Excelsior Group Productions Ltd v Yorkshire Television Ltd

A long-term contract is construed by reference to the objective meaning of its words and the factual background reasonably available when it was made. Later technological or corporate developments, subsequent conduct and subjective intention cannot expand the bargain. The words must, however, be wide enough to accommodate a later concept where the contract objectively permits that construction.

References in agreements made in 1990, 1992 and 2000 to ITV, the Independent Television Network, or the ITV Network meant the Channel 3 network and its regional transmission arrangements. They did not include later digital channels such as ITV2 and ITV3. Alternative forms of exploitation were remunerated under the royalty clause, construed purposively where necessary.

Excelsior produced television dramas with Yorkshire Television under three agreements concerning The Darling Buds of May, A Touch of Frost and My Uncle Silas. Each agreement allowed two broadcasts on the relevant ITV or Channel 3 network and provided fixed repeat fees for further transmissions. A separate clause provided royalties for other exploitation.

After ITV2 and ITV3 began broadcasting, Excelsior claimed the fixed repeat fees for transmissions on those digital channels. Yorkshire Television contended that the agreements covered only repeats on the channel then known as ITV, now ITV1, and that digital-channel transmissions fell within the royalty regime. The central issue was the proper construction of the relevant clauses at the dates of the agreements.

1. Construction at the date of contracting. The agreements were to be construed objectively by reference to the factual background reasonably available when each was made. The court disregarded subjective intentions, pre-contractual negotiations and subsequent conduct, subject to recognised exceptions such as rectification or estoppel by convention. The later corporate structure of ITV and later technological developments could not form part of the original matrix. ([2009] EWHC 1751 (Comm), paras 13-26)
2. Darling Buds of May Agreement. In its 1990 context, “ITV” meant the channel then known as ITV and formally established as Channel 3. The phrase referring to all transmitters of the IBA was directed to the 1,154 analogue transmitters serving that channel. It could accommodate the same transmitters under a different owner, but not different digital transmitters used for ITV2 and ITV3. The reference to simultaneous or non-simultaneous transmissions reinforced the connection with the regional Channel 3 and Channel 4 arrangements. ([2009] EWHC 1751 (Comm), paras 84-96)
3. Clause 4(2). The royalty clause was construed robustly and purposively so that forms of transmission or exploitation other than primary analogue terrestrial broadcasts on Channel 3 or Channel 4 were not left outside the payment regime. The court considered that result achievable by punctuation and, if necessary, by implication of a term. That construction did not enlarge clause 4(1): absence of coverage under clause 4(2) could not bring ITV2 or ITV3 within the fixed-fee provision. ([2009] EWHC 1751 (Comm), paras 97-112)
4. Later agreements and disposition. The parties accepted that the Frost and Silas agreements had the same scope and effect for these purposes. “Independent Television Network” and “ITV Network” referred to the regional licensees’ Channel 3 networking arrangements, not digital channels merely provided by companies which also held Channel 3 licences. The claim for the declaration was dismissed. ([2009] EWHC 1751 (Comm), paras 113-121)