A venture capitalist was the “real party” in a dispute between two companies over a documentary based on the Beatles’ first concert in the USA, a High Court judge has held.
Mr Justice Arnold said that since David Bailey “controlled and partly funded” the company which owned the rights to the master tape on which the documentary was based, he must the pay the costs of its unsuccessful defence of a copyright claim.
Arnold J said that the general principle was that costs orders against non-parties could be made in exceptional cases, and this case was “exceptional”.
The defendant company, WPMC, owned the rights to a master tape of the Beatles’ first concert in the USA, which took place in Washington DC.
Sony/ATV Music Publishing (SATV) became aware in 2012 that the documentary The Beatles: The Lost Concert was being promoted on the internet, and brought claims against WPTC for infringement of its copyright in many of the songs.
Mr Justice Arnold said that, following his copyright ruling in favour of SATV in July 2015, he ordered WPMC to pay costs, on the indemnity basis from July 2014, and to make an interim payment of £375,000.
Following the ruling, WPMC went into liquidation and SATV sought to recover from Mr Bailey its costs from 4 January 2013, the date on which he acquired majority ownership and control of the company.
Arnold J, who described Mr Bailey as a “private venture capitalist of considerable experience”, said: “The principal area of dispute between the parties concerns the approach to be adopted in the case of an application against a non-party who was at the material times in control of an impecunious corporate party and caused it to bring or defend the proceedings in question.
“Counsel for Mr Bailey submitted that there was no jurisdiction, or if there was jurisdiction it should not be exercised, to make an order unless there was some divergence between the interests of the controller and the interests of the company, such that the bringing or defence of the proceedings had been in the interests of the controller rather than in the interests of the company.
“Counsel for SATV disputed this, and submitted that it was proper to make an order, in an appropriate case, where the interests of the controller were aligned with those of the company.”
Arnold J said there was no dispute that, from 4 January 2013 until 5 August 2015, when the company entered liquidation, Mr Bailey controlled WPMC, and from the end of October 2013 until 8 May 2015, he “acted in person on behalf of WPMC”.
Arnold J said after that it was Mr Bailey who gave instructions to solicitors and counsel on behalf of the company.
The judge said there was also no dispute that, although lawyers represented WPMC at trial under a conditional fee agreement, Mr Bailey “partly funded” the defence, paying legal fees, expert witness fees and transcription costs.
Arnold J said Mr Bailey hoped that success in the litigation would lead to WPMC generating money from the documentary, either by way of a settlement with SATV or by exploiting the documentary in the USA.
He rejected Mr Bailey’s “apparent suggestion” that SATV had “behaved improperly” in bringing the claim, by incurring total costs of over £600,000 despite knowing that WPMC had no assets.
Arnold J noted that it was “apparent from the CFA” that Mr Bailey had been advised on the possibility of obtaining ATE insurance, but chose not to.
He concluded: “In my judgment, the factors relied upon by SATV point to the conclusion that it would be just to require Mr Bailey to pay SATV’s costs from 4 January 2013 and none of the factors relied upon by Mr Bailey support the opposite conclusion.”
Arnold J said M Bailey was the “real party since he controlled and partly funded the defence of WPMC’s claim with a view to his own benefit, and therefore it is right that he should pay the costs which SATV incurred as a result”.