Docket: T-1765-96
FEDERAL COURT OF CANADA
TRIAL DIVISION
Between:
SOCIETY OF COMPOSERS, AUTHORS AND
MUSIC PUBLISHERS OF CANADA
Plaintiff
- and -
CLAUDE DEMERS AND MADELEINE DEMERS
Defendants
REPORT ON THE REFERENCE
FRANÇOIS PILON,
ARBITRATOR
| 1. This reference was held in Fredericton, New Brunswick, on July 13, 1998, pursuant to a default judgment given by the Honourable Mr. Justice Teitelbaum on July 16, 1997. That judgment ordered in part that: |
| a. the defendants pay the plaintiff damages arising from the infringement by the defendants of the plaintiff's copyright, and that the question of the amount of the said damages be determined by a reference; |
| b. in addition to damages, the defendants pay to the plaintiff the profits made by the defendants as a result of their infringement of the plaintiff's copyright, pursuant to section 35 of the Copyright Act, and that the question of the amount of the said profits by determined by the said reference; |
| c. the defendants pay to the plaintiff interest both before and after judgment on the said damages and profits, and its costs. |
| 2. In preparation for this reference, the Federal Court issued a subpoena asking the defendants, Claude Demers and Madeleine Demers, to attend to give evidence in Court at the hearing of this proceeding on Monday, July 13, 1998, at 10:00 in the morning, at the local office of the Court at 82 Westmorland St., suite 100, Fredericton, New Brunswick, and to remain until their attendance was no longer required. In addition, the Court advised the defendants, Claude Demers and Madeleine Demers, that they were required to bring with them and produce at the hearing the following documents and things: books of account, financial statements, performers' contracts, tax returns and any other document required to determine the profits made by the defendants for 1994, 1995, 1996 and 1997. |
| 3. The plaintiff is a collective copyright society under section 67 of the Copyright Act, R.S.C., 1985, chapter C-42. Under subsection 67.2(2) of the Act, the plaintiff is entitled to collect the royalties specified in its approved statement or, in default of their payment, recover them in a court of competent jurisdiction. These royalties have been approved by the Copyright Board from year to year, in accordance with the Act. In addition, the plaintiff is entitled to bring action for infringement of copyright against any person or corporation who has not been granted a licence and infringes its exclusive rights, by permitting or authorizing the performance in public of the musical works for which it holds the copyright. |
| 4. During the material period, the defendants, Claude Demers and Madeleine Demers, were the owners of the Pub Bistro Bar and subsequently of the Bar Évasion. During the period covered by the action, the defendants managed the business in question, and directly or tacitly authorized the performance of musical works and the infringement of the plaintiff's copyright. |
| 5. The approved statements for music performed live, payment of which the plaintiff is entitled to charge establishments, were published for 1994, 1995, 1996 and 1997 in the Canada Gazette as Tariff 3A. Under that tariff, the royalties chargeable each year are calculated as a proportion of the total compensation for entertainment during the year. Tariff 3A requires that the licence holder submit a report on the compensation for entertainment with its payment. |
| 6. On numerous occasions, the plaintiff informed the defendants that the performance in public of musical works for which the plaintiff holds the performance rights without obtaining the appropriate licences violated the Act (plaintiff's documents, tabs 1, 2, 3, 4, 10 and 15). |
| 7. The defendants were duly served with a copy of the amended statement of claim, the judgment, the notice of hearing and the subpoenas setting the reference down for hearing. They chose not to attend at the hearing. It would be unfair for the defendants not to be required to pay damages to the plaintiff because there was no evidence, as a result of the fact that they deliberately chose not to defend this action and then ignored the order of this Court to appear and bring with them the documents listed in the subpoena issued for this reference. Failure to appear at the reference as required by the subpoena is a sign of contempt for the Court and its process and should be considered in this case. |
| 8. The documentary evidence submitted by the plaintiff is the only evidence available to the Court for the purpose of determining the plaintiff's damages. The authenticity of that evidence is accordingly found to have been admitted. Sonia Ouellet filed the following documents: book of documents (tabs 1 to 31); affidavit of Richard Albert; Statement of issues; Interoffice memo dated December 8, 1995. |
| 9. The method of calculating damages (Document 3, Exhibit "A") used by Mr. Albert is a rough and ready estimate, a method long recognized by the industry and in the Canadian case law. The witness stated that he had visited the defendants' premises in 1994, 1995 and 1996. On each of their visits, the inspectors discussed SOCAN's rights with the owner or another responsible person, and also the royalties for any public performance of musical works, and advised that operating without a SOCAN licence was a violation of the Copyright Act. On each visit, the inspector left documents published by Consumer and Corporate Affairs Canada explaining the nature and mandate of SOCAN. Application forms for the appropriate licences were left with the person in charge on each occasion. The inspector wrote up an inspection report that is included in the plaintiff's evidence, and subsequently, from time to time, SOCAN sent a letter to the owner of the establishment requesting that he fill out a licence application. All these letters are in evidence, in volume 1 of the exhibits filed at the hearing. Over the years, the defendants failed to communicate with the plaintiff or its representatives in order to obtain a licence and settle their dispute. |
Calculation of damages
A. Infringement of Tariff 3A (music performed live)
10. Mr. Albert calculated the total compensation for entertainment for each of the four years in question, based on the following facts and factors:
| - the known number of evenings with groups |
| - an estimate of the door |
| - other compensation |
These figures are taken from the tariff of royalties that may be collected by the Copyright Board for a licence. A percentage is established each year and is published in the Canada Gazette.
11. I would like to note here that the known number of evenings with groups is based on advertising published in the local newspapers, and that the estimate of the door is $500.00 per evening, which is a very conservative figure according to Mr. Albert, since it is known that some doors might go as high as $4,000 per evening. The total royalties under Tariff 3A were determined to be $2,169.96, G.S.T. included.
B. Calculation of profits relating to the use of the music
12. First, the gross revenue for each year is calculated by multiplying the annual figure for compensation for entertainment by four. It is well known in the industry that entertainment expenses account for 25 per cent of an establishment's gross revenue. The total operating cost is obtained by deducting the following items:
| - the cost of sales (35%) |
| - wages and benefits (22%) |
| - shrinkage (2%) |
| - bar supplies (2%) |
| - breakage (1%) |
13. These items are deducted from gross revenue and make up the operating cost. At this point, compensation for entertainment is added, to obtain a final figure for total expenses. Net profits are obtained by subtracting total expenses from gross revenue. The witness calculated the amount of profits for the four years to be $7,064.20.
14. Pre-judgment interest is $1,235.62.
15. Ms. Ouellet also claimed exemplary damages in the amount of $15,000.00. She contended that it must be remembered that SOCAN represents creators and composers, people whose job it is to write songs and create music. It is important that these people be compensated for their creative energy, since the works it produces benefit everyone. Counsel for the plaintiff submitted that a number of other arbitrators who have had to decide similar cases have awarded exemplary damages. In my view, the conduct of the defendants demonstrates a serious lack of responsibility in dealing with the repeated requests by the plaintiff, by failing to obtain the appropriate licences. They have refused any communication with the plaintiff. In the circumstances, I think that the claim for $15,000.00 in exemplary damages is entirely reasonable.
16. In conclusion, I therefore recommend to the Court that the plaintiff be compensated in the following amounts:
1. royalties under Tariff 3A (GST included) $ 2,169.96
4. profits $ 7,064.20
5. pre-judgment interest $ 1,235.62
6. exemplary damages $ 15,000.00
total $ 25,469.78
Signed Signé
FRANÇOIS PILON
Arbitrator
Traduction certifiée conforme
Bernard Olivier
FEDERAL COURT OF CANADA
TRIAL DIVISION
NAMES OF COUNSEL AND SOLICITORS OF RECORD
COURT FILE NO: T-1765-96
BETWEEN:
SOCAN
Plaintiff
- and -
CLAUDE DEMERS and MADELEINE DEMERS
Defendants
PLACE OF REFERENCE: Fredericton
DATE OF REFERENCE: July 13, 1998
REASONS FOR REFERENCE BY F. PILON, ARBITRATOR
DATE OF REASONS: July 21, 1998
APPEARANCES:
Sonia Ouellet for the plaintiff
Not represented for the defendants
SOLICITORS OF RECORD:
Gowling, Strathy & Henderson
Ottawa, Ontario for the plaintiff