Experience Hendrix Llc v PPX Enterprises Inc. & Anor

A claimant’s inability to prove financial loss does not necessarily confine contractual damages to a nominal sum. Where a defendant has deliberately obtained a benefit by breaching a negative contractual obligation, and the claimant had a legitimate interest in preventing that activity, the court may award a reasonable sum for the past infringement. That sum reflects the commercial value of the right infringed and may take account of the defendant’s benefit.

An account of all profits for breach of contract remains an exceptional remedy. The court must consider all the circumstances. A future injunction does not bar a reasonable-sum award for a completed past breach. Contractual obligations to account should ordinarily be enforced by an order where a limited undertaking does not secure the required information.

The appellant, assignee of the benefit of a 1973 settlement concerning recordings on which Jimi Hendrix performed, sued PPX and Mr Chalpin for breach. PPX had granted new licences in 1995 and 1999 for non-Schedule A masters which the settlement prohibited it from exploiting without consent.

Buckley J granted prospective injunctions but dismissed claims for damages and an account of profits, since the appellant had not proved financial loss. He accepted a limited undertaking by PPX to account for sales of Schedule A masters. The appellant appealed from [2002] EWHC 1353 (QB).

The central questions were whether a reasonable-sum remedy or an account of profits could be awarded for the completed breaches, and whether PPX should be ordered, rather than merely undertake, to account for Schedule A sales.

1. Appeal allowed. Mance LJ gave the leading judgment. Hooper J and Peter Gibson LJ agreed. The appellant was entitled to damages in the form of a reasonable sum for PPX’s past unauthorised licensing, and to an order requiring an account under clause 3(a) of the settlement.

2. Attorney General v Blake [2001] 1 AC 268 establishes that contractual damages are not invariably confined to financial loss. In a suitable case, they may be measured by the benefit obtained by the wrongdoer. The appropriate measure is the reasonable price for relaxing the contractual restriction, as illustrated by Wrotham Park Estate Ltd v Parkside Homes Ltd [1974] 1 WLR 798.

3. The court rejected the proposition that a claimant who obtains an injunction against future breaches is thereby precluded from receiving a reasonable sum for past breaches completed before effective intervention was possible. The claimant’s legitimate interest in preventing the profit-making activity supported both the injunction and the reasonable-sum remedy.

4. PPX deliberately did what it had promised not to do, knowing that consent would not be given. The settlement’s commercial and statutory background showed that the restriction had real value. Justice therefore required PPX to make a reasonable payment, despite the absence of proved financial loss. The assessment could include an appropriate proportion of advances received and a royalty rate significantly above that applicable to Schedule A masters.

5. A full account of PPX’s profits was refused. Such disgorgement is exceptional under Attorney General v Blake. This was a deliberate commercial breach, but it lacked the special public, fiduciary-like and other features that justified full disgorgement in that case.

6. PPX’s obligation under clause 3(a) was to account for the retail selling price of records sold. An undertaking contingent on receiving an account from CBH did not meet that obligation. Buckley J was wrong to accept it, and an order for an account was required.

• Court of Appeal (Civil Division): Allowed the appeal and replaced the limited undertaking with an order for an account. It declared that the appellant was entitled to reasonable-sum damages for the past breaches: [2003] EWCA Civ 323 .
• Queen’s Bench Division (Buckley J): Granted prospective injunctions, but dismissed the claims for damages and an account of profits and accepted PPX’s limited undertaking: [2002] EWHC 1353 (QB).