BSI Enterprises Ltd & Anor v Blue Mountain Music Ltd

Contractual construction is a unitary exercise. The court must identify the meaning which the language would convey to a reasonable person with the relevant background knowledge, while excluding prior negotiations and subjective intentions. Where two constructions remain possible, business common sense may assist the choice.

An express definition of transferred assets governs their scope. A non-exhaustive schedule, warranty provisions, document-delivery obligations and financial schedules do not narrow that definition unless the agreement says so. The omission of particular assets from warranty schedules is not decisive where the factual matrix provides a coherent explanation for the omission.

The appellants claimed ownership of the copyrights in thirteen Bob Marley songs and an account of royalties. The claim depended on whether a March 1992 agreement between Island Logic Ltd and Cayman Music Inc transferred those copyrights to Island.

The High Court held that the copyrights passed under the agreement and dismissed the claim. The appellants abandoned their trial interpretation argument and sought permission to advance a new argument on appeal, namely that the agreement did not include the songs. The central issue was the proper construction of the agreement, particularly the definition of “Compositions” and the significance of the schedules and warranty provisions.

The appeal was dismissed. Kitchin LJ delivered the judgment, with Lloyd Jones LJ and Arden LJ agreeing.

1. The appellants were permitted, insofar as necessary, to advance their new construction argument. The interpretation issue was dispositive of the appeal.
2. The court applied the established unitary approach to contractual interpretation. The language had to be construed as it would be understood by a reasonable person possessing the relevant background knowledge. The factual matrix was relevant, but it could not be used to make the language yield to an assumed intention. Prior negotiations and subjective declarations were excluded.
3. Clause 1.8 defined “Compositions” broadly. It included musical compositions written or recorded by Bob Marley and rights owned, controlled or administered by CMI, or from which CMI’s music publishing business received income. The thirteen Works therefore fell within the definition and were part of the Acquired Assets.
4. Clause 5.10 was a warranty concerning the compositions listed in Schedule 2. Clause 5.11 required delivery of documents pertaining to the Compositions, and Schedule 10 concerned financial information. None of those provisions redefined or limited the term “Compositions”. Schedule 2 was expressly a non-exhaustive list.
5. The omission of the Works from the schedules dealing with limited or excluded warranties did not displace clause 1.8. The omission was capable of explanation by the factual matrix, including the Estate’s registered ownership and the earlier dismissal of the New York claim.
6. The court also upheld the deputy judge’s alternative conclusion that the songwriter-agreement provisions encompassed the 1973 Agreement and associated rights, although it was unnecessary to decide that issue after the main construction point had been resolved.

1. Court of Appeal (Civil Division): The appeal was dismissed. The court granted permission, insofar as necessary, to advance the new interpretation argument. [2015] EWCA Civ 1151.
2. High Court of Justice, Chancery Division (Intellectual Property): The deputy judge held that the copyrights passed under the March 1992 Agreement and dismissed the claim for a declaration and an account. [2014] EWHC 1690 (Ch).