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Case No: FC3/98/7327/A3
CHANI/98/0946/A3
CHANI/99/0496/A3
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT
CHANCERY DIVISION
Mr. Justice Lloyd
Royal Courts of Justice
Strand, London, WC2A 2LL
Thursday 2 March 2000
B e f o r e:
LORD JUSTICE PETER GIBSON
LORD JUSTICE SCHIEMANN
and
MR. JUSTICE WILSON
|
MEDCALF
|
Respondent
|
|
-
and -
|
|
|
MARDELL
AND OTHERS
|
Appellants
|
(Transcript of the Handed Down Judgment of
Smith Bernal Reporting Limited, 180 Fleet Street
London EC4A 2HD
Tel No: 0171 421 4040, Fax No: 0171 831 8838
Official Shorthand Writers to the Court)
Mr. Romie Tager Q.C. and Mr. David Matthias (instructed by Messrs.
Camillins of London for the Respondent)
Mr. Bernard Weatherill Q.C. and Miss Josephine Hayes (instructed by
Messrs. Kay & Co. of London for the Appellants)
Judgment
As Approved by the Court
Crown Copyright ©
Peter Gibson L.J.:
1. This is the judgment of the court to which all members of the court have
contributed.
2. One of the longest running game shows on television is "the Big Break",
which has been broadcast by the BBC since 1991. It is a snooker-based quiz
game, played by three teams each consisting of one contestant from the general
public, who answers quiz questions, and one professional snooker player, who
has opportunities to display his snooker skills. The credits for the programme
have said that it was devised by Terry Mardell and Mike Kemp. They are the
First and Second Defendants respectively. In a judgment delivered on 21 May
1998 Lloyd J. held that the Claimant, Roger Medcalf, was a partner with Mr.
Mardell and Mr. Kemp to develop and exploit commercially proposals for the game
show. By his order of 29 June 1998 giving effect to his judgment, the judge
declared that the partnership continued to subsist, that the partners were
joint owners of the copyright and all other intellectual property rights in the
format for the Big Break show, that the legal title to that copyright and those
rights was held by Mr. Mardell and the Fourth Defendant, the Terry Mardell
Organisation Ltd. ("TMO"), on trust for the partners and that the partners were
entitled to equal shares of all income net of relevant expenses incurred by or
on behalf of the partnership. The judge ordered Mr. Mardell and TMO to assign
that legal title to Mr. Medcalf, Mr. Mardell and Mr. Kemp, he directed an
account of the net profits of the partnership arising or received since 20
January 1991 and he ordered Mr. Mardell, Mr. Kemp and TMO to pay Mr. Medcalf's
costs of the action.
3. Mr. Mardell and TMO, who were represented by junior counsel before the
judge, now appeal. Mr. Kemp, who appeared in person, does not appeal. The
Third Defendants, the BBC and Mr. Medcalf had come to an agreement the terms of
which were contained in a Tomlin Order, and so the BBC played no part at the
trial before the judge.
The Facts
4. Mr. Kemp has been a comedian and actor, but in addition is a writer and
has worked on a number of television projects including game shows. He is a
keen snooker player and in about 1984 he had an idea for a snooker-related
television quiz game show. He mentioned his idea to a number of friends,
including Mr. Mardell, but the only person who was interested then and who even
put a similar idea to him was Mr. Medcalf in the early part of 1987. Mr.
Medcalf had been a friend of Mr. Kemp for two or three years. They met on 22
April 1987 and thereafter there were a number of meetings when the two men
discussed their ideas together. They produced a written format for a game
which they called "the Big Break" and that format went through a number of
versions.
5. Mr. Kemp then proposed that they should try to get Mr. Mardell interested.
Mr. Mardell had also been a comedian and in addition he devised a successful
television game show connected with bingo, which was called "Bob's Full House".
He became a minority shareholder and director of TMO (then called Createl Ltd.)
with David Moore and John Lyons. In about 1989 Mr. Moore left TMO and Mr.
Mardell's shareholding increased to 60 per cent of the issued share capital.
He also then became the controller of 90 per cent of the voting rights in TMO.
It changed its name at that time to its present name. Mr. Mardell's
involvement was sought by Mr. Kemp because Mr. Mardell was expert in relation
to quiz games and because he had good connections.
6. Mr. Mardell agreed to meet Mr. Kemp and Mr. Medcalf at TMO's office on 26
May 1987 to discuss the idea for the Big Break. They showed him the latest
format. Mr. Mardell's immediate response was that it was far too complicated,
would take far too long and would cost far too much. But he said that he was
willing to help the two of them. They agreed to meet at Mr. Kemp's flat on 29
May. Mr. Mardell told them that their discussions would not preclude him or
his company from pursuing any other snooker-based idea if some other
opportunity came up.
7. At their meeting on 29 May, the three men discussed the idea further. All
of them contributed various suggestions. Mr. Mardell took the lead, as the
judge was to find, "naturally enough from his experience and his forceful
character and temperament". That meeting produced a further version of the
format. Mr. Mardell wrote various passages to be included in the revised
format. On one page Mr. Mardell wrote the copyright sign, and below that the
word "Copyright" with three dashes after it. At the end of the meeting Mr.
Kemp was left to retype the format. They felt that they had worked out
something which could work practically.
8. Without prompting from either Mr. Medcalf or Mr. Mardell, after that
meeting Mr. Kemp produced a form of agreement ("the Draft Agreement") which he
intended would be signed by the three of them. It is in this form:
"AGREEMENT
Friday 29th May, 1987
REGARDING GAME SHOW PROVISIONALLY TITLED
THE BIG BREAK
We, the undersigned, commonly agree to share without prejudice or preference,
all profits and/or income accruing from the sale, lease or performance of the
aforementioned game show. The game was originally devised by Roger Medcalf and
Mike Kemp, with the subsequent assistance and added concepts of Terry Mardell.
These three being considered to be originators and sole owners in equal share
of the said game show.
All rights and copyrights of the said game show to be reserved.
Copyright as of this date to be applied for."
Underneath were typed "Signed" and the names of the three intended parties to
the draft Agreement.
9. The Draft Agreement was not produced to the parties for signature on 29
May. Early in June Mr. Kemp typed out the latest version of the format agreed
on 29 May. He put at the bottom of each page: "Copyright, Mardell, Medcalf
and Kemp, June `87". Mr. Kemp's typing on his own machine did not produce an
impressive document, and so TMO's secretary retyped it substantially as it had
appeared in the format typed by Mr. Kemp but looking more professional. We
shall call the retyped version "the June Format". Although it appears that Mr.
Kemp, and not Mr. Mardell, caused the format typed by Mr. Kemp to be retyped,
it was Mr. Mardell who sent the June Format, or gave it, to the BBC, as the
judge found, in the hope of interesting the BBC in it, and he saw the retyped
format and must have seen Mr. Medcalf's name on it at the bottom of each page.
In Mr. Mardell's own words in para. 40 of his Witness Statement:
"I showed the BBC the worked out idea because I hoped they would allow us to
rehearse it in their studios and then make a pilot, with an eventual intention
of creating a new show, just like they had with Bob's Full House."
10. On 9 June Mr. Medcalf, Mr. Mardell and Mr. Kemp took the June Format to
the King's Cross Snooker Club to try out the idea in practice. After trying it
out the three men went back to Mr. Kemp's flat. Mr. Kemp brought out the Draft
Agreement and showed it to the others. Mr. Kemp and Mr. Medcalf signed it, but
Mr. Mardell refused to sign. He said that he could not sign because of TMO's
involvement. He said that his solicitor ought to be used to draw up any
agreement. But the judge found that Mr. Mardell did not deny the propositions
recorded in the document.
11. On 15 June the three men met again to work out how the game could be
improved with a view to a presentation to the BBC on 26 June at King's Cross.
On 26 June the three men attended that presentation to Mr. Moir and Mr. Bishop
from the BBC. They all had copies of the June Format. The BBC representatives
were sufficiently interested to agree to have rehearsals at the BBC's Acton
studios in October 1987.
12. Mr. Kemp about this time took extraordinary steps to preserve 18 pages of
documents relating to the idea for the Big Break. The judge found that the
reason for doing so was that he mistrusted Mr. Mardell. It was known to Mr.
Kemp that Mr. Mardell's brother had claimed that he had been part of the
original authorship process of "Bob's Full House" and had been wrongly excluded
by TMO and its then directors including Mr. Mardell from any entitlement to the
proceeds of that game. The brother had brought proceedings against Mr. Mardell
and Mr. Lyons. But the proceedings were settled in the course of the trial.
Mr. Kemp wanted to record clearly the product of what the three men had worked
up in case some dispute later arose as to what had happened. These documents
were the Medcalf/Kemp format of May 1987, the format typed by Mr. Kemp
following the meeting of 29 May, the June Format, Mr. Kemp's copy of the Draft
Agreement signed by Mr. Kemp and Mr. Medcalf, a page of notes made by Mr. Kemp
at the meeting of 29 May and typed up by him, and 5 pages of drawings. A copy
was made of each of those documents. A set of copies (excluding the manuscript
notes) was deposited in Mr. Kemp's bank. For this purpose Mr. Kemp was
accompanied by Mr. Medcalf. The documents were placed in an envelope which was
sealed, Mr. Kemp and Mr. Medcalf signed each corner and then the envelope was
further sealed with sellotape which covered the signatures.
13. In October 1987 Mr. Medcalf, Mr. Kemp and Mr. Mardell attended some
"run-throughs" at the BBC's Acton studios. The BBC was not very impressed but
in December 1987 encouraged Mr. Mardell to produce a better version. In April
1988 a new version of the format was prepared by Mr. Mardell. It was marked
"Copyright Createl Ltd." But neither Mr. Kemp nor Mr. Medcalf knew anything of
this. Mr. Kemp was shown the document a year later.
14. In May 1988 Mr. Kemp and Mr. Medcalf fell out for reasons which had
nothing to do with this case. Between then and September 1989 they were not in
touch. Mr. Medcalf tried to speak to Mr. Mardell from time to time but when he
was able to get through he was told that there was no news from the BBC. On 11
April 1989 the BBC wrote to Mr. Mardell confirming that it wanted to commission
a pilot of the game show.
15. As a result Mr. Mardell wrote a letter dated "May 1989" to Mr. Kemp. This
was headed "The Big Break" and appears to have been drawn professionally. It
contained the following terms:
"1 You and I have co-operated together in the creation and refinement of the
format which incorporates ideas which have been supplied by us individually or
jointly in discussion between us, or by refining each other's ideas.
Therefore, it is agreed that the entire format is a joint work and that our
individual contributions cannot in any way be separated out.
2 Accordingly, the copyright in the format is owned and will remain owned
jointly by the two of us as tenants in common in undivided equal shares."
16. Mr. Mardell told Mr. Kemp that it was possible that he would wish to carry
out the exploitation and marketing of the format through TMO or another company
which would retain from the receipts certain expenses and a fee or commission
to cover its expenses and overheads. He said that all income of whatsoever
nature arising from the exploitation and marketing of the format and the series
(including board games or books) was to be divided equally as would any
reasonable and proper expenses. Mr. Kemp was asked to countersign a copy of
the letter and initial a copy of the format to record his agreement. Mr.
Mardell said that TMO was entitled to the copyright in his contribution to the
format and so the letter was sealed by TMO to confirm its status as a
contracting party and its willingness to be bound.
17. Mr. Kemp countersigned the copy letter as requested. We will call the
agreement thereby concluded "the 1989 Agreement". The format was the document
prepared by Mr. Mardell in April 1988 which Mr. Kemp had not previously seen,
and which represented a development of what had been discussed in 1987.
18. Mr. Kemp and Mr. Mardell both took the position that Mr. Medcalf had
disappeared in 1988 and 1989 and had therefore or thereby abandoned the
project. The judge found that that was not so, and that neither Mr. Kemp nor
Mr. Mardell had sought to contact Mr. Medcalf.
19. In September 1989 there was a pilot trial of the Big Break at the BBC's
studios. At about that time Mr. Medcalf and Mr. Kemp met again. It was a
friendly meeting. Mr. Kemp told Mr. Medcalf that the BBC was going to start
production of the game soon and he promised to tell Mr. Medcalf when filming
was to start. In October Mr. Kemp told Mr. Medcalf that there had been another
postponement. Early in 1990 Mr. Medcalf went to see Mr. Mardell at his office.
Mr. Mardell told Mr. Medcalf that he had signed a contract with Mr. Kemp, which
was true, and with the BBC, which was not true, and that Mr. Medcalf was
excluded from the project, because they had been unable to get in touch with
Mr. Medcalf at the time that they were going to sign with the BBC. Mr. Mardell
said that the concept and name of the show had been completely changed and that
it was an entirely new show. Mr. Medcalf expressed his disappointment.
20. At the end of 1990 Mr. Mardell developed the format further, producing
what is marked "Final BBC Version - December 1990. Copyright TMO/Kemp". It is
the blueprint for the first series filmed by the BBC in February 1991 and shown
from April 1991 pursuant to an agreement dated 11 January 1991 and made between
the BBC and TMO. Mr. Kemp was not given a copy. Since June 1987 he had played
no part in the development of the format any more than had Mr. Medcalf.
21. Mr. Medcalf and Mr. Kemp met twice in early 1991. On the first occasion
in March Mr. Kemp said that they had not been able to contact Mr. Medcalf when
the changes were being made to the game. He indicated that he would give Mr.
Medcalf some modest compensation. Mr. Medcalf took his version of events to
the Daily Mirror which published an article about it. The second occasion when
Mr. Medcalf and Mr. Kemp met followed that publication. It was entirely
unproductive for Mr. Medcalf.
22. On 22 July 1993 Mr. Medcalf issued the writ in these proceedings. His
claim was based on an alleged infringement of copyright and breach of
confidence by Mr. Mardell, Mr. Kemp, the BBC and, following amendment, TMO.
The action originally came on for trial before Lightman J., as did a separate
action commenced in 1995 by Mr. Scally against Mr. Mardell and TMO in which Mr.
Scally claimed to be the true author of the idea for the Big Break. He claimed
that he sought to interest LWT in the idea in 1986, but it was rejected, and
that the BBC's programme, the Big Break, reproduced his basic format. He
further claimed that Mr. Mardell, as the purported creator of the Big Break,
and TMO, as its producer for the BBC, must have obtained the information given
by him in confidence to LWT from LWT. He alleged that employees or directors
of LWT were directors of TMO. He sought a declaration that he was the true
deviser of the idea behind the Big Break and claimed damages for breach of
confidence or an account of profits.
23. Mr. Medcalf's Statement of Claim had already been amended twice prior to
the commencement of the trial on 13 January 1997 before Lightman J. On the
third day, junior counsel appearing for Mr. Medcalf applied for leave to amend
the Statement of Claim yet further. The judge in his judgment on 16 January
referred to the pleaded cause of action as being breach of confidence and
infringement of copyright, and said:
"It seemed to me from the commencement of the action that to the highest
degree there was artificiality in Mr. Medcalf maintaining the action and the
action being fought on the pleaded basis. The real issue must be, not whether
the developed ideas and format of the game show were confidential information
or the subject of copyright, or whether there was any wrongdoing in granting
the licences (which it is common ground were granted at full market price): it
is quite obvious, though unstated in the Statement of Claim, that the whole
thrust of the enterprise and the efforts of all parties was to secure a
marketable commodity and to market it to the BBC or some other television
company for its full market value. The real question must be the terms
(express or implied) upon which the parties collaborated in developing the idea
and format and whether, having regard to these terms TMO, Mr. Mardell and Mr.
Kemp were free, after making further adaptions on their own, to deal with the
game show exclusively for their own benefit, or whether Mr. Medcalf should have
an entitlement to some share of the licence fees received.
I accordingly suggested to Mr. Matthias, counsel for Mr. Medcalf, that he
consider amending his Statement of Claim by pleading the arrangements made with
the defendants for developing and exploiting the idea and format for the game
show for their mutual benefit and for his sharing the subsequent fruits of this
endeavour ...."
24. Lightman J. acknowledged that he found "exceptionally difficult" the
exercise of his discretion whether or not to grant leave. But he granted leave
on terms which included that Mr. Medcalf should pay the costs of the parties to
his action, as well as of the parties to Mr. Scally's action, thrown away by
the adjournment, including the costs of the trial thus far, and the costs
occasioned by the amendment, all such costs to be set off and charged against
any sums awarded to Mr. Medcalf, whether by way of damages or costs. The judge
adjourned the trials of both actions.
25. The Statement of Claim was then amended for the third time (and, later in
1997, for the fourth time) to allege a partnership between Mr. Medcalf, Mr.
Mardell and Mr. Kemp, based on an oral agreement in May 1987 to collaborate in
the further development of the snooker-based game show with a view to profiting
therefrom, it being an express or implied term of that agreement that the three
would share equally in any profits howsoever derived from their further
development of the game show. It was further pleaded that the three became
equal partners for the purpose of the joint venture for which the partnership
was entered into, namely the further development of the snooker based game show
with a view to profiting therefrom, that their agreement or partnership was
recorded in writing in the Draft Agreement and that pursuant to the oral
agreement or partnership the three developed the format originally produced by
Mr. Medcalf and Mr. Kemp. Further and better particulars of these amendments
were sought by Mr. Kemp. The particulars given on 8 September 1997 are
singularly unhelpful. Of the oral agreement it was averred that who said what
to whom was a matter of evidence.
26. The two actions came on for trial for the second time on 11 May 1998, but
this time before Lloyd J. On 18 May Mr. Scally discontinued his action. That
morning Mr. Tager Q.C., appearing with Mr. Matthias for Mr. Medcalf, told the
court that leave to amend the pleadings further - namely, for the fifth time -
would be sought. By then Mr. Medcalf and Mr. Mardell had given evidence. We
are told by Mr. Tager that a draft of the proposed amendment was made available
to counsel then appearing for Mr. Mardell and TMO, that morning. But the
application for leave was not made until the next day after Mr. Kemp had given
evidence. Counsel for Mr. Mardell and TMO made submissions, objecting to the
late amendments. He completed his submissions on 20 May. But the judge
allowed the amendments for reasons which he then gave in a separate judgment.
Whilst a number of amendments were allowed, the only significant amendment and
the only matter to which the judge adverted in his 5-page judgment was an
amendment to plead that the agreement or partnership between Mr. Medcalf, Mr.
Mardell and Mr. Kemp was to be implied from the parties' conduct in and after
May 1987 by collaborating and working together to further develop Mr. Medcalf's
and Mr. Kemp's snooker-based game show with a view to exploiting the same
commercially. The judge made no special order as to costs when allowing the
amendments. No amendments to the Defence of Mr. Mardell, Mr. Kemp or TMO or
further discovery were necessitated by the late amendments to Mr. Medcalf's
pleadings.
27. The trial concluded on 20 May. The judge delivered his judgment the next
day. He found that at the end of the meeting on 29 May 1987 Mr. Medcalf, Mr.
Mardell and Mr. Kemp were pursuing the game show project for their joint
benefit with a view to realising the idea for profit and that the Draft
Agreement did no more than embody in simple terms the existing understanding
between the three men. He accepted that by 29 May 1987 and continuing
thereafter the three were carrying on business in common with a view of profit,
that it was not just a question of joint ownership of an asset but a joint
collaboration, a dynamic process with a view to developing the idea of a
snooker-based television quiz game show and to profit from it. The judge
called it "an oral partnership based on an agreement by conduct on the 29th
May." The judge said that as a partnership for an adventure or undertaking it
could not be terminated simply by notice and did not terminate when at the end
of 1987 the BBC did not accept the existing format but encouraged Mr. Mardell
to develop the idea further. The judge found that the eventual work, though
better and with many material differences and improvements, was not an entirely
new project but was built on the earlier work.
28. The judge then said that, on the basis that the partnership had not come
to an end, the proceeds of the exploitation of the game had to be accounted for
to the partners including Mr. Medcalf. He said of TMO that it was in no better
position than Mr. Mardell would have been on his own. It had notice of the
partners' rights and obligations and it had not been sought to prove that it
gave value without notice. He therefore held that, having received the
profits, it was accountable to Mr. Medcalf and to the other partners. But he
added:
"Of course it would be entitled to credit for its expenditure."
29. The judge then turned to the claim of Mr. Medcalf in copyright. He
accepted that each version of the format in turn was a literary work in which
copyright subsisted, the first being that of Mr. Medcalf and Mr. Kemp and the
latest being that of Mr. Mardell and/or TMO. But he held that the copyrights
were assets of the partnership and thus held by Mr. Mardell and TMO or either
of them on trust for the partnership. As for the claim that the information
relating to the idea for the game show was confidential information, the judge
held that the information of Mr. Medcalf and Mr. Kemp in May 1987 was imparted
to Mr. Mardell in confidence, that each version of the format was confidential
and after 29 May confidential to the partnership, that the successive
disclosures to the BBC were in confidence and authorised by Mr. Medcalf but
that the agreement in January 1991 was not authorised by Mr. Medcalf. The
judge expressed the view obiter that it might be that Mr. Medcalf could have
succeeded on his original pleading on the confidence claim. But his conclusion
on the partnership claim rendered that unnecessary. He accordingly made the
orders which we summarised at the start of this judgment.
30. The judge was asked to make, and made, an order for an interim payment to
Mr. Medcalf of £100,000. Mr. Tager also asked for an order for costs
against the three unsuccessful defendants. Counsel for Mr. Mardell and TMO in
response invited the court to order that the defendants should pay Mr.
Medcalf's costs only for the period after the hearing before Lightman J. and,
if Lloyd J. was against him on that, he asked that the defendants retain the
benefit of any previous costs orders in favour of the defendants. The judge in
a short judgment described Mr. Mardell's and TMO's primary submission on costs
as being on the basis that Mr. Medcalf had in effect won only on the claims
added after the hearing before Lightman J. The judge did not accept that and
ordered that Mr. Mardell, Mr. Kemp and TMO pay Mr. Medcalf's costs of the
action subject to any costs orders in their favour. Counsel for Mr. Mardell
and TMO also asked that any costs incurred as a result of the trial being
lengthened through the Scally action being heard should not fall on the
defendants' shoulders. But the judge rejected that.
31. On 29 June 1998 the judge heard an application to settle the form of the
order giving effect to his judgment of 21 May. One point arose on the costs of
the Scally action which, although awarded to Mr. Mardell and TMO, were thought
to be irrecoverable from Mr. Scally. The judge rejected an argument on behalf
of Mr. Mardell and TMO that those costs should be deductible from the
partnership profits. In the order settled by the judge the relevant expenses
to be deducted from the profits divisible between the partners were expressed
to exclude the costs incurred by any party in relation to the Scally action.
32. Mr. Mardell and TMO on 22 July 1998 served a Notice of Appeal. This is
the main appeal which we have to determine. The Notice of Appeal was a
substantial document running to 17 pages and containing 39 grounds of appeal.
Mr. Mardell and TMO then applied to the judge for a stay of the order for an
interim payment and the order for the assignment of the copyright and other
rights to the partners. That application was refused, but the judge ordered
payment of the £100,000 (in the events which happened) into court. Mr.
Mardell and TMO then presented an application for a stay to this court. It was
heard on 2 November 1998 by Morritt L.J. He in effect dismissed it. Among the
matters considered by him were the prospects of success on the substantive
appeal which he assessed as being substantially less than even.
33. In the meantime an account, described by Morritt L.J. as being on its face
extremely confusing, was served by Mr. Mardell and TMO on 25 September 1998.
The Master ordered a revised account to be served by 2 October. On 9 October a
revised account was served. Mr. Medcalf raised objections to it and Master
Bragge on 30 November referred the issues arising from the account to the
judge. This matter came before the judge on 1 and 2 March 1999. In a detailed
reserved judgment on 31 March the judge referred to the account which had been
produced. This showed that although the cumulative gross income from the Big
Break up to 21 May 1998 amounted to £736,611 Mr. Mardell and TMO were
claiming that the venture at that stage had made a loss of £42,793. The
judge said that that was all the more startling in that Mr. Kemp had been paid
£214,000 pursuant to the 1989 Agreement, under which he was entitled to
50% of the net proceeds. That entitlement had later been varied pursuant to a
suggestion made by Mr. Mardell's accountant so that Mr. Kemp became entitled to
40% of the gross proceeds. In the account TMO was shown as entitled to 25% of
"positive net revenue" amounting to £31,490, to its apportioned
administrative expenses amounting to £261,016 and to direct expenses
amounting to £486,838. Within this last figure was an allowance of
£268,318 for the time of Mr. Mardell, being an apportioned part of his TMO
remuneration said to be attributable to the time spent by him on the Big Break.
Also included within it were sums incurred in respect of a Mr. Guy Mazzeo, a
Californian lawyer, who described the preparation of the account as having been
conducted under his "direct supervision, control and active dominant
participation".
34. The judge held that Mr. Mardell, as a partner, was not entitled to
remuneration over and above his share of the partnership profits, that TMO was
accountable to Mr. Medcalf and the other partners because it took the property
of the partnership and without Mr. Medcalf's agreement exploited it
commercially, that TMO was not independent, Mr. Mardell choosing to exploit the
Big Break through TMO, that TMO had to account as if it were Mr. Mardell and
that its claim for 25% of the positive net revenue could not be allowed. The
judge left other issues relating to payments to Mr. Mazzeo, to travel expenses
and TMO's administrative expenses to be determined by the Master in the light
of the evidence before him.
35. With the leave of the judge Mr. Mardell and TMO served a Notice of Appeal
from such of the orders made by the judge on 31 March 1999 as disallowed any
deduction in respect of payment to Mr. Mardell for his work or of any part of
the positive net revenue. This is the second appeal which we have to
determine.
36. Thereafter a further account was served by Mr. Medcalf and TMO on 24 June.
Mr. Medcalf objected to that account as not complying with the orders made by
the judge and the Master. An application was issued on 21 July by Mr. Medcalf
to strike out that account. That was determined by the judge on 8 December
1999 when he refused to strike out; but he accepted that the account provided
was not a proper compliance with the order of 31 March 1999 nor a proper
account on any basis, and he gave a last opportunity to Mr. Mardell and TMO to
put a proper account before the court and Mr. Medcalf. This has led to the
filing and service of a final account on 21 January 2000. The figures
referable to payment to Mr. Mardell for his work and to 25% of the positive net
revenue run to a later date than that taken for the account served on 9 October
1998 and even in respect of the same periods are slightly different. But the
differences do not impinge on the second appeal which relates to principles
rather than figures.
37. Earlier on 6 December 1999 a remarkable application was made to the judge
by Miss Hayes, who was then appearing for Mr. Mardell and TMO. It was for a
direction to be given by the court to the police to investigate whether an
offence had been committed in connection with the transcription of the
proceedings at the trial of the action and whether an act tending and intended
to prevent the course of justice had been committed in connection with the
trial. The latter was a suggestion, to which we return in paras. 52-55 below,
that the solicitor having conduct of the case for Mr. Medcalf in `without
prejudice' discussions with the solicitor then advising Mr. Kemp had done the
latter act. The judge dismissed that application without calling on counsel
for Mr. Medcalf on the ground that there was no sufficient reason to suppose
that a criminal offence had been committed in respect of the preparation of the
transcripts, and that the documents relied on for the alleged act did not
disclose any fraud or criminal purpose; the result was that the documents
remained privileged.
38. The next round in this protracted and increasingly heated dispute was an
application by Mr. Medcalf for security for costs against Mr. Mardell and TMO.
Clarke L.J. on 28 January 2000 refused that application, but because counsel
then appearing for Mr. Mardell and TMO, Mr. Weatherill Q.C. and Miss Hayes, had
indicated that in relation to the main appeal they proposed to seek leave to
serve an amended Notice of Appeal and to adduce further evidence, detailed
directions were given designed to ensure that this court could hear both the
appeals and the application. There were some minor lapses in complying with
the timing directions, in part because Mr. Mardell and TMO for a short period
withdrew instructions from their legal representatives and later instructed
different solicitors. However, thanks to strenuous efforts by all involved,
for which we are grateful, the appeals and the application were opened by Mr.
Weatherill on 14 February.
Application to amend and adduce evidence
39. The amendments for which Mr. Weatherill sought leave would nearly double
the length of the original Notice of Appeal from the order of 29 June 1998, and
the grounds of appeal would be extended to 45, many being subdivided into
numerous paragraphs.
40. The proposed amendments were in part acceptable to Mr. Medcalf. In so far
as they were acceptable we gave leave. The application for permission to make
certain of the other proposed amendments was not pursued in front of us.
However, the making of the remainder of the proposed amendments was resisted.
We refused to give permission to make the resisted amendments stating that we
would give our reasons later, which we now do.
41. Many of the amendments are dependent upon the adduction of new evidence
before this court and lead to a request that this court order a new trial. This
court has power to do both of these things. The rule is however that no further
evidence (other than as to matters which have occurred after the date of the
trial) is admitted save on special grounds - see R59.10 (2). That rule which
echoes the practice of many years is there for a good purpose. After many
trials the losing party feels, often with justification, that if only he had
called other evidence or appreciated earlier the effect that the evidence which
had been given was having on the judge, then the judge might have come to a
different conclusion. But one of the aims of any legal system is to achieve
finality. The general rule must be that a party to an action is not entitled to
a retrial just because he or his legal advisers might have acted differently at
the trial.
42. The background to many of the proposed amendments is that Mr. Mardell's
and TMO's present legal advisers assert that he was badly represented at the
trial before Lloyd J. by some of his previous advisers including counsel.
Their incompetence, so it is said, led the case of the defendants to come
across less well than it should have done with the result that they were
rendered less credible than they should have been. We say straightaway that we
see no basis for any assertion of incompetence or worse. All the decisions
drawn to our attention seem to us to have been well within the range of
possible sensible decisions for counsel to take.
43. Our reasoning in relation to each of the disputed grounds is as
follows.
Grounds 8, 42.5 and 42.6
44. By these amendments Mr. Mardell and TMO seek to withdraw the admissions
impliedly made by their counsel at the trial that the June Format was typed in
the offices of TMO and that the document marked "Copyright Createl Ltd" and
bearing the date April 1988 was genuine. The documents are each annexed to Mr.
Mardell's witness statement which was before the judge and are dealt with at
length in that statement. Moreover they were both apparently in the list of
documents served by Mr. Mardell on 9 January 1995. It is submitted by Mr.
Weatherill that at the time when those statements were drafted it was assumed
by his client that the first document had been thus typed and that the second
document was genuine and that there are now reasons to doubt it. He submits
that he would be in a position to lead new evidence which if believed would
lead to that conclusion. Mr. Weatherill does not suggest that the material
which we have would entitle us to reach that conclusion. We consider that it
would be wrong at this stage to permit an amendment raising these points. There
is no reason why the necessary evidence should not have been produced at trial
and tested there.
Grounds 11 and 44
45 The background to these is that the BBC was named as the third defendants
in the present action. Mr. Medcalf settled with the BBC on terms which were
scheduled to a Tomlin Order. Very broadly speaking, these were that if, at the
trial, Mr. Medcalf should establish that he was indeed a partner and obtain
judgment against the other partners and fail to recover enough to satisfy the
judgment then he could look to the BBC for the balance. Mr. Medcalf
acknowledged as part of those terms that the BBC had throughout acted in good
faith. The proposed amendments suggest that Mr. Medcalf was under a duty to
disclose to Mr. Mardell and TMO the terms of the compromise and go on to argue
(1) that if the judge had seen that acknowledgment he would not have concluded
as he did that successive disclosures to the BBC were in confidence and (2)
that if Mr. Mardell's and TMO's advisers had been aware of the terms they would
have been alert to the fact that the allegations of breach of confidence and of
copyright were likely to be pursued at trial notwithstanding the discouragement
which Mr. Medcalf had received in relation to those points before Lightman J.
We do not regard it as arguable that a claimant who settles with one of several
defendants is bound to disclose the terms of settlement to the other
defendants. Further, that Mr. Medcalf accepted that the BBC throughout acted in
good faith does not preclude a finding that the disclosures were made in
confidence. Further, Mr. Medcalf's advisers, although they amended their
pleadings after the hearing before Lightman J., did not delete the allegations
of breach of confidence and of copyright. We see nothing in the point to
justify granting permission to amend.
Grounds 12 and 40
46. These concern an entry in Mr. Lyons' diary for 25 August 1987 from which
the judge drew the conclusion that Mr. Mardell had told Mr. Lyons on that day
that he was involved with Mr. Kemp and Mr. Medcalf in the game on the basis
that Mr. Mardell would receive one third of the profits. This was an important
factor in leading the judge to distrust Mr. Mardell's evidence that he regarded
himself purely as being in a 2-man partnership with Mr. Kemp as opposed to a
3-man partnership with Mr. Medcalf as well. That diary entry came to light
because the diary had been referred to in an action between Mr. Mardell and
his brother and the solicitors acting for Mr. Scally passed the transcript to
Mr. Medcalf's solicitors during the course of the instant trial. The diary
entry was, as is now accepted by Mr. Weatherill, admitted into evidence
pursuant to the provisions of the Civil Evidence Act 1968 without objection by
Mr. Mardell's and TMO's counsel. We see no grounds for criticising the judge or
anyone else for admitting that evidence which is the action criticised in the
amendment to ground 12. Ground 40 makes some criticism of Mr. Medcalf's
solicitors for not revealing the existence of the transcripts earlier to Mr.
Mardell's and TMO's solicitors. We see no grounds for that criticism. Still
less do we see why new evidence from Mr. Lyons should now be admitted when he
was not called to give evidence at the trial.
Ground 16
47. The proposed amendments are concerned with an opinion which was written by
counsel acting for Mr. Kemp, Mr. Mardell and TMO in an attempt to persuade the
Legal Aid Board not to continue Mr. Medcalf's legal aid certificate. In that
opinion counsel stated that even if Mr. Medcalf were to succeed in his claim to
a one-third share of a partnership he would be entitled to no more than one
third of the profits which share would amount to no more than £26,837.
Counsel set out the bases of their calculations which included the assertion
that the gross income of "the Big Break" in the period 1991 to 1996 was
£300,636 and the relevant costs were £220,122. The judge said:
"On that footing, having regard to the burden of costs, it was suggested to the
Legal Aid Board that, even if Mr. Medcalf was entirely right, the prospect of
his recovering any worthwhile sum at all was very remote. I do not know the
source and basis of those figures. Mr. Mardell and Mr. Kemp, to both of whom
the figures were put in cross-examination, denied all knowledge of them. What
is quite plain from the evidence before me is that the figures are false."
The thrust of the proposed amendments is that it can be shown by looking at the
attendance notes in the hands of Mr. Mardell's and TMO's former solicitors that
although counsel put forward these figures they did not emanate from Mr.
Mardell personally. We were told that they came from Mr. Mardell's and TMO's
accountants. The amendments seek to argue that Mr. Mardell's former solicitors
and counsel should either have drawn these matters to the attention of the
judge or have withdrawn from the case. Mr. Mardell and TMO accuse their former
solicitors of "gross incompetence" and "a grave breach..... of their
professional duty".
48. The reason why Mr. Mardell and TMO wish to make these amendments is
because, as Mr. Weatherill submits, the fact that the figures were (as he
accepts) false, made the judge more inclined to disbelieve Mr. Mardell. It is
impossible to demonstrate from the judgment that one of the reasons which led
the judge to disbelieve Mr. Mardell was the material contained in the joint
opinion. On the contrary, when the judge lists a number of factors which led
him to the conclusion that he could not accept Mr. Mardell's evidence without
independent support, the figures in the joint opinion do not feature. The
passage cited above lends no support to the suggestion that the falsity of the
figures played a part in the judge's reasoning at this point. In those
circumstances to have admitted these amendments and the supporting evidence
would have lengthened the hearing in front of us with no correlative benefit to
anyone.
Ground 28
49. This concerns Mr. Medcalf's former girlfriend, Miss Burke. She is referred
to in the judgment as contradicting Mr. Kemp's evidence in a number of
respects. The judge is criticised in the proposed amendment for excluding from
the evidence a letter written by solicitors on behalf of Miss Burke. It
indicated that she had fallen out with Mr. Medcalf, did not want to give
evidence, and in any event that her memory could not be relied on. The letter
was in the hands of Mr. Mardell's and TMO's advisers and although counsel for
Mr. Mardell and TMO cross-examined her they did not seek to make use of the
letter. The person who did was Mr. Kemp acting in person. The judge excluded
the letter without any attempt by counsel to seek the adduction of the letter
in evidence or cross-examination. There are a number of reasons why he may have
decided not to do so and we do not consider that Mr. Mardell's and TMO's
present team are entitled to raise a matter which his previous team chose not
to raise.
Grounds 41 and 42.4
50. These grounds were accepted by Mr. Weatherill as not being of
significance. We agree and propose to spend no more time on them.
Ground 42.7
51. This concerns a photocopy airline ticket and passport entry which were
used at the trial to support the assertion by Mr. Medcalf that he was available
in England to be contacted at the time that Mr. Mardell was negotiating with
the BBC. It arguably was relevant to the suggestion that Mr. Medcalf had
abandoned any partnership because it was impossible for the partners to contact
him. The ticket taken at face value seems to indicate that Mr. Medcalf flew
from here to the United States and back in early 1989. Mr. Mardell claims to
have evidence which, if accepted by the court, would demonstrate that the
photocopy airline ticket has been tampered with in some way. That would or
might lead to a judge taking a less favourable view of Mr. Medcalf's evidence
than he did. Mr. Weatherill submits that it would be an affront to justice if
a claimant is permitted to rely on a forged document. That attractive
proposition misrepresents the question as it faces this court. We are not faced
with an airline ticket which has admittedly been forged by or on behalf of Mr.
Medcalf. We have an assertion to that effect by one side with some supporting
evidence and a denial by the other side, also with some supporting evidence.
No-one suggests that this court is in a position to decide whether the airline
ticket was tampered with, still less whether Mr. Medcalf is responsible for any
tampering . The question for us is whether we should allow to be raised for the
first time on appeal an allegation which could have been raised at trial and
could have been decided there. We answer that question in the negative. The
same line of reasoning leads us to reject the amendment in relation to the
passport stamp.
Ground 43
52. This asserts that Mr. Medcalf's solicitors were guilty of an attempt to
pervert the course of justice. The relevant facts as alleged emerge from some
attendance notes made in early May 1998 by Mr. Kemp's solicitor (Mr. Cukier) of
conversations with Mr. Medcalf's solicitor (Mr. Gearon). Mr. Weatherill now
seeks to adduce these in evidence. Those attendance notes were in the
possession of counsel for Mr. Mardell and TMO at the trial but he chose not to
make use of them and instead relied on a contemporaneous letter from Mr.
Gearon. It was submitted by Mr. Weatherill that counsel was wrong not to use
the attendance notes but to rely merely on the letter. The basis of that
submission is that the notes, he says, suggest that Mr. Kemp was being offered
financial advantage in return for compromising and giving evidence in support
of Mr. Medcalf whereas the letter is silent on that point.
53. Mr. Weatherill does not suggest that any attempt was being made to
persuade Mr. Kemp to tell what Mr. Gearon believed to be a lie. Furthermore,
Mr. Weatherill expressly disavows any suggestion that Mr. Gearon was knowingly
acting improperly in making the approach which he did make. He submits however
that the criminal offence of perverting the course of justice is always
committed if A, with the aid of a financial inducement, seeks to persuade W to
tell what A believes to be the truth. He submits that R v Kellett [1976]
1 Q.B.372 and R v Toney and Ali [1993] 97 Cr. App. R.176 support
this proposition and not merely the proposition that the offence may be
committed in such circumstances.
54. Mr. Gearon was exploring the possibility of compromising the action
against Mr. Kemp on financial terms favourable to Mr. Kemp in return for Mr.
Kemp giving evidence supporting Mr. Medcalf's version of events. It is not
sought to plead that in the event Mr. Kemp changed his evidence as a result of
that approach but we note that the judge (to whom argument was addressed on
this point on 6 December 1999) indicated that he thought that Mr. Kemp might
have sought to correct his evidence to some degree in the light of the points
which had been made by Mr. Gearon in the settlement negotiations. The judge
however went on to say that he thought Mr. Gearon had acted perfectly properly.
He considered that there was nothing improper in a claimant trying to persuade
a defendant to tell the truth even if the means of that persuasion involved a
financial benefit to that defendant.
55. We consider that this amendment should be refused. The material was in the
hands of counsel for Mr. Mardell and TMO. He chose not to make use of it,
quite possibly on the basis that there was nothing wrong in what Mr. Gearon had
done. For our part we do not consider that this judgment is an appropriate
place to examine the complexities of the law in relation to the perversion of
justice. It suffices to say that the view taken by the judge is a tenable one
and there are no grounds for criticising counsel for not having made use of the
attendance notes. That being so, there is no case for admitting them in
evidence now. In any event, given that it is not alleged that Mr. Gearon was
knowingly acting improperly, we fail to see why his actions should reflect
adversely on the credibility of his client.
Ground 45
56. This related to the transcripts of the trial which gave rise to concern as
to their accuracy. Mr. Weatherill accepted that he could not sustain this as a
ground of appeal and we consider that he was right to do so. In those
circumstances, we refuse permission to amend to raise it.
Appeal from the order of 29 June 1998
57. We now turn to the main appeal and the grounds in the original Notice of
Appeal as amplified in the draft Amended Notice of Appeal, to the extent that
the amplifications were not resisted.
Partnership
Grounds 1.1 - 1.3, 2, 2A, 4, 5 - 7, 9, 10, 13, 14, 15, - 16.1, 16.10, 17,
19 - 25, 28 - 31.1,
32.1 - 32.2 and 33 - 37
58. Mr. Weatherill submitted that the judge was wrong to find that by 29 May
1987 and continuing thereafter Mr. Medcalf, Mr. Mardell and Mr. Kemp were
carrying on business in common with a view of profit and that a partnership of
three came into being on 29 May. He was particularly critical of the judge's
phrase "an oral partnership based on an agreement by conduct", which he
described as a concept not known to the law.
59. Mr. Weatherill's first point was that the judge was wrong to allow the
substantial re-re-re-re-amendment to the Statement of Claim to be added on 20
May 1998. By then Mr. Mardell and Mr. Kemp had given evidence. He stresses
that this was the sixth version of the Statement of Claim, and he pointed to
the exceptional difficulty which Lightman J. had experienced in allowing the
third version. He submitted that an amendment at so late a stage defeated the
main object of the pleadings, which is to give the opposing party advance
notice of the case to meet at trial, that the judge deprived the defendants of
the opportunity to cross-examine Mr. Medcalf on the amendment, that the judge
broke the rule that amendments ought only to be allowed where no injustice or
prejudice resulted and that the factors referred to in Ketteman v Hansel
Properties Ltd. [1987] A.C. 189 at p. 220 D - H (where Lord Griffiths
referred to matters such as the strain imposed on personal litigants and the
raising of false hopes) should have led the judge to refuse the amendment.
60. These are powerful considerations. But as Lord Griffiths said at p. 220
D, whether an amendment should be granted is a matter for the discretion of the
trial judge who should be guided in the exercise of the discretion by his
assessment of where justice lay. The judge, as is apparent from his judgment
on 20 May 1998 had well in mind all the relevant factors, including what was
said in Ketteman and why that case was distinguishable on its facts.
The judge said that an informally constituted agreement and partnership had
been on the pleading since January 1997. He said that there was no doubt that
in the witness statements and in the cross-examination all aspects of the
history had been in issue and tested to the full and that there had been
disputes as to the conduct of the parties. He said:
"It seems to me that this is wholly different from Ketteman. It is a
case in which, although it is an indulgence to the Plaintiff, it is appropriate
to allow the case to be re-pleaded in this way. It is not plausible to say
that, if [counsel for Mr. Mardell and TMO] had known that this is how the case
would be put, there was any significant further or different cross-examination
that he could realistically have put to the Plaintiff. The conduct, as I say,
of all three has been fully tested and probed. I cannot accept that even if
this pleading had been on the table at the outset of this trial the
cross-examination of Mr. Medcalf, or indeed the evidence of any other witness,
would have gone in any different way".
61. Mr. Weatherill also sought to assert by the application to amend the
Notice of Appeal that Mr. Mardell and TMO were unfairly disadvantaged by the
late amendment in that it caused the June Format and its significance to assume
central importance to the case of Mr. Medcalf and that if Mr. Mardell and TMO
had not been taken by surprise by the amendment, they would have joined issue
as to whether the document was what it had been represented to be. That is an
astonishing assertion. The importance of the document was obvious throughout,
bearing as it did "Copyright, Mardell, Medcalf and Kemp" at the foot of every
page. It was even annexed by Mr. Mardell to his own Witness Statement and he
sought to explain in that Witness Statement how it had come into being, and in
oral evidence he confirmed what he had said in his Witness Statement.
62. We should mention at this point a novel submission by Mr. Weatherill on
the last sentence which we have cited from the judgment on 20 May 1998. When
the judge orally delivered his judgment he added after the words "the
cross-examination" and before the words "of Mr. Medcalf" the words "at any
rate" and omitted "or indeed the evidence of any other witness". Mr.
Weatherill went so far as to submit that no judge is entitled to alter a
judgment, once delivered orally, save for grammatical errors. He prayed in aid
the rule that in criminal cases a judge may not revise a summing up (R. v
Kluczynski [1973] 1 W.L.R. 1230) and said that that should apply in civil
cases, and he suggested that a more permissive approach to judicial second
thoughts dated from before the invention of simultaneous mechanical recording
by machine. We have to say that these submissions run counter to long-standing
practice, to authority and to common sense. It is manifest that a judge who
has summed up to a jury following which the jury has given its verdict will not
be permitted for the purpose of an appeal to alter that summing up to
incorporate what with hindsight he wished he had said to the jury. But there
is no comparable position in civil cases where the judge sits without a jury.
In Secretary of State for Trade and Industry v Rogers [1996] 1 W.L.R.
1569 at p. 1578B Sir Richard Scott V.-C. (with whom Roch and Henry L.JJ.
agreed) said that a judge cannot be said to have acted improperly in adding to
the approved transcript a finding that he had not mentioned in an extempore
judgment. We can see no reason in logic or in law why a judge should not be
free to correct the transcript as he thinks appropriate, though he could not
contradict the order which he has made, once it is perfected. If he was not so
free, it would operate as a powerful disincentive to give extempore judgments,
to the detriment of good administration.
63. R.S.C. O. 20 r. 5 (1) gave the court a discretion to allow a party to
amend his pleading "at any stage of the proceedings". The judge was in the
best position to determine whether any prejudice resulted from allowing the
amendment at that stage and whether the course of the oral evidence would have
been different if the amendment had been made earlier. It has not been shown
that he was plainly wrong in the exercise of his discretion. In our judgment it
is not permissible for this court to interfere with the exercise of the judge's
discretion.
64. Next, Mr. Weatherill submitted that no contract was created between Mr.
Medcalf, Mr. Kemp and Mr. Mardell on or by 29 May 1987. He points to Mr.
Medcalf's own evidence that there was no oral agreement and that the terms of
any agreement were never discussed. In particular, he emphasises the absence
of evidence or a finding that Mr. Mardell had communicated an acceptance of any
such terms and the refusal by Mr. Mardell to sign the Draft Agreement. He drew
our attention to authorities on the formation of a contract. He further said
that the most that could be derived from the evidence is that one or more of
the three men anticipated that at some future stage a contract would be entered
into. He contended that even if a contract was created on or by 29 May 1987,
it did not amount to a partnership and he relied on the decision of the
majority of this court in Khan v Miah [1998] 1 W.L.R. 477 in support of
the submission that the three men were not carrying on a partnership business
but merely exploring the possibility of a future business.
65. We acknowledge the cogency of the submissions, but they do not persuade
us that the judge was wrong to find on all the material before him that the
existence of a partnership could be inferred from the conduct of the parties.
We take that to be all that the judge was saying by the not very happily worded
phrase "an oral partnership based on an agreement by conduct". Mr. Weatherill
does not dispute that a court may infer the existence of a partnership from
conduct. Indeed it appears to be the basis for the common acceptance that Mr.
Medcalf and Mr. Kemp did collaborate in partnership prior to Mr. Mardell coming
on the scene and for Mr. Mardell and Mr. Kemp asserting that there was a
partnership between the two of them from May 1987 until the 1989 Agreement made
formal their mutual arrangements. The policy of the law has been to recognise
that a legally binding partnership may be created wholly informally by parties
commencing business together with a view to sharing profits, the law fleshing
out their relationship by means of the implication of detailed terms through
the Partnership Act 1890.
66. Whether or not parties carry on business may depend on how the business
is defined. In Khan v Miah the business was defined as the carrying on
of a restaurant business at a particular address, and this enabled the majority
of this court to conclude that until the restaurant opened and trading
commenced, there was no business being carried on. In the present case the
business found by the judge to have been the business of the partnership was
the development and exploitation of the idea of the Big Break. That, in our
view, distinguishes the present case from Khan v Miah. True it is that
no monetary receipts were received for several years after 1987, but we see no
reason why a partnership did not arise if the parties were collaborating in May
1987 on a commercial venture with a view to sharing profits. There can be no
doubt that each of them was collaborating with a view to financial reward. Mr.
Medcalf's evidence in his witness statement, on which he was not challenged,
was that Mr. Mardell had actually spoken to Mr. Kemp and Mr. Medcalf prior to 9
June 1987 about what sort of money they could expect from the game over a
period of time and figures were mentioned, as was the likelihood of
profitability from a contract with the BBC as compared with another company
like Thames or LWT. It was not suggested that Mr. Mardell's participation was
only an act of friendship to Mr. Kemp in what was known to be a competitive
field of commerce.
67. There was clear evidence before the judge that both Mr. Medcalf and Mr.
Kemp regarded themselves as participating in a joint enterprise with Mr.
Mardell. Mr. Mardell had, according to Mr. Kemp, on 26 May 1987 indicated that
he was prepared to become further involved as a partner with Mr. Kemp. Mr.
Kemp, when asked if he understood that when Mr. Mardell indicated that he was
going to try and help Mr. Kemp and Mr. Medcalf, that would be on the
understanding that if something had come of it Mr. Mardell would share in the
profits, replied "That would follow" (see AVTS transcript for 18 May 1998 p.
46H). Mr. Kemp accepted as an accurate description of Mr. Mardell on 29 May
1987 that he was "a joint participant with you in developing the show .... he
was carrying out his responsibility by coming up with ideas". Mr. Kemp further
accepted that by the end of the meeting that day he saw the three men as
partners in the project. The Draft Agreement embodied what Mr. Kemp thought
was the common understanding of the three men. In response to the question
from Mr. Tager:
"The three of you have collaborated together and you are partners in it
together - is that correct?"
Mr. Kemp answered: "On 29th May 1987, yes".
68. Moreover, the documentation supported that view. On 29 May it was Mr.
Mardell, then firmly in charge of the wording of the format, who wrote
"Copyright, _ _ _", which Mr. Kemp correctly took to be an instruction to type
the names of the three men. Mr. Mardell did not suggest that TMO's name should
replace his, even when he saw and used the June Format on each of the two
occasions at King's Cross, including when he provided the BBC with that
document. That was a clear acknowledgment that Mr. Mardell had been
collaborating with not only Mr. Kemp but also Mr. Medcalf in producing a format
which even at that stage of its development had commercial value in their
opinion.
69. The refusal by Mr. Mardell to sign the Draft Agreement did not occur
until after the partnership was formed, as the judge found, on 29 May and after
the collaborative session at King's Cross on 9 June. But even then, when Mr.
Mardell did refuse to sign, as the judge noted, he did not deny any of the
propositions which were recorded in the Draft Agreement. Mr. Mardell's
evidence, with which Mr. Kemp agreed, was that on 29 May Mr. Mardell had told
Mr. Kemp, after Mr. Medcalf had left, that he did not want to work with Mr.
Medcalf. But the judge rejected that evidence, as he was fully entitled to,
inconsistent as it was with the Draft Agreement and the copyright
acknowledgement.
70. The clinching piece of evidence, as it seems to us, was the entry in Mr.
Lyons' diary for 25 August 1987. The entry clearly suggested that Mr. Mardell
had told Mr. Lyons of a number of projects which Mr. Mardell was intending not
to put through what was then called Createl, because of Mr. Mardell's
disenchantment with Mr. Moore. The diary entry included:
"New snooker game by Mike Kemp & friend 1/3rd of £ to Terry (pilot J.
Moir next wk) - not thru Createl".
That is cogent evidence of how Mr. Mardell viewed the position. The idea of
the new snooker game, he was telling Mr. Lyons, had come from Mr. Kemp and Mr.
Kemp's friend, who could only be Mr. Medcalf, and Mr. Mardell was to take one
third of the profits. Mr. Mardell was cross-examined by Mr. Tager on this, and
apart from initially denying saying anything of the sort to Mr. Lyons (which
again could not have enhanced his credibility), he could not explain it. Nor
was Mr. Lyons called to disprove or explain away that diary entry.
71. We conclude that the judge had ample material on which to find that a
partnership between the three men was created by their conduct and that this
arose on 29 May 1987.
Costs
Grounds 5.8 (c) and 38
72. Mr. Weatherill submitted that the judge, having granted leave to amend
the Statement of Claim so late in the trial to plead a partnership by conduct
and having decided the case in Mr. Medcalf's favour on that basis, should have
ordered Mr. Medcalf to pay the whole of Mr. Mardell's and TMO's costs of the
action. This, he submitted, is the general rule where a plaintiff makes a late
amendment without which the action would have failed. The general rule that
the plaintiff pays the costs up to the amendment was expressed by Stuart-Smith
L.J. to apply where the amendment is substantial (see Beoco Ltd v Alfa Laval
Co. Ltd. [1995] QB 137 at p. 154). The question therefore for this court
is whether the judge erred in the exercise of his discretion in awarding costs
to Mr. Medcalf having regard to the general rule. The judge plainly did not
regard the amendment as substantial, in the light of all the circumstances of
the case which had led him to allow the amendment although it was so late.
Significantly it would not appear that Mr. Mardell and TMO through their
counsel thought that the late amendment disentitled Mr. Medcalf from recovering
his costs. As we have already noted, counsel, while arguing for Mr. Medcalf to
have his costs only after the amendment allowed by Lightman J., made no
corresponding submission in relation to the amendment allowed by Lloyd J. In
the circumstances we do not think that it can be shown that the judge was
plainly wrong in giving Mr. Medcalf his costs of the action including those
incurred before the late amendment.
Costs of the Scally action
Ground 39
73. Mr. Weatherill submitted that Mr. Scally was claiming against Mr. Mardell
and TMO entitlement to the rights in the Big Break format, being the same
rights which the judge decided were held by TMO on trust for the partnership.
He argued that the judge should have held that costs properly incurred in
defeating a competing claim to beneficial entitlement to the rights were a
deductible expense in taking the account. He contended that the position was
analogous to that of a mortgagee who is entitled as against the mortgagor to
the costs of proceedings against a third party who impugns the mortgagor's
title to his estate (Parker-Tweedale v Dunbar Bank plc (No. 2) [1991]
Ch. 26). The judge heard similar arguments but rejected them in his judgment
on 29 June. He considered that defending Mr. Scally's claim had nothing to do
with the preservation of the property of the partnership and that if Mr. Scally
had succeeded that would only have affected the property of Mr. Mardell and
TMO. We agree with the judge. Mr. Scally did not sue the partners, but Mr.
Mardell and TMO personally for breaches of confidence which, if established,
would have been peculiar to them. We see no valid analogy with the position of
a mortgagee protecting the title to the estate.
Copyright
Grounds 1.4, 1.5, 3, 8, 18, 32.2 and 32.3
74. In the Notice of Appeal the judge's finding on copyright was challenged.
But Mr. Tager did not assert a claim to copyright independent of the
partnership claim and it is unnecessary to consider these grounds of appeal.
Breach of confidence
Grounds 11, 26 and 27
75. The judge considered that Mr. Medcalf's original claim based on breach of
confidence might have succeeded. But he did not decide the point. Mr. Tager
applied to put in a late Respondent's Notice relating to breach of confidence
if the partnership claim did not survive the appeal. In the event it is
unnecessary to consider this point or Mr. Weatherill's contrary submissions on
it.
Conclusion
76. For the foregoing reasons we dismiss the appeal from the judge's order of
29 June 1998.
Appeal from the order of 31 March 1999
77. The claim for a deduction from the account in respect of payment to Mr.
Mardell for his work on the Big Break is cast in alternative ways. First, Mr.
Mardell himself claims credit for his work on the project and argues (or would
argue before the Master) that it should logically be assessed as such
proportion of his salary from TMO as his work on the project has borne to all
his work for the company. Alternatively TMO claims credit for the expense
which it has borne for the benefit of the partnership in paying Mr. Mardell
that same proportion of his salary. Allied to the second formulation is the
other limb of the second appeal, namely TMO's claim to credit for 25% of
"positive net revenue", i.e. 25% of the net profit of the partnership in the
later years in which profit was achieved but without making contra-allowance
for the net loss sustained in the earlier years.
78. Mr. Weatherill made forceful submissions to the effect that, in
disallowing both formulations of the claim in respect of Mr. Mardell's work,
the judge had departed both from commercial reality and from common sense. The
purpose of the partnership had been, in the words of the judge's declaration,
to "develop and exploit" the original proposals of Mr. Medcalf and Mr. Kemp.
Mr. Mardell had been brought into the partnership because of his expertise in
relation to quiz games and of his connections, i.e. because of the contribution
that he would be likely to make to development and in particular to
exploitation. In fact, apart from their attendance at the trials of the game
in June and October 1987, neither Mr. Medcalf nor Mr. Kemp made any
contribution either to development or to exploitation at any point after 29 May
1987. Mr. Mardell did it all: he approached the BBC; created the second
version of the format dated April 1988; pressed it on the BBC; created the
final version dated December 1990, which incorporated material differences
from, and improvements upon, the original version; and secured the agreement
with the BBC dated January 1991.
79. The judge held that Mr. Mardell's own claim for payment for his work fell
foul of elementary principles of partnership law. Section 24 of the
Partnership Act 1890 provides:
"The interests of partners in the partnership property and their rights and
duties in relation to the partnership shall be determined, subject to any
agreement express or implied between the partners, by the following rules:
(1) All the partners are entitled to share equally in the capital and profits
of the business, and must contribute equally towards the losses whether of
capital or otherwise sustained by the firm.
(2) The firm must indemnify every partner in respect of payments made and
personal liabilities incurred by him
(a) In the ordinary and proper conduct of the business of the firm;
...
(6) No partner shall be entitled to remuneration for acting in the partnership
business."
80. The judge noted that at the trial in May 1998 Mr. Mardell had not pleaded
or otherwise asserted the existence of such an agreement, express or implied,
between the partners as would alter the effect of rule (6); and he held
accordingly that it was not open to Mr. Mardell to make an assertion of an
implied special term for the first time at the hearing in March 1999. This
was, arguably, a harsh ruling in circumstances where the issue of credit for
Mr. Mardell's work could be said to have fallen as readily within the ambit of
the account as within the precursive enquiry as to whether an account fell to
be taken and where, in any event, so much latitude had been afforded to Mr.
Medcalf in the formulation of pleadings. But, notwithstanding his ruling, the
judge proceeded to consider whether, having regard to all the evidence,
including the further evidence filed on behalf of Mr. Mardell, it would be
proper to imply a term that he should be remunerated above his share of profit
and beyond reimbursement of expenses.
81. The judge held that it would not be proper. We agree with him, with
the result that rule (6) precludes Mr. Mardell's own claim. Accepting that it
was not expressed, Mr. Weatherill submitted to us that such an agreement should
be implied. But to establish that it might have been reasonable for parties to
have reached an agreement is not to establish by implication that they did so.
Having - with Mr. Kemp - excluded Mr. Medcalf from any voice in the affairs of
the partnership, Mr. Mardell was asking the court to infer that Mr. Medcalf
agreed special terms unfavourable to himself. There was no ground for it.
Furthermore in our view the judge was rightly influenced by the fact that in
the 1989 Agreement Mr. Mardell and Mr. Kemp had made no provision for the
former to receive remuneration above the line of equally divided profit. Yet
the imbalance of work by Mr. Mardell was as marked in relation to Mr. Kemp as
in relation to Mr. Medcalf. Mr. Weatherill submitted that the 1989 Agreement
was irrelevant and that Mr. Mardell's generous treatment of Mr. Kemp should not
inform the law's proper treatment of Mr. Medcalf. But there was no ground in
the evidence for concluding that Mr. Mardell had been motivated to treat Mr.
Kemp generously. No doubt their agreement reflected the fact that, as the
judge had found, Mr. Mardell's hard work was in building upon the earlier
efforts of Mr. Kemp. What however the agreement failed to reflect was that the
partnership was tripartite and that Mr. Kemp's earlier efforts had been
bipartite.
82. In rejecting the alternative formulation of the claim for credit in
respect of Mr. Mardell's work - namely that made by TMO - the judge held that,
by ultimately deciding to place his work for the partnership through a company
which he controlled and which accordingly was impressed with his own knowledge
of the partnership's rights, Mr. Mardell could not on behalf of the company
escape from the consequence of his personal inability to charge
remuneration.
83. In this regard the judge was invited to consider O'Sullivan v
Management Agency and Music Ltd [1985] Q.B. 428. Mr. O'Sullivan was a pop
star who claimed to be entitled to rescind contracts, into which, when young
and unknown, he had entered with his manager's companies as a result of the
manager's undue influence. After several years of substantial operation the
contracts expired; and one of the companies' defences was that it was too late
for him to effect full restitution to them. This court held that, in lieu of
full restitution, it sufficed in equity to direct that, in accounting to the
pop star for the profits, the companies should be allowed to deduct fair
remuneration for their skill and labour together with some element of profit.
In our view the judge was right to distinguish O'Sullivan from the
present case. There is no room to apply the softening effect of such equitable
principles to the enforcement of a contract of partnership. In the absence of
equity's contribution to the resolution of the issue in O'Sullivan, the
manager's companies would have been left either with all the profits, however
unconscionably procured, or with nothing. Here Mr. Mardell retains his agreed
entitlement to share of profit, together with reimbursement of expenses. If,
with whatever degree of artificiality, one seeks to distinguish between Mr.
Mardell and TMO and to notice that TMO has paid him for his work for the
partnership, the answer is that he and TMO can argue between themselves about
the ultimate destination of his profit share.
84. Mr. Weatherill also, and in particular, relies on Boardman v Phipps
[1967] AC 46, where a solicitor to a trust and a beneficiary thereunder were
held accountable to another beneficiary for profits arising out of a
transaction into which, by the solicitor's use of his fiduciary position
towards the trust, they had personally entered. They had however acted
honestly - and had also thereby achieved separate profit for the trust - and
were held entitled to set off an allowance on a liberal scale for their work
and skill. It is important to note, however, that the parties to those
proceedings were not in a contractual relationship, whether directly or
indirectly. Thus, for example, in Guinness plc v Saunders [1990] 2 AC 663 the House of Lords refused to extend the principle of Boardman v
Phipps so as to relieve a company director obliged to repay a special fee
paid to him by the company pursuant to an agreement unauthorised by its
articles.
85. If, as we believe, the judge was right to reject the alternative
formulation of the claim for Mr. Mardell's work, namely the claim by TMO, all
the more unsustainable was TMO's claim for 25% of positive net revenue.
Subject to the suggested immunity from losses, the claim for 25% looks
suspiciously like the presentation of a fourth partner. But Mr. Weatherill
bids us to forget the percentage and to focus upon the principle. He observes
that any outside party to whom the partners might have contracted the
exploitation of the format would inevitably have insisted upon terms which
included a margin of profit; and that TMO's payments to Mr. Mardell for work on
the project carried for the company an opportunity cost, namely the loss of
opportunity for TMO to set Mr. Mardell to work instead on other business which
would have yielded it profit.
86. It was substantially as a result of his exploitative talents that Mr.
Medcalf and Mr. Kemp brought Mr. Mardell into the partnership and carved out
for him a share of the profit. The hypothesis that they would entrust the task
of exploitation to some separate fourth party was outside the partners'
contemplation; and indeed it never materialised. As anticipated, it was Mr.
Mardell who conducted the exploitation, albeit through a company in his
control. Having wrongly ousted Mr. Medcalf from any voice in the furtherance
of partnership business or even knowledge of it, Mr. Mardell finds himself
unable to establish Mr. Medcalf's consent to any variation in Mr. Mardell's
favour of the terms originally agreed. Notwithstanding his singular amount of
work, we entertain no particular regret in concluding that Mr. Mardell is
saddled with the original terms. He cannot by use of the company construct
some side door through which to retrieve what he is obliged to yield to Mr.
Medcalf through the front.
87. Accordingly we dismiss the second appeal also.
Order:
LORD JUSTICE PETER GIBSON: Very well. We make the following orders:
We order that Mr Mardell and TMO Pay the costs of the first appeal and the
application to amend and adduce further evidence, those costs to be subjected
to a detailed assessment on the standard basis if not agreed between the
parties and those costs to include the respondent's notice in both appeal's, in
the application for further evidence being the costs of Mr Medcalf. We direct
that 75 thousand pounds should be paid on account of the costs in the court.
That in our view is on the evidence put before us reasonable proportion of the
costs of the appeal. We think it appropriate that should be paid within 14
days. The direction as to wasted costs I have already indicated, that is to
say that there should be, that Mr Medcalf Should file his application with any
statement of case and evidence within 14 days and serve that to the other side
and the parties are to be at liberty to apply to me for further directions, the
intention being that it will come back before this court as presently
constituted at some later date. We think it appropriate that the 100,000
pounds ordered by costs judge wright to be paid into court should now be paid
to Mr Medcalf forthwith. We also think it appropriate that the order made by
Lord Justice Morritt that 100,000 pounds should be 100,000 pounds on account of
the damages ordered by Mr Justice Lloyd to be paid and presently held in a
joint solicitor's account should be paid to Mr Medcalf directly. There has
been no appeal from that order and we think therefore that it must be
enforced forthwith. So far as the applications now made by Mr ----
APPELLANT COUNCIL: Can interrupt your Lordships. That 100,000 pounds is in
court not in a joint account.
RESPONDENT COUNCIL: Would your Lordship say plus interest.
LORD JUSTICE PETER: Yes, if it has been - if there is interest that has
occurred. As for
the applications which are made by Mr Weather all , we refuse the
application for permission to appeal to the House of Lords, they must seek to
interest their Lordship house on that. We refuse the application for access to
the master recording of the proceedings below. We see no purpose in that. We
also refuse the application that there should be a condition attached to the
various orders for payment to Mr Medcalf, that condition being that Mr Medcalf
should provide a signed consent under the American freedom of information act.
Again we see no purpose served by that order. There is there was lines
application made for us to direct a police investigation that is also refused.
Does that cover aif thing.
RESPONDENT COUNCIL: Except Legal Aid Taxation.
LORD JUSTICE PETER GIBSON: Legal Aid Taxation yes, of course. We will correct
that. Thank you very much.
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