AEI Rediffusion Music Ltd v Phonographic Performance Ltd

A tribunal with a broad statutory costs discretion must exercise it judicially, reasonably and proportionately by considering all relevant circumstances. It must not impose a policy-based presumption that costs follow the event where its substantive jurisdiction is to determine reasonable terms between competing proposals.

Where both parties adopted unreasonable positions and the tribunal selected an intermediate outcome, it may be wrong to label one the winner and the other the loser. The tribunal should examine the parties’ proposals, success on individual issues, conduct, and the time and expense caused. Issue-based orders can promote proportionate litigation; deprivation of costs on a failed issue does not always require impropriety or unreasonableness.

An appellate court may intervene where the costs tribunal fetters its discretion, applies a wrong principle, omits a relevant matter, takes account of an irrelevant matter, or reaches a wholly wrong balance.

AEI Rediffusion Music Ltd v Phonographic Performance Ltd concerned a statutory licence to broadcast sound recordings controlled by Phonographic Performance Ltd. AEI applied to the Copyright Tribunal under sections 135D and 135E of the Copyright, Designs and Patents Act 1988 for reasonable payment terms and licence conditions.

The Tribunal adopted a royalty arrangement between the parties’ competing proposals. It later ordered PPL to pay two thirds of AEI’s costs because PPL’s proposed terms had been substantially unreasonable, although AEI’s proposed payment was also too low. The costs decision was reported at [1998] EMLR 459.

On PPL’s appeal, Neuberger J set that order aside. He ordered no costs on the section 135D payment application and required AEI to pay PPL’s costs of the section 135E conditions application. AEI appealed, raising the central question whether the Tribunal had committed an error of principle permitting appellate interference with its broad costs discretion.

1. Appeal dismissed unanimously. Mummery LJ delivered the principal judgment. Lord Woolf MR adopted his reasons and gave additional reasons, with which Mummery LJ agreed. Mantell LJ agreed that the Tribunal had erred and that Neuberger J could intervene.

2. Per Mummery LJ, section 151(1) of the Copyright, Designs and Patents Act 1988 and rule 48(1) of the Copyright Tribunal Rules 1989 confer a wide costs discretion. Unlike the applicable court rules, they impose no general requirement that costs follow the event. The discretion must be exercised judicially, reasonably, proportionately and by reference to all relevant circumstances.

3. The Tribunal’s substantive jurisdiction was akin to compulsory arbitration on quantum according to reasonableness. Its outcome would often fall between the parties’ positions and disclose no meaningful winner or loser. Relevant costs considerations included both parties’ proposals, their success on individual issues, the points pursued, and the time and expense attributable to those points.

4. The Chairman imposed an erroneous policy-based fetter by treating AEI as the winner merely because PPL’s proposed terms were unreasonable. Both sides had proposed unreasonable payment terms. Ignoring AEI’s position and insisting upon a winner and loser infected the exercise of discretion with an error of principle.

5. On the section 135D application, the reasonable payment fell between the competing proposals. Neither party was the winner, and no order as to costs was appropriate. PPL’s monopoly position did not alter that conclusion because the statutory scheme already protected AEI through a licence available as of right pending determination of the reasonable payment.

6. On the section 135E application, AEI ultimately accepted almost all PPL’s proposed conditions without a contested hearing. AEI was therefore properly ordered to pay PPL’s costs. That order also supported the desirable policy of encouraging negotiation before contested proceedings.

7. Per Lord Woolf MR, the principles in Re Elgindata Ltd (No 2) [1992] 1 WLR 1207 were unsuited to an application which was roughly a draw. Modern costs practice permits issue-based orders and does not invariably require improper or unreasonable conduct before a party is deprived of the costs of a failed issue. Tribunals should use case management and costs powers to control disproportionate expenditure while preserving access to justice.

8. The appeal was dismissed with costs. Leave to appeal to the House of Lords was refused.

1. Court of Appeal: In AEI Rediffusion Music Ltd v Phonographic Performance Ltd [1999] EWCA Civ 834, the court unanimously dismissed AEI’s appeal, upheld Neuberger J’s substituted costs orders and refused leave to appeal to the House of Lords.
2. High Court: Neuberger J allowed PPL’s appeal from the Copyright Tribunal. He set aside the Tribunal’s costs order, made no order as to costs on the section 135D application and ordered AEI to pay PPL’s costs of the section 135E application.
3. Copyright Tribunal: After determining the payment terms, the Tribunal ordered PPL to pay two thirds of AEI’s costs. Its costs decision was reported at [1998] EMLR 459.