Case No. IP-2021-000073

17.The only evidence I have of the purpose and intention of the parties at the time the RDA was executed is the RDA itself. That provides in the first recital that the RDA “sets out the terms of an unwritten agreement dating back to the 1970’s between Paddington and Pixdene regarding the net merchandising income from the worldwide exploitation of the Paddington merchandising rights. This Agreement is intended to formalise into writing and therefore replace that unwritten agreement.”18.The second recital provides that “For the sake of clarity, Paddington maintains the right to vary the computation of the net payment to Pixdene, for example, but not limited to, it’s [sic] right to deduct further payments prior to payment to Pixdene such as for example, Paddington’s approved legal expenses, trademark expenses, marketing expenses or participation granted to third parties for services judged by Paddington to be of commercial advantage to Paddington, including but not limited to its, merchandising income. At no point however, shall such deductions be limited solely to the net income being paid to Pixdene.” This gives a very wide scope to Paddington to instruct the Agent to make deductions, so reducing the final share of the net Paddington Bear worldwide merchandising income paid by the Agent to Paddington. 19.I have already summarised the third recital and clause 1 of the RDA. It is important to keep in mind that Paddington’s obligation under clause 1 is to pay to Pixdene a defined share (10%) of that final share of the net Paddington Bear worldwide merchandising income paid by the Agent to Paddington. 20.Clause 2 provides for quarterly payments to Pixdene no later than 30 days after the last day of defined quarters in each calendar year. 21.Clause 3 provides that the RDA “constitutes a valid and binding obligation on each party, enforceable in accordance with its terms and shall bind and inure to the benefit of the parties’ successors and assigns”. 22.Clause 4 provides that the RDA is governed by the law of England and Wales with a submission to the exclusive jurisdiction of the Courts of England.23.Clause 5 is the Audit clause with which we are concerned.24.Clause 6 provides that the RDA may be amended only in writing as mutually agreed by the parties. It also provides that it may not be assigned by Pixdene without Paddington’s prior consent in writing, not to be unreasonably withheld, but that Paddington “shall be entitled to freely assign this Agreement”. Related to this is Clause 9, a wide-ranging survival clause. It is clear from these provisions that it was intended by the parties that (i) Paddington should not be constrained from selling, licensing, leasing, transferring or assigning its rights in the merchandising of Paddington Bear, nor from changes in its own ownership, share allocation or name; and (ii) nor should Pixdene’s rights under the RDA be defeated by such actions. 25.Clause 7 provides Paddington with a “Right of First Refusal” and a “Right of Last Refusal”. The former applies if Pixdene has a third party offer to acquire its participation rights in the Paddington merchandising. It provides that if Pixdene wishes to dispose of such rights, then it shall give written notice to Paddington “and immediately thereafter negotiate with Paddington with respect to such disposal. If after the expiration of fifteen (15) business days following notice from Pixdene to Paddington, no agreement has been reached then Pixdene shall be free to negotiate elsewhere subject to Paddington’s Right of Last Refusal set out in clause 7(b) below”.26.The Right of Last Refusal is expressed in clause 7(b) to mean “if Pixdene and Paddington fail to reach an agreement pursuant to Paddington’s Right of First Refusal and Pixdene receives any bona fide offer for its participation rights in the Paddington Merchandising, Pixdene shall notify Paddington in writing of such offer specifying the particulars thereof, including the name of the offeror, the proposed financial terms and all other terms of such offer. During the period of fifteen (15) business days after said notice, Paddington shall have the exclusive option to acquire the participation rights upon the same financial terms and such other terms as are set forth in such notice… otherwise Pixdene shall be free to accept said bona fide offer, provided that if such offer is not consummated within thirty (30) calendar days following the expiration of said fifteen (15) day period, Paddington’s option shall revive and shall apply to such proposed offer again and to each and every further offer or offers at any time received by Pixdene”.27.Clause 7(c) amounts to a call option by Paddington: “Pixdene shall, if requested by Paddington to do so in writing, sell its participation rights in the Paddington Merchandising… to Paddington in the event that the shares in Paddington and/or the Paddington Merchandising is sold to a third party (unrelated to the Bond family).”28.I have set out those details of Clause 7 not because they have any direct relevance to the matters that I must determine, but because they are non-standard provisions of some complexity and sophistication, which appear to have been carefully and professionally drafted and closely negotiated. This provides me with some information about the context of the drafting and agreement of the RDA, which otherwise is a relatively short and simple agreement. I will come back to this. 29.Clause 8 provides that the RDA is the “final, complete and exclusive” statement of the terms of the Agreement. Neither party rely on it as both seek the Court to imply terms.