BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
INTELLECTUAL PROPERTY LIST (ChD)
INTELLECTUAL PROPERTY ENTERPRISE COURT
The Rolls Building 7 Rolls Buildings Fetter Lane London EC4A 1NL |
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B e f o r e :
(SITTING AS A JUDGE OF THE CHANCERY DIVISION)
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Between:
MR KIERAN HEBDEN
Claimant
– and –
DOMINO RECORDING COMPANY LIMITED
Defendants
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SAM CARTER (instructed through the public access scheme) appeared for the Claimant.
TOM RICHARDS (instructed by Russells) appeared for the Defendant.
Hearing dates: 16 December 2021
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Crown Copyright ©
- The Claimant, Mr Kieran Hebden, is a musical performing and recording artist who performs and records under the name Four Tet, among others.
- Mr Hebden has engaged Mr Carter as Counsel under the direct access scheme. He is also assisted on legal issues by Mr Aneesh Patel, but is formally conducting the litigation on his own behalf.
- The Defendant, Domino Recording Company (“Domino”) is an independent record label. Domino’s solicitors are Russells. It was represented at the hearing by Mr Richards.
- Mr Hebden and Domino entered into an exclusive recording agreement dated 28 February 2001 (the “2001 Agreement”). Under that agreement, Mr Hebden was obliged to provide certain sound recordings to Domino within a specified period and assigned the copyright in those sound recordings (the “Masters”) to Domino. During that period, Mr Hebden was obliged to provide his services as a musical recording artist under the name Four Tet only to Domino. Domino released the Masters and accounted for and paid royalties in respect of them.
- The claim was issued in the Intellectual Property Enterprise Court on 16 December 2020.
- In very broad terms and for background purposes only, Mr Hebden’s existing claim is that Domino has breached its contractual obligations under the 2001 Agreement, in particular by failing to account properly for royalties in respect of streaming and digital downloads. Mr Hebden seeks a declaration as to the true construction of the 2001 Agreement and monetary relief capped at £70,000.
- The Defence was filed and served on 21 February 2021, resisting the claim in its entirety. A Reply was served on 12 March 2021.
- At the CMC on 23 April 2021, a split trial was ordered with issues of liability to be determined first. The liability trial was scheduled for the third week of January 2022 and was set down for trial over two days with half a day judicial pre-reading.
- Disclosure was given on 30 July 2021. A specific disclosure application by the Claimant on 11 November 2021 resulted in limited further disclosure by the Defendant.
- There are two applications:
- Both applications arise from recent events which are briefly summarised below:
- Domino contends that, as it has made an open offer to pay Mr Hebden’s existing money claim in full, and has undertaken not to exploit the Masters digitally in future, Mr Hebden has no real prospect of obtaining the declaratory relief he seeks because it would serve no useful purpose. In those circumstances, it is said that the pursuit of the remainder of the current claim to trial is an abuse of process as it is “not worth the candle” (Jameel v Dow Jones and Co [2005] EWCA Civ 75, [2005] QB 946).
- Domino also contends that Mr Hebden’s claim should be dismissed because it is pursued for an improper collateral purpose, namely, to exert pressure on Domino to assign the copyright in the Masters to Mr Hebden, rather than to vindicate any legal right alleged in the claim.
- The draft amendments allege that Domino’s decision to withdraw the Masters from digital release and no longer to make them available digitally breaches the 2001 Agreement. The amendments focus on the construction and scope of Domino’s release obligations under the 2001 Agreement and on the consequences of the alleged breach of those obligations. Permission is also sought to add an alternative claim relating to alleged restraint of trade. If permitted, the draft amendments would add significant new claims to the existing proceedings.
- It was agreed that if the Amendment Application succeeded the trial would have to be vacated. Domino has stated that, in those circumstances, its position would be that the action, including any amended claims, should be transferred into the Chancery Division. Mr Carter stated on instruction that Mr Hebden could afford to continue the litigation only if it remained in IPEC.
- Given the implications for the SJ Application of the success or failure of the Amendment Application, Counsel first made submissions on whether any or all of the proposed amendments should be permitted. By the time submissions on that aspect had concluded, there was no longer sufficient time to hear submissions on the SJ Application, notwithstanding earlier suggestions by Mr Carter that the entire hearing would take no more than half a day at most.
- As I had by that time reached a conclusion on the Amendment Application, I considered that in the interests of efficiency and of justice, I should tell the parties of my decision on that application, indicating that I would provide a reasoned Judgment in due course. For the reasons set out below, the Amendment Application was refused in respect of the pleadings related to restraint of trade, but granted for the other grounds. It was therefore not necessary to address the SJ Application.
- The proposed amendments will be more easily understood in the light of two key provisions of the 2001 Agreement:
- Clause 16 contains further potentially relevant provisions, requiring Domino to obtain Mr Hebden’s approval before undertaking various acts in respect of the Masters. The acts in question include resequencing or otherwise altering the Masters. Clause 16 also provides that Domino will consult with Mr Hebden before entering into a licence agreement covering the United States of America. As will become apparent below, an issue between the parties is as to the construction of “Term” and its implications. For convenience, I summarise their positions on this issue here.
- The parties are agreed that the exclusive recording provisions of the 2001 Agreement terminated in around 2005.
- Mr Hebden’s position is that the Term related primarily or only to those exclusive recording provisions and that at least Domino’s royalty and release obligations continued after that date. The proposed amendments plead that Domino’s recent conduct was a breach of those remaining elements of the contract.
- Domino’s position is that, while some aspects of the 2001 Agreement (such as those relating to accounting and payment of royalties) survived the “Term”, no obligation to release or promote survives the Term and that any other reading is inconsistent with the wording of clause 4, which is also said to set out the sole remedies available for breach, in combination with clause 14.8, which provides for certain notice requirements:
- Amendments to Statements of Case for which permission is necessary are dealt with under CPR 17.3. The Court’s exercise of its discretionary power to permit amendment “should have regard to all the matters mentioned in CPR.1.1(2) so as to deal with the case “justly and at proportionate cost” in accordance with the overriding objective” (White Book 17.3.5).
- In seeking to draw the appropriate balance between the interests of the various parties to the case and of third parties, including litigants in general, one consideration is whether the amendment has real prospects of success. Other relevant considerations include, for example, the adequacy of the draft pleading before the Court and whether the application to amend is close to the trial date. A number of the potentially relevant considerations are set out in paragraph 38 of Quah Su-Ling v Goldman Sachs International [2015] EWHC 759 (Comm) to which Mr Richards referred me during argument. That was a case in which permission was sought for very late amendments. However, the circumstances were very different from the context of Mr Hebden’s application, and Mr Richards confirmed that Domino accepted that considerations relating to the proximity to the trial date or delay did not arise in this case.
- Notwithstanding the multiple considerations that may, depending on the context, influence the Court’s exercise of its discretion, Counsel for both parties agreed that the principal considerations in this instance were the need to deal with the case in accordance with the overriding objective and whether any or all of the draft pleadings had sufficient prospects of success to be permitted to proceed to trial.
- It is common ground that, as summarised in Quah Su-Ling v Goldman Sachs International: “An application to amend will be refused if it is clear that the proposed amendment has no real prospect of success. The test to be applied is the same as that for summary judgment under CPR Part 24. Thus the applicant has to have a case which is better than merely arguable. The court may reject an amendment seeking to raise a version of the facts of the case which is inherently implausible, self-contradictory or is not supported by contemporaneous documentation.” [p. 36]
- The Court may conclude on a summary basis that a pleading is not arguable if the pleading is legally defective or not maintainable in law. As explained in the White Book in the context of CPR 24.2.3, it will be appropriate to do so if the application gives rise to a point of law or construction on which the Court is satisfied both that it has all the evidence necessary for a proper determination and that the parties have had adequate opportunity to address it in argument so that it is clear that there is no real prospect of success. The Court should then ‘grasp the nettle’. However, the Court must not conduct a mini trial and it may be that the matters involved are of sufficient complexity, or that the pleadings arise in areas where the jurisprudence appears to be unsettled or evolving, such that evaluation in the light of full legal argument, prepared and delivered after proper consideration and preparation, is appropriate.
- While the complexity of a case may militate against summary decisions, complexity in itself will not preclude a decision to refuse permission to amend where it is clear that a proposed amendment has no prospects of success.
- The proposed amendments involve a series of cascading pleadings. Counsel’s skeleton arguments separated the amendments into various discrete issues and, although there were some differences between the parties as to categorisation, I have adopted that broad approach below. The proposed amendments at paragraph 2A to 2I of the proposed Amended Particulars of Claim (“APOC”) are a summary of Mr Hebden’s proposed case post-amendment. The substantive proposed amendments are summarised below.
- The first substantive set of proposed amendments is at draft paragraphs 3A and 3B. These plead that under the 2001 Agreement properly construed, “each of clauses 4.1 and 4.2 imposed on Domino a continuing obligation to use reasonable endeavours following release to exploit the Masters by all then-industry-standard means, in the UK and in the Major Markets respectively“.
- Draft paragraph 3C.1 pleads an equivalent implied term.
- Draft paragraph 3C.2 then pleads an implied obligation on Domino “to act in good faith in relation to the exploitation of the Masters under the 2001 Agreement“.
- Draft paragraph 3D pleads each of the obligations pleaded in draft paragraphs 3B and 3C was a condition of the 2001 Agreement, and of the copyright assignment provided for in clause 3.2 of that Agreement.
- Draft paragraph 10 pleads that the exclusive recording elements of the 2001 Agreement came to an end around November 2005 but that the obligations relating to the payment of royalties and the Release Commitment in clause 4 continued in force until terminated by repudiatory breach.
- Having pleaded to the express or implied contractual obligations, paragraphs 15.1 to 15.11 are unamended and set out the basis of Mr Hebden’s original claim. New draft paragraphs 15.12 to 15.14 set out the basis of Mr Hebden’s draft amended claim describing the withdrawal of the Masters from digital exploitation and Domino’s statements in its solicitors’ letters of 16 November and 25 November 2021, that it would no longer exploit the Masters digitally.
- Draft paragraphs 17A to 17E set out the new alleged breaches and plead that those alleged breaches resulted in the termination of the 2001 Agreement. In summary:
- Finally, on this aspect of the proposed new pleading, draft paragraphs 19A and 19B plead that: (i) following the alleged termination by fundamental and repudiatory breach, the copyright in the Masters has reverted to Mr Hebden; or, (ii) in the alternative that even if Domino’s conduct is not fundamental and repudiatory breach, it is a renunciation by Domino of some or all of the 2001 Agreement, which Domino should not be permitted to remedy under clauses 4.3 and/or 4.4 of the 2001 Agreement, meaning that the copyright in the Masters reverts to Mr Hebden.
- Draft paragraph 19C pleads that if Mr Hebden fails both: on his case that the termination by breach pleaded in draft paragraphs 15.12 and 15.13 of the APOC is fundamental and repudiatory; and on his case that Domino’s conduct is a renunciation by Domino which Domino should not be permitted to remedy, Mr Hebden is entitled to rely on clauses 4.3 and/or 4.4 of the 2001 Agreement. It is pleaded that if Domino fails to remedy its breaches by re-commencing digital exploitation within the periods provided in those clauses, Mr Hebden will be entitled to purchase the copyright in the Masters under clause 4.3 and/or to require a licence of the copyright under clause 4.4. In the alternative, if Domino does remedy its breaches, draft paragraph 19C.2 pleads that the original dispute will continue to require determination.
- Mr Hebden seeks permission to plead a restraint of trade case to be run in the alternative if his case that the 2001 Agreement imposes continuing obligations upon the Defendant to exploit fails. Paragraph 19D pleads that the consequences of success on the restraint of trade case would be either:
- The consequence of success on the first of those arguments is said to be that the copyright in the Masters at all times remained with Mr Hebden. The consequence of the second is said to be that as from, at the latest, the date on which Domino had sight of the draft APOC the copyright reverted to Mr Hebden. On either premise it is argued that Domino’s continued exploitation of the Masters would amount to copyright infringement, and Mr Hebden pleads that if success on the restraint of trade case resulted in the 2001 Agreement being void from its inception, all of Domino’s acts of exploitation to date and in the future would infringe Mr Hebden’s rights in the Masters.
- Finally, the draft APOC adds some further prayers for relief reflecting the draft claims.
- Mr Carter submitted that all of Mr Hebden’s proposed amendments have real prospects of success. His position on the appropriate test was that, unless proposed amendments are clearly flawed, the threshold for persuading the Court that amendments have no real prospects of success is high, particularly where the relevant areas of law are complex and unclear and/or involve evolving areas of jurisprudence. In his submission all of the proposed pleadings fall into those categories so that they are not suitable for summary determination and should be permitted.
- Mr Carter also submitted that, while permission to amend may be refused in circumstances where draft pleadings are inadequate, this would not be appropriate where Mr Hebden had pleaded his case sufficiently clearly to allow Domino to understand that case it would have to meet. In this case, the chronology of events leading up to the hearing of the Amendment Application are said to be relevant to the Court’s exercise of its discretion to permit amendment subject to any necessary clarification. Mr Carter referred, among other things, to the compressed timeframe within which the draft amendments had to be prepared.
- Mr Richards’ position was that none of the proposed amendments was tenable. His forensic approach to the legal basis for, and legal consequences of, each of the proposed amendments was most helpful. However, for the reasons below, he was not successful in persuading me that it was appropriate to refuse permission for all of the draft amendments on a summary basis.
- Mr Richards criticised the drafting of parts of the draft APOC. However, ultimately, he did not suggest that drafting issues should, in these circumstances, be the criterion for refusing permission. Mr Richards further accepted that it would not be appropriate to contend that the timing of the amendments, including the likely loss of the trial date, should affect the assessment.
- In substance, therefore, the principal question addressed by Counsel for both parties was whether it would be appropriate in the light of the overriding objective, including the likelihood of success, to refuse permission to amend. One other issue was raised briefly, whether there was incoherence in the pleading owing to its material inconsistency with the originally pleaded case. I turn to this first.
- Mr Richards contended that the pleading of breach in the draft APOC was incoherent, referring back to the Court’s observations in Quah Su-Ling v Goldman Sachs International on the Court’s ability to refuse to permit a contradictory pleading: “The court may reject an amendment seeking to raise a version of the facts of the case which is inherently implausible, self-contradictory or “. He submitted that the draft amended pleading was so contradictory as to be incoherent on the basis that it made no sense for Mr Hebden to allege, simultaneously, that the digital exploitation of the Masters was in breach of the 2001 Agreement and also that the cessation of such exploitation was also in breach.
- Mr Richards explained that Domino had understood Mr Hebden’s original pleading to allege that digital exploitation of the Masters by download and streaming is in breach of the 2001 Agreement. He referred to paragraph 15 of the original Particulars of Claim, submitting that it specifically pleaded that making available the Masters by these digital means was a breach. He also referred to the pleading in the Reply, which relied on statements in the Defence that Domino had made the Masters available by streaming and downloading. Mr Richards further referred to and relied on Mr Hebden’s previous objections to the exploitation of the Masters by streaming.
- Mr Carter’s response was that the pleading contained no inconsistency and that Mr Richards’ clients had misunderstood it. The original pleading was as to breach through a failure to pay royalties at the appropriate contractual rate for digital exploitation; the subsequent draft pleading was as to breach by failing to use reasonable endeavours to continue to exploit digitally. Mr Carter submitted that the two pleadings are entirely consistent and there is no incoherence as the specific language in original paragraph 15 referred to by Mr Richards formed part of a description of the factual background to the royalty claim rather than a standalone pleading of breach of contract by streaming. Mr Carter also stated that at no point since the signature of the 2001 Agreement had Mr Hebden objected to digital exploitation as such, although he noted that there had been discussions between Domino and Mr Hebden about making the Masters available on Spotify. He drew attention to the evidence on those discussions that had been included in the bundle for the hearing.
- If this issue becomes relevant at trial (for example in the context of a dispute about whether Domino’s actions in requiring the DSPs to cease digital delivery of the Masters were in good faith), then the varying interpretations of the parties as to the scope of the breach originally pleaded in the Particulars of Claim may require further consideration. For the purposes of this application, however, having considered the submissions of Counsel as to the initial pleading, I conclude that there is no obvious inconsistency between the original pleading of breach and that for which permission is now sought such that permission to amend should be refused on grounds of incoherence or self-contradiction.
- Specifically, I do not agree that Mr Hebden’s earlier objections to aspects of digital exploitation clearly support a reading of the original pleading as meaning that the 2001 Agreement did not authorise digital exploitation at all. Only limited evidence on this issue was available. The evidence that was available included Mr Hebden’s Witness Statement dated 22 November 2021. That witness statement set out the circumstances in which Mr Hebden had objected to the streaming of his music via Spotify. It states that, after a request from Mr Hebden, Domino removed Mr Hebden’s music from Spotify for a period of time after which Mr Hebden’s Four Tet albums (but apparently not his singles) were made available to Spotify again. The Witness Statement of Mr Bell, from Domino, also dated 22 November 2021, deals more briefly with this issue, but broadly confirms that Domino removed Mr Hebden’s music from Spotify (and apparently from other platforms) for a period at his request, but subsequently made it available again. In the absence of further evidence on the issue, this suggests that Mr Hebden did not object to digital distribution of his music as such. I conclude that the original pleading is sufficiently capable of bearing the interpretation contended for by Mr Carter to mean that there is no clear inconsistency between it and the amended pleading for which permission is now sought.
- Domino argued that any construction of clauses 4.1 and 4.2 and of Domino’s Release Commitment which sought to impose a continuing obligation on it to exploit the Masters was untenable in the light of the wording of the contract and its clear and ordinary meaning. It was submitted that “release” describes a commercial launch rather than any kind of continuing exploitation thereafter and that this would have been obvious to the parties and their lawyers at the time they concluded the 2001 Agreement. During submissions, Mr Richards made clear that Domino’s position was that the obligation to release required a ‘genuine commercial release’; it could not be satisfied by a momentary release and subsequent withdrawal, a suggestion that he described as a ‘strawman’. A ‘genuine commercial release’ would not, however, involve an obligation to continue to exploit subsequently.
- Mr Richards relied on Panayiotou v Sony Music Entertainment (UK) Ltd [1994] EMLR 229, 368 (“Panayiotou“) which he described as perhaps the leading case on recording contracts of the 1990s. In that case, Jonathan Parker J summarised the then current practice in the record industry, noting that it was rare for a record company to accept a positive obligation to exploit after first release.
- Mr Richards also relied on the specific wording of clauses 4.1 and 4.2, noting that these provisions refer to “release” as something that must happen “within specified time frames” and that failure to release can lead to termination of the Term under clauses 4.3 and 4.4. This was said to be clearly inconsistent with a suggestion that clauses 4.1 and 4.2 impose an obligation to exploit which continues beyond the Term for the full life of the copyright in the Masters.
- As to possible implied terms, Mr Richards submitted that the implied term pleaded clearly failed the tests for implying a term, namely that it should be: (i) fair and reasonable; (ii) necessary to make the contract work; and (iii) consistent with the express terms of the contract. He also noted that the tests are to be applied at the time when the contract is concluded so, in this instance, at the date of the 2001 Agreement.
- Mr Richards relied on three authorities to establish that it was beyond dispute that an assignment of copyright does not carry with it an implied obligation to exploit.
- The first was Nichols v Amalgamated Press (1908) Macg Cop Cas (1905-10) 2 166 (“Nichols“). The Court of Appeal held that the assignment by a composer to a music publisher of the copyright in songs involved no implied obligation on the publisher to publish the songs. In that case, the only payment to the composer would arise from publishing royalties if the compositions were published. The Court held (at page 168) that “The defendant company had the right to determine whether the songs should be published or not, and if published, in what form and how advertised.”
- Schroeder Music Publishing v Macaulay [1974] 1 WLR 1308 (HL) (“Schroeder“) also involved a music publishing contract. The composer assigned to the publisher the worldwide copyright in musical works composed over a considerable period. The House of Lords held that the publisher could simply place the compositions “in a drawer and leave them there“, saying that there were many reasons why a publisher might choose not to publish. In discussing this case Mr Richards properly pointed out that while saying that “I do not think that a publisher could reasonably be expected to enter into any positive commitment to publish future work by an unknown composer“. Lord Reid had suggested that “[p]ossibly there might be some general undertaking to use [the publisher’s] best endeavours to promote the composer’s work. But that would probably have to be in such general terms as to be of little use to the composer.” [p. 1313H]. Mr Richards did not regard that as undermining his general point that no positive obligation to exploit could be implied into an agreement assigning copyright.
- Both Nichols and Schroeder involved music publishing contracts where the copyright assigned was that in a musical composition, depriving the author of the ability to benefit economically from his creation for the term of the copyright. Mr Richards submitted that the principle that there is no implied obligation to exploit must apply at least as strongly to assignments where the copyright assigned is only that in the sound recording. As this means that (subject to specific contractual restrictions) the artist may perform, re-record and otherwise exploit the copyright in the underlying composition, Mr Richards submitted that there could be no question that an implied obligation to exploit would be required as a matter of necessity to make the contract work, nor would such an obligation be required as a matter of fairness and reasonableness, given the views already expressed by the Courts in the context of music publishing contracts.
- Mr Richards stressed that none of Domino’s legal advisers had identified any case in which a recording contract had been held to include any implied obligation to exploit. He referred me to John v James [1991] FSR 397, in which the claimants sought, among other things, rescission of publishing and recording agreements under which they had assigned the copyright in a large number of musical compositions and sound recordings. The rescission claim was based on allegations of undue influence. The defendants countered this by arguing that the agreements in question contained an implied term to use reasonable diligence to exploit the works. Nicholls J disagreed. He referred to the express terms of the recording agreement as tending against such a conclusion and further held that, even if such a term were implied, any such obligation would have been necessarily so loose and imprecise that it would have afforded the claimants little protection.
- Mr Richards then addressed the specific draft pleading of an implied obligation on Domino “to act in good faith in relation to the exploitation of the Masters under the 2001 Agreement“. He submitted that Mr Hebden had identified neither what the alleged obligation of good faith required nor how it had come about. As the content of any implied duty of good faith is variable and heavily dependent on context (Yam Seng Pte Ltd v International Trade Corp Ltd [2013] EWHC 111 (QB), [2013] 1 All ER (Comm) 1321, [141], [147] per Leggatt J), it was submitted that: first, the plea was not properly particularised and had no prospect of success; and secondly, to the extent that any pleaded good faith obligation encompassed a duty to exploit, it should fail for the reasons he had already put forward in relation to the alleged express and implied terms requiring exploitation.
- Mr Carter disagreed that any short or straightforward point of law or construction had been identified which provided a basis to refuse Mr Hebden the possibility of having his proposed amended case dealt with at trial.
- As to the construction of the express provisions, he submitted that Domino’s proposed construction of clauses 4.1 and 4.2 of the 2001 Agreement was clearly absurd and could not be redeemed by referring to the existence of certain specific remedies for particular breaches. In his written submissions he had suggested that Domino’s construction of the 2001 Agreement would entitle Domino to satisfy its contractual obligations to release Mr Hebden’s music by placing one CD on a shelf briefly and then removing it again and that such a construction would not reflect the commercial realities of a recording agreement and would be wholly unreasonable.
- Having heard Mr Richards’ submissions as to the proper construction of the release commitment in Clause 4 of the 2001 Agreement (see paragraph 52 above), Mr Carter submitted orally that the Court could not, without evidence, decide what a requirement of ‘genuine commercial release’ would have entailed in 2001. He disagreed with Mr Richard’s reliance on the Panayiotou case, arguing that the comments in that case represented only a summary of the factual position as understood by the judge in the early 1990s and had no bearing on the position in the early 2000s. In any event, Mr Carter submitted that it was certainly arguable that, having released the material digitally, then taking active steps to withdraw the Masters from DSPs was not consistent with the concept of a genuine commercial release.
- If wrong on the construction of the express terms, Mr Carter submitted that, in the light of the facts and contents of the specific contract, the implied obligation for which Mr Hebden contended satisfied all of the relevant conditions identified by Mr Richards:
DEPUTY JUDGE TREACY:
Introduction
Procedural history
The applications
• Mr Hebden’s application for permission to amend the Particulars of Claim (the “Amendment Application”); and
• Domino’s application for strike out and/or summary judgment (the “SJ Application”).
• Domino’s solicitors wrote to Mr Hebden on 16 November 2021. By that letter:
o Domino made an open offer to pay sums corresponding to the damages sought under the original Particulars of Claim, and costs;
o Domino informed Mr Hebden that it had instructed all digital service providers (“DSPs”) to withdraw the Masters, and undertook not to exploit the Masters digitally in future without first agreeing terms in writing with Mr Hebden. Domino also indicated that it would not agree the 50% rate claimed by Mr Hebden for exploitation; and
o Domino stated that, in the light of its offer and its unilateral conduct/undertakings, the proceedings should be stayed. Domino further explained its intention to apply for dismissal of the proceedings should Mr Hebden not consent to a stay.
• A draft Tomlin Order was subsequently provided to Mr Hebden at his request. Mr Hebden informed Domino’s solicitors on 24 November 2021 that he considered Domino’s conduct in withdrawing the Masters from the DSPs, and in stating that it would not exploit them digitally in future, to be a fundamental breach of the 2001 Agreement.
• Domino denied breach and issued the SJ Application on 25 November 2021.
• On 6 December 2021, Mr Hebden applied for permission to amend his Particulars of Claim to include claims relating to Domino’s recent conduct.
• On 14 December 2021, Domino’s solicitors wrote to Mr Hebden explaining that Domino did not consent to the proposed amendments.
• This hearing was listed for 16 December 2021 to deal with the competing applications.
The SJ Application
The Amendment Application
Conduct of the hearing
Relevant factual background
“2. Term
2.1 The expression “the Term” shall mean a period commencing on the date hereof and expiring upon your termination thereof in accordance with the provisions of sub-clause 2.2 below SAVE that if we call for all the Product Commitment hereunder then the Term shall expire six (6) months after the date of initial release in the UK of the last Album to be released hereunder in fulfilment of the Product Commitment
2.2 No sooner than one (1) year nor later than three (3) years after the date of initial release of a Commitment Album in the UK (other than the last such Album) you shall send us a cassette of bona fide demo recordings of a reasonable standard of songs that you intend shall comprise the next such Commitment Album (“Next Album Demos”) under cover of a notice hereunder specifying such intention and in the event that we shall fail to give you notice calling for such next Commitment Album within two (2) months of the date of our receipt of such demo recordings then you shall be entitled to serve notice on us terminating the Term hereof For the avoidance of doubt we shall be entitled to give you notice calling for a Commitment Album at any time prior to the expiry of such two (2) month period following the release of the previous such Commitment Album
2.3 We shall be entitled to suspend the Term in respect of any period in which you fail or refuse to comply with the performance of your obligations hereunder SAVE that no single period of suspension shall exceed one (1) year
[ .]
4. RELEASE COMMITMENT
4.1 We shall procure the release in the United Kingdom of each Commitment Album that we shall call for hereunder within one hundred and twenty (120) days following the Delivery of the same
4.2 We shall use our reasonable endeavours to procure the release in the Major Markets of a Commitment Album within one hundred and eighty (180) days following the release of the same in the United Kingdom
4.3 In the event that we shall not have released the relevant Commitment Album in accordance with the provisions of sub-clause 4.1 above you shall be entitled to give us written notice requiring us so to do and in the event that we shall not released the said Commitment Album within one hundred and sixty (60) [sic] days following our receipt of such written notice you shall be entitled to:
4.3.1 purchase from us the rights in the said Commitment Album upon reimbursement to us of any and all advances which we have paid in respect of such Commitment Album within sixty (60) days following the expiry of the sixty (60) period as aforesaid PROVIDED THAT you shall not have commenced making any subsequent Commitment Album and PROVIDED FURTHER THAT you shall secure a release for us of any of our obligations to make payment of monies to producers and/or any other third parties; and
4.3.2 terminate the Term of this Agreement forthwith by notice in writing PROVIDED THAT you shall not have commenced making any subsequent Commitment Album
4.4 In the event that we shall not have released the relevant Commitment Album in accordance with the provisions of sub-clause 4.2 above you shall be entitled to give us written notice requiring us so to do and in the event that we shall not have released the said Commitment Album within a period of ninety (90) days following our receipt of such written notice you shall be entitled to require us at any time thereafter to license such Commitment Album to any third party of your choice provided that the terms are reasonably satisfactory to us and provide for a royalty of not less than four per cent (4%) of the dealer price of any record embodying the Masters comprising such Commitment Album to us after payment of royalties to all other parties including you
4.5 Your entitlements under sub-clauses 4.3 and 4.4 above shall be your sole remedy in respect of any failure by us to procure a release under sub-clauses 4.1 and/or 4.2 as aforesaid“
“No default of any provision hereunder shall be considered a breach of a material obligation giving a right of termination unless and until the party complaining of such default shall serve notice on the other giving full details thereof and requesting the same (if capable of remedy) to be remedied and the other party or parties (as the case may be) shall have failed to remedy such default or taken substantive steps to remedy such default within a period expiring thirty (30) days from the date of such notice.“
The legal test for permission to amend
The proposed amendments for which permission is sought
Express or implied duty to exploit/duty of good faith
• the terms breached were conditions of the 2001 Agreement (draft APOC, paragraph 3D);
• the alleged breaches of those terms were repudiatory or renunciatory (draft APOC, paragraph 17A);
• Mr Hebden has accepted such repudiation or renunciation (draft APOC, paragraphs 17B and 17C);
• Domino’s conduct in withdrawing the Masters from digital distribution was not in good faith but, in part at least, to avoid adjudication by the Court of Mr Hebden’s original claim (draft APOC, paragraph 17E).
Proposed reliance on clauses 4.3 and 4.4 of 2001 Agreement
Restraint of trade / copyright infringement
(i) that the agreement is void as from its conclusion and/or unenforceable; or
(ii) that the agreement is voidable and/or unenforceable.
Submissions / assessment
Express or implied duty to exploit/duty of good faith inconsistency of pleadings submissions
Express or implied duty to exploit/duty of good faith inconsistency of pleadings assessment
Express or implied duty to exploit/duty of good faith substance submissions
- the obligation proposed was both fair and reasonable in the light of the state of the music industry at the relevant time and the nature of the obligations that would be involved, being only to use reasonable endeavours to exploit, thus accounting for the possibility that exploitation would require disproportionate efforts from Domino (e.g. because the music was not a commercial success);
- the obligation was required for business efficacy of the contract (or was indeed obvious), as an obligation which required mere initial release and nothing further would lead to absurd results, not reflecting the commercial realities of a recording contract; and
- the obligation contended for was entirely consistent with clauses 4.1 and 4.2 on their proper construction.
“It was argued that there must be read into this agreement an obligation on the publisher to act in good faith. I take that to mean that he would be in breach of contract if by reason of some oblique or malicious motive he refrained from publishing work which he would otherwise have published. I very much doubt this but even if it were so it would make little difference. Such a case would seldom occur and then would be difficult to prove.” [p. 1313G]
“In support of the allegation that Domino’s acts referred to at paragraphs 15.12 and 15.13 above were not in good faith, Four Tet will contend that the sole (or at least primary) motive behind Domino’s committing such acts was to avoid the Court determining the properly applicable rate for digital exploitation under the 2001 Agreement and/or granting the declaration sought at paragraph 1 of the prayer for relief below.“
Express or implied duty to exploit/duty of good faith assessment
Express or implied duty to exploit/duty of good faith consequences of breach submissions
(i) Domino’s release (and, on his case, continuing exploitation) obligations survived the Term of the exclusive recording provisions (see paragraph 21 above);
(ii) the remainder of the surviving agreement has now been terminated by Domino’s conduct in ceasing, and making clear that it will not resume, digital exploitation; which,
(iii) constitute acts of fundamental breach and/or renunciation.
(i) Mr Hebden’s only remedy for failure to release was that provided in clauses 4.3 and 4.4; and
(ii) Mr Hebden could not terminate the 2001 Agreement for breach unless: first, he served notice under clause 14.8; and secondly, Domino failed to take substantive steps to remedy the notified breach within 30 days.
• that termination for breach operates only prospectively and does not undo the contract as from the beginning;
• that the kind of reversion of copyright suggested by Mr Hebden is unknown to the law; and
• that no reversion in equity could come about in the absence of an equitable basis for the remedy, such as a pleading of undue influence giving rise to right of rescission.
(i) Mr Hebden states that he no longer considers himself bound by the 2001 Agreement and cannot simultaneously seek to take any benefit of the 2001 Agreement;
(ii) clauses 4.3 and 4.4 relate to a failure to “release” and not to a failure to continue post-release exploitation, even if clauses 4.1 and 4.2 or some other implied term required such exploitation; and
(iii) there is no prospect of Mr Hebden establishing that clauses 4.3 and 4.4 remain in force following the expiry of the Term of the 2001 Agreement.
Express or implied duty to exploit/duty of good faith consequences of breach assessment
Restraint of trade/copyright infringement submissions
“In the present case the respondent assigned to the appellants “the full copyright for the whole world” in every musical composition “composed created or conceived” by him alone or in collaboration with any other person during a period of five or it might be 10 years. He received no payment (apart from an initial £50) unless his work was published and the appellants need not publish unless they chose to do so. And if they did not publish he had no right to terminate the agreement or to have copyrights re-assigned to him. I need not consider whether in any circumstances it would be possible to justify such a one-sided agreement. It is sufficient to say that such evidence as there is falls far short of justification. It must therefore follow that the agreement so far as unperformed is unenforceable.
I would dismiss this appeal.” [p. 1315A]
- it imposed obligations on Domino to release the Masters;
- during the Term, the 2001 Agreement restricted Mr Hebden’s activities only as a recording artist under the name “Four Tet” and his own legal name but left him free to carry on creating and recording music under any other name;
- following the expiry of the Term, Mr Hebden was (and remains) free to exploit his output subject only to certain time limited rerecording restrictions;
- while the 2001 Agreement permits Domino to choose not to exploit the Masters copyright in which has been assigned to it, that is not a restraint on Mr Hebden’s trade; and
- notwithstanding the alleged sterilising effect of the contract today given the growth of digital means of exploitation, whether or not a contract is in restraint of trade is to be assessed as at the date of its conclusion.
“The effect of such an agreement was considered in Instone v. A. Schroeder Music Publishing Co. Ltd. [1974] 1 All E.R. 171, affirmed in the House of Lords under the name A. Schroeder Music Publishing Co. v. Macaulay [1974] 1 W.L.R. 1308. The Court of Appeal held that because the agreement was in unreasonable restraint of trade it was unenforceable in so far as it had not been carried out. and Lord Reid, dismissing the appeal against that decision, concluded his speech with these words, at p. 1315: “It must therefore follow that the agreement so far as unperformed is unenforceable.” (Waller LJ [p. 470D]).
Restraint of trade/copyright infringement assessment
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