Mca Records Inc. and and Another v Charly Records Ltd and Others

This is the official judgment of the court and I direct that no further note or transcript is made.

Introduction

The two claimants are (i) MCA Records Inc ("MCA Inc") , a Californian company and (ii) a UK company now called Universal – MCA Music (UK) Limited but which was formerly called, and sues as, MCA Records Limited ("MCA Records") . MCA Inc manufactures, sells and distributes sound recordings and owns copyrights in various recordings. MCA Records manufactures and sells sound recordings in the UK under a licence granted by MCA Inc. References in this judgment simply to "MCA" are, according to the context, to either or both of the claimants or to the MCA group generally.

The action was commenced by a writ dated 24 February 1994. Originally the only defendant was a UK company now known as Night and Day Distribution Limited but which was formerly known, and is sued, as Charly Records Limited ("CRL") . Four more defendants were added later: Charly International APS ("International") , a Danish company; Charly Holdings Inc ("Holdings") , a Panamanian company; Jean Luc Young ("Mr Young") ; and Charly Records (UK) Limited ("CRUK") . CRL and International were at all material times wholly owned subsidiaries of Holdings. References in this judgment simply to "Charly" or to "the Charly group" are to the Charly group generally.

MCA has obtained judgment in default of defence against CRL, International and Holdings, and has settled with CRUK. Mr Young is the only defendant against whom its claims remain alive. It obtained summary judgment against him on 22 November 1996, but he successfully appealed that to the Court of Appeal which, on 13 November 1997, gave him leave to defend. MCA's action against Mr Young has now been tried before me, the trial occupying the court for 11 days. MCA appeared by Mr John Baldwin Q.C. and Mr Henry Carr Q.C. Mr Young appeared by Mr Nicholas Merriman Q.C. and Mr Andrew Sutcliffe.

Nature of claim

The action is for infringements of copyright and trade marks. It relates to sound recordings in the so-called Chess catalogue. These recordings were the creation of two brothers, Leonard and Philip Chess. They emigrated from Poland to the USA, and their early activities in Chicago in the 1940s centred on the running of clubs which featured the popular musicians of the day. They soon realised there was also a growing demand by their clientele for recorded music and so they turned their hands to its production. Between about 1947 and 1975 they produced thousands of recordings by jazz, blues, rhythm and blues, and rock and roll musicians, many by well known artists: for example, Bo Diddley, Chuck Berry and Muddy Waters. The recordings became known as the Chess recordings.

There is no dispute that by 1986 MCA was entitled to the UK copyright in the Chess recordings and that Holdings, International and CRL have committed infringements of MCA's copyrights and trade marks. The issue in the action is whether Mr Young is also personally liable for those torts.

The copyright infringements admittedly committed by the companies are: (i) the authorising by Holdings and International of the copying and issuing to the public by CRL of unlicensed copies of Chess recordings (see s.16 (2) of the Copyright, Designs and Patents Act 1988); and (ii) the copying and issuing to the public by CRL of unlicensed copies of Chess recordings (see s.16(1) of the 1988 Act) . MCA's case against Mr Young is that he procured, or participated in, the licensing activities of International and Holdings, and so is jointly liable with them for authorising the relevant infringements; and that he procured, or participated in, CRL's infringing exploitation of Chess recordings by copying and issuing them to the public in the UK and so is jointly liable with it for its infringing activities.

The trade mark infringements complained of are the use by CRL of the Chess mark and Seahorse device in relation to unlicensed copies of Chess recordings (see s.10 of the Trade Marks Act 1994). I heard almost no argument on the trade mark allegations. Mr Baldwin submitted in opening that, if liability for copyright infringement is established against Mr Young, liability for trade mark infringement must follow: and I did not understand Mr Merriman to dispute this. All the evidence and argument was directed to the issue of whether Mr Young is personally liable for copyright infringement. I record that Mr Merriman's opening written argument raised an unheralded challenge to the validity of MCA's trade marks. However, in his oral opening Mr Baldwin advanced convincing arguments as to why the challenge was misdirected; and Mr Merriman did not seek to answer them in his final speech in reply. I took it that he tacitly accepted that they were correct.

It is not disputed that Mr Young played a role in the activities of the Charly group and CRL in particular. What is in issue is whether his personal involvement was sufficient to fix him with personal liability. Mr Young recognises that he was an important employee of CRL; but he claims that in all matters material to the issues I have to decide he was acting under the authority and direction of others; and that it was exclusively those others who were responsible for the tortious acts complained of. He also argues that MCA's copyright claims against him are, at least in respect of part of the relevant period, barred by acquiescence, although there is no like plea in answer to the trade mark allegations. Mr Young also raises a limitation defence, and MCA accepts that its claims in respect of pre-21 April 1990 causes of action are statute barred.

The applicable law

Before coming to the factual issues raised by this case, I will outline the law relating to the personal liability of individuals for the tortious acts of a company.

The law has of course long respected the familiar concept that a company is an entity which is distinct from its shareholders, directors, servants and agents. By way of an obvious example, the human agents responsible for the activities of a company will not be personally liable for breaches of its contracts. Nor does the law permit this particular principle to be circumvented by allowing the injured party to sue the human agents personally on the basis that, by procuring the company to breach its contract, they committed the tort of inducing a breach of contract: see , for example, Said v. Butt [1920] 3 K.B. 497, in which McCardie J said at p.506:

"I hold that a if a servant acting bona fide within the scope of his authority procures or causes the breach of contract between his employer and a third person, he does not thereby become liable to an action in tort at the suit of the person whose contract has thereby been broken. I abstain from expressing any opinion as to the law

which may apply if a servant, acting as an entire stranger, or wholly outside the range of his powers, procures his master to wrongfully break a contract with a third person. Nothing that I have said to-day is, I hope, inconsistent with the rule that a director or servant who actually takes part in or actually authorizes such torts as assault, trespass to property, nuisance or the like may be liable in damages as a joint participant in one of such recognized heads of tortious wrong. This point was incidentally dealt with by the Court of Appeal in the recent case of Belvedere Fish Guano Co. v. Rainham Chemical Works [1920] 2 K.B 487".

The last two sentences of the citation also reflect, however, that it has long been established that if an employee of a company commits a tort in the course of his duties he can be made personally liable for his tort just as can the company: for example, if he negligently causes an accident whilst driving a lorry on company business, or if he participates with others in the commission of a tort. It is no defence for him to say that he was acting on the instructions of the company's directors.

It has also for long been recognised that a director or other officer of a company may in certain circumstances be personally liable for the company's torts, although he will not be liable merely because he is an officer: he must be personally involved in the commission of the tort to an extent sufficient to render him liable. Whether he is sufficiently involved is a question of fact, requiring an examination of the particular role played by him in the commission of the tort. In Performing Right Society Ltd. v. Ciryl Theatrical Syndicate Ltd. [1924] 1 K.B 1, Atkin L.J. said at 14:

"Prima facie a managing director is not liable for tortious acts done by servants

of the company unless he himself is privy to the acts, that is to say unless he ordered or procured the acts to be done. That is authoritatively stated in Rainham Chemical Works Ltd. v. Belvedere Fish Guano Co. Ltd. [1992] 2 A.C. 465, where it was sought to make a company liable for an explosion upon their works in the course of manufacturing high explosives. The company were held liable on the principle of Rylands v. Fletcher (1868) L.R. 3 H.L. 330. It was also sought to charge two directors with liability. They were eventually held responsible because they were in fact occupiers of the works. It was contended that they were liable on the ground that they were managing directors of the company, that the company was under...