Phonographic Performance Ltd v AEI Redifussion Music Ltd

Factual and Procedural Background

The appeal arises from a dispute between two companies concerning the licensing and payment terms for the broadcasting of sound recordings by satellite. The appellant, Company A, provides a satellite service transmitting music selections as background music, which involves broadcasting sound recordings protected by copyright. The respondent, Company B, is a collecting society holding the broadcasting rights for the sound recordings and licenses users to exercise these rights.

Under the statutory scheme established by the Copyright, Designs and Patents Act 1988 (the 1988 Act), Company A invoked a statutory licence procedure to broadcast sound recordings without initially agreeing terms with Company B. Company A applied to the Copyright Tribunal to settle the terms of payment and conditions of the licence after Company B proposed terms deemed unreasonable by Company A.

The Copyright Tribunal issued a decision settling the terms of payment, partially accepting and partially rejecting proposals from both parties. The Tribunal ordered Company B to pay two thirds of Company A's costs. Company B appealed this costs order to the High Court, which set aside the Tribunal's order and made different costs orders, including no order as to costs on the payment terms application and an order for Company A to pay Company B’s costs on the conditions application. Company A then appealed to the Court of Appeal on the issue of costs.

Legal Issues Presented

1. Whether the Copyright Tribunal erred in principle in its exercise of discretion when ordering costs to follow the event and treating Company A as the winner and Company B as the loser.
2. Whether the High Court judge was correct to interfere with the Tribunal’s costs order on appeal.
3. The appropriate principle for awarding costs in proceedings before the Copyright Tribunal, particularly in the context of statutory licence applications where the outcome may not produce a clear winner or loser.

Arguments of the Parties

Appellant's Arguments

• The High Court judge erred in principle by interfering with the Copyright Tribunal’s costs order.
• The statutory scheme compelled Company A to apply to the Tribunal due to Company B’s unreasonable initial payment terms, effectively making Company A analogous to a plaintiff in ordinary litigation who had to litigate to obtain reasonable terms.
• Costs should follow the event, and Company A was the overall winner because the Tribunal substituted less onerous terms than those originally proposed by Company B.
• The judge’s approach undermines the statutory purpose of protecting copyright users from monopoly abuse by licensing bodies and may discourage users from challenging unreasonable licensing terms due to fear of adverse costs orders.
• The Tribunal was best placed to exercise discretion on costs, and its order should not have been disturbed.
• Company A contended that the costs order against it on the conditions application was incorrect since it ultimately accepted most of Company B’s conditions without a contested hearing.

Respondent's Arguments

The opinion does not contain a detailed account of the Respondent's legal arguments beyond those summarized in the Court's reasoning and the procedural history.

Table of Precedents Cited

Court's Reasoning and Analysis

The Court of Appeal analysed the nature of the Copyright Tribunal’s jurisdiction and its discretion on costs, emphasizing that it differs fundamentally from ordinary civil litigation. The Tribunal’s power is to make orders it considers reasonable in all circumstances, often resulting in outcomes where there is no clear winner or loser, unlike typical court cases where costs usually follow the event.

The Court found that the Tribunal Chairman erred by applying a binary winner-loser approach to costs, influenced by a mistaken view that policy required identifying a winner and loser even where the outcome was a compromise between unreasonable positions taken by both parties. The Chairman wrongly characterized Company B as the loser and Company A as the winner, despite both parties’ proposals being held unreasonable in different respects.

The Court agreed with the High Court judge that the appropriate order for costs in relation to the payment terms application was no order as to costs, reflecting the "roughly a draw" outcome. The statutory requirement for Company A to apply to the Tribunal did not automatically entitle it to costs.

Regarding the application on licence conditions, which was settled largely without contest, the Court upheld the judge’s order that Company A should pay Company B’s costs, encouraging negotiation over litigation when possible.

The Court also considered the practical consequences of the differing costs orders and the importance of a principled and proportionate exercise of discretion, taking into account all relevant factors including conduct, outcome, and the nature of the Tribunal’s jurisdiction.

Holding and Implications

The Court of Appeal DISMISSED THE APPEAL.

The Court held that the High Court judge was correct to interfere with the Copyright Tribunal’s costs order on the basis that the Tribunal had erred in principle by treating the applicant as the overall winner and ordering costs accordingly. The appropriate order for costs on the payment terms application was no order as to costs, reflecting the compromise nature of the outcome. On the licence conditions application, Company A was ordered to pay Company B’s costs.

The decision clarifies that in statutory licence proceedings before the Copyright Tribunal, costs discretion must be exercised with due regard to the special nature of the Tribunal’s jurisdiction and the likelihood of outcomes that do not produce clear winners or losers. The ruling discourages a rigid "costs follow the event" approach and promotes a more nuanced, case-specific exercise of discretion, thereby guiding future Tribunal and court decisions on costs in similar contexts.