HIT Entertainment Ltd & others v Gaffney International Licensing Pty Ltd and Another
| Jurisdiction | England & Wales |
| Judge | SIR DONALD RATTEE |
| Judgment Date | 09 March 2007 |
| Neutral Citation | [2007] EWHC 1282 (Ch) |
| Docket Number | Case No: 06C3533 |
| Court | Chancery Division |
| Date | 09 March 2007 |
[2007] EWHC 1282 (Ch)
Sir Donald Rattee
Case No: 06C3533
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Royal Courts of Justice
Strand
London WC2A 2LL
MR PHILIPPS appeared on behalf of the CLAIMANT
MR LOEWENSTEIN appeared on behalf of the DEFENDANT
The claimant in this case produces children's programmes featuring well-known characters in the children's entertainment field, such as Thomas the Tank Engine, Bob the Builder and others, and their business (and I take this largely from the helpful summary of the facts set out in Mr Loewenstein's skeleton) included in particular dealing in worldwide merchandising rights in those brands. The second and third claimants are subsidiaries of the first claimant. The third claimant is a company registered in Texas in the United States.
The first defendant carries on the business of licensing agent in relation to exploitation rights of such children's programmes and other children's merchandise as are dealt with by the claimant. The first defendant is a company based in Australia and the second defendant is a director and shareholder of the first defendant.
Between 1999 and 2005 a series of agreements were entered into between the claimants (or one of them) and the first defendant whereby the first defendant agreed to act as the claimant's licensing agent for intellectual property, exploitation and other rights relating to the children's brands to which I have referred, those rights belonging to the claimant that entered into the particular agreement.
By the various agreements the first defendant undertook two quite separate functions. One was that of acting as licensing agent, in the sense that the first defendant's function under such part of such agreements was to identify possible licensees of the exploitation rights belonging to the claimant. The second function was that of managing or overseeing licensing agreements relating to the claimant's intellectual property which were entered into by third party licensees either through the agency of the first defendant or, in some cases, directly between the licensee concerned and one or other of the claimants.
These proceedings concern 11 of those agreements between one or other of the claimants and the first defendant. The scope of the first defendant's duties under those agreements was limited in each case to the territory of Australia. On 24 November 2005 the claimants indicated to the first defendant that they were not proposing to renew some of the relevant agreements when they terminated on 31 December 2005.
The relevant agreements contained clauses which entitled the claimant concerned to carry out, or have carried out, an audit process at the first defendant's premises in Melbourne, in order to check the operation of the relevant agreement and to keep a check on the defendant's activities pursuant to that agreement. Sometime last year, I think it was about March 2006, the claimants caused an extensive audit to be carried out at the first defendant's premises involving the examination of many thousands of documents.
As a result of that audit the claimants started this action against the defendants in which, so far as the claim against the first defendant is concerned, the claimants allege breaches of the various licensing agreements, including unlawful retention of interests, unlawful deduction of payments such as commission payments, miscalculation of commission and various other alleged improprieties in the way in which the first defendant carried out its duties under the agreements. The claims against the second defendant are on a different basis, and that is that he not only was in breach of some of the agreements to which he was a party, but even in those where he was not a party he acted in breach of some fiduciary duty owed to the claimants in respect of the first defendant's performance.
Each of the relevant licensing agreements between the claimants (or one of them) and the first defendant contained a clause providing that English law should be the relevant law governing the agreement and providing also for non-exclusive English jurisdiction in these terms:
“This agreement shall be governed by and construed in accordance with English law and the parties hereby submit to the non-exclusive jurisdiction of the English court.” [Quotation unchecked.]
The defendants now seek a stay of the proceedings brought by the claimants on the grounds of forum non conveniens. They submit that there is an overwhelming case for this action being brought, if at all, in the state of Victoria, Australia, where the first defendant principally carries out its business, rather than in London. For all the activities or omissions complained of by the claimants in the action relate to matters which took place (or in the case of omissions did not take place, but where they should have taken place), according to the allegations, in Australia, in particular Victoria, but throughout Australia generally, and certainly in no sense in this country.
According to a mass of evidence that has been put in by the defendants on this application, to enable the defendants properly to defend themselves it will be necessary for them to call 35 to 40 witnesses. These will include, it is said, a large number of witnesses not in the employ or in any sense under the control of the defendants, but witnesses who are employed by third party licensees to whom rights in relation to the claimants' intellectual property have been granted. Such third party witnesses are persons over whom the defendants say they have no control and no power to compel them to come and give evidence at a trial in London.
I have to say I have significant doubts about the evidence as to the number of witnesses which it will be necessary for the defendants to call if the action proceeds. But, be that as it may, there is no doubt (and this is accepted on the part of the claimants) that, apart from the effect of the non-exclusive jurisdiction clause in the relevant licensing agreements between the claimants and the first defendant, and apart from any effect there may be of European Council Regulation Number 44 of 2001 on Jurisdiction and the Recognition and Enforcement of Judgments in Civil and Commercial Matters, it would be strongly arguable, at least, that the appropriate forum for the determination of the claimants' claims would be the court in Victoria rather than this court in London.
The application to stay the proceedings in this court is resisted by the claimants on two grounds. The first is that, by reason of article 23 of the European Council Regulation to which I have just referred and a decision of the European Court reported in [2005] QB at page 801, this court has no power to entertain the application currently before it. Alternatively the claimants submit that the effect of the non-exclusive jurisdiction clause included in the relevant agreements is that at least the first defendant is debarred from relying on the arguments it puts forward except to the extent, if at all, that the first defendant can show it is relying on matters which were not reasonably foreseeable at the date the relevant licensing agreements were entered into. The claimants submit that the defendants have failed to show any such matter.
I should refer first to the argument based on article 23 of the European Council regulation. That article provides in paragraph 1 as follows:
“If the parties, one or more of whom is domiciled in a member state, have agreed that a court or the courts of a member state are to have jurisdiction to settle any disputes which have arisen or which may arise in connection with a particular legal relationship, that court or those courts shall have jurisdiction. Such jurisdiction shall be exclusive unless the parties have agreed otherwise.”
In the case that I have mentioned of Owusu v Jackson the European Court had to consider a question whether the English court had power to entertain an application for a stay based on forum non conveniens having regard to the terms of article 2 of the Brussels Convention, the predecessor of the European Regulation to which I have just referred, which article provides:
“Subject to the provisions of this Convention, persons domiciled in a Contracting State shall, whatever their nationality, be sued in the courts of that State. Persons who are not nationals of the State in which...
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