02-03-07

Ongoing Management Commission gets Seal of Approval The Court of Appeal this week upheld the 2006 judgment in the case of John Wadlow v Henry Olusegun Adeola Samuel (pka Seal). The recording artist failed to persuade the Court of Appeal that a 1995 agreement ending his relationship with Mr Wadlow, his former manager, was procured by undue influence. The Court of Appeal dismissed the appeal on 28 February 2007 and confirmed the validity of the contract for Mr Wadlow, who was represented by Clintons. Mr Wadlow discovered Seal in the 1980s and invited him to record some songs at Beethoven Street Recording Studios, which he then ran. In 1988 Seal signed a publishing deal with Mr Wadlow's publishing company and in 1990 the pair signed a management agreement that provided perpetual post-term management commission to Mr Wadlow on the albums recorded during the life of the contract. In 1995, after the release of two highly successful albums, and as Seal's career was increasingly based in the US, they amicably parted company and drew up a "settlement agreement" which terminated the management agreement. Under the settlement agreement Mr Wadlow made several valuable concessions, including the return to Seal of the publishing rights in his first two albums. In return for this, the agreement confirmed Mr Wadlow's right to receive his 20% management commission on future income from those albums, in perpetuity. In 2001, having paid Mr Wadlow commission under the settlement agreement for six years, Seal stopped paying, and Mr Wadlow sued for breach of contract. In the trial at first instance, Seal ran technical arguments that the terms of neither the management agreement nor the settlement agreement provided for perpetual commission on income from the two albums, on a true construction of their terms. He also argued that both agreements were unenforceable against him, because they were in restraint of trade and/or had been procured by undue influence. The lower court dismissed these arguments. Of particular interest for managers everywhere, he upheld the enforceability of the clauses in both agreements which entitled Mr Wadlow to post-term commission in perpetuity on all income generated from "recordings made and compositions written and residual fees arising from performances given or negotiated" during the term. This finding finally laid to rest the troubling decision in the case of Armatrading v Stone [1984], which has long been cited as a reason why managers cannot put such perpetual commission provisions in their agreements with artists. However, the lower court did find that that, partly due to a lack of evidence after 15 years, Mr Wadlow had been unable to rebut a presumption of undue influence in relation to the signing of the original management agreement. However, this finding had no practical effect, as he found that no undue influence was exerted on Seal at the time of negotiation of the settlement agreement. Seal's appeal, whilst raising some further points on construction of the contract terms, centred on the finding that the settlement agreement had not been procured by undue influence. He argued that, despite there being no evidence of Mr Wadlow exerting undue influence over Seal at the time of the settlement agreement, the fact that the presumption of undue influence had not been rebutted in relation to the management agreement meant undue influence was still operative in relation to the settlement agreement, rendering it unenforceable. The Court of Appeal distinguished the case of Yorkshire Bank v Tinsley [2004], finding that the terms of the settlement agreement made commercial sense and did entitle the former manager to post-term commission in perpetuity, not least because Mr Wadlow had given up his future interest in Seal's publishing under the settlement agreement. Given that Seal had taken proper legal advice on the deal and was, at the time, already effectively managed by a new manager, he was no longer in a position of "trust and confidence" with Mr Wadlow. The Court also noted that 15 years is a long time to wait before claiming a contract is void for having been affected by undue influence and that it would therefore not be just and fair to now set it aside (though this appears to contradict last month's case involving the song "A Whiter Shade of Pale", in which a claimant succeeded after a 40-year delay). This judgment confirms that, as the Court of Appeal noted, "bargains freely entered into should be enforced" - even in the music industry - provided both parties have taken proper legal advice and the contractual terms are drafted with sufficient clarity. An account will now be taken of Seal's earnings from the relevant albums over the last six years, to determine how much is owed to Mr Wadlow. The full text of the judgment may be accessed via: http://www.lawtel.com/~39af41ba83f94a318b0a65113b16c10d~/content/display.asp?ID=AC0112868CA%28CivDiv%29.pdf
Article by Charlie Anderson