News / Non-Party Costs Orders – A Magical Mystery Tour
Last Updated on 02/06/2019
Non-Party Costs Orders – A Magical Mystery Tour
In September 2018 Sony/ATV Music Publishing LLC and another v WPMC Ltd and another  EWCA Civ 2005 came before the Court of Appeal on the point of a Non-Party Costs Order (NPCO). So what are the lessons learned?
The case itself was concerned with video footage of a concert by The Beatles performed at the Coliseum in Washington DC on 11 February 1964. A company obtained the copy of the video in which The Beatles performed 12 of their songs and a Documentary was made involving the footage. The rights to the videotape was then transferred to WPMC and another company and it was then that WPMC granted another company a licence to exploit and air the Documentary ‘The Beatles: The Lost Concert’ in the US in 2012. WPMC and the other company were owned and controlled by Christopher Hunt.
Sony owns the worldwide copyrights in 8 of the songs performed by the Beatles and licenced to its UK company a UK exclusive licence. When it found out about the Documentary in May 2012 they could not Let It Be and brought a copyright infringement claim, which was stayed against one of the companies, as a result of its winding up, but WPMC defended the claim.
Shortly afterwards, David Bailey, described by the Judge as a “private venture capitalist of considerable experience” acquired WPMC and continued with defending the action in person, but not before admitting to Sony’s solicitors in correspondence in August 2014 that “WPMC had no assets to speak of”.
After A Hard Day’s Night of ADR had taken place and WPMC rejected Part 36 Offers made by Sony, WPMC and Mr Bailey instructed solicitors who were prepared to act under a Conditional Fee Agreement. On that basis, and without taking out ATE Insurance, the Trial of the claim was heard on 1 July 2015. The Judge rejected all three grounds for defence raised by WPMC and ordered it to pay Sony its costs to be assessed, and an interim payment of £375,000 on account be made.
Promptly, on 5 August 2015 WPMC applied for a voluntary winding-up and liquidator to be appointed.
Almost a year after, on 7 July 2016 Sony wrote to Mr Bailey as director and majority shareholder intimating that it intended to seek an order pursuant to section 51(3) of the Senior Courts Act 1981, that he be responsible for payment of the costs ordered against WPMC. At first instance the Judge made the NPCO against Mr Bailey.
On appeal however, the legal position was examined:
- Whilst the making of a NPCO is exceptional, the court will consider whether in all of the circumstances, it is just to make the order
- The discretion would not be exercised against pure funders; those not personally interested in the outcome of the case, who do not seek to control its outcome and do not benefit from the outcome
- The courts aim is to identify the “real party” to the proceedings; the party that not merely funds the proceedings but also controls or benefits from them. The real party may be the non-party if he does not just facilitate access to justice as much as himself gaining access to justice for his own purposes.
- The fact that the non-party is not the only real party or an absence of impropriety will not prevent the court from making an order.
A two-step process is set out at CPR 46.2 to apply for a NPCO for the non-party to:
(a) be added as a party to the proceedings for the purposes of costs only; and
(b) be given a reasonable opportunity to attend a hearing at which the court will consider the matter further.
As can be expected, it is prudent to give notice to the non-party to any application as soon as possible. It was this factor that was fatal to Sony’s application and hence the basis of the successful appeal. The Court found that Sony Should Have Known Better. They knew or should have appreciated that WMPC would not be able to pay their costs in the event that the claim succeeded, not just because of the correspondence in August 2014, but also that both WMPC and Mr Bailey were aware of this fact. Therefore the application made a year after the final judgement was handed down was “manifestly unfair to Mr Bailey” and prevented him personally from being able to settle the litigation or protect himself against the effects of a NPCO or abandon the defence at an earlier stage. The Court ordered Sony to Get Back and allowed the appeal.
In a practical sense, a successful party may not truly realise the other party’s ability to satisfy an order made against it until after judgment is handed down and it is not uncommon that a limited liability company may become insolvent due to the judgment made against it. However, a prudent legal advisor should carry out assessment of the value of the claim, the overall legal costs to be incurred and the other party’s ability to make payment to its client well before judgment stage and offer advice and guidance as to the court’s ability to grant an NPCO and the crucial time to make such application.
Manisha Modasia at Clear Commercial advises on all aspects of commercial litigation. If you require Help on these aspects as part of an overall litigation strategy and proceedings We Can Work It Out. She can be contacted on 0161 873 2797 to discuss further.