England and Wales Patents County Court

IN THE PATENTS COUNTY COURT

		No PAT08045. St. Dunstan's House Fetter Lane, London EC4 1HD
		9th June 2011

JUDGE BIRSS:

1. Derek Wadsworth was the composer of the music used in the second series of the 1970s British science fiction television series, Space 1999. The series was made by Gerry Anderson and produced by the ATV Group of companies.
2. As is commonly done in this industry, Mr. Wadsworth assigned his copyright in the music to a music publishing company, in this case a company in the ATV Group called ATV Music. In return the assignee was to pay Mr. Wadsworth 50% of the royalties they received for the exploitation of the work. Today, the successor of ATV Music is Sony ATV Music ("Sony Music"). It is the owner of the music copyright and is obliged by contract to pay 50% of the royalties it receives to Mr. Wadsworth. Sadly Mr. Wadsworth himself died on 3rd December 2008 and the royalties are now due to his children Mary Wadsworth and Max Wadsworth.
3. Over the years the television series has been exploited by being broadcast in various countries in the world and by selling DVDs and the like. This should have generated substantial royalties for Mr. Wadsworth. Mr. Wadsworth was convinced that he was being systematically underpaid. He took it up with Sony Music. They say they have paid everything they owe, that is to say, they have paid him 50% of all that they have received. So the explanation must be they have not been receiving everything that Mr. Wadsworth thinks they should have.
4. I will interpolate at this point to mention that there are other elements in play in this case in relation to the manner in which royalties should be collected and received relating to the collecting societies, in the United Kingdom the MCPS and the PRS, but I will leave those to one side because, in my judgment, having regard to my decision in this case, they do not need to be considered in detail at this stage.
5. Exploitation of the television series was done by a different part of the ATV Group, but following a corporate restructuring some years ago that bit was separated from ATV Music. Today, the companies which exploit the television series are the Granada companies who are the defendants in this case. They are part of the ITV Group. There is an issue which I can leave to one side for the moment about whether in fact the copyright in the television programme is owned by a third company in the ITV Group, ITC, but that does not matter for today.
6. Derek Wadsworth's position was that he was being told by his publisher that they were not at fault. So the explanation for the systematic problem must lie elsewhere. In particular, it would appear perhaps that the defendants were at fault. So a claim form was issued in February 2007. It names the Granada companies as the defendants. The defendants say the claim is misconceived. They say there is no privity of contract between them and the claimant. Thus, they contend no duty of care arises, there can in fact be no claim, and they apply to strike the matter out.
7. It came before my predecessor His Honour Judge Fysh QC in October 2008. At that point also the claimant applied for disclosure. At that hearing the court decided to adjourn both applications generally and made an order for disclosure, essentially I understand on a Norwich Pharmacal basis, ordering Granada to disclose the licences that it had granted in relation to the television series between 2002 and 2008. That was done.
8. On 1st December 2008 the claimant's solicitors wrote a lengthy letter to the defendants asking a number of questions arising from the information they had received. Sadly, as I have said before, on 3rd December 2008 Derek Wadsworth died. Nothing happened for two years until about October 2010 when the court made an order to substitute Mary and Max Wadsworth for their now deceased father. The defendants restored their application to strike the matter out and it was listed before me today on 9th June 2011. On 27th May the claimant made an application for the defendants to answer the questions in the 1st December 2008 letter.
9. So I have before me an action which is barely passed the pleading stage after nearly four years. It is entirely understandable why Mary and Max Wadsworth had to deal with the tragic death of their father, but it is fair to say that a four-year delay in a case of this kind does no one any favours. However, this is not the time or the occasion to seek to attribute blame for the way in which the proceedings have got to the state they are in. I have to deal with them as they appear before me.
10. Mr. Cullen, who appears for the defendants instructed by Olswang, submits that the court should grasp the nettle in this case. In my judgment, he is right about that.
11. There was an argument that the defendants had been in breach of the order of my predecessor, but during the course of the hearing it became clear that there was no serious breach of the order. It is possible that two licences exist or existed which should have been disclosed by the defendants but have not been. However the point only arose two weeks ago, the two licences have been looked for and they have not been found. Mr. Hamer for the claimant, instructed by the solicitors Devereux, does not take a point about the breach any more.
12. Mr. Cullen submits the case is hopeless and should be struck out. Mr. Hamer submits the real problem is still a lack of proper information. He says the case should not be struck out. There should be further disclosure. He wants time to consider joining Sony Music either as co-claimant or a defendant. There is also the matter of ITC, but that, as I have said already, should not affect the position.
13. What is the way forward? I will deal with the strikeout first. What are the facts? As Mr. Hamer says, exactly what the facts precisely are is not clear, but, in my judgment, one can test the claimant's case in the following circumstances, again leaving to one side the question of PRS and MCPS for now. Realistically the facts must be one of two possibilities.
14. One possibility is that Granada (and I say "Granada" referring to the two defendants, it does not matter for this purpose which it is) has a licence from Sony Music in relation to the music and therefore when they grant licences for the exploitation of the television programme they are able to confirm to their licensees that clearance has already been obtained in relation to the music copyright. It does seem to me that this is highly likely to be the case. I say that because of the information we have already received. Just as a simple example, on 30th March 2000 the Granada companies granted a licence to International Media Limited and Toho Kabushiki Film Corporation (that I should say is No. 2 of a list which appears at page 163 at tab 4 of the Olswang bundle in this case). The licence has a clause 5.2 in it which states that all the music contained in the product (the product of course being the television series) has been cleared to permit the manufacture, sale and lending of the videogrammes of the product, and no further payments by a licensee had been required in this respect. In other words, when Granada are licensing the licensee, the licensee is not obliged to pay any further royalties for the music copyright, because the licence they receive tells them that the clearance has been obtained and that clearance would have been clearance from Sony Music. That is why, in my judgment, it seems highly likely that there is indeed at least one, if not many, contracts or licences between Granada and Sony Music. That is one possibility.
15. The other possibility is that Granada has not cleared the rights from Sony Music. In which case in the example I have just given, that would mean that the licensee, although they appear to have been authorised, would in fact be committing infringements of Sony Music's copyright. Indeed, it would also mean, probably, that Granada themselves would be committing the tort of copyright infringement by authorising someone to make copies when in fact they have no right to do so. As I say, in my judgment, it is more likely that the former is the case than the latter, but each at least is a logical possibility.
16. The case is pleaded in three ways. The key to the claimant's case, in my judgment, is paragraph (11) of the particulars of claim which states as follows:

"The programme owner [in other words, essentially for now the defendants] has at all times been under a duty to those with a beneficial interest in the copyrights aforesaid, including, in particular, the claimant and the publisher (a) to obtain a licence under the copyright in the Space 1999 music in respect of its exploitation thereof, i.e., for every licence granted by it it must obtain a corresponding licence from the publisher; (b) to give the said parties directly or alternatively indirectly through the publisher full particulars of such licences; (c) to collect and account to the publisher for all sums payable to the publisher under the said licence (including the claimant's share)."

17. I should say, first of all, that the pleading refers to a beneficial interest in the copyright which, it appears to be contending, is held by the claimant. In my judgment, as Mr. Cullen submitted, the claimant does not have a beneficial interest in the copyright. However, Mr. Hamer in argument submitted that what it really meant was that his client had a benefit or a beneficial interest under the copyright, in other words, it is referring to the claimant's right to obtain a 50% royalty from Sony Music. If that is what it means then it is right, although I do think that the language, for what it is worth, is not the best language to use. It is absolutely clear that the claimants do not have a beneficial interest in the copyright in this case. However, that is not the real problem with paragraph (11).
18. Mr. Cullen's major point is that this is pleaded as a tort. He also refers to paragraph (18) which refers back to paragraph (11) and uses the expression "aforesaid duty of care". It is clear, as I understand it, that the "aforesaid duty of care" is the duty pleaded in paragraph (11). Paragraph (18) also uses the word "negligence". So Mr. Cullen says this is a claim pleaded as a duty of care and in negligence. That is the first way in which the case is put.
19. The second way, which is also in paragraph (18), is that the defendants are said to owe a fiduciary duty to the claimants, and the third way, in paragraph (20) of the Particulars of Claim, is to say that the claimants have rights as a result of the Contracts (Rights of Third Parties) Act 1999. This is said to give the claimants the ability to enforce the contracts between Sony Music and Granada for their (the claimants') benefit.
20. Dealing with each of these in turn, first of all the negligence and duty of care. Mr. Cullen submits there is no such tortious duty of care. His principal authority is White v. Jones [1995] 2 AC 207, a decision of the House of Lords. Mr. Cullen refers me to the speech of Lord Browne-Wilkinson, in particular at page 274, and it is the passage starting just below E over to the top of the next page, the first two lines on page 275, as follows:

"Let me now seek to bring together these various strands so far as is necessary for the purposes of this case: I am not purporting to give any comprehensive statement of this aspect of the law. The law of England does not impose any general duty of care to avoid negligent misstatements or to avoid causing pure economic loss even if economic damage to the plaintiff was foreseeable. However, such a duty of care will arise if there is a special relationship between the parties. Although the categories of cases in which such special relationship can be held to exist are not closed, as yet only two categories have been identified, viz. (1) where there is a fiduciary relationship and (2) where the defendant has voluntarily answered a question or tenders skilled advice or services in circumstances where he knows or ought to know that an identified plaintiff will rely on his answers or advice. In both these categories the special relationship is created by the defendant voluntarily assuming to act in the matter by involving himself in the plaintiff's affairs or by choosing to speak. If he does so assume to act or speak he is said to have assumed responsibility for carrying through the matter he has entered upon. In the words of Lord Reid in Hedley Byrne [1964] AC 465 , 486 he has "accepted a relationship . . . which requires him to exercise such care as the circumstances require," i.e. although the extent of the duty will vary from category to category, some duty of care arises from the special relationship. Such relationship can arise even though the defendant has acted in the plaintiff's affairs pursuant to a contract with a third party.

21. The passage refers to the need for a special relationship between the parties in order for a duty of care to arise, and Mr. Cullen drew that to my attention. Mr. Cullen also referred me briefly (or perhaps to be more accurate I think I may have referred him) to the speech of Lord Goff in the same case, and the reference to an assumption of responsibility by the party who is said to owe a duty of care to the claimant. Mr. Cullen submits that it is clear from what Lord Browne-Wilkinson said, and from the case as a whole, that although the categories in which a tortious duty may be found in a case like this are not closed, nevertheless, the two examples given and the general requirement for a special relationship mean that there is no prospect of a duty of care being established in this case.
22. He says particularly if there was a negligence duty of care in this case it would create all sorts of problems. It would be entirely novel in the sense that it would overlay the law of negligence on top of the law of copyright and create a whole new species of legal liability. It would allow people who are not the owners of copyright essentially to recover for copyright infringement. He submits that that is one among many reasons why it cannot be right. He also submits that it would create the possibility of double recovery, because it would mean that Mr. Wadsworth had a claim directly for damages against Granada and that Granada would still owe a debt to Sony Music.
23. Mr. Hamer's submission essentially is to say that if one considers the facts as they must be in this case, somehow or other the money which is supposed to be for Mr. Wadsworth is going astray and has been systematically doing so for years. There is a wrong being committed and there must be a remedy.
24. In my judgment, Mr. Cullen is right. As pleaded, in my judgment, there is not and cannot be a negligence duty of care owed by Granada to Mr. Wadsworth whereby Granada could conceivably owe Mr. Wadsworth damages for breach of that duty of care. I would also say that it seems to me no further amendment, or information from the defendants which could lead to an amendment, could ever overcome that. As a matter of law, I find that the authority of White v. Jones means that I should strike out the claim for negligence and the duty of care.
25. The next question is what to do about the Contracts (Rights of Third Parties) Act 1999. Section 1 (1), (2) and (3) of that Act provide as follows:

1. (1) Subject to the provisions of this Act, a person who is not a party to a contract (a third party) may on his own right enforce a term of a contract if-

(a) the contract expressly provides that he may, or

(b), subject to subsection (2), the term purports to confer a benefit on him.

(2) Subsection 1(b) does not apply if on a proper construction of the contract it appears that parties did not intend the term to be enforceable by the third party.

(3) The third party must be expressly identified in the contract by name, as a member of a class or as answering a particular description but need not be in existence when the contract was entered into.

26. There are further sections in the Act but they are not material to the issue arising today. One other important matter is that the Act only applies to contracts coming into existence after a certain date, the precise date does not matter, but it is six months after it came into force in 1999.
27. Mr. Hamer says that Mr. Wadsworth ought to be able to use the Act to compel Granada to pay the royalties to Sony Music. That would then mean that Sony Music had received money which they accept 50% of which they should be giving to Mr. Wadsworth or his children. The problem, says Mr. Cullen, is section 1(3) which requires that the contract must either expressly identify the third party by name or as a member of a class or as answering a description.
28. Mr. Cullen submits that no conceivable contract between his clients and Sony Music could ever satisfy subsection (3) in this case. In my judgment, it is impossible to say that without seeing the contract. It seems to me that the only way to apply the Act would be to see the contract or contracts which are between Sony Music and Granada. Without seeing them, I should not strike out this part of the case. That does not mean, of course, that in the end the case may not turn out to be a bad one. However, it would be quite wrong to apply this statute in the manner Mr. Cullen submits by simply saying that no conceivable contract could possibly satisfy it.
29. I entirely understand why it is that Mr. Cullen says that no conceivable contract could satisfy the Act but in my judgment he is not right. It is a strong submission to make, but it seems to me that there are a number of conceivable contracts which could, I suppose, satisfy the Act. At the end of the day, it seems to me the right way to apply the Act to a contract is to have the contract and all the relevant circumstances before the court in order to decide whether the Act applies to it. What I should do, therefore, in that respect is order disclosure specifically related to those contracts.
30. The final matter is the fiduciary duty. There is no dispute in general terms that the publisher in a case like this may well owe a fiduciary duty to an artist such as Mr. Wadsworth, or in this case his successors. That is based on the case that was mentioned in argument briefly, the Elton John case, John v. James [1991] FSR 397. So it may well be in this case that a fiduciary duty is owed by Sony Music to Mr. Wadsworth or his successors. However I cannot see how a fiduciary duty could extend to Granada in the manner it is pleaded in the particulars of claim.
31. In my judgment, the fiduciary duty claim against Granada as pleaded is unsustainable. However, I should say this. Unlike the negligence claim, I do not say that a fiduciary duty could never arise. I should make it clear that is not an encouragement to the claimants whatsoever, I frankly very much doubt it, but, unlike the negligence claim, I am not prepared to say in this case that I cannot imagine facts that could ever support it. We simply do not know. Nevertheless, as pleaded it seems to me the fiduciary duty claim is bad. The facts pleaded do not, in my judgment, give rise to a fiduciary duty.
32. The way forward: It seems to me that Sony Music are a necessary party to this case. They should either be joined as a claimant or a defendant. I have not heard from Sony Music, but it seems to me that much of the claimants' case is in fact a case that Sony Music have either failed to pay royalties they should have paid or failed to bring in royalties from Granada they should have brought in. I make it clear that I am making no finding about that. Simply, as I say, the way the claimants put their case to me seems to me to amount to a submission of that kind.
33. It also seems to me, as I have said already, that disclosure should be given of the clearance contracts between Granada and Sony Music. In my judgment, that is the right thing to do certainly given the fact that I have not struck out the Contracts (Rights of Third Parties) Act part of the claim. It is also a proper exercise of the Norwich Pharmacal jurisdiction. In my judgment, Granada does owe the claimants a duty in this case. It is a duty to assist. That is what Norwich Pharmacal is all about. It has been put in argument that Norwich Pharmacal is a case about identifying the wrongdoer. The wrongdoer may be Sony Music or it may be Sony Music and Granada or it may be Granada alone. If it is Granada alone Mr. Wadsworth's rights or the rights now held by his beneficiaries may be very limited indeed, but, in my judgment, this is not a case where I should strike out the whole of this claim at this stage.
34. Before I hear the parties I will also say this. From now on there will be a tight timetable and I will appoint a further review hearing, a case management conference if you will, on a certain date in the future. By that hearing the disclosure that I am going to order should be given. There should be fresh form of the Particulars of Claim, and there should be the ability to hear the application to join Sony Music into this case one way or the other if that has not been agreed.
35. Accordingly, in summary, I will strike out what I will call a substantial part of the Particulars of Claim, but not all of it. I will make an order for disclosure and I will hear from the parties.

LATER

36. It falls to me to decide what to do about costs. I should say, first of all, one thing I am not going to do is decide it on the basis of whether the letter of 1st December did or did not ask for various documents. Mr. Cullen says he has been substantially successful and should have an order for costs in his favour. Mr. Hamer says the matter will come back in October and the matter can be reviewed then properly.
37. In my judgment, in all the circumstances of this case, having regard to the way in which this case has been going for so long, and in particular having regard to the fact that this case will come back in October, it is safe to reserve the costs until that hearing. I will, however, say this. It does seem to me highly likely that there will be a costs order in the defendants' favour in the end, but I do think it is possible that things might change at the end of October and I will therefore decide the costs then.
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