Ian Gillan and Others v Hec Enterprises Ltd and Others

JurisdictionEngland & Wales
JudgeMr Justice Morgan:
Judgment Date09 December 2016
Neutral Citation[2016] EWHC 3179 (Ch)
Docket NumberCase No: HC-2015-002962
CourtChancery Division
Date09 December 2016
Between:
(1) Ian Gillan
(2) Roger Glover
(3) Ian Paice
(4) Victoria Lord and Keith Gordon

(as executors of the estate of Jon Lord)

Claimants
and
(1) Hec Enterprises Limited
(2) Deep Purple (Overseas) Limited
(3) Dipak Shanker Rao, Manuela Edwards, John Andrew Craig & Nicholas Stanley John Kanaar (as executors/administrators of the estate of Maurice Anthony Edwards)
(4) Dipak Shanker Rao (as executor/administrator of the estate of John Coletta
Defendants

IN THE MATTER OF HEC ENTERPRISES LIMITED (IN ADMINISTRATION)

AND IN THE MATTER OF DEEP PURPLE (OVERSEAS) LIMITED (IN ADMINISTRATION)

AND IN THE MATTER OF THE INSOLVENCY ACT 1986

BETWEEN:
(1) Ian Gillan
(2) Roger Glover
(4) Victoria Lord and Keith Gordon (as Executors of the Estate of Jon Lord)
Applicants
and
(1) Hec Enterprises Limited (In Administration)
(2) Deep Purple (Overseas) Limited (In Administration)
(3) Mark Supperstone
(4) Simon Harris
(Joint Administrators of Hec Enterprises Limited and Deep Purple (Overseas) Limited)
Respondents

[2016] EWHC 3179 (Ch)

Before:

Mr Justice Morgan

Case No: HC-2015-002962

Case No: 314 of 2016 and 315 of 2016

IN THE HIGH COURT OF JUSTICE

CHANCERY DIVISION

Royal Courts of Justice

Rolls Building, Fetter Lane,

London EC4A 1NL

IN THE HIGH COURT OF JUSTICE

CHANCERY DIVISION

COMPANIES COURT

Edmund Cullen QC (instructed by Russells) for the Claimants and Applicants

Andrew Sutcliffe QC and Paul Choon Kiat Wee (instructed by Fieldfisher LLP) for the Joint Administrators

Mrs Abigail Flanagan, a beneficiary in respect of the estate of Mr Edwards, appeared in person

Mrs Teresa Sadeghi, a beneficiary in respect of the estate of Mr Coletta, appeared in person

Hearing dates: 28 and 29 September 2016

Approved Judgment

Mr Justice Morgan:

Introduction

1

Deep Purple was, and still is, a rock music band. Its members included Mr Gillan, Mr Glover, Mr Paice and Mr Lord. The first three of these members, and the executors of Mr Lord, are the Claimants in certain litigation brought in 2015, to which I will later refer. In this judgment, I will refer to them as "the Claimants". Other members of Deep Purple to whom it is relevant to refer were Mr Blackmore, Mr Coverdale and Mr Hughes.

2

HEC Enterprises Ltd ("HEC") contracted with various members of Deep Purple to provide various services to them and to account for royalties in relation to various copyright works connected with Deep Purple. HEC went into administration on 19 January 2016.

3

Deep Purple (Overseas) Ltd ("DPO") contracted with various members of Deep Purple to provide various services to them and to account for royalties in relation to various copyright works connected with Deep Purple. DPO also went into administration on 19 January 2016.

4

Issues have arisen in particular in relation to the rights of the Claimants, pursuant to an agreement made with HEC, DPO and others in 2005, which dealt with the formation of a new company, to which various copyrights and other assets were to be transferred, and with the ownership of the shares in that new company.

5

The applications before me are:

i) applications by the Claimants for permission to continue two sets of proceedings which they brought in 2015 against HEC and DPO, and others, to resolve the issues between them, in particular, the issues arising under the 2005 agreement, such permission to be granted notwithstanding the statutory moratorium on legal proceedings against a company in administration; and

ii) applications by the administrators of HEC and DPO for an order granting them a right of indemnity out of the trust assets of the two companies in administration for the administrators' remuneration, costs and expenses in relation to the administration and management of the trust assets; this application has given rise to dispute about the scope of, and the application of, what has been referred to as the Berkeley Applegate principle, after the decision in Re Berkeley Applegate (Investment Consultants) Ltd [1989] Ch 32.

6

Mr Cullen QC appeared on behalf of the Claimants. Mr Sutcliffe QC and Mr Wee appeared on behalf of the administrators of HEC and DPO.

The 2003 litigation

7

In 2003, Mr Gillan, Mr Glover, Mr Paice and Mr Lord brought proceedings against HEC, DPO, Mr Edwards and Mr Coletta. Mr Edwards and Mr Coletta had acted as managers for certain band members of Deep Purple. Initially, Mr Edwards and Mr Coletta acted in a personal capacity and, later, their role was taken by HEC and DPO, companies which they controlled. The proceedings raised a range of issues but, in particular, they concerned the beneficial ownership of the copyright in recordings made by Deep Purple and in compositions written by members of Deep Purple.

The 2005 settlement agreement

8

Following a mediation, the parties to the 2003 litigation reached a settlement which they recorded in a written agreement dated 13 October 2005. The parties to the agreement were: (1) Ian Gillan, Roger Glover, Jon Lord and Ian Paice (referred to in the agreement as "the Claimants"); (2) HEC; (3) DPO; and (4) Mr Edwards and Mr Coletta (referred to in the agreement as "the Managers").

9

Clause 1 of the agreement contained a number of definitions. "Artists" was defined to mean the artists, including the Claimants, who contributed to the composition of any of the Compositions or performed on any of the Recordings. "Artist's Entitlement" was defined to mean the Relevant Proportion of the Relevant Percentage of Net Income. "Compositions" was defined by reference to a Schedule to the agreement. The "Effective Date" was 1 January 2006. "Management Entitlement" was defined as 20% of Net Income until 30 June 2010 and thereafter 15% of Net Income. "Net Income" was the subject of a detailed definition. "Newco" was a company to be formed in accordance with the agreement. "Recordings" was defined by reference to a Schedule to the agreement. "Relevant Percentage" and "Relevant Proportion" were also defined.

10

Clause 2 of the agreement provided:

"2. HEC and DPO agree to form a new company ("Newco") and to transfer into Newco prior to the Effective Date:

2.1 the copyrights or other rights of a similar or proprietary nature in the Compositions if such rights are owned by either HEC or DPO or the Managers and the right to all income streams applicable to the Compositions and the benefit of all contracts affecting such copyrights and income streams

2.2 the copyrights or other rights of a similar or proprietary nature in the Recordings if such rights are owned by HEC or DPO or the Managers and the right to all income streams applicable to the Recordings and the benefit of all contracts affecting such copyrights and income streams; and

2.3 All income which has been received in respect of the Compositions and Recordings from 1 July 2005 less any sums paid to third parties and any deductions which are permitted to be made in computing Net Income hereunder (but in preparation of Newco's accounts the applicable adjustments shall be calculated and taken into account);

provided that if there is any impediment to the transfer of such assets to Newco DPO and HEC shall hold such assets on trust for Newco and shall pay the income derived therefrom to Newco."

11

Clauses 3, 4 and 5 provided for Newco to pay each Artist and the Managers the appropriate sums calculated in accordance with the detailed terms of the agreement.

12

Clause 11 provided:

"11. The shares in Newco will be held by DPO for the benefit of the Claimants and the Managers. If during the period to 30 June 2015, but not before 30 June 2010 without the consent of the Claimants' designee, the Managers wish or after 31 December 2015 either the managers or a majority of the Claimants and Ritchie Blackmore together wish the shares in Newco to be sold, the Claimants and the Managers shall cooperate to achieve the best commercial terms reasonably available. The proceeds of any such sale shall be applied first in discharge of any costs reasonably incurred in connection with such sale (including legal and accounting costs) and the balance shall be paid in the following proportions: 20% to the Managers and 80% to be divided in equal proportions between each of the Claimants and Ritchie Blackmore. If and to the extent that the Management Entitlement is sold as a connected transaction the Managers will procure that each of the Claimants and Ritchie Blackmore is offered the right to sell his Artist's Entitlement to the Managers or a third party designated by the Managers at a price calculated by multiplying the price for the Managers Entitlement ( sic) by the Artist's Entitlement divided by the Management Entitlement."

13

Clause 14 provided:

"The parties hereto shall use their best endeavours to agree a full Schedule which shall replace the Schedule hereto by 28 October 2005 and if no agreement shall have been reached by that date then the Schedule shall be settled by a person appointed by the President of the PRS for the time being at the written request of the Claimants or the Managers."

Events after the 2005 agreement

14

On 3 November 2005, Newco was formed as Purpletuity Ltd ("Purpletuity"). The entire issued share capital in Purpletuity was held by DPO.

15

Mr Coletta died on 9 July 2006. Mr Edwards died on 11 November 2014. Mr Lord died on 6 July 2012.

16

Not all of the provisions of the 2005 agreement have been implemented. In particular, the assets referred to in clause 2 of the agreement were not transferred to Purpletuity. Instead, HEC and DPO continued to receive the income which was referable to those assets. It seems that a Mr Rao, who was one of the directors of HEC, DPO and Purpletuity until 24...

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    ...available unless the work is properly for the benefit of the beneficiaries. Gillan v HEC Enterprises Ltd (in administration) and Ors [2016] EWHC 3179 (Ch) The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your ......
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    ...the beneficiaries and the granting of such relief is far from a certainty. Gillan v HEC Enterprises Ltd (in administration) and Ors [2016] EWHC 3179 (Ch) In this recent case the High Court held that administrators cannot recover the costs and expenses they incur in relation to the managemen......

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