Wednesday Law Report: Tribunal had wide discretion to award costs

24 February 1999

AEI Rediffusion Music Ltd v Phonographic Performance Ltd

Court of Appeal (Lord Woolf, Master of the Rolls, Lord Justice Mummery and Lord Justice Mantell) 19 February 1999

THE DISCRETION of the Copyright Tribunal contained in section 151(1) of the Copyright Designs and Patents Act 1988 and regulation 48(1) of the Copyright Tribunal Rules 1989 to award costs in respect of proceedings before it was very wide, and was not fettered by reference to the outcome of the proceedings.

The Court of Appeal dismissed the appeal of AEI Rediffusion Music Ltd ("AEI") against a decision of the High Court, setting aside an order for costs made by the Copyright Tribunal.

AEI, which provided a satellite delivered service involving the broadcasting of sound recordings, claimed the use of those recordings as of right under the Copyright Designs and Patents Act 1988.

It notified Phonographic Performance Ltd ("PPL"), the relevant licensing body, of its intention to avail itself of a statutory licence pursuant to section 135C of the 1988 Act. PPL sent a draft licence to AEI, but AEI objected both to the payment terms and the operating conditions in the licence.

AEI accordingly applied to the Copyright Tribunal under section 135D to settle the terms of payment, and under section 135E to settle the conditions of the licence. AEI subsequently accepted PPL's terms as to operating conditions and the application under section 135E was thus not determined by the tribunal.

On the section 135D application, the tribunal accepted the royalty rate proposed by PPL and rejected that advanced by AEI; rejected PPL's definition of "relevant revenue" and accepted AEI's contention that the royalty was to be calculated on "music only" revenue; and reduced PPL's alternative approach of a fixed fee per site, rejecting AEI's contention that there should be no such fee. The tribunal concluded that the appropriate order as to costs should be that PPL pay two-thirds of AEI's costs.

The tribunal's reason was that where the licensing body's offer had been held in significant respects to have been unreasonable, as a matter of policy the general order for costs should be on the footing that the licensing body was the loser, and it should therefore pay the costs on the basis set out in Re Elgindata (No 2) [1993] 1 All ER 232.

PPL appealed to the High Court against the order for costs, and the order was set aside, an order that there should be no order for costs being substituted. The judge held that the tribunal had erred in principle in awarding costs to AEI. AEI appealed.

Michael Beloff QC and Hodge Malek (Eversheds) for AEI; Jonathan Rayner James QC (Green Sheikh & Co) for PPL.

Lord Justice Mummery said that on an application to settle terms of payment or other conditions the tribunal's power was very different in its nature and scope from that of a court adjudicating upon ordinary civil claims.

That was reflected in the width of the discretion on costs contained in section 151(1) of the 1988 Act and in regulation 48(1) of the Copyright Tribunal Rules 1989. It was significant that neither the legislation nor the rules expressly stated any general principle such as that set out in RSC Order 62, rule 3(3), which provided that in the normal case costs should follow the event: it had been appreciated by the draughtsman of the legislation and the rules that it was not appropriate to fetter the tribunal's discretion by reference to the outcome of the application.

In the present case, the tribunal had wrongly been influenced by the need to find a winner and a loser in a case where the final determination of the tribunal was somewhere between the respective positions adopted by the parties, and had erred in principle in characterising PPL as the loser and AEI as the winner. That error had infected and vitiated the exercise of discretion in law, and the judge had accordingly been entitled to set aside the order of the tribunal.