England and Wales Court of Appeal (Civil Division) Decisions

CHAN1 97/1024-6/3

IN THE SUPREME COURT OF JUDICATURE

(MR JUSTICE CHADWICK )

Royal Courts of Justice

Strand

London WC2

Tuesday 3 February 1998

B e f o r e:

THE MASTER OF THE ROLLS

(LORD WOOLF)

LORD JUSTICE ALDOUS

LORD JUSTICE MUMMERY

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PHONOGRAPHIC PERFORMANCE LIMITED

Plaintiff/Appellant

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1. SAIBAL MAITRA

2. SIMON ANDREW & NICK ROSE

3. THE UNDERWORLD (BRADFORD) LIMITED

Defendants/Respondents

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(Transcript of the handed-down judgment of

Smith Bernal Reporting Limited, 180 Fleet Street,

London EC4A 2HD

Tel: 0171 421 4040

Official Shorthand Writers to the Court)

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MR P GOLDSMITH QC MR J RAYNER-JAMES and MISS A MICHAELS (Instructed by Messrs Green Sheik, London W1H 2BY) appeared on behalf of the Appellant.

The Respondents did not attend and were not represented.

MISS M VITORIA QC (Instructed by the Mr N Kounoupias, Solicitor for the Performing Rights Society) appeared on behalf of the Intervenor, The Performing Rights Society.

MR M SILVERLEAF QC (Amicus Curiae) (Instructed by The Treasury Solicitor, London, SW1H 9JS)

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J U D G M E N T

(As approved by the Court )

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©Crown Copyright

JUDGMENT

LORD WOOLF, MR: This is the judgment of the Court. Following the decision in Gramophone Co Ltd v Cawadine & Co (1934) 1 Ch 450, which established for the first time that under s.l of the Copyright Act l9ll a performing right subsisted in a record, Phonographic Performance Limited (PPL) were incorporated to exercise and enforce performing rights assigned by gramophone companies to PPL. That right was preserved in the Copyright Act l956, (s.12(5)(b)) pursuant to the recommendation of the Gregory Committee, and is now enshrined in the Copyright, Designs and Patents Act l988 (s.l6(l)(c) and s.l9).

This appeal raises the question of what is the appropriate order to be made when final judgment for infringement of copyright is given in favour of the PPL in default of defence.

PPL, as assignees, now administer on behalf of the vast majority of record companies, the performing, broadcasting and cable programme rights in their sound recordings. Like other collecting societies, PPL operate a number of standard tariffs for annual licences applicable to different classes of users which are either negotiated with music user organisations or have been decided after a reference to the Performing Right Tribunal, now the Copyright Tribunal. A person who takes a licence is entitled to use all of the recordings in the repertoire of PPL's member companies.

PPL, unlike the Performing Right Society (PRS) which performs a similar function on behalf of composers, authors and publishers, do not have inspectors who visit premises to ascertain whether copyright works in their repertoire are being used without a licence. They monitor the press and conduct surveys of particular businesses. If it comes to their notice that unlicensed use may be made, PPL write to the person concerned drawing his attention to the need for him to obtain a licence. If he fails to apply for a licence, further letters are written to persuade him to take a licence before solicitors are instructed. The solicitors, when instructed, write at least one letter before action and, if no satisfactory reply is received, engage enquiry agents to ascertain whether there is infringement and if so to obtain evidence upon which an action for infringement could be based. It is only then that proceedings for infringement of copyright are started.

The proceedings are normally commenced by a writ endorsed with a Statement of Claim. Annexed to the Statement of Claim is a schedule of the current repertoire of PPL. The copyright in the recordings referred to in the schedule will expire on different dates. Concern has been expressed that if the court grants injunctive relief in relation to the recordings forming the repertoire at any particular time this will result in the defendant being restrained in relation to a recording after its copyright has expired. We recognise that in theory this must be a possibility. However we do not consider that in practice this requires any change to the way the proceedings are now usually conducted.

Inevitably any proposed defendant will be playing a variety of recordings. In view of the dominant position of PPL it is inconceivable that no recordings in which PPL holds the copyright will not have been played and likely continue to be played, if not restrained, by a proposed defendant. If such a defendant is licensed he is licensed for all the recordings in the repertoire. If he is not licensed and is providing music for the public he will inevitably infringe PPL's copyright and which particular recording's copyright is infringed will be a matter of no concern to the proposed defendant.

A person who applies for a licence before starting to use the repertoire pays at the standard tariff rate. To encourage that to happen juke box licensees who do not apply in advance are normally required to pay a slightly higher royalty rate for the first year

and to pay that rate from the first day of use. That has been accepted by the Copyright Tribunal to be reasonable in principle.

The way that the question for decision arose is fully set out in the judgment in the Chancery Division of Chadwick J. ([1997] 3 All ER 673). PPL have for many years sought and obtained from the Judges of the Chancery Division final judgment in default against persons using the repertoire who have failed to take a licence. The orders made included an injunction to restrain further infringement in the normal form, ie with immediate effect and without an express limit of time.

This appeal arises out of applications by PPL in l996 for judgments in default of defence against a number of Defendants. Notices of Motion for judgment in default were served seeking injunctions restraining the particular Defendants from infringing copyright without the licence of PPL, an enquiry as to damages and costs. Chadwick J concluded that final injunctions without limit of time were not appropriate and therefore limited the injunctions to a period of six months. He ordered enquiries as to damages and costs and that there should be "liberty to apply". He contemplated that the liberty to apply would enable PPL to come back to the Court to extend the term of the injunctions, if that proved necessary.

In a number of cases PPL considered it was necessary and, believing that the "liberty to apply" enabled them to do so, they came back to the Court to have the time limit removed. At an early stage of the hearing it became clear that PPL's submissions challenged the judge's decision to refuse to grant injunctions without a time limit. The judge concluded that it was not appropriate for him to entertain such submissions on those applications because, if he had been wrong to make the order which he did, it was for the Court of Appeal to reverse his decision. PPL indicated that they wished the matter to be considered by the Court of Appeal. To enable that to be done PPL brought before the judge, in proceedings started in 1997, two further Notices of Motion for judgment in default of defence. Thus, if he came to the same conclusion as he had done in the l996 actions, the matter could be reviewed by the Court of Appeal.

This appeal is against the order made by Chadwick J in action Ch l996 P.3979 in which Mr S Maitra was the defendant and against the orders made in the l997 actions. As the issues of importance to PPL arise for decision in the l997 actions PPL, rightly in our view, are content not to pursue the appeal in the Maitra action.

The first action Ch l997 P No 2238 was started by writ dated 22 April l997. It is endorsed with a Statement of Claim. It alleges that the Plaintiffs were the owners of the copyright in the repertoire; that the Defendant was the proprietor or occupier of "The Underworld Nightclub" which had record playing equipment for public performance; that the Defendant had infringed the Plaintiff's copyright on a specified date by playing a number of named records in the repertoire; that because of letters sent prior to that date the Defendant is and was at all material times well aware of the nature and extent of the Plaintiff's repertoire and that playing it in public constituted an infringement of the Plaintiff's rights. It is also pleaded:

"Despite requests the Defendant has failed to obtain a licence and has continued to infringe the Plaintiff's rights as aforesaid and it is to be inferred that it will continue to do so unless restrained by an Order of this Honourable Court."

The Statement of Claim concludes with a claim for an injunction in these terms:

"An injunction to restrain the Defendant from doing ... the following acts or any of them that is to say infringing the Plaintiff's copyright by playing in public sound recordings issued under any of the names or marks specified in Schedule A annexed hereto or by authorising any of the acts aforesaid without the Plaintiff's licence but as to each such sound recording only during the respective periods during which the exclusive right to play the same in public is vested in the Plaintiff or from infringing the Plaintiff's copyright in any other way."

The writ was served by post pursuant to O.l0 r.1(2)(a) of the RSC. The Defendant did not acknowledge service, but, as required by O.l3 r.6(1), PPL proceeded as if notice to defend had been given. In June l997 PPL applied by Notice of Motion for judgment in default as claimed in the Statement of Claim. There is no dispute that the appropriate procedure was adopted.

The judge ordered the enquiry as to damages sought and costs, but limited the injunction by inserting this proviso:

"But PROVIDED that

(i) the said injunction shall take effect from the day 28 days after the date of this Order or from such later day as the parties (in writing signed by them or by solicitors on their behalf) may have agreed; and

(ii) the injunction shall continue until whichever shall first occur of (i) the day seven months after the date of this Order or (ii) the day on which the Defendant shall first obtain a licence to play in public the sound recordings then comprised in the Plaintiff's repertoire."

He also ordered that:

"the parties are to be at liberty to apply."

The issue of principle raised in this appeal is whether the judge was right to refuse to grant an injunction without the two limbs of the proviso.

The factual background, pleadings and order made in the other l997 action, the subject of this appeal, are for all relevant purposes the same and therefore need not be considered separately.

PPL's applications for judgment were made under O.l9 r.7(l). It provides:

"7(1) Where the Plaintiff makes against a Defendant or Defendants a claim of a description not mentioned in rules 2 - 5, then, if the Defendant or all the Defendants (where there is more than one) fails or failed to serve a defence on the Plaintiff, the Plaintiff may, after expiration of the period fixed by or under these rules for service of the defence, apply to the Court for judgment, and on the hearing of the application the Court shall give such judgment as the Plaintiff appears entitled to on his Statement of Claim."

That rule is permissive. It follows that a Plaintiff need not move for judgment in default of defence and can proceed to trial in the normal way or seek summary judgment under O.l4. The advantage of doing so is that a judgment so obtained cannot be set aside under O.l9 r.9, but to do so can increase the costs which may not be recoverable.

Note l9/7/10 states:

"Proof of Plaintiff's case - at a meeting of the Judges a majority decided that the Court cannot receive any evidence in cases hereunder, but must give judgment according to the pleadings alone ( Smith v Buchan ) l888, 58 LT 710; Young v Thomas (1892) 2 Ch 135, CA. It is therefore not necessary on the hearing of the summons or motion for judgment to prove the case by evidence ( Webster v Vincent [l898] 77 LT 167). The costs of any affidavits in support of the case will be disallowed ( Jones v Harris [l887] l5 LT 884)."

The reason for it not being necessary to prove the case by evidence was explained by Bowen LJ in Young v Thomas in these terms:

"There is no doubt that, in determining the rights of the parties in the action, the statement of claim alone is to be looked to, and the reason of this rule is obvious, namely that the facts stated therein are taken to be admitted by the defendant; and as has been decided by Lord Justice Kay in Smith v Buchan (1888) 36 WR 631 no evidence can be admitted as to those facts."

The judge reminded himself of that statement by Bowen LJ and drew attention to the conclusion reached in that case that the Court had, when considering costs, a discretion given by the rules which enabled the Court to look at facts outside the Statement of Claim just as it did in other cases. The judge went on:

"Equally, as it seems to me, there is nothing in Order l9 rule 7(1) which has the effect of depriving the court of the power to decide, in the exercise of a judicial discretion, not only whether an injunction should be granted, but also what the terms of that injunction should be. I reject any suggestion that the function of the judge in these cases is confined to checking that there is an affidavit of due service and that the time periods prescribed by the rules have elapsed; and that, subject to those checks he is required to act as a judicial rubber stamp in granting the injunction in the terms sought.

For these reasons it appears to me that it is appropriate -indeed, it is necessary in the proper exercise of the judge's discretion - to consider whether the injunction to be granted should be of unlimited duration or for some lesser period."

We endorse the judge's view that O.l9 r.7 does not deprive the Court of the discretion given by Section 37 of the Supreme Court Act l98l to refuse to grant an injunction or to grant it on such terms and conditions as are just. However that discretion has to be exercised judicially and we can see no reason for applying any different principle when the discretion is being exercised under O.l9 r.7 than under O.l4 or after a trial. In each case the judgment is final in the sense that it concludes the litigation, subject to appeal when made under O.l4 or after trial, and the power to set aside when made under O.l9 r.9. Upon the facts as proved, admitted or deemed to be admitted, the judge must decide whether an injunction is appropriate and if so its form.

It is clear from the terms of O.l9 r.7 and the Note l9/7/10 that judgment in default is given upon the facts pleaded in the Statement of Claim and that affidavit evidence to supplement or support those facts is not appropriate as the pleaded facts are deemed to be admitted. However that cannot be rigidly applied where the judge has to exercise a discretion whether to grant the relief sought. Where an injunction is sought facts relevant to the grant of that injunction, which are not deemed to be admitted, should be brought to the attention of the judge by way of affidavit or otherwise. Further, if the judge is aware of matters relevant to the exercise of his discretion, he can seek an appropriate explanation before coming to any decision. The appropriate costs of such an exercise would, if reasonably incurred, be accepted as allowable. Note l9/7/10 is not applicable to this situation.

The judge was aware of the practice of PPL from earlier contempt proceedings which had come before him. PPL require a person who applies for a licence to take the licence from the first day that the person used the repertoire. Thus a person who infringes will only be granted a licence when he has regularised his position. Similarly a person who has been injuncted will not be granted a licence if he does not pay the appropriate licence fee in respect of the time when he has infringed. The attitude of PPL is "pay or stop" - those who do not pay should not be in a better position to those who do.

The judge was concerned at the practice of PPL using an injunction of unlimited duration as a lever to extract payment of past fees, a practice he regarded as an abuse of process. He therefore restricted the injunction by the proviso set out above. That, PPL submitted, was a wrong exercise of discretion.

As neither of the defendants appeared, this Court thought it right that it should have the assistance of an Amicus Curiae and we are grateful for the submissions of Mr Silverleaf QC who was appointed, and for the submissions of Miss Vitoria QC, who appeared for the PRS as intervenor.

Mr Goldsmith QC, who appeared for PPL, submitted that where, as in this case, a plaintiff establishes that his copyright has been infringed and there is a threat of further infringement, is entitled as of course to an injunction to prevent the Defendant from carrying out further infringements. See Weatherby v Int. Horse Agency (1910) 2 Ch 297; PRS v Cyril Theatrical Syndicate Ltd (1923) 2 KB 146; Samuelson v Producers Distributing Co Ltd (1931) 48 RPC 580 at 593; PRS v Mitchell (1924) 1 KB 762 at 774; Pride of Derby v British Celanese Ltd (1953) Ch 149 at l8l and l94; Redland Bricks v Morris (1970) AC 652 at 664D and 665F; Colgate Palmolive Ltd v Markwell Finance (1990) RPC 197 at 200 and PRS v Berman (1975) FSR 400 at 403. That, he submitted, was the intention of Parliament as can be seen from the Copyright Designs and Patents Act l988. Further, PPL were in no different position in this respect from other copyright owners. There was nothing in the attitude or practice of PPL which required the Court to deviate from the normal practice of restraining by final injunction in the normal form infringement of copyright when there is a threat to continue.

Section l(l) of the l988 Act states in terms that copyright is a property right. It entitles the owner to the exclusive right to do the acts restricted by copyright (see Section 2) which, in this case, is public performance of a record (see Sections l6 and 19). The exclusive right has a duration fixed by statute (the 50-year period now specified in s.l3A in the case of sound recordings). In an infringement action the copyright owner has available all relief, including injunctive relief, as is available in respect of any other property right (see Section 96). Although the Act in other parts provides for licences as of right to be granted, there is nothing requiring an owner of copyright of the type being considered in this case to grant a licence, save where the Monopolies and Mergers Commission has become involved (see sections 98 and l44). An owner may exercise and exploit his proprietary right by licensing some and not others. He may charge whatever he wishes.

Collecting societies, such as PPL and PRS, have been recognised to be in the public interest. They provide a practical way for copyright owners to obtain recompense for use of their work and for the public to obtain a licence to use the complete repertoire of works. However, by reason of their control of all the works of record companies and of composers, they have quasi-monopoly positions and have considerably more power when exercising their copyright than an individual owner. That was recognised by Parliament both in the l956 and l988 Acts. Chapter VIII of the l988 Act set up the Copyright Tribunal, which has jurisdiction to hear and determine disputes relating to licensing schemes of Collecting Societies. For example, a person claiming that he requires a licence may refer a scheme to the Copyright Tribunal and the Tribunal can upon such a reference confirm or vary the scheme (see Section ll9). A person may also apply to the Tribunal, if he has been refused a licence or he believes that the terms offered are unreasonable and the Tribunal may make an order declaring that he is entitled to a licence on such terms as the Tribunal considers reasonable (see Section 121). Mr Goldsmith properly concedes that it would be perfectly proper for a judge to stay an action on appropriate terms if a defendant wishes to refer a relevant issue to the Tribunal.

Although the terms upon which PPL licence their copyright are subject to the control of the Copyright Tribunal, Parliament did not see fit to restrict the way that they enforced their copyright against infringers. Parliament provided them with the same rights as ordinary copyright owners and prima facie they should be granted the same relief.

We accept that when a person establishes infringement of copyright and a threat to continue infringement, an injunction will in the ordinary case be granted without restriction. This is especially true when the defendant takes no part in the proceedings. But the Court, when granting an injunction, is still required to exercise a discretion and in so doing there could be circumstances where restriction or refusal of an injunction would be warranted. We do not believe that such circumstances arise in this case or would normally do so in similar cases.

At the heart of the judge's decision to limit the injunction in time was his view that the injunctions obtained by PPL were used as a lever to extract licence fees - a practice that he regarded as an abuse. Although PPL have, since the judge first expressed his views, modified the letters they write, it remains their objective to make sure that all users of their rights pay the appropriate licence fee or stop infringing. The purpose of the injunction is to prevent unlicensed use. Inevitably it is an incentive to the injuncted person to obtain a licence or, when threatened with committal, to pay the fee which he should have paid or stop.

We do not take the same view as the judge. A person who exploits his property right by licensing is entitled, unless there are special circumstances, to prevent another from using that property right without his licence and to refuse to grant a licence save on his terms and conditions as to payment and use. In a case, such as the present, where the Defendant did not contest the allegation in the PPL's Statement of Claim, was well aware of PPL's rights and that he was infringing and shows an intention to continue to infringe, we can see no reason why the use of an injunction in the normal form to prevent further infringement could be an abuse. No doubt the consequence is that a Defendant is forced to pay if he wishes to use the repertoire, but PPL are entitled to use the rights assigned to them for the purpose of requiring payment of fees in return for a licence to do what would, in the absence of a licence, be an infringement of the rights. On the admitted facts of the l997 cases, there were no grounds for suspending the injunction for 28 days which the judge said was "intended to provide time for negotiation". The admitted facts were that the Defendant was a person who had, with full knowledge of the position, disregarded the proprietary rights of PPL. Whether or not the Defendant would be in a position to pay any damages or costs was not known. To allow him a further 28 days of infringement (which is also a criminal offence under s.107(3)(b) of the l988 Act, if the offender knew or had reason to believe that copyright would be infringed) was, in our view, wrong.

The second limb of the proviso to the injunction was intended to ensure that the injunction did not continue for a period longer than was necessary to protect PPL's rights. That was considered to be, at most, seven months. The purpose of such a limitation in time was to prevent PPL using the threat of committal to make the Defendant pay further licence fees.

Use of an injunction by PPL to obtain money to which they are not entitled would be an abuse, but there is no evidence that that ever occurs. Where unauthorised use of PPL's copyright is taking place, we do not believe it is an abuse to refuse to licence that copyright without an appropriate payment for past use and an agreement for future use. Nor do we consider it an abuse for PPL to require compliance with an injunction either by the person refraining from using the repertoire or by paying for such use that has taken place and will take place.

A man who is aware of PPL's rights and that he has infringed them and has shown an intention to continue to do so should not be surprised to be told that, if he continues to do so in the future, he risks committal to prison: nor should he be surprised that, when a breach of the injunction has occurred, it is pointed out that committal proceedings will follow unless the infringer regularises his position. We can see no reason why a Court should modify the normal form of injunction for the benefit of a person in the position of the Defendants in the l997 actions. In fact, we can see every reason to grant the normal form of injunction to PPL to prevent the Defendants infringing copyright, which is not only an infringement of PPL's rights but can also be a criminal offence. If a Defendant has no intention of infringing, then he should apply to have the order set aside insofar as it grants an injunction against him. If there were to be any abuse of the grant of the injunction then again the Defendant could apply for the discharge of the injunction. In any event, the Court would take into account abuse by refusing any relief on any contempt application. In the ordinary case, however, the course taken by the judge might lead unnecessarily to further litigation and to substantial additional costs, which might well be irrecoverable by PPL from the defaulting defendant.

It was suggested by Mr Silverleaf that it might be appropriate in the circumstances of the cases before us, where licences were available, to refuse to grant an injunction at all as damages would be an adequate remedy and, if necessary, to award damages in lieu of an injunction under Section 50 of the Supreme Court Act. That, it was said, would reflect the position and provide appropriate relief as PPL's desire was to maximise their return and not to refuse licences.

Such a course would not be sufficient to safeguard what are the admitted rights of PPL for four reasons. First, upon the admitted facts the Defendants have an intention to continue to infringe PPL's rights. In those circumstances an injunction is the appropriate remedy to prevent that intention being carried out. Second, calculation of the damages for future infringements of copyright in lieu of the injunction would not be practical, as it would not be possible to estimate the length of time the infringement would continue. Damages for infringement of copyright are awarded as compensation for loss caused by past infringements, but they are rarely an appropriate remedy for unlicensed future use of copyright. Third, PPL are the owners of a statutory property right which they are seeking to enforce in the same way as they have done for many years. When Parliament enacted the l988 Act it did not give these Defendants permission to perform sound recordings in public without the need for the copyright owner's licence or, apart from the right to apply to the Copyright Tribunal, a right to compel the copyright owner to grant a licence to do the restricted act (and without payment). It would therefore be surprising, absent special circumstances, if the Court framed an injunction in terms which would licence a Defendant's activities when Parliament did not consider it was right to do so. Fourth, we can see no reason why a Court should have any sympathy with a Defendant who, as in this case, is aware of PPL's rights and that he is infringing them and then shows an intention to continue to do so.

It follows that we would allow the appeals in the l997 actions with the result that the injunctions will be in the normal form sought by PPL.

Order: Appeal allowed with Injunction as ordered. No Order as to Costs.