Insights High Court permits recording artist to amend Particulars of Claim in contractual dispute with his recording label to introduce further allegations of breach by the label

In February 2001, the musician Kieran Hebden, who performs and records under the name Four Tet, entered into an exclusive recording agreement with Domino Recording Company Ltd under which Mr Hebden agreed to provide certain sound recordings to Domino within a specified period and assigned the copyright in those sound recordings (the Masters) to Domino. Domino released the Masters and accounted for and paid royalties in respect of them.

In December 2020, Mr Hebden issued proceedings against Domino claiming that Domino had breached its contractual obligations under the 2001 agreement by failing to account properly for royalties in respect of streaming and digital downloads. Mr Hebden sought a declaration as to the true construction of the 2001 agreement and monetary relief capped at £70,000.

In November 2021, Domino offered to pay damages and costs in full to Mr Hebden. Domino also instructed all digital service providers (DSPs) to withdraw the Masters and undertook not to exploit them digitally in the future without first agreeing written terms with Mr Hebden. Domino also indicated that it would not agree the 50% rate claimed by Mr Hebden for exploitation. Domino said that the proceedings should be stayed in return.

Mr Hebden rejected the offer and applied for permission to amend his Particulars of Claim to include additional claims that Domino had further fundamentally breached the 2001 agreement by withdrawing the Masters from the DSPs and not exploiting them digitally in the future.

Mr Hebden sought to plead that under the 2001 agreement Domino had a continuing obligation, either express or implied, to use reasonable endeavours following release to exploit the Masters by all then-industry-standard means, and an implied obligation to act in good faith in relation to their exploitation. Mr Hebden said that the exclusive recording elements of the 2001 agreement terminated around November 2005, but that the obligations relating to payment of royalties and the commitment to release had continued until terminated by Domino’s repudiatory breach. Mr Hebden also sought to plead that following the alleged termination by repudiatory breach, the copyright in the Masters had reverted to Mr Hebden.

Domino denied breach, rejected Mr Hebden’s amendments and applied for strike out and/or summary judgment on the claim.

Ms Pat Treacy, sitting as a Judge of the Chancery Division, found that it was not appropriate to refuse Mr Hebden’s requests to amend, as she could not conclude summarily that the draft pleadings faced no real likelihood of succeeding.

The dispute between the parties as to the meaning of the “Release Commitment” in the 2001 agreement and what a “genuine commercial release” may or may not have required at the time was likely to require evidence to resolve. The judgment in Panayiotou v Sony Music Entertainment (UK) Ltd [1994] EMLR 229, which related to recording agreements in the 1990s, provided good background, but the industry had potentially changed between the early 1990s and 2001, including as a result of the advent of digital distribution, and there was no evidence on that before the court.

Further, Ms Treacy could not conclude that the authorities cited precluded the possibility that a music recording contract might be construed to require continued exploitation of some sort, including potentially on the basis of a good faith obligation. The law was not sufficiently clear to allow summary determination.

As for the requirements to be satisfied for implying terms into a contract, Ms Treacy was not persuaded that Mr Hebden had no realistic prospects of establishing that those conditions could, if necessary, be satisfied. Again, to reach that conclusion required a greater understanding of the factual position in the industry at the time the contract was concluded.

It was also unclear at this stage that the proposed terms to be implied (both to continue exploitation and to act in good faith) were not at least arguably necessary to make the agreement work. The current evidence showed that digital distribution had been a part of the parties’ relationship under the 2001 agreement for some time. It was not unarguable, therefore, that the proposed implied continuing obligation to exploit digitally was consistent with the express terms of the 2001 agreement, as it depended on the construction of those terms. As for the proposed obligation to act in good faith, this was not so inconsistent with the express terms of the 2001 agreement as to be unarguable.

Finally, it was not clear that the authorities cited meant that the terms suggested by Mr Hebden were so contrary to principle and authority that they could not be implied.

As for proportionality and the overriding objective, it was clear that some evidence would be necessary to decide the points proposed by Mr Hebden, but it was not clear that this would be very substantial. In any event, given the potential consequences for Mr Hebden of refusing permission to amend when she had found that the proposed amendments were not fanciful and had at least some prospect of success, Ms Treacy said that it would not be just to refuse permission.

As for the reversion or otherwise of the copyright in the Masters, Ms Treacy said that she had “considerable sympathy” with Domino’s arguments, but that Mr Hebden’s arguments were “made with some conviction” in view of the potential position that he might face if he were to succeed in establishing breach and she could not find that they were fanciful or clearly unsustainable. On balance, given her conclusion on the proposed amendments as to breach, and as the arguments as to remedy would require legal submission only rather than significant evidence, Ms Treacy concluded that it was not appropriate to refuse Mr Hebden permission to amend in this regard either.

Given the findings on Mr Hebden’s proposed amendments, it was not necessary to address Domino’s summary judgment application. (Mr Kieran Hebden v Domino Recording Company Ltd [2022] EWHC 74 (IPEC) (19 January 2022) — to read the judgment in full, click here).