O'Sullivan v Management Agency and Music Ltd

JurisdictionEngland & Wales
CourtCourt of Appeal (Civil Division)
JudgeLORD JUSTICE DUNN,LORD JUSTICE FOX,LORD JUSTICE WALLER
Judgment Date14 February 1984
Judgment citation (vLex)[1984] EWCA Civ J0214-3
Date14 February 1984
Docket Number84/0058

[1984] EWCA Civ J0214-3

IN THE SUPREME COURT OF JUDICATURE

COURT OF APPEAL

ON APPEAL FROM THE HIGH COURT OF JUSTICE

QUEEN'S BENCH DIVISION

(MR JUSTICE MARS-JONES)

Royal Courts of Justice,

Before:

Lord Justice Waller

Lord Justice Dunn

Lord Justice Fox

84/0058

1979 O. No: 175

O'Sullivan
and
Management Agency & Music Limited & Others

MR M. MILLER, Q.C., MR N. STRAUSS, Q.C., MR H. McGREGOR, Q.C., and MR M. ASHE (instructed by Messrs. Landau & Scanlan) appeared on behalf of the Appellants (1st-5th Defendants).

MR K. GARNETT (instructed by Messrs. McKenna & Co.) appeared on behalf of the Appellants (6th Defendants).

MR A. BATESON, Q.C., MR H.W. BURNETT, Q.C., and MR F. BRENNAN (instructed by Messrs. Amhurst, Brown, Martin and Nicholson) appeared on behalf of the Respondents (Plaintiffs).

LORD JUSTICE DUNN
1

Raymond O'Sullivan (professionally known as Gilbert O'Sullivan) to whom I shall refer as "O'Sullivan" is a well known composer and performer of popular music. The retail sales of records of his music between 1970 and 1978 realised a gross figure of some £14.5 million. In addition he has achieved world wide fame as an artiste playing to packed houses in this country and the U.S. He has won many awards. In 1970 he was 23 years old, and although he had a publishing agreement with April Music Ltd., and a recording agreement with C.B.S. Ltd., all his compositions and recordings had been failures. But he was convinced of his own talent and determined to attain success in the music world both as a composer and performer.

2

In 1969 he approached the 3rd Defendant to whom I shall refer as "Mills", known internationally as a manager, producer and performer, who managed amongst others Tom Jones and Engelbert Humperdinck. Mills operated through three public companies in which he was a substantial share holder and the chairman of at least one of them. Mills was concerned mainly with the artistic side of the operation. The parent company was the 1st. Defendant and the subsidiaries the 2nd Defendant, the publishing company, and the 5th Defendant, the recording company. William Smith (Smith) was also a shareholder in and Managing Director of these companies, and was responsible for the business side. The companies shared offices in Bond Street, and were known collectively as "MAM".

3

On the 25th February 1970 O'Sullivan signed a management agreement with Mills, and a sole agency agreement with the 1st Defendant. The agreements were for 5 years with an option exercisable by the Defendants to extend the period for a further 2 years. At an early stage in their relationship Mills realised that O'Sullivan had enormous potential, and in July 1970 O'Sullivan signed a publishing agreement with the 2nd Defendant, which was post dated to the 1st February 1972 to coincide with the release of O'Sullivan from his contract with April Music. At about the same time O'Sullivan moved into a cottage in the grounds of Mills' house near Weybridge. He was given £10 per week pocket money, his previous wage as a postal clerk, and all his outgoings were paid by one or other of the Defendant Companies. In addition he was entitled to draw and did draw cheques for any monies he required by way of advances on his royalties although his requirements were modest. Mills acted as his producer without any additional charge save for the 20% on all earnings to which he was entitled under the management agreement. On 5th October 1970 O'Sullivan signed a recording agreement with the 5th Defendant, which was issuing its first label which was attended by very wide publicity. O'Sullivan was one of the artistes to benefit from that publicity. He had total confidence in Mills and trusted him implicitly.

4

By 1972 O'Sullivan had achieved enormous success. 6.5 million of his records were sold and were at or near the top of the charts in this country and the U.S. He was voted the biggest selling solo artiste in the world by the Music Business Association. In that year he moved out of the cottage and bought his own house for £95,000 with the assistance of a loan of £60,000. His success continued in 1973 with more records and a new album. He was composing at a prolific rate and travelling all over the world promoting his records. He was blissfully happy, having achieved his ambition.

5

In 1973 a change was made in the contractual arrangements, for perfectly lawful tax avoiding reasons. The 2nd Plaintiff, wholly owned by O'Sullivan, was set up to receive his earnings in relation to the United Kingdom. Another company, the 4th Defendant, had been set up to receive the earnings of Jones, Humperdinck and O'Sullivan from outside the United Kingdom, The 4th Defendant was a private trust company of which the directors were Smith and a Mr. Landau who were entitled to profits from the company as beneficiaries of discretionary trusts in which their wives and families also had interests. Although this information was disclosed in the reports and accounts of the 1st. Defendant, it was not known to O'Sullivan. On the 7th September 1973 O'Sullivan signed service agreements with the 1st Plaintiff and the 4th Defendant and on the same day both companies entered into recording agreements with the 5th Defendant. All these agreements were to continue until the 31st July 1979.

6

In 1974 O'Sullivan was advised by Mills that he should leave the country for tax reasons, and he spent about eight months abroad. By that time Mills was living mostly in the U.S. Nonetheless another album was produced which sold well in the U.K. although badly in the U.S. During the production of this album disagreements arose between O'Sullivan and Mills, both of whom wished to have control of the production of the recordings, particularly the "mix" of the music and the artistic presentation of the records. Despite these disagreements another hit record was produced in 1975 which had been recorded by O'Sullivan and Mills in the U.S. In 1976 O'Sullivan and Mills recorded their last LP in Los Angeles. But their disagreement had become such that the record was never published, and thereafter Mills ceased to act as producer although he remained de facto as O'Sullivan's Manager, notwithstanding that the management agreement expired. O'Sullivan returned to England and produced an album himself which was recorded by the 5th Defendant, but it was not a success. Mills by then was spending most of his time in the U.S. where Jones and Humperdinck were living.

7

In 1976 there was another change in the contractual arrangements. MAM did not have a fully developed recording company and the group required the services of a large marketing pressing and distribution organisation with international outlets. On the 7th June 1976 agreements were made between the 1st., 4th. and 5th Defendants and E.M.I. whereby E.M.I. were granted exclusive rights in respect of the recordings of O'Sullivan's music in consideration of an advance of U.S. $1.2. million by E.M.I. to those Defendants. E.M.I. were to exploit the recordings world wide outside North America. On the 14th June 1976 a similar agreement was made between the 1st. and 6th. Defendant for the exploitation of records of various artistes, including O'Sullivan, in North America. The advance to the 1st. Defendant under this agreement was U.S. $600,000. On the same day O'Sullivan signed a letter of inducement, i.e. an agreement to be bound in the terms of that agreement.

8

By this time O'Sullivan was unhappy with his contractual arrangements. He was disillusioned with Mills and did not trust Smith. He was horrified to discover that he was spending more and earning less than he used to. He consulted solicitors who eventually on the 15th May 1979 wrote alleging that all the agreements referred to above were illegal, and these proceedings were commenced.

9

This summary of the facts has omitted all reference to one matter. Right from the outset O'Sullivan had wanted what he called a "joint publishing company". This is an arrangement whereby a company is set up in which the composer and the publisher each has a 50% interest. All the composer's copyrights are assigned to the company which pays the composer a royalty. So that in addition to the royalty the composer retains 50% ownership in his copyrights. This is clearly a very valuable asset for the composer.

10

O'Sullivan thought that he had been offered such an arrangement by April Music, but in fact the agreement which he had provided for the retention of the copyrights by the composer, or a company formed by him for the purpose, with a licence to the publisher to reproduce the works for a period of 5 years on payment of a 50% royalty, after deduction of 15% expenses. O'Sullivan showed the April Music agreement to Mills who said his company would do the same. Thereafter O'Sullivan raised the question of the Joint Publishing Company on numerous occasions both with Mills and Smith, but it was never achieved although he was told he would get it. A minute of the Board of Directors of the 2nd Defendant dated the 2nd May 1974 was in the following terms: " Gilbert O'Sullivan A schedule giving brief details of new agreements which were proposed should be entered into with this Artiste Composer was available for the Board to consider. The proposals as regards Management & Agency Services (renewed on same terms until 31st January 1979) were considered most satisfactory as were the terms for renewal of the Recordings Agreement for the same period at royalty rates rising during the year to July 31st 1979 to a maximum of 8%.

11

"The new proposal as regards Music Publishing was discussed and although accepted by the Board was subject to certain reservations made particularly by Mr. C. Berlin, and Mr H. Davison. The new...

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    ...2015) at p 619. 201 For instance, is good faith a threshold requirement or merely a factor to be taken into account in the exercise? 202[1985] QB 428. 203O'Sullivan v Management Agency and Music Ltd[1985] QB 428 at 458. 204O'Sullivan v Management Agency and Music Ltd[1985] QB 428 at 458. 20......
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