Recorded Picture Company Ltd v Alfama Films Production & Anor [2018] EWCA Civ 767

Case No A3/2017/3540[2018] EWCA Civ 767
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
(Ms Lesley Anderson QC, sitting as Deputy High Court Judge)
Venue Royal Courts of Justice, Strand, London, WC2A 2LLDate 13/04/2018
Before
LADY JUSTICE ARDENLADY JUSTICE ASPLIN
RECORDED PICTURE COMPANY LIMITED Appellant
Between
(1) ALFAMA FILMS PRODUCTIONRespondents(2) PAULO BRANCORespondent
(Richard Spearman QC and Christopher Langley instructed by Wiggin LLP) for Appellant(Andrew Scott instructed by Lee & Thompson LLP) for RespondentsHearing Hearing date: 11 th April 2018
Judgment
[1]This appeal is concerned with the proper construction of a Deed of Agreement dated 31 March 2016 (the “Deed”) made between the Appellant, Recorded Picture Company Limited, (“RPC”), the First Respondent, Alfama Films Production (“Alfama”) and the Second Respondent, Mr Paulo Branco (“Mr Branco”). By the Deed, Alfama and Mr Branco were granted an option to obtain a licence to develop, produce and exploit a film provisionally entitled “The Man Who Killed Don Quixote” (the “Film”). Where relevant, I shall refer to Alfama and Mr Branco together as the “Producers”.[2]RPC’s case is that the option expired by effluxion of time on 30 September 2016. The Producers, on the other hand, contend that the option term of six months was extended and continues in force. RPC’s Part 8 Claim in which it sought a declaration that the option term had expired was dismissed by the Order of Ms Lesley Anderson QC sitting as a Deputy Judge in the Chancery Division of the High Court, dated 8 December 2017. She decided that the option term had been extended by reason of a dispute between Alfama and the proposed director of the film, Mr Terry Gilliam, (the “Gilliam Dispute”) which led to litigation in France (the “French Litigation”) and which had the result of triggering the provisions of Clause 16 of the Deed. RPC appeals her decision.[3]The relevant factual background is set out at paragraphs [4] to [9] of Ms Anderson’s judgment (the “Judgment”) which I gratefully adopt and to which reference should be made. In summary, however:(i) Mr Gilliam has been involved with attempting to make the Film since 2000. Mr Gilliam played a key role in each attempt and was the intended director.(ii) RPC is the successor in title to the rights to the project having acquired them by virtue of an agreement dated 14 May 2009 under which it acquired the legal and beneficial ownership of an exclusive option to acquire all right, title and interest in the Film from HDI-Gerling Industrie Versicherung AG (respectively the “Gerling Option” and “Gerling”). Gerling was the former insurer of the previous producer of the Film, Hachette. It had insured Hachette against the risk of consequential pecuniary losses including those arising from the unavailability of the director, Mr Gilliam and had compensated Hachette for the total loss of the Film when it was abandoned in October 2000. Recital 6 to the Gerling Option records that RPC was approached by Gerling “for the purposes of acquiring the Film Rights . . . with a view to producing a new cinematographic feature film for which Terry Gilliam would be the director (hereinafter the Film II) . . .”(iii) Having entered into the Deed and paid the option fee of Euros 25,000, the Producers commenced pre-production work on the Film and entered into a written director’s agreement with Mr Gilliam dated 29 April 2016 (the “Director’s Agreement”) to which RPC was not a party;(iv) By August 2016 the relationship between the Producers and Mr Gilliam had broken down. By a letter of 30 August 2016, Mr Gilliam’s lawyers notified Alfama of alleged breaches of the Director’s Agreement including allegations that Alfama had failed to provide a financing and budget plan for the Film and had not paid Mr Gilliam for eight weeks. Counter allegations were subsequently made and the French Litigation ensued. Mr Gilliam has appealed the decision of the French court which was in Alfama’s favour and judgment is awaited;(v) On 30 September 2016, the final day before the term for exercising the Option expired, Alfama wrote to RPC informing it that pre-production of the Film had been suspended and stating that the Producers required an extension of the Option for a further six months “in order for Alfama Films to get the chance of producing the Picture and take advantage of the production work already preformed and the production expenditures already incurred . . .”; and(vi) RPC refused the extension and served a Notice of Expiration to the effect that the option term had expired on 1 October 2016. On 14 October 2016, RPC granted an option to a third party producer, Tornasol Films, on substantially the same terms.[4]In fact, the Film has now been completed, having been directed by Mr Gilliam and produced by Tornasol Films. It is now ready for distribution and the hearing of this appeal has been expedited in order to accommodate the terms of the distribution agreement.

The Deed

[5]The relevant terms of the Deed are considered and where necessary, set out at paragraphs [10] – [19] of the Judgment. For ease of reference, I shall set out those paragraphs here:
“10. The parties entered into the Agreement on 31st March 2016 with effect from 1st April 2016, which is expressed to be its “Effective Date”
. The recitals to the agreement set out its background and purpose in the following terms:
"WHEREAS: (A) Pursuant to an option and assignment agreement between Hachette Premier et Cie ('Hachette'), HDI-Gerling Industrie Versicherung AG ('Gerling') and the Grantor dated 14 May 2009 as amended by an amendment agreement dated 30 June 2011 and a further amendment agreement dated 18 September 2014 (together 'the Gerling Option') attached hereto at Exhibit 1, the Grantor is the legal and beneficial owner of an exclusive option to acquire all right, title and interest in and to a feature film project provisionally entitled 'The Man Who Killed Don Quixote' written by Tony Grisoni and to be directed by Terry Gilliam (the 'Work'); (B) The Company intends but does not undertake to produce a theatrical feature film provisionally entitled 'The Man Who Killed Don Quixote' based on the work (the 'Film'); (C) The Grantor has agreed to grant to the Company the sole and exclusive option to purchase a one picture licence to produce the Film upon and subject to the terms and conditions of this Deed. (D) If the Company exercises the Option (as defined below) in accordance with Clause 3 below, the Grantor will licence the Rights to the Company by executing the Licence (as defined below) in the form attached to this Deed as Exhibit 3." 11. Clause 1.2 of the Deed provides for various definitions, including the following key terms: "[1] 'Option' the exclusive and irrevocable option for the Company to acquire the Rights from the Grantor upon the terms of the Licence; [2] 'Licence' the agreement (the form of which is attached hereto as Exhibit 3) to be entered into between the Grantor and the Company which shall be effective upon the exercise of the Option by the Company pursuant to the terms of this Deed whereby the Grantor irrevocably licences to the Company the Rights in the Work for the Term; [3] 'Rights' - as defined in the Schedule to the Licence", i.e. "a licence to develop, produce and exploit (1) feature length film based on the Work (in whole or in part) which licence includes without limitation all rights of exploitation and communication of the Film (together with all allied and ancillary rights in and to the Film) in all media now known or hereafter devised in any and all languages in any part of the Territory for the Term EXCLUDING ONLY the Reserved Rights", (such reserved rights being defined in sub-clauses (i) to (iii) of Part 1 of the Schedule). [4] 'Film' the feature film which the Company proposes but does not undertake to produce based in whole or part on the Work and which is intended for theatrical release and/or television broadcast; [5] 'Work' has the meaning given in Recital (A). In addition, reference to the Work shall be deemed to include a reference to any part or parts of the Work and to the title, themes, plots, schemes, sequences, articles, incidents, formats, characters, character names and characterisations thereof and any other material contained therein or related". 12. The following are included within the Agreement and referred to in certain of its terms, but I do not propose to read them to any great extent. Firstly, a Short Form Option Agreement (Appendix 1); the Gerling Option (Exhibit 1); Recorded Picture Company Development Costs (Exhibit 2); importantly, the Licence (Exhibit 3) ("the draft Licence"). The draft Licence is stated to be entered into further to the Option Agreement and defines 'Rights' by reference to Part 1 of the Schedule to mean “a licence to develop, produce and exploit [the Film]”. By clause 6.1 of the draft Licence, clauses 7, 8 and 9 of the Option Agreement are deemed incorporated into and shall apply to the Licence. 13. Clause 2.1 of the Deed provides that, “Upon paying the Option Price, the Grantor irrevocably grants to the Company the Option”. The “Option Price” is defined under clause 1.2 to be €25,000 or €75,000, depending on when it was entered into. 14. Clause 3.1 of the deed provides for the exercise of the option as follows: "
The Company may exercise the Option by the earlier of (a) giving notice of exercise in writing to the Grantor at any time before the end of the Option Term or (b) upon commencement of principal photography of the Film." 15. Clauses 3.2, 3.3 and 3.5 provide for certain obligations or consequences upon the exercise of the ”Option”, including that Producers pay the “Purchase Price” upon the happening of which "the Licence and Short Form Licence shall be effective and binding between the parties thereto and the Company shall deliver a fully executed and dated original of the Licence to the Grantor". Further consideration is provided for under clause 4. 16. Clause 7.1 of the deed further provides for the obligations of RPC, including, materially as follows:
"7. OBLIGATIONS 7.1 The Grantor warrants, undertakes and agrees with the Company that: 7.1.1 the Grantor will not dispose of nor deal in any way with any of the Rights during the Option Term; 7.1.2 to the best of the Grantor's knowledge and belief, the Grantor is the exclusive owner of the Rights in the Work; 7.1.3 to the best of the Grantor's knowledge and belief, the Work does not infringe or violate any rights of any person including but not limited to any rights of copyright or moral rights or right of privacy or confidentiality, or any other common law or statutory rights of any kind, nor does it contain any malicious falsehood and is not defamatory, blasphemous or obscene, or in contempt of court or contravention of the Official Secrets legislation; 7.1.4 to the best of the Grantor's knowledge and belief, the Grantor has the right to enter into this Deed and the Licence and to grant the rights therein, and has not made, and will not during the Option Term make, any arrangement (whether written or oral) which might inhibit or restrict the Company's rights under this Deed or the Licence; 7.1.5 to the best of the Grantor's knowledge and belief, there is no present or prospective claim proceeding or litigation in respect of the Work or the Rights or the title to the Work". 17. In summary, the Deed provides for the grant by RPC, as Grantor, to Producers of an ”Option” to acquire ”Rights”, as defined under the Deed, in exchange for the “Option Price, 25,000 (€ YES?) in the relevant circumstance, with a ”Purchase Price (€250,000) and certain additional consideration, including contingent consideration, in respect of film profits to be payable upon exercise of the ”Option” pursuant to clause 4 of the Deed. 18. The Deed defines the "
Rights" as, in summary, to “develop”, “produce” and “exploit” a “Film” based on the ”Work” defined in the Deed as follows:
"a feature film project provisionally entitled 'The Man Who Killed Don Quixote' written by Tony Grisoni and to be directed by Terry Gilliam"
(emphasis added). I emphasise those words because they are of some significance in the case. 19. Pursuant to clause 3 of the Deed, the Producers were entitled to exercise the Option within the Option Term as defined in the Deed - i.e. by 1st October 2016. That, in turn, is subject to clause 16, which provides as follows for the extension of time periods under the Deed:
"16. FORCE MAJEURE If this Deed cannot be performed or its obligations fulfilled by reason of an Event of Force Majeure or if the Grantor is in default or in material breach of any of the warranties or other terms of this Deed or if there is any litigation or claims affecting the Work, the Rights or the Film, then any dates or time periods in this Deed shall be extended automatically until the Deed can be performed or its obligations fulfilled plus an additional thirty days provided that no extension of time following an Event of Force Majeure will exceed six (6) months unless any claim, action or proceeding remains active and unresolved for a period in excess of six (6) months."” "
WHEREAS: (A) Pursuant to an option and assignment agreement between Hachette Premier et Cie ('Hachette'), HDI-Gerling Industrie Versicherung AG ('Gerling') and the Grantor dated 14 May 2009 as amended by an amendment agreement dated 30 June 2011 and a further amendment agreement dated 18 September 2014 (together 'the Gerling Option') attached hereto at Exhibit 1, the Grantor is the legal and beneficial owner of an exclusive option to acquire all right, title and interest in and to a feature film project provisionally entitled 'The Man Who Killed Don Quixote' written by Tony Grisoni and to be directed by Terry Gilliam (the 'Work'); (B) The Company intends but does not undertake to produce a theatrical feature film provisionally entitled 'The Man Who Killed Don Quixote' based on the work (the 'Film'); (C) The Grantor has agreed to grant to the Company the sole and exclusive option to purchase a one picture licence to produce the Film upon and subject to the terms and conditions of this Deed. (D) If the Company exercises the Option (as defined below) in accordance with Clause 3 below, the Grantor will licence the Rights to the Company by executing the Licence (as defined below) in the form attached to this Deed as Exhibit 3." "[1] 'Option' the exclusive and irrevocable option for the Company to acquire the Rights from the Grantor upon the terms of the Licence; [2] 'Licence' the agreement (the form of which is attached hereto as Exhibit 3) to be entered into between the Grantor and the Company which shall be effective upon the exercise of the Option by the Company pursuant to the terms of this Deed whereby the Grantor irrevocably licences to the Company the Rights in the Work for the Term; [3] 'Rights' - as defined in the Schedule to the Licence", i.e. "a licence to develop, produce and exploit (1) feature length film based on the Work (in whole or in part) which licence includes without limitation all rights of exploitation and communication of the Film (together with all allied and ancillary rights in and to the Film) in all media now known or hereafter devised in any and all languages in any part of the Territory for the Term EXCLUDING ONLY the Reserved Rights", (such reserved rights being defined in sub-clauses (i) to (iii) of Part 1 of the Schedule). [4] 'Film' the feature film which the Company proposes but does not undertake to produce based in whole or part on the Work and which is intended for theatrical release and/or television broadcast; [5] 'Work' has the meaning given in Recital (A). In addition, reference to the Work shall be deemed to include a reference to any part or parts of the Work and to the title, themes, plots, schemes, sequences, articles, incidents, formats, characters, character names and characterisations thereof and any other material contained therein or related". "The Company may exercise the Option by the earlier of (a) giving notice of exercise in writing to the Grantor at any time before the end of the Option Term or (b) upon commencement of principal photography of the Film." "7. OBLIGATIONS 7.1 The Grantor warrants, undertakes and agrees with the Company that: 7.1.1 the Grantor will not dispose of nor deal in any way with any of the Rights during the Option Term; 7.1.2 to the best of the Grantor's knowledge and belief, the Grantor is the exclusive owner of the Rights in the Work; 7.1.3 to the best of the Grantor's knowledge and belief, the Work does not infringe or violate any rights of any person including but not limited to any rights of copyright or moral rights or right of privacy or confidentiality, or any other common law or statutory rights of any kind, nor does it contain any malicious falsehood and is not defamatory, blasphemous or obscene, or in contempt of court or contravention of the Official Secrets legislation; 7.1.4 to the best of the Grantor's knowledge and belief, the Grantor has the right to enter into this Deed and the Licence and to grant the rights therein, and has not made, and will not during the Option Term make, any arrangement (whether written or oral) which might inhibit or restrict the Company's rights under this Deed or the Licence; 7.1.5 to the best of the Grantor's knowledge and belief, there is no present or prospective claim proceeding or litigation in respect of the Work or the Rights or the title to the Work". "16. FORCE MAJEURE If this Deed cannot be performed or its obligations fulfilled by reason of an Event of Force Majeure or if the Grantor is in default or in material breach of any of the warranties or other terms of this Deed or if there is any litigation or claims affecting the Work, the Rights or the Film, then any dates or time periods in this Deed shall be extended automatically until the Deed can be performed or its obligations fulfilled plus an additional thirty days provided that no extension of time following an Event of Force Majeure will exceed six (6) months unless any claim, action or proceeding remains active and unresolved for a period in excess of six (6) months."”

The Judgment, the Grounds of Appeal and the Respondent’s Notice

[6]There is no challenge to the way in which the Judge analysed the applicable legal principles at paragraphs [28] and [29] of the Judgment and the same approach was adopted before us. At paragraph [28] the Judge set out the proposition articulated by Lord Clarke in Rainy Sky SA vKookmin Bank [2011] 1WLR 2900 at para 23 that “where the parties have used unambiguous language , the court must apply it” and went on at paragraph [30] to set out the now well known passages from Wood v Capita Insurance Services [2017] UKSC 24; [2017] 2 WLR 1095 per Lord Hodge at paras 10 – 13, as to the court’s task when construing a contract and the means by which it should go about it.[7]There is also no challenge to the Judge’s approach to the admissible factual matrix as set out at paragraphs [22] – [27] of the Judgment. At paragraph [23] the Judge referred to the initial failed production of the Film and the agreement with Gerling as the owner of the rights to it, which were the basis on which RPC acquired the “Rights” that are the subject matter of the proposed licence under the Deed. She noted that:
“[T]hese arrangements also proceed on the express basis that what was to be contemplated was a film to be directed by Mr Gilliam.”
The Judge went on to state that Mr Gilliam had played a central role in the efforts to get the Film into production and that it was unnecessary for her to determine Mr Gilliam’s precise involvement in the events immediately preceding the execution of the Deed. In any event, at paragraph [24], she went on as follows: “. . . There was before me material which was in the public domain, including an article that had appeared in The Independent on 17th November 2009 under the title "The Best Films Never Made" which described in some detail the problems which had beset Mr Gilliam's earlier attempts to make the Film and which amply evidence his close connection with the project. Also there is no doubt that an email which Mr Gilliam sent on 26th March 2016 to Peter Watson and others, including Mr Jeremy Thomas of RPC, is part of the admissible factual matrix. It stated: "Thanks for all your advice, warnings, threats, but the only way this film will get made this year is to leap into the madness with Paulo." (I interject that that is a reference to Mr Branco.) "So Peter, can you send him the option immediately?" This had followed a lunch at which the Film had been discussed and at which Mr Gilliam was present. So, on any basis, he was closely involved in the decision to go with RPC.” "Thanks for all your advice, warnings, threats, but the only way this film will get made this year is to leap into the madness with Paulo." (I interject that that is a reference to Mr Branco.) "So Peter, can you send him the option immediately?"[8]Having summarised the assertions and evidence about film industry practice upon which RPC sought to rely, the Judge concluded at paragraph [27] that it was of little assistance to her for a number of reasons and concluded that:
“. . . even if I was persuaded to have regard to evidence of film practice, it seems to me that the Producers are right to say that such practice would not necessarily be applicable in the circumstances of this case when, on any analysis, Mr Gilliam was inextricably connected with the project that was the subject matter of the Agreement.”
Mr Spearman QC, on behalf of RPC, did not seek to rely upon film industry practice before us.[9]RPC does dispute the Judge’s conclusions in relation to the proper construction of clause 16 of the Deed. There are two grounds of appeal which largely overlap. They are that the Judge erred in law: in concluding that the Gilliam Dispute prevented the performance of the Deed because it made it impossible for RPC to grant the “Rights” it had promised because the exercise of an option to produce a film without Mr Gilliam as director was not what the parties contracted for; and in holding that the Gilliam Dispute was “a claim or litigation affecting the Work, the Rights or the Film” for the purposes of clause 16 of the Deed.[10]The Producers seek to uphold the Judgment for the additional reason that the Judge’s construction of clause 16 of the Deed was correct for the further reason that unless the Gilliam Dispute fell within the scope of that clause, RPC would, on the exercise of the Option have immediately been in breach of Clause 7.1.5 of the Deed which was incorporated in the draft Licence by clause 6.1.[11]Both grounds of appeal and the point raised in the Respondent’s Notice, turn on a narrow point which is the significance of the phrase “to be directed by Terry Gilliam” in the definition of the “Work” contained in Recital (A) of the Deed and the way in which that definition, and the definition of “Rights” which makes reference to it, should be interpreted; and as a result, the way in which clause 16 operates.”[12]The Judge rejected RPC’s argument that the Deed could still have been performed and its obligations fulfilled notwithstanding the Gilliam Dispute at paragraph [42] of the Judgment and supported her conclusion with the matters set out at paragraphs [43] – [45]: “42. In my judgment, this adopts an artificially restrictive view of the clause for two reasons. First, it focuses largely on the obligations of Producers and not those of RPC itself. For the reasons developed further in relation to the second argument, it is necessary to examine what “Rights” were being granted by RPC. Secondly, whether the Deed can be performed or its obligations performed is not, in my view, confined only to literal impossibility.43. I also accept the submission that the Producers' construction is supported by consideration of the other trigger events under clause 16. As I have indicated already, the first trigger event occurs upon the happening of an “Event of Force Majeure”, which is defined under clause 1.1 of the deed as follows: "If this Deed cannot be performed or its obligations fulfilled on account of fire, accident, action of the elements, war, riot, civil disturbance, royal demise or sickness, national calamity, act of God, labour disputes or other causes beyond the control of the Company, or by reason of the death, illness or incapacity of the writer, director, key production personnel or any lead cast member."44. The parties thus contemplated that performance of the Deed might be interfered with in a variety of ways, including by “cause[s] beyond the control of [the Producers]”, or by reason of the unavailability by death, illness or incapacity of certain individuals who were important to the production. It would be consistent to construe the third trigger event under clause 16 as extending to any litigation claim which has an equivalent effect; for example, because it results in the unavailability of such individuals as a result of the stance they have taken in the relevant claim or litigation. That is so irrespective of whether it is a chain of title dispute.45. Similar points were made on behalf of the producers in relation to the second trigger event which arises upon, for example, RPC's breach of its warranties under clause 7.1. These include, under clause 7.1.5 warranties in relation to RPC's knowledge of claims, proceedings or litigations "in respect of the Work or the Rights or the title to the Work". A claim in respect of any of these matters could result in the breach of clause 7.1.5, which could, in turn, constitute trigger event 2 for the purpose of clause 16 depending on its impact. That suggests that the parties contemplated that claims otherwise in relation to the title to the “Work” could, in principle, impact performance of the Deed for the purposes of clause 16.” "If this Deed cannot be performed or its obligations fulfilled on account of fire, accident, action of the elements, war, riot, civil disturbance, royal demise or sickness, national calamity, act of God, labour disputes or other causes beyond the control of the Company, or by reason of the death, illness or incapacity of the writer, director, key production personnel or any lead cast member."[13]The Judge turned to the second argument that the Gilliam Dispute was not “a claim or litigation affecting” the “Work”, the “Rights” or the “Film” because the Deed was concerned solely with rights to the underlying project in the sense of the chain of title rather than any creative aspects, at paragraph [46]. She accepted at paragraph [47] that the definition of “Work” contained an ambiguity. Having summarised the opposing arguments that the words "and to be directed by Mr Gilliam" were merely descriptive of the underlying film project on the one hand and the proposition that "Rights" are defined by reference to “Work” and "Work" is defined as a film “to be directed by Terry Gilliam” and accordingly, that RPC would be unable to grant the “Rights” promised without Mr Gilliam as director, on the other, the Judge accepted that the terms of the Deed did not support a construction to the effect that RPC promised or guaranteed the services of Mr Gilliam: see paragraph [47].[14]However, at paragraph [48] the Judge rejected the submission made on behalf of RPC that “litigation or claims” in clause 16 should be construed to refer to chain of title disputes only and concluded that “"claims" suggests that a broad view is being taken of circumstances which might affect the making of the film and is not confined only to litigation.” In the same paragraph she concluded that the words used “contemplate[s] a wide range of situations being caught by clause 16”. The Judge went on as follows:
“49. Secondly, in my judgment, the Producers are also correct to point to the word "affecting" as carrying the widest meaning. Thirdly, it seems to me that it is not possible to characterise the words "to be directed by Terry Gilliam" as a mere descriptor. It is not necessary to go so far as to find a promise or guarantee of Mr Gilliam's involvement in this regard. The natural and ordinary meaning of the words is that RPC's performance - i.e. delivery of the Rights to produce the Film - is inextricably linked to the provision of rights to produce a film directed by Mr Gilliam. 50. Bearing in mind the factual matrix which I have described, including the long and chequered history of the project, I am unable to accept the submission of RPC that clause 16 should be construed narrowly. On the contrary, against the backdrop of this history, the parties contemplated that there might be litigation and claims and sought to allocate the risk of them through the mechanism of clause 16. 51. In my view, the Gilliam Dispute (and, for that matter, the French Proceedings) fall squarely within clause 16. That is because they made it impossible for RPC to grant the “Rights” that it had promised because the exercise of an option to produce a film without Mr Gilliam as director was not what the parties contracted for.”
[15]Finally, the Judge considered RPC’s argument that the Producers’ construction would entail, in effect, an indefinite extension of the Option Period at paragraph [54]. She held that RPC was incorrect and concluded that “[T]he Producers' construction would, in accordance with the terms of clause 16 of the Deed, effect an extension of the Option Term until “the Deed can be performed or its obligations fulfilled, plus an additional 30 days”. In the present case the longstop would thus be resolution of the French Proceedings.”

Discussion and conclusions

[16]First, it seems to me that the Judge was right to find at paragraph [49] that the phrase “to be directed by Terry Gilliam” which appears at the end of Recital(a) (A) in the definition of “Work” which is incorporated by reference in the definition of “Rights”, cannot be characterised as a mere descriptor. Despite the fact that RPC did not guarantee Mr Gilliam’s services, and the Producers did not undertake to produce the Film (see Recital(b) (B) to the Deed) it seems to me that the natural and ordinary meaning of the definition of “Work”, in the context of the Deed as a whole, read against the backdrop of the relevant factual matrix, is that it refers to a film project based upon a particular script and directed by Mr Gilliam. The definition encapsulates the product in relation to which the option is to be granted. As Mr Scott pointed out, the definition of “Work” forms the bedrock of both the definition of “Rights” and “Film” and it seems to me that it is of no significance that it is set out in a recital and then defined again at clause 1.2 of the Deed by reference to that recital.[17]In the light of the significance of the definition, I reject Mr Spearman’s submission that the phrase merely crept in from the Gerling Option, the full text of which was exhibited to the Deed. On the contrary, it seems to me that it makes sense that the definition of “Work” is consistent with Recital 6 to the Gerling Option which refers to the acquisition of “Film Rights” by RPC “with a view to producing a new cinematographic feature film for which Terry Gilliam would be the director.”[18]Such a construction is also consistent with the use of the future tense:
“to be directed” in “Work” which is to be contrasted with the historic or provisional nature of the remainder of the definition. The parties could have chosen other language such as “anticipated”
. If the phrase is also interpreted against the factual matrix explained in detail by the Judge, including the lengthy involvement of Mr Gilliam with the project, its chequered history and Mr Gilliam’s involvement with the grant of the option evidenced by the extract from his email set out at paragraph [24] of the Judgment, it seems to me that the natural and ordinary meaning is clear. Such an interpretation is also consistent with RPC’s interest in the success of the project evidenced by clause 4.1 of the Deed which provides for it to receive a share of the net profits of the Film.[19]It is also consistent with the inclusion of the equivalent of clause 16 in the draft licence itself, providing for an extension of the licence period in circumstances including “litigation or claims affecting the Work”. The inclusion of such a provision is in keeping with the wider definition of “Work” which is not restricted solely to the script of the Film and matters arising from the chain of title. It also highlights the significance which the parties attributed to the possibility of supervening litigation preventing performance of the Deed which is also consistent with a wider definition. This is all the more so in the light of the repetition of RPC’s warranties in the draft licence at clause 6.1. They include clause 7.1.5 of the Deed which is concerned with present or prospective claims, proceedings or litigation, not only in respect of the “Work” and the “Rights” but also “the title to the Work.” Accordingly, not only did the parties take account of the potential for supervening litigation not only in the option period but once the licence had been granted, but expressly distinguished between title disputes and other claims and proceedings in relation to the “Work”.[20]Despite, Mr Spearman’s submissions to the contrary, in my judgment, it also makes commercial common sense. The Producers were paying for an option to produce the Film in relation to which Mr Gilliam’s involvement was well known in the market place. As Mr Scott put it, they would not have been interested in paying the option fee if the Rights were only in relation to the script. Arguably, RPC would have been entitled to refuse to grant the licence to the Producers if they had intended to engage a different and perhaps unknown director. The risk that Mr Gilliam would withdraw his co-operation from the project was inherent in its very nature and in my judgment, given all the other matters to which I have referred, does not lead to the conclusion that “Work” and therefore, “Rights” should be construed narrowly to refer solely to copyright matters and the chain of title.[21]In my judgment, the Judge was also correct in her interpretation of clause 16 of the Deed. It is not disputed that the purpose of the provision is to allocate risk in relation to supervening events which impact on the performance of the obligations under the Deed. Nor is it disputed that there are three distinct events which trigger the provision for extension of time under clause 16 and that it is the third which is potentially engaged in this case. The three events or circumstances are: circumstances in which the Deed or its obligations cannot be fulfilled by reason of an “Event of Force Majeure”; if RPC is in default or material breach of any of the warranties or other terms of the Deed; or if there is any litigation or claims affecting the Work, the Rights or the Film.[22]I agree with the Judge’s conclusion at paragraph [48] that there is no support in the wording of clause 16 of the Deed or the Deed as a whole for limiting the ordinary and natural meaning of “litigation or claims” to disputes in relation to the chain of title to the Rights. The words themselves are very broad and all the more so when read with “affecting” the “Work”, the “Rights” or the “Film” which is also a broad concept. I can see no reason why the ordinary and natural meaning of the phrase should not include the Gilliam Dispute, particularly when the phrase “litigation or claims” is interpreted in the light of the relevant factual matrix. Although it arises out of the Director’s Agreement to which RPC was not a party, it affects the Work and the Rights because they are concerned with the production and development of the Film “to be directed by Mr Gilliam.” There is nothing unworkable about such a construction even if as Mr Spearman suggested, a claim might prove ultimately to be unfounded or the litigation lengthy.[23]As the Judge pointed out at paragraph [44] of the Judgment, a broad interpretation is also consistent with the nature of the first trigger event, which is an “Event of Force Majeure”. Such an event results in an extension of time in circumstances including the death, illness or incapacity of key personnel including the director. It is consistent to construe the third trigger event of “litigation or claims affecting the Work” as extending to litigation which has a similar effect. It is also consistent with the second trigger event which occurs when RPC is “in default or in material breach of any of the warranties or other terms of [the] Deed.” The warranty contained in clause 7.1.5 refers to knowledge of claims, proceedings or litigation “in respect of the Work, or the Rights or the title to the Work.” It includes expressly, therefore, claims in respect of the Work which are not related to the title to the Work. Nevertheless, they have the effect of extending time under clause 16 “until the Deed can be performed or its [RPC’s] obligation fulfilled plus an additional thirty days”. It seems to me that this is support not only for construing “litigation or claims” in the third trigger event under clause 16 widely to include matters other than title to the Work but also for an interpretation of the definition of “Work” and accordingly, “Rights” themselves which is wider than matters of title alone.[24]I agree with Mr Scott that there is nothing uncommercial about such a construction. It seems to me that clause 16 of the Deed is the means by which risk was allocated between the parties including the risk that the co-operation of Mr Gilliam could not be obtained or maintained. The Producers were to have the six month option period to commence pre-production work including obtaining the co-operation of Mr Gilliam and that period was to be extended under the terms of clause 16 if any claims or litigation affecting the Work, the Rights or the Film, such as the Gilliam Dispute arose. In such circumstances, the Producers are afforded extra time in which to decide whether to exercise the Option.[25]As a result of the Gilliam Dispute and the French Litigation, therefore, the option period was extended under Clause 16. This is consistent with the point raised in the Respondent’s Notice that if the Option were exercised during the currency of the Gilliam Dispute, RPC would immediately have been in breach of the warranty contained in clause 7.1.5 as repeated in the Licence because to its knowledge there would be “litigation in respect of the Work or the Rights . . .”.[26]My conclusion in relation to the proper construction of “Work”, “Rights” and clause 16 is not affected by the inclusion of the death of the director as one of the “Events of Force Majeure” which would also trigger an extension of time under clause 16. Mr Spearman submits that this provision is consistent with his construction of “Work” and “Rights”, namely that they are not tied to Mr Gilliam in any way and that it only makes sense if the Film can be directed by anyone. In their written submissions, Mr Spearman and Mr Langley state that as the “Rights” could be granted irrespective of the death, illness or incapacity of the director and others, the reference to the “Events of Force Majeure” in clause 16 is probably, in practice, redundant. It seems to me that great care should be taken before reaching such a conclusion. The Court should seek to give meaning to all the relevant provisions and to construe them in the light of the document as a whole. It seems to me that there is no reason to do otherwise. They also submit that clause 16 only applies to events which are not permanent.[27]Mr Scott submits that on his construction, if Mr Gilliam were to become incapacitated or to die, either the Deed would be frustrated at common law or the contractual mechanism contained in clause 16 would apply to extend time in order to determine whether, for example, Mr Gilliam might recover from his incapacity or in the case of death or incapacity that his obligations had been substantially performed. Such an extension of time would be subject to the longstop of six months which applies in the case of an “Event of Force Majeure” unless any claim, action proceedings (relating to such an event) remains active or unresolved.[28]First, in this regard, it seems to me that there is no reason or basis upon which to imply the limitation in relation to permanence in clause 16 for which Mr Spearman contends. There is no indication that a distinction is to be made between the permanent and impermanent states of affairs. In fact, the reference to the death of the director in the definition of “Events of Force Majeure” is some indicator that the clause is intended to apply where there is permanence. In any event, in the light of the express long stop in relation to “Events of Force Majeure”, it seems to me that there is neither the need nor the room for such an implication or interpretation.[29]Secondly, it seems to me that if Mr Gilliam were to die, the mechanism in clause 16 would operate, nevertheless, to extend the option period for six months. During that period it would be possible to determine whether the Film and hence the directing by Mr Gilliam was substantially complete or whether the contract had been frustrated at common law because it was not possible to grant the licence in relation to the “Rights”. In my judgment, therefore, the inclusion of the death of the director in the definition of the “Event of Force Majeure” does not militate against the conclusion I have already reached in relation to the proper interpretation of “Work” and “Rights”.[30]Thirdly, in any event, in this case, the French Litigation is not permanent and so the issue does not arise. Further, it seems to me that RPC cannot rely upon the fact that the Film has now been made under Mr Gilliam’s direction with other producers, to seek to circumvent the operation of clause 16 which took effect when the Gilliam Dispute arose before the end of the initial six month option period, even though it seems that the Producers did not appreciate that it had automatic effect.[31]For all the reasons set out above, I would dismiss the appeal.[32]I agree.