West Is West Distribution Ltd v Icon Film Distribution Ltd

This is the hearing of the defendant’s application by notice dated 22 October 2012 that the claim be struck out, alternatively that summary judgment be given for the defendant.

There is a cross application by the claimant by notice dated 18 April 2013 for summary judgment on the following issues : i) that the acquisition agreement between the parties dated 9 September 2009 (“the Agreement”) was validly terminated by the claimant and ii) that the DVDs manufactured by the defendant are the property of the claimant.

Under the Agreement the claimant licensed the defendant to promote and exploit rights held by the claimant in the film “West is West” (“the film”). The Agreement covered both the theatrical release of the film and its subsequent exploitation through other media such as home media and television. It provided inter-alia for the defendant to be paid commission from receipts generated by the film and to recoup distribution expenses from such receipts.

Despite a successful theatrical release relations between the parties broke down over the course of 2011 and the Agreement was terminated in January 2012. There is a dispute over whether the termination resulted from repudiatory breach by the claimant or the defendant. However, it is common ground between the parties that the Agreement was terminated with effect from 10 January 2012.

The most material provisions of the Agreement are set out in the Amended Points of Claim (“APOC”) at paragraphs 6,7,8,9, 9 a-c, 10, 11 and 13.

Of particular relevance are:

CPR rule 24.2 provides so far as material as follows:

“The court may give summary judgment against a claimant or defendant on the whole of a claim or on a particular issue if – (a) it considers that (ii) that the defendant has no real prospect of defending the claim or issue;... and (b) there is no other compelling reason why the case or issue should be disposed of at a trial.”

The principles which should guide the court in dealing on an application for summary judgment are helpfully summarised in Easyair Limited v Opal Telecom Limited [2009] EWHC 339 (Ch) Lewison J at [15], approved by Etherton LJ in A C Ward & Son v Caitlin (Five) Limited [2009] EWCA Civ 1098 at [24].

“…….the court must be careful before giving summary judgment on a claim. The correct approach on applications by defendants is, in my judgment, as follows:

(i)

The court must consider whether the claimant has a “realistic” as opposed to a “fanciful” prospect of success: Swain v Hillman [2001] 2 All ER 91;

(ii)

A “realistic” claim is one that carries some degree of conviction. This means a claim that is more than merely arguable; E D & F Man Liquid Products v Patel [2003] EWCA Civ 472 at [8]

(iii)

In reaching its conclusion that the court must not conduct a “mini-trial”: Swain v Hillman;

(iv)

This does not mean that the court must take at face value and without analysis everything that a claimant says in his statements before the court. In some cases it may be clear that there is no real substance in factual assertions made, particularly if contradicted by contemporaneous documents: ED & F Man Liquid Products v Patel at [10];

(v)

However, in reaching its conclusion the court must take into account not only the evidence actually placed before it on the application for summary judgment, but also the evidence that can reasonably be expected to be available at trial: Royal Brompton Hospital NHS Trust v Hammond (No. 5) [2001 EWCA Civ 550;

(vi)

Although a case may turn out at trial not to be really complicated, it does not follow that it should be decided without the fuller investigation into the facts at trial than is possible or permissible on summary judgment. Thus the court should hesitate about making a final decision without a trial, even where there is no obvious conflict of fact at the time of the application, where reasonable grounds exist for believing that a fuller investigation into the facts of the case would add to or alter the evidence available to a trial judge and so affect the outcome of the case: Doncaster Pharmaceuticals Group ltd v Bolton pharmaceutical Co 100 Ltd [2007] FST 63;

(vii)

On the other hand it is not uncommon for an application under Part 24 to give rise to a short point of law or construction and, if the court is satisfied that it has before it all the evidence necessary for the proper determination of the question and that the parties have had an adequate opportunity to address it in argument, it should grasp the nettle and decide it. The reason is quite simple: if the respondent’s case is bad in law, he will in truth have no real prospect of succeeding on his claim or successfully defending the claim against him, as the case may be. Similarly, if the applicant’s case is bad in law, the sooner that is determined, the better. If it is possible to show by evidence that although material in the form of the documents or oral evidence that would put the documents in another light is not currently before the court, such material is likely to exist and can be expected to be available at trial, it would be wrong to give summary judgment because there would be a real, as opposed to a fanciful, prospect of success. However, it is not enough simply to argue that the case should be allowed to go to trial because something may turn up which would have a bearing on the question of construction: ICI Chemicals & polymers Limited v TTE Training Limited[2007] EWCA Civ 725”.

Although the claimant’s application was issued after that of the defendant, logically the first matter that should be considered is the claimant’s application for a declaration that the Agreement has been validly terminated. If it was then the defendant’s own application for summary judgment cannot succeed.

The claimant gave notice of termination on 16 December 2011 for alleged breach of the Agreement accounting provisions. The claimant had complained about lack of transparency and insufficient detail in the statements provided by the defendant and also about aggregation. Details are set out in the Reply at paragraph 10. The claimant’s case is that it was entitled to statements of account that were timely, reasonably accurate and capable of being understood by the person to whom they were addressed, but that this obligation was not fulfilled.

For the purpose of the present application the claimant accepts that it is arguable whether the accounting breaches were sufficiently serious to be “material” so as to give rise to rights of termination under clause 11. However, the claimant contends there was a further breach unknown at the time which is clearly “material”.

On 28 November 2011 the defendant entered into an agreement with Lionsgate for the exploitation of SVOD rights (subscription video on demand) about which the claimant was not informed. Indeed the claimant’s understanding at the time was that the defendant was negotiating with a different distributor, Love Film, for the exploitation of those rights and that it was not until a considerable period later they learned of the Lionsgate deal.

The claimant’s pleaded case is that entering into the Lionsgate agreement was a breach of the Agreement because it was an agreement with a sub-distributor which was made without consultation with or the agreement of the claimant. It is also pleaded that it was a repudiatory breach of the agreement because the defendant had deliberately concealed from the claimant the fact that it was not negotiating with an approved sub-distributor, Love Film, but was in fact negotiating with Lionsgate, a sub-distributor that was not approved and of which the claimant had no knowledge.

Details of this alleged concealment are then set out in the pleading which concludes with a plea that the defendant’s conduct evinced an intention not to be bound by its obligations under and the terms of the Agreement and constituted a repudiation of the same.

The case put at the hearing, however, was not that set out in the pleading. The essence of the breach which was said to be “material” at the hearing was the fact that the agreement with Lionsgate involved an agreement to exploit SVOD rights at a time when there was no licence for the exploitation of such rights. That was because under the Agreement there was a twelve month period during which there was no right for the licensee to exploit SVOD rights. The claimant’s submission was that entering into an agreement to do so was a serious and material breach of the agreement and, moreover, an irremediable breach.

The defendant’s main answer to this case was that this basis for contending that the breach was “material” was not pleaded and was not one which it had had any opportunity to address in the evidence. It further submitted that had it had that opportunity it would have wished to have adduced evidence that there was in fact an agreement in principle for the exploitation of rights in this way, albeit not specifically with Lionsgate. The defendant further submitted that although it is well established that a party who terminates an agreement for repudiation can rely in justification of that termination on grounds which were not known or identified at the time that same principle does not apply to a notice of termination clause such as clause 11.

I accept the defendant’s submission that it is not satisfactory for an issue of this kind to be dealt with on a summary basis in circumstances where it has not been pleaded, is clearly advanced for the first time at the hearing and where there has been no proper opportunity for the other side to address it. Further, the issue of whether a breach is “material” is a fact dependent issue that potentially involves consideration of a wide variety of circumstances.

I also accept that there is a serious issue as to whether there is an entitlement to rely on later grounds in respect of a contractual right of termination such as clause 11 and none of the cases relied upon by the claimant specifically addresses that question.

In the circumstances I do not consider this to be an appropriate case to grant summary judgment on the first issue put forward by the claimant although I accept that its claim has a real prospect of success.

The other issue in relation to which summary judgment was sought was its claim for a declaration that the DVDs manufactured by the defendant are the property of the claimant.

In this connection I was referred to the definition of “Licensee Created Materials” in the Agreement which was as follows:

“.. all materials created, prepared and/or manufactured by the Licensee in the Licensed Language Version including but not limited to dubbed or sub-titled versions of the Film and key art, trailer, advertising and publicity materials.”

Clause 7.2 then provides as follows:

“The Licensor shall be the sole owner of any Licensee Created Materials. The Licensee hereby assigns to the Licensor the entire right title and interest in and to the Licensee Created Materials from the inception hereof for the full period of copyright and all extensions thereof…..”

The claimant submitted that this means that any DVD created by the licensee is the property of the licensor. It, however, accepted in oral submissions that in so far as the licensee’s own logos were used on those DVDs then the licensor would have no right to exploit or use those DVDs without the agreement of the licensee. However, the DVDs themselves would be the property of the licensor which could, if they so wished, be destroyed.

In the light of this apparently accepted caveat on the exercise of the licensor’s property rights it was not apparent there remained any real issue between the parties. However, subsequent to the hearing the claimant withdrew its concession. In the result there was no full argument on the issue and in circumstances where the claimant has fundamentally changed its position in this manner I do not consider that it can be appropriate to accede for its application for a declaration, if persisted in. The claimant’s changing position shows that there are real grounds for resisting the unqualified claim made.

The defendant’s application is for summary judgment and/or for the claim to be struck out. It is not an application that parts of the claim should be struck out nor is it an application that judgment should be given on particular issues as provided for under Part 24 (in which case the relevant issues should be identified).

The defendant’s application as advanced in the written skeleton and at the hearing was in effect that the claimant has no sustainable claim for damages and/or for an account rather than that it has no sustainable cause of action.

It was not disputed that the claimant does have an arguable claim for breach in relation to the breaches identified in the APOC. The one exception related to the distribution agreement made with Universal which it was submitted by the defendant was not an agreement that involved any grant of a right to Universal to sell rights in the film to other parties and therefore did not involve any breach of the terms of the Agreement. It was simply an agreement to provide logistical “pick, pack and ship” services. Although its application was for judgment the defendant sought summary determination of this specific issue. I agree however, with the claimant that, even if such an application is open to the defendant, this issue is one which is very much linked to the factual background and context and that it would not be appropriate on the basis of the limited evidence before the court to seek to determine it. Indeed the defendant specifically relies on what it contends is film industry understanding.

Given that the defendant rightly accepts that the claimant has a case with a real prospect of success on liability this is clearly not an appropriate case for summary judgment for the defendant. Even if, for example it was the case that the claimant had no sustainable case on damages that would not mean that it would be appropriate for there to be judgment for the defendant. The claimant may still be entitled to judgment even if the damages are nominal. It is therefore not at all clear that the arguments advanced by the defendant are open to them on their application. Nevertheless I shall address them briefly.

The claimant’s damages case as explained in the evidence is that there was a serious disruption in the supply and sales of DVDs as a result of the defendant’s breaches of the Agreement.

In Miss Udwin’s third witness statement she says that the defendant did not deliver up DVD masters following termination of the Agreement as it was obliged to do and, moreover, that it refused even to tell the claimant who authored the DVD masters. As a result it was necessary for the claimant to manufacture a new DVD master which meant that the film could not be sold by the claimant through its new distributor between January 2012 and May 2012. The alleged consequence was a serious short fall in sales and the belief was expressed that the claimant’s claim is worth between £200,000 and £600,000.

Support for this case is provided in the statement of Peter Dutton who is the Managing Director of a film distribution company. He explains how the DVD had been selling extremely well up until January 2012 averaging between 1800-2000 units per week. He then describes the delay in obtaining the new DVD masters meant that there was an inability to restore the supply chain until the middle of April. In consequence the film was not available for a significant period of time which caused what he described as a “fatal interruption” in the sales of what was otherwise a successful DVD exportation. He points out that the title went from selling an average of 1800 units a week to selling 3000 over a number of months.

This is disputed as a matter of fact by the defendant on the basis that the retail outlets had copies of DVDs throughout this period and that any failure to supply or re-supply the retailers was the failing of the new distributor company, rather than any delay on its part in delivering up materials.

The question of the damages to which the claimant may be entitled is very much a fact dependent issue. There is clear evidence before the court of a serious disruption in sales. The cause of that is in issue but a plausible case has been made on the evidence that it was the defendant’s breach of the Agreement. There is no possibility for factual issues of this nature to be dealt with on a summary basis, even if it is open to the defendant on its application so to contend.

There is, however, force in the defendant’s point that the basis of the damages claim has not been properly pleaded, even following recent amendments to the pleadings. In particular, the case based on the delay in provision of the master DVDs is not clearly set out in the pleadings, nor is the alleged consequence thereof.

The claimant needs to marry its pleading with its evidence and to set out clearly in the pleading which breach is said to have caused what loss and how it was allegedly so caused. At present there are various claims of breaches but no satisfactory linkage between the very general assertions of damages and the breaches set out. That needs to be remedied. I will hear counsel as to the particular terms in which further particularisation should be provided, but I am satisfied that this should be done and in relatively short order.

The other aspect of the monetary relief claimed concerned the claimant’s claim for an account. It is correct that given that the claimant has an arguable case on breach and indeed repudiatory breach, it equally has on the face of it an arguable claim for an account. The complication here, however is that pursuant to a settlement reached in relation to the Lionsgate agreement there already has been an audit carried out by an accountant instructed by the claimant. The defendant’s position is that it has paid the sums it says are due as a result of taking that audit and that the few accounting issues which have not been accepted by them are capable of being disposed of summarily. Further, the defendant submits that the claimant should not be entitled to reopen the whole question of the accounts or seek wide ranging disclosure relating to it in circumstances where to a significant extent this exercise has already been performed.

I have some sympathy with the defendant’s position, but I cannot accept that it is appropriate summarily to dismiss at this stage the claimant’s prima face right to claim an account. I agree, however, that account needs to be taken of the work which has already been done so as to avoid unnecessary and disproportionate cost. In my judgment the appropriate way forward is to order the claimant to identify what documents it wishes to have disclosed to it in relation to the accounts and for it then to set out in a pleaded schedule what its case is on the accounts. To some extent this has already been done in the pleading and in Miss Udwin’s third witness statement, but the claimant says there is further material that it is entitled and wishes to review. It recognises that in so far as this does prove to be a fruitless exercise it may have in exposure on costs.

In my judgment in principle the claimant is entitled to enquire further into the accounting position both in terms of documents and in terms of the figures, but if it is to do so then it must be on the basis of specifically identifying what it is that needs to be done which is not covered by the existing exercise. It should therefore identify, probably with the assistance of its accountant, the further documents needed and it should then produce a schedule setting out clearly what the accounting issues are.

The defendant has already set out its position and indeed addressed in some detail the points already identified by the claimant. It is to be hoped that by proceeding in this manner the accounting issues will be kept within a relatively narrow and defined framework.

For the reasons outlined above I am not satisfied that either party’s application for summary judgment should be granted. However, this is a case in which it is appropriate to make directions which should serve to clarify the issues and to enable the case to go forward in a focused and proportionate manner. My provisional view is that the result of the hearing is a score draw and that costs should be in the case. The parties are encouraged to seek to agree the appropriate order to be made.