Samuel (Professionally Known As Seal) v Wadlow

A post-termination commission clause may cover income from recordings made during the management term where the agreement links commission to the artist’s activities during that term or to agreements negotiated then. A settlement agreement should be construed according to its plain commercial intention. A technical construction which removes expressly preserved commission should be rejected. Whether a later agreement varies or supersedes an earlier agreement need not determine an undue-influence challenge. The court must examine the full circumstances and ask whether the later agreement was a true exercise of free will. Delay, evidential prejudice and the practical consequences of rescission may also defeat relief through laches or acquiescence.

The appellant, a singer and songwriter, appealed from Gray J’s judgment in the Queen’s Bench Division concerning his former manager’s claim for an account and damages. The dispute concerned continuing commission on income from the appellant’s first and second albums under a management agreement and a later settlement agreement. The appellant challenged the construction of both agreements, argued that the management agreement remained vulnerable to rescission for undue influence, and relied on undue influence affecting the earlier agreement. He also challenged the findings of laches and acquiescence. The central issues were the parties’ contractual rights after termination, the effect of an earlier potentially tainted agreement on a later related agreement, and whether rescission remained equitable after prolonged delay.

Lord Justice Toulson gave the judgment of the court. Lord Justice Wilson and Lord Justice Ward agreed.

1. Management agreement. Clause 7(a), read with clause 7(c), entitled the manager to commission on earnings resulting from the artist’s musical activities during the agreement or from agreements negotiated during that period. The first and second albums were recordings made during the management agreement. The manager was therefore entitled to commission on income from them both during and after the agreement.
2. Settlement agreement. Clause 2(a) plainly preserved continuing commission on the first and second albums while excluding other continuing commission. The court should give effect to that commercial intention. A highly legalistic construction which produced the opposite result was rejected.
3. Variation and supersession. The distinction between variation and discharge or replacement was artificial in this case. The authorities, including United Dominions Corporation (Jamaica) Limited v Shoucair [1969] 1 AC 340, Morris v Baron [1918] AC 1 and British and Benningtons Limited v NW Cachar Tea Company Limited [1923] AC 48, arose principally from statutory formalities such as those associated with the Statute of Frauds. That technical distinction should not determine the application of undue influence where the parties’ continuing rights are clear.
4. Undue influence. Applying the guiding principle in Royal Bank of Scotland PLC v Etridge (No 2) [2001] UKHL 44, [2002] 2 AC 773, the court had to examine the full circumstances and decide whether the settlement agreement represented the appellant’s free will. Yorkshire Bank PLC v Tinsley [2004] EWCA Civ 816, [2004] 1 WLR 2380 did not establish an automatic rule invalidating every later related agreement. The settlement was made in a materially different context, after the relationship of trust and confidence had ended, with independent legal advice, fair terms and significant concessions by the respondent. It was therefore enforceable.
5. Laches and acquiescence. Ignorance of the legal right to rescind was relevant but did not create a fixed bar to laches or acquiescence. The court had to consider all the circumstances, including the lengthy delay, evidential difficulties, restitutionary complications and effects on third-party rights. The appeal was dismissed.

• Court of Appeal (Civil Division): In [2007] EWCA Civ 155, the appeal was dismissed.
• High Court, Queen’s Bench Division: Gray J’s reserved judgment dated 22 June 2006 held that the respondent was entitled to continuing commission on the first and second albums, rejected the appellant’s undue-influence and restraint-of-trade arguments, and found that laches and acquiescence also defeated rescission.