Case No. IP-2021-000073

”). Clause 4.6 reads:“Copyrights shall keep full and proper books of accounts and records showing clearly all receipts, payments and transactions relating to this agency and to the Property. Copyrights shall allow you [Paddington] or your representative at all reasonable times to have access to such books of accounts and records for the purpose of auditing and inspecting them and taking copies thereof.” (my explanatory note).69.Pixdene submits that pursuant to that clause 4.6 of the Copyrights Agreement Paddington has an entitlement to access, audit, inspect and take copies of the Part B Requested Documents. Accordingly, it argues, they are within the scope of clause 5 of the RDA because there is no basis to restrict clause 5 to documents which Paddington owns, rather it encompasses documents to which Paddington has a right to inspect or take copies.70.Pixdene relies upon the definition of “control” in CPR 31.8 as a “helpful guide” when interpreting clause 5. CPR 31.8 deals with a party’s duty of disclosure being limited to documents which are or have been in a party’s control. CPR 31.8 (2) defines a document as being in a party’s control if: (a) it is or was in his physical possession; (b) he has or has had a right to possession of it; or (c) he has or has had a right to inspect or take copies of it. On that definition, Pixdene submits, the Part B Requested Documents are within Paddington’s control whether it has copies of them in its possession or not, as it has a right to inspect or take copies of them pursuant to Clause 4.6 of the Copyrights Agreement. 71.Paddington submits that the question is whether the Part B Requested Documents fall within “any other business records of Paddington” which are also relevant to the verification of Paddington’s compliance with the RDA, since that is the purpose for which inspection is being provided. It argues that clause 5 would not apply to an agreement or business record of Paddington that did not relate to merchandising income but, for example, income from film rights, as that would be irrelevant to Pixdene’s rights under the RDA.Discussion and determination72.There is no definition of “business records” in the RDA and that phrase is not a term of art with a particular legal meaning. I do not think that CPR 31.8 is of particular assistance as there is no reference to that rule in clause 5 of the RDA, and it is not clear why a reasonable person having all the background knowledge of the parties at the time of the RDA would have understood the parties to have meant that clause 5 should be construed with reference to the definition of control in CPR 31.8, particularly as there is no use of the word “control” in clause 5 of the RDA. In my judgment we must give “business records” the ordinary English meaning of documents (electronic or otherwise) which are kept for the purposes of running a business, and I consider that it is generally understood that encompasses documents which the business keeps in its possession or which are otherwise in its control, including its documents held by third parties which it has the right to call for. 73.I agree with Paddington that its obligation to provide for inspection of “the agreements and any other business records of Paddington with respect to the relevant records or associated matters” is limited by the purpose of the inspection: to enable the third party auditor “to verify Paddington’s compliance with the RDA”. I am satisfied that the reasonable person with all the background knowledge of the parties at the time of the RDA would have understood that to mean that Paddington was only obliged to provide for inspection its agreements and any other business records which are relevant to the calculation of merchandising royalties relating to Paddington Bear.74. Without that limitation: (i) the references to “relevant” records and “associated” matters would be meaningless, and the court is slow to ignore deliberately chosen language particularly by professionally advised commercial parties; and (ii) Paddington would be obliged to disclose all its business records, including matters which have no conceivable relevance to Pixdene’s entitlement to a share of merchandising royalties, such as employee sickness records, health & safety records etc., as well as more obviously related (but equally irrelevant) documentation including agreements dealing solely with film and television royalties. I am satisfied the reasonable person with the relevant knowledge of the parties at the time would not understand the parties to mean that clause 5 should open all business records of Paddington, including those irrelevant to the question of whether Paddington had complied with the RDA, up to the third party auditor.75.Dealing first with the Royalty audits carried out on behalf of Copyrights relating to Paddington Bear (as distinct from Royalty audits carried out by Paddington or by Copyrights on behalf of Paddington, which the Claimant has accepted are within the scope of clause 5 by para 4 of Part A to Appendix 1 of the Amended Particulars of Claim): I am satisfied that such audits, if they exist, are part of Paddington’s own business records because Paddington has a right to obtain them under clause 4.6 of the Copyrights Agreement. I am not persuaded by Paddington’s argument that they are not, because they are Copyrights’ records not Paddington’s; a business may have many business records where they do not have ownership of the underlying document. Nonetheless if the document is in their possession or control, including having the right to call for the document, it is a business record. However, Paddington is only obliged to make them available for inspection pursuant to clause 5 of the RDA if they are relevant to the calculation of merchandising royalties relating to Paddington Bear. If they are not, Paddington does not.76.In relation to the Edwin Coe LLP quarterly reports for Copyrights in respect of worldwide trade mark applications, however, I do not consider that these are part of Paddington’s own business records which Paddington is obliged to disclose because: i)Pixdene has not explained why it considers that these fall within Clause 4.6 of the Copyrights Agreement (which allows inspection and copying by Paddington of Copyrights’ “full and proper books of accounts and records showing clearing all receipts, payments, and transactions relating to this agency and to the Property”, but do not appear to cover trade mark reports) and so it is not clear to me that Paddington may call for them. If it cannot, they are not within its control;ii)Pixdene has provided no other satisfactory reason why they would form part of Paddington’s “business records” for the purposes of verifying Pixdene’s entitlement to a share of merchandising royalties. Paddington distinguishes between these reports and Edwin Coe LLP’s invoices for the work done in producing the reports, which it accepts would be part of Paddington’s business records relevant to the calculation of deductions (because Paddington has a right to the invoices under Clause 4.6 of the Copyrights Agreement), and as such within clause 5 – as both parties have agreed at item 6 in Part A of Appendix 1 to the Particulars of Claim. Pixdene submits that the quarterly reports will enable the auditor to understand the nature of such expenditure evidenced by the invoices, and check that they are correctly applied, but if Paddington has no right to obtain them then they cannot form part of its business records, in my judgment.77.I further accept Paddington’s submission that to the extent that such reports contain legal advice, they would be legally privileged. For reasons I have given earlier, Paddington is not obliged to make legally privileged documents available for inspection pursuant to clause 5.