Experience Hendrix LLC v PPX Enterprises Inc

The Court of Appeal allowed the appellant's appeal in relation to financial remedies for breach of the 7 March 1973 settlement agreement. Applying the principles in Attorney General v Blake and Wrotham Park, the court held that where a defendant has deliberately breached a negative contractual obligation and the claimant has a legitimate interest in preventing the defendant's profit-making activity, the claimant may recover a reasonable monetary sum assessed by reference to the benefit obtained by the wrongdoer even where there is no proved financial loss to the claimant. The court declined to order a full account of profits, holding that the case was not exceptional enough to justify disgorgement of all profits, but declared that PPX must pay a reasonable sum (assessed by reference to a proportion of advances received and an appropriate royalty on retail selling prices) for licences granted in breach of clauses 3(a)/3(b) of the settlement and that the judge had been wrong to accept the limited undertaking rather than make an order for an account under clause 3(a).

Background and procedural posture:

• The appeal arose from Buckley J's judgment of 5 July 2002 ([2002] EWHC 1353 (QB)) concerning breaches by PPX of a 1973 settlement between PPX and the late Jimi Hendrix's estate. The appellant, assignee of the estate's rights, appealed the dismissal of claims for damages and an account of profits and challenged the acceptance of a limited undertaking as to accounts for Schedule A masters.

Facts and issues:

• PPX held copyright in a number of Hendrix masters. The settlement (7 March 1973) preserved PPX's rights in Schedule A masters and allowed existing licences for other masters but prohibited extensions or renewals without the estate's consent and required delivery up/destruction of other masters. PPX granted licences in 1995 (to CBH) and 1999 (to Crown) in breach of the settlement.
• The main issues on appeal were (i) whether the appellant could obtain damages or an account of profits despite not proving financial loss, and (ii) whether the judge was right to accept an undertaking rather than make an order for an account of sales under clause 3(a).

Court's reasoning:

• The court reviewed Attorney General v Blake and Wrotham Park and held that damages may in suitable cases be measured by the defendant's benefit from breach where the claimant has a legitimate interest in preventing the defendant's profit-making activity and where other remedies (injunction/specific performance) are inadequate to address past profit-making. An account of profits is available only in exceptional circumstances; the instant case did not meet that threshold.
• Applying those principles, the court concluded that it would be unjust to allow PPX to retain the benefit of the 1995 and 1999 licences without payment. The proper remedy for the past breaches was a reasonable monetary payment assessed by reference to (a) a proportion of advances received attributable to non-Schedule A masters and (b) an appropriate royalty on retail selling prices. The court gave guidance that the royalty for non-Schedule A masters should be significantly higher than the 2% (or 1%) applicable to Schedule A masters and suggested that a rate less than one-third of PPX's royalties would be surprising.
• The court also held that Buckley J was wrong to accept a limited undertaking and that there should be an order requiring PPX to account in accordance with clause 3(a) rather than an undertaking limited to accounts provided by CBH.

Relief sought and disposition: The appellant sought damages and/or an account of profits and an order to account under clause 3(a); the Court of Appeal allowed the appeal, declared the availability of a Wrotham Park-style monetary remedy (but refused a full account of profits), and ordered that PPX account for Schedule A royalties and pay a reasonable sum in respect of the non-Schedule A licences; the court also required an order rather than the limited undertaking.

Appeal allowed. The Court held that (1) where a defendant deliberately breaches a negative contractual obligation and the claimant has a legitimate interest in preventing the defendant's profit-making activity, the claimant may recover a reasonable monetary sum assessed by reference to the defendant's benefit (a Wrotham Park-style award) even without proof of financial loss; (2) an account of all profits was not appropriate on these facts; and (3) the judge was wrong to accept a limited undertaking rather than to make an order requiring PPX to account under clause 3(a) of the settlement (directions given as to proportion of advances and appropriate royalty guidance).

Appeal from the Queen's Bench Division (Buckley J) [2002] EWHC 1353 (QB) to the Court of Appeal ([2003] EWCA Civ 323). Permission to appeal to the House of Lords was refused.