MCA Records Inc & Anor v Charly Records Ltd & Ors

An individual is not liable for a company’s tort merely because he is a director, controlling shareholder or employee. Liability may arise where, independently of constitutional control exercised through the company’s organs, he procures or induces the infringing acts or joins with the company in concerted action to secure them.

For copyright infringement, a tacit common design is sufficient. There need be no express instruction, formal resolution or shared intention to infringe. Under Copyright, Designs and Patents Act 1988, section 97(2), a trial judge’s finding that infringement was flagrant is relevant to an inquiry, but the inquiry court must decide whether all the circumstances make additional damages just.

MCA Records Inc and its United Kingdom subsidiary owned the copyright in the Chess sound recordings. Charly Records Ltd had copied and issued recordings under purported licences derived from a source which had no title.

Rimer J held Mr Jean Luc Young personally liable with Charly Records Ltd for those infringements. Although he did not formally hold office at the material time, the judge found that he exercised ultimate influence over the company, had secured the purported licences and intended the continued exploitation of the recordings. The judge also directed an inquiry into damages, including consideration of additional damages after September 1992.

Mr Young appealed, challenging both the test for personal liability and the finding of flagrancy. The central issue was whether his conduct made him a joint tortfeasor with the corporate infringer.

1. Appeal dismissed unanimously. Chadwick LJ, with whom Tuckey and Simon Brown LJJ agreed, upheld the finding that Mr Young was jointly liable with Charly Records Ltd for copyright infringement.

2. The court held that a director or person exercising corporate control is not liable merely by reason of that status. A person who does no more than exercise constitutional powers through board or shareholder processes will only rarely be liable with the company. But a person whose participation goes beyond that role is subject to the ordinary principles of joint tortfeasance.

3. Applying CBS Songs Ltd v Amstrad Consumer Electronics Plc [1988] AC 1013 and Unilever Plc v Gillette (UK) Ltd [1989] RPC 583, the necessary and sufficient inquiry was whether Mr Young procured or induced Charly Records Ltd to carry out the restricted acts, or otherwise joined with it in concerted action to secure them. A common design may be tacit. It is enough that the parties combine to secure acts which prove to be infringements.

4. The judge’s findings established that test. Mr Young exercised control outside Charly Records Ltd’s constitutional organs, obtained the purported licences for its exploitation, supported and promoted the releases, and intended their continuation. The absence of an express direction or formal resolution did not prevent a finding that he had impliedly procured the copying and public issue of the recordings.

5. Section 97(2) of the Copyright, Designs and Patents Act 1988 requires the court taking an inquiry to consider all the circumstances. The trial judge could properly indicate that his findings of post-judgment flagrancy deserved particular regard. He could not finally determine whether justice required additional damages, since that remained for the inquiry court. The finding that continued exploitation after knowledge of the Californian judgment was highly flagrant was upheld.

• Court of Appeal (Civil Division) — dismissed Mr Young’s appeal and upheld his joint liability for copyright infringement and the relevant finding of flagrancy: [2001] EWCA Civ 1441.
• Chancery Division — Rimer J, by order dated 22 March 2000, found Mr Young liable with Charly Records Ltd for infringement, granted consequential relief, and directed an inquiry as to damages. The citation is not stated in the judgment.