purpose and must therefore be profitable. Why otherwise would the Defendants undertake this expense ?
[24] In the circumstances of this case, and based on the evidence and the Plaintiff's submissions at the reference, I further agree with the Plaintiff that, in the absence of evidence to the contrary, a "best as I can" approach must be taken to determine the profits arising from this activity. I am not inclined, however, to agree with counsel's suggestion that the profits for recorded music for dancing would probably be the same as for live performances of music in respect of Tariff 3A, even with an appreciation that expenses incurred for recorded music would likely be less than for live performances. In my view, the draw of patrons for recorded music would be somewhat less, although not significantly so, than for live performances. Having said that, I have applied an 80% rate to the profits determined above in respect of Tariff 3A (ie. $29,519.36 x 80%) and determine that the profits due to the Plaintiff for the use of recorded music for dancing by the patrons at the Defendants' premises during the years in question should be fixed at $23,615.49.
[25] The Plaintiff is unable as well to quantify profits arising from performances of music by means of recorded background music. In consideration however of the evidence regarding the Defendant's business and based on the Plaintiff's submissions that an amount of double the licence fees would be approriate, I recommend also that $2,814.49 be awarded for this activity.
[26] No exemplary damages are requested by the Plaintiff.
[27] In counsel's written submissions following the hearing of this reference, the Plaintiff claimed a total of $2,009.10 for the legal costs of this action and for the reference. Fees for the services of counsel with respect to preparation of the Statement of Claim ($400), the Motion for default judgment ($350) and attendance on the reference ($100) are allowed as claimed. The claim for preparation for the reference cannot be allowed under item 13(a) because, as I interpret part D of the Assessable Services described in Tariff B, the hearing of a reference is not included in that definition. In the exceptional circumstances of this particular ex parte reference, however, I will exercise my discretion in allowing 3 units under item 27 for services by the Plaintiff in preparation of its Statement of Issues and preparing for the reference. The disbursements for court fees ($50) filing services ($96.30) and process servers ($712.80) are also allowed. In this manner, costs for the action and the reference are allowed in the total amount of $2009.10.
[28] In conclusion, pursuant to the Judgment of this Court dated March 6, 1997, I find the following amounts to be due to the Plaintiff in its claim against the Defendants herein and a Report of these findings, in accordance with rule 161 of the Federal Court Rules, 1998, will issue accordingly:
Total damages under Tariffs 3A, 3B, 15A and 18: $ 8,093.76
Pre-judgment interest on damages at the rate of 4.5%: $ 749.40
Profits:
Tariff 3A - live performances 1993-1997: $29,519.36
Tariff 18 - recorded music for dancing 1993-1997: $23,615.49
Tariff 15A - recorded background music 1993-1997: $ 2,814.48
Costs of the action and the reference: $ 2,009.10
Total amount determined owing to the Plaintiff
for damages, interest, profits and costs: $66,801.59
"Gregory M. Smith"
Gregory M. Smith
Referee
Ottawa, Ontario
June 8, 1998
FEDERAL COURT OF CANADA
TRIAL DIVISION
NAMES OF SOLICITORS AND SOLICITORS OF RECORD
COURT FILE NO.: T-2374-96
BETWEEN:
| SOCIETY OF COMPOSERS, AUTHORS AND |
MUSIC PUBLISHERS OF CANADA
Plaintiff
| - and - |
| 2971977 MANITOBA LTD., carrying on business as |
TOWERS HOTEL, and JOE LEDUCHOWSKI
| Defendants |
PLACE OF HEARING: Teleconference - Ottawa/Toronto
DATE OF HEARING: May 1, 1998
REASONS FOR REPORT ON REFERENCE BY G.M. SMITH, REFEREE
DATE OF REASONS: June 8, 1998
APPEARANCES:
| Mark F. Walker for the Plaintiff |
No one appearing for the Defendants
SOLICITORS OF RECORD:
SOCIETY OF COMPOSERS,
AUTHORS and MUSIC
PUBLISHERS OF CANADA
Don Mills, Ontario for the Plaintiff
No one appearing for the Defendants