United Kingdom House of Lords Decisions

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Cite as: [1998] UKHL 2, [1999] AC 197, [1998] 1 All ER 385

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Redrow Homes Ltd and Others v. Bett Brothers Plc and Others (Scotland) [1998] UKHL 2; [1999] AC 197; [1998] 1 All ER 385 (22nd January, 1998)

HOUSE OF LORDS

Lord Goff of Chieveley Lord Jauncey of Tullichettle Lord Slynn of Hadley
Lord Hope of Craighead Lord Clyde

OPINIONS OF THE LORDS OF APPEAL FOR JUDGEMENT IN THE CAUSE

REDROW HOMES LIMITED AND OTHERS
(APPELLANTS)

v.

BETT BROTHERS PLC AND OTHERS
(RESPONDENTS) (SCOTLAND)

ON 22 JANUARY 1998

LORD GOFF OF CHIEVELEY

My Lords,

I have had the advantage of reading in draft the speeches which have been prepared by my noble and learned friends, Lord Jauncey of Tullichettle and Lord Clyde. For the reasons they have given I would dismiss this appeal.

LORD JAUNCEY OF TULLICHETTLE

My Lords,

The single issue in this appeal concerns the proper construction of sections 96 and 97 of the Copyright Designs and Patents Act 1988 (the Act of 1988). It is whether a pursuer in an action for infringement of copyright is entitled to obtain from the defender both an account of profits and a sum of money by way of additional damages.

The pursuers aver that they are residential developers and builders of detached houses to a number of designs in respect of which they own the copyright. They further aver that the defenders who are in the same line of business are building houses which are flagrant copies of the pursuers' designs. The pursuers seek inter alia (a) an order for production of a full account of profits realised by the defenders by reason of their infringement and for payment of a sum equivalent to such profits, and (b) a sum of money as additional damages in terms of section 97(2) of the Act of 1988. The defenders took a plea to the relevancy inter alia of the pursuer's averments anent additional damages but the Lord Ordinary after a hearing in Procedure Roll allowed a proof before answer of all the pursuers' averments. On a reclaiming motion the Second Division sustained the defenders' plea to the relevancy of the above averments. The pursuers now appeal to Your Lordships' House.

Sections 96 and 97 of the Act of 1988, which occur in the Chapter of Part 1 thereof dealing with remedies for infringement, are in the following terms:

Rights and remedies of copyright owner

"(2) In an action for infringement of copyright all such relief by way of damages, injunctions, accounts or otherwise is available to the plaintiff as is available in respect of the infringement of any other property right.

"(3) This section has effect subject to the following provisions of this Chapter.

(b) any benefit accruing to the defendant by reason of the infringement,

The appellants accepted that they could not competently claim both damages and an account of profits under section 96(2) but they argued that section 97(2) provided an independent remedy of additional damages which was sui generis and which could therefore be sought in addition to an account of profits. They relied particularly on (i) the difference in wording between the two sections and their predecessor, section 17 of the Copyright Act of 1956, and (ii) Cala Homes (South) Ltd. v. Alfred McAlpine Homes (East) Ltd. (No 2) [1996] F.S.R. 36, in which Laddie J. held that additional damages could be awarded as well as any other form of financial relief ordered under section 96(2). The respondents maintained that "additional" meant additional to other damages and that the Cala Homes case had been wrongly decided.

The court was first empowered to award additional damages for infringement of copyright in section 17 of the Act of 1956 which resulted from the Gregory Committee Report (Cmnd. 8662 (1952)). This report recommended, inter alia, in paragraph 294:

This recommendation was given effect to in section 17 of the Act of 1956 which provided, inter alia:

"Action by owner of copyright for infringement

is satisfied that effective relief would not otherwise be available to the plaintiff

in assessing damages for the infringement

I have italicised the words in subsection 3 for reasons which will appear later.

The distinction between exemplary or punitive damages on the one hand and aggravated but nevertheless compensatory damages on the other had become somewhat blurred prior to Rookes v. Barnard [1964] AC 1129 and Broome v. Cassell & Co. Ltd. [1972] 1 A.C. 1027, so that it cannot be certain which of the two categories of damage the Gregory Committee had in mind in 1952. What is certain, however, is that section 17(3) restricted the court's power to award additional damages to cases in which it was already assessing damages for the infringement. My reasons for this conclusion may be stated quite shortly.

Section 17(1) contemplated, inter alia, an action of damages for infringement. Subsection (2) provided that such damages should not be available against an innocent infringer. When subsection (3) referred to "assessing damages" it referred back to the damages mentioned in subsection (1) and (2), that is to say, normal compensatory damages for infringement. Subsection (3) made clear that it was only in assessing such damages that the court had power to award additional damages. There could thus have been no question of additional damages being awarded where an account of profits had been awarded. Additional damages in the subsection were damages additional to those being awarded under section 17(1).

The Act of 1988 was preceded by the Whitford Committee Report on the Reform of copyright law (Cmnd. 6732 (1977)), and paragraph 704 thereof, which alone of all the paragraphs refers to the remedy of additional damages, is in the following terms:

This paragraph is instructive in that although it recommends the strengthening of the provisions for additional damages in two respects it nowhere suggests that such damages should in future be capable of being awarded independently of normal compensatory damages. In the event, the Act of 1988 in section 97(2) gave effect to only one of the Whitford Committee recommendations anent additional damages, namely, the removal of the requirement in sections 17(3) that effective relief would not otherwise be available to the plaintiff. Against this background I turn to consider whether, notwithstanding the lack of a recommendation in the report, Parliament has nevertheless brought about the result for which the appellants contend.

They argued that the omission from section 97(2) of the Act of 1988 of the words which I have italicised in section 17(3) of the Act of 1956 demonstrated that Parliament intended to alter materially the position in relation to additional damages. In particular the failure to re-enact the words "in assessing damages for infringement" showed that it was no longer intended to tie additional damages to an award of normal compensatory damages but to erect them into an independent remedy. Considerable reliance was placed on the Cala Homes case [1996] F.S.R. 36, which was agreed to be the only reported decision directly in point. Laddie J. said, at p. 40:

After stating that there was nothing to show that the legislative intent was that section 97(2) should merely restate the law as it was under section 17(3), he continued, at p. 43:

My Lords I must respectfully disagree with Laddie J.'s views on the legislative history. Whatever the Gregory Committee Report may have intended to recommend there can be no doubt, for the reasons which I have already stated, that Parliament in section 17(3) provided that additional damages could only be awarded when normal compensatory damages were being assessed under section 17(1). The question is whether this position has been altered in the Act of 1988.

Sections 96 and 97(1) re-enact respectively section 17(1) and (2) of the Act of 1956. The minor differences in wording between the earlier and later provisions do not as a matter of construction produce a difference in effect. Indeed section 172(1) and (2) which occurs in Part 1 of the Act of 1988 specifically provides:

Section 97(2) substantially re-enacts section 17(3) but omits the words italicised in the latter section, which omission, the appellants claim, amounted to far more than a mere change of expression. Their argument necessarily involves the omission of the above words resulting in two material alterations to the previous law. In the first place "additional damages" would have a different meaning in section 97(2) than it did in section 17(3), being now an independent remedy. In the second place, whereas no award of additional damages could be made against an innocent infringer under section 17 such an infringer may now, the appellants argue, be subject to such an award. Furthermore the argument produces the anomaly that "damages" in section 97(2) must necessarily have a meaning somewhat different from "damages" in sections 96(1) and 97(1). If this were not so an innocent infringer could not be exempt from the damages referred to in the latter two sub-sections but nevertheless liable to the damages referred to in the former sub-section.

Part III of the Act of 1988 creates a new property right known as a design right. Subsections (1)(2) and (3) of section 229 are in effect in identical terms respectively to sections 96(1) and (2) and 97(2). The provisions of section 97(1) relating to innocent infringers are repeated in a separate section. There being no prior legislation in relation to design rights section 229 must be construed solely by reference to its context in the Act of 1988. The words "additional damages" without further explanation or qualification immediately provoke the question "additional to what"? The natural and ordinary meaning is additional to other damages already assessed, or as the respondent put it succinctly "more of the same." That is the proper meaning of the words in section 229(3). This was the meaning of the words in section 17 and deletion of the italicised words on re-enactment has in my view done nothing to alter that meaning. It would be surprising if sections 229(3) and 97(2) albeit in almost identical terms were to be construed as producing substantially different results. Furthermore in light of the provisions of section 172(1) and 2) it would be particularly remarkable if Parliament had intended to create an entirely new independent remedy available against infringers whether innocent or not in a section dealing with damages rather than remedies and that solely by implication as a result of the omission of certain words in a re-enacting section. I am satisfied that Parliament had no such intention and I therefore consider that the Second Division were correct in their reasoning and conclusion that a claim to additional damages does not lie where a pursuer seeks an account of profits. It follows that Cala Homes (South) Ltd. v. Alfred McAlpine Homes (East) Ltd. (No. 2) [1996] F.S.R. 36 was wrongly decided.

I would only add that since I take the view that this appeal turns on the proper construction of sections 96 and 97 I have found it unnecessary to determine whether additional damages are by nature punitive or purely compensatory, since in either event they remain damages.

For the foregoing reasons I would affirm the interlocutor of the Second Division of 14 March 1997 and dismiss the appeal.

LORD SLYNN OF HADLEY

My Lords,

I have had the advantage of reading in draft the speeches which have been prepared by my noble and learned friends, Lord Jauncey of Tullichettle and Lord Clyde. For the reasons which they have given I also would dismiss this appeal.

LORD HOPE OF CRAIGHEAD

My Lords,

I have had the advantage of reading in draft the speeches which have been prepared by my noble and learned friends, Lord Jauncey of Tullichettle and Lord Clyde. For the reasons which they have given I also would dismiss this appeal.

LORD CLYDE

My Lords,

This appeal concerns the construction of the words "additional damages" in section 97(2) of the Copyright, Designs and Patents Act 1988. Either it is intended to refer to an addition to an award of damages, or it is intended to constitute a self-standing remedy. As was recognised both in the Outer House and in the Inner House persuasive arguments can be presented for either view and the decision is not altogether easy. Despite the careful presentation of the argument for the appellants, fortified as it was by the judgment of Laddie J. in Cala Homes (South) Ltd. v. Alfred McAlpine Homes (East) Ltd. (No.2) [1996] F.S.R. 36 I have come to the view that the result reached by the Second Division is to be preferred. There are four considerations which have moved me to that opinion.

In the first place the language used in the statute seems to me to point to the understanding that what is intended in section 97(2) is an enhancement of an award of damages and not the provision of a self-standing remedy. The use of the word "damages" in sections 96(2) and 97(1) plainly refers to the ordinary remedy of damages and it is difficult to read the term "additional damages" in section 97(2) as something quite separate and distinct. The phrase itself naturally reads as intending an addition to an award of damages rather than, as Laddie J. put it, at p. 40, "damages additional to the relief ordinarily available under section 96(2)."

Secondly, it seems to me that Chapter VI of the Act, which commences with section 96, sets out a statutory code for the remedies for infringement of copyright. This is reflected in particular in sections 96 and 97 by the repetition of the phrase "in an action for infringement of copyright", in sections 96(2), 97(1) and 97(2). The provision in section 97(1) is tied in as part of the scheme and does not constitute a separate remedy. The initial list of remedies in section 96(2) is made by subsection (3) to have effect "subject to the following provisions of this Chapter." Thus structurally section 97(1) is a qualification to section 96 and it is natural to read section 97(2) as similarly related. In this way section 97 appears to contain respectively a derogation from and an embellishment to the provisions of section 96(2). That it is not as matter of form directly included within section 96(2) does not mean that it is an independent self-standing remedy. The corresponding provision of the Act dealing with design right, section 229, provides in subsection (2) for the list of remedies and in subsection (3) for the award of "additional damages." That the provision appears in the one context in a separate section and in the other in the same section suggests that the particular layout of sections 96 and 97 is not of consequence.

In the third place, it seems to me quite clear that additional damages under the earlier legislation, section 17 of the Copyright Act 1956, were intended to be an enhancement of an award of ordinary damages. In section 17(3) it was expressly provided that the court might make such an award "in assessing damages for the infringement." Those words have not been copied in the later form of the legislation in section 97. But the significance which might otherwise have been attributed to the disappearance of those words in the 1988 Act is materially diminished by the provisions of section 172. That section explains that Part I of the Act, into which sections 96 and 97 fall, is restating and amending the law of copyright. It then provides expressly in subsection (2) that a provision of Part I which corresponds to a provision of the previous law is not to be construed as departing from the previous law merely because of a change of expression. Subsection (3) expressly permitted reference to decisions under the former law to establish a departure from the previous law or to establish the true construction of Part I. The intention was plainly not only to amend but also to restate the former law, in what was no doubt hoped to be clearer language, and to preserve the existing jurisprudence. The expression "additional damages" remained unchanged. If it was to be transformed into some independent remedy compatible with an accounting that would have required clear words. On the contrary the retention of the expression and the evident intention to re-write without necessarily amending the law suggest that the concept of additional damages was not intended to be changed. Furthermore I find no indication in paragraph 704 of the report of the Whitford Committee, which deals with this matter, of the intention to make any basic change in the concept of additional damages. It was evidently desired to strengthen the deterrent element in a damages award with particular reference to flagrant infringements, especially since it was proposed to remove the provisions in section 18 of the Act regarding conversion damages. The whole context and substance of the discussion is one of damages. The intention at least of the Committee was evidently to widen the scope of the remedy and the deletion of the words in the former legislation restricting the award of additional damages to cases where "effective relief would not be otherwise available" was not done in order to change the nature of the award from being an enhancement of an award of damages.

Finally, I accept that, as counsel for the appellant explained, a distinction can be drawn between a "benefit accruing to the defendant" such as is referred to in section 97(2) and the net profits which the defender might earn by the infringement. The latter would be caught by an action for accounting, but the former could extend to such matters as the acquisition of an enhanced position in the market which would not be included in a calculation of the net profits. But this additional content for the word "benefit" does not seem to me to justify the conclusion that an award under section 97(2) was intended to be available when the pursuer opted to claim an accounting. The matter of a benefit accruing to the defender was among the express considerations to which the court was to have regard under the former provision in section 17(3)(b) of the Act of 1956 which was plainly in the context of an award for damages. That the remedy of an award under section 97(2) may not be available as an addition to an accounting of profits is wholly consistent with the basic principle that an award for damages is inconsistent with an accounting. Whether the character of an award of damages under section 97(2) is defined as exemplary damages, or, more probably, aggravated damages, it remains an award of damages. In the absence of any clear indication to the contrary I am not persuaded that Parliament intended to innovate upon the basic principle and allow a claim of this kind to be pursued alongside an accounting. But that is what the pursuers have sought to do in the present action.

The appeal should be dismissed.