B e f o r e :
LORD JUSTICE TOULSON ____________________
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Mr Mark Barnes QC and Miss Rebecca Sabben-Clare (instructed by Reed Smith Richards Butler LLP) for the Claimant Mr Andrew Green (instructed by Lee & Thompson) for the Defendant Hearing dates: 5-6 December 2006 ____________________
HTML VERSION OF JUDGMENT ____________________
Crown Copyright ©
Lord Justice Toulson :
Introduction
The claimant ("BBCW") seeks summary declarations on a number of points of dispute which have arisen in relation to three contracts referred to as the Masterrights Agreement, the Led Zeppelin Agreement and the Archangel Agreement.
BBCW is a wholly owned subsidiary of the BBC. The BBC has in its archives many recordings of live performances of pop and rock music transmitted on BBC programmes. The agreements in issue concern the intended commercial exploitation of such recordings. Unfortunately the agreements were not well drafted and the commercial hopes were not fulfilled.
The Masterrights Agreement contained an English choice of law and exclusive jurisdiction clause. The Archangel Agreement contained an English choice of law and non-exclusive jurisdiction clause. The Led Zeppelin Agreement was intended to resolve an issue which had arisen under the Masterrights Agreement. There is an issue whether it is to be regarded as an amendment to the Masterrights Agreement (incorporating the terms of the earlier agreement except as varied) or as a free standing agreement (not incorporating any of the terms of the previous agreement), but it is common ground that, however it is regarded, its proper law is English law. So the three contracts are all governed by English law.
The Masterrights Agreement was made on 25 September 1996 between BBCW and Masterrights Limited ("Masterrights"). In outline, in return for the payment of advances of royalties, BBCW granted to Masterrights the exclusive right to manufacture and sell in the USA, Canada and Mexico, not less than 100 records comprising BBC archive recordings selected by Masterrights, subject to any necessary consent from third parties, which BBCW would use every commercially reasonable effort to obtain by clearance agreements. The term of the agreement was to be five years from clearance in respect of each artist.
The Led Zeppelin Agreement was a compromise of a dispute which arose between Masterrights and BBCW in relation to Led Zeppelin recordings. In 1996 and 1997 Led Zeppelin's management company and its record label, Atlantic Recording Corporation ("Atlantic"), repeatedly declined to grant a licence for the release of Led Zeppelin recordings through Masterrights. BBCW took the position that the refusal of clearance for release of the recordings under the Masterrights Agreement entitled it to enter into a direct agreement with Atlantic for the release of a record comprising BBC archive recordings of the band in North America. Masterrights disagreed. The issue was compromised by BBCW agreeing to pay to Masterrights an override royalty on sales of the record.
In March 2000 administrative receivers were appointed over Masterrights' parent company. By an agreement dated 20 April 2000 Masterrights and its parent assigned to the defendant ("Bee Load") all their rights in the Masterrights Agreement, as varied by the Led Zeppelin Agreement. Bee Load subsequently asserted that BBCW was in breach of its obligations under the Masterrights agreement. BBCW's position was that any obligations on its part to clear recordings for Masterrights had expired on 31 December 1997 (for reasons to which I will come) and that prior to that date it had exercised commercially reasonable efforts to obtain all relevant clearances.
Bee Load is a company registered in England but at all relevant times its only place of business was in Maine, USA, and it operated under the trading name of Archangel Limited.
On 15 August 2001 BBCW and Bee Load entered into the Archangel Agreement. In outline, the Archangel Agreement "set aside" the Masterrights Agreement as amended by the Led Zeppelin Agreement, for the duration of the Archangel Agreement, and created a new framework for the exploitation worldwide of previously unreleased recordings or re-released albums previously released under the Masterrights Agreement. The agreement was to operate from 1 September 2001 until termination by either party by six months' written notice, provided that no notice was to be effective before 31 August 2003. By letter dated 12 March 2003 BBCW gave notice to Bee Load that the agreement would terminate on 14 September 2003.
The Litigation so far
On 22 July 2003 Bee Load filed a complaint against BBCW in the Superior Court of Maine alleging breaches of the three agreements, fraud, conversion and negligent misrepresentation, and seeking the imposition of a constructive trust, damages (including punitive damages) and an account, together with injunctive and declaratory relief. Its complaint was later amended to add breaches of fiduciary duty under the Archangel Agreement.
On 2 October 2003 BBCW moved to dismiss the amended complaint on the ground of forum non conveniens, arguing among other things that Bee Load's claims were founded on the Masterrights Agreement and that the High Court was the exclusive forum for resolving those claims. Bee Load countered that the Masterrights Agreement was not part of the Maine action. It is correct that there is no count in the amended complaint headed "breach of the Masterrights Agreement", but the pleading contains assertions of breach of the Masterrights Agreement and the claims for declaratory relief include declarations concerning the status of the parties' rights under the Masterrights Agreement and whether it has been effectively terminated.
On 28 January 2004 Humphrey J refused BBCW's motion to dismiss because he considered that there were links to both England and Maine, and that BBCW had not discharged the burden of proof on it to establish that the relevant private and public interest factors strongly favoured dismissal.
On 30 March 2004 BBCW filed a further motion for partial dismissal of the complaint and for reconsideration of the earlier decision. On 2 August 2004 this application was rejected.
On 18 November 2005 BBCW began the present action. On 2 December 2005 Bee Load applied to the Maine court for a temporary restraining order (an anti-suit injunction) restraining BBCW from pursuing the English action. The application was dismissed on 6 December 2005 by Humphrey J. He said in his judgment:
On 12 January 2006 BBCW issued its application for summary judgment with which I am now dealing. On 7 February 2006 Bee Load applied to stay the present action until after the trial of the action in Maine. The application was made under CPR 3.1(2), which enables the court to stay the whole or part of any proceedings either generally or until a specified date or event. On 3 March 2006 Cooke J rejected the application.
After quoting from the judgment of Humphrey J, including the passages set out above, he observed:
The judge listed fourteen considerations which he took into account in dismissing the application. Among them, he noted that:
BBCW's summary judgment application was due to be heard on 10 March 2006. However, on 9 March 2006 Bee Load applied for Chapter 11 protection in the Bankruptcy Court for the District of Maine. As a result, under the US Bankruptcy Code an automatic stay of all proceedings against the debtor went into effect. In those circumstances, on 10 March 2006 Colman J stood out BBCW's application for summary judgment to a date to be re-fixed. By agreement between the parties, the Bankruptcy Court lifted the automatic stay as to the action in Maine, but it initially denied BBCW's application for relief from the stay in order to proceed with the present action.
On 24 March 2006 BBCW filed a further motion for the dismissal of the action in Maine or for a stay of the proceedings pending a resolution of its claims in the High Court. In a judgment dated 15 May 2006 Humphrey J refused the first part of the application but granted a temporary stay. The application to dismiss was based on Cooke J's judgment in which he had concluded that the three contracts were all subject to exclusive English jurisdiction. As to this, Humphrey J observed:
As to the application for a stay, he said:
Since at the time of his judgment the decision of the Bankruptcy Court refusing to lift the automatic stay under the Bankruptcy Code in respect of the English action was subject to appeal, and since the outcome of that appeal would determine whether the parties could proceed to a decision on the pending motion for summary judgment in this court, the court directed that the Maine action should be temporarily stayed until of the decision of that court, after which it would determine whether the temporary stay should be terminated or extended.
On 25 August 2006 BBCW succeeded in its application for relief from the automatic stay under the Bankruptcy Code in order to allow it to continue with the present action. The judge observed that he "would consider it, at minimum, beneficial and likely essential to have guidance from the High Court on the matters that are pending before it".
By a further order of the Bankruptcy Court, made by consent on 23 October 2006, the action in Maine has been transferred from the State Court to the Bankruptcy Court, with a timetable arranged in such a way that the present application would be determined before any further consideration of the merits of Bee Load's claims in Maine.
CPR 24 and the jurisdiction to give declaratory judgments
In considering whether to exercise its jurisdiction to grant a summary declaration, the court should take into account justice to the claimant, justice to the defendant, whether the declaration would serve a useful purpose and whether there are any other special reasons for granting or refusing the declaration: Financial Services Authority v Rourke 19 October 2001, unreported (Neuberger J). In this case the existence of the proceedings in Maine, in which judicial indications have been given that the view of this court on questions of English law regarding the three agreements would be welcomed, provides a cogent reason for exercising the jurisdiction provided that the necessary requirements are met.
CPR 24.2 provides that the court may give summary judgment against a claimant or a defendant on the whole of a claim or on a particular issue if it considers that the claimant has no real prospect of succeeding on the claim or issue or, conversely, that the defendant has no real prospect of successfully defending the claim or issue. Part of Bee Load's argument is that on all the issues of construction its argument is tenable, and accordingly the requirements of CPR 24 are not satisfied. This raises the question how the court should proceed where the issue raised is a pure point of construction which can be as well determined on a summary application as on a full trial (or a trial of preliminary issues), because it will not be affected by evidence. It seems to me that if at the end of the argument the court comes to a clear view as to the correct construction, the court has jurisdiction to grant summary judgment under CPR 24.2 on the basis that a trial would have no realistic prospect of causing it to reach a different judgment.
I believe that this approach accords with the underlying objective of Part 24, which superseded RSC O14, O14A and O18 r 19. RSC O14A provided for summary disposal of a case on a point of law. If I were wrong in this approach, an alternative approach in order to minimise the use of court time and the cost to the parties would be to direct the hearing of preliminary issues, reserve the matter to myself (having already heard detailed arguments on the issues) and then give judgment, but I do not believe that this is necessary. I agree with Cooke J's observation that if summary judgment is given on points of construction, it is because they appear to the judge to be clear as a matter of English law.
The Masterrights Agreement
Clause 1 contained definitions. "Territory" was defined as meaning the country or countries specified in Schedule A, clause 1, which named the USA, Canada and Mexico. The term "Recordings" was defined as meaning "those Recordings set out in Schedule B hereof". The definition clause continued:
Schedule B, clause 2, provided that for the purposes of determining the payment dates for the advance and the royalty, the parties agreed to categorise the Recordings as follows:
Schedule B, clause 3 provided that:
Schedule B, clause 4(i) set out a detailed timetable for the selection of recordings by Masterrights and the obtaining of clearances by BBCW. Masterrights was to use its commercially reasonable efforts to provide to the BBC lists of at least 25 proposed BBC records by 30 September 1996, 30 November 1996, 31 March 1997 and 1 August 1997. The BBC was to use its commercially reasonable efforts to obtain all necessary clearances for the sale and distribution in the Territory of each of the proposed BBC records, and to obtain all necessary clearances with respect to advertising and publicity rights in connection with them. If the BBC informed Masterrights that all necessary clearances could not be obtained in respect of a proposed BBC record, or one or more tracks, Masterrights would have a choice of options which would include changing the designation of the artist or a selection of tracks.
Schedule B clause 4(ii) provided:
Clause 2 gave certain rights to Masterrights to grant sub-licences.
Clause 3 provided:
Declaration 1.1
The declaration claimed reads as follows:
It is common ground that alternative B more accurately reflects the terms of the agreement as a matter of pure construction.
BBCW says that it did not in fact happen that more than 25 "C" list titles were cleared to Masterrights prior to 31 December 1997, and therefore the declaration should be in form A. However, the declaration sought is as to the proper construction of the policy, as to which alternative B is the appropriate form. There was argument about whether Bee Load has any realistic possibility of showing that more than 25 "C" list titles were cleared to Masterrights prior to 31 December 1997. On the evidence before me, I do not consider that it has, and it was pointed out by BBCW that Bee Load's amended complaint in its action in Maine states:
BBCW agrees with those statements, but they are matters of fact rather than issues which call for an interpretive declaration by this court.
Declarations 1.3 to 1.5
BBCW puts forward three alternative forms of declaration dealing with the situation where titles were nominated by Bee Load under the procedure provided for by Schedule B, clause 4(i), but BBCW was not able to obtain the necessary clearances. The fullest of the three versions is Declaration 1.5, and that reflects most accurately the terms of the agreement. It reads:
Mr Green on behalf of Bee Load objected to this form of declaration only on the ground that it failed to incorporate express reference to Bee Load having proposed the relevant recordings under the procedure set out in Schedule B, clause 4(i).
Mr Barnes QC on behalf of BBCW was agreeable to the wording being revised to accommodate that point. That should be capable of agreement, and on that basis there is no longer any contentious point for me to decide on the issue of the parties' rights where nominated titles could not be cleared.
Declarations 1.2, 2 and 3
These declarations deal with the rights of the parties to the Masterrights Agreement after 31 December 1997 and involve the construction, in particular, of Schedule B, clause 4(ii).
Declaration 1.2 reads:
The form of declaration set out in the points of claim includes a further sub-paragraph (b), but that is less straightforward and in his oral argument Mr Barnes did not pursue it.
Declaration 2 reads:
Declaration 3 reads:
The factual background is that at 31 December 1997 BBCW had not delivered to Bee Load 100 cleared titles. The key issue is whether after that date Bee Load had a continuing right to provide lists of proposed recordings to the BBC, and BBCW was under a continuing duty to procure that the BBC used commercially reasonable efforts to obtain all necessary clearances until 100 cleared titles had been delivered. BBCW's case is that after that date Masterrights had no continuing right to propose records and BBCW had no continuing obligation to procure that the BBC tried to obtain clearances for proposed records. Bee Load's case is that Masterrights' entitlement to propose records and BBCW's obligations in relation to the obtaining of clearances would continue until such time as 100 cleared titles were delivered (unless the parties entered into alternative arrangements or the agreement was terminated by repudiatory conduct of one party accepted by the other).
Mr Barnes submitted that it followed necessarily from the language of Schedule B clause 4 (ii) that unless the parties agreed to an extension of the timeframe in which 100 titles or more could be cleared, BBCW's obligations to procure clearances ended at 31 December 1997. He further submitted that there was no enforceable obligation in relation to the extension of the timeframe, because an obligation to discuss in good faith an extension was unenforceable as a matter of law. For this proposition he relied on the decision of the House of Lords in Walford v Miles [1992] 2 AC 128, at 138, where Lord Ackner said that an agreement to negotiate, like an agreement to agree, is unenforceable because it lacks the necessary certainty. Lord Ackner continued:
Mr Green submitted that if the clause was unenforceable, it had no legal effect of any kind. He further submitted that there was nothing in the agreement which expressly precluded Masterrights from continuing to propose records after 31 December 1997 or which limited BBCW's obligations in relation to obtaining clearances to the period before that date. Such a cut off date could also cause manifest unfairness. If, for example, a problem over clearance related only to a single track of a record, and Bee Load was notified of the BBC's inability to obtain clearance for that track on 30 December 1997, it would be unfair for Bee Load not have a reasonable time in which to exercise its option to change its selection of tracks.
The starting point for the construction of any clause in any agreement is that the court will assume that it is intended to fulfil a purpose and will try, so far as it can, to construe and apply the clause so as to give effect to that purpose. In this case it is not difficult to detect the underlying purpose of Schedule B, clause 4(ii), when seen in the context of the provisions about payment of advances in Schedule A and the timetable for proposing records and obtaining clearances contained in Schedule B, clause 4(i).
The evidence does not disclose how far, if at all, Masterrights and BBCW were cooperating before the agreement was formally signed, but under it Masterrights was to use its commercially reasonable efforts to provide its first list of proposed records within 5 days after the signature of the agreement. It was to use its commercially reasonable efforts to provide further lists at intervals over the next 10 months, which would bring the total number of proposed records to not less than 100. The dates set were not expressed to be of the essence of the contract, but on the other hand the setting of the timetable is inconsistent with an intention that Masterrights' entitlement to the proposed records should be entirely open ended. It is a reasonable conclusion from the agreement that the parties considered that by the end of 1997 the BBC should have been able to obtain all necessary clearances for the records proposed, if the clearances were obtainable, and that Masterrights should have been able to exercise its alternative options, if the clearances were not obtainable. If the parties had intended that Bee Load should have an ongoing right to nominate records, and the BBC should have an ongoing obligation to obtain clearances, after the end of 1997, there would have been no need to "extend" the timeframe in which 100 titles could be cleared, as contemplated by Schedule B, clause 4(ii), because the timeframe would not have expired. If, however, the timeframe expired on that date, without 100 titles having been cleared, there was a risk of Bee Load suffering financial loss through having made an advance payment or payments under Schedule A, unless some mechanism was provided to enable Masterrights to recoup its loss. The obvious purpose of Schedule B, clause 4 (ii) appears to me to have been to provide such a mechanism. The clause envisaged two possibilities. The first possibility was an agreed extension of the timeframe "to enable Masterrights to recoup its investment". The second alternative was that the number of titles and size of the advance might be proportionately reduced according to the value formula in Schedule A.
If, as seems clear to me, that was the purpose of the clause, is the court able to give effect to it under English law? If the clause had merely provided that the parties should discuss in good faith an extension of the time frame to enable Masterrights to recoup its investment, I would have judged it to be unenforceable for uncertainty. However, the alternative possibility, namely a reduction in the number of titles (to the number which had in fact been cleared) and a proportionate reduction in the size of the advance according to the value formula in Schedule A, would be a simple enough matter. If the parties were unable to agree on the figure, it could be determined by a court. In my judgment proper effect can be given to the purpose of Schedule B, clause 4 (ii) by construing it so that if at 31 December 1997 BBCW had failed to deliver 100 cleared titles, unless the parties agreed to extend the timeframe for the clearance of titles to enable Masterrights to recoup its investment by that means, Masterrights would be entitled to a proportionate reduction in the advance according to the number of titles which had been cleared (and their classification). Obviously if there had been an antecedent breach of the agreement by BBCW, for example in failing to procure that the BBC used its commercially reasonable efforts to obtain all necessary clearances for the sale of records proposed by Masterrights, Masterrights would have been entitled to hold BBCW liable for such breach, but that is quite different from BBCW being under a continuing obligation to procure releases after 31 December 1997.
In my judgment that construction not only gives effect to the commercial purpose of the parties as it appears from the language of the agreement, but also makes commercial sense. It would have been surprising if BBCW had been willing to tie up the release in North America of its entire archive of pop and rock recordings for an indefinite period.
There is, however, a further issue, which formed a major part of Bee Load's argument. It contends that there is (at least) an arguable defence that BBCW is estopped by convention from denying that its obligations in relation to clearances, and Masterrights' entitlement to proposed records, continued beyond 31 December 1997. In his skeleton argument, Mr Green put forward an alternative argument that the agreement was varied by conduct, but that argument was not pursued at the hearing.
The essential principles regarding estoppel by convention are not in dispute. The party asserting an estoppel by convention must establish that:
Further, where there is a mutual assumption between contracting parties about their contractual rights and obligations, one party will only be estopped from relying on the actual provisions of the contract if it would be unjust or unconscionable to allow that party to do so ( The Leila [1985] 2 Lloyd's Rep 175, The Vistafjord).
Bee Load asserts that there was in the present case a clear mutual assumption that Masterrights' and BBCW's rights and obligations in relation to proposing records and obtaining clearances did not come to an end at 31 December 1997. There is no dispute that after that date BBCW continued for a time to attempt to obtain clearances, but it does not follow that there was a convention that BBCW was contractually obliged to do so.
I have been referred to various communications which "cross the line". On 26 February 1998 BBCW wrote to Masterrights' solicitors as follows:
Masterrights did not accept that statement of the contractual position, and the parties continued for a time at an operational level to entertain the possibility of the release of further records, but there is no evidence of communication between the parties which demonstrates that BBCW accepted that it was under a legal obligation to do so, contrary to the terms of its previous letter. In the event, it does not appear that any further records were released other than the 5 identified in Bee Load's amended complaint in the action in Maine (and in declaration 3), and I do not consider that Bee Load has any sustainable argument that BBCW was obliged to obtain any further clearances under the Masterrights Agreement, whether as a matter of the true construction of the agreement or by application of the doctrine of estoppel by convention. I will hear further argument from the parties about the most appropriate form of declaration on this issue in the light of this judgment.
Declaration 9
The declaration reads:
This may not necessarily be so, because BBCW's letter dated 26 February 1998 (to which I have referred) acknowledged an accounting obligation under Schedule B, clause 4(ii). I heard no argument about whether that obligation falls within the terms of the Limitation Act or whether it would be governed by the equitable doctrine of laches or, in any event, whether it would be too late for Bee Load, as Masterrights' assignee, to enforce it (if it has not already been fulfilled).
The Led Zeppelin Agreement
The Led Zeppelin Agreement begins as follows:
Detailed provisions followed about the override royalty to be paid by BBCW and how the accounting was to be done.
Clause 13(B) and (C) of the Masterrights Agreement contained provisions entitling BBCW to make enquiries about levels of sales of records by Masterrights and to appoint an accountant to examine Masterrights' books in so far as they related to sales of records and monies payable to BBCW. These provisions would clearly be inapposite in relation to sales of Led Zeppelin records by Atlantic, giving rise to an obligation for payment of an override royalty by BBCW to Masterrights. Accordingly, paragraph 3 of the Led Zeppelin Agreement included a provision that:
Declaration 10
The declaration reads:
This is a question of fact. On the evidence before me (containing accounting documents) the assertion appears to be correct, but I do not think that it would be appropriate for me to make a formal declaration, and I am not sure what value it would have if I were to do so. The court in Maine has indicated that it would be assisted by declarations of this court on issues of English law, but it will naturally decide questions of fact on the evidence presented to it.
Declaration 11
The declaration reads:
Mr Green objected to this declaration on four grounds; that it is unnecessary in view of the observations of Cooke J in his judgment on the application for a stay of the present action; that it would invite conflict with the court in Maine, which has said that the Led Zeppelin Agreement did not incorporate the terms of the Masterrights Agreement (except as varied); that the Led Zeppelin Agreement was on its proper construction a free standing agreement; and that the form of the declaration is unclear.
There is no doubt that the Led Zeppelin Agreement varied the Masterrights Agreement. The term "side agreement", although commonly used, does not bear a particular legal meaning. There is a potential question of construction to what extent the Led Zeppelin Agreement varied the Masterrights Agreement, and to what extent provisions in the Masterrights Agreement apply to the Led Zeppelin Agreement, but it is necessary to identify more precisely what the issue is.
The point on which the parties concentrated in argument was whether the jurisdiction clause in the Masterrights Agreement applies also to the Led Zeppelin Agreement.
In his judgment on the application for a stay, Cooke J said at para 27:
I share that view. The fact that the Led Zeppelin Agreement stated that the terms set out in it were to apply in substitution for those in the Masterrights Agreement does not prompt the conclusion that the two agreements were to be treated as if wholly independent of one another. The transposition of references to the BBC for references to Masterrights in clauses 13(B) and (C) of the Masterrights Agreement was necessary because those clauses would not otherwise work as intended; but it could not be sensibly supposed that the parties intended that a dispute as to the application of those clauses should be dealt with by different jurisdictions according to whether the dispute related to the clause in its original form or the clause as applicable in relation to Led Zeppelin records.
The judgment of Humphrey J dated 15 May 2006 does not, as I read it, express a different view. On the contrary, he referred to Cooke J's reasoning as irrefutable, but he went on to rule that the "High Court's sound reasoning" did not foreclose continuation of the action pending in Maine, for the reasons which he explained.
It may therefore be that there is no practical utility in my declaring that as a matter of English law the exclusive jurisdiction clause of the Masterrights Agreement applies to the Led Zeppelin Agreement, for Humphrey J has already proceeded on that premise. Equally, to make such a declaration would involve no affront to comity, and if BBCW wants such a declaration to be made, I think that I should make it since it represents the clear position under English law as I see it. A declaration in terms similar to the language used by Cooke J would not involve uncertainty.
The Archangel Agreement
Clause 1 contained the following statements:
Clause 2 provided:
As already stated, the agreement was to operate from 1 September 2001 until either party terminated it by six months notice in writing, subject to the proviso that no such written notice should be effective before 31 August 2003, and the territory was to be the world.
Clauses 8 and 12 set out detailed working arrangements and financial arrangements. The parties were to establish an executive committee. Apart from certain decisions about which BBCW was to have a casting vote (e.g. in relation to the use of the BBC name), in the event of a deadlock either party was to have a power of veto. The parties were to prepare a detailed business plan, and net profits in respect of sales specified in the business plan were to be distributed equally between the parties.
Clause 15 provided:
Clause 19 was a confidentiality clause.
Clause 21 provided:
Declarations 13 and 14
These declarations read:
As Bee Load observed in its skeleton argument prepared for the intended hearing of the present application on 10 March 2006, these alternative forms of declaration are inextricably linked with declarations 2 and 3, and would only be material if BBCW had failed in respect of those declarations. As it is, in my judgment at the date of Masterrights' assignment of its rights under the Masterrights Agreement to Bee Load, Masterrights' only continuing rights were its rights in respect of the albums released under the agreement (which would continue for 5 years from clearance) and whatever right it had to proportionate repayment of its advance pursuant to Schedule B clause 4 (ii). (If there had been prior breaches of the Masterrights Agreement by BBCW, Masterrights may have been entitled to claim damages, but that would be a different matter from the existence of continuing unfulfilled contractual obligations.) By clause 1.4 of the Archangel Agreement those rights were set aside for the term of the Archangel Agreement. In relation to albums previously released, the Archangel Agreement provided in its place, by clause 2.2, for the potential re-release of those albums on the profit sharing terms set out in the agreement.
I doubt the value of making any formal declaration about these matters, since they follow as a matter of simple logic from my construction of the Masterrights Agreement, but I will give the parties the opportunity to make further observations before any order is drawn up.
If I had not formed the clear view which I have about the construction of the Masterrights Agreement, I would have concluded that any continuing rights under it were set aside for the term of the Archangel Agreement, not only because of the wording of clause 1.4, which seems to me to be unambiguous, but also because the whole framework (including the financial provisions) for the exploitation of the BBC pop and rock archive is quite different under the Archangel Agreement from that under the Masterrights Agreement. The argument put forward by Bee Load that the words of clause 1.3 that Archangel was "contributing the benefit of the Masterrights Agreement" somehow entitled Bee Load to enforce previous rights of Masterrights under the aegis of the Archangel Agreement is in my view unsustainable, but it is unnecessary to go into that in further detail because of my conclusion as to the proper construction of the Masterrights Agreement.
It was also suggested on behalf of Bee Load that there was an arguable case that BBCW was estopped by convention from denying that rights under the Masterrights Agreement were "incorporated into" the Archangel Agreement. Again, it is unnecessary to discuss that further since I have concluded that there were no continuing rights and obligations under the Masterrights Agreement except of the narrow kinds which I have identified (rights in respect of released albums, which were superseded by clause 2.2 of the Archangel Agreement, and a right to a repayment of a proportionate share of any advance payment).
Declarations 15 and 16
These declarations read:
In my judgment declaration 15 is too broad for reasons which can be seen by comparison with declaration 16. Suppose that the parties selected a recording by an A list artist for release. The exploitation of that recording would undoubtedly fall within the scope of the agreement by virtue of clause 2.1. It was the intention of the parties, as stated in clause 3, that there would be a marketing campaign for each A list artist's album involving a television programme dedicated to the artist. The marketing expenses involved in that exercise would be part of the expenses to be deducted before calculation of the net profits to be shared by the parties under clause 12. A declaration in the terms of declaration 15 would mean that BBCW would be entitled in such circumstances to release the same recording to another company (which had not contributed to any marketing expenses), possibly for a higher royalty. It is hard to imagine that it could have been within the parties' intention that BBCW should be able to act in such a way. When faced with the point in argument, Mr Barnes did not suggest that it was.
Declaration 16 was formulated in such a way as to track clause 2.2 of the Archangel Agreement, which is headed "scope of profit share agreement" and identifies the recordings to which the agreement relates. BBCW's argument is that there was nothing in the Archangel Agreement to preclude it from exploiting in other ways recordings which were never brought within the scope of the profit share agreement. In principle, that argument is in my judgment correct. This was not a licence agreement creating an exclusive worldwide licence in respect of the entirety of the BBC's rock and pop archive, but an agreement to share the profits from the exploitation of certain recordings from the archive to be chosen by the parties jointly.
However, I have reservations about the form of wording. Paragraph 16.3 ends with the words "which the Executive Committee had decided would be released pursuant to clause 2.3 of the Archangel Agreement". That echoes the sentence beginning "The number of releases and choice of repertoire shall be decided by the Executive Committee…", which typographically appears as if it is part of clause 2.3, but must, I think, from its content refer to the whole of clause 2. Clause 2.1 provided for initially "no less than" six "A" list artist albums. Bee Load asserts in its evidence that the parties agreed a business plan which included a number of A list artists not included in Schedule 1 to the agreement. Clause 12 provided that the parties were to prepare a detailed business plan dealing, among other things, with details of release strategy for albums and promotional programmes in terms of the specific artists from whom clearance would be sought and the number of albums proposed to be released in each year of the agreement. If so, it is well arguable that the contractual effect would be to add those artists to the list in Schedule 1 for the purposes of the agreement. The wording needs revision in my view for the reasons stated above.
Bee Load argued more broadly that there was an estoppel by convention, the effect of which was to preclude BBCW from permitting the release of any recording from its pop and rock archive other than under the Archangel Agreement, even if the recording was not within clause 2 or Schedule 1 or any business plan. In my view, the communications between the parties which are relied upon by Bee Load to support that contention, when examined as a whole, do not show any realistic prospect of such a convention being established. By way of example, on 27 March 2002 Mr McNulty of Bee Load sent an e-mail to Angela Robertson of BBCW in which he asserted that "The Archangel Agreement contributes "the rock and pop archive" worldwide for two years and terminable with six months notice, then we go back to 100 artist Masterrights Agreement". Miss Robertson replied on the next day. Bee Load relies on part of her e-mail, in which she referred to the benefit of the Masterrights Agreement becoming part of the profit share arrangement between BBCW and Archangel, but she went on to say that "As you know, we do not share your interpretation of the Archangel Agreement but our view is that these issues can be discussed…while we proceed to try to clear titles for release." Read as a whole, it is impossible in my view to read her e-mail as an agreement to the proposition that the Archangel Agreement precluded BBCW from releasing any part of its pop and rock archive in any part of the world for two years, except under that agreement. Further, I do not see why it would be inequitable for BBCW to release to a third party a recording which was not within the scope of the Archangel Agreement as set out in clause 2, nor by an artist identified in Schedule 1 or in any business plan agreed between the parties.
Declarations 18 and 22:
Declaration 18 reads:
Declaration 22 reads:
Clause 15 provided:
The agreement to consider in good faith any request by Archangel to extend the scope of the agreement is in my view unenforceable as a matter of English law on the principle of Walford v Miles .
Mr Green relied on observations of Longmore LJ in Petromeck Inc v Petroleo Brasileirosa Petrobus at paragraphs 115 to 121. At paragraph 116 he said:
He went to say that he doubted whether any of those objections would be good reasons for saying that the obligation to negotiate in good faith contained in the clause with which the court was concerned in that particular case was unenforceable. In that case Petromeck agreed to carry out certain work to a vessel and Brasileirosa agreed to pay to Petromeck the reasonable cost of doing so. The relevant clause went on to say Brasileirosa agreed to negotiate the costs with Petromeck in good faith. (The clause was rather more complex, but that was the essence.) So there was a substantive obligation on the part of Brasileirosa to pay Petromeck's reasonable costs, and the agreement to negotiate them in good faith was a matter of machinery for quantifying them. Longmore LJ observed that the cost to Petromeck was comparatively easy to ascertain; that if agreement was not reached, the court would itself have to ascertain the reasonable cost; and that if the court was able to conduct the exercise of finding the reasonable cost, there should be no difficulty in deciding what the result of good faith negotiations was likely to have been. Unless there were special factors present, it was likely to be the same as the reasonable cost. By contrast, in the present case clause 15 cannot be regarded as machinery for determining the amount of a contractual liability. The clause provides no criteria by which a court could determine whether "in good faith" any particular request for any particular form of extension should be considered favourably.
I was also referred to the decision of the Court of Appeal in Blackpool and Fylde Aeroclub Limited v Blackpool Borough Council [1990] 1 WLR 1195 , where it was held that a party which invited tenders owed a contractual obligation to consider any tenders submitted in time. However, in that case, which turned on rather peculiar facts, it was no part of the plaintiffs' case that the defendants were under any obligation to make a fair selection based on the merits of the tenders received. The court did not therefore have to consider the enforceability of an agreement to consider an offer fairly.
Clause 6.3 is on its face nothing more than a statement of intent, as distinct from a promise, and as such it did not give rise to any future obligations.
The point was made on behalf of Bee Load that if at the time of the Archangel Agreement BBCW had no intention of the kind stated in clause 6.3 and/or had no intention of considering any future request to extend the scope of the agreement, clauses 6.3 and/or 15 would have constituted misrepresentations. I agree, but declarations 18 and 22 do not suggest otherwise. It seems to me that BBCW is properly entitled to declarations that the relevant clauses do not constitute enforceable contractual promises as a matter of English law.
Declaration 19
This declaration is undisputed except in relation to its precise form of wording, which should be capable of agreement.
Declaration 23
The declaration reads:
I see no realistic prospect of Bee load establishing that the Archangel Agreement was a partnership agreement. Clause 21 stipulated that it was not to constitute a partnership and that neither party should do or permit any act to be done whereby it might be represented as being the agent or partner of the other. The agreement also contained an entire agreement clause (clause 24).
The fact that the parties specified that the agreement was not intended to create a partnership is not conclusive: Adam v Newbigging (1888) 13 App Cas 308 315 (Lord Halsbury LC) and Weiner v Harris [1910] 1 KB 285 , 290 (Cozens-Hardy MR). The court has to look at the document as a whole in order to determine its legal effect. The matter is helpfully summarised in the following passage from Lindley and Banks on Partnership (18 th Ed), para 5-04:
The same text book goes on to discuss "joint ventures", a term which does not have a precise legal meaning. It observes, at para 5-07:
Clause 22 also stated that the agreement was not to constitute a joint venture between the parties. It is not clear to me what the drafter had in mind as a joint venture, because it was certainly an agreement to cooperate in a venture for an equal share of the profits, which was a form of joint venture as I would understand the phrase. But the issue is whether it constituted a partnership agreement.
Partnership is defined in Section 1 of the Partnership Act 1890 as the relation which subsists between persons carrying on a business in common with a view of profit. Sharing of the profits of the business is prima facie evidence of partnership. Carrying on business in common involves mutual agency, and indeed mutual agency is of the essence of partnership. If, therefore, there was a genuine intention that the participants in the venture were not to be agents of one another in the dealings of either of them with third parties, that would negate an intention to enter into the legal relationship of partners.
In this case the agreement stipulated that neither party should represent itself, or permit itself to be represented, as the agent of the other, and I can see nothing in the details of the agreement inconsistent with that being a true intention, or suggestive that third parties were intended to be led to suppose that there was a partnership. The agreement did not, for example, create a business name for the venture. It was obviously contemplated that there would be dealings with record companies and artists with a view to entering into specific agreements with them in relation to the recordings, and under clause 8 BBCW was to be responsible for those matters. In the evidence filed on behalf of Bee Load reference was made to BBCW acting as "the venture's agents" with respect to such matters, but that is not the language of the agreement. As I see it, any agreement made between BBCW or the BBC with a record company or an artist for the release of a recording would have been entered into by it as a principal rather than an agent on behalf of itself and Bee Load.
It is perfectly common for commercial entities to want to enter into cooperative arrangements for a specific purpose, involving a share of profits, but without intending to follow the route of mutual agency and the court should give effect to their intentions.
As to declaration 23(ii), Bee Load argued that, if the Archangel Agreement did not constitute a partnership agreement in the strict sense, it created an analogous relationship giving rise to fiduciary duties. There are certainly features of the Archangel Agreement which are analogous to partnership, particularly the profit sharing. But I have difficulty in following the argument about fiduciary duty, because it does not seem to me to be sufficiently specific or focused. Two statements of the highest authority are relevant when considering a question of fiduciary duty in the context of a commercial contract.
In Henderson v Merrett Syndicates Limited [1995] 2 AC 145 , a case concerning underwriting agents, Lord Browne-Wilkinson said:
In Re Goldcorp Exchange Limited [1995] 1 AC 74 a company dealing in bullion contracted to sell quantities of bullion to customers on terms that the company would store the bullion. The company went into receivership and questions arose about the rights of non-allocated claimants. It was argued on their behalf that the company was a fiduciary. Lord Mustill said at page 98:
Both these passages stress the importance of identifying any particular fiduciary duty alleged to have been owed, and both stress the importance of giving full effect to the terms, and limitations, of any underlying contract. The Archangel Agreement was a commercial contract. Despite the existence of some analogy with a partnership, I have difficulty in seeing how as a matter of English law a commercial contract of this kind would give rise to duties wider than, or of a different character from, the contractual obligations created by it. I do not think that it would be appropriate for me to go further than that by making a formal summary declaration about the existence of duties the precise nature of which is not fully clear to me from the arguments presented. I hope, however, that my reasoning and observations will be of some assistance to the court in Maine in showing what I conceive to be the correct approach as a matter of English law.
The term "obligation of good faith" is less specific even than fiduciary duty. I do not see the Archangel Agreement giving rise under English law to some species of "obligation of good faith" that was somehow to operate over and above its contractual provisions. On the other hand considerations of good faith, like considerations of reasonableness, may possibly be relevant in determining the scope of particular contractual provisions, but I have not heard detailed argument about that. It would not in my judgment be appropriate to make a formal summary declaration in the broad language of declaration 23(iii), but again I hope that my observations will be of assistance to the court in Maine.
Declaration 26
This declaration reads:
In my judgment this declaration is plainly correct. Bee Load's argument to the contrary is that the words of clause 4 that "no such written notice shall be effective before 31 August 2003" mean that no such written notice may be given before 31 August 2003. That is in my view a strained and incorrect interpretation of the words. I read the words "shall be effective" as meaning "shall have the effect of terminating". The two requirements of a notice are that it must be given (at least) six months before it is to take effect, and that it is not to take effect before 31 August 2003. The notice given by BBCW complied with those requirements.