England and Wales High Court (Chancery Division) Decisions

IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION

		Royal Courts of Justice Strand London WC2A 2LL
		5 March 2014

1. MR STEPHEN SMITH QC: This is an application for a stay of proceedings issued on 9 September 2013 which allege breach of copyright. The claimant in the proceedings is the well-known company, Phonographic Performance Limited ("PPL") and the defendant is an individual named Simon Noel Raine. In the proceedings PPL claims an injunction to restrain Mr Raine from infringing copyright in what is described as the repertoire from the collection of recordings whose copyright rights are administered by PPL, and it also claims damages and other relief.
2. The claims for breach of copyright are, as I say, made against the individual, Mr Raine, but it is clear that throughout the time in which he has operated a number of nightclubs up and down the country, the operations at the clubs have been in the names of a number of different companies. It is pleaded that as regards the relevant companies Mr Raine was at the material times the sole shareholder and sole director. Whether that is right or not does not matter for the purposes of this application because it is accepted that Mr Raine was very closely associated with the relevant companies.
3. The claim, were it to proceed to a hearing of an outstanding application for judgment (which I shall mention in a moment) or to trial, raises interesting issues of the law of copyright and indeed company law.
4. There is some considerable history of disputes between PPL and companies connected with Mr Raine and indeed Mr Raine himself. As the position stood in the early part of 2013, it seems that Mr Raine's companies operated at least five nightclubs in the following venues: Birmingham, Leeds, Nottingham, Sheffield and Watford. At that time the clubs were operated in the name of Gatecrasher Clubs & Bars Limited, as regards the four clubs apart from the club in Watford, and as regards the Watford club the company was Late Night Watford Limited. As regards the license fees payable to PPL at that time, i.e. prior to August 2013, the companies had reached an agreement with PPL that the licence fees would be payable by instalments. However, cheques which were tendered in payment of the licence fees were not honoured and arrears arose. PPL's position is that when license fees payable by instalments are not paid, the licence fee has not been paid and the licence is terminated. Whether that is right or wrong on PPL's terms and conditions is not something that I am to consider today.
5. The Gatecrasher company which was operating the majority of the nightclubs changed its name to Tiptoptap Limited on 7 June 2013. Whether that was in connection with the financial difficulties which that company and the company operating the Watford club were facing at that time is not clear, but what is clear is that on 8 August 2013 both Tiptoptap Limited and Late Night Watford Limited entered administration. It is also clear that a number of the nightclub operations, which in some cases may have included the freehold on a long lease on premises and in other cases just licences, were purchased by at least two new companies from the administrator more or less straight away. The two relevant companies for present purposes are a company called Gatecrasher (Birmingham) Limited and The Right Scene Limited. The Right Scene Limited took up the operations at the nightclub in Watford. Gatecrasher (Birmingham) Limited took up the operations in several of the other venues.
6. On 18 September 2013 three applications were made to PPL for licences for the public use of sound recordings in three clubs. One of the applications was made by Gatecrasher (Birmingham) Limited in respect of a club in Birmingham, another was made by a company called GLM Trading Limited in respect of one or possibly two clubs in Nottingham and the third application was made by a company whose name was stated as Late Night Watford Trading Limited in respect of the club in Watford. It is accepted that the name of the company on the application in respect of the premises in Watford was incorrectly stated and it should just have said Late Night Watford Limited. It is that company which was subsequently renamed The Right Scene Limited. That is not the only error in the licence application regarding the Watford premises because in the applications the applicant was obliged to identify the date when it commenced playing recordings at the respective venues and in each case the date given was 2 August 2013, and it was also required to give an indication of the regular and occasional events which it foresaw would take place at the premises involving recordings over the course of the ensuing year (the licence was being granted on an annual basis). The information required to be given included the number of occasions the club was going to be used each year and on which days of the week, the hours of recorded use forecast for each event and the average attendance figures that were anticipated. As far as the Watford venue is concerned, the information provided was that the Watford club would be open on Mondays, Tuesdays and Wednesdays and not any other day of the week and that the Tuesday and Wednesday openings would be (a) more frequent (51 times throughout the year) and (b) of a much higher attendance record, so there were no occasional events identified. In fact the position is, and it is accepted on behalf of Mr Raine that this was a mistake, that the figures for Tuesday and Wednesday should not have appeared in those columns at all and should instead have identified that the club was going to be used to the extent specified on Fridays and Saturdays, not Tuesdays and Wednesdays, and in the occasional events column there should have been an indication that on occasional Wednesdays the club was going to be open to gay and lesbian customers.
7. Those applications, as I say, were dated 18 September 2013 and were responded to by at least one telephone conversation on 23 September 2013 when the applicants through Mr Garden of the Wilkes Partnership, who instructs counsel to represent Mr Raine at this hearing, was party to a telephone conversation in which it was indicated to him that none of the licences would be granted because of their connection with Mr Raine unless "the past was dealt with". That reference was a reference to the fact that because of the administration, and indeed with more general concerns about the quality of the declarations of usage which had been provided by Mr Raine's companies, PPL asserted that money was due from the companies that had entered into administration and indicated that more money may be due because there had been significant underdeclarations by the companies of likely usage of the relevant clubs.
8. That telephone conversation was followed up in particular by a letter from Mr Gilmore on behalf of Hamlins for PPL to Mr Garden dated 2 October 2013, where Mr Gilmore made a number of points on behalf of PPL, one of which was the outstanding fees which because the companies were in administration were unlikely to be paid. Another was what Mr Gilmore described as the substantial underdeclarations of usage that had been included on the applications and he gave detailed reasons as to why he said there were underdeclarations. He asserted that there was no licence in place for any of the premises because any false declaration would automatically terminate any licences which had previously been granted, and he attached a schedule of sums due to PPL asserting that the balance outstanding was some £26,000-odd which would be required to be paid before any licence was granted, and said that PPL was looking for security to be provided in respect of licence fees going forward and accurate declarations to be provided in respect of the relevant premises, concluding by requesting the cessation of music performance at the various venues until agreement had been reached on the various points which were raised.
9. Agreement was not reached on any of the points raised. The performances of music did not cease, therefore these proceedings were issued. They were issued against Mr Raine only, as I have indicated, and no interlocutory injunctive relief was sought against him. However, on 14 November 2013 PPL issued an application notice seeking an order that Mr Raine's defence to the claim of infringement of copyright by him be struck out on the grounds that it disclosed no reasonable grounds for defending the claim and is an abuse of the process of the court; alternatively, there be summary judgment for the claimant in return for a draft order attached which contained an injunction and also an enquiry as to damages.
10. The application for summary judgment came before Peter Smith J in the Applications Court on 5 December 2013 when it was adjourned by consent to be fixed through the usual channels, which order resulted in it being fixed to come on before me today. That order, which also laid down a timetable for evidence, was an order made by consent in appreciation that there was very little time in the Applications Court for the parties to air the various points they wished to air on the application.
11. My attention has been drawn by counsel for PPL to a statement made by counsel for Mr Raine in his skeleton argument for that hearing. Counsel wrote as follows in that skeleton argument under the heading "Application to Copyright Tribunal":

"The real dispute in this case is not between C and D; it is between C and the three new companies, which have applied to C for a licence and tendered payment, but have been met with C's refusal to grant the same. If the three new companies are entitled to a licence, as they claim, there is no basis for the claim for an injunction … The proper course is for the three companies to refer the matter to the Copyright Tribunal for its determination and for these proceedings to be stayed in the meantime (so as not to prejudge the outcome) [Reference is then made to the case of Phonographic Performance Limited v Maitra [1998] 1 WLR 870, a decision of the Court of Appeal] ... The three companies have now been advised that this is the appropriate course and will be issuing an application to the Copyright Tribunal."

12. That did not occur forthwith. The application for summary judgment, as I say, was fixed for hearing today, I imagine some not inconsiderable time ago, but it was not until last Friday, 28 February 2014, that application was made to the Copyright Tribunal as foreshadowed by counsel in his skeleton argument of early December last year, and counsel for PPL informed me that he did not actually see that application until Monday of this week. That is a little over 48 hours ago. There is no good explanation for why the application to the Copyright Tribunal was left until such a late stage.
13. There were in fact two applications to the Copyright Tribunal dated 28 February 2014, one in the name of Gatecrasher (Birmingham) Limited and one in the name of The Right Scene Limited, and the basis of both was the same. It was an application under section 121 of the Copyright, Designs and Patents Act 1988, which recited that the company applicant had duly applied to PPL for a public performance licence for the year commencing 2 August 2013 and tendered the payment for the applicable licence fee and was therefore entitled to the grant of a licence; however, PPL had refused to grant the company a licence, and had failed to do so within a reasonable time, and had sought to impose preconditions for the grant of a licence which were unreasonable and extended beyond PPL's standard terms and conditions, being imposed for an improper collateral purpose and constituting an abuse of PPL's power, causing a monopoly position; the applications concluded by saying that the company was therefore entitled under section 121 to apply to the Tribunal for an order declaring that it is entitled to a licence on PPL's standard terms and conditions for the year commencing 2 August 2013 or under such other terms as the Tribunal finds to be reasonable in the circumstances.
14. As I say, the applications were made in similar terms, in fact probably identical, which is unfortunate at least so far as The Right Scene company is concerned because the statement of grounds for that company's application state that it carries on business in premises in Birmingham, whereas it should have said that it carries on business in premises in Watford. It is obvious that it was not only a late application, but also that it was a rushed application and was not given the amount of attention that an application made at a more leisurely pace would presumably have received. As I say, no good explanation for the lateness of the application has been given to me. If it is to go forward then it would seem as though, certainly so far as The Right Scene is concerned, there is going to have to be an application to amend the statement of grounds.
15. Nonetheless, it is clear that the intention is to ask the Tribunal not only to declare that the company is entitled to a licence but also to declare that it was entitled to a licence as from 3 August 2013, and if that were right and the Tribunal acceded to the application and made a declaration or, even better for the company, granted a licence from that date or directed that one be granted, then it would follow that none of the companies could be found to have acted in breach of copyright after that date. And if that were right, then there would be no foundation for an injunction against Mr Raine based on the fact that he had authorised or procured a breach of copyright by either or both of those companies after that date.
16. When I enquired of counsel whether it was clear that there was a power in the Copyright Tribunal to make as it were a retrospective grant of a licence, or a retrospective declaration of entitlement to a licence, to the companies, counsel for PPL very fairly responded that he did not accept that there was such a power but since the matter had arisen at such a late juncture he had not had sufficient time to be able to address me on the point and wished to reserve this position. That was a sensible course for him to follow in the circumstances. In the light of that, not having been impressed on the point by either side, I assume that the Tribunal would have that jurisdiction.
17. In the light of that, counsel for Mr Raine says that since the relief if granted by the Tribunal would have such a significant effect on the claims of PPL in these proceedings, then the right course is for me to grant a stay of these proceedings to await the outcome of the proceedings before the Copyright Tribunal. In that context counsel referred to the Maitra case, which was of course the case where the Court of Appeal was considering whether PPL could legitimately require late payment of fees in respect of a previous licence before it was prepared to grant a new licence, and the decision was that it could. That was a case which was different from the case before me in that the applicant for a licence in that case was the same individual as had accrued arrears in the previous licence period. So the actual decision is of no relevance on the question of whether or not a stay should be granted. If it is relevant at all it is more relevant to the question of the correctness or otherwise of PPL's desire to impose conditions and the conditions it has imposed on the companies' outstanding applications for licences. However, during the course of his judgment, at the beginning of page 877, Lord Woolf MR said this:

"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 [Copyright Act] l956 and [the Copyright, Designs and Patents Act 1988]. 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 [leading counsel for PPL on that occasion] 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."

18. It appears from that passage that either the defendant in that case had argued, or the court itself had put to counsel for PPL, that a judge in a position such as the one I am placed in would have jurisdiction to and could properly stay an action on terms in the event of a relevant issue being referred to the Tribunal and counsel for PPL had so conceded (and properly conceded) that it would be proper for a judge to take that course if he saw fit.
19. Mr Harbottle, counsel for PPL, submitted that the court was not obliged to grant a stay in the situation in which I find myself and the situation contemplated by Lord Woolf in the Maitra case. I agree wholeheartedly with Mr Harbottle. I certainly do not feel obliged to grant a stay. I have a discretion whether or not to grant a stay.
20. Mr Harbottle raised four points as to why he said I should exercise my discretion against granting the stay which Mr Francis, counsel for Mr Raine, has applied. First of all, he submitted that the court had power to resolve the issue of whether the licencing conditions which PPL sought to impose were an abuse of PPL's dominant position and award damages in the event that it found that there was an abuse of that position. That may or may not be right. I would need to have further argument on the point to resolve the question. I have of course borne in mind the decision of Whitford J in PPL v Grosvenor Leisure [1984] FSR 24, where Whitford J, when faced with a claim by an applicant for a licence that PPL had abused its dominant position, was nonetheless prepared to grant judgment against the complainant of an abuse of dominant position on the basis that there were other established channels for the resolution of disputes between copyright owners. However, it seems to me that the resolution of whether or not there should be an award of damages for abuse of a dominant position is only part of the overall dispute between the parties and one thing which I have not been addressed on, and presently do not accept I can do, is make the sort of order under section 121(4) of the 1988 Act which is within the power of the Tribunal in connection with declarations of entitlement to licence and the terms of any such licence. That, it seems to me, is likely to be something which only the Tribunal can do, and in any event I have not been addressed on the issues arising on such an application and it would seem to me that quite a lot more would need to be done in terms of the parties' pleadings and submissions and preparation of evidence before the court could begin to entertain the argument if it had jurisdiction to do so.
21. So Imoveon to Mr Harbottle's second point, which was that there is no merit in the application to the Tribunal. Save for two points, I do not propose to deal in detail with the points made by Mr Harbottle in that regard. It seems to me that those are points which should be aired if at all before the Tribunal, and nothing I say or have already said in this judgment should imply that PPL should not be at liberty, if they consider it appropriate, to apply to the Tribunal to strike out the application. I am not encouraging them to do that but I am not intending to limit any rights that they may have in that regard. The two points I will address are that Mr Harbottle did refer to the rather slipshod way in which the application for the licence was made and the fact there was on any footing an underdeclaration of usage, at least as regards the occasional Wednesday night usage, and a misleading description of when the club would be open, because it said it would be open on Tuesday and Wednesday instead of regularly on Friday and Saturday, and that was indicative of the fact that inadequate and/or misleading information was provided which justified PPL in taking the course it did. Mr Francis's response on behalf of Mr Raine was that that was just a mistake and they accept that that was just a mistake. It would have been advisable I think if that mistake had been explained as a mistake as well as the inaccurate naming of the company in the application form in the grounds which were put before the Tribunal but no doubt that will be done when the grounds are amended.
22. The other point which Mr Harbottle made under this head is that the timing of this application is extremely late. The application for a stay itself is dated 28 February, not surprisingly the same date as the application to the Copyright Tribunal, and has occurred long after Mr Francis indicated in his skeleton argument to Peter Smith J that an application to the Tribunal would be made. I agree with all of that. It is lamentable that it was left to such a late stage after it was foreshadowed, but it has now been made. Mr. Raine was not, strictly speaking, obliged to make the application earlier but his lateness may have some consequences so far as costs are concerned. Otherwise I do not believe there is any real prejudice suffered by the society by the lateness of the application so I do not propose to refuse the stay for that reason.
23. The third point made by Mr Harbottle was the likely effect of a stay on the proceedings: how long is it likely to take before the Copyright Tribunal determines the application by the company? No one can tell me. In fact, I rather got the impression from the way counsel have dealt with and reacted to the application that this application, if not unique, is very rare, and it may be that as far as the Tribunal is concerned it cuts new ground. As I say, Mr Harbottle has reserved the position as to whether or not the Tribunal has jurisdiction to backdate any licence which it finds should have been or should be granted to the companies. Again, it does not appear as though there is any clear guidance in any authorities on that point.
24. This aspect of Mr Harbottle's submissions has caused me some considerable concern because it does appear to me that it could be many months if not longer before the application to the Tribunal is resolved, and that may have a number of consequences. One consequence could be that the licence fees which will be payable, or the damages for infringement if no licence is granted, will not be paid until the resolution of the Tribunal proceedings, at least for the period of this licence which, if it is eventually granted, will last until August 2014, and there is a chance that as happened in 2013 the companies may enter into administration or some other insolvency process towards the end of the period and leave PPL high and dry. That point, it seems to me, however, can be addressed by appropriate terms being imposed for the purposes of a stay. Lord Woolf recognised that it could be appropriate to impose terms if any stay were granted and it seems to me a stay requiring security to be given in respect of any such payments would meet Mr Harbottle's concerns in that regard.
25. Mr Harbottle also raised in this connection the question of whether Mr Raine would be bound by a determination of the Tribunal on the application by the companies. Whether he would or whether he would not, Mr Harbottle rightly says PPL should not be exposed to the uncertainty and Mr Francis for Mr Raine has subsequently confirmed that Mr Raine will undertake to be bound by the determination on the application by the companies.
26. Fourthly, there is the question of costs and Mr Harbottle referred to an element of duplication of costs. I think, however, that questions of costs can be dealt with either by an award of security for costs, for which Mr Harbottle is now pressing, and/or by an award of costs in connection with the application for a stay, so I do not consider costs issues to be a reason for not making the order if such an order is otherwise the appropriate treatment to make.
27. I do think that it is appropriate to stay these proceedings pending the outcome of the proceedings before the Tribunal for the reasons given by Mr Francis which I have already adumbrated. It strikes me that to proceed against Mr Raine now as a joint tortfeasor or otherwise for infringements of copyright committed in the names of the companies, when in however many months' time it is possible that the Tribunal will declare that there was not any infringement because of a backdated licence it grants or a declaration of retrospective entitlement, would not be sensible and, subject to trying to protect the interests of PPL in the meantime as best one can by imposing terms on the stay, that it is appropriate to make an order staying the proceedings.
28. Therefore I do propose to grant a stay of these proceedings on the following terms:

(1) the companies are to give an undertaking to the court to prosecute the Tribunal proceedings with all reasonable expedition;

(2) Mr Raine is to undertake to the court (i) that he will take all steps within his power to ensure that the companies prosecute the proceedings with all reasonable expedition and (ii) that he will be bound by the findings of the Tribunal in those proceedings;

(3) that the companies are to provide security in respect of the claim of infringement asserted by PPL, the security to take the form of a payment into the court.

29. The amount of the security was the subject of some debate between counsel and the court. Mr Francis suggested that the appropriate figure was no more than £14,000. Mr Harbottle said that the appropriate figure was £41,000. I think I can do no more, really, on the state of the evidence and argument that I have heard, than stick my finger somewhere between the two and I am going to order security in the sum of £25,000 to be paid into court within 14 days (I say within 14 days but I will hear Mr Francis on whether, because the figure is higher than the one that he was proposing, Mr. Raine needs longer than 14 days).
30. The companies, I understand, are also agreeable to confirming the truth of the contents of any form of application for future licences in a witness statement and I think it appropriate in those circumstances that they undertake to do so. Mr Raine, as I understand it, is agreeable that a similar process is gone through in respect of any licences for any new clubs which are proposed to be opened or operated by any other company in which he is interested. The two companies which are the applicants in the Tribunal proceedings are also prepared to undertake to use their actual current figures when applying for new licences in the new licencing round with effect from, I imagine, 3 August 2014, and that should also be embodied in the undertakings.
31. The final point which I will rule on in a moment is whether or not, if I make any order for costs for immediate payment by Mr Raine, compliance with that order should also be a condition of the stay. As I have not heard any argument yet on whether any order for costs should be made, it is quite inappropriate for me to address that point so I will revert to that after I have heard counsel.
32. Finally I should say that there should be liberty to PPL to apply to lift the stay in the event of material non-compliance with any of the conditions or in the event of the determination, however that comes about, of the Tribunal proceedings, or on the usual basis on showing material change of circumstance.