Copyright

Twentieth Century Fox Film Corporation and other companies v Harris and others: Chancery Division: 16 May 2014

Claimants bringing proceedings against first defendant, H, and companies allegedly being controlled by him – H contending proceedings an abuse of process – Whether H responsible for large-scale copyright fraud

The claimant companies were members of the Motion Picture Association of America, Inc, and owned the copyright to many films and television programmes. The instant proceedings arose from two earlier actions. The first, N1, was a copyright claim concerning the operation of a website (N1) by a company, Newzbin Ltd (N), for the purpose of making unlawful copies of copyrighted works available to its users.

The court held that there had been extensive infringement of the claimants’ copyrights by N (see Twentieth Century Fox Film Corp and others v Newzbin Ltd [2010] EWHC 608 (Ch)). The second action, N2, concerned the ‘reincarnation’ of N1 as N2, a similar website operating out of the jurisdiction. The claimants brought an action regarding N2, and the court made an order requiring the major internet service providers in the UK to take steps to prevent subscriber access to N2. The claimants became increasingly convinced that H, the first defendant, was actively involved in the operation of the N2 website.

They brought proceedings against him and persons and companies linked to him. At the heart of the claimants’ case were the following allegations: (i) that, since about mid-December 2009 until about the end of November 2012, the first defendant, H, had been the driving force behind mass deliberate infringements of the claimants’ copyrights; (ii) that the second, third and sixth to eighth defendants (together, the corporate defendants) were his corporate creatures, owned and/or controlled by him; and (iii) that he had used them for the purposes of channelling to himself or for his benefit the revenues earned from those infringing activities, as well as for syphoning off funds from N and thwarting the claimants’ ability to recover costs and compensation for the infringement by N of their copyright, established in the N1 and N2 proceedings.

H and the defendants effectively submitted that: (i) although H had been the sole director and owner of N from December 2009 to May 2010, he had not intended to infringe copyright and had not believed that infringing activity was occurring until the N1 judgment; (ii) H had had nothing to do with the setting up or running the N2 website, which had been operated by hackers who had stolen data from the N1 website in order to do so; and (iii) there had been no conspiracy between the defendants. H submitted, based on the case of Henderson v Henderson ([1843-60] All ER Rep 378) that, in making him a party to the proceedings, the claimants were re-litigating matters against a new defendant whom they ought to have joined in the original trial (the Henderson submission). That, he submitted, was an abuse of process.

The claim would be allowed.

(1) Regarding the Henderson submission, the evidence before the court provided no basis on which it could be properly concluded that there had been sufficient material available to the claimants in the N1 and N2 proceedings to justify holding that they ought reasonably to have joined H as a defendant in the N1 action at any stage (see [134] of the judgment).

There was no substance in the argument that commencing the instant proceedings against H had been an abuse of process (see [134] of the judgment).

Henderson v Henderson [1843-60] All ER Rep 378 applied.

(2) H was a joint tortfeasor with N in respect of the copyright infringing operations via the N1 website. H had masterminded and directed all the actions of N throughout that period, including those actions that had been found to constitute infringing conduct. If ever there was a clear case of a company director intending, procuring and sharing a common design to commit an infringement with the company, it was the instant case. He was similarly liable to the claimants for infringement of their copyright through his operation of the N2 website.

In that regard, he was either the sole tortfeasor or, to the extent that his associates had been sufficiently involved in the infringing activity, liable on the application to the principles relating to joint tortfeasors (see [138], [141] of the judgment).

MCA Records Inc v Charly Records Ltd [2001] All ER (D) 70 (Oct) applied.

(3) There were four elements required for an unlawful means conspiracy to be made out, namely: (i) a combination of two or more persons; (ii) to take action which was unlawful in itself; (iii) with the intention of causing damage to a third party; and (iv) damage being caused to the third party (see [146] of the judgment).

Without exception, each of the corporate defendants had been established by H. At all material times, each had been under his sole control and direction (whether de jure or de facto or both), and each had been, in that regard, his creature or alter ego. H’s purpose in establishing and in directing/controlling the corporate defendants had been so that they could assist N and himself in continuing to infringe the claimants’ (and others’) copyrights, and in realising, extracting and preserving for his own benefit (or for that of others whom he might wish to benefit) the revenues earned by such infringing activities, together with any property derived therefrom.

The main concern of H (and, by extension, of the corporate defendants) in that regard had been to ensure that the funds and property in question had been put beyond the reach of, and so far as possible concealed from, the claimants, both regarding the claimants’ enforcement of the judgment (including the costs order) obtained or likely to be obtained against N in the N1 action, and any subsequent judgment they might obtain in respect of the operation of the N2 website.

Pursuant to that purpose, the corporate defendants had provided H with assistance in, among other things: (i) extracting funds and property from N by submitting bogus invoices to N, receiving funds/property from each other or third parties, transferring funds/property to each other or third parties, and using N’s funds to acquire property other than for the benefit of N, and (ii) acting in that way in respect of monies or property derived from the infringing activities carried out via the N2 website. Virtually every such act carried out by the corporate defendants had been done pursuant to the those overall aims (see [148] of the judgment).

The claimants had established unlawful means conspiracy against H and the other defendants, on the basis of conspiracy to infringe the claimants’ copyrights and conspiracy to defraud the claimants (see [175] of the judgment).

Scott v Metropolitan Police Comr [1974] 3 All ER 1032 applied; Kuwait Oil Tanker Co SAK v Al Bader [2000] 2 All ER (Comm) 271 applied; Total Network SL v Revenue and Customs Comrs [2008] 2 All ER 413 applied; Digicel (St Lucia) Ltd (a company registered under the laws of St Lucia) v Cable & Wireless plc [2010] All ER (D) 107 (Apr) applied.

Richard Spearman QC (instructed by Wiggin LLP) for the claimants; H appeared in person, and on behalf of the third and sixth defendants; The remaining defendants were not represented.