Ottawa, Ontario, April 11, 2006
PRESENT: The Honourable Mr. Justice Barnes
BETWEEN:
THE CANADIAN COPYRIGHT LICENSING
AGENCY ("ACCESS COPYRIGHT")
and
APEX COPY CENTRE, BLOOR COPY CENTRE
and LAC VAN NGUYEN (aka KEVIN WYANE)
REASONS FOR JUDGMENT AND JUDGMENT
[1] The Plaintiff in this proceeding is a reproduction rights organization which facilitates authorized public access to copyrighted works through licensing and royalty arrangements. In that capacity, it represents Canadian authors and publishers and it protects their copyright interests by agreements and by investigation and enforcement action.
[2] The Defendant, Lac Van Nguyen (Nguyen), is the owner and operator of the two Defendant proprietorships, Apex Copy Centre and Bloor Copy Centre (respectively Apex and Bloor) and for a number of years has carried on the business of printing or copying published materials - often infringing upon the copyright interests of others, including those managed by the Plaintiff.
[3] The Plaintiff has had a protracted litigation history with the Defendants in this proceeding beginning with the granting of an Anton Piller Order by this Court on October 7, 2004. The Plaintiff's initial attempt to execute upon that Order early in 2005 was frustrated by the Defendants' refusal to comply. On March 14, 2005, the Plaintiff was granted a default Judgment against the three named Defendants in the amount of two hundred and fifty nine thousand and five hundred dollars ($259,500.00) as statutory damages for breach of copyright. That Judgment also included an award of pre-judgment interest at the rate of five percent (5%) calculated from October 8, 2004. By subsequent Order of this Court, the Plaintiff was awarded costs against the Defendants in the amount of three thousand seven hundred and twenty five dollars ($3,725.00).
[4] In its efforts to collect upon the Judgment, Mr. Nguyen was served with a Direction to Attend a Judgment Debtor Examination on April 25, 2005. He failed to attend that examination as required.
[5] On October 7, 2005, the Plaintiff obtained a Writ of Seizure and Sale and a Writ of Delivery with respect to the three named Defendants. On October 26, 2005, the Sheriff enforced the Writ of Seizure and Sale and the Writ of Delivery against Bloor and various goods and chattels were seized at that time. Included in the seized material were five (5) boxes of infringing works which had been copied by the Defendants.
[6] In the course of attempting to execute against the property of Apex on September 22, 2005, the Sheriff advised counsel for the Plaintiff that the signage at the Apex location had been changed to indicate that the business was then being operated by Gerrard Copy Centre Inc. (Gerrard). Because of that apparent ownership change, the Sheriff declined to enforce the Writ of Seizure and Sale at the Apex location. Nevertheless, the Sheriff did successfully enforce the Writ of Delivery with respect to infringing works found at that location.
[7] Because of the apparent change of control or ownership of the business at the Apex location, the Plaintiff engaged the services of a private investigator with a view to determining whether Nguyen continued to operate the business at that location. Surveillance was carried out and it confirmed that Nguyen continued to work at the Apex location and continued to be directly involved in the infringement of the Plaintiff's copyright interests.
[8] The Plaintiff also conducted a corporate search under the name of Gerrard and it disclosed the name of a single director, Tam Nguyen. That company was incorporated on September 7, 2005. Further investigation by the Plaintiff indicated that neither Nguyen nor Gerrard had complied with the filing requirements of the Bulk Sales Act R.S.O. 1990, Chapter B. 14 pertaining to the transfer of assets from one to the other.
[9] The Plaintiff maintains, with some apparent justification, that Nguyen continues to be in charge and control of the business now being operated at the Apex location under the name of Gerrard. The evidence does indicate quite clearly that Nguyen and Gerrard continue to infringe the Plaintiff's copyright interests from that location. The problem for the Plaintiff, however, is that the Sheriff was not willing to execute against the business assets at that location because of the ostensible change in ownership of those assets to Gerrard. That company is not a named defendant in this proceeding and the Sheriff was unwilling to look behind the new corporate arrangement. In the result, the Plaintiff brought an application to this Court seeking to have amended Writs of Execution issued directing the Sheriff to seize and to sell the following:
... the real property or moveables and the personal property or moveables at located at 86 Gerrard Street, Unit 100, Toronto, ON... wherein Lac Van Nguyen is in care and control of the business there being carried on, and without regard to the fact that the ostensible entity there carrying on business is Gerrard Copy Centre Inc. or any other corporation or unincorporated proprietorship or partnership and to realize from that seizure [the amounts owing to the Plaintiff pursuant to its Judgment against the named Defendants].
[10] The Plaintiff brought this application seeking relief under Rule 434(1)(b) of the Federal Courts Rules SOR/98-106 which states:
| 434. (1) A writ of execution to enforce an order shall not be issued without the leave of the Court if
(a) six or more years have elapsed since the date of the order;
(b) a change has taken place, by death or otherwise, in the persons entitled or liable to execution under the order;
|
434. (1) Un bref d'exécution ne peut être délivré sans l'autorisation de la Cour pour faire exécuter une ordonnance dans les cas suivants :
a) six ans ou plus se sont écoulés depuis la date de l'ordonnance;
b) les personnes ayant droit ou assujetties à l'exécution en vertu de l'ordonnance ne sont plus les mêmes par suite d'un décès ou autrement; |
When this matter initially came before me, it was by way of an ex parte motion. I directed that the Plaintiff give notice to Nguyen and Gerrard to allow those parties to make representations with respect to the ownership of the assets at the Apex location if they so chose. Service of the Notice of Motion was effected upon Nguyen and Gerrard. Nevertheless, when the matter came before me again on March 20, 2006 no one appeared on behalf of either Nguyen or Gerrard.
[11] The single question which I am required to resolve is whether Rule 434(1)(b) authorizes me to amend the Writ of Execution in the manner requested by the Plaintiff.
[12] The Plaintiff argues that this Court has the authority to lift the corporate veil which would otherwise protect Gerrard from an execution against the assets which it now ostensibly owns. In effect, what the Plaintiff seeks is the addition of Gerrard as a judgment debtor by way of an ex post facto amendment to the outstanding execution order. I am, accordingly, invited to authorize the Sheriff to take a step which he had declined to take on the strength of the original execution order wherein Gerrard was not named.
[13] The Plaintiff relies upon a number of authorities which recognize that, in appropriate circumstances, a court may pierce the corporate veil to avoid "a result which is too flagrantly opposed to justice": see Trans-Pacific Shipping Co. v. Atlantic & Orient Trust Co. [2005] F.C.J. No. 416, 2005 FC 311 citing Constitution Insurance Co. v. Kosmopoulos (1987) 34 D.L.R. (4th) 208 at 213 (S.C.C.) affirming 149 D.L.R. (3d) 77. These authorities do, in fact, authorize a court to ignore the separate entity principle where one entity is the agent or puppet of another or where a corporation is being used to cloak the actions of another party: see Nedco Ltd. v. Clark et al., 43 D.L.R. (3d) 714 (Sask. C.A.) reversing 41 D.L.R. (3d) 565 and Syntex Pharmaceuticals International Ltd. v. Medichem Inc. [1990] 2 FC 499, [1990] F.C.J. No. 24 (F.C.A.).
[14] The Plaintiff says that I can also rely upon an evidentiary presumption which can impose upon a party a provisional or tactical burden to respond where a prima facie claim has been advanced by the opposite party: see Apotex Inc v.Bristol-Myers [2003] F.C.J. No. 950, 2003 FCA 263 (F.C.A.) and Ely Lilly & Co. v. Nu-Pharm Inc. (1996) 199 N.R. 185 (F.C.A.), [1996] F.C.J. No. 904, [1997] 1 F.C. 3 (F.C.A.). Because neither Nguyen nor Gerrard appeared on this Motion after notice was given to them, it is argued that an inference arises that Gerrard was created solely to defeat the Plaintiff's legal interests as a judgment creditor.
[15] Finally, the Plaintiff asserts that the failure of Nguyen and Gerrard to comply with the Bulk Sales Act and the Corporations Information Act, R.S.O. 1990, c.C 39 is further evidence of a lack of bona fides in the creation of Gerrard. On the strength of all of this, I am asked to amend the execution order to allow the Sheriff to seize the property located at the Apex location which ostensibly belongs to Gerrard.
[16] After reviewing the evidence with some care, I am satisfied that Gerrard is likely controlled by Nguyen and that this would likely be an appropriate case for the lifting of the corporate veil to properly secure the Plaintiff's legal interests.
[17] The problem that remains, however, is whether Rule 434 is the proper means by which that result can be achieved. I have reluctantly concluded that it is not.
[18] Counsel for the Plaintiff was unable to find any authority which has considered the purpose or the range of relief intended to be covered by Rule 434 and its predecessor rules. What is clear is that the Rule is a modern variant of English Rule 19. In one form or another, English Rule 19 has been part of the Rules of the Federal Court and of the Exchequer Court since at least 1895 and probably earlier. Notwithstanding that ancient heritage, the part of the Rule dealing with the issuance of execution where a change has occurred in the party liable under the original order does not appear to have ever been judicially considered in Canada and has only been obliquely mentioned in a handful of English authorities. In the result, there is very little to guide me in the interpretation of the scope of the Rule.
[19] Despite the absence of direct authority, I am confident that Rule 434 does not have the scope of application suggested by the Plaintiff. If it did, it would essentially allow for a form of default judgment against a party who was never named in the proceeding and, in this case, against a corporate party which did not even exist at the time the liability to the Plaintiff arose.
[20] If it had been intended by this Rule that an execution order could be amended to charge the assets of a party other than a named defendant or to lift a corporate veil on the basis of a summary process such as the one used here, presumably clearer language would have been used. While this is probably a situation where it would be appropriate to lift the corporate veil protecting Gerrard, that is not an outcome which this Rule was designed to accomplish.
[21] Furthermore, by linking the words "death" and "otherwise", the drafter of the Rule likely intended that "otherwise" be limited to the devolution of an interest or liability in circumstances similar to the death of one of the parties to a judgment. This would be consistent with the ejusdem generis rule of construction "whereby where there are general words following particular and specific words, the general words must be confined to things of the same kind as those specified [where the special words are of the same nature]" (Dukelow & Nuse, The Dictionary of Canadian Law (2nd Edition)).
[22] There is some English authority which touches on the history and use of this Rule but none of the cases precisely define the full scope of its application. Nevertheless, in Stewart v. Rhodes [1900] 1Ch. 386, [1899 S. 103] (Court of Appeal), Lindley MR did allude to the historical rationale for the Rule as a means to avoid certain technical problems in the enforcement of the execution where a debtor has died. His comments, in that regard, were as follows:
This section shews that it is necessary for the application of the Act and for obtaining of a charging order to have a person against whom a judgment has been entered, and the procedure shews that that person is the "judgment debtor," who must be in a position to shew cause why the charging order should not be made absolute. In other words, he must be alive. And it was settled long ago in Finney v. Hinde n(1) that a charging order nisi against a dead man was useless, and that it could not be converted into an order absolute. That is really all that Finney v. Hinde n(1) decided. That led to this possible result, that a creditor who had recovered a judgment for his debt against a dead man must, if he wished to have a charging order against his executor, obtain a judgment against the executor and thus make him a "judgment debtor." This could be done under the old practice. Then, when the creditor had got a judgment against the executor, the executor would be a "judgment debtor" within 1 & 2 Vict. c. 110, and the procedure under that Act would be applicable.
The objection to this experiment is that it is an attempt to obtain a charging order against an executor without first making him a "judgment debtor." But it is said that the plaintiffs have done that which by the modern practice is equivalent to a judgment. Is it so? Let us look a little further. The order relied on by the appellants as providing a procedure equivalent to obtaining judgment is Order XLII., r. 23. I agree that for most purposes if you have a judgment against a deceased man you need not bring an action on that judgment and recover another judgment against his executor; you can under that rule obtain leave to issue execution against the executor. There are two possible views of that rule. The one is that which has been urged by the appellants, that an order giving leave to issue execution is equivalent to a judgment. The other view is that an order giving leave to issue execution dispenses with the necessity of a judgment. In my opinion, the latter is the true view. The rule does not say, and it does not mean, that the plaintiff is to be treated as if he had got a judgment against the executor, but that, although he has no judgment against the executor, he need not obtain one, because he may issue execution against the executor without it.
n.1 4 Q.B.D. 102
[23] In Norburn v. Norburn [1894] 1 QB 448 (Divisional Ct.) Wills J. also commented on the same English Rule in the following passage:
I think that this appeal must be allowed. It may be desirable that the rules should be altered, as to which I express no opinion, but as they stand this is a very clear case. It is quite clear that upon the death of the plaintiff before judgment a personal action abates. If the plaintiff's death takes place after judgment, it is the judgment, not the action, which has to be considered. The old method of dealing with such a case was for the executors to issue a scire facias or a writ of revivor to enforce the judgment in their favour. For this cumbrous process has been substituted the method provided by Order XLII., r. 23. There is no other provision in the orders entitling them to be heard. Now, rule 23 gives executors a right to ask for leave to issue execution upon a judgment obtained by their testator; in this case the applicants have not done this, but have asked for a receivership.
[24] The English Rule has also been considered in the context of a bankruptcy (In re Clement [1901] QB 260 (Divisional Ct.)), in the context of an assignment (Forster v. Baker [1908-1910] All ER Rep. 554 (Court of Appeal)), and in the context of probate (Stewart v. Rhodes, above); but none of these decisions offers much help in understanding the full scope of the words "or otherwise" used in the Rule.
[25] I am, therefore, left to navigate in mainly unchartered waters. Given the very limited judicial history of this Rule and of its predecessor, I am of the view that it has a narrow construction. The use of the Rule should be limited to situations where the obligation of a judgment debtor has devolved by operation of law to some other representative party like an executor, guardian, trustee or administrator or perhaps by virtue of a merger of interests.
[26] Certainly, the Plaintiff has other forms of recourse available to it to achieve the desired outcome; but I do not believe that it can benefit from Rule 434 in the manner it proposes. I am, therefore, dismissing this application.
JUDGMENT
THIS COURT ORDERS that this application is hereby dismissed.
" R. L. Barnes "
Judge