Samuel (Professionally Known As Seal) v Wadlow [2007] EWCA Civ 155

[2007] EWCA Civ 155

Case No A2/2006/1548

IN THE SUPREME COURT OF JUDICATURE

COURT OF APPEAL (CIVIL DIVISION)

ON APPEAL FROM HIGH COURT QUEENS BENCH DIVISION

GRAY J

HQ05X01564

Venue Royal Courts of Justice, Strand, London, WC2A 2LL

Date 28 February 2007

Before

LORD JUSTICE WARD

LORD JUSTICE WILSON

LORD JUSTICE TOULSON

Between

SAMUEL (PROFESSIONALLY KNOWN AS SEAL)Appellant

WADLOWRespondent

(Transcript of the Handed Down Judgment of

WordWave International Ltd

A Merrill Communications Company

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Mr Andrew George (instructed by Messrs Russells) for Appellant

Mr Ian Mill QC and Mr Mark Vinall (instructed by Messrs Clintons) for Respondent

Hearing Hearing date: 7 February 2007

Judgment

Lord Justice Toulson :

Introduction

[1]The appellant is a singer and songwriter known professionally as Seal. The song which first made his name was “Killer”, which he produced in collaboration with the artist “Adamski” in 1989. It was released in April 1990 and went to the top of the UK singles chart. The respondent, Mr Wadlow, is the appellant’s former manager.

[2]Mr Wadlow’s management was brought to an end by a settlement agreement dated 31 March 1995. The dispute is about whether Mr Wadlow is entitled to continuing commission on income from the exploitation of two albums referred to in the settlement agreement as the first album and the second album.

The History in Brief

[3]The parties met in 1987 when the appellant was aged 24. The respondent was then a partner with Mr Julian Spicer in a recording studio business known as Beethoven Street Studios (“BSM”). They let the appellant have free studio time, and the respondent began to perform what might loosely be described as managerial services for the appellant. He tried to promote the appellant’s music to record companies, but at that time without success.

[4]On 9 May 1988 the appellant and Beethoven Street Music (“BSM”), which was a partnership between Mr Wadlow and Mr Spicer formed for the purpose, entered into a written publishing agreement. Before doing so the appellant received legal advice from Ms Helen Searle, a specialist music lawyer. By the terms of the agreement the appellant assigned to BSM the publishing rights in all compositions written by him during the period of the agreement in return for a right to royalties, which were broadly to be split 70/30 between the appellant and BSM. The agreement was to run until 22 February 1991, with an option for BSM to extend it for a further two years.

[5]The respondent continued to provide managerial services for the appellant, which after “Killer” took up more of his time. He negotiated for the appellant a 50% share of the copyright in “Killer” and he advised on the contracts which followed.

[6]On 17 July 1990 the appellant entered into a recording agreement with ZTT Records Limited. This entitled ZTT to record a maximum of five albums and committed it to record one album and two singles.

[7]On 1 September 1990 the parties entered into a written management agreement. The terms of the management agreement and the settlement agreement are central to the dispute.

[8]On 18 January 1991 BSM entered into an administration agreement with Perfect Songs Limited (ZTT’s sister publishing company). Copyright in the appellant’s compositions was licensed to Perfect Songs in return for royalties payable to BSM at the rate of 65% of income received, and BSM’s publishing obligations to the appellant were subcontracted to Perfect Songs. The term of the administration agreement was to be co-extensive with the recording agreement. On the same day the publishing agreement between the parties was varied to make it co-extensive with the term of the recording agreement and the administration agreement. The variation to the publishing agreement also contained provision about the royalties to be paid by BSM to the appellant in respect of the first and second albums to be released by ZTT under the recording agreement.

[9]In May 1991 the appellant’s first album, entitled “Seal”, was released by ZTT and went to the top of the UK charts. In the same month the parties engaged a company called Direct Management Group Inc as the appellant’s North American manager. That arrangement did not prove to be satisfactory, and in June 1993 the appellant’s North American management was taken over by Mr Bob Cavallo of Roven Cavallo Entertainment Inc.

[10]In May 1994 the appellant’s second album, entitled “Seal II”, was released and again went to the top of the UK charts.

[11]The appellant became more impressed by Mr Cavallo than by the respondent, and in early 1995 the appellant told the respondent that he wanted to terminate his management and publishing relationship with the respondent and BSM. After discussions, the appellant, the respondent and BSM entered into the settlement agreement, which terminated both the publishing and management agreements.

[12]The appellant continued to pay commission to the respondent in respect of earnings on the first and second albums until the end of 2000.

[13]Another payment was made in 2001 but otherwise there were no further payments.

[14]On 2 June 2005 the respondent began the present action, claiming an account and damages for breach of the management and/or settlement agreements. The respondent subsequently amended his pleadings to base his case on the settlement agreement alone.

[15]The appellant’s grounds of defence as advanced at the trial were the following: 1. the respondent was not entitled to continuing commission on the proper construction of either the management agreement or the settlement agreement; 2. but if he was prima facie entitled to commission under either agreement, his claim was under the management agreement; 3. the management agreement was unenforceable as an unreasonable restraint of trade; 4. the management agreement and the settlement agreement were voidable for undue influence, and the appellant was entitled to rescind them.

[16]The claim to rescind the agreements for undue influence was introduced by amendment about 2 weeks before the start of the trial.

The Judgment under appeal

[17]By a reserved judgment dated 22 June 2006, Gray J held that the respondent was entitled to continuing commission on the appellant’s earnings from the albums and ordered an account. He made the following findings: 1. as a matter of construction, the respondent was entitled under the management agreement to commission in respect of the first and second albums both during its term and after its termination; 2. the management agreement was superseded, and not merely varied, by the settlement agreement; 3. under the settlement agreement the respondent was entitled to continuing commission in respect of the first and second albums; 4. the circumstances in which the parties entered into the management agreement gave rise to a presumption of undue influence, which the respondent had not rebutted; 5. the settlement agreement was not procured by undue influence; 6. the undue influence which affected the management agreement did not make the settlement agreement voidable; 7. the respondent was also entitled to rely on laches and acquiescence to defeat the appellant’s defence of undue influence; 8. neither the management agreement nor the settlement agreement was unenforceable on restraint of trade grounds.

The Grounds of Appeal

[18]The appellant advanced the following grounds: 1. on its proper construction, the management agreement did not entitle the respondent to commission in respect of the first and second albums after the termination of the agreement; 2. similarly, on its proper construction the settlement agreement did not entitle the respondent to commission in respect of the first and second albums; 3. the management agreement was varied but not superseded by the settlement agreement, and the appellant was therefore prima facie entitled to rescind it for undue influence; 4. if the settlement agreement superseded the management agreement, the appellant was entitled to rescind it on grounds of the undue influence which affected the preceding agreement; 5. the judge was wrong to find laches and acquiescence.

[19]It is logical to consider first the construction issues, then undue influence and finally laches and acquiescence.

The Management Agreement

[20]Clause 1 provided that:

“The Artist [the appellant] hereby appoints the Manager [the respondent] and the Manager agrees to act as the sole and exclusive Manager of the Artist throughout the world in respect of all the musical activities of the Artist in all branches of the entertainment industry and in particular Artists’ [sic.] activities as a recording artist composer or writer in connection with the record industry…”

[21]By clause 3 the respondent undertook to use his best endeavours to advance and promote the interests of the appellant in all branches of the entertainment industry and to procure and obtain suitable and proper agreements, engagements and bookings for him.

[22]The critical clause is clause 7. This provided:

“(a) By way of remuneration for his services hereunder the Manager shall be entitled to commission as hereinafter specified based on the gross total earnings of the Artist from the activities including without prejudice to the foregoing all royalties of whatsoever kind and all pecuniary considerations of any nature whatsoever paid or payable (provided always that commission will not be deducted until payment is received) to the Artist or to anyone on his behalf during the Term hereof or to which the artist or any party on her [sic.] behalf may become entitled as a result of agreements engagements performances or bookings entered into negotiated or procured during the currency of this Agreement or any modifications of or substitutions for such agreements performances or bookings including any products of the Artist’s services (no matter where the same may have been rendered)… (b) The remuneration shall be a sum equal to 20% (twenty per cent) of the relevant earnings referred to in this Clause. (c) After the expiration of the term hereof the Manager’s commission shall be limited to monies arising and [which is agreed should read “from”] recordings made and compositions written and residual fees arising from performances given or negotiated during the period hereof.”

[23]The first and second albums were recordings made during the management agreement and therefore appear to fall within clause 7(c). However, Mr George argued on behalf of the appellant that nothing can fall within clause 7(c) which is not first within clause 7(a), and that monies arising from the first and second albums did not fall within clause 7(a). This was because the first part of 7(a), down to the words “during the Term hereof”, was confined to commission on earnings paid or payable during the period of the agreement, and the second part was confined to earnings from agreements, etc., negotiated during the period of the agreement. Although the albums were recorded during the period of the agreement, this resulted from the recording agreement with ZTT, which pre-dated the management agreement.

[24]I would read clause 7(a) as follows: “By way of remuneration for his services hereunder the Manager shall be entitled to commission as hereinafter specified based on the gross total earnings of the Artist from the activities [including without prejudice to the foregoing all royalties of whatsoever kind and all pecuniary considerations of any nature whatsoever paid or payable (provided always that commission will not be deducted until payment is received) to the Artist or to anyone on his behalf] during the Term hereof or to which the Artist… may become entitled as a result of agreements engagements performances or bookings entered into negotiated or procured during the currency of this Agreement…” [including without prejudice to the foregoing all royalties of whatsoever kind and all pecuniary considerations of any nature whatsoever paid or payable (provided always that commission will not be deducted until payment is received) to the Artist or to anyone on his behalf]

[25]In other words, the respondent would be entitled to commission on the appellant’s earnings if they resulted from his musical activities during the period of the agreement or if they resulted from agreements negotiated during the period of the agreement.

[26]That construction makes commercial sense, particularly in the context that the respondent had recently negotiated the ZTT recording agreement under which it was expected that the first of five possible albums would shortly be made. The construction also avoids any tension between 7(a) and 7(c). The function of the words “including without prejudice to the foregoing…to the Artist or to anyone on his behalf” is to make it clear that the expression “gross total earnings of the artist from the activities” is not intended to be confined to money received, but includes money or any pecuniary consideration paid or payable to the appellant or anyone on his behalf.

[27]Mr George submitted that there was too big a gap between the words “total earnings of the Artist from the activities” and the words “during the Term” for this to be an acceptable interpretation, and that the words “during the Term” must be read as limiting the words “paid or payable…to the Artist or to anyone on his behalf”. I am unpersuaded by that argument. I am more impressed, as was the judge, by the fact that the recording agreement had been negotiated by the respondent as the appellant’s de facto manager at the same time as the management agreement was being negotiated, and that it appears to have been fortuitous that the recording agreement was concluded first by a margin of a few weeks. It would be surprising if the respondent’s commission was not intended to include commission on earnings from albums made during the management agreement.

[28]For those reasons I agree with Gray J that the management agreement entitled the respondent to commission on the appellant’s earnings, both during and after it, from the first and second albums.

The Settlement Agreement

[29]The settlement agreement provided, among other things, as follows:

“1. In consideration of the mutual promises herein contained and other good and valuable consideration it is agreed that with effect from the 28th day of February 1995 the Management Agreement is terminated. Subject as hereinafter appearing [the appellant] and [the respondent] agree to release each other from their respective obligations under and the further performance of the terms of the Management Agreement. 2.(a) Notwithstanding the termination of the Management Agreement [the respondent] shall be entitled to his commission entitlement as defined in clause 7 of the Management Agreement … [“the Commission Entitlement”]…on recordings made compositions written and performances rendered during the term of the Management Agreement. For the avoidance of doubt [the respondent’s] ongoing Commission Entitlement shall be limited to income arising on all those recordings and compositions appearing on [the appellant’s] first and second albums recorded and released by ZTT (“the First Album” and the “Second Album” respectively) …Furthermore notwithstanding that [the respondent] is a fifty per cent share holder of BSM [the respondent] shall be entitled to retain the full amount of his commission entitlement on publishing income arising from the exploitation of the First Album and subject as hereinafter provided to the full amount of his Commission Entitlement on publishing income arising from the exploitation of the Second Album. (b) [The appellant] agrees pursuant to clause 5(c) of the Management Agreement that he will use his reasonable endeavours to ensure that [the respondent] is directly accounted to by: (i) ZTT for his Commission Entitlement on recording income arising from the Commissionable Material on the same dates as [the appellant] is accounted to by ZTT; (ii) [Perfect Songs] for his Commission Entitlement on publishing income arising from the Commissionable Material on the same dates as [the appellant] is accounted to by [Perfect Songs].” (i) ZTT for his Commission Entitlement on recording income arising from the Commissionable Material on the same dates as [the appellant] is accounted to by ZTT; (ii) [Perfect Songs] for his Commission Entitlement on publishing income arising from the Commissionable Material on the same dates as [the appellant] is accounted to by [Perfect Songs].”

[30]By clause 9(c) the respondent surrendered to the appellant his 50% interest in the share of publishing income payable to BSM from Perfect Songs for the second album.

[31]Mr George’s argument that the settlement agreement did not entitle the respondent to continuing commission in respect of the first and second albums, despite the parties’ expressed intention in clause 2(a) that the respondent should be entitled to such commission, depended on his argument about the proper construction of the management agreement, which I have rejected. The point is therefore academic, but I would have also rejected it in any event. His argument was as follows: 1. the words “[the respondent] shall be entitled to his Commission Entitlement as defined in clause 7 of the Management Agreement” and “For the avoidance of doubt [the respondent’s] ongoing Commission Entitlement shall be limited to…” meant that the respondent could not be entitled to commission in respect of the first and second albums unless clause 7 of the management agreement entitled him to such commission after its termination; 2. clause 7 of the management agreement did not entitle the respondent to such commission; 3. by further restricting any continuing commission so as to exclude all but the first and second albums, the true effect of clause 2(a) of the settlement agreement was to preclude the respondent from having any continuing commission.

[32]This highly legalistic approach would produce a result opposite to that which the parties as commercial people plainly intended.

[33]If, as I consider, the plain commercial intention of the parties by clause 2 of the settlement agreement was that the respondent should have continuing commission in respect of the first and second albums, but no other continuing commission, the court can and should construe the agreement so as to give effect to that intention.

Did the Settlement Agreement Vary or Supersede the Management Agreement?

[34]The sole reason for this issue being debated was because of its possible relevance in relation to undue influence.

[35]The chapter in Chitty on Contracts, 29th Ed (2004), on discharge by agreement begins by stating (at para 22-001) that the discharge of a contract by agreement is a subject of considerable artificiality and refinement, and that the niceties of legal reasoning which appear in this branch of the law are not easy to justify.

[36]The case law on the subject has mainly arisen from the Statute of Frauds and similar statutory provisions. A good example is United Dominions Corporation (Jamaica) Limited v Shoucair

[1969] 1 AC 340

. The case arose from a Commonwealth statute based on section 6 of the UK Moneylenders Act 1927, which made unenforceable any contract for the payment of interest on money lent, and any security given by the borrower in respect of any such contract, unless it was supported by a note or memorandum signed by the borrower and containing all the terms of the contract. A lender advanced money to a borrower on mortgage at an interest rate of 9%. Later the rate of interest was varied to 11%. The original contract was supported by a note which complied with the statutory requirements, but the variation was not. The lender sought to enforce the contract at the original rate. The question was whether the variation, itself unenforceable, made the prior agreement also unenforceable.

[37]Lord Devlin, at pages 347-349, set out the possible approaches to the problem:

“…the difficulty about enforcing the original mortgage in this case is that, although itself untouched by the statute, it is no longer the real contract between the parties. In reality, although the statute prevents reality from being proved, there is no longer a mortgage at 9% but one at 11%. Since, however, the real contract is not evidenced in the way required by the moneylending law, it cannot be enforced. This is the approach made by Douglas J in the Supreme Court and by Lewis J, who gave the leading judgment for the majority in the Court of Appeal. Another way of arriving at the same result is to treat a variation of contract as something that necessarily requires the rescission of the old contract and the substitution of a new one. On this view the old contract cannot be enforced because it has been rescinded and the new contract cannot be enforced because it is not properly evidenced. This was the conclusion reached by the Divisional Court in Williams v Moss’ Empires [1915] 3 KB 242 and adopted by the Court of Appeal in Morris v Baron [1918] AC 1. As Sankey J put it in the former case: “The result of varying the terms of an existing contract is to produce, not the original contract with a variation, but a new and different contract.”

The disadvantage of this view is that a minor variation may destroy the effect of the whole of the transaction between the parties. The alternative view, adopted by the House of Lords in Morris v Baron and again in British and Benningtons Limited v NW Cachar Tea Company Limited

[1923] AC 48

(where Lord Sumner referred to the former view as possibly correct “as a matter of formal logic”), is based on the intention of the parties. They cannot have that which presumably they wanted, that is, the old agreement as amended; so the court has to make up its mind which comes nearer to their intention – to leave them with an unamended agreement or without any agreement at all. The House answered this question by rejecting the strict view propounded by Sankey J and distinguishing between rescission and variation. If the new agreement reveals an intention to rescind the old, the old goes; and if it does not, the old remains in force and unamended. If the principle in Morris v Baron applies to this case, the mortgage of April 22 remains in force. The contrary has not been and could not be argued. It would be impossible to contend that a temporary variation in the rate of interest reveals any intention to extinguish the debt and the mortgage… The choice before the board lies between solving the problem by means of what Lord Sumner called formal logic or solving it by giving effect as far as possible to the intention of the parties as was done in Morris v Baron.”

[38]The Privy Council chose the latter course.

[39]However, it may not be easy to determine whether the parties “intended” that the original contract should continue to exist as a matter of legal analysis but in varied form, or whether as a matter of legal analysis it was intended to be discharged and replaced, since the distinction is one of legal theory which might have little commercial meaning for the parties.

[40]In the present case it is plain what the parties intended to be the effect of the settlement agreement in terms of their ongoing financial rights and obligations; but to ascribe to them an intention to achieve that result by variation of the management agreement, as distinct from its replacement by the settlement agreement, or vice versa, is artificial. From a practical viewpoint it is a distinction without a difference.

[41]In Morris v Baron the House of Lords used a variety of expressions to formulate a test. In British and Benningtons Limited v NW Cachar Tea Company Limited Lord Sumner, at 67, collected the various phrases used and said that the question was whether the common intention of the parties was to abrogate, rescind, supersede or extinguish the old contract by a substitution of a completely new self-contained or self-subsisting agreement, containing as an entirety the old terms, together with and as modified by the new terms.

[42]In this case the settlement agreement was plainly intended in a broad sense to supersede the management agreement and the publishing agreement, but whether it was intended to extinguish the prior agreements is more debatable. The settlement agreement dealt comprehensively with the parties’ continuing obligations, but it did so in language which imported parts of the management agreement.

[43]Mr George submitted rightly that the management agreement could be terminated without being discharged (that is, ceasing to have any legal effect). If the management agreement had been terminated in accordance with the notice provisions in that agreement, the post-termination provisions would continue to have legal force, because the contract would continue to have validity although the term of the management contract would have expired. Similarly, he submitted, the termination of the agreement by the settlement agreement did not extinguish the contract as an entirety. He pointed to expressions in the settlement agreement such as “subject as hereinafter appearing [the parties] agree to release each other from their respective obligations under and the further performance of the terms of the Management Agreement” and “notwithstanding the termination of the Management Agreement [the respondent] shall be entitled to his commission entitlement as defined in clause 7 of the Management Agreement” and “[the appellant] agrees pursuant to clause 5(c) of the Management Agreement that he will use his reasonable endeavours…” as showing that the management agreement was not being entirely extinguished.

[44]The respondent argued that the continuing obligations took their force only from the terms of the settlement agreement and that the reference, for example, to him being “entitled to his commission entitlement as defined in clause 7 of the Management Agreement” was merely a convenient way of identifying his rights.

[45]It is a fine question. I consider that it is also a sterile question. The law about undue influence is based on broader concepts and I do not believe that its application to the present case should be affected by whether technically the settlement agreement discharged the management agreement.

[46]The principle in Morris v Baron was brought into existence in order to deal with the technical problems produced by legislation analogous to the Statute of Frauds. The less that it is brought into other parts of the law to deal with problems of a different nature which do not require a formalistic approach, the better.

Undue Influence

[47]Contract law is built on the principle that bargains freely entered into should be enforced. The cardinal principle of autonomy also has another side. In circumstances where one party has taken improper advantage of the other, so that the agreement cannot fairly be regarded as an exercise of free will, rules have been developed to protect the vulnerable party. The rules relating to misrepresentation, duress and undue influence share in this respect a common objective.

[48]In Royal Bank of Scotland PLC v Etridge (No 2)

[2001] UKHL 44

[2002] 2 AC 773

, Lord Nicholls went back to first principles in analysing the modern law of undue influence. He expressed the founding principle developed by the courts of equity as a court of conscience as follows (at para 7):

“The law will investigate the manner in which the intention to enter into the transaction was secured: “how the intention was produced”, in the oft repeated words of Lord Eldon LC, from as long ago as 1807 (Huguenin v Baseley 14 Ves 273, 300). If the intention was produced by an unacceptable means, the law will not permit the transaction to stand. The means used is regarded as an exercise of improper or “undue” influence, and hence unacceptable, whenever the consent thus procured ought not fairly to be treated as the expression of a person’s free will. It is impossible to be more precise or definitive. The circumstances in which one person acquires influence over another, and the manner in which influence may be exercised, vary too widely to permit of any more specific criterion.” (Emphasis added)

[49]If two parties enter into an agreement which is voidable for undue influence, and the same parties later enter into a related agreement but without any additional undue influence, in my opinion Lord Nicholls’ guiding principle must apply to the question of the validity of the second agreement, whether or not the second agreement was technically intended to discharge the first agreement. The court must look at the full circumstances (which may vary infinitely from one case to another) in order to determine whether the second agreement ought fairly to be treated as the expression of free will of the person later seeking to challenge it.

[50]That the doctrine of undue influence may apply in such circumstances was established by the decision of this court in Yorkshire Bank PLC v Tinsley

[2004] EWCA Civ 816

[2004] 1 WLR 2380

. Gray J distinguished the decision on the facts. Mr George submitted that he was wrong to do so.

[51]Mrs Tinsley and her husband jointly executed two mortgages over their home as security for the husband’s current and future business debts. Mrs Tinsley acted under the undue influence of her husband, of which the bank had constructive knowledge. The bank’s security over the home was therefore unenforceable against her. Sometime later the marriage broke down. It was arranged that the matrimonial home would be sold and part of the proceeds used to buy a smaller property for Mrs Tinsley. The bank insisted on her signing a new mortgage in its favour over the new property as a condition of its agreement to discharge the mortgages on the matrimonial home. Mrs Tinsley did so. The court held that the bank’s mortgage over her new property was no more enforceable against her than its mortgages over the matrimonial home. The undue influence which affected the earlier had also affected the later.

[52]The leading judgment was given by Longmore LJ. Two passages from his judgment gave rise to debate in the present case as to their proper interpretation. The first was this, at para 18:

“A substitute contract will often come into existence in a different factual context from an earlier contract, and that factual context may show that the second contract is not a true substitute for the first. But if the factual situations are materially similar, and if it is a condition of the rescission or release of the original void or voidable bargain that the parties enter into a new bargain, that new bargain must be as open to attack as the old one.”

[53]It was suggested in argument that Longmore LJ was there seeking to lay down a principle of law that a contract which is “a true substitute” of an earlier contract voidable for undue influence will be automatically unenforceable, subject to laches or the like. That suggestion led to rather unsatisfactory attempts to formulate definitive tests of what would amount to “a true substitute”. That trail leads quickly back to the sort of problems already looked at when considering whether the second agreement involved a discharge or variation of the first.

[54]As I read the passage, Longmore LJ was not seeking to create such a test. Rather, he was drawing a distinction between the type of case which the court was considering (a case of the simple substitution of one mortgage for another at the insistence of the bank) and other possible cases where there might be material differences between the first and second agreements in their content or in their factual context. He went on in the next sentence to say that whether the new contract would be as open to attack as the old one would be partly a question of construction, implying that the court needs to look at what the parties have agreed as well as at the factual context in order to decide whether the second agreement was open to the same attack as the first.

[55]There was also some debate about para 19 of the judgment of Longmore LJ in which he said:

“If a mortgage or guarantee is voidable for undue influence as against a husband and against a bank, a replacement mortgage, even if undue influence is not operative at the time of such replacement, will itself be voidable, at any rate if the replacement mortgage is taken out as a condition of discharging an earlier voidable mortgage. This should be the case even if there is a new contract rather than a mere variation of an old contract.”

[56]The debate was about the meaning of the words “even if undue influence is not operative at the time of such replacement”.

[57]I would not read that as meaning “even if the original undue influence has ceased to be operative”, but rather as “even if there is no fresh undue influence”. I say that for two reasons. First, that reading is consistent with the judgments of the other two members of the court. Secondly, it would be inconsistent with the fundamental notion of undue influence to set aside an agreement which was not entered into under the continuing effect of undue influence but as a true exercise of free will.

[58]Peter Gibson LJ took as his starting point that the conscience of the bank had been affected during the subsistence of the prior mortgages because it had constructive knowledge of the equitable wrong done to Mrs Tinsley by her husband, and he asked rhetorically at para 32:

“Why should the bank’s conscience not continue to be affected when it had made its consent to the exchange transaction conditional on Mrs Tinsley giving the bank a mortgage of 113 London Road in substitution for the voidable mortgages? The bank insisted on the substitution and thereby it connected inseparably the new mortgage to the earlier mortgages.”

[59]Peter Gibson LJ also considered, at para 35, how a lender could protect himself against the risk of earlier undue influence affecting a later transaction. He said that he could see no reason why a lender should not be able to do so, in much the same way as the law requires lenders to do in order to avoid being on constructive notice of an equitable wrong to a wife, by taking steps to ensure that the wife received independent advice on the transaction into which she was to enter with the lender. Those observations are relevant in this case, because the appellant had independent legal advice at the time of the settlement agreement, although as a result of a combination of lapse of time, faulty memories and loss of documents it was not altogether clear what advice he received.

[60]Rix LJ in a short judgment emphasised, in para 39 that the new mortgage was inseparably connected with the previous mortgages and that there was nothing to cause the earlier undue influence to have ceased to be operative in connection with the new mortgage. As a result, the mere fact that there was no additional undue influence was not determinative.

[61]Gray J considered that the present case was very different on its facts from Yorkshire Bank plc v Tinsley, and he found that the settlement agreement was not procured by undue influence. He listed a number of considerations which led him to this conclusion. By the time of the settlement agreement, the relationship between the parties had ceased to be one of trust and confidence. The appellant had already effectively replaced the respondent as his manager by Mr Cavallo. He received independent legal advice from Ms Searle in relation to the settlement agreement. The factual context in which the settlement agreement came into existence was fundamentally different from the factual context of the management agreement. The settlement agreement terminated not only the management agreement but also the publishing agreement, the validity of which had not been questioned. The terms agreed were not unreasonable or oppressive from the appellant’s viewpoint. The continuing obligation to pay post-termination commission had to be taken in conjunction with other provisions of the agreement, which included significant concessions by the respondent.

[62]The concessions were indeed significant. The publishing agreement, as amended, entitled BSM to rights in up to five albums. At the date of the settlement agreement, only two albums had been released. BSM gave up its rights in respect of the further albums. This enabled the appellant to enter into an agreement in the next year with Perfect Songs, under which he received £2million as an advance. BSM’s term of exploitation would have lasted for 5 years after the fifth album. The period was greatly reduced. The respondent’s ongoing commission was limited to the first and second album notwithstanding that there was a substantial volume of other material recorded by the appellant prior to the settlement agreement. Further, the appellant’s share of the proceeds from the first and second albums was increased.

[63]In my judgment the judge was entitled to conclude that the settlement agreement was properly to be regarded as an exercise of the appellant’s free will and was therefore enforceable.

Laches and Acquiescence

[64]The judge dealt with this issue briefly, because it was academic on his conclusions as to the construction of the agreements and undue influence. Since I would uphold his conclusions, I will be similarly brief on this issue.

[65]The appellant’s claim to rescind the management agreement and the settlement agreement came very late. It was more than 15 years after the management agreement and more than 11 years after the settlement agreement. Much water had flowed under the bridge. Looking backwards, it is noteworthy that the respondent failed on the issue of undue influence in relation to the management agreement because of his inability to rebut a presumption. Part of the respondent’s difficulty related to unearthing the legal advice which the appellant had received as a result of the many years which had passed before the issue was raised. Looking forwards, the consequences of rescission so long after the contracts would be highly problematic. On the face of things, the appellant would be entitled to repayment of all sums under the management agreement and the settlement agreement. The court would have jurisdiction to make an allowance to the respondent for his labour and expenses on the appellant’s behalf, but the respondent would face the problem of having to provide a basis for their quantification many years after the event. The rescission of the settlement agreement would also, on its face, revive retrospectively the publishing agreement. However, under the settlement agreement BSM had forgone rights and re-assigned copyrights which had in turn been assigned to third parties.

[66]Mr George emphasised that there was no evidence that the appellant had actual knowledge of a right to rescind either the management agreement or the settlement agreement for undue influence before the point was finally raised. That was a relevant factor, but there is no hard and fast rule that ignorance of a legal right is a bar to laches or acquiescence. The authorities show that ultimately the court has to look at the whole of the circumstances and decide whether on balance it is just that the agreement should be set aside: see John v James

[1991] FSR 397

, 459 (Nicholls J) and Goldsworthy v Brickell

[1987] Ch 378

, 411-412 (Nourse LJ) and 416-417 (Parker LJ).

[67]The judge inferred that it was likely that Ms Searle would have advised the appellant about the possibility of raising undue influence at the time when the settlement agreement was being negotiated. Mr George submitted that this inference could not properly be drawn from the evidence. I do not think that it is necessary to examine the evidence in detail on that point, because that was not the sole factor which influenced the judge. Leaving that matter aside, I would have considered it surprising in any event if the judge had concluded that it was equitable to set aside the management agreement or the settlement agreement having regard to the very considerable passage of time and its effects.

[68]I would dismiss the appeal.

Lord Justice Wilson:

[69]I agree.

Lord Justice Ward:

[70]I also agree.