Independiente Ltd and Others v Music Trading on-Line (HK) Ltd
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE MUMMERY,Lord Justice Lloyd,LORD JUSTICE RIX,LORD JUSTICE LLOYD,Lord Justice Mummery |
| Judgment Date | 26 January 2007 |
| Neutral Citation | [2007] EWCA Civ 111 |
| Docket Number | A3/2006/2522 |
| Court | Court of Appeal (Civil Division) |
| Date | 26 January 2007 |
[2007] EWCA Civ 111
IN THE SUPREME COURT OF JUDICATURE
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM CHANCERY DIVISION
(MR JUSTICE UNDERHILL)
Royal Courts of Justice
Strand
London, WC2
Lord Justice Mummery
Lord Justice Rix
Lord Justice Lloyd
A3/2006/2522
MR P ROBERTS (instructed by Messrs Kirkpatrick & Lockhart Nicholson Graham LLP) appeared on behalf of the Appellant.
MR R SPEARMAN QC and MR M VANHEGAN (instructed by Messrs Wiggin LLP) appeared on behalf of the Respondent.
On 9 November 2006 Underhill J sitting in the Chancery Division gave judgment on a preliminary issue which had been directed. He gave a ruling in favour of the claimants in the action. He gave permission to appeal. The preliminary issue arose on the construction of an agreement which was made between the parties to the action, compromising earlier proceedings which had been brought by the claimant in these proceedings for infringement of copyright. One of the defendants to those proceedings is the appellant in this appeal. The appellant is a Hong Kong-based company. It runs a retail business called CD WOW!, selling CDs and DVDs to members of the public in the United Kingdom. The infringement was of the kind which has come to be well-known as parallel imports. The settlement agreement is dated 20 January 2004. Pursuant to it the appellant gave undertakings to the court. The undertakings are contained in a consent order made by Master Bowman on 21 January 2004, that is, just one day after the date of the settlement agreement.
It is now alleged by the claimants in the action, who are respondents to this appeal, that the appellant is in breach of the undertakings. The respondents commenced the second action in respect of the alleged breaches of the undertaking, claiming that they were also breaches of contract. They also issued in a committal application October 2005. The preliminary issue which was directed by Master Winegarten on 27 July 2006 was whether, in the light of the issues which arose on the pleadings and on the assumption that there had been breaches, the appellant is liable for breach of contract as well as for contempt of court. Underhill J held that there was no relevant express term of the settlement agreement but that there was an implied term of the settlement agreement that, on the claimant's contentions, had been breached. I will come to his ruling straight away. In paragraph 25 of his judgment he said this:
“I therefore decide this issue in the Claimants' favour. I hold that it is open to each of the Claimants to bring a claim for damages against the Defendant for breach of the undertakings contained in the draft orders at Annexes A and B of the Settlement Agreement on the basis that, albeit by implication, the undertakings in question were given to them as well as to the Court.”
He had referred earlier in his judgment to the wording of the preliminary issue which was directed. This was as follows:
“That the following issue (arising out of paragraph 16 of the Defence and paragraphs 4, 4.1, 4.2 and 5 of the Reply) be tried as a preliminary issue namely: 'whether any breaches by the Defendant of the undertakings it gave to the Court in the recital to the Order of Master Bowman dated 21 January 2004 in Claim number HC02C02413 are actionable by the Claimant by way of separate proceedings for breach of contract.'”
The crucial document in the case is therefore the settlement agreement. The judge quoted the important passages from it in his judgment. I will go straight to the settlement agreement where, after identifying the parties and setting out recitals and the formal words, “now it is agreed as follows”, there are the following provisions.
Clause 1 was concerned with definitions and interpretations. It was provided that defendants included MTOL (HK), which is the appellant and was one of the defendants in the proceedings.
Clause 2 provided for payment. There was an agreement that the defendants would pay to Messrs Wiggin and Co on behalf of the named parties the sum of £100,000 in full and final settlement of all claims for damages including additional damages and/or an account in the United Kingdom proceedings, then a further sum of £330,000 in full and final settlement of legal costs incurred in the United Kingdom proceedings.
I pause to comment there that there is no question that that is a contractual obligation and that, if the money had not been paid as agreed, a claim for breach of the settlement agreement could have been made.
Clause 3 contains provisions relating to undertakings and is the most important provision for the purposes of the preliminary issue. It says: MTOL (HK) and other named defendants:
“… will each give undertakings to the Court in the form set out in the draft orders annexed hereto marked “A” and “B” such undertakings to take effect from 4pm on:
(a) 9 February 2004 in relation to dealings in products containing both audio and visual content including DVDs
(b) 27 January 2004 in every other respect.”
The undertakings as stated there were set out in the annexes and they are contained in the order of Master Bowman. His order recited that, upon the parties having agreed confidential terms of settlement as set out in the agreement between the claimants and the defendants and other interested parties dated 20 January 2004, and upon the first, second and third defendants (the first one being the appellant) undertaking to the court that from 4pm on 27 January 2004 (and so on) giving the undertakings that they had promised to give that they would not without the express written consent of the relevant UK copyright owner or exclusive licensee whether acting by their respective directors, officers, employees or agents or otherwise howsoever do various specified acts.
Mr Philip Roberts in his submissions for the appellant says that only gives rise, once the undertakings have been given to the court, to liability for contempt if there are breaches of the undertakings. He says his client performed the promise by giving the undertakings. If, which is in dispute, there has been a breach, then the only remedy available to the respondents is contempt. There is no contractual liability. He points out that the undertakings were expressly to be given to the court. It does not state that they were undertakings to the claimants in the earlier action.
Before I come to deal with the arguments on construction in more detail, I should complete the review of the terms of the agreement. Clause 4 contains what Mr Roberts accepts is a purely contractual provision relating to interim trading and it provides that, in the period between the signature of the agreement and 4.00pm on 27 January 2004, the defendants will not cause any CD recording identified within its current top 75 chart as available for purchase by United Kingdom purchaser at £6.99 and/or by an Irish purchaser at €10.95 to be purchased for less than this price, and there are various other similar provisions. If not performed, they would give rise to a contractual liability but that obligation came to an end once the undertaking had been given.
We were also referred to clause 9 which deals with change of law. That says that the defendants are permitted to apply to the court on notice to the claimants to be released from any or all of the undertakings referred to at paragraph 3 if certain specific provisions of the Copyright Designs and Patents Act 1998 are revoked, supplemented, otherwise amended or interpreted by the Court of Justice in Luxembourg in such a way that the defendants consider that, as a matter of national or European Community law only, some or all of the activities of the kind prevented by the undertakings would not thereafter be an...
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