Quick Draw LP v Global Live Events LLP & Ors

The court held that the Debenture executed on 22 September 2011 operated as an equitable assignment/mortgage over GLE’s present and future rights, including future debts and copyright arising from the Michael Jackson Forever tribute concert, and that the Loan Agreement and Debenture were to be treated as a package. Clause 3 of the Commissioning Agreement purporting to vest copyright and related materials in GLE took effect on production and therefore the film and sound recordings were GLE’s assets and passed to Quick Draw under the Debenture (with vesting on creation by virtue of s91 and s191C of the Copyright, Designs and Patents Act 1988 where applicable).

The court found that the BEP Refund (US$1.6m) and the SEL ticket receipts (£115,828.19) were charged assets held on trust for Quick Draw and that their diversion without Quick Draw’s consent was a breach of trust. The Second Defendant (Mr Hunt) and the Third Defendant (Mr Henry) were held liable for dishonest assistance in relation to the SEL Amount and the BEP Refund, and Iambic Media Limited was liable for knowing receipt of the SEL Amount. The court rejected the defendants’ arguments that intellectual property rights vested in Iambic or that any purported Rights Confirmations were effective; Quick Draw’s intellectual property claims therefore succeeded. The defendants’ counterclaim in malicious falsehood failed.

Background and parties: Quick Draw LP provided short-term bridging finance to Global Live Events LLP (GLE) to fund a tribute concert. GLE had contracted Iambic Media Limited to produce film and sound recordings under a Commissioning Agreement. Quick Draw took security by way of a Loan Agreement and a Debenture dated 22 September 2011. After the Concert GLE could not repay the loan and disputes arose over ownership and control of recordings and over two specific sums (the BEP Refund and the SEL ticket receipts).

Relief sought: Quick Draw sought repayment of the loan, declaration and delivery up/assignment of intellectual property rights and materials, injunctive relief, and recovery/accounting of two specific sums (US$1.6m BEP Refund and £115,828.19 SEL Amount). In the alternative Quick Draw pleaded inducing breach of contract and deceit. Mr Hunt and Iambic counterclaimed in malicious falsehood.

Issues framed:

• Construction and effect of the Loan Agreement and Debenture: whether they constituted a mortgage/assignment covering present and future debts and copyright;
• Construction of the Event Company Agreement and Commissioning Agreement: whether the film and sound recordings and related materials were GLE’s or Iambic’s;
• Status of the BEP Refund and SEL Amount and whether their diversion breached the Debenture;
• Liability of the individual defendants for dishonest assistance and of Iambic for knowing receipt;
• Whether the Rights Confirmations or other events (including alleged repudiation) vested rights in Iambic; and
• The counterclaim in malicious falsehood.

Reasoning and findings: Applying commercial construction principles (notably Rainy Sky) the judge construed the Debenture as a mortgage/assignment including future debts and future copyright (clause 3.1.3 expressly referred to assignment pursuant to s91 CDPA). The Commissioning Agreement (clause 3 and related clauses) vested copyright and delivery material in GLE on production; the 27 July purchase order and related documents reinforced that. Consequently on production copyright vested in GLE and, under the Debenture and statutory provisions (s91 and s191C CDPA), passed to Quick Draw.

The BEP Refund and SEL Amount were either Concert Rights, Debts or money standing to the credit of the GLE account and were therefore Charged Assets held on trust for Quick Draw. The court found GLE had no right to apply those sums without Quick Draw’s prior written consent. The evidence and contemporaneous correspondence established that consent had not been given and that Mr Hunt and Mr Henry knew or strongly suspected the monies were not at GLE’s free disposal. The court therefore found breach of trust by GLE, dishonest assistance by Mr Hunt and Mr Henry, and knowing receipt by Iambic (through imputable knowledge of its director). The Rights Confirmations and post hoc documents were ineffective to divest Quick Draw.

Other findings: the trial judge made credibility findings adverse to Mr Hunt and Mr Henry and accepted Quick Draw’s witnesses where conflicts arose. The counterclaim in malicious falsehood failed because there was no evidence of malice in the solicitor correspondence complained of.

The claim succeeded. The court held that the Debenture effected an assignment/mortgage over GLE’s present and future rights (including future copyright and future debts) and therefore Quick Draw acquired the relevant intellectual property and repayment revenues; the BEP Refund and SEL Amount were held on trust for Quick Draw; GLE’s diversion of those sums was a breach of trust; Mr Hunt and Mr Henry were liable for dishonest assistance; Iambic was liable for knowing receipt; and the defendants’ counterclaim in malicious falsehood failed. The court’s reasoning was founded on contractual construction (applying Rainy Sky), statutory vesting provisions (s91 and s191C CDPA) and equitable principles governing trusts, dishonest assistance and knowing receipt.