In an action for copyright infringement in a documentary about a 1964 concert given by The Beatles, the Court of Appeal overturned a non-party costs order against a company director. The absence of an early warning was a key factor in deciding that the director and shareholder should not be personally liable.The decision highlights the importance for a party considering a non-party costs order of stating this early in proceedings.

Background

In Sony/ATV Music Publishing LLC & Anor v WPMC Ltd & Anor [2018] EWCA Civ 2005, a copyright action was brought against WPMC over the proposed release of the documentary “The Beatles, the Last Concert”. The claimant held worldwide copyright for the majority of songs performed by the Beatles and did not want footage of the concert to be broadcast. WPMC’s arguments were rejected at trial, and it was ordered to pay costs by Arnold J. WPMC’s solicitors had advised the claimant before trial that the company had no assets. After the judgment, WPMC was wound up. A year later, the claimant applied for a non-party costs order against the director and majority shareholder of WPMC, Mr David Bailey. Arnold J ordered Mr Bailey to pay in the region of £600,000. Although he noted that there was no explanation as to why the claimant did not warn Mr Bailey that it would seek costs from him, he held that a warning would not have made any difference to Mr Bailey’s conduct. Mr Bailey appealed.

The Court of Appeal laid down general guidelines for the exercise of the discretion to award costs against non-parties in Symphony Group Plc v Hodgson [1994] QB 179. One of the guidelines states that there should be a warning to the non-party “at the earliest opportunity.

The appeal

Lord Justice Floyd concluded that Arnold J had wrongly rejected Mr Bailey’s evidence as to how he would have behaved if a warning had been given. If the possibility of a non-party costs order had been raised early in proceedings, Mr Bailey might have abandoned the case or protected himself by securing after the event insurance cover. The failure to warn was therefore “manifestly unfair”, and the non-party costs order was overturned.

The decision makes clear the importance of considering at an early stage of any litigation how to respond to an opponent’s lack of financial means. If there is a likelihood of an application for a non-party costs order, the opponent should be informed of this at the earliest opportunity. The other factors set out by the Court of Appeal in Symphony Group should also be considered in order to maximise the likelihood of a successful costs recovery.