Case No. IP-2020-000140

, 18th edn, 28-367 and relied on, among others Crosstown Music Co LLC v Rive Droite Music Ltd & ors [2012] Ch 68 (“Crosstown”) for the statement of principle of Mummery LJ that: “” (at paragraph 37), 88.Mr Carter submitted that the assignment of copyright under the 2001 Agreement was conditional on, among other things, Domino fulfilling its continuing obligations as pleaded in the draft APOC. It was his position that following breach of those obligations the copyright reverts by operation of law to Mr Hebden. Mr Carter referred to specific express provisions in the 2001 Agreement providing for reversion which he submitted make it clear that the assignment of copyright under the 2001 Agreement was not unconditional and, indeed, indicated that the case was not outside the class of cases envisaged by the Court of Appeal in Crosstown.89.90.Mr Richards submitted that the proposed pleadings are nonsensical and have no prospect of success at trial.91.Mr Richards relied first on an argument that the Term of the 2001 Agreement has expired and that there could thus be no breach and no remedy. The parties’ arguments on this issue have been summarised above at paragraphs 20 to 22.92.Mr Richards relied secondly on the remedy provisions in clauses 4.3 to 4.5 and 14.8, submitting that, even if it had not terminated in all respects material to the current dispute at the end of the Term, the 2001 Agreement is clear that:(i)Mr Hebden’s only remedy for failure to release was that provided in clauses 4.3 and 4.4; and(ii)Mr Hebden could not terminate the 2001 Agreement for breach unless: first, he served notice under clause 14.8; and secondly, Domino failed to take substantive steps to remedy the notified breach within 30 days.93.His position was that Mr Hebden has not served the necessary notice and is not therefore entitled to terminate for breach, irrespective of any alleged renunciation of the 2001 Agreement by Domino and/or any purported termination of the 2001 Agreement by Mr Hebden. That being so, there can be no remedy. In any event, even if a remedy could be envisaged (for example if the notice were given), that would not involve reversion, but only specific remedies provided for in the contract.94.•that termination for breach operates only prospectively and does not undo the contract as from the beginning;••that no reversion in equity could come about in the absence of an equitable basis for the remedy, such as a pleading of undue influence giving rise to right of rescission.95.Mr Richards submitted that Mr Carter’s position on legal reversion was premised on a misreading of Crosstown and that, when read in context, it became clear that the statement of Mummery LJ relied on by Mr Carter is not authority for a general proposition that rights may revert generally on breach. He also contended that Mr Carter’s submissions that clauses 4.3 and 4.4 of the 2001 Agreement had a similar effect to the provisions considered in Crosstown96.(i)Mr Hebden states that he no longer considers himself bound by the 2001 Agreement and cannot simultaneously seek to take any benefit of the 2001 Agreement;(ii)clauses 4.3 and 4.4 relate to a failure to “release” and not to a failure to continue post-release exploitation, even if clauses 4.1 and 4.2 or some other implied term required such exploitation; and(iii)there is no prospect of Mr Hebden establishing that clauses 4.3 and 4.4 remain in force following the expiry of the Term of the 2001 Agreement.Express or implied duty to exploit/duty of good faith – consequences of breach – assessment97.98.As to the objections to the alternative draft pleading relying on clauses 4.3 and 4.4 as giving rise to a right for Mr Hebden to acquire the rights or to require them to be licensed to a third party, these were dealt with only briefly in written and oral submissions by Counsel. Mr Richards’ points were that, as Mr Hebden no longer considered himself to be bound by the agreement, he could not take any benefit under it, that clauses 4.3 and 4.4 related only to initial release; and that they did not survive the expiry of the term.99.Mr Richards’ second and third objection were both predicated on Mr Richards’ submissions on those issues ultimately proving correct. I do not consider it to be clear that that will be the case: my initial view is that at trial it may be concluded that a number of elements of the 2001 Agreement have not expired and that the correct construction of Term is closer to that contended for by Mr Hebden. Further, the meaning of ‘release’ is core to the issues between the party, and I have already concluded that the pleadings on that issue should go to trial. Given that position, I do not consider that objections based on Mr Hebden’s arguable equivocation as to the status of the contract are sufficient to exercise my discretion to refuse permission for this aspect of the draft amended pleadings.100.Mr Hebden’s proposed case on restraint of trade would arise in the event that he is wrong about the construction of the contract and that Domino is right. Mr Carter submitted that, in those circumstances, Domino could have fulfilled its contractual obligations towards Mr Hebden’s Masters with minimal or no effort for a limited period never subsequently exploiting them and this would permit the ‘sterilisation’ of a substantial portion of Mr Hebden’s output under the name Four Tet by which he is known to fans. An agreement permitting such a sterilisation is said to be an agreement in restraint of trade and Mr Carter states that this is clear from Domino’s withdrawal of the Masters from digital exploitation, and its subsequent undertakings precluding future digital exploitation of the Masters. The sterilisation effect is said to be particularly clear where those albums already have a significant fan base.101.Mr Carter further submitted that ‘sterilisation’ is not a necessary prerequisite for a finding of restraint of trade as numerous other authorities exist where a unilateral right to decide whether to exploit copyrights has been held to amount to restraint of trade. He referred in particular to Schroeder:“I would dismiss this appeal.” [p. 1315A]102.As to the consequences of a finding that a recording agreement is in restraint of trade, Mr Carter argues that the question as to whether the 2001 Agreement is void or voidable is far from clear. He relies on a passage from Copinger (28-367) which first states that “it may be that such an agreement is better described as unenforceable” and then goes on to comment that in consequence “.” In the light of that passage, Mr Carter submitted that the issue is therefore manifestly not suitable for summary determination. Mr Carter submitted that the case relied on by Mr Richards as authority that the proposition was unarguable did not bear the weight that Mr Richards sought to place upon it as the point of principle had in fact been conceded by Counsel and was not argued before the Court.103.Mr Richards submitted that Mr Hebden’s restraint of trade case has at least two fatal flaws, meaning that it is wholly fanciful and could not lead to a successful outcome for Mr Hebden.104.First, the 2001 Agreement does not sterilise Mr Hebden’s output because:•it imposed obligations on Domino to release the Masters;•during the Term, the 2001 Agreement restricted Mr Hebden’s activities only as a recording artist under the name “Four Tet” and his own legal name but left him free to carry on creating and recording music under any other name;•following the expiry of the Term, Mr Hebden was (and remains) free to exploit his output subject only to certain time limited rerecording restrictions;••notwithstanding the alleged sterilising effect of the contract today given the growth of digital means of exploitation, whether or not a contract is in restraint of trade is to be assessed as at the date of its conclusion.105.Secondly, proving that a contract is in unreasonable restraint of trade does not lead to rescission but has the effect that “the agreement so far as unperformed is unenforceable” (Schroeder [p. 1315A] per Lord Reid). Mr Richards submitted that this was unarguable, having subsequently been applied by all three judges in the Court of Appeal in O’Sullivan v Management Agency and Music Ltd [1985] QB 428 (“O’Sullivan”):“The effect of such an agreement was considered in Instone v. A. Schroeder Music Publishing Co. Ltd. [1974] 1 All E.R. 171, affirmed in the House of Lords under the name A. Schroeder Music Publishing Co. v. Macaulay [1974] 1 W.L.R. 1308. The Court of Appeal held that because the agreement was in unreasonable restraint of trade it was unenforceable in so far as it had not been carried out. and Lord Reid, dismissing the appeal against that decision, concluded his speech with these words, at p. 1315: “It must therefore follow that the agreement so far as unperformed is unenforceable.” (Waller LJ [p. 470D]).106.In the light of that ruling by the Court of Appeal, Mr Richards submitted that it was clear, and unarguable, that in the absence of a finding of some additional fiduciary duty (as in Schroeder and in O’Sullivan) the consequence of a finding that an agreement is in restraint of trade is that it is voidable and unenforceable.107.108.Finally, Mr Richards submitted that permission to introduce the alternative restraint of trade pleading should be refused not only on the grounds that it has no realistic prospect of succeeding at trial but also on the basis of proportionality and the overriding objective. He referred to the costs and burden on the parties of preparing for a restraint of trade case. Mr Richards submitted, by reference in particular to the Panayiotou case, that such cases give rise to the need for substantial factual and expert evidence. In his submission such costs and the burden of the parties and the Court could not be justified where the case for which permission is sought is only a tertiary alternative case and has at very best a fanciful chance of succeeding on the substance and ultimately of assisting the party seeking to raise it.109.110.As with many other aspects of the Amendment Application, the submissions relating to the proposed amended pleading on restraint of trade were complex, albeit packed into a fairly short period of time.111.Mr Richards raised a number of very significant legal and practical hurdles to be overcome by Mr Hebden if he is to succeed on this pleading. These relate not only to the substantive elements of the common law doctrine of restraint of trade, but also to the utility to Mr Hebden of any such finding given the clear statements in the authorities that the effect of a finding that a contract is in restraint of trade is that the contract is voidable, and an inability to enforce the contract against the other party. I have reviewed the authorities to which I was referred and conclude that, in the light of those authorities, it would be very difficult for Mr Hebden to succeed at trial in obtaining the relief he seeks as a consequence of the proposed amendments on restraint of trade.112.Mr Carter’s submissions that Schroeder might ultimately be less compelling in itself because the conclusion was based on a concession rather than full argument were eloquent. However, in my view, the conclusions of the Court of Appeal in Sullivan, applying Schroeder and drawing a clear distinction between cases in which a contract was held to be voidable and unenforceable in consequence of a finding of restraint of trade and those in which a contract was held to be void and unenforceable owing to some breach of a fiduciary duty would make it very difficult indeed for Mr Hebden’s proposed amended case on restraint of trade to succeed.113.As mentioned above, it is necessary for the Court deciding any application for permission to amend to have regard both to the utility of the application (both as to prospects of success and otherwise) and to the need to balance all other considerations, including proportionality and justice as between the parties and as against third parties.114.Taking all of the above into consideration, I have concluded that it would be inappropriate to grant Mr Hebden permission to introduce a new case on restraint of trade as an alternative to the other new claims for which permission has been granted. I reached this view in part on the basis of the significant legal difficulties such a case would face as well as the difficulties Mr Hebden faces in obtaining a useful remedy likely to give the claim utility in the context of the action as a whole. Additional considerations are the likely disproportionate cost and time burdens on the parties of preparing for such a claim (which is in any event only a tertiary fall back, with limited prospects of success), the additional pressure on Court resources in dealing with it, and fairness for other litigants. On balance, I concluded that, given the requirements of CPR 17 and the overriding objective, permission for this proposed amendment should not be granted.115