England and Wales High Court (Chancery Division) Decisions

IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION

		Royal Courts of Justice Strand, London, WC2A 2LL
		5th July 2007

MR JUSTICE LEWISON:

1. Mercury Development Mortlake Limited, ("Mercury") is engaged in the development of a mixed residential and commercial site at Mortlake in South West London as the employer under a JCT design and build contract. The contractor appointed under the contract was John Coyle Contracts Limited, ("JCCL"). Mercury is now in administration and JCCL is in liquidation. The administrators want to sell the partly completed development and also, want to pass on to the buyer the right to use engineering and architectural drawings for the purpose of completing the development. It is common ground that copyright and drawings belonged originally to the engineers and architects concerned; Mason Nabarro Partnership Limited, the engineers, and Life Architecture Limited, the architects. It is also common ground that the copyright now belongs to Mr Coyle, subject to certain irrevocable licences that had been granted beforehand.
2. The issues between the parties have narrowed since the application was made. Mr Coyle's position is that the administrators are entitled to pass on to the buyer the right to use the drawings if, but only if, they are passed on under the umbrella of the JCT contract. The administrator's position is that they are entitled to pass on to a buyer the right to use the drawings free from any restriction contained in the JCT contract.
3. It is now also common ground that any licence to use the drawings contained in the JCT contract itself is limited to the carrying out of works under that contract. That licence is contained in clause 9.1(a) of the contract in the following terms:

"The contractor hereby grants with full title guarantee... ...to the employer an irrevocable royalty free licence to reproduce and make use of dimensions other work and design which had been or are hereafter written, originated, conceived or made by or on behalf of the contractor in the course of carrying out Works and in the event of determination by either party under clause 27, 28 or 28(a) to develop the same as may be necessary in the opinion of the employer to complete the Works."

The word "Works," which appears twice in that clause, is spelt with a capital W, and is the subject of a definition as follows:

"The Works to be designed and constructed by the contract under the contract, including any Works designed or constructed pursuant to any change and anything which would be inferred from the employer's requirements and the contractor's proposals by a diligent design and build contractor experienced in carrying out Works of a like nature to the Works."

Because of that limited definition of the Works, which ties the word to Works to be designed and constructed, "Under the contract," it is now accepted that the JCT contract itself does not entitle the administrators to do what they want to do.

4. Miss Toube, who appears on their behalf, says, however, that the irrevocable licences, which had previously been granted by the consultants to Mercury, are free-standing rights. Mr Aylwin, who appears on behalf of Mr Coyle says, on the contrary, that they are tied in to the JCT contract.
5. For practical purposes the various licences are the same. I propose to deal with the rival arguments by reference to the licence granted by Mason Nabarro Partnership Limited, who were the engineers. The agreement between Mason Nabarro Partnership Limited, Mercury and JCCL begins with two recitals in the following terms:

"(A) By the Contract (as hereinafter defined) the Building Contractor has appointed the Consultant to act in the capacity of Structural Engineer in relation to the Project (as hereinafter defined).

(B) The Client has engaged the Building Contractor to carry out the design and construction of the project and it is a condition of the Building Contract that the Consultant enter this deed."

The word "Project" is spelt with a capital P and the phrase "Building Contract" is spelt with a capital B and a capital C. Project is in turn defined by clause 1 of the agreement and it is:

"… the works a description of which is set out in Schedule 2."

Schedule 2 in turn speaks of:

"The design and construction of 12No.1 and 2 bedroom flats and one A2/B1 unit with basement car parking and the installation of associated services at the Property."

Schedule 3:

"The Property is 76 Lower Mortlake Road,Richmond, London TW9 2TJ."

Clause 8 of the agreement, which is the critical one for present purposes, contains the licence. It reads as follows:

"The Consultant grants to the Client an irrevocable royalty-free licence to use and reproduce for all purposes relating to the Project including construction completion reconstruction modification extension repair reinstatement refurbishment redevelopment maintenance use letting promotion and advertisement of the Project:

8.1 all plans designs drawings specifications models photographs calculations and other documents and materials and computer software and similar things ("Copyright Material") relating to the Project the rights in which at any time belong to the Consultant; and

8.2 all amendments and additions to the Copyright Material which are now or at any time during the course of the Consultant's engagement under the Contract prepared designed or drawn; and

8.3 all works designs and inventions of the Consultant incorporated or referred to in them; but

8.4 the Consultant shall have no liability to the extent that any Copyright Material is used for any purpose other than that for which it was originally prepared or otherwise authorised to be used pursuant to this Clause.

8.5 The licence granted in sub-clause 8.1 includes the right to grant sub-licences and is transferable without the consent of the Consultant PROVIDED that although such licence shall enable the Client or its appointee to copy and use the Copyright Material for the extension of the Project it shall not include a licence to reproduce the designs contained in them for any extension of the Project."

Clause 12 of the same agreement provided that the building contractor had joined in the deed to confirm its concurrence with the arrangements made and contemplated by it.

6. Mr Aylwin says that the description of the Works and the definition of the Project as, "Design and construction," necessarily ties the description to the JCT contract. He says, correctly, that only the contractor under that contract has the dual responsibility both to design and also to construct the development. He points to the fact that this licence is part of a carefully constructed contractual package and is part of a quadripartite arrangement between consultants, contractor, employer and funders. There is no doubt in the modern law that background plays an important part in the interpretation of contract, but background cannot be used to make a contract that the parties did not make for themselves.
7. I do not agree with Mr Aylwin's submission that the definition of the Project is tied to the JCT contract for the following reasons. First, the words used to describe the Project do not refer to the JCT contract at all. The agreement does contain a definition of building contract, which the parties, in fact, used whenever they wished to refer to the JCT contract. That definition finds no place in the definition of the Project. Second, an important part of the agreement was the grant by the engineers of the right to use engineering drawings, which would otherwise have been the subject of copyright. It would have been a matter of indifference to them what contractual arrangements were in place between the employer and the building contractor, so long as they themselves were paid. Third, Mercury were concerned to have the right to use the drawings. The list of specific purposes in clause 8 includes many that are nothing to do with the JCT contract, for example, use, letting, promotion and advertisement of the development and also, includes others which may only arise long after the JCT contract has ceased to exist, for example, repair, refurbishment and redevelopment. There is, in my judgment, no warrant for reading down the word Project in the context of that clause. Fourth, in addition, Mercury would have wished to have the right to use the drawings if, for whatever reason, the JCT contract were terminated or discharged by agreement. Lastly, the contractors themselves joined in the deed for the purpose of confirming their concurrence to the arrangements contained in it and did not link the licence to the JCT contract. I therefore hold that the definition of the Project does not tie the licence to the JCT contract and that it is therefore, a free-standing right.
8. The next question is whether the terms of the licence entitle the administrators to use the drawings for the purposes of a sale. There is a distinction here between use and copying. The law of copyright prevents copying. It does not prevent anything else. If the administrators have drawings in their possession then subject to the law of confidentiality, which no one suggests applies here, they can show the drawings to anyone they please, in the same way that I can allow you to read my copy of the latest Harry Potter novel. What you cannot do is copy it. If, therefore, the administrators simply wished to show the drawings to a buyer there is nothing in the law of copyright to prevent that. Moreover, the licence given by clause 8 is transferable without the need for the consultant's consent, so once a sale has taken place the administrators can transfer the licence. The buyer would then be entitled to use and reproduce the drawings for the purpose of the construction and completion of the development as the licence expressly permits. But what if, before the sale, the administrators want to copy the drawings to give to the buyer? The licence to reproduce the drawings is given:

"For all purposes relating to the Project."

In my judgment these words are wide enough despite the subsequent enumeration of specific purposes to permit the administrators to reproduce the drawings for the purpose of showing them to a prospective buyer or for facilitating the sale. I might add, although I do not rest my decision on this that, s.63 of the Copyright, Designs and Patents Act 1988 provides:

"It is not an infringement of copyright in an artistic work to copy it or to issue copies to the public for the purpose of advertising the sale of the work."

It is likely therefore, that the reproduction of the drawings in order to facilitate a sale would not have amounted to a breach of copyright anyway.

9. For those reasons I therefore hold that the administrators are entitled to the declaration that they seek.
COSTS JUDGMENT

MR JUSTICE LEWISON: Well I am not going to assess the costs summarily, because Mr Aylwin has not been given sufficient notice of the schedule, but the normal practice is to order an interim payment. The principle is that the administrator should not be kept out of money to which they are entitled and therefore, I must be satisfied that whatever interim amount I order will be one that they will recover on a detailed assessment. The hourly rate charged is, I think, on the high side. I do think that it is pertinent to look at the Respondent's schedule and in all the circumstances I propose to order an interim payment of £25,000 on the usual 14 days.

___________________