COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEENS BENCH DIVISION (Commercial Court)
MR JUSTICE COOKE
Strand, London, WC2A 2LL
B e f o r e :
LORD JUSTICE JACOB
LORD JUSTICE NEUBERGER
| UNIVERSAL STUDIOS INTERNATIONAL BV
|- and -
|FLEXTECH RIGHTS LTD
Mr Michael Driscoll QC and Mr Dominic Chambers (instructed by Messrs Wiggin LLP) for the Respondent
Hearing dates : 23rd and 24th May 2006
Crown Copyright ©
Lord Justice Neuberger :
The Factual Background
"1.Universal is a Dutch company, part of the Universal Studios Group, and is the international licensor of the television programmes, The Jerry Springer Show ("Jerry Springer") and Maury Povich ("Maury Povich"). Flextech is a company incorporated in England which acquired broadcasting rights for various satellite TV channels including Living TV in respect of some of these programmes.
2. Both "Jerry Springer" and "Maury Povich" are talk shows named after their respective hosts. They are made primarily in the US for a US audience but have been licensed for broadcasting in many countries around the world. Flextech broadcast "Jerry Springer" on Living TV from 1995 to 1998 under a series of one year licenses, the last of which ("the 1997 Agreement") was dated 12th August 1997 although its terms were negotiated well into 1998 and it was only finally executed in May and October of that year.
3. In April 1998, Universal invited bids for licenses for future seasons of "Jerry Springer" and "Maury Povich". Universal wanted a "run of series" deal for "Jerry Springer" which meant that the licensee would acquire rights and pay for them as long as the shows were broadcast nationally in the US. The basic commercial terms were agreed with Flextech for this by 6th May 1998 and thereafter negotiations took place until an agreement was executed on 20th October 1998 ("the 1998 Agreement"). Under that agreement, Flextech was licensed to show programmes for each calendar year – i.e. from 1st January - from the 1998/1999 US broadcast season (which ran from 1st September to 30th August) and thereafter for the run of both the "Jerry Springer" and "Maury Povich" series.
4. Whilst, at that time "Maury Povich" had no track history, "Jerry Springer" was well known and had attracted both controversy and complaints because of its confrontational nature, the topics discussed in it and the conduct of the host, the guests and the audience. Both the nature of the issues discussed and the treatment of them were, it appears, designed to be sensational, to shock and, its critics would say with considerable justification, to exploit the unfortunate, degenerate and the perverse, and to pander to the baser instincts of humanity with material of a salacious nature. There was therefore scope for conflict with the Independent Television Commission ("ITC") which produced a programme code ("the ITC Code") which regulated the type of material which could not be shown at all, which could only be shown after 9 o'clock at night and which could only be shown in term time during the day (not in school holidays- "NSH").
5. The ITC described "Jerry Springer" in its August 1998 ruling on a complaint over one show in April 1998 in the following way:
"This controversial US talk show is renowned for its outrageous guests and their shock revelations. The subject matter often consists of emotional problems of a kind which are outside most people's experience, discussed in a way which is less restrained than in equivalent UK produced shows. The programmes are sometimes rowdy and raucous, and the participants often appear to be playing up to the camera, with or without the encouragement of the host, Jerry Springer, himself.
In the view of the ITC, there is a role for programmes which cover and discuss difficult social and emotional issues, and some editions of "Jerry Springer" have provided compelling viewing. There has been some public debate, however, about the exploitational aspects of the show. The participants are frequently drawn from the poorer segments of American society, and invited to parade their faults and misfortunes for public entertainment. Many are inarticulate and unable to make a proper case for themselves. Frequently, guests resort to persistent verbal abuse or physical violence. This is sometimes described as 'victim' entertainment."
6. By a letter of 30th December 2002, Lovells, Flextech's solicitors wrote to Universal stating that the contents of "Jerry Springer" had significantly changed over the years, despite the fact that the parties had agreed that the programme would remain substantially similar in form and substance to the 1997/1998 US season, that this constituted a breach of the 1998 Agreement and that Flextech was dissolving the 1998 Agreement "as per 1st January 2003" on the basis of Article 6:245 of the Dutch Civil Code. (It is common ground between the parties that the 1998 Agreement was governed by Dutch law).
7. Universal disputes the validity of this dissolution and maintains that the 1998 Agreement continues in full force and effect and that it is entitled to license payments due in respect of programmes supplied prior to the purported dissolution and in respect of payments which fall due under the Agreement on an instalment basis until the conclusion of the run of the series.
8. On 13th July 2004, it was ordered that the Court determine as preliminary issues all those issues set out in the List of Issues agreed by the parties, excluding those relating to evaluation of the content of the individual episodes of "Jerry Springer" and "Maury Povich" and some other limited issues as set out in the Court's Order."
The 1998 Agreement
"This shall confirm the agreement ("Agreement") entered into as of this day of 1998 by and between Flextech Rights Limited ("Flextech") and Universal Studios International BV ("Universal") with respect to Universal granting Flextech the right to exhibit the television series "Jerry Springer" and "Maury Povich" (each a "Program" and collectively the "Programs") on the following terms and conditions:"
There then followed certain provisions of which only some are relevant.
(a) "Jerry Springer"
Each episode of each Licensed Season of the Program shall primarily feature Jerry Springer as the host and shall be similar in content and overall production value to the episodes in the 1997/1998 US broadcast season. For the purpose of this clause, "primarily" shall mean that occasionally a guest host may appear in the show instead of Jerry Springer in the event of illness or similar event.
(i) Licensed Seasons
Commencing with the 1998/1999 US broadcast and continuing thereafter on a run-of-the-series basis (meaning each and all subsequent broadcast seasons during which the Programs are broadcast in the US…).
(iii) Number of episodes Per Licensed Season
195 original episodes plus (to be selected or approved by Flextech) 65 repeat episodes of that season's or, with Universal's approval, any previous season's episodes; provided that, if more (or less) than 195 original episodes are produced in a particular season then the number of original episodes, the number of repeat episodes for such season being licensed by Flextech shall be adjusted accordingly (with the number of repeat episodes being adjusted so that, when added to the original episodes for the particular season, the total number of licensed episodes for such season equals 260) provided however that if the number of original episodes is less than 130 then at Flextech's election either:
-The number of permitted transmissions of the original and/or the repeat episodes shall be increased in compensation; or,
-The total number of licensed episodes decreased proportionately (so that the number of repeats is equal to the number of original episodes) in which event the total License Fee shall be decreased proportionately and the Payment Schedule adjusted.
(iv) Permitted Number of Transmissions Per Licensed Episode
3 transmissions for each original episode; 3 transmissions for each repeat episode.
(vi) License Fee Per Hour
$25,000 per hour for each of the original and repeat hour-long episodes for the 1998/1999 season; the per hour License Fee shall increase by 5% (on a compounded basis) for each subsequent season of the Program licensed under this Agreement.
(vii) Total License Fee for 1998/1999 Season
7. DELIVERY/RETURN OF MATERIALS
Delivery of physical/promotional materials for the programs to Flextech shall take place at least one month prior to the start of the relevant license period….
Flextech shall not (other than to conform with scheduling requirements and to ensure compliance with the ITC regulations) edit, dub or modify the Programs without the prior written consent of Universal.……Flextech agrees that Flextech shall only exhibit episodes from the Program in their entirety in the form delivered by Universal to Flextech in compliance with all instructions furnished by Universal to Flextech in connection therewith….."
"8. …[Flextech] may make minor cuts in the films hereunder in order to conform to time segment requirements, governmental laws or regulations, or to [Flextech's] broadcasting policy on program content existing at the proposed date of broadcasting by [Flextech] and applicable where relevant to other programming broadcast on the Station. [Flextech] shall not be required to transmit any picture which does not conform to such policy.
In the event of such non-conformance, and if such non-conformance is not the subject of correction by cuts as hereinbefore provided, [Flextech] shall promptly advise [Universal]. In such event [Universal] shall deliver a substitute film if available, in the same series, which shall be deemed to be one of the films hereunder. If no film is available, the number of films to be delivered and paid for hereunder shall be reduced by one and the last instalment shall be correspondingly reduced."
The preliminary issues
The assumed facts upon which the preliminary issues were determined
"26. …Particulars of the episodes of ["Jerry Springer"] …which breached the express and/or implied terms of the 1998 License Agreement were given to [Universal] by [Flextech] in writing in October and November 2002 (letters from [Flextech] to [Universal] dated 21 October 2002 and 15 November 2002). Full particulars of the episodes of ["Jerry Springer"] in question, and the basis on which they breached the express and implied terms of the 1998 License Agreement, are set out in Schedule 1 attached to this Defence.
27. In summary, [Flextech] will say that whereas ["Jerry Springer"] in 1997/98, …essentially constituted mainstream viewing suitable for broadcast during the daytime, the episodes of both programmes deteriorated from season to season, with the result that by the 2001/02 season the vast majority of the episodes contained content which was wholly unsuitable for daytime viewing and which did not comply with the ITC Code. Particulars of the unacceptable content of the programmes of ["Jerry Springer"] are set out in Schedule 1 attached to this Defence.
28. So, as regards ["Jerry Springer"], in the 1997/98 season out of a total of 194 new episodes, 61 episodes had compliance problems in that 15 episodes could not be broadcast at all because of their content (which could not be cured by editing) and 46 episodes could, after a process of editing, be broadcast but only after 2100 hours. A total of 134 episodes were suitable for broadcast at any time. By contrast, in the 2001/2002 season, out of a total of 190 new episodes, 176 episodes had compliance problems in that 41 episodes could not be broadcast at all because of their content (which could not be cured by editing), 102 episodes could, after a process of editing, be broadcast but only after 2100 hours, and 33 episodes could not be broadcast during the school holidays prior to 2100. Only 14 episodes were suitable for broadcast at any time. …..
30. As a result of the facts and matters set out above, in the 2001/02 season: -
(1) [Flextech] was unable to broadcast at all a total of  of the episodes; and
(2) [Flextech] did not have enough new episodes of the programmes to broadcast prior to 2100 hours; and
(3) [Flextech] was forced to rely more heavily on showing repeat episodes of the programmes…"
"Phil reveals that he is gay and is only sleeping with Tiffany to get close to her boyfriend Danny. Tami reveals to her boyfriend Mike that she has been prostituting herself with their mutual friend Jason in order to pay the bills. Kelly reveals that she has been cheating on her husband Mike with his best friend."
The original certification was "2100", i.e. only to be shown after 9.00 pm, but, on review, this was changed to "NSH", i.e. it could be shown at any time outside school holidays, but not before 9.00 pm during school holidays. The "Reason for Certification" was recorded as:
"Adult themes of infidelity and prostitution but detail not too explicit or the specifics not dwelt on. The grievances are aired and solutions are offered. Upon review it was decided that it was possible to edit the extreme elements of the stories (language and more risqué comments) to enable NSH certification."
The meaning and effect of clause 4(a) of the 1988 Agreement
The rival contentions
"By the words 'similar in content', the parties meant only that the show would remain the same type of show – that is to say a show hosted by Jerry Springer with the same look, feel and style, dealing with shocking subject matter in a confrontational manner. It was the shock factor, the salacious content and the confrontational nature of the show which (at least initially) distinguished it from others, provided its appeal and constituted its content for the purpose of the clause…"
"Similar in content"
Comparing an episode with an earlier series of episodes
"If the material which formed the basis of certification was such as to give rise to an increased number of untransmissible, non-compliant or restricted viewing [episodes], then, although the comparison is to be made between an individual episode in the [2001/2002] season, and the range of broadcasts in the [1997/1998] season, and there might be little difference between the content of the [individual episode] as compared with one particular [episode] of the [1997/1998] season, a comparison against the sweep of [episodes] in the [1997/1998] season can be made by comparing the number of offending [episodes] in the [2001/2002] season as against those in the [1997/1998] season. Each episode [of the 2001/2002 season] must be taken by way of comparison with the general run of [episodes] in the [1997/1998] season and not with the worst of such [episodes]."
These observations could, but should not, be read as treating non-compliance or untransmissability as constituting aspects of "content" (which would be wrong), as opposed to evidence of "content" (which appears to me correct). On that latter basis, I would agree with what the Judge said in that passage.
My conclusions so far
Flextech's entitlement to dissolve the 1998 Agreement on the assumed facts
The two issues relating to Rider 8
Does Rider 8 preclude alleging that untransmissible episodes breach clause 4(a)?
Does Rider 8 permit the substitute episode to be a repeat?
Lord Justice Jacob
Sir Anthony Clarke, MR