England and Wales High Court (Chancery Division) Decisions

IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION

		Royal Courts of Justice Strand London WC2A 2LL
		23 November 2000

MR. JUSTICE NEUBERGER: This is a preliminary issue which is of some importance to Local Authorities and to owners of copyright in musical recordings.

The issue is whether a Local Authority, in this case a Metropolitan District Council, can take advantage of Section 67 of the Copyright Design and Patents Act 1988. Section 67 is one of a number of statutory permissions, contained in Chapter III of the 1988 Act, for the doing of acts which would otherwise be an infringement of copyright.

Chapter III is introduced by Section 28 which provides:

"(1) The provisions of this chapter specify acts which may be done in relation to copyright works notwithstanding the subsistence of copyright; they relate only to the question of infringement of copyright and do not effect any other right or obligation restricting the doing of any of the specified acts.....

(4) The provisions of this chapter are to be construed independently of each other, so that the fact that an act does not fall within one provision does not mean that it is not covered by another provision. The exceptions include research and private study (Section 29); criticism, review and news reporting (Section 30); various educational uses (Sections 32 to 36A); use in connection with library and archives (Sections 37 to 44); and public administration (Sections 45 to 50)."

Section 67 is in these terms:

"(1) It is not an infringement of the copyright in a sound-recording to play it as part of the activities of or for the benefit of a club, society or other organisation if the following conditions are met.

(2) The conditions are: (a) that the organisation is not established or conducted for profit, and its main objects are charitable or are otherwise concerned with the advancement of religion, education or social welfare; and (b) where the proceeds of any charge for admission to the place where the recording is to be heard are applied solely for the purposes of the organisation."

The Defendant is the South Tyneside Metropolitan Borough Council. It is a Local Authority which came into existence pursuant to the provisions of the Local Government Act 1972; its functions are statutory and derive from a number of Acts of Parliament.

Mr. David Marsden, Head of the Defendant's Leisure Department, explains that the Defendant "maintains numerous premises throughout the local area which are used for many different purposes, ranging from adult education to sports centres and swimming pools, libraries, parks and museums." He goes on to say that the activities of the Defendant are "very varied and all of the activities and services are activities and services which [it] is authorised or empowered to carry out or provide by statute."

The preliminary issue is concerned with two specific cases. They both involve aerobics and keep fit lessons for adults, which are open to all members of the public subject to the capacity of the room in which they are conducted. People who attend have to pay in order to obtain entry; after a payment of outgoings, the balance is retained by the Defendant.

At these classes sound recordings are played. One of the cases involves such a class at the Monckton Stadium, a large building comprising a sports' hall, an indoor sprint track, a meeting room, a fitness room, a solarium, changing facilities, offices, reception and a kitchen. Outside there are two football pitches, a training track, some offices and a pavilion. The Monckton Stadium is used for a great variety of sporting and leisure activities and is used by, among others, church groups, schools, colleges and athletic federations.

The other case involves a similar class at the Bolingbroke Sports Hall which consists of a sports' hall, a squash court, a judo room, a meeting room, a main hall, a play room, a solarium, two fitness rooms, model railway club rooms, changing rooms and a rifle range. Bolingbroke Sports Hall is used for football, keep fit, pistol shooting, judo, model railway club and various other uses.

The sound recordings, or at least the great majority of them, broadcast at these classes are said to be the copyright of the Claimant, Phonographic Performance Limited (PPL). PPL is the collective licensing body of record companies and owns or controls the performing and associated rights of the vast majority of commercially available sound recordings. PPL's ownership of the copyright to the recordings broadcast in the test cases is not formally admitted.

The issue before me today is whether the sound recordings broadcast at these events (and, indeed, it would seem to me to follow, at any events organised by the Defendant, other than one where the Defendant effectively subcontracts the event to another organisation and merely takes a fee from the organisation, which then runs and profits from the event) where the proceeds (after expenses) are retained by the Defendant, the Defendant can take advantage of Section 67 of the 1988 Act.

In my firm view, the answer to that question is in the negative. I accept that the word "organisation" is, shorn of any limiting context, capable of extending to a Local Authority; however, it appears to me that in the context of Section 67 it does not do so.

Section 67(1) and (2) have to be read together. There are, as I see it, two limiting factors inherent in those two subsections on the type of organisation contemplated by Section 67(1). The more uncontroversial and the more obvious is the express limitation in the second half of Section 67 (2)(a). I do not think, as a matter of normal language, that a reader of Section 67(1) would think that a Local Authority was an organisation whose "main objects are charitable or.....otherwise concerned with the advancement of religion, education or social welfare."

The advancement of education is irrelevant. I do not consider that the normal user of language would think of any of a Local Authority's functions, and certainly the Local Authority's functions viewed as a whole, as "charitable". No doubt one (but only one) of the main objects of a Local Authority could be said to be the advancement of education, but social welfare in the context of Section 67(2)(a) is, in my judgment, an inappropriate expression to apply to the functions of a Local Authority.

Secondly, there is a natural, albeit not spelt out, limitation from the fact that the word "organisation" in Section 67(1) is preceded by the words "clubs, societies or other". There seems little point in referring to "clubs" and "societies" if "organisation" is meant to have such a wide meaning as to include Local Authorities.

This can be said to involve an application of the so-called ejusdem generis rule. Lord Diplock explained this rule in Quazi -v- Quazi (1980) Appeal Cases 744 at 807-8 in these terms:

"As the Latin words with the label attached to it suggests, the rule applies to cut down the generality of the expression "other" only where it is preceded by a list of two or more expressions having more specific meaning, and sharing some common characteristics from which it is possible to recognise them as being species belonging to a single genus and to identify what the essential characteristics of that genus are. The presumption then is that the draftsman's mind was directed only to that genus and that he did not, by his addition of the word "other" to the list, intend to stray beyond its boundaries but merely to bring within the ambit of the enacting words those species which complete the genus but have been omitted from the preceding list either inadvertently or in the interests of brevity."

In the same case, Lord Scarman said at 824: "

If the legislative purpose of a statute is such that a statutory series should be read ejusdem generis, so be it, the rule is helpful; but, if it is not, the rule is more likely to defeat than to fulfil the purpose of the statute. The rule, like many other rules of statutory interpretation, is a useful servant but a bad master."

To a significant extent, my remarks so far can be said to be based on impression. It is often difficult for anyone, even a lawyer, to explain precisely why a specific set of words convey one meaning rather than another to him. Nonetheless, bearing in mind the points I have so far been discussing, the strong and clear impression I have is that a Local Authority is not within the scope of Section 67.

To explore this matter a little further, the two types of entity specified in Section 67(1), "clubs" and "societies", consist of individuals who could be said to be to an extent bound together in a common activity or enterprise, the nature of which is qualified by Section 67(2)(a).

A Local Authority is quite different: it is an entity with specific statutory duties and powers enabling it, indeed requiring it, to raise substantial sums of money and to provide administrative services and functions for a specified region.

Further, if the words "or other organizations" include Local Authorities, it appears to me that it would have a very wide ambit indeed; most, possibly virtually all, arms of National Government, Local Government, Quangos, Regional Health Trusts and so on, would appear all to be covered by the word "organization", if the Defendant's argument is correct. They could all be said to be "established for the purposes of social welfare", as that expression is explained on behalf of the Defendant.

I think it is most unlikely that the legislature can have intended to bring such a large number of different entities within the ambit of Section 67 simply by use of the words "or other organizations" after "clubs or societies". This is all the more so in light of the qualification in Section 67(2)(b). After all, the advancement of religion and the advancement of education are both classically charitable in nature - see Commissioners of Income Tax -v- Pemsel (1890) 1 A.C. 531 at 538. This suggests to me that the words after "charitable" in Section 67(2)(b) are intended to extend to activities which are quasi charitable in nature, especially in the light of the words "or are otherwise concerned with".

A more analytical consideration of the nature and function of a Local Authority appears to me to support this view. In Hazell -v- Hammersmith and Fulham London Borough Council (1992) 2 A.C., 1 at 22 A-F, Lord Templeman gave a helpful summary of the functions of a Local Authority. He said this: "

By the Local Government Act 1972 England was divided into local government areas consisting of counties, districts, London Boroughs and parishes. A Local Authority charged with the administration of local government in a Local Government area, consists of an elected council which "shall have all such functions as are vested in them by this Act or otherwise", and then he referred to certain sections of the 1972 Act. "A Local Authority, although democratically elected and representative of the area, is not a Sovereign body and can only do such things as are expressly or impliedly authorised by Parliament. The functions of a principal council.....as a county district or London Borough Council, extend under many statutes to public health, housing, planning, highways and other environmental matters, and to education, housing, social and welfare services, including the care and protection of children, the sick and the elderly. The expenditure incurred by a Local Authority in the discharge of its functions is funded partly by grants from Parliament derived from the taxpayer, partly by rates and community charges derived from local residents, and partly by income lawfully generated by the council in the due performance of some of its functions, for example, the rents from council houses. Authorised expenditure by a Local Authority may be short-term or long-term." He then goes on to deal in a little more detail with the source and applications of funds.

In effect, the function of a Local Authority is to carry out the administrative and governmental functions in respect of a specific area, to the extent that the legislature has thought it right to devolve these functions onto Local Government from National Government. Although there are features of that overall function which could be said to fall within one or more of the categories identified in Section 67(2)(a), it seems to me clear that, viewed as a whole, administration or government, whether local or national, does not fall within Section 67(2)(a).

Approaching the matter from a slightly different angle, I accept that it would be rash to pretend that one could comprehensively summarise all the "main objects" of a Local Authority. However, assisted, as I am, by the observations of Lord Templeman, it appears to me that its main objects would clearly include education, housing, social and welfare services, control of planning, maintenance of roads (which would include pavements and lighting) and licensing activities. Furthermore, I am of the view that it is clear that one of the main functions and objects of a Local Authority is to raise money by way of business rates and council tax payments under the provisions of the Local Government Finance Acts 1988 and 1992.

Mr. Roger Wyand Q.C., who appears with Mr. Ashley Roughton for the Defendant, argues that the "main objects" should be assessed by reference to the amounts spent by the Local Authority on its various functions, and that the evidence shows that the Defendant spends the great proportion, around 67 per cent, of its total expenditure on education and housing. Those, therefore, constitute its main objects; and those, he says, therefore fall within Section 67(2)(a).

I cannot accept that the main objects of any entity can be determined or judged by reference to what aspect of its functions the entity spends for the larger proportion of its expenditure. Certain important functions, which cannot, to my mind, sensibly be said to fall outside the main objects of a Local Authority, are planning control and raising money; yet, on the evidence I have heard from Mr. Brian Welsh, the Director of Finance of the Defendant, the amount spent on these two activities by the Defendant represents a pretty modest proportion of its total budget.

Mr. Wyand also argues that raising money is merely an ancillary function and therefore not a main object of a Local Authority. I cannot accept that. It is an essential function. Unless the Local Authority raises money, it cannot begin to comply with its other statutory obligations. Further, a substantial proportion of a Local Authority's revenues are paid to National Government. The fact that all or a substantial proportion of the aggregate sums collected from Local Authorities by National Government are then paid out to Local Authorities, in no way militates against this.

The conclusion I have reached is, as Miss Presiley Baxendale Q.C., who appears with Mr. Stephen Bate for PPL, says, supported by authority. While there is no directly helpful authority on Section 67 of the 1988 Act, or its statutory predecessor, Section 12(7)(b) of the Copyright Act 1956, there are cases on section 8(1)(a) of the Rating and Valuation (Miscellaneous Provisions) Act 1955 which, to my mind, throw light on the issue I have to decide.

That section (whose terms will seem familiar to anyone who has considered section 67(2)(a) of the 1988 Act) is in these terms:

"This section applies to.....any hereditament occupied for the purposes of an organization.....which is not established or conducted for profit and whose main objects are charitable or otherwise concerned with the advancements of religion, education or social welfare".

It is clear that in order to fall within this provision, all the main objects of an organization must satisfy that requirement; although, as Mr. Wyand says, provided each of the main objects satisfy one or more of the four requirements, charitable, religion, education or social welfare, set out in the relevant statutory provision, that is sufficient. In this connection, I would refer to what was said by Lord Justice Romer giving the judgment of the Court of Appeal in Berry -v- St. Marylebone Borough Council (1958) 1 Chancery 406 at 413-4, and to what Lord Denning said in National Deposit Friendly Society Trustees -v- Skegness Urban District Council (1959) A.C. 293 at 320.

It is relevant, also, to refer to Lord Justice Romer's observation as how to assess the main objects of The Theosophy Society in Berry and to what extent the affidavit evidence of Mrs. Berry was admissible on this topic. At (1958) Chancery 414-5, he said this:

"In our opinion, when an organizational body has a written constitution, it is to that, and to that alone, to which the court should normally resort in order to ascertain its objects for the purpose of Section 8 of the Act. And as Lord Buckmaster pointed out in Macaulay -v- O'Donnell (1943) Chancery 435 note: Unless an English word or phrase has, in relation to the organization, a special meaning, evidence as to its meaning is not properly admissible. The House of Lords would not formally reject the affidavit which had been filed in Macaulay -v- O'Donnell, explaining the word "nucleus" in the Society's first object , and we are willing to take note of what theosophy is, and what theosophists believe, as stated by Mrs. Berry in her affidavit. It would, however, be going too far, in our opinion, to accept as admissible, in so far as it is directed to the question of construction, evidence of how theosophists explain the meaning of their objects.....the interpretation of the object is a matter for the court and not for members of the Society."

It seems to me that the position is a fortiori where one is concerned, as here, with an entity such as a Local Authority whose functions are specified by statute. As was said by Lord Keith of Avonholm in General Nursing Council for England and Wales -v- Marylebone Borough Council (1959) A.C. 540 at 559(M):

"In my opinion, the only way by which the main objects of the Appellant Council can be ascertained is by looking at the objects as expressed in the Act. It is by the language used that Parliament has expressed its intention, and it is with the objects for which the Council was immediately and directly constituted that we are, in my opinion, concerned and not with the results of its activities at second or third hand."

Accordingly, the evidence of Mr. Marsden as to what he regards as the main functions of the Defendant, and the evidence of Mr. Welsh as to how the Defendant's expenditure was apportioned in 1998-9, is therefore not merely unhelpful, it is irrelevant. However, it is fair to say that it cast an interesting light on local government, and it set the case in a more helpful factual context than if I had not received their evidence.

The main thrust of Mr. Wyand's submission is that a Local Authority's main objective, when viewed as a composite whole, was "concerned with social welfare". I think that submission runs into difficulties, quite apart from those I have already mentioned, in light of the observations of the House of Lords as to the extent of that expression.

In the National Deposit case, Lord Keith of Avonholm said this at 311 to 312:

"I"f I may venture on a general observation, it is that the words 'or otherwise concerned with the advancement of religion, education or social welfare' indicate that the section is concerned with objects which are also the concern of charitable organizations but which, for some reason or other, may fail to come under the definition of 'charitable purposes' in the strictly legal sense."

"Some organizations prior to 1955 which were charitable, in the popular rather than in the legal sense, seem to have been given sympathetic assessments by rating authorities. On the other hand, the section shows that the objects of an organization need not be wholly charitable; it is sufficient if its main objects are charitable, but that leaves it open, if the main objects are not charitable in the legal sense, to say that they are concerned with the advancement of religion, education or social welfare. I attach some importance to the words 'concerned with the advancement of', as did also the Court of Appeal; these words import, I think, some limitation on the words which follow. It would have been very simple, otherwise, to have said 'are otherwise concerned with religion, education or social welfare'."

This was also reflected in what Lord Denning said in the same case at 321:

"The main objects which are 'otherwise' concerned, must, I think, be objects that are akin to charitable objects, have some kindred quality with charitable objects."

Further, it appears to me that the main thrust of Mr. Wyand's submission is similar to that of the unsuccessful Appellants in General Nursing Council, for the reasons summarised by Lord Keith of Avonholm at [1959] A.C. 561 to 563. At 561-2 he said this:

"The Appellants are established for the purpose of exercising statutory powers and carrying out statutory duties relating to the keeping of a Register of Nurses. If it be remembered that one of these duties is concerned with the training of nurses, in so far as the council has to prescribe courses of training and approve training institutions under Section 3 of the Act in order that nurses may achieve the standards of knowledge and experience necessary for admission to the Register or Roll.....We are not concerned with indirect consequences, nor entitled to speculate on what ultimate purposes, if any, Parliament had in view.....I have no doubt that the Act was of public benefit, as one must assume most legislation to be, but the question is: was what the Council was created to do, and does, charitable? I cannot hold that it was. It may be that at some distance more or less remote what it does redounds to the interests and benefits of the charitable organizations. So is it, when a benefactor does something for a charity; that does not create him a charity. The test of the matter, in my opinion, is to consider the content or character of the functions discharged by the Council and ask: are these charitable? I cannot hold that they are."

Lord Keith then turned to the question of social welfare. At the bottom of 562 and top of 563 he said this:

"The considerations which influenced me on the charitable aspect of the matter seem to me to be equally applicable here. However wide a meaning is given to 'social welfare' or to 'the advancement of social welfare', the objects or functions of the council, in my opinion, are not concerned with either.

"Mr. Justice Dankworth taking the view apparently that the council was established in the general public interest, held that it came within the subsection. 'It was not established', he said, 'as it seems to me, for the purpose of raising the professional status of the nurses, but for the purpose of creating a system of registration so as to prevent incompetent nurses being able to victimize the public, and for making sure that the public should receive services only of competent nurses. That seems to me to be the establishment of a body for the purpose of benefiting the public and therefore for the purposes, it seems to me, of social welfare'.

"But accepting the hypothesis on which he bases his conclusion" (and then these important words) "I cannot accept public benefit as a test of social welfare, although social welfare may be a public benefit, and the Appellant's counsel were not able to support this view of the learned Judge. I would accept the words of the Master of the Rolls where he says, (1958) Chancery 421, 434: 'It is not enough that the objects of the organization are in some degree related to the advancement of social welfare, they must in a real sense be directed to it.' For the reasons I have given, the objects of the Council are not, in my opinion, 'directed' to social welfare." Lord Morton of Henryton agreed - see at 555-6 - as did Lord Tucker - see at 556.

In my judgment, therefore, the contention on behalf of the Defendant fails. First, on a natural reading of Section 67, it does not seem to me that a Local Authority can be said sensibly to fall within the ambit of the section.

Secondly, if one looks at the consequences of the argument that a Local Authority falls within the section, it seems to me to give far too wide a meaning to other organizations.

Thirdly, application of "ejusdem generis" rule, remembering Lord Scarman's observation that it has to be applied with caution, appears to me to lead to the conclusion that I have indicated.

Fourthly, if one considers what a Local Authority does, its functions are essentially administrative and governmental and not within the ambit of any of the categories in Section 67(2)(a).

Fifthly, if one characterizes, more critically, the various functions of a Local Authority, it appears to me quite clear that many of those functions, perhaps most notably the raising of finance, the performance of planning control and maintaining of highways, do not sensibly fall within the ambit of any of the four categories in Section 67(2).

Lastly, it appears to me that the important guidance given by the Court of Appeal and the House of Lords on a similar provision, albeit in a different statutory context, show that the contention on behalf of the Defendant is wrong.

It is right to mention that Miss Baxendale also developed two other arguments. The first was on the report of the Gregory Committee, Command 866-2, October 1952, at Paragraphs 194 to 196, which led to the 1956 Act; and to the report of the Litford Committee, Command 6732, March 1977, Paragraphs 374 to 6. The second was on the Council Directive 92/100/EEC of November 1992.

She also raised, in her skeleton argument, the possibility of relying on Parliamentary debates, particularly Hansard Volume 493 at columns 1188 to 1189, and on Article 1 of the First Protocol to the Convention On Human Rights.

As I have reached a clear conclusion based on the arguments which I have, I hope, accurately summarised, I do not consider it necessary to consider further the assistance I might get from the two reports and the directive, or to invite argument on the Parliamentary material in Article 1 of the First Protocol.

In the event, for the reasons I have given, I determine the preliminary issue in favour of the Claimant.

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