CAN DMS 40986083 v3 Statement of Defence (Woods)

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Court File No.

13-57387

ONTARIO
SUPERIOR COURT OF JUSTICE

BETWEEN:

TANYA WOODS and 2285675 ONTARIO INC.


Plaintiffs

- and -

UNIVERSITY OF OTTAWA
Defendant

STATEMENT OF DEFENCE

1. The defendant admits the allegations contained in paragraphs 2, 4 to 6, 8, 10,


14, 23, 24, 26, 38, 40 and 44 to 47 of the statement of claim.

2. The defendant denies the allegations contained in paragraphs 9, 11 to 22, 25,


27 to 37, 39, 41 to 43 and 48 to 91 of the statement of claim.

3. The defendant has no knowledge or insufficient knowledge in respect of the


allegations contained in paragraphs 3 and 7 of the statement of claim.

Background

4. The defendant University of Ottawa is a university incorporated under the


University of Ottawa Act.

5. The Canadian Internet Policy and Public Interest Clinic (“CIPPIC”) is a legal
clinic within the Faculty of Law at the University that focuses on technology law issues.
At the time the parties entered into the agreement at issue in this proceeding, the
director of CIPPIC was Philippa Lawson.

6. The plaintiff Tanya Woods was a law student at the University from September
2005 to May 2007, at which point she was a candidate enrolled in the Law Society of
Upper Canada’s licensing program. Ms. Woods began her articles with the Copyright
Board in July 2007 and was called to the Ontario bar in June 2008.

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7. The plaintiff 2285675 Ontario Inc. (the “corporate plaintiff”) is an Ontario
corporation. Ms. Woods is the sole director and officer of the corporate plaintiff. The
University has no knowledge of any assignment of Ms. Woods’s rights to the corporate
plaintiff.

‘Unlocateables’ class action

8. In Ms. Woods’s third year of law school, she began a research project on the
rights of copyright owners of musical works in Canada who were unaffiliated with large
music publishers and who had not received payments from recording companies
because they could not be located.

9. Ms. Woods undertook this research project for academic credit in fulfillment of
her degree requirements. Ms. Woods did not have any personal interest in the
prosecution of any class proceeding. Ms. Woods was not a copyright owner of musical
works and would not have been a member of any proposed class, whether on behalf of
unaffiliated or affiliated copyright holders.

10. At the start of February 2007, Ms. Woods contacted Ms. Lawson about a
potential class proceeding on behalf of unaffiliated copyright owners that she thought
CIPPIC would be interested in pursuing (the “Unlocateables class action”).

11. CIPPIC eventually entered into the Consortium Agreement with Bates Barristers
and Harrison Pensa to prosecute the class proceeding.

12. Under the terms of the Consortium Agreement, the parties would enter into a
retainer agreement with the proposed representative plaintiff on a contingent fee basis,
with any resulting fee provisionally divided as follows: Bates Barristers, 40%; Harrison
Pensa, 40%; CIPPIC, 20%.

13. The parties agreed and understood that the above fee division could be
amended to account for each party’s actual contribution to the prosecution of the class
proceeding.

14. In September 2008, the consortium filed a statement of claim under the Class
Proceedings Act, 1992, on behalf of the estate of Chet Baker and a proposed class
consisting of unaffiliated and affiliated copyright holders.

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15. In May 2011, the court certified the action on consent and approved the
settlement of the action.

16. In November 2011, the court approved counsel fees and disbursements in the
amount of $6,250,000 plus taxes.

17. In total, the defendants in the class proceeding paid $46,688,805.91 into the
settlement fund, inclusive of costs, disbursements and taxes. As such, the award of
counsel fees represented a contingency fee of approximately 15%.

18. Bates Barristers and Harrison Pensa were required to put more time into the
prosecution of the class proceeding than contemplated at the signing of the consortium
agreement. As such, the parties agreed that CIPPIC would receive 10% of the fees.

19. CIPPIC received its share of the fees from the class proceeding in the amount of
$656,793.64 through two cheques, dated November 28, 2011 ($209,286.30) and
February 1, 2012 ($447,507.34).

Ms. Woods’s involvement with the class proceeding

20. In early 2007, Ms. Woods prepared initial drafts of the statement of claim under
the supervision of David Fewer, another lawyer at CIPPIC. This was her only
substantive involvement in the class proceeding once CIPPIC, Bates Barristers and
Harrison Pensa became involved. Ms. Woods’s direct involvement with the class
proceeding ended in July 2007 when she began her articles with the Copyright Board.

21. In her claim, Ms. Woods alleges that she spent 473.32 hours working on the
class action between September 2006 to May 2011. To reach this total, Ms. Woods has
included time spent exclusively on academic assignments, negotiating her agreement
with the consortium and CIPPIC, and monitoring the class proceeding in order to protect
her alleged pecuniary interest in the outcome of the class proceeding.

22. In the costs submissions, class counsel listed Ms. Woods’s contribution to the
class proceeding as a member of CIPPIC. Class counsel advised the court that Ms.
Woods had spent 296.3 hours working on the class proceeding at a rate of $135 per
hour, for a total contribution of $40,000. Class counsel also indicated that Ms. Woods
had incurred disbursements in the amount of $20.

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Agreement between CIPPIC and Ms. Woods

23. In response to the allegations at paragraph 69 of the statement of claim, the


University denies that CIPPIC and Ms. Woods ever had a common intention to enter
into an agreement whereby Ms. Woods would receive 5% of the total settlement
amount.

24. As admitted at paragraph 26 of the statement of claim, Ms. Woods could not be
a party to the Consortium Agreement because at the time it was signed she was still a
law student and her participation would accordingly violate the prohibition against fee
splitting in the Rules of Professional Conduct.

25. As a result, the common intention of CIPPIC and Ms. Woods, as evidenced by
the parties’ negotiations and executed agreement as set out below, was that Ms.
Lawson would enter into a sub-contract with CIPPIC, and that CIPPIC would pay Ms.
Woods 5% of the total fees received in the class proceeding out of the payment of fees
to which CIPPIC was entitled under the Consortium Agreement.

26. On July 17, 2007, Ms. Woods sent Ms. Lawson an email asking her to send “a
draft of a CIPPIC contract that you use for ‘sub-contractors’” that she could use a
precedent. Ms. Woods also asked if the Consortium Agreement had guaranteed a 5%
minimum contribution for CIPPIC so she could ensure that CIPPIC would at least get a
sufficient share to cover her 5%.

27. Ms. Lawson replied the same day and provided a standard CIPPIC
subcontractor agreement for Ms. Woods’s use. Ms. Lawson was confused by Ms.
Woods’ question as to the minimum contribution, stating that she “thought your 5% was
going to be under CIPPIC’s share’.

28. Ms. Woods responded by confirming that the parties’ agreement was that Ms.
Woods would receive 5% of the legal fees recovered in the class proceeding, to be paid
from CIPPIC’s portion:

To clarify, it is a guaranteed 5% minimum (which may be


negotiably higher) stake in the total amt [sic] (so it is 5% of
total fees/costs award to all members of consortium vs.
5% of CIPPIC's cut only).

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29. On November 12, 2007, Ms. Lawson sent an email to Ms. Woods to remind her
that they should put their agreement in writing. Ms. Lawson asked Ms. Woods to draft
the agreement, and provided a copy of the consortium agreement for her to use as a
precedent.

30. On November 16, 2007, Ms. Woods sent Ms. Lawson the first draft agreement.
The first draft agreement as prepared by Ms. Woods provided for compensation of “no
less than 5% of the legal fees which include pre and post judgment interest and tax that
are generated by the lawsuit”, although even that amount could be reduced to an
amount commensurate with Ms. Woods’s actual contribution.

31. Ms. Woods also made a note to draft in which she asked Ms. Lawson what she
could do to ensure that in the event of a settlement that she would receive her minimum
“5% total for settlement fees received”.

32. The compensation provisions in the first draft agreement were as follows:

4. FEE DIVISION AND PAYMENT

a) This Agreement acknowledges the existence of a


Retainer Agreement between CIPPIC and its collaborators
and the representative plaintiff(s) on a contingent fee
basis.

b) As such it is agreed that TW will not demand


compensation upon completion of her work but will be
compensated on a contingent fee basis in the amount of
not less than 5% of the legal fees which include pre and
post judgment interest and tax that are generated by the
lawsuit.

c) It is understood that CIPPIC will ensure the timely


receipt of TWs fees and disbursements.

d) TW reserves the right at her sole discretion to


make a donation to CIPPIC at the conclusion of this
matter.

e) The percentage fee distribution described above is


intended to reflect the contribution of resources by TW to
CIPPIC, its collaborators and the prosecution of the
lawsuit. In the event that there is any material deviation
between the resources contributed and the percentage
fee described above, the fee may be modified to reflect

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the actual contribution of resources by TW
notwithstanding the agreed minimum fee of 5%.

f) In the event that interim fees and disbursements


are received by way of awards of costs, proceeds of
individual settlements, or otherwise, upon receipt of such
fees to CIPPIC, TW should be reimbursed for the
disbursements outstanding at the time of such receipt.

g) In the event that there is a balance, such balance


shall be divided among HP, BB and CIPPIC pro rata
based on their properly docketed time with respect to the
subject matter of the Costs Order. (Pippa how do I find
my 5%, if there is a settlement I still want a minimum
of 5% total for settlement fees received.) [emphasis in
original]

33. The same day, Ms. Lawson sent Ms. Woods a second draft with the following
proposed changes to the compensation provisions:

4. FEE DIVISION AND PAYMENT

[…]

c) It is understood that CIPPIC will do its best to


ensure the timely receipt of TWs fees and disbursements.

[…]

g) In the event that there is a balance, such balance


shall be divided among HP, BB and CIPPIC pro rata
based on their properly docketed time with respect to the
subject matter of the Costs Order. CIPPIC agrees to
provide TW with 5% of such balance, out of its share of
the balance. (Pippa how do I find my 5%, if there is a
settlement I still want a minimum of 5% total for settlement
fees received.) [emphasis in original]

34. Ms. Woods returned the second draft agreement to Ms. Lawson without any
changes to the compensation provisions.

35. On November 19, 2007, Ms. Lawson sent Ms. Woods a clean copy of the
second draft agreement. Ms. Lawson stated that the proposed change to subparagraph
4(g) was “designed to clarify the result you are looking for (5% share of total settlement
+ fees)”. To the extent that Ms. Lawson’s email can be interpreted as stating that Ms.
Lawson was looking for 5% of any total settlement as opposed to 5% of legal fees, Ms.

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Lawson’s email contained a typo and was not an accurate reflection of either parties’
intentions.

36. Ms. Lawson further stated in her email that she still wanted to send the draft
agreement to David Fewer, another lawyer at CIPPIC, for his review.

37. On November 21, 2007, Ms. Lawson sent Ms. Woods a third draft agreement
with the following changes to the compensation provisions as suggested by Mr. Fewer:

WHEREAS CIPPIC has entered into an agreement with


the Collaborators (the “Consortium Agreement”) that
addresses the equitable division of any awards or legal
costs payable to CIPPIC and the Collaborators as a result
of the successful prosecution of the Action (the “Award”);

WHEREAS TW is not a party to the Consortium


Agreement;

WHEREAS TW, CIPPIC and the Collaborators have


agreed that TW’s participation in the Award shall be
limited to a share of CIPPIC’s participation in the Award;

[…]

4. FEE DIVISION AND PAYMENT

a) This Agreement acknowledges the existence of a


Retainer Agreement between CIPPIC and its collaborators
Collaborators and the representative plaintiff(s) on a
contingent fee basis.

b) As such it is agreed that TW will not demand


compensation upon completion of her work performance
of the Services but will be compensated on a contingent
fee basis in the amount of not less than 5% of the legal
fees which include pre and post judgment interest and tax
that are generated by the lawsuit Award.

[…]

g) In the event that there is a balance after complying


with the instructions of a cost order, such balance shall be
divided among HP, BB and CIPPIC and the Collaborators
have agreed, pursuant to the terms of the Consortium
Agreement, to divide the balance among them pro rata
based on their properly docketed time with respect to the
subject matter of any Ccosts Oorder. CIPPIC agrees to

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provide TW with at least 5% of the total balance, out of its
pro-rata share of the balance. [emphasis in original]

38. Ms. Woods sent Ms. Lawson a fourth draft agreement that incorporated Mr.
Fewer’s proposed additional recitals with one change, accepted the proposed changes
to subparagraphs 4(a) and (g), and rejected the proposed changes to subparagraph
4(b). The parties executed the fourth draft agreement.

39. The agreement as executed by the parties contained the language from Ms.
Woods’s first draft that she would be “compensated on a contingent fee basis in the
amount of not less than 5% of the legal fees which include pre and post judgment
interest and tax that are generated by the lawsuit”:

WHEREAS CIPPIC has entered into an agreement with


the Collaborators (the “Consortium Agreement”) that
addresses the equitable division of any awards or legal
costs payable to CIPPIC and the Collaborators as a result
of the successful prosecution of the Action (the “Award”);

WHEREAS TW is not a party to the Consortium


Agreement;

WHEREAS TW, CIPPIC and the Collaborators have


agreed that TW’s participation in the total Award shall be
remunerated from the share allocated to CIPPIC’s
participation in the Awards;

[…]

4. FEE DIVISION AND PAYMENT

a) This Agreement acknowledges the existence of a


Retainer Agreement between CIPPIC and its
Collaborators and the representative plaintiff(s) on a
contingent fee basis.

b) As such it is agreed that TW will not demand


compensation upon performance of the Services but will
be compensated on a contingent fee basis in the amount
of not less than 5% of the legal fees which include pre and
post judgment interest and tax that are generated by the
lawsuit.

c) It is understood that CIPPIC will do its best to


ensure the timely receipt of TWs fees and disbursements.

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d) TW reserves that right at her sole discretion to
make a donation to CIPPIC at the conclusion of this
matter.

e) The percentage fee distribution described above is


intended to reflect the contribution of resources by TW to
CIPPIC, its Collaborators and the prosecution of the
lawsuit. In the event that there is any material deviation
between the resources contributed and the percentage
fee described above, the fee may be modified to reflect
the actual contribution of resources by TW
notwithstanding the agreed minimum fee of 5%.

40. Ms. Woods signed the agreement on February 6, 2008 and Ms. Lawson signed
the agreement on behalf of CIPPIC on March 17, 2008. At the time she signed the
agreement, Ms. Woods was an articling student with the Copyright Board.

Agreement is unenforceable at law

41. In complete answer to the statement of claim, the University states that the
agreement between Ms. Woods and CIPPIC is unenforceable at law.

42. Ms. Woods’s was a non-lawyer who involved herself in the class proceeding and
entered into an agreement with CIPPIC so she could speculate on the outcome of the
litigation for personal gain.

43. The agreement between Ms. Woods and CIPPIC purported to provide Ms.
Woods with a contingency fee payment or ‘finder’s fee’ for identifying a potential class
proceeding and providing services in connection with the prosecution of the proposed
class proceeding.

44. Ms. Woods was not a class member and had no genuine interest in the class
proceeding.

45. Ms. Woods was not a solicitor for the purposes of the Solicitors Act nor the
Class Proceedings Act, 1992.

46. Further, any contingency fee payment that the agreement purported to give Ms.
Woods would primarily be for work she had performed as a law student and in part for
work Ms. Woods prepared in fulfillment of her degree requirements.

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47. Further or in the alternative, if the agreement is otherwise enforceable, which is
not admitted but denied, Ms. Woods rendered the agreement unenforceable at law by
transferring her interest in the agreement to a corporate plaintiff who had no connection
whatsoever with the class proceeding and did not perform any work in connection with
the class proceeding.

48. Further or in the alternative, the corporate plaintiff is trafficking in litigation and
the present action should be stayed as an abuse of process.

49. The University pleads and relies on the provisions of An Act respecting
Champerty, section 1 of the Solicitors Act, section 33 of the Class Proceedings Act,
1992 and Rule 2.08 of the Rules of Professional Conduct.

Agreement reflects the parties’ common intentions

50. Further or in the alternative, the University states that the written and executed
agreement accurately reflects the parties’ common intentions.

51. The parties’ common intentions prior to creating the agreement was that CIPPIC
would pay Ms. Woods 5% of the legal fees recovered in the proposed class proceeding
from the amount CIPPIC received under the consortium agreement, as set out above.

52. The parties drafted the agreement in accordance to their common intentions. In
fact, Ms. Woods herself drafted the portions of the agreement relating to her
compensation.

53. The parties did not make any mutual mistake in drafting the agreement.

54. Further or in the alternative, if the agreement is enforceable, which is not


admitted but denied, the total amount payable to Ms. Woods under the terms of the
agreement is $40,020.

55. Regardless as to whether Ms. Woods was entitled to 5% of the total settlement
or 5% of the legal fees recovered in the class proceeding, the agreement specifically
permitted CIPPIC to pay Ms. Woods less than 5% in order to ensure that the amount
accurately reflected Ms. Woods’s actual contribution to the class proceeding.

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56. The actual value of Ms. Woods’s contribution to the class proceeding was
$40,020, as set out in class counsel’s costs submissions in the class proceeding.

No claim in quantum meruit

57. In response to the allegations at paragraphs 56 to 59, the University denies that
the plaintiffs are entitled to any amount in quantum meruit.

58. CIPPIC has not received any monies on behalf of Ms. Woods because Ms.
Woods’s entitlement to any such contingency fee is based on the existence of an
agreement that is unenforceable at law.

59. In any event, CIPPIC has only received $656,793.64, and so has not been
enriched to the extent alleged by Ms. Woods.

60. Further or in the alternative, the amount claimed is excessive. Ms. Woods is
seeking a payment equal to more than half of the legal fees awarded to class counsel in
the class proceeding. The actual value of Ms. Woods’s contribution to the class
proceeding was $40,020, as set out in class counsel’s costs submissions in the class
proceeding. If Ms. Woods were awarded the amount she seeks based on the time she
alleges she spent in support of the class proceeding, the value of her time would be
over $7,000 an hour.

No claim in tort

61. In response to the allegations at paragraphs 49 to 55, the University denies that
it owed any duty to Ms. Woods or that it breached any such duty.

62. The parties accurately recorded the terms of their agreement.

63. Ms. Lawson did not represent that Ms. Woods would receive 5% of the total
settlement and fees. Even if she had, any such misrepresentation would not have
caused or contributed in any way to the plaintiffs’ alleged damages.

64. The University denies that the plaintiffs suffered the damages as alleged. In the
alternative, the damages claimed are remote and excessive.

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65. The University states that any damages suffered by the plaintiffs are the result of
their own negligence, in that Ms. Woods drafted the relevant compensation provisions
in the agreement and failed to properly review the portions of the agreement that
CIPPIC drafted.

66. The University pleads and relies upon the provisions of the Negligence Act.

No claim in breach of fiduciary duty

67. In response to the allegations at paragraphs 60 to 67 of the statement of claim,


the University denies that CIPPIC owed any fiduciary duty to Ms. Woods or that it
breached any such duty.

68. Specifically, the University denies that CIPPIC entered into a solicitor-client
relationship with Ms. Woods.

69. In all of her dealings with CIPPIC, Ms. Woods acted as a contractor in a
commercial relationship with CIPPIC with a distinct pecuniary interest.

70. Ms. Woods never asked CIPPIC to be her lawyer or conducted herself as a
client of CIPPIC. CIPPIC never represented itself as Ms. Woods’s lawyer or acted in
that capacity for Ms. Woods.

71. Ms. Woods knew that CIPPIC was not its lawyer.

72. Ms. Woods knew that she was able to seek independent legal advice on any
facet of her relationship with CIPPIC and her involvement with the class proceeding.

73. Ms. Woods sought out and obtained legal advice from a party other than CIPPIC
when she was concerned that her past involvement in and her ongoing pecuniary
interest in the class proceeding placed her in a conflict of interest vis-à-vis the Copyright
Board.

No claim in breach of copyright

74. In response to the allegations at paragraphs 81 to 87 of the statement of claim,


the University denies that the Statement of Claim is a literary work in which copyright
subsists or that Ms. Woods is the author of the Statement of Claim.

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75. Further or in the alternative, the University denies that it infringed Ms. Woods’s
copyright in the Statement of Claim.

76. Further or in the alternative, Ms. Woods gave the University an implied license
or consent or both to use the Statement of Claim.

77. Further or in the alternative, if the University infringed Ms. Woods’s copyright,
which is not admitted or denied, an damages would be de minimus.

June 13, 2013 Norton Rose Fulbright Canada LLP


45 O'Connor Street, Suite 1500
Ottawa, Ontario K1P 1A4 CANADA

Sally Gomery LS# 37515W


Jamie Macdonald LS#: 53432C
Tel: +1 613.780.8604/8628
Fax: +1 613.230.5459

Lawyers for the Defendant

Box No. 308

TO: GIBSONS LLP


360 Albert Street, Suite 1520
Ottawa, Ontario K1R 7X7

D. Kenneth Gibson LS#: 014245K


Ryan E. Flewelling LS#: 49009W

Telephone: 613.238.8865
Fax: 613.238.8880

Lawyers for the Plaintiffs

Box No. 137

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Tanya Woods et al. University of Ottawa Court File No: 13-57387
Plaintiffs and Defendant

ONTARIO
SUPERIOR COURT OF JUSTICE

Proceeding commenced at Ottawa

STATEMENT OF DEFENCE

Norton Rose Fulbright Canada LLP


45 O'Connor Street, Suite 1500
Ottawa, Ontario K1P 1A4 CANADA

Sally Gomery LS#: 37515W


Jamie Macdonald LS#: 53432C
Tel: +1 613.780.8604/8628
Fax: +1 613.230.5459

Lawyers for the Defendant

Served on Fax: 613.238.8880

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