England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM CHANCERY DIVISION
(MR JUSTICE DAVID RICHARDS)

		Royal Courts of Justice Strand London, WC2
		2 November 2006

1. THE CHANCELLOR: This is an appeal brought with the permission of Jonathan Parker LJ from part of an order of David Richards J made on 2nd February 2006 which dealt with the costs; and second, a renewed application for permission to appeal in respect of the remainder of his order.
2. Matters arise in this way. In January and February 1974 a pop group call "the Rubettes" was established to perform a pop song written by Mr Bickerton and Mr Waddington. It was recorded on a demo tape made by Polydor and called "Sugar Baby Love". The lead vocalist on the demo was the third defendant, Paul Prewer Alan. Alan Williams, the second claimant, and Bill Hurd the third defendant, were founder members of the group.
3. Between 1982 and 2002 Alan Williams Entertainment Ltd, the first claimant, managed the Rubettes.
4. In 1999 the Rubettes split, one faction went with Mr Williams and the other with Mr Hurd.
5. On 21st August 2000 Mr Williams and his company commenced proceedings for passing off and infringement of trade mark against Mr Hurd and two other members of the band called Mr Bines and Mr Prewer in respect of the use of the name "the Rubettes".
6. On 30th October 2002 the action was compromised by an order in Tomlin form made by Chief Master Winegarten. The schedule to the order ("the Compromise") contained the terms of the compromise. The issues on this appeal directly concern clauses 1, 5 and 10 but it is necessary to show their content from paragraphs 1 to 10 together. They are in the following terms:

"Band names

1. There be two Rubettes bands with immediate effect and named as follows:

1.1 'The Rubettes featuring Alan Williams [and other band members]'

2.2 'The Rubettes featuring Bill Hurd [and other band members]'

except that Mr Williams' band is to perform as

'The Rubettes' up to and including 31 December

2002.

Existing stock and Merchandise

2. Provided Alan Williams supplies to the defendants within 14 days a full stock list of all existing product and merchandise and memorabilia, he be permitted to sell the same notwithstanding the terms of this agreement.

New Logo and Trade Marks

3. Each Party to produce and use 'new' Rubettes logo and Trade Marks and neither party to use the current Rubettes logo or Trade Marks.

4. Mutual non -objection to registration of the new Trade Marks by the other party.

5. Neither band will trade as 'The Rubettes' as from 1 January 2003.

6. All future merchandise to have new logo on.

Press release

7. The parties will be entitled to put out their own Press Release regarding the settlement of the case.

Alan William's Present Website

8. Alan Williams to change his website to reflect the terms of this Agreement by 1 January 2003.

Mutual Undertakings: Non -disparagement and

Peaceful co -existence

9. Mutual undertakings by all parties not to disparage the others to third parties nor to threaten the others, but to peacefully co -exist in fair competition with each other.

Paul Prewer

10. Paul Prewer (professionally known as Paul Da Vinci) agrees not to refer to himself as former lead singer of the Rubettes and to use his reasonable endeavours to prevent others from doing so."

7. On 17th September 2004 proceedings were commenced by Mr Williams and his company against Mr Hurd, Mr Bines and Mr Prewer for damages for breach of the compromise by continuing to represent themselves as the original "the Rubettes" pop group.
8. A defence and counterclaim was served on 20th October 2004 in which Mr Hurd, Mr Bines and Mr Prewer deny any breach of the Tomlin order, but contend in their counterclaim that it was Mr Williams and his company who broke the Tomlin order by representing themselves as "the Rubettes". That claim came before David Richards J between 4th and 10th October 2005. He gave judgment on the claim on 2nd February 2006. His material conclusions were as follows:

(1) The ordinary meaning of the words "trade as" in the context of paragraph 5 of the compromise agreement extends to "any promotion of the Band as the Rubettes".

(2) Paragraph 5 of the Compromise Agreement necessarily involves an obligation to use reasonable endeavours to ensure that third parties with whom they deal do not describe or promote their band as "the Rubettes" encompassing reasonable steps both in advance of promotion and in correction of wrongful promotion.

(3) The Defendants were in breach of the Compromise Agreement in respect of:

(i) entries in the website of its agents International Artists,

(ii) three out of seven alleged infringements by promoters.

(iii) all three TV appearances on which [the claimants] relied.

(iv) one of six miscellaneous events [on which the claimants relied].

(v) and in the use of the domain names and part of the website set up and used by the defendants.

(4)the Claimants were in breach of the Compromise Agreement in respect of:

(i) four out of six alleged infringements alleged [by the defendants].

(5) The judge concluded that there should be inquiry as to damages.

9. There followed, on 2nd February 2006, argument as to the costs. The judge then gave a second extempore judgment on that issue. His material conclusions are: first, that each side had been only partially successful; second, that it is common for issues of costs to be determined at the liability stage in cases of a split trial; third, although the eventual quantum of damages could not be known at that stage the parties could have, but had not, conceded issues of liability; fourth, it would not be appropriate to leave the issue of costs on liability to the judge or the master dealing with questions of quantum; fifth, each side had succeeded on about half of the alleged issues as to liability. Ultimately he concluded, at paragraph 9 of the transcript of his judgment:

"Having said that, some of the issues on which the claimant failed did take up some time, both in evidence and in submissions, and also have taken up time and consumed costs in the preparation for the case. Looking overall at the issues on which the parties have succeeded, taking account of the fact that the claimant has succeeded in establishing a significant number of breaches of contract, and having regard to the amount of time (so far as I can assess it) in preparation of the various issues as well as the time taken up at trial, I propose to order that the defendants pay 75 per cent of the claimants' costs of the action to date, not distinguishing for these purposes between the claim and counterclaim. In reaching that decision I have taken account of the issues both in the claim and in the counterclaim."

10. On 16th February 2006 the defendants issued their appellant's notice. They sought to have the judge's order set aside on a number of grounds, namely first, that he had been wrong in his construction of paragraph 5 of the compromise agreement as to the obligation to use reasonable efforts to ensure that third parties did not describe their group as "the Rubettes", particularly by contrast to paragraph 10 of the compromise; second, the judge was wrong to attribute to the parties the acts of their agents; third, the domain names did not constitute "trading as" for the purposes of clause 5; fourth, the judge wrongly considered the defendants' website to be an infringement; and fifth, the costs order was wrong because the defendants had succeeded on more allegations than the claimants and he should have left all questions of costs to the judge trying the inquiry anyway.
11. The matter came before Jonathan Parker LJ on the papers on 30th March 2006. He refused permission to appeal on the first four grounds I have summarised, but granted it in respect of the fifth in relation to costs.
12. On 21st April 2006 the solicitors for the defendants wrote to the court seeking to renew their application for permission to appeal on the first four issues. Nothing more was done until 2nd June 2006 when they issued an application for permission to appeal on those grounds out of time. This was supported by a witness statement of the solicitor for the defendants. He explained that the mistake was his. It was not suggested that anyone else had been prejudiced by it. Accordingly we extended the time so as to authorise the application for permission to appeal issues for which permission had not been granted.
13. However, in a letter to the court on 31st October 2006, that is to say the day before the hearing of the appeal commenced, the defendants indicated through their solicitors that grounds 2, 3 and 4, as I have summarised them, had been abandoned. Thus there are three issues before this court for determination at this hearing: first, whether the judge was right to conclude that there was necessarily implicit in clause 5 the obligation to use reasonable endeavours to ensure that those with whom they dealt did not describe or promote their band as the Rubettes, including the obligation to take reasonable steps to prevent or, after the event, to correct any such wrongful description or promotion; second, whether the judge was right to conclude that the defendants' own website was an infringement of the terms implicit in clause 5; and third, whether the costs order made by the judge was wrong in principle.
14. Plainly the third point would not arise if the defendants were right on either of the two prior points. Accordingly, we invited counsel for the parties to address us on the first two points on the assumption that permission had been granted. I will now address those arguments in turn.

The first issue

15. In paragraph 20 of his judgment, the judge concluded that the prohibition contained in clause 5 against "trading as 'Rubettes' or 'the Rubettes' as from 1st January 2003" extended beyond mere use of those names as names of the bands to any promotion of the band under either of those names. There is no appeal against that construction. The appeal is against the later conclusion that:

"clause 5 necessarily involves an obligation on the parties to use reasonable endeavours to ensure that third parties with whom they deal do not describe or promote their bands as the Rubettes. This obligation encompasses both reasonable steps in advance of any promotion, advertisement or announcement to prevent their description or promotion as the Rubettes and, where they are being wrongly described or promoted in that way, reasonable steps to correct it."

16. Counsel for the defendants contends that such an implication is unrealistic, uncertain, uncontrolled and a ready source of dispute between the parties. He submits that no such intention could have been imputed to the parties and that such an implication lies uneasily with the express provision in clause 10 in the case of Mr Prewer. Counsel for the defendants suggested that the source of the judge's error lies in his failure to distinguish between the bands' own trades and the separate trades of their respective promoters.
17. I do not accept any of those submissions for substantially the reasons given by counsel for the claimants. The context in which the compromise agreement was made was the settlement of a passing off action. The original band had irretrievably split. Each was entitled to trade -off its reputation derived from its past association with the original group but not to suggest that it was the original group with or without some mutations. Thus clause 1 provided for "two Rubettes Bands", and specified their names for the future. Clause 5 was, in effect, its corollary.
18. As the judge recorded ins paragraph 12 of his judgment:

"Both sides agree that promoters and others will commonly describe them simply as The Rubettes, and this in turn has led to argument as to the obligations, if any, of the parties under the agreement as regards material put out by third parties. In view of the reputation of the original Rubettes, there is an obvious incentive to promoters of concerts and other events to publicise either band as The Rubettes, rather than using their correct names."

19. Both parties referred us to well -known passages dealing with the principles to be applied in the construction of written agreements. Particular reliance was placed on the speech of Lord Bingham of Cornhill in BCCI v Ali [2001] 1 AC 251, where he said in paragraph 8:

"In construing this provision, as any other contractual provision, the object of the court is to give effect to what the contracting parties intended. To ascertain the intention of the parties the court reads the terms of the contract as a whole, giving the words used their natural and ordinary meaning in the context of the agreement, the parties' relationship and all the relevant facts surrounding the transaction so far as known to the parties. To ascertain the parties' intentions the court does not of course inquire into the parties' subjective states of mind but makes an objective judgment based on the materials already identified."

20. To my mind this case concerns not so much the construction of what was written as what is to be implied therein. Those principles are equally well known. For present purposes it is sufficient to quote Chitty on Contracts 29th Ed Vol 1 paragraph 13 -004:

"Intention of parties. In many cases, however, one or other of the parties will seek to imply a term from the wording of a particular contract and the facts and circumstances surrounding it. The court will be prepared to imply a term if there arises from the language of the contract itself, and the circumstances under which it is entered into, an inference that the parties must have intended the stipulation in question. An implication of this nature may be made in two situations: first, where it is necessary to give business efficacy to the contract, and, secondly, where the term implied represents the obvious, but unexpressed, intention of the parties. These two criteria often overlap and, in many cases, have been applied cumulatively, although it is submitted that they are, in fact, alternative grounds. Both, however, depend upon the presumed intention of the parties."

21. I have already referred to the context in which the compromise was made and the judge's conclusion that the concept of "trading as" included the promotion of the activities of the band. Given their community of interest, I do not think that any meaningful distinction can be drawn between the promotional activities of a promoter as part of his trade and as part of the trade of one of the bands. In addition it was common ground, as recorded by the judge in paragraph 21 of his judgment, that the terms of the agreement applied to the parties' agents as well as to themselves. In those circumstances, in my view, it is plain that some obligation in relation to the promotion of the respective bands was required. Were it otherwise, each band could tacitly suffer promoters to represent them as the original brand, contrary to clause 1 of the compromise agreement. As the judge recorded in paragraph 22 of his judgment:

"Both sides agreed that promoters have a financial interest in advertising either band in this case the Rubettes, because of the continuing popularity of the original band. A construction of clause 5 which will allow the parties to stand by while promoters and others advertise either band as the Rubettes would deprive it of much of its intended purpose. Of course the parties are not directly responsible for the actions of third parties the agreement could not be construed as imposing an absolute obligation on the parties to prevent third parties from describing either band as the Rubettes."

22. This conclusion, with which I agree, justifies some implication in or extension of the express terms of clause 5. As that passage shows, the judge rejected an absolute obligation. Similarly, in paragraph 37, he dismissed a suggestion that the respective bands were obliged to supervise their promotion. In paragraph 64 he recognised that there could be no obligation in relation to a promotion of which the relevant party was unaware. Further, the implied term as found by him was limited in its terms to promotion by third parties with whom the respective bands or their respective agents deal.
23. It is in this context that the submissions of counsel for the defendants must be considered. No doubt the court will be slow to imply a term which is unduly onerous or uncertain, let alone one which unnecessarily provokes disputes. I do not think that any of the epithets which counsel for the defendants applied to the term implied by the judge is justified.
24. An obligation to use reasonable endeavours to a certain end is commonly imposed by a contractual term, whether express or implied. By definition it precludes any step which can be regarded as "unreasonably" onerous. Nor is it uncertain because what is required to be done depends on what is reasonable in all the circumstances.
25. The suggestion that the implied term unnecessarily provokes disputes between the parties is in my view equally unfounded. The benefit of the implied term is a protection to each band in relation to the activities of the other for which the price is the acceptance of the burden of the implied term. The problems arise, not from the implied term, but the circumstance of two bands each seeking to trade off its past connection with the original band.
26. Finally, I should refer to the provision in clause 10 that:

"Paul Prewer (professionally known as Paul Da Vinci) agrees not to refer to himself as former lead singer of the Rubettes and to use his reasonable endeavours to prevent others from doing so."

27. Thus there was expressed in the latter part of that clause the obligation which was implied in clause 5. But the two provisions are not comparable. Clause 5 imposes reciprocal rights and obligations on the two bands in the context of clause 1. Clause 10 imposes obligations on Mr Prewer alone and in a somewhat different context. I do not regard the terms of clause 10 as sufficient reason to ignore what to me is the obvious implication of clause 5.
28. I turn then to the second issue. This concerns the website "owned" and controlled by the defendants. The original complaint related both to the domain names and the website's contents. The judge concluded that both the domain names and the content infringed the provisions of clause 5 of the promise agreement as construed by him. There is now no appeal against the former finding and we are concerned only with the content. That was described by the judge in paragraph 61 of his judgment in these terms:

"... parts of it blur the distinction between the original band and Mr Hurd's band to the point where the latter is presented as the Rubettes or the line -up of the Rubettes. Although the home page is headed 'Welcome to the official website for The Rubettes featuring Bill Hurd', the page as a whole, including in particular the final words 'the Rubettes of the 21st Century, will convey to the uninformed reader that this is the successor to the original Rubettes. 'The Band' section more strongly suggests that Mr Hurd's band are the Rubettes by describing the history of the original Rubettes and the formation of Mr Hurd's band as one narrative against the heading 'The Band'. No such complaint can be made about the History page, and Mr Williams accepted in his evidence that it was in accordance with the agreement."

29. Counsel for the defendants complained that the allegation that the content of the website infringed clause 5 of the compromise agreement had not been pleaded. He contended that the judge's conclusion was not justified by the actual contents of the website when read as a whole.
30. The contention that the allegation was not pleaded is, even if true, made too late. It is clear from the pleadings, skeleton arguments and the judgment of the judge that the complaint about the content of this website was fully ventilated at the trial. The judge considered the whole of that content and arrived at the conclusion I have already quoted.
31. Accordingly, the only question is whether that conclusion was justified by the contents. We have read the whole of the contents of the website. It appears to me that the judge's summary of it is accurate in the sense that he has recorded all relevant matters. Having read it to myself, I see no basis for disagreeing with his conclusion.
32. I turn then to the third issue. This concerns the costs order made by the judge. I have already summarised or quoted from material passages in the judgment of David Richards J. By his order the defendants were required to pay the claimants 75 per cent of the costs of the action to date.
33. In giving permission to appeal on this point, Jonathan Parker LJ said this:

"1. Notwithstanding that costs were in the discretion of the judge, it is in my view arguable (I need put it no higher than that) that his costs order may have worked an injustice on the applicants. According to the applicants' solicitors note of his judgment on costs, the judge rightly observed that he was in no position to say what loss might or might not have been suffered. Given his findings on the counterclaim, he might have added 'by either side'. There was, in other words, no way of telling which side might emerge from the inquiry as to damages as the overall winner. Were the applicants to emerge as the overall winners, the judge's order that they pay 75 per cent of the claimants' costs of the trial might be said, in retrospect, to look somewhat harsh.

2. In concluding that the appropriate percentage would be 75 per cent, the judge said that he was not distinguishing between the claim and the counterclaim. However, it is not easy to see [how] he could have reached a figure of 75 per cent simply by reference to his findings of breaches by either side (ie his findings on the claim and the counterclaim): yet, as he acknowledged, at that stage that was the only yardstick he could apply."

34. I infer that the learned Lord Justice reached that conclusion on the basis that the solicitors' note of the judgment to which he referred is possibly not the transcript we now have. Accordingly, it is not clear to me whether Jonathan Parker LJ was aware of the time basis on which the costs had been apportioned by the judge.
35. Counsel for the defendants submitted that unless and until the inquiries have been taken and made, it is not possible to tell which party is the successful one. For this proposition he relied on the terms of paragraph 28 of the judgment of Longmore LJ, with which Clarke and Ward LJJ agreed, in Al Barnes Ltd v Time Talk UK Ltd [2003] EWCA Civ 402 that,

"in deciding who is the successful party the most important thing is to identify the party who is to pay the money to the other."

Counsel also pressed upon us the judgment of Lightman J when giving the judgment of the Court of Appeal in Weill v Mean Fiddler Holdings Ltd [2003] EWCA Civ 1058. In paragraph 33, which was quoted by David Richards J in his judgment on costs in this case, Lightman J said:

"The fact that only nominal damages are awarded after a single trial of the issues of liability and damages in the circumstances of a particular case may constitute grounds for refusing the claimant his costs or his full costs of the issue of liability. There is much to be said for the view that the incidence of costs should be the same whether or not for case management reasons there has been an order for a split trial and whether or not the order for a split trial was made on the initiative of the claimant or the defendant. If this is so, in the case where there is a split trial and it is left uncertain until conclusion of the trial on quantum whether the claimant will recover more than nominal damages, it may be proper for the trial judge to defer making any order for the costs of the trial of the issue of liability until the final outcome of the action is known. This may be the case whenever the judge considers that there is a real possibility that the outcome of the assessment of damages may affect the merits of the parties' entitlement to the costs of the issue of liability. If the Judge forms the view that it does, he must consider carefully whether justice to the defendant requires him to postpone any decision on costs until the final outcome of the action is known."

36. Finally, counsel for the defendants pointed out that the claimants had been successful on only 11 of the 22 breaches alleged by them and had lost five of the eight breaches alleged against them in the counterclaim. Yet they had recovered 75 per cent of the combined costs of both claim and counterclaim. He suggested that this was obviously disproportionate.
37. It is, of course, well established that costs are in the discretion of the judge and that this court will not interfere with his exercise of that discretion unless it be shown that he erred in principle. I do not doubt that the judge might properly have reserved the costs of the hearing before him to the judge hearing the inquiry as to damages in due course. But I am unable to see any principle he failed to observe in not doing so.
38. No doubt in money terms success is most clearly attributed to the party who is adjudged entitled to receive money from the other. Thus in Al Barnes Ltd v Time Talk UK Ltd [2003] EWCA Civ 402 Barnes had obtained a judgment for £216,968 but was liable on the counterclaim to £87,000. He was a net recipient of £130,000, yet he was ordered to pay 50 per cent of the costs of Time Talk. That is not this case. There are no monetary judgments either way. In any event, it is not an immutable rule that only a successful party shall recover its costs (see CPR Rule 44.3(2)), nor that success may only be ascertained on a monetary basis.
39. In Weill v Mean Fiddler Holdings Ltd [2003] EWCA Civ 1058 in the passage I have quoted, the Court of Appeal was at pains to point out through its use of the word "may" that in a case such as this, reserving the costs of the liability hearing as to damages is a permissible, but not the only, way of dealing with them. Against that is the requirement of CPR Rule 1.4(2)(i) that the court should deal with as many aspects of the case as it can on the same occasion. In the case of a split trial, once liability is established the parties are often enabled to settle any issue as to quantum. It does not necessarily help them to do so if the liability for costs is still undecided.
40. Finally, I do not think that the number of specific issues won or lost could in this case be any guide to the proper apportionment of the costs. They were of differing importance and consequence. The time basis adopted by the judge was a much surer guide as to what was the fair proportion the defendants should be required to pay the claimants.
41. In short, I do not consider that there is any principle which the judge failed to observe in arriving at the conclusion he did.
42. I can summarise my conclusions as follows. For all these reasons I would dismiss all three grounds on which the defendants relied. Given that we heard all three of them argued in full, the appropriate order would seem to be to refuse permission to appeal on the first and second, and dismiss the appeal on the third.
43. LADY JUSTICE ARDEN: I agree.
44. LORD JUSTICE DYSON: I also agree.
JUDGMENT ON COSTS
45. THE CHANCELLOR: We will make an order that the unsuccessful appellant pay the costs of the appeal and the application for permission to appeal to the respondent. We summarily assess those costs and we do so on the basis of accepting the skeleton bill dated 26th October, except for the £17 for travel. So that is taken off. We will add on a further £200 for the solicitors's costs of attendance today plus £40 in respect of the travel and taxes, making a grand total of £12,285. We will assess the costs in that figure and in the ordinary course that is payable within 14 days unless an application is made for extension of time.