PHONOGRAPHIC PERFORMANCE LIMITED V RAYMOND HAGAN; (2) EDWARD HAGAN; & (3) GERARD BYRNE [2016] EWHC 3076 (IPEC)

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In Phonographic Performance Limited (‘PPL’) v (1) Raymond Hagan; (2) Edward Hagan; & (3) Gerard Byrne the Intellectual Property Enterprise Court (‘IPEC’) has ruled that the prescribed caps on costs and damages may be exceeded where a Claimant has obtained a result at trial which is at least as advantageous as a Part 36 offer made earlier in the proceedings. In this case, which concerned an application made after trial, due to the bad conduct of the Defendants the Claimant was also awarded Additional Damages under s.97(2) of the Copyright Designs and Patents Act 1988 (‘CDPA’).

Facts

The Claimant, PPL, is an organisation who licences recorded music played in public and distributes fees as royalties to its members. In April 2012, it alleged that the Defendants, who owned bars in London, had infringed copyright in sound recordings by playing these recordings in two bars without a licence.
In September 2013 PPL obtained judgment against the Third Defendant, Mr Byrne. However, it had come to light that the First and Second Defendants were in fact the same person and this person had been evasive about their identity. Following a failure to disclose and lack of compliance with an unless order, an order was made against Mr Hagan in December 2013 – including an injunction and directions for an inquiry as to damages.
This inquiry was listed for a hearing, however, at the hearing Mr Hagan alleged that he had accepted a Part 36 offer which had been made by the Claimant in October 2013. This offer was made on the following terms:
- Mr Hagan consents to an injunction in the form requested in the proceedings; and
- Payment of £5,000 is made in respect of damages, additional damages and interest.
Following submissions on this point, it was found that the alleged acceptance email had in fact been forged by Mr Hagan and the offer was never accepted by the Defendants. The Claimant subsequently beat this offer at trial and obtained damages of over £13,000. Mr Hagan was also ordered to pay the Claimant’s costs of £44,587.01.

Additional Damages

The Claimant had asked for additional damages to be awarded in accordance with s.97(2) CDPA and/or Article 13 of Directive 2004/48/EC (the ‘Enforcement Directive’). Due to the poor conduct of Mr Hagan during these proceedings, Hacon HHJ considered that such an award would be appropriate. However, it was made clear that damages could not be awarded under s.97(2) and Article 13 as there would be considerable overlap.
In looking at these provisions, the judge determined that the focus in s.97(2) CDPA was on how flagrantly the Defendant had conducted himself; whereas the focus in Article 13 is only on the prejudice suffered by the rights holder. On the facts, Hacon HHJ therefore felt that s.97(2) would provide the greater award in this case; the infringements were not just carried out with knowledge, there was clear flagrancy in the way Mr Hagan had behaved. An award of £2,000 as additional damages was therefore made against Mr Hagan.
Interest and the Claimant’s Part 36 offer
In its post-trial application, the claimant also claimed interest on the earlier award of costs and damages. Such an award would be affected by the Claimant’s Part 36 offer made in October 2013.
At the time of the offer, CPR 36.14(3) (now CPR36.17(3)) stated that, where a judgment against a Defendant is at least as advantageous to the Claimant as the proposals contained within the Claimant’s part 36 offer, the court will, unless it is unjust to so, order that the claimant is entitled to:
(a) Interest on the whole or part of any sum of money awarded, at a rate not exceeding 10% above base rate for some or all of the period starting with the date on which the relevant period expired;
(b) Costs on the indemnity basis from the date on which the relevant period expired;
(c) Interest on those costs at a rate not exceeding 10% above base rate; and
(d) An additional amount not exceeding £750,000 calculated by applying the prescribed percentage on the sum awarded to C by the court (the percentage for sums up to £500,000 is 10%).
On the facts, Hacon HHJ was satisfied that there would be no injustice in PPL being awarded this further relief, subject to one issue - the tension which exists between the relief under (b) and (d) above and the caps on costs and damages in the IPEC (contained with CPR 45).
Hacon HHJ considered previous cases on this area including his decision in OOO Abbott v Design & Display Limited in which the Defendants successfully argued that an award under (b) was still subject to the overall £50,000 under the IPEC rules. In this case it was however held that the overall IPEC damages cap of £500,000 did not apply to any award under (d). Hacon HHJ also considered the Court of Appeal’s more recent decision in Broadhurst v Tan (a case concerning the fixed costs regime for low value road personal injury cases).
In Broadhurst v Tan, the Court of Appeal noted that CPR36 made express provision that the cost consequences of a part 36 offer were to remain untouched where a claim had been started under to the Road Traffic Accidents in Protocol. However, Hacon HHJ said that as there is no such express provision for the IPEC fixed costs regime, no analogy could be drawn here.
However, in Broadhurst v Tan, Lord Dyson felt that two further grounds supported the conclusion that the costs cap should be trumped by Part 36. Firstly, he commented that the way in which Part 36 is structured is that, where fixed costs are intended to prevail, it expressly says so. No express provision is made to the IPEC costs caps. Secondly, Lord Dyson referred to the Explanatory Memorandum to the 2013 Civil Procedure Amendment Rule, which states that if a Claimant makes a successful Part 36 offer, it will not be limited to receiving its fixed costs, but will be entitled to costs assessed on the indemnity basis in accordance with rule CPR36.14 (now CPR 36.17).
Guided by these points, Hacon HHJ concluded that contrary to his prior IPEC decision the limits on costs in the IPEC, both stage costs and the overall cap of £50,000 do not apply to an award of costs under rule 36.14(3)(b) (now CPR36.17(3)(b)). The claimant was therefore awarded its costs from the expiry of the relevant period (25 October 2013) on an indemnity basis, which was not subject to the IPEC caps.

Comment

This case makes clear that, where appropriate, the caps on costs (and also damages) which exist in the IPEC will be waived where the consequences of a claimant’s part 36 offer so require. However, the Claimant will first have to attend an inquiry as to damages and be awarded a result at least as advantageous as the proposals of its valid Part 36 offer.
Following this case, it is also clear that the IPEC will be willing to award additional damages in copyright claims where the conduct of the Defendant is flagrant. Therefore, where appropriate, such a claim should be included in the particulars of claim.

Link to Judgment

Judgment Date: 30 NOVEMBER 2016

 

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