Far Out Productions Inc v Water Music Productions Ltd & Ors
Court: Chancery Division
Judge: Nicholas Strauss QC
Date of judgment: 16 Dec 2009
Summary: Discontinuance – CPR r. 38.6 - Alternative order for costs – Whether valid reason for departing from deemed order under r. 44.12 that C pay costs on standard basis.
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Instructing Solicitors: Macgrath for C; Swan Turton for D4; Forbes Anderson Free for the other Ds
C owned copyright in a sound recording, ‘Low Rider’. D3 was an advertising agency, engaged by D1/2 to run a TV advertising campaign for Marmite, which it did between 1994 and 2003. D3 engaged D4, a music production company to make music for the soundtrack; initially in 1993 to make the music for a mock-up by using the sound recording, and then when the mock-up was approved, to re-perform Low Rider not using the original soundtrack for the broadcast version. D4’s evidence was that it had expected D3 to have cleared any necessary rights. In 2003 C complained to D3 of infringing use of sound recording in the adverts. In 2004, D1-3 admitted liability and said that D4 was responsible for the presence of the infringing content. In 2005 C made a Part 36 offer to settle for £4M. Later in 2005, C started action. In October 2009 C settled with D1-3 for £400,000 plus a contribution to costs, and discontinued against D4.
Whether C had shown a valid reason for departing from the usual rule on a discontinuance that a claimant pays the costs; and whether it was just to depart from that rule. C said that it had acted reasonably in joining D4 and that it would not have done so had D1-3 made a reasonable offer.
Dismissing C’s application and ordering C to pay D4’s costs down to discontinuance, and Ds’ costs of the application, on the indemnity basis:
There was no valid reason for disapplying the usual rule. The claim was very unlikely to succeed and C should have appreciated this in 2005. C had to establish deliberate, i.e. knowing, infringement against D4 to circumvent the primary limitation period under s 32 Limitation Act 1980. It was also extremely unlikely that D4 could have met any substantial claim in view of its net asset position in 2005, particularly after it paid for the costs of its defence. D1-3 had not accused D4 of deliberate infringement and joining D4 did not render it any more likely that C would circumvent D1-3’s limitation defence to pre-1999 usage. Meaningful negotiations with D1-3 had been prevented by C’s misconceived claim for an account of profits of £4M, and proper compensation for the infringement should have been a hypothetical licence fee.
This decision highlights the importance of a careful choice of defendants in multi-party cases. So far as solvency is concerned, a company search of a corporate entity should be carried out to see whether there would be any available assets after the company has paid for its defence, assuming that the action would likely be defended.