Twentieth Century Fox Film Corporation & Ors v Harris & Ors [2014] EWHC 1568 (Ch)

Case No HC12F01500

[2014] EWHC 1568 (Ch)

IN THE HIGH COURT OF JUSTICE

CHANCERY DIVISION

Venue Royal Courts of Justice, Strand, London, WC2A 2LL

Date 16/05/2014

Before

MR JUSTICE BARLING

Between

(1) TWENTIETH CENTURY FOX FILM CORPORATIONClaimants

(2) UNIVERSAL CITY STUDIOS LLCClaimant

(3) WARNER BROS. ENTERTAINMENT INC.Claimant

(4) PARAMOUNT PICTURES CORPORATIONClaimant

(5) DISNEY ENTERPRISES, INC.Claimant

(6) COLUMBIA PICTURES INDUSTRIES, INC.Claimant

(1) DAVID HARRISDefendants

(2) KTHXBAI LIMITEDDefendant

(3) THE NZB FOUNDATIONDefendant

(4) PAYPAL (EUROPE) SARL et CIE SCADefendant

(5) CHRISTOPHER ELSWORTHDefendant

(6) MOTORS FOR MOVIES LIMITEDDefendant

(7) HKB OPERATIONS LIMITEDDefendant

(8) NZBS4ALL LIMITEDDefendant

Mr Richard Spearman QC (instructed by Wiggin LLP) for Claimants

The First Defendant appeared in person, and for Third and Sixth Defendants

for The remaining Defendants were not represented

Hearing Hearing dates: 02 - 06.12 & 09.12.2013

Judgment

TABLE OF CONTENTS

I. INTRODUCTION 5 II. THE N1 ACTION 7 III. THE N2 ACTION 11 IV. EVENTS FOLLOWING THE JUDGMENTS OF ARNOLD J 17 V. THE PRESENT PROCEEDINGS 17 Commencement of proceedings 17 Summary of the main contentions of the parties 18 Evidence adduced 21 The Chat Logs 25 My conclusion as to the accuracy of the Chat Logs 30 Mr Harris’s knowledge of, and participation in, the activities of N and the N1 website 33 Mr Harris’s knowledge of and participation in the operation of the N2 website 37 The nature of Mr Harris’s relationships with the other Effective Defendants: the nature and purpose of their activities/transactions 42 K; Payments to K; the FO website; Amberleigh 43 The Foundation 48 MFM 54 HKB, Mike Wong, the Flat and 4All 58 Other issues 66 Legal fees paid to Mr Harris 66 Extracting funds generally 68 VI. THE CLAIMANTS’ CAUSES OF ACTION 68 Alleged liability of Mr Harris – infringement of copyright jointly with N 68 Mr Harris’s Henderson v Henderson submission 68 Mr Harris a joint tortfeasor with N 70 Alleged liability of Mr Harris – infringement of copyright by reason of the operations of the N2 website 72 Alleged liability of Mr Harris and the other Effective Defendants – conspiracy to injure by unlawful means 72 Relevant findings 74 A combination of two or more persons 75 To take action which is unlawful in itself 77 (a) Conspiracy to infringe the Claimants’ copyrights 77 (b) Conspiracy to defraud the Claimants 80 With the intention of causing damage to a third party 83 Who suffers the damage 85 Unlawful means conspiracy – my conclusions 86 VII. RELIEF 86 VIII. OTHER MATTERS 87 IX. ANNEX A 88 X. ANNEX B 90 XI. GLOSSARY OF ABBREVIATIONS AND DEFINED TERMS 98

Mr Justice Barling

INTRODUCTION

[1]The Claimants are members of the Motion Picture Association of America Inc. (“MPA”) and are the owners or exclusive licensees of copyrights in many motion pictures and television programmes. They sue in a representative capacity on behalf of themselves and all other companies which are controlled by, control, or are under common control with, members of the MPA. Their claims are for(1) infringement of copyright and

(2) unlawful means conspiracy against the First Defendant (“Mr Harris”), the Second Defendant (“K”), the Third Defendant (“The Foundation”), the Sixth Defendant (“MFM”), the Seventh Defendant (“HKB”), and the Eighth Defendant (“4All”) (collectively “the Effective Defendants”; references are also sometimes made to “the corporate Defendants” where it is necessary to distinguish the other Effective Defendants from Mr Harris).

[2]Proceedings against the Fourth Defendant (“Paypal”) have been discontinued, and settlement has been reached with the Fifth Defendant (“Mr E”), who was called as a witness by the Claimants. After the proceedings had begun, Mr E disclosed documentary evidence in the form of 1,119 printed pages of private internet discussions (more technically known as Internet Relay Chat) said to have taken place between Mr Harris, Mr E and other associates over the period December 2009 to August 2010 (“the Chat Logs”).

[3]A winding-up order was made against K on 21 October 2013 on the petition of HMRC in respect of an outstanding tax liability of about £361,000. The effect of that order is that, pursuant to s130(2) of the Insolvency Act 1986, “no action or proceeding shall be proceeded with or commenced against the company or its property, except by leave of the court and subject to such terms as the court may impose”. The Claimants expressly do not ask for leave in the present case.

[4]At the heart of the Claimants’ case are the following allegations: that since about mid-December 2009 until about the end of November 2012 Mr Harris has been the driving force behind mass deliberate infringements of the Claimants’ copyrights; that K, the Foundation, MFM, HKB and 4All are his corporate creatures, owned and/or controlled by him; and that he has used them for the purposes of inter alia channelling to himself or for his benefit the revenues earned from those infringing activities, as well as for syphoning off funds from Newzbin Limited (“N”), another company owned by him, and thwarting the Claimants’ ability to recover costs and compensation for the infringement by N of their copyright, established in earlier proceedings.

[5]The Chat Logs have to some extent been relied upon by Mr Harris, but in other respects are said by him to have been fabricated by Mr E. However, if, as the Claimants contend, they accurately record the conversations in question, then they would provide very powerful evidence in support of the Claimants’ allegations in these proceedings. The genuiness of the Chat Logs is, therefore, one of the issues of fact which I need to determine.

[6]The present proceedings follow two earlier cases brought by the Claimants. It is necessary to explain the nature and outcome of both those cases in order to understand how the present matter has come about. The first (“the N1 action”) was a copyright infringement claim brought against N. It was heard by Kitchin J (as he then was), and his judgment dated 29 March 2010 is at: Twentieth Century Fox Film Corp. and others v Newzbin Limited

[2010] EWHC 608 (Ch)

. The second (“the N2 action”) was a claim for a blocking injunction pursuant to section 97A of the Copyright, Designs and Patents Act 1988 (“the 1988 Act”). It was decided by Arnold J, and his judgment dated 28 July 2011 is at Twentieth Century Fox Film Corp. v BT [2011] R.P.C. 28. (A further judgment by Arnold J relating to the form of relief to be granted was given on 26 October 2011, and is to be found at:Twentieth Century Fox Film Corp v BT

[2011] EWHC 2714 (Ch)

THE N1 ACTION

[7]The N1 action arose out of the operation by N of a website which was known as Newzbin (“the N1 website”). The sole purpose of the N1 website was (as the Claimants contended and the learned Judge found) to make available to its users unlawful copies of copyright works, including movies and TV programmes. Kitchin J summed up his main findings as follows:

“111. …. I have found that the defendant well knows that it is making available to its premium members infringing copies of films, including the films of the claimants. In summary, the defendant operates a site which is designed and intended to make infringing copies of films readily available to its premium members; the site is structured in such a way as to promote such infringement by guiding the premium members to infringing copies of their choice and then providing them with the means to download those infringing copies by using the NZB facility; the activation of the NZB facility in relation to one of the claimants' copyright films will inevitably result in the production of an infringing copy; the defendant has encouraged and induced its editors to make reports of films protected by copyright, including those of the claimants; the defendant has further assisted its premium members to engage in infringement by giving advice through the sharing forums; the defendant has profited from the infringement; and finally, the claimants are not able to identify particular infringements by particular members only because the defendant keeps no records of the NZB files they have downloaded. 112. In all these circumstances, I believe the question I have identified admits of only one answer. The defendant has indeed procured and engaged in a common design with its premium members to infringe the claimants' copyrights……. 125. …. This service is not remotely passive. Nor does it simply provide a link to a film of interest which is made available by a third party. To the contrary, the defendant has intervened in a highly material way to make the claimants' films available to a new audience, that is to say its premium members. Furthermore it has done so by providing a sophisticated technical and editorial system which allows its premium members to download all the component messages of the film of their choice upon pressing a button, and so avoid days of (potentially futile) effort in seeking to gather those messages together for themselves. As a result, I have no doubt that the defendant's premium members consider that Newzbin is making available to them the films in the Newzbin index. Moreover, the defendant has provided its service in full knowledge of the consequences of its actions. In my judgment it follows from the foregoing that the defendant has indeed made the claimants' copyright films available to its premium members and has in that way communicated them to the public.”

[8]In relation to the extent of infringing content available via the N1 website, the learned

Judge stated:

“46. It was the defendant's case, maintained by Mr Elsworth in his evidence, that only an insignificant fraction of the defendant's database relates to infringing content. I am satisfied this is quite wrong and I reject both the defendant's case and Mr Elsworth's evidence. On 16 December 2009, Mr Clark, assisted by trainee solicitors in the firm of solicitors acting for the claimants, carried out an analysis of a sample of the reports entered in the Newzbin index under the Movies category. About 50,000 reports were analysed. 97.5% had a valid link to the IMDb site, 0.7% had a valid link to Amazon and a further 1.5% were shown to be commercially available upon further investigation. Only 0.3% were not shown to be commercially available. In my judgment this analysis is extremely powerful. It shows that, in practice, the overwhelming majority of the reports in the Movies category of the Newzbin index relate to content which is commercial and very likely to be protected by copyright. 47. …[The results of a second sampling exercise] …were not challenged and demonstrate that the sampled binary messages for which reports had been assigned and which had been categorised as Movies were, without exception, commercially available and very likely to be protected by copyright.”

[9]Thus, Kitchin J held that, as the operator of the N1 website, N infringed copyright by(i) authorising users to make copies

(ii) procuring users’ acts of infringement (copying) and participating in a common design with users and

(iii) communicating the copyright works to the public. He also held that N had engaged in a deliberate course of conduct well knowing that the vast majority of the materials in the Movies category were protected by copyright and that the users of the website who downloaded the materials were infringing copyright. These findings are relied upon in paragraphs 4 and 9 of the Re-Re-Re-Amended Particulars of Claim in the present proceedings (“the PoC”).

[10]By an order dated 14 April 2010 Kitchin J granted an injunction restraining N from further infringing acts, directed an inquiry as to damages, and ordered N to pay costs on an indemnity basis and to make an interim payment on account of costs in the sum of £230,000.

[11]The hearing of that case took place mainly in the first half of February 2010. Mr Harris, who had qualified as a barrister, represented N on a direct access basis for most of the trial. In mid-December 2009 Mr Harris had in fact acquired, on his own behalf, all the shares in N, and he had been a director of N from 17 December 2009. In his capacity of director he had adopted the name “David Bahan”, and he now accepts that he created, or allowed to be created, the impression that he and David Bahan were two separate people. He put in evidence before Kitchin J material which clearly gave this impression, and he also misled the court in this respect in a witness statement in later winding up proceedings relating to N.

[12]Mr Harris was disbarred by the Bar Standards Board on 26 January 2012 as a result of various charges relating to his involvement in the N1 action, including knowingly or recklessly misleading Kitchin J as to the capacity in which he held the shares in N. In evidence before me Mr Harris admitted that he lied to the Bar Standards Board by denying, in his defence to another of the charges, that he was “Geeklawyer”, the author of a number of tweets made in relation to the trial of the N1 action.

[13]The Claimants point to these as two of what they contend to be many examples of Mr Harris’s dishonesty, and as being relevant to the credibility of his evidence and to the interpretation of his actions for the purposes of these proceedings.

[14]The judgment and order of Kitchin J are relied upon in paragraphs 9 and 10 of the PoC, and are admitted in paragraph 7 of the Defence of Mr Harris and K, in paragraph 7 of the Defence of MFM, and in the Defence of the Foundation (which adopts the Defence of MFM). No Defence has been served by HKB and 4All. The Claimants therefore submit that it is not in issue as between themselves and the Effective Defendants that N engaged in extensive infringement of the Claimants’ copyrights, and was liable to pay them at least £230,000 in respect of the costs of the N1 action. In that regard, paragraph 11 of the Defence of Mr Harris and K states inter alia that Mr Harris “says: he never intended N to infringe anybody’s copyright, and did not believe it had done so until the judgment of Mr Justice Kitchin” and that thereafter he “used all reasonable endeavours to…bring [N]’s infringing activities to an end…” The truth of this assertion is disputed by the Claimants.

THE N2 ACTION

[15]Following the judgment in the N1 action no monies have ever been paid to the Claimants by N. On 26 April 2010 Mr Harris informed N’s creditors of his intention to seek approval for a creditors’ voluntary liquidation, which is what then took place, on about 18 May 2010. On that day the N1 website, which had been operating the day before, was taken down. This coincided with rumours on the internet that the source code for the N1 website had been stolen. A little later there were rumours that the N1 website would be reincarnated. The latter rumour was realised when, on about 28 May 2010, a very similar website (“the N2 website”) began to operate at the same domain name (www.newzbin.com) from servers outside the jurisdiction. The Claimants took the view that, in all material respects, the N2 website operated in exactly the same way as the N1 website, and in particular that its operators, and its users, whoever they were, were infringing the Claimants’ copyrights in the same way.

[16]As a result the Claimants brought the N2 action which, as I have said, was an application under section 97A of the 1988 Act. The application was initially against British Telecommunications plc (“BT”), the UK’s largest Internet Service Provider (“ISP”). However, similar applications were later brought against other major UK ISPs. The section 97A procedure provides a means of preventing or impeding access to a particular website by subscribers of an ISP. The Claimants contended that this was the only means by which they could prevent, or at least reduce the scale of, these infringements of their copyrights. They sought an order which would require BT to take steps to prevent its services being used by users and operators of the N2 website to infringe the Claimants’ copyrights, and for that purpose to use a blocking technology known as “Cleanfeed”. This was a system which BT was already using to block websites carrying unlawful images of children. BT opposed the Claimants’ claim.

[17]The N2 action was heard by Arnold J, and the Claimants were successful. Arnold J held that they were entitled to the relief sought, on the ground (among others) that the operators of the N2 website were using BT’s services to infringe the Claimants’ copyrights in the three ways which had been identified by Kitchin J in his judgment in the N1 action (see paragraph 9 above).

[18]On the basis of the evidence before him Arnold J made a number of important findings about the N2 website and its operations. I now summarise those findings. The number in brackets at the end of each summary indicates the relevant paragraph of Arnold J’s judgment. i) On about 28 May 2010 the N2 website began operating. Apart from one or two superficial differences, the design and manner of operation of the N2 website was substantially the same as that of the N1 website. Content could only be obtained by means of the N2 website by members who had purchased premium credit. As with the N1 website, premium credit was sold in blocks of weeks, with the minimum purchase being an 8 week block. The N2 website had the same categories of content available. It also had the same sub-categories of content in the "Movies" and "TV" categories, including "CAM", and "Screener". (48) These two categories are indicative of piracy – the first referring to use of a hand-held CAM or video in a cinema, and the second to a copy of a film supplied on a restricted basis to persons within the industry, eg critics, before commercial release. (34) ii) As with the N1 website, the N2 website had a substantial UK user base, with membership fees payable in pounds sterling, English as the only language, and references to UK legislation. (49) iii) The Claimants had established that the vast majority of the content accessible via the N2 website was commercially available and thus highly likely to be protected by copyright. An analysis of 34,510 records found in the "Movies" category in early September 2010 found that 32,547 (94.3%) related to commercially available content. A sample of the remaining 1,963 records (5.7%), found that they all related to content that was commercially available from Amazon's UK website. (50) iv) Similar analyses were carried out of samples of records from the "TV", "Music", "Books", "Games" and "Consoles" categories. In the case of "TV”, 99% of the records analysed were found to relate to commercially available content or content that was otherwise likely to be copyright protected. In the case of "Music", the corresponding figure was 90%; in the case of "Books" it was 93%; in the case of "Games" it was 92%; and in the case of "Consoles" 94%. (51) v) The evidence of the Claimants, and of representatives of trade organisations who supported the N2 action, was that none of these bodies or their members had granted the operators of the N2 website any licence. (4 and 52) vi) As with the N1 website, the main focus of the N2 website was film and TV programmes. As at 11 November 2010 the relative proportions of content contained in each of the categories on the N2 website were as follows: Anime: 4.89%; Apps: 1.88%; Books: 3.56%; Consoles: 2.98%; Games: 1.26%; Movies: 18.88%; Music: 14.15%; TV: 51.55%; Other categories: 0.84%. (53) vii) In December 2010 one of the Claimants' witnesses downloaded the following 12 sample films using the N2 website. The copyright in these films is owned (wholly or jointly) by, or exclusively licensed to, the Claimant identified in brackets:

"Knight and Day" (Twentieth Century Fox Film Corporation); "

Wall Street: Money Never Sleeps" (Twentieth Century Fox Film Corporation); "Despicable Me" (Universal City Studios LLLP); "Nanny McPhee and the Big Bang" (Universal City Studios LLLP); "Harry Potter and the Deathly Hallows: Part 1" (Warner Bros. Entertainment Inc); "Inception" (Warner Bros. Entertainment Inc); "Dinner for Schmucks" (Paramount Pictures Corporation); "3D Jackass" (Paramount Pictures Corporation); "Alice in Wonderland" (Disney Enterprises, Inc.); "The Sorcerer's Apprentice" (Disney Enterprises, Inc.); "Takers" (Columbia Pictures Industries, Inc.); "The Other Guys" (Columbia Pictures Industries, Inc.). (54) viii) It appeared to be quite hard to find any content on the N2 website that was not protected by copyright. (55) ix) The N2 website was operated by unidentified individuals acting under pseudonyms. The operators referred to themselves as "Team R Dogs" (which appears to be a reference to the film "Reservoir Dogs") and used pseudonyms such as "Mr White", "Mr Black" and "Mr Pink". "Mr White", the spokesman of Team R Dogs, had been quoted in an interview on a blog and in a post on the N2 website as saying:

"Team R Dogs are a small team of digital highwaymen who, thank you, prefer to remain behind their face-masks. … we have no association with WCIS Ltd who own the domain … we sought to buy the domain but in the end we were offered a lease on the name. Nor do we have any association with the Newzbin1 team…" "

Newzbin2 is using its own assets which are nothing to do with Newzbin1. The domain is not an asset of Newzbin1 since they sold it to a 3rd party. The code maybe Newzbin's but let the liquidator come after us for that." (56) x) On 21 June 2010, an investigator from the Federation Against Copyright Theft ("FACT") made a covert payment to the N2 website. This showed that the recipient of payments made to the website was K. K was incorporated on 21 December 2009. Mr Harris was the sole director and shareholder, but denied any involvement in the operation of the N2 website. (57) xi) According to statements made by "Mr White" in interviews on blogs, the operators of the N2 website had made plans to avoid enforcement action by the Claimants. The servers used to host the website were not located in the UK (as was the case with the servers of the N1 website) but in Sweden. The domain name www.newzbin.com was registered to a company in the Seychelles. (58)

[19]In paragraph 16 of the PoC the Claimants plead the basis upon which Arnold J granted relief pursuant to section 97A in the N2 action. This is admitted in paragraph 31 of the Defence of Mr Harris and K. However, paragraph 12 of the PoC, which alleges that the N2 website was in all material respects the same as the N1 website, is denied in paragraph 16 of the Defence of Mr Harris and K. This states that those Defendants “admit that Newzbin2 resembled Newzbin1 in appearance” but “that they can neither admit nor deny and require the Claimants to prove that the code and databases of those sites were the same…” The Defence goes on to assert that “The NZB tool of Newzbin2 was programmed in such a way that it could not be used to download matter that fell within the scope of Mr Justice Kitchin’s injunction”. The same pleaded case is put forward by the other Effective Defendants who filed defences.

[20]The Claimants contend that the Effective Defendants’ pleaded case in this regard is inconsistent with the findings of fact made by Arnold J, with the evidence which was before Arnold J, and with the evidence of the Claimants’ witnesses in the present proceedings. The Claimants also argue that there is an obvious tension between that pleaded case, and the Effective Defendants’ contention that they had nothing to do with the operation of the N2 website; for, the Claimants argue, if that is correct they would hardly be in a position to know how the “NZB tool” of the N2 website was programmed.

EVENTS FOLLOWING THE JUDGMENTS OF ARNOLD J

[21]As stated above, Arnold J made an order under section 97A on 26 October 2011, and thereafter similar orders were made requiring all other major ISPs in the UK to take appropriate steps to prevent subscriber access to the N2 website. The Claimants’ evidence is that despite these orders and the resultant blocking measures by ISPs, the N2 website continued to operate as before, providing its services to subscribers outside the UK and also within the UK where those users were able to take steps to evade the ISPs’ measures. The chief operator of the N2 website, who used the pseudonym “Mr White” (alleged by the Claimants to be Mr Harris), had announced on 14 September 2011, before the blocking order was made, that:

“We are pleased to announce the first Newzbin2 client software… This is targeted at UK users who are likely to get blocked in October. This first version is a bit rushed and so not very polished. As time goes by we shall improve it and add features… We can’t say how our client application works but it uses a number of techniques to utterly defeat Cleanfeed.”

THE PRESENT PROCEEDINGS Commencement of proceedings

THE PRESENT PROCEEDINGS

[22]The Claimants were by now becoming increasingly convinced that Mr Harris was actively involved in the operation of the N2 website. On 13 April 2012 the present proceedings were issued, but not served. The Claimants had become aware that K, a company of which Mr Harris was the sole director, had been receiving payments from subscribers to that website. Disclosure applications made against Paypal revealed inter alia an HSBC account registered to Mr Harris with K’s name as the account’s business name, into which some US$547,986 had been paid, and another HSBC account in K’s name into which monies derived from the operation of the N2 website were paid.

[23]On 23 November 2012 the Claimants obtained an interim freezing order against Mr Harris, K, the Foundation and Mr E. On 26 November 2012 the present proceedings, together with the freezing order, were served on those Defendants. Two days later, on 28 November 2012 the N2 website ceased operations. Thereafter, as I have already noted, the Claimants’ claim against Mr E was settled, and he disclosed the Chat Logs. Later, MFM, HKB and 4All were joined as defendants, and were also made subject to the freezing order.

Summary of the main contentions of the parties

[24]In very brief outline, it is the Claimants’ case that Mr Harris:(1) was in charge of the infringing N1 website, and was himself infringing the Claimants’ copyrights by means of that website from about 17 December 2009 until that website ceased operating on about 18 May 2010;

(2) was behind the setting up of the N2 website and its copyright infringing operations from start to finish, and was “Mr White”, the spokesman for the operators of the N2 website;

(3) was at the heart of concerted efforts to remove funds from N in order to prevent the Claimants from recovering either damages or costs pursuant to the Judgment and Order of Kitchin J;

(4) is the moving force behind K, the Foundation, MFM, HKB and 4All, which companies he has used for the purposes of (a) syphoning off monies from N (b) receiving and channelling to him, or for his benefit, revenues earned from the operation of the N2 website (c) acquiring assets with those revenues, in particular a house called Amberleigh and a McLaren motor car, for his own use and (d) thwarting the Claimants’ ability to recover compensation for the infringement of their copyrights; and

(5) in these and other respects, conspired with others, including with one or more of the other Effective Defendants, to injure the Claimants by unlawful means, including by infringing their copyrights and by conspiring to defraud them.

[25]In similarly brief outline, Mr Harris/the Effective Defendants (in so far as they have filed defences):(1) accept that Mr Harris was the sole director and owner of N from about 17 December 2009 until its winding up in May 2010, but state that Mr Harris did not intend N to infringe the Claimants’ copyrights, and did not believe infringing activity had been taking place, until Kitchin J’s judgment in the N1 action, after which all reasonable steps were taken to curtail N’s infringing activity/comply with the judge’s order; deny that Mr Harris was himself guilty of any infringement by means of the N1 website; maintain that the infringing activity of the N1 website occurred before Mr Harris became a director; in relation to his acts as a director, rely upon the principle in Henderson v Henderson;

(2) deny that Mr Harris had anything to do with setting up or running the N2 website; but, while admitting the basis upon which Arnold J granted relief in the N2 action, and that the N2 website looked similar to the N1 website, deny that the N2 website was in all material respects the same as the N1 website; they “require the Claimants to prove that the code and databases of those sites were the same…” and they maintain that the N2 website’s software was programmed to avoid a breach of Kitchin J’s order (see paragraph 19 above); they allege that the N1 website’s servers were hacked and its software and data stolen without the authority or assistance of Mr Harris, and that the N2 website was operated by Swedish nationals, one of whom was called Anders;

(3) deny the allegations of conspiracy; deny that Mr Harris or K have received monies for operating the N2 website or infringing the Claimants’ copyrights; deny that the Foundation is the “alter ego, vehicle, thing or creature” of Mr Harris, and that Amberleigh was purchased with the products of infringement of the Claimants’ copyrights – they state that it was purchased with K’s earnings from a website called “FileOrgy” which was administered by Mr Harris and provided a secure file storage service (“FO” or “the FO website”) and from K’s payment processing services to the N2 website; maintain that two thirds of the payments into the HSBC account in K’s name were in respect of the FO website, with the balance being payments by users to the operators of the N2 website; deny that the sale of N’s domain name to WCIS Limited, a Seychelles company owned and controlled by Mr Harris, was at an undervalue; maintain that all payments by K to Mr Harris were for legitimate expenses; deny inter alia that the transfer of the McLaren car to MFM was ineffective, or that MFM is the “alter ego, vehicle, thing or creature” of Mr Harris, and maintain that the McLaren was purchased for MFM to let out for hire.

Evidence adduced

[26]The Claimants adduced evidence from the following witnesses:(1) Okke Delfos Visser, the Vice President and Head of Legal Department for the MPA, whose witness statement dealt with the N1 website, the N1 action, the disciplinary proceedings against Mr Harris, the N2 website, the N2 action, the history of the present proceedings, and elements of the Effective Defendants’ case. Mr Visser was cross-examined by Mr Harris.

(2) Jan Van Voorn, the Region Director Content Protection Operations for the MPA, whose witness statement dealt with the nature and contents of the N2 website. The Defendants did not seek to cross-examine Mr Van Voorn, and he did not give oral evidence.

(3) Bret Arthur Boivin, a director of Incopro Limited, a company which provides advice and technical services to content owners. His witness statement dealt with the FO website. In particular, Mr Boivin’s evidence covered the likely popularity of, and the extent of the revenues generated by, that website, in comparison with the N2 website, and the extent to which some 359,263 payments made between 11 June 2010 and 16 November 2012, totalling £2,111,744, related to revenues of the N2 website. Mr Boivin was cross-examined by Mr Harris.

(4) Victoria Louise Stanford, a trainee solicitor at the Claimants’ solicitors, Wiggin LLP. Her witness statement dealt with the FO website, payments received by K, and the extent to which those receipts can be said to be attributable to payments made for services provided by the FO website. Ms Stanford was cross-examined by Mr Harris.

(5) Mr E, whose witness statement dealt with the Chat Logs which he disclosed to the Claimants. Mr E was cross-examined by Mr Harris

[27]Mr Harris/the Effective Defendants placed the following evidence before the court: Nine affidavits or witness statements by Mr Harris. These dealt variously with the following matters: Affidavit 4 December 2012: (filed in connection with the freezing order obtained by the Claimants) the assets of Mr Harris, K and the Foundation, as well as the circumstances relating to the McLaren car and a flat at 28 Sillwood Road, Brighton (“The Flat”); Mr Harris’s dealings with HKB. Witness statement 12 December 2012: Mr Harris’s personal history; the business carried on by K and its business streams; the nature of the FO website; the reasons for setting up the Foundation; Mr Harris’s involvement with N, the N1 website, and the N1 action; his arrangement with the operators of the N2 website to allow use of N’s domain name and to provide payment processing services to the N2 website via K; Mr Harris’s participation in the N2 action; the timing of the creation of the Foundation and the transfer of the McLaren motor car; the “Alexa” ranking system relating to the extent of traffic on individual websites. Affidavit 13 December 2012: Further information relating to the Flat (in connection with the freezing order). Witness statement 19 December 2012: (on behalf of the Foundation): details of the Foundation’s incorporation, domicile, management and activities; its ownership of Amberleigh; Mr Harris’s role as “Protector”. Affidavit 28 January 2013: assets of MFM; transactions concerning the McLaren car, and Mr Harris’s involvement in same. Affidavit 30 January 2013: assets of the Foundation, including Amberleigh. Witness statement 11 August 2013: (on behalf of the Foundation): further details of the Foundation’s governance and funding and Mr Harris’s involvement; his acquisition of Amberleigh through K, and transfer of the property to the Foundation; use of Amberleigh thereafter; Foundation’s relationship with K and others. Witness statement 16 August 2013: comparison of the N1 and N2 websites; whether the N1 website (after Mr Harris took N over) and the N2 website were aimed at copyright infringement and/or were infringers; the reason why Mr Harris wished to give the impression that he and David Bahan were different people; his management of N between 17 December 2009 and 17 May 2010, including steps said to have been taken to avoid infringement of copyright; payments made by Mr Harris from N’s funds prior to liquidation; sale of N’s domain name to WCIS Limited, a Seychelles company controlled by Mr Harris; how the operators of the N2 website acquired the code to the N1 website; Mr Harris’s allowing the N2 website to use N’s domain name; his provision, through K, of payment services to the N2 website; his intervention in the N2 action; whether Amberleigh and the McLaren motor car were purchased with monies derived from infringing copyright; why he set up and endowed the Foundation; why the McLaren car was transferred to MFM. Affidavit 20 November 2013: Mr Harris made two corrections to his earlier written evidence concerning(1) the ownership of the Flat and

(2) his knowledge of and acquaintance with his main contact at HKB, Mr Mike Wong. In addition, Peter Bahan, Mr Harris’s brother, made a witness statement and gave oral evidence on behalf of MFM. He dealt with MFM and issues relating to the McLaren motor car. Both Mr Harris and Mr Bahan were cross-examined by Mr Richard Spearman QC, who appeared on behalf of the Claimants.

The Chat Logs

[28]The brief summaries of the parties’ respective cases set out above (paragraphs 24-25) identify certain key issues of fact (or mixed fact and law) between the parties. These include, in particular: the nature of Mr Harris’s knowledge of, and participation in, the activities of N and the N1 website, the nature of his connection with the operators and activities of the N2 website, the nature of his relationships with the other Effective Defendants, and whether certain transactions involving those companies were genuine and legitimate or, as the Claimants contend, mere shams and devices used by Mr Harris for the purposes of illegitimately syphoning off funds from N and/or putting the fruits of N’s and his own alleged copyright infringements beyond the reach of the Claimants.

[29]The veracity of the Chat Logs, with which Mr Harris has taken issue (paragraph 5 above), is central to several of these issues. If the Chat Logs are a true and accurate account of the private internet conversations they purport to record, then much of Mr Harris’s testimony, written and oral, is untruthful, and much of his, and the other Effective Defendants’, defences to the present proceedings rests on a foundation of lies. It is therefore appropriate to consider Mr Harris’s challenge to the genuineness and accuracy of the Chat Logs at the outset.

[30]Some 1,119 pages of conversation in the Chat Logs have been placed before the court. These conversations relate to the period December 2009 to August 2010. In the PoC the Claimants have pleaded specific extracts from these conversations. The passages in question were annexed to their skeleton argument in the form of numbered paragraphs. For convenience these numbered paragraphs are reproduced and appended to this judgment as Annexa. A. The same passages are also expressly pleaded in the PoC under paragraph 11(4) as particulars of the Claimants’ allegation in that paragraph. In their skeleton argument the Claimants also relied upon certain additional passages from the Chat Logs. These, too, are appended to the judgment, as Annex

b. B. In their skeleton the Claimants prefaced most of these extracts with the words “Mr Harris wrote” – that being their contention. As I have said, in some cases Mr Harris disputes that he wrote the words in question, and this is a matter I must now decide. I need hardly say that by reproducing the passages as they are set out in the skeleton, including the Claimants’ attribution of authorship, I have not pre-judged that issue.

[31]Mr E, who disclosed the Chat Logs to the Claimants in the course of these proceedings, gave written and oral evidence. In his witness statement he stated that the Chat Logs were provided to him by a friend, Thomas Hurst, who had himself formerly been a shareholder and company secretary of N, and an operator of the N1 website. Mr E stated that the parties to the conversations in question included himself (Mr E), Mr Harris, Mr Hurst, and a Mr Lee Skillen who had also at one time been a shareholder of N and an operator of the N1 website. Mr E said that the log-in “identifiers” of these participants were, respectively: <chris>, <dharris>, <freaky> and <kalante>.

[32]Mr E was cross-examined by Mr Harris. Mr E agreed that logs of this kind were capable of being altered, and that he could not confirm what was said on the channel after he had logged out, but he stated that he trusted Mr Hurst not to alter the log, and that he had not altered it himself. He stated that he had not read all of it thoroughly but had skim read it to ensure that it was the right channel and that the material was relevant, and to see who was present and when he himself had left. He was aware of most of the content as he had been present on the channel during most of the discussions in question. He was asked by Mr Harris about an on-line exchange recorded as taking place on 21 May 2010 at 13.58, and he confirmed that Mr Harris had written “Newzbin 2 team will now be named after Reservoir Dogs characters … I bagsy Mr White” (see paragraph 45 of Annex B to this judgment). Mr E also confirmed that he himself had asked to be “Mr Blue”, as the Chat Logs record. On 20 June 2010, in the course of a conversation recorded in the Chat Logs, Mr Harris is asked what his username is. He replies “Mr White” [p.962, 14.28]

[33]At no time in his cross-examination of Mr E did Mr Harris put to him that he (Mr E) had altered and/or fabricated the Chat Logs in relation to any particular passage or at all. Yet on several occasions later, when he was being cross-examined by Mr Spearman, Mr Harris made that assertion.

[34]In relation to the “I bagsy Mr White” conversation of 21 May 2010, Mr Harris said (twice) when being cross-examined “I have no recollection of having used the name Mr White”. Then:

“I don’t remember whether I used the name Mr White or not.”

He went on “I have no recollection of this conversation. I believe it has been tampered with. Mr Elsworth or Mr Hurst have lied to fit me up, under pressure from the Claimants.”

[35]There is a problem with this allegation of fabrication. An hour or so after the reference to “Reservoir Dogs” and “Mr White” etc., the Chat Logs record Mr Harris, in conversation with Mr E, composing a message to be sent to “ex-Newzbin users” as follows:

“Lamenting the departed site?....Good news: we are Newzbin Two. And we have glad tidings: NEWZBIN IS BACK! And we are the new management. The crew got most of the original Newzbin source code and the main databases…..We reckon we’ll up very soon. So don’t drift off …..Mr White”. (21 May 2010, 15.14). Mr Harris then asks Mr E for: “comments?”

. Mr E replies:

“probably just add a “we’ll email again when we have something to show you” type comment at the bottom”

Mr Harris says “aye”. Later he writes “My paragraphs look a bit wrong. Make Good news: we are Newzbin Two run into “And we have glad tidings….” and make And lower case….put in the deepsharer blog link too…”

[36]The significance of this composition is that, later that evening, an email in virtually identical terms to the one composed in the Chat Logs was sent by “Mr White” to former subscribers/users of the (now off-line) N1 website. In cross-examination Mr Harris said that he could not remember ever seeing this email. However, the suggestion that Mr E or Mr Hurst had taken the trouble to reverse engineer the Chat Logs so elaborately as to reflect the detailed composition of an actual email emanating from Mr White, is fanciful. Even supposing that he wished for some reason to “fit up” Mr Harris by falsely suggesting he was Mr White, there would be no need for him to go to these lengths.

[37]Mr Harris was asked by Mr Spearman about a lengthy passage in the Chat Logs covering some five pages, and purporting to record a discussion on the evening (18.21-19.51) of 9 January 2010 between Mr E and Mr Harris. It is common ground that at this time Mr Harris was acting as counsel for N in the run up to the hearing of the N1 action, in which Mr E was going to be a witness. Mr Harris and Mr E are recorded, in effect, concocting false evidence to be put before the court by Mr E in those proceedings. The falsification related essentially to the extent of downloads, via the N1 website, of “binaries” as opposed to “text”. “Binaries” refers to movies and TV programmes, which were at the heart of the copyright infringements alleged in those proceedings.

[38]When cross-examined about this conversation Mr Harris gave what I consider to be ambivalent answers. At one point he said that the recorded passages did not represent any kind of conversation that ever took place. He then stated that, though the record may be accurate in part, it had been doctored by Mr E. Later he said that he doubted the conversation had taken place, but that if it had, it showed Mr E saying he was going to fabricate evidence, in which case either Mr E had made a mistake in implicating himself, or the Claimants had given him assurances. Finally Mr Harris again denied that the conversation in question had ever taken place.

[39]At another point in his oral evidence Mr Harris referred to Mr E as a “clever forger of evidence” who may have “inserted stuff into” the Chat Logs. This latter remark was made by Mr Harris in the context of it being put to him in cross-examination that the relatively very small portion of the Chat Logs (about a dozen pages or so) which he himself had disclosed, and was relying upon, did actually appear to have been doctored by deletions when compared with the version disclosed by Mr E. Mr Harris’s version excluded certain text attributed to Mr Harris, which included an impolite reference to the MPA, and did not give any indication that some text had been removed from the conversation.

[40]In making this remark about Mr E, Mr Harris seemed to be suggesting that the version of the log which he himself had disclosed was the accurate one, and that the missing text must therefore have been inserted into the other version by Mr E. If that was the suggestion, it is one which is frankly absurd. The missing words might have been somewhat embarrassing to Mr Harris, and it is therefore understandable that he might have been tempted to remove them before disclosing the document. However, the idea that Mr E would trouble to insert them is risible, given the much more problematic material for Mr Harris in the 1,119 pages disclosed by Mr E.

[41]Although Mr Harris is in the position of a litigant in person in these proceedings, given his legal training and qualification as a barrister that does not explain his failure to give Mr E an opportunity in oral evidence to comment on the serious allegations of fabrication that Mr Harris was proposing to make in his own evidence and submissions. It is inconceivable that Mr Harris was unaware of the obligation to put such matters to Mr E. Nor was Mr Harris able to give any real explanation for the omission when the matter was raised with him during the hearing. My conclusion as to the accuracy of the Chat Logs

[42]I am satisfied that the Chat Logs as disclosed by Mr E accurately record the conversations contained in them, and that they have not been doctored by Mr E or anyone else. Mr Harris’s challenges to their accuracy and his allegations against Mr E are groundless. I also find that he is perfectly well aware of this. The main reasons for reaching this conclusion are as follows.

[43]First, I believe Mr E’s evidence that he had not altered the Chat Logs and that he did not believe Mr Hurst to have done so. I am, of course, aware that Mr E was found to be an untruthful witness in the N1 action, and I have taken this into account. I have also taken into account the fact that in these proceedings a settlement on confidential terms has been reached between him and the Claimants, so that he has, in effect, “turned Queen’s evidence” against the Effective Defendants. Nevertheless, in my view he was telling the truth on this occasion. His demeanour was not that of someone who has concocted a wicked pack of lies in order to frame a former associate. Nor is there any credible reason for him to have done so.

[44]Secondly, it was very noticeable that at the hearing Mr Harris did not treat Mr E as someone who had acted in that way. As I have already noted, he did not put any allegation of forgery or fabrication to Mr E in cross-examination. Further, when he himself was being cross-examined, Mr Harris accepted that during a short break in the hearing after Mr E had completed his evidence, he had invited Mr E to have a coffee with him, and that they had talked amicably. When Mr Harris was asked by Mr Spearman why he would feel favourably disposed to someone who had just given false and highly damaging testimony against him, Mr Harris replied “I don’t bear him any ill will. He was forced to pay legal costs and … that if he didn’t give …sort of evidence against me he would be nailed. He’s a nice chap although he has fitted me up.”

[45]In my view the reason for Mr Harris’s failure to put the allegation of fabrication to Mr E in the witness box, and for his apparently amicable behaviour to Mr E, is that there is not a grain of truth in the allegation of fabrication, and Mr Harris is well aware of this.

[46]Thirdly, for Mr E or anyone else to doctor the Chat Logs so extensively as to implicate Mr Harris in the multiple ways revealed in these several conversations, would be a gargantuan and very time-consuming task. It is implausible in the extreme to suggest that Mr E would have felt it necessary to create such a work of fiction in order to persuade the Claimants to settle with him, or that they would be complicit in or encourage any such exercise. Moreover, in the infinitely unlikely circumstance that this had happened, the author of the fiction would be unlikely to implicate himself quite so thoroughly: Mr E does not come at all well out of the Chat Logs, as Mr Harris himself pointed out when being cross-examined (see paragraph 38 above).

[47]Fourthly, Mr Harris’s own evidence about these matters in cross-examination was on several occasions ambivalent and highly implausible. I need only refer to the examples of such answers contained in paragraphs 34 and 38 above. Mr Harris’s suggestion that he could not “remember” whether he had used the name Mr White as a pseudonym, is literally incredible: either he did or he did not. In the present context, it is hardly something that might have slipped his mind.

[48]Finally, the conversations set out in the Chat Logs flow naturally and consistently. Mr Harris pointed to nothing in any of the disputed passages which gives the slightest hint of doctoring by alteration, insertion or otherwise.

[49]It also follows from my findings in this regard that Mr Harris and Mr White are clearly one and the same person, and that in denying (or in claiming not to remember) that he had opted to use this pseudonym as revealed in the Chat Logs, Mr Harris was once more being knowingly untruthful in his written and oral evidence to the court.

[50]I now turn to examine the other main issues of fact in the case, in the light of the evidence and of my finding that the Chat Logs are genuine, not fabricated and accurate.

Mr Harris’s knowledge of, and participation in, the activities of N and the N1 website

[51]This issue cannot be treated in isolation from the issues relating to the N2 website, as the evidence relating to one clearly also has a bearing on the other.

[52]It is common ground that Mr Harris was the sole director and sole owner of N from about 17 December 2009 until its winding up in mid May 2010. It was clearly established in the N1 action that at the time he acquired sole ownership and direction, and thereafter until at least the hearing and judgment in those proceedings, N was engaged in systematic, extensive and deliberate infringement of the Claimants’ and others’ copyrights, as found by Kitchin J. While Kitchin J’s findings, summarised earlier in this judgment, are not formally binding on the Effective Defendants, none of whom were parties, the judgment and findings are pleaded in the PoC and are admitted in the Defence of Mr Harris and K, which also refers to N’s “infringing activities” (see paragraph 25(1) above).

[53]The contention in the Defence is that Mr Harris did not intend N to infringe, and did not believe infringing activity had been taking place, until Kitchin J’s judgment in the N1 action, after which all reasonable steps were taken to curtail N’s infringing activity and to comply with the judge’s injunction. Mr Harris’s evidence was that with this aim he arranged for a repertoire filter to be installed in the N1 website software. There is a denial of any infringement on the part of Mr Harris by means of the N1 website, and a contention that the infringing activity of the N1 website occurred before Mr Harris became a director. Mr Harris stated in his evidence that thereafter, although as owner and sole director of N he was formally in charge, he was so busy running the litigation that Mr E was actually running the N1 website.

[54]I reject these contentions of Mr Harris. They are wholly inconsistent, not just with the findings of Kitchin J, but with the other material which has been put before me, not least the Chat Logs. In that regard there is, for example, the fact (as I find it to be) of Mr Harris planning with Mr E the fabrication of evidence in the N1 action (see paragraph 37 above). Some of the proposed fabricated material was aimed at misleading the court about the extent of N’s infringing activities. Such conduct is not consistent with that of someone who does not believe an infringement is taking place. Further, the tenor of the conversations between Mr Harris and Mr E on 9 January 2010 indicates knowledge that infringing activity is continuing on a substantial scale. For example, Mr Harris writes (at 18.43) “where it goes pear shaped is if they get an order to grab live logs and see real traffic!” Further fabrication is planned during conversations on 25 January 2010 between Mr Harris, Mr E and Mr Hurst (17.54-19.30) and on 29 January 2010 between Mr Harris and Mr E, with Mr Hurst and/or Mr Skillen (15.46-16.03). Mr Harris denied in evidence that he was a participant in these particular discussions. For the reasons I have already given, I am satisfied that the Chat Logs are a true record, and that the writer who logged in as “davidh” or “david” was Mr Harris, as he admits and avers to be the case in respect of those parts of the Chat Logs that he himself relies upon.

[55]As for who was actually running the business during the run up to the N1 action, it is clear from the Chat Logs that Mr Harris was in charge in all senses, and not just formally. It is clear that Mr E and the other associates did Mr Harris’s bidding, and that Mr Harris made all strategic decisions about the operation of the N1 website following his purchase of N.

[56]As to Mr Harris’s evidence about a repertoire filter, the Chat Logs show that following the Claimants’ success in the N1 action Mr Harris was concerned to ensure that he was not exposed to a risk of being sent to prison for contempt of court. He therefore discussed with Mr E and others the introduction of a filter designed to minimise the risk of the Claimants’ protected material in the movies and TV categories being downloaded by users of the N1 website. However, this arrangement was clearly only intended to be very temporary, pending the planned move of the servers to Sweden and the setting up of what became the N2 website. For example, in a conversation on 31 March 2010 Mr Harris said “I suppose I’ll have to take the risk [of users downloading infringing material if they conducted a search in “Everything” rather than in just movies and TV categories] for the 2 weeks it takes to get a server to Sweden….I’d rather make an honest attempt for 2 weeks to remove movies and tvs that are infringing. I hate the damage this will do but”.

[57]In his opening Mr Harris referred to Mr E as having cobbled together a rough and ready filter at his (Mr Harris’s) request after the Claimants had succeeded in the N1 action. Mr Harris said that when he cross-examined Mr E he would establish this and that work was done by HKB to supply a more refined filter. However, Mr Harris did not in fact put to Mr E that he had installed a filter. Mr E was asked about HKB, but said that he had no knowledge of any work done by them, although others may have known of it.

[58]It is not clear whether any filtering measure was actually taken in respect of the N1 website in the very short period between the order of Kitchin J and the website being taken down. In any event, I find that no measure intended to be effective in ensuring compliance with the order of Kitchin J was taken in respect of the N2 website. It would have defeated the object of that website. On the contrary, as described below, Mr Harris arranged instead for technical measures to be applied to the N2 website, with the aim of countering the anti-infringement software put in place by ISPs pursuant to the order of Arnold J in the N2 action.

[59]The evidence relating to the run up to, and commencement of, the N2 website, referred to below, is also highly material to Mr Harris’s case that he was innocent of any knowledge of, or participation in, the copyright infringement committed by N by means of the N1 website. My findings above are reinforced by that evidence.

[60]I deal later in this judgment with the effect of these findings, and in particular with the Claimants’ submission that, as owner and sole director of N from 17 December 2009, Mr Harris is a joint tortfeasor with N so far as the latter’s infringement of the Claimants’ copyrights is concerned. I also deal later with Mr Harris’s submission that the Claimants’ claim in that respect falls foul of the principle in Henderson v Henderson.

Mr Harris’s knowledge of and participation in the operation of the N2 website

[61]As noted earlier, Mr Harris denies having had anything to do with setting up or running the N2 website, and maintains that it was operated by Swedish nationals, including one called Anders, who (it is implied) must have stolen N’s data and software. At the same time he contends that the N2 website was not materially the same as the N1 website. This latter contention seems to rest, at least in part, on the assertion that the N2 website benefited from a repertoire filter intended to avoid a breach of Kitchin J’s order. I have already found that assertion to be untrue. Mr Harris also refers in that context to the absence of any “DMCA” or “take down” notices sent to the N2 website operators by the Claimants, asking them to remove infringing copies from their website. As to this, Mr Harris’s own documents show that such notices are largely ineffective. In the face of mass copyright infringements on the part of the N2 website, the Claimants understandably preferred to rely upon their remedies under section 97A of the 1988 Act, for the reasons explained by Mr Visser when he was being cross-examined.

[62]Mr Harris’s evidence was that he had met Anders (whose second name he did not know) in a pub, and had leased the domain name used by the N1 website to Anders and the other Swedish people who, according to Mr Harris, were operating the N2 website. Mr Harris said that he had done so on condition that they did not infringe copyright. Anders had agreed to pay him 5% or 10% (Mr Harris could not remember which, nor whether this included payment for the lease of the domain name) of the earnings of the N2 website in return for payment collection services to be carried out by K. He maintained that he had paid Anders some £20,000 in cash in respect of payments collected by K pursuant to these arrangements with Anders. Mr Harris accepted that there was no documentary evidence of the arrangements, except some hotel and restaurant receipts which indicated that he had been to Sweden.

[63]Despite Mr Harris’s denials, the evidence that he was the driving force behind the setting up and operation of the N2 website is overwhelming, and it is clear that the suggestion of theft of N’s software and of Swedish nationals running the N2 website is a fairytale (to use a more polite term than the equally accurate one used by Mr Harris in the Chat Logs on 17 May 2010 – see the extract for that date under paragraph 67 below). I find that there was no arrangement to lease out the domain name, and that Mr Harris alone was in charge of the operations of the N2 website. As for the payment arrangements involving K, I find that K was set up by Mr Harris as a vehicle for inter alia receiving the monies resulting from the earnings of the N2 website (see further at paragraphs 73-86 below).

[64]Nor is there the slightest truth in the assertion that the N2 website was materially distinct from the N1 website and was designed so as not to breach the injunction of Kitchin J. The reverse is the case. I find that the N2 website was the same in all material respects, and was from the outset designed and intended by its operator to continue the infringing activity of its predecessor, as Arnold J found (paragraph 18 above). This is also clear from the evidence of Mr Visser and the unchallenged evidence of Mr Van Voorn, both of which I accept. Mr Van Voorn was able without difficulty to access and download many of the Claimants’ most popular copyright protected films from the N2 website between September and December 2010. Mr Visser, too, stated in his evidence that the movies which were available via the N1 website were still available on the N2 website.

[65]On 28 May 2010 Mr White (Mr Harris) is reported as stating in an interview with a blogger called Revoltingfilesharers, under the heading “Newzbin is back”:

“The site is gonna open really really soon…..We’ll be running a straight clone to start with but we want to change it eventually.”

[66]The Chat Logs provide further and cogent evidence demonstrating that the contentions of Mr Harris are untrue. They show that on 21 May 2010 Mr E wrote “how long till relaunch?” to which Mr Harris replied “I’m thinking middle/end of next week.” (09.49) It is common ground that the N2 website began operations on 28 May 2010. This was about ten days after the N1 website had been taken down, following the injunction of Kitchin J and the voluntary winding up of N on Mr Harris’s initiative.

[67]This “re-launch” was being discussed and planned in the Chat Logs from at least February 2010 onwards. For example: On 13 February2010 Mr Harris wrote:

“I’ll do what I can to keep Newzbin together and move it to a successor company, or to leverage the technology into a new company...” [p.414, 20.48]. On 15 February he wrote: “Am setting up another new offshore company in the Seychelles to take Newzbin assets. HKB will be just for siphoning off funds. Made it clear to Jane that that we need to a) buy time if we can b) ensure no judgement stops us doing stuff in future – by ‘us’ I mean any successor to Newzbin. Told them whatever happened to us “someone” would take over a v similar job…[p.421, 19.09ff].. …..am hoping Bogon will look the other way when we, *cough*, ‘swap’ old newzbin servers for new servers from a new 3rd party” [p.422, 20.34]. On 16 February he wrote: “Am now talking to guys who do or once did hosting for Pirate Bay” [p.440, 18.43] and “as long as Bogon keep their mouths shout we’re are OK” [p.446, 21.56] and “In longer term we may need bulletproof hosting in Ukraine or China but for now this will allow us to reorganise. Wonder if we need to go over to Sweden with a box? or mebe Fedex it and they deal with it?” [p.446, 22.01] and “I do need a proxy solution fast: it’s the one thing that really is a critical issue. Will take a short term crap solution while working out something better for longer. Essential to keep subscribers happy and no gap”

. Mr Hurst then observes:

“concerned about the suspicion no gap would raise”

. Mr Harris replies: “YEa but I think we can be quite brazen. WE saw business was going tits up we sold to someone in a manner minimising gaps. It’s not like we, and a purchaser, havent been aware of risk for ages … Solicitor like my offshore structures, thought it was very ‘slick’” [p. 447, 22.22]. On the same day he wrote: “if we can keep subscribers on board I hope to have enough funding to buy (at some point) petabytes of redundant cheap diskspace and bandwith and research to develop new search engines - it’s going to take some time I reckon. It’s prolly a 3/4/5 year project - core to it I reckon is to keep funding core viable, which means keeping Newzbin research going and upping the retention times and also at some point (when we have technical capacity to cope with a server load) a free Newzbin search page … I want Newzbin to be totally free at some point” [p.448, 22.55]. On 19 February he wrote: “yea upbeat when we have something to be upbeat about: when this shit is all sorted I can assure subscribers that come what may Newzbin rolls on regardless” [p.472, 14.01] On 7 April he wrote: “I will say this by hook or fuckig crook newzbin will go on - It’s a good money earner” [p.727, 15.52] On 12 April he wrote: “Once the action is over and Newzbin is [wound] up, when it restarts MPA are bound to say ‘you are just Newzbin 2.0’ but as long as thy have no proof I dont give a crap. It’s the classic whackamole they always face with p2p sites. 99% of times it’s the same ppl over again. They know it they just [can’t] usually prove it” [p.749, 15.57]. On 20 April he wrote: “It’s all academic. By the time it happens Newzbin 1 will be gone and in Sweden. Volcanoes permitting” [p.782, 14.44]. On 22 April he wrote: “I think we are looking at about 3 ish weeks till we can do Newzbin 2” [p.793, 15.44]. On 17 May [the day that the N1 website was taken down]Mr Harris wrote: “The site will remain down for 1 or 2 weeks. What needs to happen then is that when the site comes back it looks a little bit differet - ideally it’s be fully redesigned. But that ain’t practical in 10 days. But if someone hauls u before a judge it will help if it does look a bit different. The story is that the newzbin code was nicked. manifestly bollocks but no-one can prove otherwise” [p.875-876, 18.52]. On 21 June 2010, Mr Harris wrote: “There is clearly a real suspicion that I’m behind NB2 but no hard evidence. If I got raided all my drives are encrypted and there is no paper documentation at my house… Also since I run a legit website I have a real alibi. If asked I would just say “Yea, I got approached by the Newzbin2 guys and agreed to act as payment gateway” again, not unlawful so far as we know on current law.” [p.968, 19.53-19.55].

[68]There are many other conversations recorded in the Chat Logs which show beyond doubt that, far from abandoning the infringing activities carried on via the N1 website, Mr Harris was carefully laying the ground so that after the N1 action and anticipated winding up of N, the infringing activities in question would continue more or less seamlessly well into the future, by means of servers based outside the jurisdiction, and with Mr Harris running the operation. See, for example, paragraphs 12, 14-16, 19, 20, 23-28, 30-38, 40, 43, and 45-60 of Annex B to this judgment.

[69]Mr Harris’s attitude to compliance with the order of Kitchin J was the same as his approach to the Claimants’ application for a blocking order in the N2 action: in September 2011 he (in the guise of Mr White) announced via a website called torrentfreak.com that the operators of the N2 website were doing what they could “to utterly defeat Cleanfeed” (the blocking technology developed and used by BT, which formed the basis for the order of Arnold J). The technical counter measures deployed by the operators were “targeted at UK users who are likely to get blocked in October. This first version is a bit rushed and so not very polished. As time goes by we shall improve it and add features.”

[70]My conclusions on the effect of these findings, in relation to the Claimants’ submission that Mr Harris is liable for the infringements of the Claimants’ copyrights carried out by means of the N2 website, are set out later. The nature of Mr Harris’s relationships with the other Effective Defendants: the nature and purpose of their activities/transactions

[71]As already noted, the Claimants, in general terms, contend: that the other Effective Defendants are Mr Harris’s creatures; that he has used them to help him harvest the earnings of the N1 and N2 websites, and as a means of illegitimately syphoning off funds from N and putting those funds and the fruits of N’s and his own copyright infringements (via those websites) beyond the reach of the Claimants; that he has done this by arranging a number of sham or illegitimate transactions, so as to thwart the Claimants’ ability to recover costs or compensation in respect of those infringements, whilst at the same time preserving the funds and property in question for his own benefit.

[72]These allegations are denied by the Effective Defendants (paragraph 25 above). It is therefore necessary to examine the Claimants’ contentions, and the surrounding circumstances as revealed in the documents and other evidence. K; payments to K; the FO website; Amberleigh

[73]It is common ground that K was incorporated on 21 December 2009, a few days after Mr Harris acquired all the shares in N and became its sole director. On the same date Mr Harris was appointed director of K. The annual return to Companies’ House shows Mr Harris holding the only share in that company as at 21 December 2011. That share was apparently transferred to Mr Harris’s brother, Peter Bahan, on 13 September 2012.

[74]According to documents provided by the liquidator of N, K began receiving money from the operations of N and the N1 website from 5 January 2010, at which time Mr Harris was the sole owner and director of both companies. When cross-examined about these payments Mr Harris was unable to say what they were for, and speculated that K “could have been providing subscription services for” N.

[75]Mr Boivin’s evidence was that a spreadsheet containing payments information disclosed by Mr Harris showed 359,263 payments received by K totalling £2,111,744. These payments were made between 11 June 2010 and 16 November 2012, and thus were almost exactly co-extensive with the period during which the N2 website was operative. Mr White (Mr Harris) stated in a post on the website on 28 May 2010 “We don’t have a functional payment system in place yet so the site will be free for a week or two.” In a further post on 11 June 2010 he stated “We have secured a payment services provider and so can now take donations or credit top-ups via PayPal and credit cards. We hope you’ll dig deep to help secure the future of the site.”

[76]Mr Boivin described how each payment in the spreadsheet was identified as either “fo” or “nzb”. He took these to be indications that a payment was derived either from the FO website (see paragraph 25(3) above) or the N2 website. He found that about two thirds of the payment transactions in the spreadsheet were marked as “fo”. However, he said that further investigation revealed that in relation to over 25,000 of the payments the IP address (usually used by a payer at the time of making payment) was associated with the N2 website. He also stated that he was able to ascertain that a number of users who were designated in Mr Harris’s spreadsheet as having made payments for the services of FO, appeared never to have heard of the FO website, or were users of the N2 website.

[77]Ms Stanford also gave evidence casting significant doubt on the spreadsheet’s accuracy in designating payments as “fo”. She conducted a sample of followers of the N2 website on Twitter. She ascertained that there were 3,290 such followers in February 2013. From these she sought to identify a sample who indicated that they had been users of the N2 website. She then examined whether they were identifiable on the spreadsheet as having made payments. A number of such individuals were identified whose payments were attributed to FO rather than the N2 website. Ms Stanford accepted in cross-examination that she had been unaware at the time that there were free users of the N2 website as well as premium users, but she stated that her examples included people designated “fo” who had paid for access to N2 website and who had downloaded NZB files.

[78]As far as the nature of the file storage and encryption services provided by FO were concerned, having reviewed a range of other such services available on the market, Ms Stanford concluded that other such services were more complex, more user-friendly and cheaper than FO’s. Mr Boivin gave evidence to the same effect. Having examined the FO website he formed the view that it was no better than hundreds of other on-line storage services, and appeared to have less features than many.

[79]Both Ms Stanford and Mr Boivin referred in this regard to what are called “the Alexa rankings”. Mr Boivin described the Alexa traffic ranking, provided by Alexa Internet, Inc, as globally the most highly regarded method of assessing the relative popularity if internet websites, which uses data from many thousands of sources to measure traffic on (and popularity of) a particular website. It was, he said, considered to represent the “industry standard” for such rankings. Mr Boivin checked the Alexa rankings for the FO website in October 2012, which revealed extremely low levels of traffic (share of global internet use of 0.000003%); he also checked in February 2013 and found that no ranking at all was recorded for FO. Other ranking services checked by him held no data for FO, indicating negligible traffic. Mr Boivin said that, by contrast, the Alexa ranking for the N2 website in October 2012 was very much higher (apparently by a factor of about 1000). In the light of this material both Mr Boivin and Ms Stanford were of the view that, contrary to the designations in Mr Harris’s spreadsheet, it was much more likely that the vast majority of payments received by K related to payments made by users of the N2 website.

[80]This was disputed by Mr Harris. His evidence was that the FO website was not a sham as alleged by the Claimants, but was a genuine and sophisticated service providing storage and encryption facilities. He said that it was the “only file storage and transfer service that offers secure encryption.” He said that although they did not have high hopes for it, it was a runaway success, being responsible for two thirds of the money taken by K.

[81]Mr Harris put to Mr Boivin in cross-examination a number of comments from internet users dating from 2006-7 calling into question the accuracy of the Alexa ranking system. Mr Boivin pointed out that these comments, even if correct when made, were now out of date. Alexa had since then been bought by Amazon and had made many changes to the way in which data is collected for measuring traffic. The system and the technology used had been improved. In particular the Alexa system now used 25,000 sources that reported data, and each source used a variety of means of collection, including toolbars, browsers etc. Mr Boivin emphasised that his evidence dealt with the rankings in 2012-3, and not 2006-7.

[82]I prefer the evidence of Mr Boivin and Ms Stanford to that of Mr Harris where there is a conflict. In the light of the evidence I find that the FO website was simply a front for the infringing activities carried on by Mr Harris via the N2 website, and for the collection by K/Mr Harris of the revenue earned by those infringing activities. I accept the evidence of Mr Boivin and Ms Stanford as to the “also ran” quality of the service offered by FO, and I accept what Mr Boivin said about the standing of the Alexa ranking system, and its relative ranking of the two websites in 2012-3. I also accept the evidence of Mr Boivin, supported by that of Ms Stanford, that the designation of payments on Mr Harris’s spreadsheet as “fo” or “nzb” is not reliable. Mr Harris himself accepts that K collected some £701,000 from the operation of the N2 website, but I find it overwhelmingly likely that the vast majority of the payments recorded on the spreadsheet relate to users’ access to that website. Furthermore, payments received by K from January 2010 until the N1 website was taken down in May that year are likely to be in very large measure the fruits of the same activity carried on by N while that company was in the sole ownership and control of Mr Harris.

[83]These conclusions are reinforced by the Chat Logs. There are several relevant passages, but it suffices to cite the following here: On 4 January 2010, in the course of a conversation with Mr E and others, Mr Harris wrote: “I wondered about a legit file backup site: “1Gb of encrypted offsite backup storage for your most important emails & docs. £20 a year (p.s. Newzbin Premium access for free to new members”). … imagine most Newzbin users will say “This sucks, but fuck it we get Newzbin so lets just ignore it” … Like I say: don’t forget the service is a sham, we know it – I imagine users pretty soon will. Then who cares if its crap …3 or 4 years from now MPAA may be able to built up enough of a case to show it’s a sham and shut even the membership site down but that’s waaaay down the line…… “secure affordable temporary storage”….We can afford that. We can panic if users are stupid enough to actually start to use the service. Chris: my main worry is that users will take it srsly and be pissed if it is shite… ” [p.132, 17.04-17.27] On 8 March 2010, Mr Harris wrote: “what happens when Newzbin user is told ‘you have to be FO [FileOrgy] user’? They lose their credits? … right so only time they get to know about FO is when their credit runs out & they go to top up and are told “we don’t do that anymore – see FO?” … so do we just stop allowing people to top up at Newzbin and when their credit runs out we say “you need to be a member of an affiliate site here’s the list: a) FO. b) that’s it”” [p.569, 13.51-13.57] (See, by way of further examples, the entry for 21 June 2010 at paragraph 67 above, and Annex B to this judgment, paragraphs 1, 20, 25, 27, 34, 43, 49, and 50.)

[84]I will consider the issues relating to the purchase by K of a house called Amberleigh for £430,000 when I examine the nature and role of the Third Defendant, the Foundation. Similarly the transfer of a McLaren motor car by K to the Sixth Defendant, MFM, will be considered later in this judgment.

[85]At this stage I record my finding that the only purposes of K’s existence were to assist Mr Harris in continuing the infringing activities of N and himself, in providing a corporate vehicle for holding and/or utilising the proceeds of such activities for the benefit of Mr Harris. I find that at all material times K was under the sole direction and control of Mr Harris, and was, in effect, his alter ego.

[86]The part played by K in the events with which these proceedings are concerned does not end here, but it is convenient now to turn to another of the Effective Defendants. The Foundation

[87]The Foundation was established in Panama by Mr Harris on 28 January 2011. A great deal of evidence has been put before the court by Mr Harris as to his purpose in setting it up, and as to the structure of its governance, and the role he played in that governance (for example in the witness statements and affidavits to which I refer at paragraph 27 above). The thrust of this evidence is as follows: The purpose of the Foundation is to hold property and sponsor research and development in “Usenet” and privacy technologies, as well as “to provide counter lobbying to balance the expensive lobbying of the Claimants”. The Foundation is managed by a “council of Panamanian nationals”. However the only member of this council is said to be an entity called Pearl Management Inc. The Foundation was created by a “founder” who appointed a “protector”, whose role is that of an agent of the Foundation. Under the terms of appointment the protector’s tenure ceases on the protector being served with a court order. Mr Harris is the founder, and the only protector there has been. He also holds a “power of attorney”. However, he states that because of service of the asset freezing orders in the current proceedings he has ceased to hold the position of protector, which has been assumed by the council, and he is no more than a “bystander”.

[88]Mr Harris produced documents reflecting these governance arrangements. He denied that the Foundation is his alter ego or that it is directed or controlled by him. He maintained that it was managed independently from him, and was not set up by him in order to launder the proceeds of infringing activity. He said that even before his role as protector ceased as a result of the court’s freezing order, he had very little to do with its management and control. However, it is a fact that Mr Harris represents the Foundation in these proceedings and signed its defence.

[89]The main focus of evidence and submissions in relation to the Foundation has concerned the house called Amberleigh to which I have already referred.

[90]It is common ground that on 15 November 2011 K bought Amberleigh for £430,000 and transferred that property to the Foundation for no consideration on 3 February 2012. There are apparently no documents relating to the transfer between K and the Foundation. There is reason to believe that Mr Harris would have preferred to arrange for the house to be acquired directly by the Foundation, and that K was interposed by him because the solicitors acting on the purchase were concerned about money laundering. At any rate, it is probable, and I so find, that the funds used to purchase the house, as with K’s funds generally, were derived in very large measure from the operations of the N1 and/or the N2 websites.

[91]In his written evidence Mr Harris referred to his decision to “donate” Amberleigh to the Foundation as an “honest and in context a fairly sensible act….the initial seed funding will come from rental income from Amberleigh.” He stated that although no money changed hands on the transfer, the intention (ie his own intention as holder of a power of attorney for the Foundation and as sole director/owner of K) was that leases should be drawn up in favour of K and himself and that rent would be paid under them. However, Mr Harris accepted in evidence that he and his family had lived there without paying rent from about November 2011 until June 2013, although he stated there was an intention to pay. Further, according to Mr Harris’s oral evidence, the lease to be granted by the Foundation in exchange for the transfer to it of Amberleigh would be either 50 or 90 years long, during which only a notional rent would be paid by K, but from the end of that period K would pay a commercial rent. In the meantime he said that tenants were paying £1,600 per month to rent the house. Asked how in these circumstances there would be a lease to K, Mr Harris said that what was envisaged was a split lease – part domestic, and part commercial. Mr Harris also stated that the £1,600 rent was being paid to him rather than to the Foundation, pending the creation of a lease.

[92]Under the “Regulations” of the Foundation, the only “beneficiaries” of the Foundation are K and HKB. When it was put to him in cross-examination that his written evidence that the Foundation did not have “any connection with [K]”, and that “the Foundation has no relationship with [K] other than providing it with an office”, was misleading given that K was its beneficiary, Mr Harris replied that he did not regard that as a “connection” nor as a “relationship”. Mr Harris also said he could not remember what the thinking was in making K a beneficiary, and that this may have been done as a result of representations he had made to the Council, or the Council could have done it off their own bat, whether he wished it or not. Nor did he know why HKB had been made a beneficiary. It was possible that they were felt to have a common purpose with the Foundation.

[93]The Foundation’s Regulations also show that the Foundation is a 100% owner of the Eighth Defendant, 4All, a company incorporated in Hong Kong. Mr Harris in cross-examination said that he had no recollection of the relationship between 4All and the Foundation, and had no idea who owned 4All. Shown a conversation in the Chat Logs on 7 July 2010 at 09.41, in which he is recorded as writing “New offshore for Newzbin will be “NZB4All””, Mr Harris’s evidence was that he had never said that, and it was likely that Mr E had fabricated it. I have already made findings about the accuracy of the Chat Logs and about Mr Harris’s allegations of fabrication. I find that Mr Harris wrote this passage.

[94]Mr Harris accepted that under the relevant rules of the Foundation only he, as Protector, had power to change the beneficiaries, and manage or transfer the assets of the Foundation. He agreed that, as recorded in the Regulations, he had opened a bank account on behalf of the Foundation and that he was its sole signatory. It was put to him by Mr Spearman that in his written evidence he had stated on oath that he did not know where the Foundation’s bank account was or how much was deposited in that account, or whether the Foundation had any other assets, and that these statements were obviously untrue. His reply was “I don’t have an answer to that.” He later maintained that the statements were accurate. He also said that although he had set it up, the Foundation was not exclusively within his control. Pearl Management Inc were paid by him to run the Foundation and, like all trustees, took their own advice.

[95]Mr Harris said in his written evidence that “nothing could be further from the truth” than that the Foundation is his alter ego. He also denied that he set it up for the purpose of laundering the proceeds of the N1 and N2 websites and putting those funds beyond the reach of the Claimants.

[96]I reject the evidence of Mr Harris on these points. I find that, far from having handed over control of the Foundation to Pearl Management Inc, the Council or any other person or body, Mr Harris is, and always has been, de facto the sole controller of the Foundation and he alone has determined, and continues to determine, its actions in all respects. In this sense the Foundation is his alter ego. Whether Mr Harris is also its de iure controller may involve questions of foreign law, and may well be irrelevant in the present context. I find that Mr Harris established the Foundation for the purposes of holding property derived from the operation of the N1 and N2 websites, and creating the false impression that that property is held outside his control, when the reality is that Mr Harris is in practice almost certainly in a position to dispose of it in whatever way he wishes, by arranging for the Foundation to execute whatever documents and carry out whatever transactions are required for that purpose.

[97]Amberleigh represents such property. Mr Harris has had exclusive enjoyment of Amberleigh – first by occupying it as his family home, and after that by receiving the rent from tenants. I find that this was always his intention and he never intended that Amberleigh, or its rental income, would be used for the benefit of the Foundation or anyone else.

[98]Mr Spearman in his closing submissions suggested that although the Claimants would not shrink from the consequences of a finding that the transfer of Amberleigh by K to the Foundation was a sham, it was probably not necessary for me to determine the ownership of that property. He said the Claimants’ case was simply that Mr Harris was behind everything. I propose to accept Mr Spearman’s suggested course, at least at this stage. It is certainly possible that the transfer was a sham, but I would not feel able to determine that or the ownership of Amberleigh without further argument. As things stand I do not feel it appropriate to go further than the findings in the two previous paragraphs. MFM

[99]The Sixth Defendant, MFM was incorporated on 14 November 2012. Mr Harris is and was at all material times its only director. His younger brother, Mr Peter Bahan, was the sole shareholder. Mr Harris's evidence was that K had bought the McLaren (paying in part by exchanging an Audi car said to have been bought for £54,394) and transferred the McLaren to MFM on terms that K would be paid its market value over 3 or 4 years. Both K’s purchase and the transfer agreement were admittedly undocumented. Mr Harris put in evidence a log book showing a transfer of registered keeper on 15 November 2012, and registration with the DVLA on 29 November that year. The transfer took place a day before the freezing order granted by Mr Justice Mann was served on Mr Harris (paragraph 23 above). Mr Harris’s evidence was that this was a coincidence, as he had no knowledge of the order before it was served. The order was later extended to MFM.

[100]The only witness called by the Effective Defendants (apart from Mr Harris himself) was Peter Bahan. He told me that he was Mr Harris’s younger brother and that he had been in the police force since 2004. Before that he had been an IT consultant. He said he was currently suspended from duty as a policeman, as he had been arrested after £192,000 cash had been found in the loft of his house. He told me that this cash, which had been seized by the police under Proceeds of Crime legislation, had been given to him by Mr Harris in £50, £20, and £10 notes over a period from about January 2010 to sometime in 2013. It represented what his brother had told him was his share of their mother’s estate. Mr Bahan said he wanted the funds in cash as he was worried about the uncertainty of banks’ financial position at that time. He had no means of knowing the source of the money other than what his brother told him.

[101]Mr Bahan’s written evidence about the McLaren was to the effect that Mr Harris had bought it as a company car for K, with a view to letting it out on hire to film and TV companies. Mr Bahan had told Mr Harris that he knew a number of police high speed drivers who would be interested in hiring it privately; the upshot was that they decided to transfer the car from K into a new company, formed for that purpose. Mr Bahan said he would have been a director but for police rules. However, he was to be the sole shareholder. Mr Harris, as director, would do the day to day administration. They would share the marketing and promotion work. Mr Harris was free to use the car if he paid the agreed (preferential) rate of hire. No formal terms of the agreement were ever recorded; it was an oral family agreement. The idea was to give Mr Bahan some financial security once he retired from the police.

[102]In cross-examination Mr Bahan stated that he had taken no steps to hire out the car, as that would be inconsistent with the police rules. He was happy for his brother to take care of this. He said that the only person who had ever used the car was Mr Harris, who paid for its insurance at £200 per day. As far as Mr Bahan was aware, no hire fees had ever been paid to MFM. He agreed that the whole arrangement was very vague and that he had never calculated how much hire fees would have to be paid in order to cover the cost of the car. He was prepared to trust his brother, who had said he would take the lead in hiring it out.

[103]Mr Harris in his witness statement of 4 December 2012 said that MFM had not yet agreed a price for the transfer to it of the car, but it was likely to be between £135,000 and £145,000. In his witness statement of 28 January 2013 Mr Harris stated that he had not yet prepared a written sale agreement but his intention as director of both K and MFM was that MFM should pay K the monies owed from rental income over a period of 5 years. In his witness statement dated 26 August 2013, Mr Harris states, under the heading “Why I set up Motors”:

“Although I like to drive the McLaren, I bought it as an investment…. I set up [MFM] as a specialist hire company.”

[104]The Effective Defendants deny the Claimants’ contentions inter alia that the transfer of the McLaren to MFM was ineffective, or that MFM is the “alter ego, vehicle, thing or creature” of Mr Harris, and they maintain that the McLaren was purchased for MFM to let out for hire, as stated in their evidence.

[105]I consider that Mr Harris’s and Mr Bahan’s account of the purpose of setting up MFM and transferring the McLaren to it, is implausible in the extreme. I do not believe that there ever was a genuine plan to hire the vehicle out for films and TV productions. On the evidence the overwhelming probability is (and I so find) that Mr Harris acquired the car, through K, for his own personal use – certainly that is the only use to which it had been put up to the time of the hearing before me. I also find that Mr Harris set up MFM with Mr Bahan as its sole shareholder, and purported to transfer the car to the company, purely in order to distance the apparent ownership of the vehicle from himself, and thereby to seek to shelter it from the Claimants.

[106]Whether or not when he did this in November 2012 Mr Harris had got wind of the present proceedings, commenced in April 2012, or of the steps being taken by the Claimants to collect evidence, leading up to the application for the freezing order in November 2012, matters little. It is clear that from the time of the N1 action onwards, Mr Harris was taking steps to shelter in one way or another the proceeds of his operation of the N1 and the N2 websites. MFM was just another example of what I find to be his policy in that regard, in the same way that he established the Foundation and purported to transfer Amberleigh to it.

[107]Notwithstanding Mr Harris arranging for the single share in MFM to be transferred to his brother, I find that MFM was under Mr Harris’s sole direction and control. He was, of course its sole director. But in addition I find that in regard to transactions relating to MFM and/or the vehicle Mr Bahan would be likely to act in whatever way he was directed to by Mr Harris. As with the purportedly independent Council in the case of the Foundation, the issuing of the share to Mr Bahan was in essence no more than window-dressing. In the light of the evidence I find that MFM was the tool or alter ego of Mr Harris.

[108]As to whether the ownership of the vehicle was in fact and law transferred by K to MFM, or remained with K, or has been with Mr Harris throughout, I do not propose to decide without hearing further argument. Given the multiplicity of issues in these proceedings, this question, like the ownership of Amberleigh was touched upon only superficially at the hearing. Also, it is possible that the interests of others who are not party to these proceedings may be affected by a decision on these questions. HKB, Mike Wong, the Flat and 4All

[109]HKB was incorporated in June 2009 in Hong Kong. 4All is also apparently a Hong Kong company, incorporated on 20 July 2010. They were joined as defendants following Mr E’s disclosure of the Chat Logs. They have served no defences and played no part in these proceedings. As such they are liable to have judgment entered against them in default. 4All is apparently wholly owned by the Foundation, as I have already mentioned. The ownership of HKB is obscure.

[110]The Claimants’ case against these companies is set out in paragraph 11(4) of the PoC. In summary it is alleged that(i) HKB is and was at all material times the alter ego, vehicle, thing or creature of Mr Harris,

(ii) Mr Harris and, among others, HKB, agreed upon and implemented a plan to remove and conceal the assets of N for the express purpose of defeating and rendering worthless any judgment or order for costs obtained by the Claimants in the N1 action, and to use those assets for purposes of benefiting either Mr Harris personally or others who were involved in the scheme or whom he wanted to benefit; and to that end,

(iii) Mr Harris and/or HKB caused HKB to raise invoices to N which were false, and to prove and vote in the liquidation of N on the basis that HKB was owed £555,340 by N when in truth it was owed nothing;

(iv) Mr Harris also caused N to pay HKB at least £237,427.00 for no consideration as follows: £91,590 on 12 February 2010; £50,000 on 9 April 2010; and £95,837.00 on 14 April 2010;

(v) either as part of the same scheme to remove and conceal the assets of N and, or as part of a similar scheme concerning the revenues generated by the N2 website, Mr Harris caused the following sums to be paid by HKB to K and to HKB by K (resulting in a total net payment to K of £98,714.00): £2,500 on 9 March 2010 from K to HKB; £50,000 on 20 April 2010 from K to HKB; £50,000 on 4 November 2010 from HKB to K; £33,214.00 on 25 March 2011 from HKB to K; £68,000.00 on 28 March 2011 from HKB to K.

[111]The Claimants allege that on or about 1 July 2010 4All began to be used, together with or in substitution for HKB, for these purposes, and/or joined in the above scheme or schemes.

[112]Some of the main factual issues concerning HKB at the hearing related to whether Mr Harris in fact controlled this company, and whether invoices submitted by HKB to N for work allegedly done to develop and supply inter alia a repertoire filter, were genuine or bogus. (As to that, my finding earlier at paragraph 58 is to be noted in the context of the work allegedly carried out by HKB.) Allied to these issues was the question whether a person called Mike Wong, said by Mr Harris to be his main contact at HKB, was real or a fabrication of Mr Harris. Another issue relates to the Flat (see paragraph 27 above and the reference there to Mr Harris’s affidavit of 4 December 2012).

[113]In relation to the HKB invoices, one of the key documents relied on by Mr Harris is an unsigned agreement dated 11 April 2009 purporting to be between N and HKB. That date is about 2 months prior to HKB’s incorporation on 17 June 2009. The preamble states that HKB offers to perform technical and administrative operations for the services run by N in Asia. It also states “Because of litigation against N this agreement is highly confidential and must remain confidential to protect the commercial viability of both this agreement and the positions of the parties”. It goes on to provide for “funding arrangements”.

[114]Also in evidence are a series of “Funding Letters” with HKB’s heading, bearing the following dates:(1) 12 June 2009,

(2) 16 October 2009 and

(3) 19 December 2009. All purport to come from HKB and are addressed to N. In addition there is

(4) an invoice headed “Software Development” dated 7 April 2010. The first of these documents pre-dates the incorporation of HKB, and bears a domain name which appears not to exist. It seeks payment of £91,590. Mr Harris accepted that this sum was paid by N into the Foundation’s bank account of which, as I have already noted, Mr Harris is the sole signatory. The second seeks payment of £164,295 for development work. Again it bears the same non-existent email address. The third bears a date within a day or so of Mr Harris acquiring ownership and control of N, and seeks payment of £391,045. About two thirds of this sum is said to be in respect of “Projected development hours needing funding to completion and agreed today by Newzbin (Mr Bahan) pursuant to Funding Agreement clauses 2.1 and 2.2”. Still the non-existent email address is shown. When asked in cross-examination why there was a reference to “Mr Bahan” in the invoice, Mr Harris replied “I don’t know. You’ll have to ask HKB.” It will be recalled that this was a name which Mr Harris now accepts he assumed when he became a director of N in order to give the impression that he and Mr Bahan were two separate people.

[115]Document (4) requires payment in advance “before work can proceed” of £50,000 for “development of content blocking filter to specification as discussed.” There appear to be at least two payments to HKB for which no invoice exists: a sum of £95,837 was paid by N on 14 April 2010. Mr Harris gave no explanation when asked about it in cross-examination. Another payment by N on 9 April 2010 of £50,000 was said by Mr Harris in cross-examination to be perhaps in respect of a repertoire filter.

[116]At the hearing Mr Harris disclosed another document, purporting to be an email dated 9 July 2010 from a representative of HKB, Mike Wong. In this email Mike Wong was answering questions put to him by Mr Harris with a view to the answers being put in evidence before the court which was going to hear the winding up petition in respect of N. In these answers Mike Wong states in relation to the non-existent domain name/email address:

“We intended to acquire this domain name but decide to use another better address. I think you must have been sent old stationery templates.”

In response to a question about the amounts billed for work Mike Wong states:

“We had a large team on this….for many months, I think one year plus. The bills you were sent were all for work done not billed in advance. We are still owed money by you.”

[117]Clearly the answer about advance billing is inconsistent with the clear content of the largest of the invoices. Further, it is curious, to say the least, that HKB, which according to another answer from Mike Wong, worked on high security projects for governments and banks, should use a domain name/email address never apparently acquired by the company on several large invoices over a period of about ten months.

[118]Mr Harris’s evidence about Mike Wong was even more puzzling. In a witness statement dated 9 July 2010 in the winding up proceedings he said this on the subject of HKB:

“I have had a number of conversations with the company over the past year and I have met the technical director Mike Wong on several occasions when he was living in the UK; they are a legitimate trading entity.”

In his affidavit of 4 December 2012 he stated that he owned all the shares in a company which owned the Flat, but he had recently transferred those shares to HKB as part of a deal to pay for software development. He went on:

“I have known some of the key people behind HKB since I was a postgraduate in London: we used to enjoy the student lifestyle to the full and were all drinking buddies. I also attended the wedding of my main contact at HKB, Mike Wong. We are all friends and we have enjoyed a good personal relationship over the years.”

In an affidavit dated 13 December 2012 Mr Harris refers to “my flat” and apologises for not mentioning that Sutton LBC had applied for a charging order over both the Flat and “my shares”, to enforce a judgment. In his affidavit dated 20 November 2013 he stated that the shares in the Flat were actually owned by his mother, and not by him. He also corrected his earlier statement about Mike Wong:

“I think I must have misrecalled another wedding since I haven’t met Mike Wong.”

[119]The questions thrown up by that bizarre evidence about Mike Wong are resolved by the Chat Logs. In the course of a conversation on 1 April 2010 between Mr Harris and “kalante” (Lee Skillen), the latter remonstrates with Mr Harris:

“Why did HKB email, and why is my name on the bottom? The conversation then continues [15.27-15.35, p.704-5]: Mr Harris: ahh soz. Lee is a chinese name. kalante: Aye, I’m j/k, I know that, but usually a surname. Is this an actual person, or …? [wink sign] Mr Harris: If you are worried delete it from exim & I can “cough” ask HKB to resend the email. kalante: Yes please. Would prefer someone else to send it [wink sign] ……………………………… kalante: chris: Could you make that email disappear from logs? [wink sign] Mr Harris: hhm, Need another typical Chinese name. “Thomas”, yea that’ll do [smile sign] kalante: lol. Wong is a HK surname. Chan etc. remember surnames come first. Chan Li, for example Mr Harris: they often use anglicised Eng first names. “Mike Wong” ……Chris: can you lose that last email to legal pls? Boy, we really suck at faking evidence.” kalante: Yes please. Would prefer someone else to send it [wink sign] kalante: chris: Could you make that email disappear from logs? [wink sign] Mr Harris: hhm, Need another typical Chinese name. “Thomas”, yea that’ll do [smile sign]

Mr Harris: they often use anglicised Eng first names. “Mike Wong”

[120]There is a good deal more in the Chat Logs, but it may suffice to cite here the following two further passages touching on HKB, which Mr Harris denied: On 29 January 2010 : Mr Harris is discussing with Mr E and Mr Skillen the possibility of a costs order being made against N in the N1 action: “Mr E: thought you were going to set up a contract between HKB before we got to this point, for some imaginary sum of £5m or so? So we didn’t have to pay them? Mr Harris:………I think we signed that Mr E: oh good [smile sign] Mr Harris: But I [n]eed to do more of that anyway” [p.353, 15.53-15.54] On 15 February 2010, Mr Harris wrote to Mr E: “Am setting up another company in Seychelles to take Newzbin assets. HKB will be just for siphoning off funds”. [p. 421, 19.09] See also: the other extracts at Annex A to this Judgment, and paragraphs 5, 8, 13, 18, 21, 24, 26, 29, 49 and 53 of Annex B.

[121]It was put to Mr Harris in cross-examination that Mike Wong did not exist and had been fabricated by him, as part of a fiction that HKB was independent of him rather than merely his creature. Mr Harris denied that the conversation above had taken place, and repeated his allegation about the Chat Logs being fabricated in part.

[122]In his oral evidence Mr Harris commented on the inconsistency of his earlier written evidence about the Flat; he said that when he transferred the shares to HKB he did so as his mother’s executor and was making an investment on behalf of her estate. It was put to him in cross-examination that any sale of the shares would accrue to the benefit of HKB. To this he replied: “I don’t know.” He then stated that the leasehold interest in the Flat had been sold in mid 2013, and he had been involved in the sale on behalf of his mother’s estate. The proceeds were, he said, about £100,000, but he could not remember where that money had gone, or if it had gone into a bank account in his name.

[123]In the light of all the evidence I am satisfied that Mike Wong either does not exist, or if there is such a person he has nothing to do with HKB. I find that the unsigned agreement, the funding letters and the other invoices which purport to have been issued pursuant to it, were fabricated by or on behalf of Mr Harris with the sole purpose of extracting money from N, and latterly from the operations of the N2 website, and seeking to put them beyond the reach of the Claimants. I find that none of those invoices represent actual work by HKB, whether creation of a repertoire filter or anything else, for which HKB was entitled to be paid. It is to be noted that Mr E’s defence in these proceedings states that no development work was done by HKB for N while he (Mr E) was a director of N ie up to mid December 2009 (see paragraph 18 of that defence; see also paragraph 12 of Annex A to this judgment). I find that Mike Wong, the HKB invoices to N (amounting to some £555,000, of which about £237,000 was paid) and Mr Harris’s whole account of his dealings with HKB, are an elaborate falsehood. Virtually the only truthful statement Mr Harris has made about HKB (which he denies making) is in the Chat Logs:

“HKB will be just for siphoning off funds.”

That company has carried out no activities other than as determined by Mr Harris – limited largely to making and receiving payments. I find that, like the other Effective Defendants discussed earlier in this judgment, HKB was Mr Harris’s alter ego. It is also to be noted that HKB, along with K, was and is a “beneficiary” of the Foundation.

[124]It is clear, too, in the light of my findings above that the several payments made by HKB to K, which Mr Harris suggested were for software development work done by K for HKB, were further examples of funds being moved around by Mr Harris in pursuance of what I have already found to be his overall aim. I am satisfied that K did no work for HKB which justified any of these payments and that Mr Harris’s suggestion to the contrary is another fabrication. One example of such a payment is the sum of £50,000 credited to K on 20 April 2010.

[125]For the same reasons I am also satisfied that if and to the extent that Mr Harris transferred the Flat, and/or the shares in the company which owned the Flat, to HKB (and it is not clear that he has done so), such transfer was not pursuant to any legitimate commercial deal with HKB as Mr Harris has suggested; it was almost certainly for the purpose of concealing and/or sheltering those assets by distancing them from himself. Further, his statement that he does not know what has become of the proceeds of sale of the Flat, in which he states he was involved, is risible. His recent suggestion that the Flat/shares really belonged to his mother’s estate is also very probably untrue.

[126]The activities of 4All do not figure so prominently in the evidence put before me. I accept that it was set up by Mr Harris on 20 July 2010 as (in what I find to be Mr Harris’s own words) the “New offshore for Newzbin” (see paragraph 53 of Annex B below). I find that Mr Harris placed the company entirely in the ostensible ownership of the Foundation, his Panamanian repository of assets. In the light of that it is difficult to resist the contention of the Claimants that 4All, too, is a corporate creature, or alter ego, of Mr Harris. I am content so to find. On that basis its origin and sole purpose would mark it down as a participant in Mr Harris’s scheme to extract and conceal funds and property arising or derived from the operations of the N1 and N2 websites. I am aware of no evidence of any active participation by 4All. This may not matter in the context of a claim for conspiracy to which 4All was allegedly a party (see below). Account should also be taken of 4All’s vulnerability to a judgment in default of defence. Other issues 127. Legal fees paid to Mr Harris

Other issues

[127]The evidence shows, and it is not in dispute, that N paid Mr Harris and/or his legal service entity “UK Legal” £470,837.50 for legal services, mainly for Mr Harris acting as a barrister for N in the N1 action. It also seems to be common ground that about £214,570 of that sum is not covered by any fee note rendered by Mr Harris or UK Legal.

[128]Mr E was asked in cross-examination about a conversation between himself and Mr Harris on 6 February 2010 as the N1 action was reaching a climax. Mr Harris is there sending Mr E a backdated fee note, bringing the fees billed up to that date to £138,000. Mr Harris wrote:

“OK. It just looks more credible this way as otherwise the hours are fricking insane.”

(p.390-1, 12.49-13.36; see also paragraph 3 of Annex B to this judgment). Mr E’s evidence was that Mr Harris wanted to create new liabilities of N before the case was decided against N. Mr Harris agreed in cross-examination that he later arranged for N to pay him a further £200,000 without any fee notes.

[129]Mr Harris’s conduct of the N1 action on behalf of N resulted in him being disbarred, and Mr Harris has conceded that in any event the complexity and nature of that litigation were well outside his competence as a relatively inexperienced barrister. Mr Harris accepts that N was likely to lose and that there would be an interim costs order against N, although his evidence was that he expected this to be about £30,000 and was surprised that it was £232,000. On any view he was overcharging in the circumstances, and some of the amounts charged were not even invoiced let alone properly particularised. It is clear that Mr Harris was using his conduct of the litigation as another illegitimate means of getting money out of N before the axe fell at the end of the proceedings. There is no doubt that his main reason was to make sure that there was no money left in N for the Claimants to recover their costs, as he said very clearly in the Chat Logs (see paragraph 2 of Annex A, and also the extract for 29 January 2010 at paragraph 120 above). Extracting funds generally

[130]Mr Harris’s aim as set out in the previous paragraph is perfectly clear. In another graphic expression of this aim in the Chat Logs, he wrote: “I’m squirreling away the Newzbin money so we’ll be OK …I’m hoping to swap who hold the escrow fund liability the idea is that I will personally guarantee HSBC the 232k they’ll release the 232k and I can whisk it out … Suppose if MPA found out about it they could try & grab it but the legal basis is dubious … I might see if I can get my brother to do it … I moght offer brother 5% o fund to act as guarantor he’d prolly go for that. And he can explain having the cash to pay for it” [12 February 2010, p.409-410]. (See also the Chat Log references at paragraph [120] above.)

[131]He pursued this policy in a number of different ways, some of which I have already dealt with in examining his relationship with the other Effective Defendants. Other examples include:(1) causing N to discharge his personal obligations to Mr E and the other former shareholders under the share transfer deed in respect of the sale to Mr Harris of all the shares in N; and

(2) extracting a sum of £232,000 belonging to N from an escrow account with HSBC, as described in the citation from the Chat Logs above. THE CLAIMANTS’ CAUSES OF ACTION 133. Alleged liability of Mr Harris – infringement of copyright jointly with N 134. Mr Harris’s Henderson v Henderson submission

[132]Mr Harris submitted that in making him a party to these proceedings the Claimants are re-litigating matters against a new defendant whom they should have joined in the original trial. Mr Harris contended that the Claimants were aware of his role in regard to the N1 website as a director of N, and that they could have acted then but chose not to do so. He submitted that this is an abuse of process under the principle set out in the well known case of Henderson v Henderson (1843) 3 Hare 100, and that this aspect of the claim against him is precluded.

THE CLAIMANTS’ CAUSES OF ACTION

[133]This submission is entirely devoid of merit. I have already referred to Mr Harris’s misleading conduct at the trial of the N1 action (paragraphs 11 and 12 above). This is described in more detail in the witness statement of Mr Visser, who states that it was only during the cross-examination of witnesses called by N that it transpired that the entire shareholding of N had been transferred to Mr Harris, then acting as counsel for N. Mr Visser states that the fact that Mr Harris was sole director and shareholder of N was unknown to the Claimants before the trial commenced. Further, throughout the trial Mr Harris kept up the pretence that there was a director of N called David Bahan who was a separate person. None of Mr Visser’s evidence in this regard was challenged by Mr Harris in his cross-examination of Mr Visser, or even referred to. I accept the evidence.

[134]Mr Harris deliberately misled both Kitchin J and the Claimants as to the nature and extent of his involvement in the operations of N. The evidence before me provides no basis on which it could properly be concluded that there was sufficient material available to the Claimants at that stage to justify holding that they ought reasonably to have joined Mr Harris as a defendant in the N1 action at any stage. There is therefore no substance whatsoever in the argument that commencing and prosecuting the present proceedings against Mr Harris in respect of the infringements of copyright found to have been committed by N, is an abuse of process. I reject this submission. Mr Harris a joint tortfeasor with N?

[135]For the principles to be applied in determining who may be sued either as a joint tortfeasor or as a company director in this context, I was referred by Mr Spearman to the summary of the law in Laddie, Prescott and Vitoria, The Modern Law of Copyright and Designs, 4th edn at paragraphs 62.20 and 62.21 respectively. With regard to a joint tortfeasor, the authors state that “the underlying concept is that the joint tortfeasor has made the infringing act his own”. With regard to company directors, they state:

“Directors are not liable as such for infringements committed by their company without their sanction or involvement; but they are liable if they procure the infringement by the company or the company acts pursuant to a common design to which they are a party; in essence, liability arises if it would arise regardless of the fact that the relationship is one of director and company.”

[136]A number of cases are cited as authority for these propositions. In one of these, MCA Records Inc v Charly Records Ltd

[2002] FSR 26

, Chadwick LJ (with whom Tuckey LJ and Simon Brown LJ agreed) identified the following propositions at [48] to [53]:

“First, a director will not be treated as liable with the company as a joint tortfeasor if he does no more than carry out his constitutional role in the governance of the company – that is to say, by voting at board meetings. … Second, there is no reason why a person who happens to be a director or controlling shareholder of a company should not be liable with the company as a joint tortfeasor if he is not exercising control through the constitutional organs of the company and the circumstances are such that he would be so liable if he were not a director or controlling shareholder. … Third, the question whether the individual is liable with the company as a joint tortfeasor – at least in the field of intellectual property - is to be determined under principles identified in CBS Songs Ltd v Amstrad Consumer Electronics Plc [1988] AC 1013 and Unilever Plc v Gillette (UK) Limited [1989] RPC 583. In particular, liability as a joint tortfeasor may arise where, in the words of Lord Templeman in CBS Songs v Amstrad at page 1058E to which I have already referred, the individual "intends and procures and shares a common design that the infringement takes place". Fourth, whether or not there is a separate tort of procuring an infringement of a statutory right, actionable at common law, an individual who does "intend, procure and share a common design" that the infringement should take place may be liable as a joint tortfeasor. …”

[137]A further helpful analysis of the relevant case law and principles is set out by Kitchin J at paragraphs 103 -111 of his judgment in the N1 action itself (above). At paragraph 108 he said:

“I derive from those passages that mere (even knowing) assistance or facilitation of the primary infringement is not enough. The joint tortfeasor must have so involved himself in the tort as to make it his own. This will be the case if he has induced, incited or persuaded the primary infringer to engage in the infringing act or if there is a common design or concerted action or agreement on a common action to secure the doing of the infringing act.”

[138]Applying these principles in the light of my findings at paragraphs 51-60 above, I am satisfied that Mr Harris is a joint tortfeasor with N in respect of the copyright infringing operations via the N1 website (summarised at paragraph 9 above) for the period between 19 December 2009 and 18 May 2010, when the website closed. Mr Harris masterminded and directed all the actions of N throughout that period, including those actions which were found to constitute infringing conduct. If ever there was a clear case of a company director “intending, procuring and sharing a common design” to commit an infringement with the company, and “making it his own”, then this is it.

[139]In principle the Claimants appear to be entitled as against Mr Harris to the relief granted by Kitchin J in the N1 action. However, they have proceeded on the basis that they wish to seek an account of profits rather than an inquiry as to damages, and have indicated that the present trial is therefore to be treated as one of liability alone. They do, though, wish to seek an interim payment on account in respect of the N1 website profits in the period after 17 December 2009.

[140]I refer again later to the question of relief (see paragraph 177 below). Alleged liability of Mr Harris – infringement of copyright by reason of the operations of the N2 website

[141]By reason of the matters and findings set out at paragraphs 61-70 above, I conclude that Mr Harris is similarly liable to the Claimants for the infringements of their copyrights which arose from his operation of the N2 website throughout the period from 28 May 2010 to 28 November 2012. In this regard Mr Harris was either the sole tortfeasor, or, to the extent that his associates were sufficiently involved in the infringing activity, Mr Harris was also liable in application of the principles relating to joint tortfeasors discussed above.

[142]The Claimants are entitled to the same relief against him as in respect of the N1 website, mutatis mutandis, including an account of profits. In the meantime they propose in this respect too to seek an interim payment on account of such profits. (See paragraph 177 below.) Alleged liability of Mr Harris and the other Effective Defendants –conspiracy to injure by unlawful means

[143]In his closing submissions Mr Spearman stated that it was no part of his case that any of the corporate Defendants is primarily liable as an infringer or joint tortfeasor in relation to the infringing activity carried out via the N1 and N2 websites. Nor is such a case pleaded against any of them as far as I can see.

[144]Instead, in the PoC the Claimants plead against Mr Harris and the corporate Defendants an unlawful means conspiracy or conspiracies as follows:(1) to infringe the Claimants’ copyrights through the operation of (a) the N1 website and (b) the N2 website; and

(2) to defraud the Claimants (a) by removing and concealing the assets of N, so as to defeat and render worthless the judgment and order for costs obtained by the Claimants in the N1 action and (b) by removing and concealing the revenues generated by the N2 website, so as to defeat and render worthless any judgment or order for costs obtained by the Claimants in respect of the operation of that website. It emerged during the hearing that by oversight the PoC did not plead as against the Sixth Defendant (MFM) the second of these two categories of alleged unlawful means conspiracy, namely conspiracy to defraud. Mr Spearman sought leave to amend the PoC to correct the omission. He submitted that there was no prejudice, and Mr Harris did not object to the amendment.

[145]An unlawful means conspiracy was defined as follows by Nourse LJ, giving the judgment of the Court of Appeal, in Kuwait Oil Tanker v Al Bader [2002] 2 All ER (Comm) 271 at paragraphs 108 and 110:

“A conspiracy to injure by unlawful means is actionable where the claimant proves that he has suffered loss or damage as a result of unlawful action taken pursuant to a combination or agreement between the defendant and another person or persons to injure him by unlawful means, whether or not it is the predominant purpose of the defendant to do so…..The essence of the unlawful means conspiracy is injury to the claimant as a result of an unlawful act or acts where two or more people have combined to cause the injury. It is not necessary that every overt act is done by every conspirator, but the act must be done pursuant to the conspiracy or combination.”

[146]There are therefore four elements required for an unlawful means conspiracy to be made out, namely:(1) a combination of two or more persons;

(2) to take action which is unlawful in itself;

(3) with the intention of causing damage to a third party,

(4) who suffers the damage (see Clerk & Lindsell on Torts, 20th Edn, [24-95]).

[147]It is necessary to consider these elements in more detail, in the context of my findings. Relevant findings

[148]In summary, my findings are that:(1) without exception each of the corporate Defendants was established by Mr Harris; at all material times each was under his sole control and direction (whether de iure or de facto or both); and each was in that regard his creature or alter ego;

(2) Mr Harris’s purpose in establishing and in directing/controlling the corporate Defendants was so that they could assist N and him in continuing to infringe the Claimants’ (and others’) copyrights, and in realising, extracting and preserving for his own benefit (or for that of others whom he might wish to benefit) the revenues earned by such infringing activities, together with any property derived therefrom;

(3) the main concern of Mr Harris (and, by extension, of the corporate Defendants) in that regard was to ensure that the funds and property in question were put beyond the reach of, and so far as possible concealed from, the Claimants, both as regards the Claimants’ enforcement of the judgment (including the costs order) obtained or likely to be obtained against N in the N1 action, and any subsequent judgment they might obtain in respect of the operation of the N2 website;

(4) pursuant to that purpose the corporate Defendants provided Mr Harris with assistance in inter alia (i) extracting funds and property from N by submitting bogus invoices to N, receiving funds/property from each other or third parties, transferring funds/property to each other or third parties, and using N’s funds to acquire property other than for the benefit of N, and (ii) acting as aforesaid mutatis mutandis in respect of monies or property derived from the infringing activities carried out via the N2 website. In my view virtually every such act carried out by the corporate Defendants was done pursuant to the overall aims to which I have referred. A combination of two or more persons

[149]The Court of Appeal in Kuwait Oil (above) made clear that nothing in the nature of an express agreement, whether formal or informal, is required. It is sufficient if two or more persons combine with a common intention, or, in other words, if they deliberately combine, albeit tacitly, to achieve a common end. (See paragraph 111 of the Court of Appeal’s judgment.)

[150]Mr Harris argued that if each of the corporate Defendants was his alter ego, thenit did not make sense to suggest that he “conspired” with himself. I disagree. In my view there is no reason in principle or, as far as I am aware, in authority, why such a situation should not give rise to a conspiracy. As Morgan J put it in Digicel (St. Lucia) Limited and others v Cable & Wireless Plc and others

[2010] EWHC 774 (Ch)

: “In a group of companies, all of the individual companies have separate legal personality. If an enterprise organises itself so as to operate its business through a group of companies, taking the benefits of limited liability and perhaps the tax advantages involved, it cannot complain if a court holds it to an analysis based on the separate legal personality of the individual companies. Thus, in principle, a parent company can combine with a subsidiary and two subsidiaries can combine with each other. Further a director can combine with the company he directs and a shareholder (whether a corporate body or a natural person) can combine with the company in which the shares are held. Whether such a combination has taken place will depend upon the detailed facts.” (See paragraph 77 of Annex I to that judgment.) It also lies ill in Mr Harris’s mouth to argue that the separate legal personalities, which he created specifically in an attempt to distance himself from certain funds, property and related transactions, should be ignored by the court when it comes to consider the question of conspiracy. It is my conclusion that insofar as Mr Harris, as the controlling mind of the corporate Defendants, arranged for them to participate and assist in the overall scheme described above, each of those Defendants 2 There were also other participants in the same conspiracy or conspiracies, including N, Mr E, and other individuals who assisted Mr Harris in operating one or both of the websites. became his partner in a conspiracy to implement that scheme.

[151]It is arguable that, rather than one conspiracy, there were several; for example, one in respect of the operation of the N1 website and another in respect of the N2 website. It is also arguable alternatively that there were a series of conspiracies, each including Mr Harris together with one or more of the corporate Defendants (and possibly other participants) relating to individual transactions. However, given the central controlling role played by Mr Harris throughout, I prefer the Claimants’ primary analysis of a single overarching conspiracy which parties may have joined and left at different times. To attempt to divide or even subdivide what is, in reality, a single enterprise with Mr Harris at its heart, would in my view be artificial. To take action which is unlawful in itself

[152]The next question is whether the conspiracy was to take action which was unlawful in itself.

[153]Mr Spearman argued that here the Claimants’ best case 3 As to other possible sources of “unlawfulness”, see paragraph 176 of this judgment. was that the Effective Defendants combined(a) to infringe the Claimants’ copyrights and/or

(b) to defraud the Claimants – a criminal offence at common law. These two categories, along with certain alleged breaches of trust, are the only “unlawful means” pleaded in the PoC. However, the breaches of trust did not figure much, if at all, in Mr Spearman’s skeleton argument or his oral submissions. Therefore I do not propose to deal with that aspect in this judgment. (See paragraph 178 below.)

[154]It is necessary to examine the Claimants’ arguments in relation to those two main candidates for “unlawful means” relied upon by Mr Spearman.

(a) Conspiracy to infringe the Claimants’ copyrights

[155]As I have said, it is no part of the Claimants’ case that any of the corporate Defendants is primarily liable as a joint tortfeasor in relation to the infringing activity carried out by N, Mr Harris and others via the N1 and N2 websites. The reasons for this were not explored in any detail at the hearing, but I assume that it is because the roles of the corporate Defendants were essentially subsidiary, mainly directed to dealing with, holding or concealing the proceeds of the infringing activity, rather than any more active participation in the infringements themselves. It may be arguable that a role limited to assistance of that kind could give rise to liability as a joint tortfeasor, depending on the particular circumstances. However that is not argued here, and I do not consider it further.

[156]I have already found that in the present case the combination, to which the corporate Defendants were party along with Mr Harris and others, was to implement an overall scheme at the heart of which was a persistent course of copyright infringing activity in respect of both websites. I have also found that Mr Harris was a primary tortfeasor in both connections. It is clear that the tort of infringement of copyright falls fairly and squarely within the scope of “unlawful means” for this purpose.

[157]Does it matter, for the purposes of the corporate Defendants’ liability for a conspiracy to injure by unlawful means, that they are not themselves primarily liable as joint tortfeasors? In my view the answer is clearly in the negative. The controversy resolved by the House of Lords in Revenue and Customs Commissioners v Total Network SL

[2008] 1 AC 1174

was whether the tort of conspiracy to injure by unlawful means required the unlawfulness relied upon to be actionable as a separate tort against at least one of the conspirators. The House of Lords indicated that was not essential, but the speeches of their lordships clearly proceed on the premise that such actionability is sufficient, in other words that where the unlawfulness relied upon is actionable against at least one of the conspirators, this element of the tort of unlawful means conspiracy is satisfied. (See, for example, per Lord Hope at paragraphs 1 and 37, and per Lord Scott at paragraph 56.) Were it otherwise there would be little “added value” in the cause of action of conspiracy. Further confirmation is to be found in the judgment of Laddie J in Michaels v Taylor Woodrow

[2001] Ch. 403

: “… I do not think Mr. Mowbray is necessarily right in suggesting that the defendants' arguments would mean that an unlawful means conspiracy adds nothing to the cause of action available against each defendant alone. First it is possible to sue for wrongful means conspiracy in cases where only some but not all of the conspirators would be liable individually for the wrongful act. In this respect, the tort dovetails with or overlaps the law of joint tortfeasance.” (Paragraph 65, at page 516)

[158]By the same token, in order to satisfy the requirement of “taking action”, it is not necessary that each conspirator should participate to the same extent in the acts carried out pursuant to the combination. As Morgan J put it in Digicel (above): “It is also clear that the issue in relation to an alleged combination is whether a defendant was a party to the combination. That is a different question from whether a defendant participated in all or some of the acts done pursuant to a combination. In principle, it is possible for a defendant to be a party to a combination but not himself carry out any of the acts done pursuant to that combination.” (See paragraph 76 of Annex I to that judgment.)

[159]With the possible exception of 4All, all the corporate Defendants clearly took active steps in pursuance of the overall scheme, as indicated earlier in this judgment. I agree with the Claimants’ submission that there is a strong analogy between the acts carried out by the corporate Defendants, and those which are capable of founding liability for dishonest assistance in relation to a breach of trust or fiduciary duty carried out by another. Such assistance can post-date the breach of trust or duty eg as part of a cover up, can take a wide variety of forms eg helping to provide an appearance of legitimacy, and need not be extensive so long as it is not de minimis (see, for example, Balfron Trustees Ltd v Peterson [2001] I.R.L.R. 758 per Laddie J in, at paragraph 21; Twinsectra v Yardley

[2002] 2 AC 164

, per Lord Millett at 194, applied by Lewison J in Ultraframe v Fielding

[2006] FSR 17

at 1497; Heinl v Jyske Bank (Gibraltar) Ltd [1999] Lloyd’s Rep Bank 511, per Nourse LJ at 523; and Fayers Legal Services Ltd v Day, Ch. Div. 11 April 2001 (reversed on other grounds on appeal) per Patten J. Of course the element of dishonesty must be established.

(b) Conspiracy to defraud the Claimants

[160]In Total Network (above) the House of Lords clarified the law in this area by holding that criminal activity, or at least some kinds of criminal activity (in that case, the common law crime of cheating the public revenue), is capable of being relied upon as the required “unlawful means” in this tort. The matter was put in a variety of ways: “… The conspirators cannot, on the Commissioners' primary contention, be sued as joint tortfeasors because there was no independent tort actionable by the Commissioners. This is a gap which needs to be filled. For reasons that I have already explained, I do not accept that the Commissioners suffered economic harm in this case. But assuming that they did, they suffered that harm as a result of a conspiracy which was entered into with an intention of injuring them by the means that were deliberately selected by the conspirators. If, as Lord Wright said in Crofter Hand Woven Harris Tweed Co v Veitch

[1942] AC 435

, 462, it is in the fact of the conspiracy that the unlawfulness resides, why should that principle not apply here? …” (per Lord Hope at paragraph 44). “…I too would hold that criminal conduct can constitute unlawful means for the purposes of a tortuous conspiracy to injure by unlawful means … The circumstances must be such as to make the conduct sufficiently reprehensible to justify imposing on those who have brought about the harm liability in damages for having done so. Bearing that in mind, the proposition that a combination of two or more people to carry out a scheme that is criminal in its nature and is intended to cause economic harm to some person does not, when carried out with that result, constitute a tort actionable by that person is, in my opinion, unacceptable. Such a proposition is not only inconsistent with the jurisprudence of tortious conspiracy, as Lord Walker has demonstrated and explained, but is inconsistent also with the historic role of the action on the case.” (per Lord Scott at paragraph 56). “From these and other authorities I derive a general assumption, too obvious to need discussion, that criminal conduct engaged in by conspirators as a means of inflicting harm on the claimant is actionable as the tort of conspiracy, whether or not that conduct, on the part of a single individual, would be actionable as some other tort. To hold otherwise would, as has often been pointed out, deprive the tort of conspiracy of any real content, since the conspirators would be joint tortfeasors in any event … In my opinion your Lordships should clarify the law by holding that criminal conduct (at common law or by statute) can constitute unlawful means, provided that it is indeed the means….of intentionally inflicting harm….. In short, and with great respect to those who take a different view, any suggestion that the unlawful means conspiracy is a form of secondary liability, and must therefore have an actionable wrong as an essential ingredient, seems to me to be a circular argument which assumes what it sets out to prove.” (per Lord Walker at paragraphs 94, 95 and 104). “…I consider that the history and jurisprudence relating to this type of conspiracy point clearly to the conclusion that at least some criminal acts, not amounting to torts, may suffice to ground the tort…” (per Lord Mance at paragraph 116). “In this connection, I should record my agreement with Lord Walker and Lord Mance that, for the reasons they give, the tort of unlawful means conspiracy is not a form of secondary liability. Furthermore, although it involves an element of pulling oneself up by one's own bootstraps, it is hard to see what role the tort of unlawful means conspiracy…. could have if it did not apply in a case such as this.” (per Lord Neuberger at paragraph 225). In the light of the speeches of the House of Lords in the TotalNetwork case, the statement at paragraph 24.98 of Clerk & Lindsell on Torts, 20th Edn: “If however the overt acts alleged are not actionable in a civil action the claimant will fail to establish a cause of action for conspiracy…” should perhaps be qualified, even though there is a subsequent discussion of Total Network at paragraph 24.99, and at paragraph 24.100 of the Second Supplement there is a reference to a case in the Ontario Court of Appeal which endorses the position set out in Total Network.

[161]Conspiracy to defraud is an offence at common law. The offence was defined by Lord Dilhorne in Scott v Metropolitan Police Commissioner

[1975] AC 819

at 840 in this way: “….in my opinion it is clearly the law that an agreement by two or more by dishonesty to deprive a person of something which is his or to which he is or would be or might be entitled and an agreement by two or more by dishonesty to injure some proprietary right of his, suffices to constitute the offence of conspiracy to defraud”.

[162]In that case, the defendant had agreed with cinema employees that, in return for payment, and without their employer’s consent, they would let him borrow films for the purpose of making and distributing infringing copies on a commercial scale. The House of Lords upheld the defendant’s conviction on an indictment which charged conspiracy to “defraud such companies as might be caused loss by the unlawful copying and distribution of films the copyright in which and the distribution rights of which belonged to companies and persons other than the…persons so conspiring and by divers other subtle crafty and fraudulent means and devices”.

[163]The Claimants contend that the matters complained of in the present case (see my summary of relevant findings above) constitute the precise equivalent, in the age of the internet, of the acts of the conspirators in that case.

[164]In his speech in Total Network Lord Hope refers with apparent approval, to a passage in the judgment of the Court of Appeal in the same case describing conspiracy to defraud as “a perfectly proper, well-recognised tort” (see paragraphs 23 and 26 of Lord Hope’s speech; see also per Nourse LJ in Kuwait Oil (above), at paragraph 131). On that basis there is no reason why it should not provide the basis of the tort of unlawful means conspiracy. But in any event, in the light of the decision in Total Network it is clear that in its manifestation as a criminal offence at common law, conspiracy to defraud can fulfil that role, whether or not any of the overt acts are actionable against one or more of the conspirators.

[165]Having regard to Lord Dilhorne’s definition, I consider that the combination which I have found to exist in the present case amounts to a conspiracy to defraud the Claimants, amongst others. The elements of the offence are clearly satisfied: dishonesty has permeated the whole enterprise from start to finish; central to the scheme are the unauthorised use of the Claimants’ copyrights and the extraction and appropriation of revenue and property derived therefrom and to which the Claimants would or might be entitled, either as owners or exclusive licensees of the intellectual property in question or as creditors of N, whose property and funds were misappropriated in order to defeat the claims, both existing and potential, of the Claimants. With the intention of causing damage to a third party

[166]As Nourse LJ stated in Kuwait Oil, although the conspirators must intend to injure the claimant, it need not be their “predominant purpose” to do so. In Lonrho Plc v Fayed

[1992] 1 AC 448

, Lord Bridge explained at p. 465-466:

“…when conspirators intentionally injure the plaintiff and use unlawful means to do so, it is no defence for them to show that their primary purpose was to further or protect their own interests; it is sufficient to make their action tortious that the means used were unlawful.”

[167]Therefore, the fact that the conspirators are motivated predominantly by factors unrelated to the injury to the claimant - typically by making money for themselves - does not afford a defence.

[168]There must, of course, still exist an intention to injure the claimant. As to what constitutes such “intention”, in the House of Lords in OBG Ltd v Allan

[2008] 1 AC 1

, Lord Hoffmann (in the majority) expressed the test as follows at paragraph 62 of his speech:

“…it is necessary to distinguish between ends, means and consequences. One intends to cause loss even though it is the means by which one achieved the end of enriching oneself. On the other hand one is not liable for loss which is neither a desired end nor a means of attaining it but merely a foreseeable consequence of one’s actions.”

[169]Lord Hoffmann later emphasised that the “means to an end” category is a broad one (see paragraph 134 of his speech).

[170]Lord Nicholls, too, dealt with this question of intention, at paragraphs 164-5 in the same case:"164. I turn next, and more shortly, to the other key ingredient of this tort: the defendant's intention to harm the claimant. A defendant may intend to harm the claimant's business either as an end in itself or as a means to an end. A defendant may intend to harm the claimant as an end in itself where, for instance, he has a grudge against the claimant. More usually a defendant intentionally inflicts harm on a claimant's business as a means to an end. He inflicts damage as the means whereby to protect or promote his own economic interests.

165. Intentional harm inflicted against a claimant in either of these circumstances satisfies the mental ingredient of this tort. This is so even if the defendant does not wish to harm the claimant, in the sense that he would prefer that the claimant were not standing in his way.”

[171]In Meretz Investments NV v ACP Ltd

[2008] Ch 244

, the Court of Appeal said that, although not strictly a case about unlawful means conspiracy, the principles from OBG nevertheless applied to it. See also, to the same effect, per Morgan J in Digicel (above) at paragraph 83 of Annex 1 to that judgment, and the judgment of Briggs J (as he then was) in Bank of Tokyo-Mitsubishi UFJ Ltd v Baskan Gida Sanayi Ve Pazarlama AS

[2009] EWHC 1276 (Ch)

[172]Applying Lord Hoffmann’s test, I accept the Claimants’ submission that in a situation where the means of enriching oneself is to infringe copyright and to squirrel away the proceeds of the infringement so that it cannot be recovered or used to recompense the copyright owner, it cannot plausibly be said that one did not intend to cause loss to that owner. The damage in question is clearly the means to the desired end. Accordingly I find that this component of unlawful means conspiracy is satisfied in the present case. Who suffers the damage

[173]The authorities establish that the acts which constitute the unlawful means at the centre of the combination must be the instruments by which loss is caused to the claimant. The acts will not be instrumental in this sense if they are incidental or collateral to the damage: see OBG (above)at paragraphs 159 -160 per Lord Nicholls, and TotalNetwork (above) at paragraphs 95 – 96 per Lord Walker and at paragraph 119 per Lord Mance. See also per Morgan J in Digicel at paragraphs 70-71.

[174]Provided some loss and damage has been caused by the unlawful means in question, that is sufficient for the purposes of this aspect of the tort of unlawful means conspiracy. I am satisfied that the unlawful means in this case have caused loss and damage to the Claimants. Such loss obviously includes that which has arisen from the infringing activity via both websites. At this stage I do not need, and do not propose, to quantify such loss. Unlawful means conspiracy - my conclusions

[175]In the light of these considerations my conclusion is that the Claimants have established unlawful means conspiracy against Mr Harris and the other Effective Defendants, on the basis of both conspiracy to infringe the Claimants’ copyrights and conspiracy to defraud the Claimants.

[176]Various other possible sources of “unlawfulness” were canvassed in the Claimants’ skeleton argument, including allegations of theft from N, and a number of money-laundering offences under the Proceeds of Crime Act 2002. These were not pleaded in the PoC, although as I understand it no additional factual material was sought to be relied upon by Mr Spearman in this regard. If these further contentions are to be pursued then an application to amend the pleading can be made and, if appropriate, further argument can be addressed to me. I will also, if necessary, hear the Claimants in relation to the alleged breaches of trust and fiduciary duty which were pleaded in this context but did not really figure in the written or oral submissions (see paragraph 153 above).

RELIEF

[177]I have touched briefly on the question of relief at paragraphs 139 and 142 above. At the hearing Mr Spearman submitted that the precise form of relief, including the interim payment sought and any other consequential findings or directions, would be better dealt with after matters of liability had been determined. I therefore propose to say no more about these matters at this stage.

OTHER MATTERS

[178]Similarly, it may be necessary to consider at a subsequent hearing whether, aside from the precise form of relief, there are any other matters which should be determined. In this connection I have already referred to possible outstanding issues relating to the ownership of Amberleigh and the McLaren car, and the possible further sources of “unlawful means” for the purposes of the conspiracy claim. In addition, there is an issue (at least on the pleadings) as to whether the domain name at which the N1 website was located, and a further domain name - both owned by N - were transferred at an undervalue by Mr Harris to WCIS Limited, a company of opaque ownership originally incorporated in the Seychelles. If necessary I will hear the parties’ proposals on these matters in due course. ANNEX A [Reproduced from the Claimants’ skeleton argument. NB. In some of these cases Mr Harris denied writing the words here attributed to him.] (1). On 6 January 2010, when referring to payments to be made to Mr Elsworth for his shares in Newzbin Limited, Mr Harris wrote to Mr Elsworth “I’ll co-operate in money transfers. I can do it all from Hong Kong so taxman could be kept out of the loop”. [C5/161] (2). On 12 January 2010, when referring to the Claimants’ claim in the Newzbin action, Mr Harris wrote to Mr Elsworth “Which is why we need to work on plan B. I don’t intend to pay them a penny of their costs. Fuck ‘em. We’ll shuffle bits off into other companies”. [C5/192] (3). On 15 February 2010, Mr Harris wrote to Mr Elsworth “Am setting up another company in Seychelles to take Newzbin assets. HKB will be just for siphoning off funds”. [C5/421] (4). On 17 February 2010, in the context of an exchange about the implications of rendering “large 2009 invoices” to Newzbin Limited, Mr Harris wrote to Mr Elsworth “Ahem yea. I was a bit slow in getting that invoice in. Left it in a pile. Surprised HKB didn’t kick up a fuss”. [C5/451-452] (5). On 19 February 2010, Mr Harris wrote to Mr Elsworth “Spoke to HSBC merchant services & hoping this time I am speaking to right guys. Hope to get 232k issue sorted soon. May need to provide security personally & then they’ll unlock funds & I can whick them away”. [C5/472] (6). On 25 February 2010, Mr Harris wrote to Mr Elsworth “My offshore bank HKB password [isn’t] fricking working – don’t want to pull out rest of money in cash if I can help it”. [C5/536] (7). On 27 February 2010, Mr Harris wrote to Mr Thomas Hurst (alias “freaky”) (“Mr Hurst”) “Spent all afternoon hiding huge amounts of cash”. [C5/545] (8). On 9 March 2010, on the same day as HKBO made a payment of £2,500 to Kthxbai, Mr Harris wrote to Mr Elsworth “Money I wired out of offshore account hit kthxbai account just fine. Phew. Now have reliable way of extracting money not in cash. Almost the last bit falls into place. Just one more”. [C5/578] (9). On 12 March 2010, Mr Harris wrote to Mr Elsworth “Just paid £110,000 to HSCB (sic) so they should free that amount up from our escrow soon. Then I’ll recirculate it via HKB to free up more ;)”. Mr Elsworth wrote in reply “Ok, will it just be another KHB (sic) invoice”. Mr Harris wrote in response “No it’s payment as part of the previous funding letter (I think, will double check)”. [C5/587] (10). On 29 March 2010, 7 days after the draft judgment in the Newzbin action had been made available by Kitchin J, Mr Harris wrote to Mr Elsworth “We have a hearing on Wednesday. Need to get as much money out of (sic) asap”. [C5/660] (11). On 1 April 2010, in the context of an exchange with Mr Lee Skillen (another of the original directors of Newzbin Limited, alias “kalante”) (“Mr Skillen”) concerning an “HKB email” bearing Mr Skillen’s name which Mr Skillen was concerned about, Mr Harris wrote “If you are worried delete it from exim & I can ‘cough’ ask HKB to resend the email”. Later in the same exchange, Mr Harris wrote “Need another typical Chinese name. ‘Thomas’, yea that’ll do :)”. [C5/704] (12). On 13 April 2010, Mr Elsworth wrote to Mr Harris “What’s the £50k HKB payment for? What QB account should it go in?”. Mr Harris wrote in reply “That’s for development of a repertoire filter for the MPA. They can’t whinge about me paying for that ;)”. [C5/754] (13). On 14 April 2010, Mr Harris wrote to Mr Elsworth “… it’s really just so I can know what [the] liquidator is going to ask about. I can’t remember all our payments out to HKB and for servers legal costs etc etc. Liquidator likely to ask some probing questions: tho’ nothing by comparison to Speck [the Claimants’ Counsel in the Newzbin action]”. [C5/762] (14). On 14 May 2010, Mr Harris wrote to Mr Elsworth “Wiggin are trying to substitute their own insolvency practitioner for ours. Nu-uh I don’t think sooooo …” and “My (sic) a merciful coincidence HKB Operations is owed £555k to their £230k”. Mr Elsworth replied “haha … convenient”. Mr Harris responded “Coincidence. Honest”. [C5/866] ANNEX B [Reproduced from the Claimants’ skeleton argument. NB. In some of these cases Mr Harris denied writing the words here attributed to him.] (1). On 4 January 2010, Mr Harris wrote:

“I wondered about a legit file backup site: “1Gb of encrypted offsite backup storage for your most important emails & docs. £20 a year (p.s. Newzbin Premium access for free to new members”). … imagine most Newzbin users will say “This sucks, but fuck it we get Newzbin so lets just ignore it” … Like I say: don’t forget the service is a sham, we know it – I imagine users pretty soon will. Then who cares if its crap …3 or 4 years from now MPAA may be able to built (sic) up enough of a case to show it’s a sham and shut even the membership site down but that’s waaaay down the line” [C5/132] (2). On 6 February 2010, Mr Harris wrote “We are going to get FUCKED on costs”

. In response to Mr Elsworth’s reply that, “we need to get the servers out of newzbin before that then” Mr Harris wrote “ye. I must knock up contracts for those today if possible.” [C5/338] (3). Subsequently on 6 February 2010, Mr Harris wrote to Mr Elsworth:

“Make two payments: one for 38k: “LegalFees” … so that will be 135k in legal fees so far soz 138k … Then I’ll do these contracts and we can get the rest out under a different transaction … Its credible: my fees are high and I want them now incase (sic) we are bankcrupted (sic) by case … It looks more credible this way as otherwise the hours are fricking insane … changing date to 6th feb …see? I cant fake to save my life :D” [C5/390-392] (4). On 7 February 2010, Mr Elsworth wrote “where is today’s £50k going?” and Mr Harris responded “t (sic) isn’t. Am not withdrawing that today. Want to make it look credible so will arrange other transactions soon. Will let you know but am busy doing closing speech.” [C5/395] (5). On 12 February 2010, Mr Harris wrote “I’m squirreling away the Newzbin money so we’ll be OK …I’m hoping to swap who hold (sic) the escrow fund liability the idea is that I will personally guarantee HSBC the 232k they’ll release the 232k and I can whisk it out … Suppose if MPA found out about it they could try & grab it but the legal basis is dubious … I might see if I can get my brother to do it … I moght (sic) offer brother 5% o (sic) fund to act as guarantor he’d prolly go for that. And he can explain having the cash to pay for it” [C5/409-410] (6). On 13 February 2010, Mr Harris wrote “I’ll do what I can to keep Newzbin together and move it to a successor company, or to leverage the technology into a new company, and ensures (sic) everyone gets what they are properly due at some point” [C5/414]. (7). On 14 February 2010, Mr Harris wrote “I am in Liverpool on Monday, sorting a new Newzbin account on Tuesday” and “However, I am planing (sic) to sell Newzbin’s servers to cover impending legal costs and MPA costs. Will sell for market value. New company will prolly (sic) choose to rehouse thm (sic) in new rack at Bogon” [C5/417]. (8). On 15 February 2010, Mr Harris wrote “Am setting up another new offshore company in the Seychelles to take Newzbin assets. HKB will be just for siphoning off funds. Made it clear to Jane that that we need to a) buy time if we can b) ensure no judgement stops us doing stuff in future – by ‘us’ I mean any successor to Newzbin. Told them whatever happened to us “someone” would take over a v similar job. They got the point and will pursue that goal. I think they get the bigger picture: they seem reasonably savvy” [C5/421] and “am hoping Bogon will look the other way when we, *cough*, ‘swap’ old newzbin servers for new servers from a third party” [C5/422]. (9). On 15 February 2010, Mr Elsworth wrote “Well, dunno, MPA must have a hefty clout in Germany, they’re EU-wide? If we’re gonna use em may as well just be up front and ask them what they’d do if MPA came knocking really, no point bothering otherwise” and Mr Harris replied “Indeed. Tho they have hosted/are hostin (sic) PirateBay” [C5/423]. (10). On 16 February 2010, Mr Harris wrote “Am now talking to guys who do or once did hosting for Pirate Bay” [C5/440] and “as long as Bogon keep their mouths shout (sic) we’re OK” [C5/440] and “In longer term we may need bulletproof hosting in Ukraine or China but for now this will allow us to reorganise. Wonder if we need to go over to Sweden with a box? or mebe Fedex it and they deal with it?” [C5/446] and “I do need a proxy solution fast: it’s the one thing that really is a critical issue. Will take a short term crap solution while working out something better for longer. Essential to keep subscribers happy and no gap” and (in response to the observation “Concerned about the suspicion no gap would raise”) “Yea but I think we can be quite brazen. We saw business was going tits up and we sold to someone in a minimising manner. It’s not like we, and a purchaser, haven’t been aware of risk for ages … Solicitor like (sic) my offshore structures, thought it was very ‘slick’” [C5/447]. (11). On 16 February 2010, Mr Harris wrote “If we can keep subscribers on board I hope to have enough funding to buy (at some point) petabytes of redundant cheap diskspace and bandwith to develop new search engines. It’s going to take some time I reckon. It’s prolly (sic) a 3/4/5 year project. Core to it I reckon is to keep funding core viable, which means keeping Newzbin research going and upping the retention times and also at some point (when we have technical capacity to cope with a server load) a free Newzbin search page … I want Newzbin to be totally free at some point” [C5/448]. (12). On 17 February 2010, Mr Harris wrote “tho’ I’m not happy about anyone being able to locate the other end of the VPN connection – I’m as worried about someone finding out it’s Bogon serving it up as anything” [C5/452]. (13). On 19 February 2010, Mr Harris wrote “Spoke to HSBC merchant services & hoping this time I am speaking to right guys. Hope to get 232k issue sorted. May need to provide security personally & then they’ll unlock funds & I can whick (sic) them away” and “Forming second company apart from HKB to take over Newzbin operations as it will look more credible than having HKB do that as well … yea upbeat when we have something to be upbeat about: when all this shit is all sorted I can assure subscribers that come what may Newzbin rolls on regardless” [C5/472] and “need to be careful I don’t provide MPA with any ammo” and “The terms of the injunction are going to be the key issue here” [C5/417] and [C5/473]. (14). On 20 February 2010, Mr Harris wrote (referring to Newzbin users) “Can’t tell them we are busily preparing plan B in case MPA get wind” [C5/479] and “so I’ll need T&Cs, privacy, billing and contact fr (sic) the footer. I guess you’ll so (sic) stuff for signup … just confirm user login, email account plan for now …” [C5/481-482]. (15). On 22 February 2010, Mr Harris wrote “First Gyron invoice! Wish they were as slow with those … we pay from today” [C5/493-494] and “It may kill Newzbin but there I have to create other corporate groups to take on its operations it (sic) assets and it (sic) liabilities. But not its liabilities to the MPA … so we can plough on regardless. As long as the tech behind Newzbin & it’s servers go on you will get your dosh” [C5/502]. (16). On 25 February 2010, Mr Harris wrote “I need to encrypt my home directory and get infringing movies on my Drobo out of the house. Plus move paper files :)” [C5/537] (17). On 27 February 2010, Mr Harris wrote “spent all afternoon hiding huge amounts of cash! … need to cleanse by Gmail account and local drives. Then encrypt home drive” [C5/545] (18). On 4 March 2010, Mr Harris wrote to Mr Hurst “it looks like we have about 4 weeks before judgement (sic). Use that time to grab your money. We’ll have more time after that too but sooner the better. How much have you got out? … spiffy so that leaves you only 75k to get out. Am pleased.” [C5/554] (19). On 5 March 2010, Mr Harris wrote “Will get graphx guy to look at redoing newzbin when I transition to ‘new’ ownership” [C5/560]. (20). On 8 March 2010, Mr Harris wrote “what happens when Newzbin user is told ‘you have to be FO [FileOrgy] user’? They lose their credits? … right so only time they get to know about FO is when their credit runs out & they go to top up and are told “we don’t do that anymore – see FO?” … so do we just stop allowing people to top up at Newzbin and when their credit runs out we say “you need to be a member of an affiliate site here’s the list: a) FO. b) that’s it”” [C5/569] (21). On 10 March 2010, Mr Harris wrote “oooh! Looks like I /may/ be able to sneak the escrow money out of Newzbin (though it will be secured by me personally). The MPA will go BALLISTIC! Now I just need to rustle up £263k in a hurry. Eeesh” and “I ahev (sic) the money but it’s all in bundles of £50 notes. Fuck. That’s going to be hard getting back into the banking system” [C5/579] (22). On 11 March 2010, Mr Harris wrote “Am in middle of assigning Newzbin IP to offshore company & if I can get escrow money out we will be in a strong position to tell MPA to shove it. Will send you guys a form to assign any residual IP rights you have in Newzbin IP to WCIS directly” [C5/581] (23). On 11 March 2010, in the context of discussing responses received to a job advertisement placed by Mr Harris on wiredsussex.com, Mr Harris wrote “one guy figured out on his own it was Newzbin related!! which was bizarre” and “I think he’ll nail FO quickly so I want/need him to contribute to Newzbin” … “I really want Newboy & GraphicMan to tart up Newzbin so some kind of access is a must” [C5/582] (24). On 11 March 2010, Mr Harris wrote “sweet. HSBC cards have confirmed they will allow me to take over giving security for clawbacks. We will deffo get, at worst , a significant chunk of cash out. As long as I can hide this arrangement from Wiggin we’ll be cool” [C5/585] (25). On 12 March 2010, Mr Harris wrote “Kalante: Interviewed a very competent sounding guy. Gonna test him to kick skeleton site into workable alpha. He needs info from you to assist him getting FO [FileOrgy] login to work with NB [Newzbin]. In response to Mr Elsworth’s question, “I don’t really see the need for all this complication and integration – all we want to achieve is using FO’s [FileOrgy’s] payment system to let Newzbin users topup, yes?, Mr Harris responded, “yes”. [C5/588] (26). On 19 March 2010, Mr Harris wrote “Yea Pargue (sic) for 4 nights. Reckon I won’t get time after verdict as I’ll be to (sic) busy shuffling companies and assets” [C5/617]. (27). On 29 March 2010, Mr Harris wrote “Plus am hiring an employee and contracting with a site developer for FO [FileOrgy] so it will even look true in a bit” and “Am planning to do MPA up the arse on money, but you guys will be fine no worries. You are integral to the company, albeit just as contractors” and “We have a hearing on Wednesday. Need to get as much money out of (sic) asap :)” [C5/658] (28). On 29 March 2010, Mr Harris wrote “May need to shut down the wiki documentation, BTW. It’s too late for Newzbin1, but Newzbin 2 need (sic) to cover it’s (sic) arse.” [C5/663] (29). On 29 March 2010, in response to Mr Elsworth’s question “£40k from WCIS Limited?”, Mr Harris wrote “£40k for ‘purchase’ of Newzbin IP assets, to prevent anyone claiming was not a valid transfer because there was no market value attached” and “It’d be nice to leave money lying about but given that there may be a freezing injunction in a wee (sic) or so I kinda think it’d be useful to get as much money out to run the new company” [C5/663-664]. (30). On 30 March 2010, Mr Harris wrote “Second: I’m gonna get that proxy server in place ASAP and migrate over all the stuff to wcis. We need to change domain record to reflect new owner. Not sure about tech contacts but it needs to be someone other than Bogon obv., or you guys” [C5/671] and “Chris: will speak to DHL tomorrow about couriering server to Sweden. Imagine it will be frickin’ painful cost” [C5/678]. (31). Later on 30 March 2010, Mr Harris wrote “Chris: emailed you details for wcis entry in domain record (phone number phoney – but is an ISP – every else (sic) legit” … “tell Bogon that is their new ‘Nezbin’ (sic) customer not you. Though you’ll act as consultant to wcis?” [C5/673] (32). On 31 March 2010, Mr Harris wrote “I think my concern with the whole whack-a-mole thing is I just don’t know a) if we can keep Bogon servers hidden and b) how quickly MPA will act in other countries. It’ll be a learning process” [C5/698]. (33). On 2 April 2010, Mr Harris wrote: “kalante: your and supplier invoices will be paid by kthxbai or (secretly) by WCIS” [C5/708] and “I prolly (sic) need to start investigating post Sweden options too. Spain mebe” [C5/710] and “Am considering a plan to have a holding page in place for when servers ‘move’ to another country. “Newzbin is down for 1 day while we relocate servers”

. Make our move out of UK more convincing to MPA?” [C5/711]. (34). On 4 April 2010, Mr Harris wrote “Oh, BTW I hired the Unix geek Matt Densley. Need to work on integrating him into NB and FO” and “I want him to get handle on NB code & I have old code dump which will do for now” [C5/714] and “He doesn’t start for 2 weeks. His initial brief is to have a poke around the source code for NB” [C5/715]. (35). On 6 April 2010, Mr Harris wrote “I can run a castrated Newzbin until we can rejig things. Say new site nothing to do with NB. Proxy working well rly (sic) important. kalante: How easy would it be to reskin new site to remove our logo and references to NB?” [C5/719] and “If there was no evidence proxy was connected to NB we could just whistle and say “nothing to do with us gov” and if NB is still running we could just claim site code nicked or leaked by a misbehaving licensee” [C5/720] and “WCIS paid 40k that/could/be a licence fee for the code and the indices. That’s fine. I could just say that if they don’t believe it they should prove it” [C5/721]. (36). On 7 April 2010, Mr Harris wrote “I will say this by hook or fuckig (sic) crook newzbin will go on. It’s a good money earner” [C5/727]. (37). On 8 April 2010, Mr Harris wrote “Chris is adding NZBs to v4. When Swedeboy pulls his finger out I’m gonna reskin the site and put it up on the proxy straight away” [C5/731] and “When the proxy is up we’ll have v4 and then when the dust settles on legals, we’ll drag reports over” [C5/732] and “I prolly (sic) want david off as much Newzbin stuff as possible TBH. Since they are talking criminal … NB will be run by mysterious geezers in the Seychelles” [C5/735]. (38). On 11 April 2010, Mr Harris wrote “To be clear: we will run the v4 site on the bare IP address with no domain name yet until I can buy one for cash without it coming back to me!” [C5/743]. (39). On 12 April 2010, Mr Harris wrote “I need v4-like capabilities for the proxy site but it cannot be available via v4.newzbin.com or Newzbin will be in breach of the order” and “plan is to push out a service from the proxy that is ‘nothing to do with Newzbin’” [C5/747] and “Once the action is over and Newzbin is wound up, when it restarts MPA are bound to say ‘you are just Newzbin 2.0’ but as long as they have no proof I don’t give a crap. It’s the classic whackamole they always face with p2p sites. 99% of the time it’s the same ppl (sic) over again. They know it they just [can’t] usually prove it” [C5/749]. (40). On 13 April 2010, Mr Harris wrote “Only way to fuck those guys up is by finding a good jurisdiction. And hoping they don’t figure out we are proxying. (& having a backup plan if they do)” [C5/757]. (41). On 20 April 2010, Mr Harris wrote “It’s all academic. By the time it happens Newzbin 1 will be gone and in Sweden” [C5/782]. (42). On 22 April 2010, Mr Harris wrote “I think we are looking at about 3 ish weeks till we can do Newzbin 2” [C5/793]. (43). On 5 May 2010, in answer to the question “Just to confirm that I understand the task required: newzbin will use fileorgy as a payment gateway – as a website might use paypal”, Mr Harris replied “Yes, that’s the idea conceptually” [C5/816]. (44). On 17 May 2010, Mr Harris wrote “The site will remain down for 1 or 2 weeks. What needs to happen then is that when the site comes back it looks a little bit different. Ideally it’s be fully redesigned. But that ain’t practical in 10 days. But if someone hauls u before a judge it will help if it does look a bit different. The story is that the newzbin code was nicked. Manifestly bollocks but no-one can prove otherwise” [C5/875-876] and “I am much more concerned with retention than site graphx TBH” [C5/879]. (45). On 21 May 2010, Mr Harris wrote “Newzbin 2 team will now be named after Resevoir Dogs characters … I bagsy Mr White” [C5/902] and Mr Harris then composed the message to “ex-Newzbin users” signed “Mr White” that appears at [C5/903]. (46). On 25 May 2010, Mr Harris wrote “Do you feel comfortable knocking up a quick hacked new logo? stylized Newzbin2” [C5/923]. (47). On 26 May 2010, Mr Harris wrote “I’ve put a to do on the Wave account but my priorities are: a) quick hack to logo (don’t spend ages on it) b) prep the user docs to come back even if only the NZB spec for now c) document the systems” [C5/924] and “I suggest switching on the proxy Friday evening” [C5/926]. (48). On 28 May 2010, Mr Harris wrote “At the moment if you hit newzbin you get a login box and no more. I reckon t’d be better if people who hit the site see the search page or something more inviting than a blank page and a login box” and “At some stage what I want is people, non-members, to hit the site from, say, google but not to be able to do certain things unless they register” [C5/930]. (49). On 21 June 2010, Mr Harris wrote “Will freely admit I’m getting very very neurotic about it. MPA ominously silent. Wonder if something big is about to happen to servers” [C5/960] and (n answer to the question “What’s your username?”) “Mr White” [C5/962] and “Of course once MPA dig into kthxbai they’ll know who I am – and I’m happy to be open about it – and recall the NB litigation. But that’s some way from proving we run NB since there is no evidential attachment to NB. The only danger is a judge may just wave his hand and say it is likely we are. That’s a risk” [C5/967-968] and “There is clearly a real suspicion that I’m behind NB2 but no hard evidence. If I got raided all my drives are encrypted and there is no paper documentation at my house… Also since I run a legit website I have a real alibi. If asked I would just say “Yea, I got approached by the Newzbin2 guys and agreed to act as payment gateway” again, not unlawful so far as we know on current law. Then again I have said that in the past too” [C5/968] and “They [MPA] got burnt for £500k+ legal costs which they aint getting back” [C5/968]. (50). On 29 June 2010, answering a question about who took care of which areas, Mr Harris wrote “Mr White: Yea. Mr Black does mainly code stuff, bugs feature requests. Mr Blue does network and sysadmin type stuff, Mr Violet does payment faults; I do most of the other stuff and management issues, membership problems etc” [C5/992] and “But they [MPA] found my kthxbai ad for a sysadmin and I was a cunt when drafting it. Put in a tad too much detail that is possibly compromising … Anyway they are now alleging that I am behind NB2 … So apart from job ad everything is fine. I am now constructing, with Tomas, a plausible excuse for the job ad. We are going to add a search engine to fileorgy relating to comparison shopping” [C5/994] and “Anyway main thing now is to have a look at servers and see what we can do to make things less incriminating if they are seized… My main concern if servers snatched is whether they have any evidence tying me in directly e.g. logged IP addresses in VPN etc. No idea what that might be” [C5/995]. (51). On 30 June 2010, Mr Harris wrote “Given MPA activity – I am giving thought to having another backup server running somewhere” [C5/1004]. (52). On 1 July 2010, Mr Harris wrote “Please be VERY VERY careful what you say in other chat rooms – e.g. tech details about what we do – it’s an insecure room and there may v well be MPA guys lurking in there” [C5/1012]. (53). On 8 July 2010, Mr Harris, by reference to action by the US Government against pirate websites, wrote “Trouble is if they did it to Newzbin I’d need to argue ‘but there’s never been any criminal investigation’ and they might respond by doing one which would be a catastrophe!...We’re gonna pull in just under 10k in last 30 days I reckon … bout 12k is break even – excluding hardware … New offshore for Newzbin will be ‘NZB4All’ … NZBs4All” [C5/1036-1037] and “BTW will start a Newzbin official blog at wordpress.com. Have blog.newzbin.com point at it. It/may/slow down or halt US gov/ICANN grabbing domain. I can bang on about censorship of free speech” [C5/1040]. (54). On 9 July 2010, Mr Harris wrote “Am bit concerned MPA may be on to Bogon” [C5/1044]. (55). On 17 July 2010, in answer to the question “aren’t the references to kthxbai gunna lead the MPA straight to you, david?”, Mr Harris wrote “They are already aware of Kthxbai. Kthxbai is acting as a payment gateway but no more. As long as Kthxbai isn’t in some “common design” we have a defence, albeit not one that’s as bullet proof as I’d like” [C5/1074]. (56). On 18 July 2010, Mr Harris wrote “We pulled in a tad over £10k and I reckon we need 12-14k to break even, so I am taking a small loss which I can bear for a few months” and “MPA are aware of us and torrentfreaks has an insider saying they are preparing an action. We don’t know if they’ve figured out .se is a proxy and London is at the heart of it” and “I am at some risk – tho’ pretty sure legally I am OK so long as they [MPA] can’t prove kthxbai doing more than payments & tech advice. On tech front we are in better shape” [C5/1077]. (57). On 19 July 2010, Mr Harris wrote “Also am thinking about the architecture of things from an operational security/legal perspective. Broadly: is it possible to split off the legally safe bits of what we do and keep the vulnerable bits separate” [C5/1080]. (58). On 20 July 2010, in response to the question “There’s some user complaining about hitting a download limit for NZBs. According to the db he downloaded 2000 within 20 minutes. Can I pass the ticket on to you, Mr White?”, Mr Harris wrote “Mr Black: yea. WTF is doing d/l 2000 in 20 minutes. Wondering if he is a leech from another site?” [C5/1086] and “Mr Black: I appear to have made a terrible error and raised your pay last month to £45,000 not £35,000, your last pay slip is therefore wrong and I hope you didn’t rely on this in any financial transactions” [C5/1091]. (59). On 21 July 2010, Mr Harris wrote “BTW Newzbin email system has account for Mr White?” and “davidh is now known as davidh” [C5/1095-1096]. (60). On 22 July 2010, in answer to the suggestion “Maybe you should change your nick here before you mispaste something”, Mr Harris wrote “Aye, fair point. davidh is now known as Mr White” [C5/1100]. Glossary of Abbreviations and Defined Terms 1988 Act Copyright, Designs and Patents Act 1988 BT British Telecommunications plc FACT Federation Against Copyright Theft FO or the FO website A website called “FileOrgy”, administered by Mr Harris and providing a secure file storage service HKB HKB Operations Limited, the Seventh Defendant ISP Internet Service Provider K Kthxbai Limited, the Second Defendant MFM Motors For Movies Limited, the Sixth Defendant MPA Motion Picture Association of America Inc. Mr E Christopher Elsworth, the Fifth Defendant Mr Harris David Harris, the First Defendant N Newzbin Limited 4All NZBS4ALL Limited, the Eighth Defendant Paypal Paypal (Europe) SARL et CIE SCA, the Fourth Defendant The Chat Logs 1,119 printed pages of private internet discussions (more technically known as Internet Relay Chat) said to have taken place between Mr Harris, Mr E and other associates over the period December 2009 to August 2010 The Effective Defendants The First, Second, Third, Sixth, Seventh and Eighth Defendants The corporate Defendants The Effective Defendants except Mr Harris The Flat 28 Sillwood Road, Brighton The Foundation The NZB Foundation, the Third Defendant The N1 action A copyright infringement claim brought by the Claimants against N in respect of the N1 website The N2 action A claim by the Claimants for an injunction under section 97A of the 1988 Act brought against BT in respect of the N2 website The N1 website See the N1 action The N2 website See the N2 action The PoC TheRe-Re-Re-Amended Particulars of Claim