#6663 - Experience Hendrix V. Ppx Enterprises - Commercial Remedies BCL

Experience Hendrix v. PPX Enterprises

Facts

The legend behind the 1973 and present proceedings is Jimi Hendrix. He died in 1970 aged 27. In action 1967 P No. 3007, PPX sued him and after his death his estate for breach of an agreement made on October 15, 1965. The agreement committed him to “produce and play and/or sing exclusively” for PPX for three years from that date. He was to make his services available at PPX's request with a minimum of 10 days notice to produce no more than 4 titles per session, with a minimum of 3 sessions per year. The trial of action 1967 P No. 3007 had extended over more than 20 days, when on March 6/7, 1973 counsel advised PPX to settle.

The settlement reached and incorporated in an order of the court on March 7, 1973 provided as follows:

Defendants agree that the plaintiff is entitled to the masters of the titles listed in Sch. A hereto being masters now in the possession of the Plaintiff and all rights of all kinds in respect of those masters and the copyright therein and the performances recorded thereon PROVIDED THAT in respect of any new licence or any extension or variation of any existing licence relating thereto;

Defendants further agree that the Plaintiff is entitled to honour, carry out and comply with any existing contract or licence relating to titles not listed in Sch.A full particulars of which and of the contracts and licences relating thereto shall be supplied by Mr Chalpin to the 1st defendant within 10 days hereof.

Breach by PPX: PPX was in breach of the settlement agreement in 1995 and 1999 as follows. On December 29, 1995 PPX granted to CBH Records GmbH (“CBH”) for Europe a licence in respect of 63 named master recordings. Some 24 of these were from Sch.A, but the remaining 39 were within cl.3(b) (although the licences referred to therein had long since expired). An advance of $350,000 was payable on royalties, although it is PPX's case that only $250,000 was ever paid before PPX terminated the licence for breach in August 1996. Then, on or about July 1, 1999 PPX granted a three year licence in respect of the same recordings to Nippon Crown Co., Ltd. (“Crown”), providing for an advance against royalties of $35,000. The licence expired by effluxion of time on June 30, 2002. There is presently no indication as to what retail sales these licences led, or what royalties were ever earned by PPX under them.

Appellant’s claim: At the outset of the trial before Buckley J., Mr Jones representing the appellant made clear that he had no evidence, and he said that he did not imagine that he could ever possibly get any evidence, to show or quantify any financial loss suffered by the appellant as a result of PPX's breaches. So it was accepted that, if this was the only available measure, then no (or perhaps strictly only a nominal) award of damages could be made. However, Mr Jones obtained leave to amend to introduce claims for (i) damages consisting of such sums as could reasonably have been demanded by the appellant for relaxing the prohibitions contained in cl.3(b) of the settlement agreement or, alternatively, (ii) the entire profit attributable to PPX's exploitation of the non-Sch. A material.

Question

This appeal raises as a matter of principle whether the Court can and should order the recovery of any damages or an account of profits in circumstances where the appellant has not proved that it has suffered any financial loss.

Holding

“Exceptional nature” of Blake

The exceptional nature of Blake's case lay, first of all, in its context — employment in the security and intelligence service, of which secret information was the lifeblood, its disclosure being a criminal offence (p.286G–H). Blake had furthermore committed deliberate and repeated breaches causing untold damage, from which breaches most of the profits indirectly derived in the sense that his notoriety as a spy explained his ability to command the sums for publication which he had done (pp.286G and 287G–H). Thirdly, although the argument that Blake was a fiduciary was not pursued beyond first instance, the contractual undertaking he had given was “closely akin to a fiduciary obligation, where an account of profits is a standard remedy in the event of breach”.

Injunction and restitutionary damages/account of profits may be combined

It was argued before us by Mr Englehart that any order for the payment of damages or a fortiori an account of profits must in a case such as the present be precluded by the judge's grant of an injunction. The argument is that the award in Wrotham Park was only possible because the Court was refusing an injunction, in which connection it was entitled under Lord Cairns's Act to assess damages to compensate the plaintiffs for the continuing invasion of their right in the future. That, it is submitted, is not an order that a common law court could or would have made. Common law courts could only grant relief for losses crystallised prior to the issue of a writ. We were referred to the statements on these points in Bredero and in Jaggard. The decision in Blake in my view avoids the need to consider Mr Englehart's submissions on these points at length. The remedies for breach of contract have a flexibility which they fail to recognise. Since Blake I see no reason why, if the beneficiary of a restrictive covenant is unaware of its infringement in time to obtain an injunction immediately, but is able to obtain an injunction for the future after the defendant by the infringement has obtained some benefit, the appellant should be precluded from obtaining an injunction and, if justice requires, a reasonable sum to compensate for the past infringement, even though he may not be able to show any financial loss to himself. If compensation on this basis is available in respect of the permanent deprivation of a right because the law does not consider that injunctive relief is appropriate, there seems no justification for refusing it in respect of a temporary deprivation arising because the infringement has been committed too quickly for the law to be able to intervene. In either case, though for different reasons, the compensation awarded would be in substitution for an injunction.

Application of Blake to the facts

As in Blake, we are concerned with a breach of a negative obligation, and PPX did do the very thing it had contracted not to do. Further, as in Blake so here on the Judge's findings, PPX through Mr Chalpin knew that it was doing something which it had contracted not to do, and in 1995 and 1999 well knew that the appellant would not consent thereto. Further, as in Wrotham Park it can be said that the restriction against use of PPX's property of which PPX was in breach was imposed to protect the appellant's property, although there is the distinction that PPX's property did not ever belong to the appellant or appellant's predecessor. Finally, the grant of an injunction for the future shows that the appellants had a legitimate interest in preventing PPX's profit-making activity (cf. Lord Nicholls in Blake at p.285H).

On the other hand, there are also obvious distinctions from Blake's case. First, we are not concerned with a subject anything like as special or sensitive as national security. The State's special interest in preventing a spy benefiting by breaches of his contractual duty of secrecy, and so removing at least part of the financial attraction of such breaches, has no parallel in this case. Secondly, the notoriety which accounted for the magnitude of Blake's royalty earning capacity derived from his prior breaches of secrecy, and that too has no present parallel. Thirdly, there is no direct analogy between PPX's position and that of a fiduciary.

Application of Niad to the Facts

The case of Niad presents a similar feature to the present, in so far as damages may be said to be an inadequate remedy, because of the practical impossibility in each case of demonstrating the effect of a defendant's undoubted breaches on the appellant's general programme of promoting their product. But, despite Mr McDermott's evidence, it is not shown that the present defendant's breaches went to the root of the appellant's programme or gave the lie to its integrity. Nor is the present a case where the defendant can be said to have profited directly, by receipt under the agreement which it broke of monies that it ought in fairness to restore.

Unique features of the present case

The present case does however arise out of a particular background, which has no direct parallel in these prior cases. I turn therefore to consider in greater depth the circumstances, nature and object of the settlement agreement of March 7, 1973. It seems clear that it was entered into in circumstances where the litigation about the validity of the agreement dated October 15, 1965 was not going well for PPX and its financial backer, LRI/Decca. In the proceedings begun in 1967 and tried in 1973, it was not suggested that the setting aside of the agreement would or should lead to Jimi Hendrix or his estate acquiring any proprietary interest in the masters which PPX made and of which it held and still holds the copyright. Without the consent of Jimi Hendrix in writing, it would have been a criminal offence for PPX to make any record from or by means of any performance involving Jimi Hendrix, or to sell or let for hire, or distribute...