Quick Draw LP v Global Live Events LLP & Ors

Commercial agreements must be construed as a unitary exercise, having regard to their language, commercial purpose, relevant background and business common sense. A security instrument expressed to assign present and future rights may operate as a mortgage, with future debts held on trust pending legal assignment and future copyright vesting when created. An implied term permitting withdrawals from secured assets will not be inferred where it would undermine the security.

Dishonest assistance requires a breach of trust, assistance and dishonesty judged objectively by the standards of ordinary honest people possessing the defendant’s knowledge and characteristics. Knowledge that the property is not freely disposable may suffice. Copyright and performers’ property rights created under a commissioning agreement passed to the commissioning company where the agreement so provided, notwithstanding non-payment or the abandonment of an intended broadcast.

Quick Draw provided bridging finance to Global Live Events LLP for a Michael Jackson tribute concert. The loan and debenture secured repayment from concert revenues and assigned or charged concert rights, intellectual property and future debts.

After the concert, Global Live Events entered administration. Ticket proceeds and a refund of an artist’s deposit were used without Quick Draw’s consent. Iambic Media, which had been engaged to produce recordings, claimed ownership of the recordings and sought to exploit them. Quick Draw claimed repayment, breach of trust, dishonest assistance, knowing receipt, copyright and performers’ property rights. Iambic and Mr Hunt counterclaimed in malicious falsehood.

The issues included the construction and scope of the loan and debenture, ownership of the commissioned recordings, liability for misuse of secured assets, infringement and the counterclaim.

1. Construction and security. The Loan Agreement and Debenture formed a single package and were to be construed together. Applying Rainy Sky SA v Kookmin Bank [2011] 1 WLR 2900, the Debenture operated as a mortgage rather than a mere charge. It assigned present and future rights subject to reassignment when the secured obligations were discharged.
2. The Debenture clearly extended to future copyright, performers’ property rights and future debts. The references to present assignment, agreement to assign, future assets and amounts payable could not sensibly be confined to existing property. The future debts were held in equity on trust for Quick Draw, and future copyright and performers’ rights vested in Quick Draw when created under sections 91(1) and 191C of the Copyright Designs and Patents Act 1988.
3. No term could be implied requiring Quick Draw to release secured money for production or exploitation. Such a term would undermine the security and was neither necessary for business efficacy nor obvious.
4. The BEP Refund and SEL Amount were Charged Assets and were also within the Debenture’s provisions concerning debts and money standing to the credit of the relevant accounts. Their use without prior consent was a breach of trust.
5. Mr Hunt dishonestly assisted in misapplying the BEP Refund. Mr Hunt and Mr Henry dishonestly assisted in misapplying the SEL Amount, and Iambic was liable for knowing receipt. Dishonesty was assessed objectively. It was sufficient that the defendants knew or strongly suspected that the monies were not at GLE’s free disposal.
6. Under the Commissioning Agreement, as varied or amplified by the July letter and Purchase Order, ownership of the recordings and related material passed to GLE on production. Non-payment did not postpone ownership. The inability to broadcast live and the later BSkyB agreement did not remove the recordings from the Commissioning Agreement.
7. The purported Rights Confirmations were ineffective and contrary to the Loan Agreement and Debenture. Iambic infringed performers’ property rights, and the defendants acted pursuant to a common design. Mr Henry also authorised copyright infringement. The alternative contractual, inducing breach and deceit claims would have succeeded if necessary.
8. The counterclaim for malicious falsehood failed. The Funds Claims and Rights Claims succeeded, subject to the formal accounts, repayment and consequential relief sought.