England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM CENTRAL LONDON CIVIL JUSTICE CENTRE
(HER HONOUR JUDGE HAZEL MARSHALL QC)

		Royal Courts of Justice Strand, London, WC2A 2LL
		22nd April 2008

Lord Justice Jacob:

1. This is an appeal, with my permission, from part of a judgment of HHJ Hazel Marshall, given on 15 September 2007.
2. Status Quo, the pop group, was founded in the 1960s. Over the years its membership changed. One of the founder members was the respondent, Mr Alan Lancaster. Another founder member, Mr John Coghlan, was the other claimant in the action. Mr Coghlan left the group in 1981 and Mr Lancaster in 1985 (although he had been living in Australia for some time before then). Another member of the group at an earlier stage had been Mr Lynes. He left as early as 1970.
3. The action consisted of a variety of claims by Mr Lancaster and Mr Coghlan to royalties. Some of the claims were struck out by the Chancellor by a judgment of 9 November 2005. The claims which survived were the subject of the judgment below. We are concerned only with one aspect of that judgment. Both Mr Coghlan and Mr Lancaster had made claims in respect of what are called the "Pye royalties". These were royalties due under a contract made with the Pye recording company in 1966, as varied during the next few years.
4. The judge held that both the claimants were entitled to the Pye royalties, though in respect of some past royalties the claim was barred by reason of delay in taking action, what the lawyers sometimes call "laches", a word I was taught at university to be pronounced as it would be pronounced by a refined Chinese waiter offering the fruit of a similar name.
5. There is no appeal from her decision about Mr Coghlan's entitlement to Pye royalties. The sole point, the subject of the appeal, is one aspect of her decision about Mr Lancaster's entitlement. It is said that the effect of an agreement of 12 January 1987, which he entered into with the relevant defendants, was that he gave up his entitlement to any claim to the Pye royalties. The agreement is called a "Deed of Release and Indemnity".
6. The relevant defendants were the first defendant, Handle Artist Management Limited, the producer/manager of the group from about 1989 until 2001 or 2003, the second defendant, Mr Francis Rossi, the third defendant, Mr Richard Parfitt, who joined the group in 1968, who has remained a member ever since and the fourth defendant, Sanctuary Records Group Limited, which is the current assignee of the rights of the recordings made with Pye. It has played no part in the proceedings but will be bound by the result. From 2002 it has paid the disputed royalties into court.
7. Mr Jonathan Crystal for the appellants relies upon Clause 1 of the Deed of Release and Indemnity. This reads as follows:

"Mr Lancaster hereby releases and forever discharges Mr Rossi, Mr Parfitt, Classicmoor, Quo Entertainments, Shawbury Music and each of them from any and all sums of money (including but not limited to all repayments of tax suffered or paid for by any of the foregoing) actions, proceedings, accounts, claims and demands whensoever arising whether prior to the date hereof or at any time for a period of 80 years hereafter relating to Mr Lancaster's participation as a member of and/or partner in the group of musicians known as "Status Quo" and/or as a shareholder and/or director of Classicmoor, Quo Entertainments and Shawbury Music."

Clause 2 is a similar clause going the other way. Mr Lancaster was discharged from "any and all sums of money, actions, proceedings, accounts, claims and demands whensoever arising whether prior to the date hereof or at any time for a period of 80 years hereafter relating to Mr Lancaster's participation as a member of and/or partner…" and so on. Clause 3 of the agreement was the clause by which Mr Lancaster renounced any and all rights or interest he may have had in the name Status Quo, and he also undertook not to use that name in the future. And Clause 4 provided for an indemnity. It read as follows:

"Mr Rossi, Mr Parfitt, Classicmoor, Quo Entertainments and Shawbury Music hereby jointly and separately undertake that they will at all times hereafter indemnify and keep indemnified Mr Lancaster from and against all actions, proceedings, liability, claims, damages, costs and expenses in any way directly or indirectly attributable to the activities of and/or Mr Lancaster's membership of or partnership in the group of musicians known as "Status Quo" whensoever and wheresoever arising."

8. Mr Crystal's basic submission is that Clause 1 had the effect of putting an end, once and for all, to any financial claim of Mr Lancaster concerned with Status Quo. It was a "clean break". That would include his right to any royalties of any kind, which in turn would include the Pye royalties.
9. There is no dispute about the relevant legal principles for the construction of a contract. The court is to put itself in the position of a reasonable reader trying to ascertain the meaning of the document intended by its authors. That reader needs to be equipped with the relevant knowledge of the context in which the agreement was made -- the "matrix of fact", as it is called.
10. The relevant factual matrix in this case, goes back over rather a long time and in places is rather hazy, particularly as to the amounts and times of payments by Pye, to whom payments were made (at least in the early years) and what happened to those payments eventually. In the end, however, that may not matter. It is sufficient to note for present purposes that the sums involved do not seem to have been substantial, particularly having regard to the much more substantial sums of money being dealt with in later agreements.
11. The factual matrix then goes as follows. Mr Lancaster had left the group in 1985, dissatisfied with its contractual arrangements with its recording company, Phonogram, and with its management company, Quarry Productions Limited ("Quarry"). As I have said, by then he was living in Australia. Mr Lancaster had discovered that Messer Rossi and Parfitt were recording and performing as Status Quo.
12. As is often the case with pop groups the question of leaving and new members is apt to throw up problems. Is the group really the same if all or some of its members change? Or can the name only be used be the "original" group? Or most of them? In the absence of clear agreements about the subject it is not uncommon for ex-members of a group to complain about the use of the name by those who remain, whether with others or on their own.
13. Mr Lancaster brought proceedings in February 1986 founded on such a complaint and also for a complaint about an indemnity about some tax matters. Phonogram joined in because they were concerned about their ability to release records under the name Status Quo. In those proceedings Mr Lancaster was contending that there was a continuing partnership between himself and Messrs Rossi and Parfitt and not with any of the other former members of the group. They in turn contended that the partnership had already been dissolved or if not it ought to be; and in any event it ought to be wound up.
14. The deed in question, along with four other agreements, was entered into partly to settle the litigation.
15. Status Quo had had over the years four groups of recording contracts. The Chancellor described these in his judgment at paragraphs 4 to 7.

"4. The first group comprised recording contracts made between the individual members of the group with Pye records, made on various dates, between 18 July 1966 and 26 January 1970. I shall refer to them collectively as the 'Pye Agreements'. In each case they provided for royalties to be paid to the members of the group, but they authorised Pye to pay them to their then manager, Mr Barlow. The second group comprised recording agreements made between Gaff Management Ltd (a company then entitled to the services of individual members of the group) and Phonogram Ltd on various dates between 10 November 1972 and 12 July 1976. I shall refer to them collectively as the "Gaff Agreements". Although under the recording contracts themselves the royalties were paid to Gaff Management Limited, that company irrevocably authorised Phonogram to account for and pay them to the members of the group individually. The third group of recording agreements was a series of agreements between Phonogram Ltd, Phonogram International BV, Quarry Productions Ltd, the individual members of the group and Quo Entertainments Limited, dated 29 June 1979. I shall refer to these agreements collectively as the '1979 Agreement', Under the 1979 Agreement the services of the members of the group were provided via a chain of companies owned and controlled by the group to Phonogram, and the royalties due in respect of the performances of the group were payable down the chain by Phonogram to the members of the group as individuals. The chain of companies included Quarry Productions Ltd, Quo Entertainments Ltd and Multiplefine Ltd.

5.  In November 1980 there was concluded a Settlement Agreement on the occasion of Mr Lynes leaving the group. It was agreed that royalties payable to the group under the Pye agreements should be paid to Wright, Webb, Syrett & Sons, a firm of solicitors. They in turn would pay the share due to Mr Lynes to him, and the shares due to the remaining members [of the group] to Quarry Productions Limited as their agent.

7.  The fourth group of recording agreements were made on about 14 December 1982, which I will refer to as the 'Classicmoor' agreements. They include an agreement between Phonogram Ltd and Classicmoor Ltd, a company controlled by the members of the group for the supply of masters and grant of exclusive rights therein in consideration of a non-returnable advance and a royalty payable to Classicmoor. That agreement was made against the background of inducement letters to Classicmoor from Mr Parfitt, Mr Rossi and Mr Lancaster, and an inducement letter from Mr Lancaster to Phonogram. The second claimant, Mr Coghlan, was not a party to that group of recording agreements because he had left the group in November 1981, but he participated in certain recordings which were  provided to Phonogram pursuant to the Classicmoor Agreement."

16. Going back to the matrix, the Pye royalties were payable under the 1966 contract, originally with Messrs Lancaster, Rossi, Lynes and Coghlan individually; they were collectively called in the agreement "the artiste". The contract provided authority to Pye to pay all royalties to their manager, who happened to be, as the Chancellor noted, a Mr Barlow at the time. After some time, Mr Parfitt joined the group and was treated as a party to the contract by a number of letters. From time to time thereafter, although it was not specifically provided for in the Pye Agreement, the manager changed and the group nominated to Pye the new manager as the person to whom royalties should be paid and as the person who could give a receipt for the royalties. Pye accepted that practice.
17. In 1977 Mr Lynes, who, it will be recalled, had left in 1970, commenced some proceedings, the details of which do not matter, which included claims to the Pye royalties. There was a settlement agreement of November 1980. By then all the sums due were going to the group's management company, Quarry. Under the settlement agreement that followed, the payments by Pye were to some solicitors, Wright, Webb, Syrett & Sons. They in turn paid one-fifth under the settlement to Mr Lynes and the rest to Quarry. That was the position at the time of the 1987 deeds.
18. Quarry was also the recipient of monies paid by Phonogram. They were not royalties as such. The group were mainly paid by way of recoupable advances. These advances were so large that they were not recouped and so no actual royalties were ever paid. For present purposes it is important to note that the money found its way via a succession of companies to the management company, Quarry. So Quarry were receiving the advances and the Pye royalties into a single pot. The detailed position was evidently muddled and confused. There is an accountant's letter of 5 June 1985 making this abundantly clear. It includes the following paragraph:

"In the first instance we note that the 'statements' referred to by you seem to deal with 'Status Quo' as a whole and do not in any way distinguish or identify what should be:-

a) Classicmoor Limited.;

b) Quo Entertainments Limited.;

c) Possibly Multiple Fine Limited.; and

d) the various individual members of the Band personally."

19. So part of the relevant matrix of fact is that there was not much clear distinction going on between the various individuals and corporate entities, or as to the various income streams going into Quarry.
20. The final element of the factual matrix is that by the time of the 1986 litigation, Mr Coghlan was no longer being treated as a member of the group. He was effectively being frozen out. He had not been joined into the Classicmore agreements with Phonogram and he was not a party to the litigation.
21. In summary, therefore, the party to the agreements knew that there had been a fractious past. The 1986 litigation was the third set of proceedings involving Status Quo. The main members of the group and Phonogram wanted to be sure of free use of the name Status Quo. There were financial claims made by Mr Lancaster. All the money was going into the same Quarry pot and that included the money which came from Pye via the solicitors.
22. I turn back to the language of the deed. The judge noted it was wide and so it is. The following bits of language show just how wide it is:

"any and all sums of money"

That is apt language for dealing not only with things you have thought of but things you think might turn up in the future or things which you have not specifically thought of.

"whensoever arising whether prior to the date hereof or at any time for a period of 80 years hereafter"

Again showing an intention to cast a very wide net.

"participation as a member of and/or partner in the group of musicians known as 'Status Quo' and [any of the companies]"

"Participation" is wide too.

23. Clause 4, the indemnity, is of equal wide import. It covers any kind of claim, directly or indirectly attributable, to anything Mr Lancaster did by way of his membership or partnership in the group of musicians known as Status Quo, whensoever and wheresoever arising. It would cover a claim by Pye or its successors.
24. The judge accepted that the language of clause 1 was potentially very wide. She said that whilst that wording might be arguably literally wide enough to cover all forms of claims or demands against the other parties, it did not have that meaning in the context.
25. Mr Robert Deacon, who argued the case for the respondents, submitted she was correct to hold the meaning was narrower than its apparent import. He took us to the history, pointing out that Pye had always been treated quite differently and separately from the general corporate structure of the later years. Pye was about payments to individuals; all the rest were payments to companies. He pointed out there was no mention of the Pye royalty agreements or any provisions about it in the settlement agreements; nor was there any joinder of any of the earlier members of the group, and in particular Mr Coghlan, in relation to the settlement. Quarry was not a party to the litigation or the settlement agreements and it had not been suggested that the Pye royalties were a partnership asset.
26. Are those background matrix factors enough to give the clause a narrower meaning that its ostensible import? I think not. The reasonable reader, knowing each and every one of them, would not be given a reason to read the words narrowly, excluding claims which were not partnership assets or not said to be partnership assets or claims which were only as between Mr Lancaster and the other two remaining members of the group.
27. If the parties had thought about the Pye royalties at all there probably would have been express provision about them. If they were to be preserved for the individuals, it would have been necessary to change the machinery of payment, at least by way of an agreement to change the instructions to the solicitors who were receiving the money. And, as Mr Crystal pointed out, there was some provision of a parallel or semi-parallel nature: in another of the agreements there was a preservation to Mr Lancaster of his musical copyright. Why not, asks Mr Crystal, a similar provision for the Pye royalties if it was intended they should be kept out of this settlement.
28. On the more likely basis that the Pye royalties had simply been forgotten, it seems to me that the language the parties devised was nonetheless intended to bring all money claims to an end: the things that people had forgotten as well as the things they had borne in mind. The wide nature of the language, is entirely apt to cover money claims which people have not yet or specifically thought of.
29. I turn to the judge's judgment. It is only a small part of this meticulous and careful judgment which is at all under attack. The judge's reasons for construing the words 'narrowly' were several. Firstly she said that there was nothing in the documents which purports to deal with or could be construed as dealing with Mr Lancaster's right to receive royalties from Pye. There is an implicit assumption that Mr Lancaster was entitled to receive royalties direct from Pye; but I do not think that was so. The arrangement with Pye was that Pye could pay collectively to the manager; so if each individual had asked Pye to pay directly to him, Pye could have said no.
30. Secondly the judge seems to have overlooked the fact, that the money had been going for some years into the single Quarry pot along with other monies to do with Status Quo, particularly the advances.
31. The judge's next reason is at paragraph 89. She says:

"Mr Lancaster's entitlement to receive a share of Pye royalties was of course a right which he could direct Pye to fulfil by paying the share to a nominated agent whose receipt would be a good discharge."

32. Again, I fear she was mistaken about that. The Pye royalties could not be dealt with in that way -- only if Pye agreed. It seems the judge thought that the argument was that the agreement was that the Pye royalty was covered by implication in the Deed of Release and Indemnity. I do not read the Deed in that way at all. What it is saying is that Mr Lancaster will no longer be making any claims for money against the other parties. They were collectively receiving the money via the solicitors and then Quarry. That is the only way it could be collected under the Pye Agreement. So Mr Lancaster would have to bring a claim against the other parties in order to receive his share if it were not being paid.
33. The judge clearly felt some difficulty about the actual language in the clause, particularly the words relating to Mr Lancaster's "participation" as a member of Status Quo. She said that any concept of participation has a connotation of activity. But with respect, whilst that is so, past participation means past activity and Mr Lancaster got his rights as a result of his past activity in Status Quo.
34. The judge's final reason was based upon some evidence of a Mr Rose about some papers he had seen when he took over the management of the group in 1989. It was a speculation, in effect, by Mr Rose, as to the intended meaning of the contract. With respect, I do not think it was a useful way of construing the contract when one is simply asking what was the background matrix against which the words of the parties were chosen.
35. Accordingly, I would allow this appeal. I would mention one point about which we did not get to hear argument. Mr Crystal had an alternative basis of argument based on post-contract conduct. We did not encourage argument about this, not least because the House of Lords has made it absolutely clear that it is irrelevant, as indeed it must be if in logic one construes the language against the background of the past matrix, not any future matrix.

Lord Justice Wall:

36. I agree. Whilst I too would wish to pay tribute to the clarity and thoroughness of the judge's judgment, I agree with Mr Crystal that the language of the deed of release and indemnity made on 12 January 1987, and in particular, of course, one of the deeds is the language of the "clean break". For reasons given by my Lord, Jacob LJ, I am unable to agree with the judge's reasoning in relation to it. It follows, in my view, that Mr Lancaster is wholly bound by the deed of release and indemnity and his claim in these proceedings must fail.

Lord Justice Thomas:

37. I agree with both judgments. The wording was clear. The agreement makes commercial sense on that wording. The factual matrix, so persuasively put persuasively put before us by Mr Deacon, cannot in any way dent those clear terms used, particularly in circumstances where, as my Lord, Jacob LJ has pointed out, the factual circumstance is almost certainly that the parties did not have present to their mind, when they drafted and finalised this agreement, the Pye royalties. It is common in such circumstances, where parties wish to achieve a "clean break", to use wide wording. There is absolutely no reason in the circumstances, therefore, why effect should not be given to that wide wording, despite the arguments that have been put to the contrary. The appeal must therefore be allowed.

Order: Appeal allowed