Phonographic Performance Limited v Stephen Russell Reader [2005] EWHC 416 (Ch)

IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
[2005] EWHC 416 (Ch)Case No Case No: 1999-03778Venue Royal Courts of Justice Strand,, London, WC2A 2LL
Between
Phonographic Performance LimitedClaimantStephen Russell ReaderDefendant
Before
Mr Justice PumfreyGwilym Harbottle (instructed by Hamlins) for the claimantStephen Russell Reader did not appear and was not represented)Hearing dates: 20th October 2004Date 22 March 2005
[1]The Hon. Mr Justice Pumfrey On 17 th December 1999 Rattee J. made an Order in the usual form restraining Mr Stephen Russell Reader from playing in public without the claimant's licence the sound recordings bearing names or marks comprised in the complainant's repertoire set out in the Schedule to the Order. On 22 nd July 2004, I found that Mr Reader had been guilty of contempt of court in that on the night of the 6 th to the7th March 2004 at the premises known as the Core Club, 12/15 King's Road, Brighton Mr Reader through a disc jockey acting on his behalf or on his instructions or with his encouragement played three such recordings(i) World Filled with Love (Craig David);(ii) Bounce Along (Wane Wonder); and(iii) Fifty/Fifty (Lemar). Mr Reader, who was present at that hearing, informed me that he intended to pay off his unpaid licence fees and to take a licence for the future, and so I made an Order requiring him to pay the Claimant's costs on the footing of an indemnity. In the same application, the claimant applied for an Order for additional damages for the admitted copyright infringement, and I directed that application to come on at a later date. It was heard before me on 20 th October 2004.[2]As is well known, the claimant exists for the purpose of enforcing and protecting the exclusive right to play in public and to authorise the playing in public of sound recordings that have been issued to the public. The copyright in substantially all such recordings in the United Kingdom has been assigned to the claimant.[3]The claimant exploits the copyrights assigned to it by granting licences to play the recordings in public in exchange for a fee. Each such licence relates to specified premises and lasts in the usual case for a year. Normally, the licence fee has to be paid in advance of the year to which the corresponding licence relates. The premises in the present case are a club forming part of the Brighton Charter Hotel, which appears to be owned by the defendant, his wife Lisa Reader, Nina Wendy Reader and Christopher Reader trading in partnership. They have traded since about July 1998, and the Core Club opened for business it would seem in about August 1998.[4]In September 1998, Mr Reader submitted an application for a licence in respect of the club. He was sent an invoice by the claimants which was never paid. Mr Justice Rattee's Order of the 17 th December 1999 was made in default of appearance to proceedings. The Order was served on Mr Reader on 29 th February 2000, and in April 2000 he obtained a licence for two years to 27 th August 2000.[5]In the usual way, Mr Reader was sent a renewal notice but failed to renew the licence for the period to 27 th August 2001. Towards the end of the year 2000, he sought a refund of some of the licence fee in respect of the previous year on the basis that the premises had been closed during some of that period. He was unable to substantiate his claim that the premises had been closed, and then paid the licence fee for the year to 27 th August 2001 in two instalments. The PPL licence accordingly expired on 27 th August 2001, and was not renewed until 5 th October 2004.[6]On 8 th November 2001, Mr Reader told PPL that the premises were closed for eight weeks for renovation but that it was hoped that they would reopen before Christmas. Before me, PPL accepted that the premises did not reopen until December 2002. After that date, no licence for public performance of sound recordings was obtained until 5 th October 2004. Therefore, the premises had been unlicensed for the two years prior to the hearing before me.[7]The application to commit Mr Reader was supported by a complaint that the three selected sound recordings played on 6/7 March 2004 at the club fell within the description of sound recordings contained in Rattee J's Order. This was accepted by Mr Reader.[8]From the reopening of the club on 19 th December 2002, PPL incurred substantial expense both in seeking to induce Mr Reader to take a further licence and in policing his activities. These are all set out in the form of a "statement of additional costs incurred from 19 th December 2002 for the hearing on 22 nd July 2004". This is verified by a witness statement from Mr Laurence Gilmore, a partner in PPL's solicitors, Hamlins. What is sought is to recover this additional expenditure by way of an award of additional damages pursuant to section 97(2) of the Copyright Designs and Patents Act 1988.[9]Section 97 provides as follows " 97.-(l) where in an action for infringement of copyright it is shown that at the time of the infringement the defendant did not know, and had no reason to believe, that copyright subsisted in the work to which the action relates, the plaintiff is not entitled to damages against him without prejudice to any other remedy. (2) the court may in an action for infringement of copyright having regard to all the circumstances, and in particular to - a) the flagrancy of the infringement, and b) any benefit accruing to the defendant by reason of the infringement, award such additional damages as the justice of the case may require."[10]PPL therefore contends that the expenditure that I have described above may be recovered as "additional damages" within the section on the grounds put shortly following :-(a) Mr Reader's deliberate refusal to obtain a licence has caused PPL to incur the expenditure.(b) The expenditure represents the cost of employing enquiry agents and of pursuing Mr Reader to take a licence. It is therefore expenditure of the kind which can be recovered as damages: such losses are a foreseeable consequence of playing the PPL repertoire in public without a licence - see for example Morton - Norwich Products v. Intercen [1981] FSR 337 and British Motor Trade Association v. Salvadori [1949] 1 Ch 556.(c) Furthermore, there should be an award of additional damages reflecting the benefit to the defendant of running the Club without a licence. Can damages be awarded on a successful committal application?[11]It seems clear that the Court has a power to make an award of damages where a breach of an undertaking to the Court of an injunction is also a breach of contract. In Midland Marts v. Hobday [1989] 1WLR 1143 Vinelott J. held that "I can see no reason in principle why the Court, if satisfied that the facts proved at the hearing of a motion to commit constitute both a breach of the undertaking to the Court and a breach of contract and also that there is no tenable ground of defence to an action for damages for breach of contract, should not direct an enquiry into damages or in a sufficiently clear case make a summary award of damages". There is jurisdiction to make such an award: see Fairclough and Sons v. The Manchester Ship Canal Co. (1897)41 S.J.225.[12]It appears from the judgment of Jacob J. in Sony Computer Entertainment Inc. v. Owen [2002] E.M.L.R. 34 (page 742) [2002] EWHC 45 that an infringement of copyright committed in breach of an injunction restraining such infringement can found an award of additional damages. In paragraph 28 of the judgment, Jacob J says this in distinguishing the judgment of Eady J in WB v. H. Bauer (Publishing) Ltd [2002] E.M.L.R 8:
"That seems to me to be a very different case because there is no provision authorising damages for contempt itself and no provision in the general law for additional damages for the wrongs alleged [Bauer's case was a case of breach of confidence]. Here there is. Section 97 requires the Court to have regard to all the circumstances. Those circumstances, to my mind, plainly can include the circumstance that the sales were done in breach of a Court Order. They make the act flagrant. They make the act fairly describable as "scandalous"
. In this regard, copyright is different from many other rights precisely because there is the statutory right to additional damages if the Court, in all the circumstances, thinks it right to grant them. I do, in this case, in principle, although I am told that the evidence will establish mitigating circumstances. "[13]In summary therefore one can conclude that where the underlying infringement is established to the standard required to support an application to commit for breach of an injunction, then there is no arguable defence to a claim for copyright infringement; and the circumstance that the infringements complained of are committed in breach of a Court Order render either an enquiry as to additional damages or, in a proper case, a summary award of additional damages to the copyright owner. The ingredients of the award of damages.[14]The expenditure on Mr Reader's activities during the time he was unlicensed and the club was open seems to me to fall squarely within the principles identified by Graham J. in Morton-Norwich Products Inc. v. Intercen Ltd (2) [1981] FSR 337. and of Roxburgh J. in British Motor Trade Association v. Salvadori [1949] 1 Ch 556 at 569. In both these cases, the plaintiffs were held to be entitled to recover the expenses of the investigation of the activities of the defendants including, in the former case, all the costs of the well-known discovery action. The principle is that expenses incurred which cannot be recovered as part of the costs of the action but which are the reasonably foreseeable consequences of the defendants' acts of infringement are recoverable. In the present case of course by the time of the alleged infringements the action was over. Some of the costs incurred prior to the application to commit may not be allowable as the costs of that application. These sums do not, it seems to me, form any part of an award of statutory additional damages but are rather a recoverable head of damages for infringement.[15]I have recently discussed the principles applicable to an award of additional damages in very different circumstances in Nottinghamshire Health Care National Health Service Trust v. News Group Newspapers Ltd [2002] EWHC 409 [2002] EMLR 33. In that case I expressed the view (see paragraphs 51 ff.) that it is permissible for an award of statutory additional damages to include a punitive element provided that the purpose of the award of damages is not solely to punish the defendant. I am satisfied that in the present case it is clearly established(1) that Mr Reader was aware of the need for a PPL licence;(2) that he had in the past only obtained such a licence under the threat of legal proceedings;(3) that after the closing and reopening of the club, he knew that a licence for the public performance of the PPL repertoire was necessary; and(4) that he has been able to find no excuse for his failure to seek the appropriate licence accordingly. This is, therefore, a case which is admitted to be one of deliberate and flagrant infringement.[16]The discretion to make an award of damages under section 97(2) is unfettered but two circumstances only are expressly referred to. The first is flagrancy, which I have already discussed. The second is any benefit accruing to the defendant by reason of the infringements. This provision invites an assessment of the relative importance of the contributions of many factors to the success of the defendant's business. Such an assessment is likely always to be complex. Indeed, it has certain superficial similarities to the problem of assessing the profits attributable to an infringement in taking an account of profits. All successful commercial operations owe their success to a multitude of factors, one only of which may be infringement. Of course, there are some activities to which infringement is central, and a club of the kind run by Mr Reader in the present case is an example. It is difficult to conceive of a modern club in which music is not played, and equally difficult to conceive of a club in which recorded music from the PPL repertoire is not played.[17]Mr Harbottle on behalf of PPL showed that Mr Reader had failed to make any serious disclosure of the financial circumstances of the Club. This was so despite many attempts on the part of the claimant's solicitors to invite him to do so. Two enquiry agents' reports were deployed with the view to demonstrating the extent of Mr Reader's business. Mr Reader did not reply to this evidence. It is, however, too uncertain for me to base any sensible assessment even of the profits to Mr Reader from the activities of the club. Mr Reader's refusal to come up with any sensible response to the claimant's solicitors attempts to obtain information regarding the financial position of the club necessarily has one of two consequences. Either I can direct an enquiry as to additional damages upon the basis that the infringements were flagrant, or I can summarily assess the damages now. Mr Harbottle presses me to summarily assess the damages. Mr Reader through his non-appearance at the hearing was unable to make any representations to me on this question but I feel that I should have regard to the desirability of deploying the full procedure of an enquiry as to damages with the associated disclosure, expert evidence, cross examination and so on in the present case.[18]Were I to feel it appropriate to base an award of damages upon the contribution of the infringements to the profitability of Mr Reader's club, I think there would be little alternative to the latter course. There are, however, cases in which a rather more "broad brush" approach to this issue has been adopted. In Peninsula Business Services Limited v. Citation Plc [2004] FSR 17 HHJ Maddocks awarded 100% of a notional licence fee by way of additional statutory damages, and in Springsteen v. Flute International Ltd [1999] EMLR 180 , Ferris J. awarded £1 per CD produced and not sold, and £5 per CD produced and sold for infringement by pressing CDs of recordings of the artist's performances. These figures appear to have been arrived at on a very broad consideration of the factors relevant to an award of additional damages. HHJ Maddocks, indeed, described his award as "a mark-up". In an appropriate case, I see good reason for such an approach. In my view, an award of additional damages equal to the licence fees unpaid down to the hearing of the application to commit is appropriate, and I shall award that sum accordingly.[19]In the result therefore, I award as additional damages(1) the costs of the enquiry agents and(2) a sum equal to the unpaid licence fees down to the date of the application to commit. The claimants are entitled to their costs of the application before me.

Cited in 5 later judgments