Portobello Productions Ltd v Sunnymarch Ltd
| Jurisdiction | England & Wales |
| Judge | Master Marsh |
| Judgment Date | 07 November 2022 |
| Neutral Citation | [2022] EWHC 3014 (Ch) |
| Docket Number | CASE NUMBER BL-2022-000207 |
| Court | Chancery Division |
[2022] EWHC 3014 (Ch)
DEPUTY Master Marsh
CASE NUMBER BL-2022-000207
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
BUSINESS LIST (ChD)
Edmund Cullen KC (Instructed by RPC) appeared on behalf of the Claimant
Gwilym Harbottle (Instructed by Simkins) appeared on behalf of the Defendant
Delivered remotely on
November 2022 at 2pm
(hearing 2 November 2022)
This is my judgment on hearing the claimant's application dated 6 July 2022 seeking judgment under CPR rule 24(2) of an issue deriving from paragraph 14 of the defence. The issue concerns whether a term is to be implied in clause 11.3 of an agreement made between the parties on 21 December 2019. The application seeks, in the alternative, an order that paragraphs 14 to 18 of the defence are struck out pursuant to CPR Rule 3.4(2)(a).
At the hearing on 2 November 2022 Edmund Cullen KC appeared for the claimant and Gwilym Harbottle appeared for the defendant. I am grateful to them both for their clear and helpful submissions.
I am delivering this judgment as speedily as possible after the hearing because there is a costs and case management conference listed for hearing on 18 December 2022 and the parties need to know the basis upon which they should prepare for it.
Background
The claimant is a film production company owned and controlled by Eric Abraham which held film rights to the Roald Dahl book Danny the Champion of the World (“the Book”). The defendant is a production vehicle of Benedict Cumberbatch and Adam Ackland (in the agreement they are referred to respectively as BC and AA). SunnyMarch Holdings Limited is the defendant's holding company.
In December 2019 the claimant and defendant entered into a Co-Production Agreement for the development and production of a film of the Book (“the Film”). The Agreement included provisions for its termination in clause 11 on various grounds. Clause 11.3 provided that:
“Portobello [the claimant] may forthwith terminate the Agreement if BC and AA ceased to have control of SunnyMarch [the defendant] or SunnyMarch Holdings Limited or if either of their services are no longer exclusively available to either of those companies.”
There are two points to note at this stage. First, clause 11.3 gives only the claimant an entitlement to terminate the Agreement. Secondly, notice may be given if one or both of the two conditions are met. Subject to meeting those conditions, the claimant is, on the face of the Agreement, entitled to serve notice on an unrestricted and unqualified basis. I will refer to the conditions where necessary as “the Control Condition” and “the Exclusivity Condition” or merely as “the Conditions”.
It is accepted by the claimant that issues of construction concerning the circumstances in which the Conditions are met arise but they are not of direct concern to the application I am dealing with.
By a notice dated 23 December 2021, the claimant gave notice of termination of the Agreement pursuant to clause 11.3. This notice referred to the Exclusivity Condition and was served on the basis that the services of Mr Cumberbatch and Mr Ackland were not being made exclusively available to the defendant or to SunnyMarch Holdings Limited. The claimant relied on the fact that both Mr Cumberbatch and Mr Ackland had entered into service agreements with other entities.
By a further notice, given on 14 June 2022, and served without prejudice to the validity of the original notice, the claimant gave notice of termination of the Agreement pursuant to clause 11.3, this time referring to the Control Condition. The notice was based on an allegation that Mr Cumberbatch and Mr Ackland had ceased to have control of the defendant and SunnyMarch Holdings Limited, by reason of having entered into a Shareholders' Agreement with a third party, Anton Capital Entertainment SCA (“Anton”). Under the Shareholders' Agreement, Anton is given certain rights in relation to the management and direction of SunnyMarch Holdings Limited. The claimant's case, relying upon a failure to comply with the Control Condition, was added by amendment after the defendant had provided — the claimant would say belatedly — a redacted copy of the Shareholders' Agreement.
The claimant seeks declarations that it has validly terminated the Agreement and that the defendant has no continuing rights in relation to the Film that were or are the subject of the Agreement.
The main defence put forward by the defendant is based upon the construction of the Agreement and, in particular, that neither the Control nor the Exclusivity Conditions were met. The defendant advances various arguments as to why, on a proper construction of the Agreement Mr Cumberbatch's and Mr Ackland's services were exclusively available to the defendant and SunnyMarch Holdings Limited and that they retain control of the defendant and the holding company.
These arguments, which are largely dependent on various alternative formulations of what the defendant says is the proper meaning of services and control in clause 11.3, do not matter for the purposes of this application. This is because the application concerns the alternative defence put forward in paragraph 14 by the defendant in relation to both conditions. That defence proceeds on the basis that “… if the defendant was in breach of clause 11.3 of the Co-Production Agreement the Defendant will contend that the clause grants the Claimant a discretion.” In other words, the defence pleaded in paragraph 14 is based upon the premise that the conditions for service of a notice as set out in clause 11.3 were satisfied.
The defendant goes on to say in paragraph 14:
“The purpose of the Co-Production Agreement was to provide a contractual framework for the Claimant and the Defendant to work together to develop, produce and exploit the Film and thus to obtain mutual benefits including remuneration, copyrights which they could own in common pursuant to clause 6.1 of the Co-Production Agreement and credits in accordance with clause 10 of the Co-Production Agreement. In the premises, it was an implied term of the Co-Production Agreement that the Claimant would exercise its said discretion rationally and in a manner which was consistent with the reasonable expectations of the parties arising from their agreement.”
Paragraph 14 then provides further details of what the reasonable expectations of the parties are said to be in relation to the two conditions. With regard to the exclusivity condition, it is said:
“Having regard to the fact that at the date of the Co-Production Agreement all parties knew that Messrs Cumberbatch and Ackland had extensive other commitments, those reasonable expectations included that the Claimant would only seek to invoke clause 11.3 on the grounds that those other commitments were such as to make it impossible to complete the Film in a reasonable time.”
With regard to the control condition, paragraph 14(b), which was added by amendment, the parties' reasonable expectations are said to include that:
“…the Claimant would only seek to invoke clause 11.3 on the grounds that Messrs Cumberbatch and Ackland had ceased to have control of the Defendant or its holding company in the event that such loss of control affected the Defendant's ability to complete the Film in a reasonable time.”
Paragraphs 15 to 18 of the Amended Defence then go on to assert that the implied term was breached because the reasons underlying Portobello's termination notice were inconsistent with it and that as a consequence the termination notices were invalid.
The defendant pursues a counterclaim seeking declaratory relief concerning sums due under the agreement and other matters on the basis that the notices to terminate were of no effect.
The defence does not aver that the Co-Production Agreement was a relational agreement or that clause 11.3 was subject to a duty of good faith. There are, as we will see, specific clauses in the agreement in which a duty of good faith is expressly included.
The Agreement
I now turn to deal with the contractual terms. It is necessary to set out some parts of the agreement in full.
Recital A:
“Portobello and SunnyMarch … have agreed to work together to develop, produce and exploit a feature film, provisionally called Danny the Champion of the World … based on a novel by Roald Dahl also entitled Danny the Champion of the World”
“Clause 1: Co-production and acting services.
1.1: Portobello and SunnyMarch shall jointly co-develop and co-produce the Film in accordance with the terms and conditions of this Co-Production Agreement and the terms of any agreements with a Financier (as defined below).
1.2: Portobello shall provide the services of Eric Abraham and Jack Sidey (the Portobello Producers) and SunnyMarch shall provide the services of Benedict Cumberbatch (BC), Leah Clarke and Adam Ackland (AA) (the SunnyMarch Producers), as individual producers for the Film, all on terms and conditions in accordance with industry standard terms and, if applicable, to be negotiated in good faith with a third party studio and/or financier and/or other source of finance for the Film (each a financier).
1.3: It is the intention of the parties that SunnyMarch shall also provide the acting services of BC in the role of “Father” in the...
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