Mark Forstater and Another v Python (Monty) Pictures Ltd and Another
| Jurisdiction | England & Wales |
| Judge | Mr Justice Norris |
| Judgment Date | 05 July 2013 |
| Neutral Citation | [2013] EWHC 1873 (Ch) |
| Docket Number | Case No: HC11C01394 |
| Court | Chancery Division |
| Date | 05 July 2013 |
[2013] EWHC 1873 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Royal Courts of Justice
The Rolls Building
Fetter Lane
EC4A 1NL
Mr Justice Norris
Case No: HC11C01394
Tom Weisselberg & Mark Vinall (instructed by Fladgate LLP) for the aClaimants
Richard Spearman QC & Amanda Michaels (instructed by ENT Law) for the First Defendant
Edmund Cullen QC (instructed by Lee & Thompson) for the Second Defendant
Hearing dates: 27, 30 November 2012, 3,4,5,6 December 2012, 22, 29 January 2013
After the success of the three series of "Monty Python's Flying Circus" which ran from 1969 until 1972 Graham Chapman, John Cleese, Terry Gilliam, Eric Idle, Terry Jones and Michael Palin ("the Pythons") decided to write and perform a feature film. This case concerns the events which happened in 1973 and 1974 and form part of the pre-history of that film, which became "Monty Python and the Holy Grail" ("The Grail").
The Pythons had already made one feature film ("And Now For Something Completely Different…"). But that experience had taught them the importance of not only writing and performing the material but also of keeping control of the direction and production of the film. To that end the Pythons incorporated Python (Monty) Pictures Ltd ("PMP") as the film production company: and they identified Chippenham Films (a partnership between Julian Doyle ("Mr Doyle") and Mark Forstater ("Mr Forstater")) as the film production unit. In the credits for "The Grail" Terry Gilliam and Terry Jones are shown as the directors, all of the Pythons are shown as the writers, Mr Forstater is shown as the producer (along with John Goldstone as Executive Producer) and Mr Doyle is shown as the production manager and as responsible for special effects.
Two disputes have arisen between the Pythons and Mr Forstater. One relates to what entitlement Mr Forstater has to share in the continuing income stream generated by the success of "The Grail". The other relates to how much Mr Forstater has to pay by way of expenses in relation to the collection and distribution of that income stream. In broad terms Mr Forstater says that under the contracts he negotiated he should receive twice as much, and pay half as much, as the Pythons say he should.
The terms upon which Mr Forstater came to be the producer of "The Grail" are set out in an Agreement dated 25 April 1974 between PMP and himself ("the MF Agreement"). This entitled PMP to the exclusive services of Mr Forstater as producer from the 25 April 1974 until the 31 August 1974 and thereafter for such period or periods as PMP might require "for the purposes of completing principal photography"; and then to the non-exclusive services of Mr Forstater for such further period after the completion of principal photography as may be required in order to assist in the cutting, titling, editing and completion of "The Grail". In return the Claimant was to be paid £5,000 (of which £2,000 was to be deferred so as to be available for use by PMP towards the costs of completing the production of the film in the event that third party funding was exhausted, and either paid when the costs of production were certified or, if utilised, repaid out of the proceeds of distribution).
In addition to that fixed payment Mr Forstater was entitled under clause 3(a)(iii) to 5.6875% of "the profits of the film as defined in the Third Schedule hereto". The Third Schedule to the MF Agreement defined "Profits of the Film" as including the adjusted gross proceeds of distribution and exploitation and also
"Any and all so-called "merchandising" and other "spin-off" rights arising therefrom"
subject to certain deductions. But there was a proviso relating to certain of the "merchandising" and "spin-off" rights. This action is about that proviso. It is common ground that Mr Forstater shares in the "merchandising" and "spin-off" profits governed by the proviso: the issue is: "To what extent?"
The MF Agreement was one of several agreements entered into simultaneously. The others were:—
a) Agreements between PMP and each of the Pythons for their services as artists;
b) Agreements between PMP and Terry Jones and Terry Gilliam for their services as co-directors;
c) An agreement with John Goldstone ("Mr Goldstone") for his services as executive producer; and
d) An agreement between PMP and Michael White Ltd ("the Funding Agreement") for the provision of a £75,000 advance to help fund the production of "The Grail" (additional third party funding also being required).
The Funding Agreement contained a term that PMP had to arrange a retention "from the moneys otherwise payable to the Pythons and to Mark Forstater" of a provision for overage. The deferred £2000 to which I have referred was Mr Forstater's contribution to that retention.
It was a term of the Funding Agreement that the investments being made by Michael White Ltd and by the third party investors should be made under a scheme run by the National Film Trustee Company Ltd ("NFTC"), and that PMP would, simultaneously with the making of those investments, enter into a Trust Deed with NFTC providing for the assignment by PMP to NFTC of the intellectual property rights in "The Grail" and the payment to NFTC of all the proceeds of exploitation of "The Grail". Under the Trust Deed NFTC would then pay out to Michael White Ltd and the third party funders repayment of their advances plus interest, and a participation in the profits of the film (according to their respective entitlements).
The respective entitlements were set out in the First Schedule to the Funding Agreement. There are two points to note about the entitlements. First, "the profits of the film" were defined in terms that included "merchandising" and "spin off" rights: but certain "merchandising" and "spin-off" rights were to be treated in a special way. They were identified as those resulting "in the event only that the Pythons contribute materially to the making production or other the preparation of any such …..merchandise or other means whereby the Film may be exploited other than by its release for viewing". Second, in relation to the mainstream "merchandising" and "spin off" rights not subject to this separate treatment the First Schedule said that 22.455% of the profits should be payable to Michael White Limited and 39.8125% "to [PMP] and Mark Forstater", so treating that tranche of profits as if it were a joint share. If the joint share were divided equally between the Pythons and Mark Forstater then each would have 5.6875%: that is why that percentage is frequently referred to as "1/7 th" in the correspondence, and it is the origin of the percentage figure found in the MF Agreement.
The Trust Deed ("the Deed") carrying into effect the obligations created by the Funding Agreement was entered into on the 30 September 1974 between PMP and NFTC. It recited that PMP intended to make arrangements for the exploitation of "The Grail" throughout the world. PMP then assigned to NFTC (amongst other things) the present and future copyright in "The Grail", its rights under a distribution agreement with EMI and in any of the contemplated further distribution agreements, and
"All other rights and properties acquired or to be acquired by [PMP] in connection with the production of ["The Grail"]".
The Deed then provided for how the receipts deriving from the exploitation of these assigned rights should be divided up, dealing separately with the period during which loans made by Michael White Ltd and the third party financiers under the NFTC loan scheme remained outstanding, and the period after repayment. As to the period after repayment of the loans made by Michael White Limited and the third party funders, clause 8 of the Deed in its original form first provided for payment of the remuneration and expenses of NFTC (or its successor as trustee). It next addressed the proceeds of the "merchandising" and "spin off" rights that had to be separately treated. It provided for payment to PMP of 50% of the divisible receipts derived from the exploitation of the "merchandising" and other "spin-off" rights arising from "The Grail" (as the same were more particularly referred to in the Funding Agreement)
"and in the event only that [PMP] certifies in writing to the Trustee that the Pythons have contributed materially to the making production or other preparation of the means whereby such "merchandising" and other "spin-off" rights have been exploited".
So the "merchandising" and "spin-off" income generated because of the Pythons' material contribution to its creation was specially treated: 50% was paid to PMP directly before the residue went into the pot for division amongst all of the participants (including the Pythons). This income payable directly to PMP was in argument called "the Top Half": and I shall adopt that term in this judgment. Subject to the special treatment of the Top Half, NFTC and its successor trustees were to hold the assigned property and the proceeds of any sale or licensing of it and all other monies received from the exploitation of "The Grail" for the benefit of the profit participants in accordance with their stated percentages. PMP was entitled to 34.125% (and if divided equally between the Pythons that would have given each of them 5.6875%): and Mr Forstater was separately entitled to 5.6875%. So in the Deed the profit allocation was not treated as a joint share.
To summarise the position: if income from merchandising into which the Pythons had put special creative effort (over and above simple exploitation of the existing creative content of "The Grail") was treated as mainstream income then the Pythons would have...
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