Pink Floyd Music Ltd and another v EMI Records Ltd
| Jurisdiction | England & Wales |
| Judge | Lord Justice Laws,Lord Justice Carnwath |
| Judgment Date | 14 December 2010 |
| Neutral Citation | [2010] EWCA Civ 1429 |
| Docket Number | A3/2010/0794 |
| Court | Court of Appeal (Civil Division) |
| Date | 14 December 2010 |
[2010] EWCA Civ 1429
The Rt Hon Sir Andrew Morritt, Chancellor of the High Court
Before: The Master of the Rolls
Lord Justice Laws
and
Lord Justice Carnwath
A3/2010/0794
IN THE HIGH COURT OF JUSTICE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Elizabeth Jones QC and Ruth Holtham (instructed by Mayer Brown International LLP) for the Appellant
Robert Howe QC and Shaheed Fatima (instructed by Sheridans Solicitors for the Respondents
Hearing date: 2 November 2010
Lord Neuberger MR:
Introduction
This appeal is brought by EMI Records Ltd (“EMI”) against the decision of the Chancellor of the High Court. It raises issues of interpretation relating to two agreements which EMI entered into with Pink Floyd Music Ltd (“PFM”) on 17 June 1999. Those agreements have been referred to in argument as “the 1999 Agreement” and “the MLA”, expressions which I shall adopt. The appeal also gives rise to concerns about private hearings and anonymisation, which I shall touch on at the end of this judgment.
The relevant factual background
PFM and its fellow claimant, Pink Floyd (1987) Ltd (which can for present purposes be treated as included within PFM), are service companies for members of the well known pop group, Pink Floyd. The 1999 Agreement relates to the overseas and UK sales of five named albums (and two single tracks), and incorporates the provisions of the MLA, which was a Master Licence Agreement. The two agreements terminated all earlier agreements (entered into between 1967 and 1992), and their effect was to confer licences on EMI to exploit those albums on terms. Between 1 February 2000 and 27 September 2005, there were a number of subsequent agreements between the parties by which four further albums became subject to the terms of the MLA.
In March 2007, PFM notified EMI that, in accordance with their rights under clause 7 of the MLA, they had appointed Prager & Fenton to carry out an audit of the royalty statements provided by EMI for the period from July 2002 to September 2007. In July 2008, Prager & Fenton produced a report indicating that, in their view, there were fifteen areas of under-accounting amounting to a total value of more than £10 million.
In March 2009, PFM issued their claim form in the instant proceedings, essentially based on that assessment, and their amended particulars of claim were served in June. EMI's defence was served the following month, and, in October 2009, PFM served a reply and applied for summary judgment.
All but four of the fifteen claims have now been settled. The four claims that remain are based on PFM's allegations that EMI (a) used an incorrect base price for digital sales; (b) wrongly exploited the works in the albums in the form of single track downloads; (c) wrongly exploited those works in the form of ring tones and streaming; and (d) did not include digital income from single track downloads.
The claim for summary judgment seeks two declarations. The first relates to clause 9(d)(i) of the 1999 Agreement (and clause 6.1(b)(i) of the MLA, which for present purposes is to the same effect). The second declaration relates to clause 4.13 of the MLA, which was incorporated into the 1999 Agreement. The first declaration relates to claim (a), the second to claims (b) and (c).
The declarations sought
The first declaration sought by PFM was in these terms:
“Upon the true construction of [the 1999 Agreement] and/or the MLA, internet music providers (such as, for example, iTunes) are ‘sub-licensees affiliates or any third party obtaining rights in this respect directly or indirectly from [EMI]’ within the meaning of Clause 9(d)(i) of [the 1999 Agreement] or clause 6.1(b)(i) of the MLA, so that [EMI] is obliged to account to [PFM] in respect of income received at source by such providers.”
The second declaration sought by PFM was:
“Upon the true construction of the MLA, Clause 4.13 of the MLA applies to Online Distribution, so that the Defendant is not entitled to exploit the recordings on the MLA Albums (or other Albums now subject to the terms of the MLA) by Online Distribution or by any other means other than the original Album configurations, without the prior written consent of the Claimants which may be absolutely withheld (including by means of ringtunes and streaming).”
The Chancellor granted both declarations, and I will consider them in turn. However, before doing so, it is appropriate to set out the principally relevant terms of the 1999 Agreement and the MLA, and to discuss the applicable law.
The centrally relevant provisions of the 1999 Agreement and the MLA
As explained above, the 1999 Agreement provided that the licence and all rights previously granted to EMI in respect of recordings reproduced on five albums (whose album titles and individual tracks are set out in Schedule 2 to the MLA) and two Single tracks (whose titles are also set out in Schedule 2), the copyright to which was owned by EMI, would be replaced by the terms of the MLA. By the MLA, PFM granted to EMI, in return for royalty payments, licences to exploit certain other albums in which PFM owned the copyright.
Clause 1(b) of the 1999 Agreement incorporates various definitions contained in clause 12.1 of the MLA, which include the following:
“‘Album’: any sound alone record derived in whole or in part from the Master Tapes.
‘Associate’: any person firm or company which is a connected person (as defined in the Income and Corporation Taxes Act 1988 Section 839) of the Licensee or which is an associated company of the Licensee within the meaning of Section 416 of that Act….
‘Delivery Material’: the Master Tapes and other material short particulars of which are set out on Schedule 1 [which refers to “[t]he Master Recordings listed in Schedule 2 …”].
‘Master Tapes’: duplicate master tapes containing the Recordings suitable for the creation and exploitation of first class Records.
‘On-Line Distribution’: distribution of recordings via telephone, satellite, cable, point of sale manufacturing or other means of direct transmission to the consumer over networks or through the air now known or hereafter invented.
‘Records’: any sound alone devices manufactured by the Licensee in a configuration now known and currently exploited together with formats to be devised and derived in whole or in part from the Master Tapes.
‘Recordings’: recordings of [Pink Floyd] and musical works short particulars of which are contained in Schedule 2.
‘Royalty Calculation Price’: the price upon which royalties (not being mechanical royalties) due to the Company in respect of the sale of Records hereunder are calculated. Such price will be the Licensee's published price (or if no such published price exists the actual price gross of all discounts charged for such Records by the Licensee to the majority of dealers in such country) exclusive of VAT or other sales taxes of such Records gross of all discounts (howsoever arising) in the country of sale of which the Licensee's Records are customarily available to dealers ……
‘Single’: a seven inch 45 rpm Record and/or a twelve inch (45 rpm or 33 1/3 rpm) Record (and/or the Compact Disc and/or the cassette and/or DVD and/or other agreed format equivalent thereof and all other equivalent means of exploitation the rights to which are granted to the Licensee as specified herein) containing not less than two (2) tracks or more than four (4) tracks.”
Clause 12.3 of the MLA provides, inter alia, that the singular includes the plural and vice versa, unless the context otherwise requires.
Clause 4(b) of the 1999 Agreement incorporates royalty rates by reference to the second schedule thereto, which specifies rates for certain online distributions to be a percentage of “receipts”.
Clause 9(a) of the 1999 Agreement confirms that the rights granted to [EMI] under both agreements include rights of online distribution. Clause 9(d)(i) is the centrally relevant provision for the purposes of the first declaration. It is in the following terms (with the figure being replaced by “XX” on the ground that it is commercially confidential):
“In the event of the sales distribution by [EMI] or its Associates (whether directly or by licence) of [EMI] Recordings by the Artists hereunder by Online Distribution –
(i) Such sales shall be deemed sales of Records for all purposes SAVE THAT the royalty in respect thereof shall (subject to the provisions of clause 9(d)(ii) hereof) be a [XX]% … share of [EMI's] receipts. [EMI's] receipts shall be calculated at the so-called ‘source’ so that they shall incorporate the receipt of EMI's licensees sub-licensees affiliates or any third party obtaining rights in this respect directly or indirectly from [EMI].”
Clause 9(d)(ii) contains a provision allowing an increase in the royalty rate for online distributions payable by [EMI], and it uses, as a comparator, dealer prices less certain specified expenses.
Turning back to the MLA, clause 1.1 grants EMI “the sole and exclusive right” to manufacture, sell and distribute “Records reproducing the Recordings”, and clause 1.3 grants “the sole and exclusive rights of On-Line distribution (as hereinafter defined) and the sole and exclusive rights to reproduce Records on DVD …”.
The centrally relevant provision of the MLA for the purpose of the second declaration is clause 4.13, which reads as follows:
“[EMI] warrants undertakes and agrees with [PFM] …
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