#6893 - O’sullivan V. Management Agency And Music - Restitution of Unjust Enrichment BCL

O’Sullivan v. Management Agency and Music

Facts

Raymond O'Sullivan (professionally known as Gilbert O'Sullivan) to whom I shall refer as "O'Sullivan" is a well-known composer and performer of popular music.

Agreements with the defendant companies: In 1969 he approached the third defendant to whom I shall refer as "Mills," known internationally as a manager, producer and performer, who managed amongst others Tom Jones and Engelbert Humperdinck. On 25 February 1970, O'Sullivan signed a management agreement with Mills, and a sole agency agreement with the first defendant. Mills acted as his producer without any additional charge save for the 20 per cent. on all earnings to which he was entitled under the management agreement. On 5 October 1970 O'Sullivan signed a recording agreement with the fifth defendant, which was issuing its first label which was attended by very wide publicity. O'Sullivan was one of the artistes to benefit from that publicity. He had total confidence in Mills and trusted him implicitly.

By this time O'Sullivan was unhappy with his contractual arrangements. He was disillusioned with Mills and did not trust Smith. He was horrified to discover that he was spending more and earning less than he used to. He consulted solicitors who eventually on 15 May 1979 wrote alleging that all the agreements referred to above were illegal, and these proceedings were commenced.

Sullivan’s demand for joint publishing company, never acceded to: Right from the outset O'Sullivan had wanted what he called a "joint publishing company." This is an arrangement whereby a company is set up in which the composer and the publisher each has a 50 per cent. interest. All the composer's copyrights are assigned to the company which pays the composer a royalty. O'Sullivan thought that he had been offered such an arrangement by April Music Ltd., but in fact the agreement which he had provided for the retention of the copyrights by the composer, or a company formed by him for the purpose, with a licence to the publisher to reproduce the works for a period of five years on payment of a 50 per cent. royalty, after deduction of 15 per cent. expenses. O'Sullivan showed the April Music Ltd. agreement to Mills who said his company would do the same. Thereafter O'Sullivan raised the question of the joint publishing company on numerous occasions both with Mills and Smith, but it was never achieved although he was told he would get it.

Order by the lower court: On 5 May 1982 after a long hearing the judge gave a short judgment stating his conclusions, and gave his reasons in a full judgment on 22 July. He made declarations that all the agreements referred to in this judgment, except the service agreement between O'Sullivan and the second plaintiff, were and always had been void and unenforceable and were to be set aside, and that the inducement letter of 14 June 1976 did not and never had created any contractual obligation binding upon O'Sullivan.

The judge held that the agreements were void and unenforceable because they were in restraint of trade on the basis of Instone v. A. Schroeder Music Publishing Co. Ltd. [1974] 1 W.L.R. 1308 and because they had been obtained by undue influence on the basis of Lloyds Bank Ltd. v. Bundy [1975] Q.B. 326. O'Sullivan himself said in evidence that no actual pressure had been exerted upon him to sign the agreements, but the judge held that undue influence was to be presumed because of the special relationship between O'Sullivan and the defendants.

Question

On the footing therefore that the companies were in a fiduciary relationship with O'Sullivan, and consequently all the agreements were obtained by undue influence, the principal question on the appeal was what is the appropriate remedy against Mills and the companies?

Holding

In cases of equitable wrongdoing, not necessary to achieve precise restitution

This analysis of the cases shows that the principles of restitutio in integrum is not applied with its full rigour in equity in relation to transactions entered into by persons in breach of a fiduciary relationship, and that such transactions may be set aside even though it is impossible to place the parties precisely in the position in which they were before, provided that the court can achieve practical justice between the parties by obliging the wrongdoer to give up his profits and advantages, while at the same time compensating him for any work that he has actually performed pursuant to the transaction. Erlanger v. New Sombrero Phosphate Co., 3 App.Cas. 1218 is a striking example of the application of this principle.

Are the defendants entitled to deduct a share of the profit?

Argument: Mr. Bateson submitted that the defendants had gained the following advantages: (1) profits from the agreements; and (2) the copyrights in the songs and master tapes for the life of O'Sullivan and 50 years thereafter. He accepted that the defendants in accounting for their profits were entitled to credit in respect of their proper and reasonable expenses for the work done including work done gratuitously, but that they were not entitled to credit for any profit element in such work.

I do not think that equity requires such a narrow approach. It is true that in this case moral blame does lie upon the defendants as the judge's findings of fact show. On the other hand it is significant that until O'Sullivan met Mills he had achieved no success, and that after he effectively parted company with Mills in 1976 he achieved no success either. During the years that he was working with Mills his success was phenomenal. Although equity looks at the advantage gained by the wrongdoer rather than the loss to the victim, the cases show that in assessing the advantage gained the court will look at the whole situation in the round. and it is relevant that if Mr. Bateson's approach is applied O'Sullivan would be much better off than if he had received separate legal advice and signed agreements negotiated at arm's length on reasonable terms current in the trade at the time. This point...