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England and Wales High Court (Chancery Division) Decisions
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Cite as:  EWHC Ch 140
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| IN THE HIGH COURT OF JUSTICE
CH 1998 S 5419.
Royal Courts of Justice
London WC2A 2LL
24 February 2000
THE HONOURABLE MRS JUSTICE ARDEN DBE
SPICE GIRLS LIMITED
APRILIA WORLD SERVICE BV
Mr Ian Mill QC and Mr Vernon Flynn (instructed by Lee & Thompson, Green Garden House, 15-22 St Christopher's Place, London W1M 5HE) appeared on behalf of the Claimants
Mr Andrew Sutcliffe (instructed by CMS Cameron McKenna, Mitre House, 160 Aldersgate Street, London EC1A 4DD) appeared on behalf of the Defendants.
Hearing: 7, 8, 9,11 and 14 February 2000
Judgment: 24 February 2000
Mrs Justice Arden
1. Aprilia World Service BV ("AWS") is a member of a group of companies of which the parent company is Aprilia Spa ("Aprilia"). AWS is not itself a manufacturing company. Aprilia is a substantial company based in Italy which produces a wide range of motorbikes, mopeds, scooters, including scooters for teenagers, and its products are sold throughout Europe and in the United States of America. Spice Girls Limited (which I will call "SGL") is an English company formed to promote the services of the celebrated group of girl singers known as the Spice Girls. At the start of 1998, the Spice Girls consisted of five singers, Geri Halliwell, Emma Bunton, Victoria Adams, Melanie Brown and Melanie Chisholm.
2. A fact which plays a part in these proceedings is that each of the members of the Group took a professional name which portrayed their individual character. Thus Emma Bunton is known as "Baby Spice", Victoria Adams as "Posh Spice", Melanie Brown as "Scary Spice", Melanie Chisholm as "Sporty Spice" and Geri Halliwell as "Ginger Spice". Ms Halliwell left the band on 29 May 1998. This dispute arises as a result of her departure.
3. At the time of Ms Halliwell's departure the group were in the final stages of the European leg of the Spice World Tour. AWS had agreed to sponsor the Spice Girls on this tour. In return it received rights to use the logos and images of the Spice Girls. The detailed arrangements are set out in a written agreement signed on 6 May 1998. I will refer to this agreement as "the agreement". SGL claims that AWS owes it money under the agreement but AWS has responded by claiming damages for misrepresentation or breach of contract arising out of the departure of Ms Halliwell. In short AWS claims that Ms Halliwell had declared her intention to leave the group to SGL before the agreement was signed and that because it (AWS) was not told about this it incurred expenditure and suffered loss in a number of ways. For example it arranged for a television commercial to be made immediately before the agreement was signed featuring the Spice Girls and Aprilia's scooters (this is referred to below as "the commercial shoot"). AWS also abandoned plans for the sale of a limited edition of "Spice Sonic" scooters targeted at teenage girls. AWS accepts that it had to take the commercial risk that the composition of the group (the "line-up") might change during the agreement. Its complaint is essentially that when it made the agreement with SGL it did not have the information about Ms Halliwell's intentions which SGL had. The case raises questions of fact and of law. I will set out the pleaded issues, the factual background, issues arising on damages, the submissions and finally my conclusions.
The pleaded issues
4. The parties' contentions in the pleadings have changed as facts have emerged and cases been refined. I am not concerned with those changes but with the case as currently pleaded.
5. SGL claims £100,000 (plus VAT) in respect of the third instalment of sponsorship fees payable under the agreement, £112,500 (plus VAT) a guaranteed royalty payment pursuant to clause 13 of the agreement and the market value of the one Spice Sonic scooter (worth £900) and two Phillip Stark Aprilia "Moto" bikes (worth £5,650) which Aprilia agreed to deliver under clause 5 of the agreement.
6. AWS's response (its defence and Part 20 claim) claims damages of £434,564.46 alternatively £1,016,541 (depending on whether it establishes its claim for misrepresentation or its claim for breach of contract), and further claims that it is entitled to set off these damages against SGL's claims. AWS puts its case in a number of ways. Primarily, it alleges that SGL represented to it that it did not know and had no reasonable ground to believe (either when or before it entered into the agreement) that any of the Spice Girls had an existing declared intention to leave the group during the minimum term of the licence, i.e. before 31 March 1999. It claims that that representation was made expressly in a fax dated 30 March 1998, which I set out below, and by use of the words "currently comprising" in the first paragraph of the agreement. It accepts that the words "currently comprising" were literally true but contends that (and this is one of its alternative ways of putting its case) the agreement, when interpreted in the light of its commercial purpose, contained a promise by SGL that no member of the group had an existing declared intention of leaving the group. In a yet further way of putting its case, AWS contends that there was an implied term or collateral warranty that SGL did not know and had no reasonable grounds to believe that any member of the group had an existing declared intention to leave the group prior to 31 March 1999. AWS makes no claim that SGL is estopped from claiming any monies due under the agreement.
7. AWS's case is that if it had known what SGL knew about Ms Halliwell's intention to leave the group it would not have signed the agreement.
8. AWS has given further details of its claim in misrepresentation. It relies on SGL's conduct in the course of negotiations. It made available marketing material – logos, images and designs - for use in Aprilia's marketing material. SGL's material "emphasised the distinct and individual image, style and personality of each of the five Spice Girls ... [and] each of the individual members of the Group and the character type she represented was given as much prominence as the image which the Group portrayed as a whole". For instance, the Spice Girls' logo, which was supplied for use on the scooters, was the word "SPICE" with each letter incorporating the likeness of a different Spice Girl. Posters, postcards, brochures, life-size cardboard cut-outs and videos advertising Aprilia's products were produced showing the image of one or all five Spice Girls. Furthermore, all five Spice Girls made themselves available for the commercial shoot, the press shoot, and the three photocalls. Moreover before the agreement was signed the commercial had to be deferred because not all the Spice Girls were available to take part in it. SGL also knew that AWS was incurring substantial expenditure, such as the costs of the photoshoots and the commercial shoot. Accordingly SGL, says AWS, knew that the departure of one of the girls was a matter of fundamental importance to AWS when considering the commerciality of a sponsorship and endorsement deal involving the scooters.
9. SGL in its reply relies on an agreement said to have been made in correspondence between Mr Thompson and Mr Vianello in June 1998 that Ms Halliwell's departure did not give rise to any claim for damages and that in return SGL would not insist on strict adherence by AWS to the restrictions imposed by the agreement on promotional activities which it could require of the Spice Girls in the USA. I will set out the relevant parts of this correspondence later in this judgement. SGL previously relied also on estoppel and waiver but this defence is not now relied on. SGL denies that it had any obligation to inform AWS before the agreement was signed that Ms Halliwell had declared an intention to leave the group. SGL admits that Ms Halliwell mentioned the possibility of leaving to the other Spice Girls during a conversation on 3 March 1998; that she told the other Spice Girls that she definitely wanted to leave the group on 9 March 1998 but that she would stay with the group until the end of September; that she stated that she was going to leave after the US tour at a general management meeting in late April 1998.
10. I will set out the applicable law later, but it can be seen that the sheet anchor of AWS's case is SGL's failure to disclose what it knew but AWS did not. It is well-established, however, in English law that, as a general rule, a person who is about to enter into an agreement is under no duty to disclose material facts which he knows but which the other party does not know. However there are exceptions to this general rule, for instance where a party makes a misrepresentation by words or conduct which induces the other party to enter into the agreement. A party must correct that impression if he knows that it is not true before the agreement is made. These rules are indicative of a basic principle of contract law that parties should be bound by contracts to which they freely agree unless their consent was obtained by a misleading process. The courts are not concerned with the substance of the contract but with whether the negotiating process was in some way abused. It is now common ground that Ms Halliwell stated an intention to leave the group before 6 May 1998, the date on which the agreement was signed. But in its reply SGL contends that it was not under any obligation to inform AWS of this fact.
11. There is separate and comparatively minor claim made by AWS for wasted expenditure amounting to £5,841.46 relating to a photocall in New York that had to be cancelled. SGL claims that it is not liable for this sum and has not disputed the calculation of this amount.
The factual background
12. I set out below the facts as I find them to be. AWS bears the onus of proof and accordingly it called its witnesses first as there is no dispute as to the amounts claimed by SGL. It called the following witnesses of fact: Rossanna Fuzzi, advertising manager, Roberto Brovazzo, head of Aprilia's marketing department, Federico De Benetti, a financial controller with Aprilia, and (pursuant to a witness summons) Nancy Phillips, a director of SGL. It has served Civil Evidence Act notices in respect of the evidence of Alessio Vianello, a partner in the law firm of Studio Legale Vianello-Bortoluzzi-Molesini-Gentilomo, and Marco Ferro, head of Aprilia's Communication and Press Department. SGL called Emma Bunton, Geri Halliwell, Paul Morrison, a director of KLP (Scotland) Ltd ("KLP"), Barry Michael Drinkwater, a director of Bravado International Group Ltd (exclusive merchandise agents for the Spice Girls' European and US tours), Adrian Pettett, John Simidian and Andrew Thompson. Mr Pettett and Mr Simidian were at the material time project managers with KLP. Mr Thompson is a partner in Lee & Thompson, SGL's solicitors. At Aprilia, Ms Fuzzi reported to Mr Ferro and Mr Ferro reported to Mr Brovazzo.
(a) The initial negotiations between Aprilia and SGL
13. The events begin in early 1998. By this stage the Spice Girls were one of the most successful groups of girl singers. They had begun in 1994, and had been highly successful. They had had two successful albums and had a world wide reputation. In early 1998 they were about to start a tour which would take them initially to Europe and then perhaps to the USA and then possibly to Japan. Mr Brovazzo said, and it has not been challenged, that the Spice Girls were the creators of a new "girl power" concept and were "symbolic for the fashionable, fresh and a bit cheeky image that Aprilia wanted to convey for the Sonic scooter which it had recently launched," and that Ms Halliwell was a "core member of the Spice Girls and the embodiment of the "girl power" concept in the public eye."
14. In January 1998, SGL appointed KLP as their consultant to find sponsors for the Spice World Tour. The appointment was made by Lee & Thompson because at that date the Spice Girls had no manager and throughout the events material to these proceedings Mr Thompson was fulfilling some of the functions that might be carried out by the manager, as well as acting as solicitor to the Spice Girls. The principal contacts at KLP were Paul Morrison ("Mr Morrison") and Adrian Pettett ("Mr Pettett"). As the European tour was from 24 February to 29 May 1998, KLP had little time to find sponsors. KLP were to be remunerated by a commission on fees received and sponsorship income. By 11 February 1998, Mr Morrison had made contact with Aprilia with a view to its becoming a sponsor for the Spice World Tour. Ms Fuzzi emerged as the principal contact at Aprilia. In December of the previous year Aprilia had launched its new range of scooters called "Sonic scooters" which were targeted at 14 to 17 year olds. (In some European countries teenagers can drive scooters at 14 years). An association with the Spice Girls was an attractive idea as the Spice Girls appealed to young girls. Aprilia wanted to use the images of the five girls to promote its new product. The Sonic scooter was an important new product for Aprilia in that it provided the entry into a new product range (compact scooters for young drivers) in which Aprilia was not previously sufficiently represented and it was also the first product that Aprilia intended to sell world-wide. Aprilia had previously worked successfully with Italian pop artists.
15. On 20 February 1998, Mr Morrison wrote to Ms Fuzzi enclosing a proposal for Aprilia's involvement with the Spice World European Tour and "extension marketing activities". He stated in his letter that he believed that there could be
"... a mutually beneficial partnership and would like to stress the fact that you can use the tour to make the Aprilia/Spice Girls connection famous before having a 12 month opportunity to have the biggest band in the world endorse your products and appear in your advertisements".
The proposal enclosed with this letter stated that Aprilia would receive access to the Spice Girls for a one-day television/cinema commercial shoot, a twelve-month period for television and cinema advertising, access to the Spice Girls for a one-day trade press shoot, four opportunities in European cities for outdoor photocalls, two thirty-second commercials in auditorium screens and a full colour half-page advertisement in the tour programme of which an initial run of 50,000 had already been printed. In the event, Aprilia did not get the promised publicity in brochures or on tickets, but no complaint is made about that.
16. Mr Morrison's proposal stated that Aprilia would provide a rights fee of £650,000 for these rights. Mr Morrison subsequently produced a summary of agreement, stating that the photo call should feature the Spice Girls together, ideally each on her scooter. It listed the commercial rights as being: first, authority to promote the Aprilia Sonic scooter as "Official Sponsor of the Spiceworld Tour" in all Sonic promotional literature for a period of twelve months from the commencement of activity; second, that Aprilia should have access to the Spice Girls for one day for the filming of a television/cinema commercial for the Aprilia Sonic scooter on a date to be arranged, the commercial so made being capable of being distributed in Italy, Spain, France and Holland for a period of twelve months; and, third, access to the girls for a one day photo shoot for press advertising to promote the Sonic scooter, the advertising so produced to be capable of being used for a period of twelve months in Italy, Spain, France, Holland, Greece and Portugal. In his summary of agreement, Mr Morrison further notes that "Aprilia are very keen to produce a limited number of Sonic scooters with a Spice sticker on them to be called 'Sonic Spice'" and that royalty terms would have to be agreed for the limited edition Sonic Spice scooter. Apparently Aprilia had expressed its wish to market 2,000 Sonic scooters with a Spice sticker attached next to the Sonic logo. Aprilia for its part clearly saw the potential for linking its product, a scooter for "fun loving girls" as one whose sales could be enhanced by being linked with "the spirit of 'girl power' made famous by the Spice Girls." Aprilia attached considerable importance to those parts of the deal which would enable it to manufacture the Spice Sonic scooter. Aprilia had frequently marketed limited editions of its models. Such editions have additional exclusive features which distinguish them from the standard model and they sell at a higher retail price (about 10% above the price for the standard product) and they generally sell very well. The Spice Sonic scooter was to be sold in two fashion colours, light blue and orange, which were associated with the public image of Baby Spice and Ginger Spice.
( b) The Noale meeting on 4 March 1998
17. On 4 March 1998 there was an important meeting in Noale attended by Mr Morrison, Mr Pettett, Ms Fuzzi and three other representatives of Aprilia. They were Mr Ferro, Ms Fuzzi's immediate superior, Mr Leo Mercanti and Ms Roberta da Ros. By the conclusion of this meeting the parties had agreed on heads of agreement for Aprilia to have sponsorship and endorsements rights for the Spice Girls' European Tour. These rights included : the right to sell a limited edition of Spice Sonic scooters; the right to issue sales literature mentioning Aprilia as the sponsor of the tour; access to the Spice Girls for one day for the filming of a television/cinema commercial; the right to broadcast the commercial for the Spice Sonic scooter on Music Television ("MTV") throughout Europe and the right to promote the Spice Sonic scooter in trade and consumer press advertising in the same specified European countries.
18. In relation to the Spice Sonic scooters, the heads of agreement said that Aprilia was to have the right to produce and market a limited edition scooter in return for a guaranteed royalty payment of £150,000 and noted for immediate action that Aprilia's desire to market the scooter with a Spice sticker attached to the Sonic logo should be clarified. Aprilia estimated at that point that some 10,000 would be sold. The royalty was to be payable by the end of August. The heads of agreement envisaged that there would be a formal agreement. The licence to use the word "Spice" for the purpose of producing the limited edition scooter was an important factor for Aprilia when considering whether the deal with the Spice Girls would make sense for it.
19. It is common ground that at no stage in the negotiation did Aprilia (or AWS) ask KLP or SGL directly whether one of the group was thinking of leaving the group during the period of the agreement. However there was no evidence as to whether its representatives ever thought to do so.
20. On 8 March 1998, Aprilia announced its association with the Spice Girls at a press conference in Milan, and, as the tour was then beginning in Italy, it was permitted to take advantage of that association even before the agreement was signed. There is no evidence as to precisely when SGL approved promotional material and delivered it to Aprilia to advertise its association with the Spice Girls, but it must have been soon after the Noale meeting as promotional material was required for display at the Spice Girls' concert venues. SGL contends that Aprilia failed to prove with any precision when the marketing material was provided and by whom it was provided. There has been no suggestion that Aprilia used any promotional material without the requisite approval. I find that it was delivered to Aprilia at various dates as from 8 March 1998. I also find that when SGL approved material to be used by Aprilia, it did so in the belief that it was doing so in accordance with the rights to be conferred by the agreement
21. In the next few weeks negotiations took place over the terms of the formal agreement. Aprilia considered that these differed from the heads of agreement that had been agreed so there was further negotiation on new matters. These negotiations principally concerned the terms for the payment of the sponsorship fees and minimum royalty and the availability of the Spice Girls for the photo calls and the commercial shoot. There was also some negotiation about the precise scope of some of the rights. There was a disagreement about the date when the guaranteed royalty payment had to be paid. This led to difficulties between the parties in April 1998. SGL demanded payment and as explained below threatened to suspend the agreement unless the first payment due under the agreement was made.
22. Aprilia introduced AWS as the contracting party. I will turn to the negotiation over payment for the product endorsement later in this judgment but in order to set out the facts in chronological order I will now turn to the relevant events on tour which occurred in March.
(c) Frankfurt and Milan
23. Ms Bunton and Ms Halliwell gave evidence about two conversations on 3 and 9 March 1998. Ms Bunton did not recall them until she saw them mentioned in Ms Halliwell's draft statement.
24. Mr Sutcliffe suggested from what Ms Bunton said at a press conference in Milan that Ms Bunton had taken it seriously, but I accept Ms Bunton's explanation that this was not so.
25. On 3 March 1999 the Spice Girls were in a coach being taken from Frankfurt airport to their hotel nearby. On this trip Ms Halliwell said to Ms Bunton and the other Spice Girls that she was thinking of leaving the group at the end of September. This statement then was very tentative and the other Spice Girls did not take her seriously.
26. The next incident concerning Ms Halliwell's intention to leave the group took place shortly before a concert in Milan on 9 March 1998. The Spice Girls were waiting to go on stage when Ms Halliwell said that she definitely wanted to leave in September, that she said that she had "had enough" and that she would not leave before September. Ms Halliwell's evidence is that she sensed that the rest of the Spice Girls felt hurt and let down by this. Ms Bunton did not remember this. On the other hand she did recall a memorable exchange between the Spice Girls, which is also recorded in Ms Halliwell's recent autobiography "If Only". Counsel put this episode to her in cross-examination:
Q. Do you remember Melanie Chisholm saying something
along these lines. You may remember that. "That it feels like a Take That
moment. Is that how it was when Robbie [Williams] -- left? Are you doing
a Robbie on us?" Do you remember that?
Q. Do you remember Geri's reply, that was along the
lines of no I am not. I am going to stick that out until September. I am
committed to the band?
A. Kind of, but I think as she said it, it was very jokily said and we were just about to go on stage. I think we even ended up laughing so it was not something again I took seriously.
Q. The show had to go on and I am sure that it was
a great show?
A. Yes we always had great shows.
Q. Would Geri Halliwell be right when she says that
she sensed that after that announcement by her, that was obviously the second
occasion in the space of a week that she mentioned [it], the rest of you
felt rather hurt and let down? That is what she says. Would that be fair?
A. Not that I recall.
27. Again, I accept that the Spice Girls did not take Ms Halliwell seriously on this occasion either. It was a quick reference immediately before going on stage. At this time the Spice Girls were on tour. I do not consider that the Spice Girls or through them SGL appreciated that Ms Halliwell was going to leave the group as a result of these brief conversations. All that they knew was that she was thinking about it, and that there was a risk that she would leave. She did not give any reasons or say what her plans were. On the evidence, they were justified in not taking her seriously at this point. On her return to London Ms Halliwell telephoned Mr Thompson and called a meeting, which was the Wembley management meeting referred to below.
(d) The Madrid photocall
28. On 16 March 1998, the Spice Girls gave a concert in Madrid and there was a photo call which was arranged to give Aprilia's products publicity as provided by the heads of agreement and as subsequently provided by the agreement. However the photocall in Madrid, and indeed also those which took place in Munich and Paris on 22/23 March and 26 March 1998, caused Ms Fuzzi concern, which she described in her witness statement and the contemporaneous correspondence. On 18 March 1998, she wrote to Mr Morrison, Mr Pettett and Mr Simidian (among others) stating that the Spanish event had been very disappointing for Aprilia. This was due to several factors including
"very few people showed up, the girls on stage had been quite flat and not motivated, Mr Beggio [chairman of Aprilia] had the feeling of having been left apart during the photocall, no interaction between the people sitting down and Mr Beggio since the photographers were all standing up during his speech, TV's were not allowed inside - which caused a lot frustration for Aprilia Spain as well - the organisation was ready very late, so that we all had to waste time for checking everything, the buffet was very poor and so was the presentation on the tables."
Ms Fuzzi concluded:
"I think we need to improve overall to an enormous extent .... unless Paris is going to be an event organised at a real higher standard, we are not interested in such a project because we feel that it is not going to bring us any good, both externally and internally the company"
29. There is a dispute as to whether the photocall in Madrid was as bad as Ms Fuzzi perceived it to be. SGL has produced a photograph taken at the Madrid photocall and published in the South American press showing that most of the girls were smiling. There is also a photo taken at the Paris photo call showing Mr Beggio and the Spice Girls with a scooter. Mr Beggio and all but one of the girls was smiling. It is common ground that the Spice Girls had had bad relations with the Spanish press for historical reasons, and that that was one of the reasons why there was adverse comment about them in the Spanish press at the time. The Spice Girls also themselves had negative feelings towards the Spanish press, whom they say were rude and aggressive to them. As it was a photocall, television crews were not admitted, and Ms Fuzzi's complaint about this was not well-founded. However that may be, Aprilia had expressed considerable concern and KLP rightly felt that it was its responsibility to improve relations between Aprilia and SGL.
(e) The 30 March fax from KLP to Aprilia
30. On about 27 March 1998, the Spice Girls were in Arnhem in Holland. At Mr Pettett's request, their tour manager, Richard Jones (who did not give evidence) spoke to them about Ms Fuzzi's concerns over photocalls. There is no record of the discussion. Mr Jones then reported to Mr Pettett. Ms Halliwell accepted that it was likely that Mr Pettett was told that the Spice Girls were fully committed to the deal with AWS and she said that if there was a problem she is likely to have tried to smooth it over. Following the discussion that weekend, Mr Pettett sent Ms Fuzzi on 30 March 1998 a fax as follows:-
"This is a note to let you know about discussions we have had with the Spice Girls during the weekend and their involvement with Aprilia. We know you were disappointed with the attitude of the band at the press photocalls and we wanted to acknowledge your concerns in this area.
Firstly, we want to confirm that the band are totally committed to their involvement with Aprilia and this was discussed at length this weekend. All involved want to make sure that this arrangements works very well for you.
The band, who are currently undergoing a very hectic touring schedule and are therefore subject to enormous pressures from media attention, are committed to ensuring that all the activities and TV ad production works well and positively for Aprilia.
To conclude, we pride ourselves on being wholly professional in our approach and discussed the needs of the promotional activities with the band and their management again this weekend. This is understood and they are fully committed to make it as powerful as possible for Aprilia. We are confident that over the period of the agreement, Aprilia will achieve maximum value and results from this association with the Spice Girls. We look forward to a very good relationship with Aprilia and a positive association in our dealings." (Italicisation added)
AWS particularly rely on the words which I have italicised.
31. The fax was addressed to Ms Fuzzi. When she received the fax, her concerns were allayed. She also says and I accept that she relied on the assurances in the fax in making arrangements for the commercial photo shoot. As no agreement had been signed at this point or payment made it was still possible for either party to withdraw from the deal and given Ms Fuzzi's strong feelings about the Spice Girls' lack of commitment I have no doubt that Aprilia would have pulled out at this stage if it had not received this fax.
32. No copy of the fax was sent to SGL and accordingly SGL were not aware of its contents at any material time. However, there is no evidence from the Spice Girls or SGL to suggest that the contents of this fax were surprising.
33. Meanwhile, Aprilia was working on its plans for the production of the Sonic scooter. They produced a dashboard which had printed on it "Spice Girls" but no picture of them. It also produced stickers which were to be placed on the scooter.
34. Subsequent concerts were more successful for Aprilia. In particular in Holland, the Dutch subsidiary of Aprilia observed that the promotion of Aprilia at the event had been an enormous success. On 16 April 1998, KLP confirmed with Aprilia that the Spice Girls were available for the commercial shoot on 25/26 April 1998. Thereupon Aprilia made arrangements for the bookings for the location, the set, the film crew and so on.
(f) Dispute over payment by Aprilia of the first instalment due under the agreement35. On 24 March Lee & Thompson sent out the agreement in what they thought was its final form so that it could be signed. They also sent AWS an invoice for £337,500. On 1 April 1998, Lee & Thompson wrote to Aprilia expressing concern that Aprilia had been exercising its rights under the agreement for almost a month and had made no payment. The agreement had been sent to them for signature on the basis that all points had been agreed but Aprilia had raised new points, prolonging signature of the agreement. Lee & Thompson stated that unless the first instalment due under clause 5.1 of the agreement was paid by close of play on Thursday 3 April, Aprilia's rights would be suspended. The letter finished:-
"Failure to receive payment may also affect the girls' decision to do the commercial shoot envisaged under clause 10.9 of the agreement."
36. This letter was followed up by a letter from Mr Simidian to Ms Fuzzi. On 6 April, however, Aprilia raised further points on the agreement. Lee & Thompson made a second threat to suspend Aprilia's rights on 8 April 1998. On the same day Ms Fuzzi wrote to Mr Morrison saying that the agreement did not reflect the payment terms agreed at the meeting in Noale. The draft agreement provided for the 75% of the sponsorship fees to be due immediately on signature of the agreement, and the remaining 25% to be paid by 14 April 1998, and for the minimum royalty to be paid by 31 August 1998. Aprilia was not prepared to pay the sponsorship fees until 31 August 1998, as agreed at the Noale meeting. Likewise it was not prepared to pay the minimum guaranteed royalty payment until 31 December 1998. However, KLP offered a solution to this difficulty by agreeing to fund the minimum royalty payment so that it would be paid on the date which SGL required. It is not necessary to go into these arrangements in detail. Aprilia then agreed that it would accommodate the Spice Girls by making stage payments in relation to the sponsorship fees to the end of August 1998. The first payment of £150,000 would be made immediately, the second payment of £150,000 at the end of the European tour (29 May 1998) and the last payment at the end of the US tour (31 August 1998). The final payment schedule was agreed on 16 or 17 April 1998.
37. On about 16 April 1998, KLP agreed that the Spice Girls would be available for the commercial shoot on 25 and 26 April. Ms Fuzzi made the arrangements for the shoot such as hiring the set, the film crew and so on. The arrangements involved the participation of the Spice Girls, for example there had to be a costume fitting.
38. By 20 April 1998, no payment had been made to SGL and KLP wrote to Aprilia stating that if the first payment of £150,000 was not received by the end of that day SGL would potentially cancel the weekend's commercial shoot. The payment was made on 21 April and received by SGL on 23 April 1998. On this date Ms Fuzzi arrived in London in readiness for the film shoot. On her arrival Mr Morrison telephoned her to tell her that the shooting had been cancelled by the Spice Girls on the initiative of Lee & Thompson because they had not received the first payment under the agreed payment schedule. Aprilia's consultants advised that the cancellation costs in respect of the commercial shoot would be some 350,000,000 Italian lira (approximately £120,000).
39. Ms Fuzzi tried to persuade Mr Thompson that the shoot should still go ahead but he was not persuaded even when informed of the size of the cancellation costs. Mr Thompson's telephone attendance log shows that Mr Thompson made a number of telephone calls on the Friday to Mr Morrison, Ms Halliwell, Mr Brovazzo and Ms Phillips. Mr Thompson did not need to consult the Spice Girls other than Ms Halliwell as they had given her responsibility for making decisions about sponsorship and endorsement deals. The episode must have made it clear to SGL that the television commercial was a major investment for Aprilia.
40. On 4 May 1998 the second instalment of £150,000 due under the agreement was paid.
(g) The commercial shoot (originally fixed for 25/6 April, took place 4 May 1998)
41. It was however too late to prevent the cancellation of the shoot on 25 April 1998. By this time Victoria Adams was no longer available to do the shoot on that day. SGL suggested that the four girls who were available should be used. Aprilia rejected this possibility. Accordingly the arrangements for the commercial shoot for 25 April were cancelled but the shoot was rearranged for 4 May, when all five girls would be available. This led to a cancellation fee of approximately £120,000. Aprilia contends that it is significant that Aprilia rejected the possibility of doing the commercial shoot with just four girls. It shows that Aprilia attached importance to each member of the group. There is some weight in this point, but I do not consider that it would be possible to do a satisfactory commercial shoot featuring of any group of this size unless they were all present since the fans would expect to see all the group.
42. When the commercial shoot took place on 4 May 1998, Aprilia understood that the girls would attend the shoot between 9 a.m. and 11 p.m. However, the girls finished at about 8 p.m. leaving Aprilia to find doubles. However after negotiation, on 15 May 1998, Aprilia waived any claim it might otherwise have in relation to both the fact that the shoot was postponed and the fact that the Spice Girls left the set at around 8 p.m. rather than 11 p.m. SGL conceded a reduction of £50,000, provided that the second instalment was paid forthwith and Aprilia had little option but to agree to this, although the costs of the shooting that was cancelled were about £120,000. However, in the course of further correspondence, Aprilia said that it was running late with its advertising campaign for the Sonic Spice scooter and therefore was prepared to guarantee sales of 7,500 only.
43. The significance of the commercial shoot was not however that the Spice Girls did not stay as long as had been promised but rather that it took place and featured all five Spice Girls when SGL had reason to believe that the group's line-up would be only four Spice Girls from the end of the US tour.
(h) The agreement
44. The agreement was signed on 6 May 1998. On the same day KLP sent a fax to Aprilia confirming that it would pay the royalty payment of £112,500 due to be paid under the agreement on 31 August on behalf of Aprilia and that it would invoice Aprilia for this on 23 December 1998. The agreement was in the form of a letter from AWS to SGL and so far as material it was in these terms:
You are entitled to the product endorsement rights of the group of individuals performing together under the professional name 'Spice Girls' (currently comprising Emma Bunton (p/k/a 'Baby Spice'), Melanie Brown (p/k/a 'Scary Spice'), Melanie Chisholm (p/k/a 'Sporty Spice), Geri Halliwell (p/k/a 'Ginger Spice') and Victoria Adams (p/k/a 'Posh Spice') and jointly and individually referred to herein as 'the Group') and you will procure that all the necessary arrangements are made for the Tour (as hereinafter defined).
We write to confirm our agreement as follows:-
1. Throughout this Agreement the following terms shall have the following meanings:
1.1 'the Tour' shall mean all those concerts described in the First
1.2 'the Territory' shall mean those countries mentioned in the First Schedule.
1.3 'the Term' shall mean the period commencing 5th March 1998 to 29 May 1998.
2. The Tour shall be known as 'The Spiceworld Tour'. You and we shall agree on a design for the visual representation of the title of the Tour which design shall incorporate your and our trademark(s) (including the 'Aprilia' logo and the associated logo 'Sonic'). You shall use your best endeavours to procure that such visual representation shall be used in all printed material hereafter produced used or distributed in connection with the Tour.
3. Neither the Group nor any person on the Group's behalf shall accept or permit in relation to any concerts undertaken by the Group as part of the Tour within the Territory during the Term any sponsorship by any other motorbike/scooter entity. We shall during the Term be described as and acknowledged to be one of the 'Official Sponsors' of the Tour. During the Term the Group shall not in any part of the Territory advertise, endorse, publicise or promote any motorbike/scooter manufactured by any entity other than Aprilia. ...
5. We shall pay to you the sum of four hundred thousand pounds (£400,000) net of any applicable withholding taxes but with VAT in addition thereto, if applicable ('the Fee') in the following instalments:
5.1 one hundred and fifty thousand pounds (£150,000) not later than
1st April 1998 (receipt of which you hereby acknowledge)
5.2 one hundred and fifty thousand pounds (£150,000) ('the Second Instalment') by such date as such sum shall clear from the relevant account of our bank to your designated bank account in the United Kingdom ('UK'). Notwithstanding the foregoing we hereby acknowledge and agree that we shall by 12.00pm UK time on 4th May 1998 supply you with written evidence confirming that we have given unconditional and irrevocable instructions to our bankers to transfer forthwith the Second Instalment to your designated bank account in the UK and failure [by] us to supply you with such evidence by such deadline shall constitute a fundamental breach of this Agreement.
5.3. the balance of one hundred thousand pounds (£100,000) by 31 August 1998 ('the Third Instalment') and we shall supply you with written evidence by close of business on 31st August 1998 that we have given unconditional and irrevocable instructions to your designated bank account in the UK and failure by us to supply you with such evidence by such deadline shall constitute a fundamental breach of this Agreement.
In addition to the Fee, we shall supply to you (to a place designated by you) free of charge within seven (7) days of signature hereof:
(a) twenty (20) 'Sonic' scooters;
(b) ten (10) Phillip Stark Aprilia 'Moto' bikes.
Furthermore, if we require the Group to travel for the purposes of fulfilling this Agreement we shall pay for all (first class) travel costs, shall provide limousines for the Group and its entourage and pay any other incidental expenses together with a per diem allowance of US $100 per day for each member of the Group.
6. You hereby agree that the Tour as described in the First Schedule may vary but it shall (unless we agree otherwise in writing) satisfy the following minimum requirements:-
6.1 The Tour shall comprise not less than the following number of concerts
6.2 the various concerts comprising the Tour shall be performed at venues with an audience capacity (for concerts as opposed to, for example, sporting or other events) of not less than eight thousand (8,000) persons.
6.3 at each concert the Group will perform as the so-called 'headline act' or 'main attraction'.
8. You hereby grant to us the non-exclusive right to use the Group's character names, and their approved likenesses, photographs, biographical materials and the Group's approved logos, designs, emblems, trademarks, and approved artwork, transparencies and other approved visual representations of the Group ('Materials') for the purposes of our sponsorship of the Tour and the 'Spice Sonic' scooters (referred to in clause 13 below). ...
9. All uses of the Materials shall be approved by you in advance. We shall not be entitled to use the Materials in any way to promote the sale of records, videos or any other audio-visual products featuring the Group's performances nor to promote or endorse any products other than our motorbikes/scooters in accordance with the terms of this Agreement. Nothing contained in this Agreement shall permit us to make recordings whether of sound alone or sound coupled with visual images of the Group's performances.
10. As sponsors of the Tour we shall as soon as practicable following the signature of this Agreement and thereafter during the Term be entitled to the following advertising and promotional rights in the Territory (save as otherwise specified) subject always to your approval to the precise manner in which we wish to exercise such rights on the basis that any and all costs relating to the exercise of such rights shall be paid by us:-
10.1 you will procure sponsorship identification free of charge, in
all official programmes hereafter printed in connection with the Tour (in
which we shall receive one full colour full page advertisement subject to
the advertisement being approved by you) ...
10.6 the right to require that the Group attend so-called 'meet and greets' at each concert (subject to the Group's availability);
10.7 the right to require that the Group attend press conferences/photo calls, as follows:-
- in Milan a press conference on 8th March 1998
- in Madrid a photo call on 16th March 1998
- in Paris a photo call on 23rd March 1998
- in Munich a photo call on 26th March 1998
10.8 the right to mention our sponsorship of the Tour in sales literature issued by us for the 'Sonic' scooter;
10.9 the right to require that the Group attend (at our sole cost and expense) at a mutually agreed location in London on 4th May 1998 between 9.00am and 11.00pm for the filming of a television/cinema commercial for the 'Sonic' scooter which commercial may be broadcast/exhibited only in the countries of Italy, Spain, France, Greece, Portugal, Germany and Holland but on the basis that such commercial can be broadcast on MTV on a pan-European basis;
10.10 the right to require that on the 19th or 20th May 1998 (at your election to be exercised on or before 8th May 1998) the Group attend (at our sole cost and expense) at a location in Stockholm for a photo shoot for press advertising to promote the 'Sonic' scooter which press advertising campaign may only utilise such photos in the countries of Italy, France, Spain, Germany, Holland, Greece and Portugal (in both trade and consumer press) ...
We acknowledge that the Tour commenced prior to 4th March 1998 and that many elements of the Tour (in particular, advertising and publicity materials) had been put in place prior to our involvement with the Tour and, as such, may impact on your ability to fulfil some or all the requirements of this Agreement.
You and we agree that those rights granted to us pursuant to clauses 10.8, 10.9 and 10.10 may be exercised both during the Term and thereafter but not beyond 4th March 1999. ...
11.1 In respect of the tour you plan but do not guarantee to hereafter undertake in the United States (currently scheduled for the period commencing on or about 15th June 1998 and ending on or about 31st August 1998) we shall (for the duration of such tour only) have only the rights for the United States only that are described in the Second Schedule to this Agreement (but not any other rights whether specified herein or otherwise).
13. We shall have the right (both during the Term and thereafter unless and until you terminate such right on not less than two (2) months written notice which notice may not however be given until 31st January 1999 the earliest) to manufacture and sell worldwide a scooter under the brand name 'Spice Sonic'. For the first ten thousand (10,000) sales of such scooters you shall be entitled to a royalty of fifteen pounds (£15) (net of withholding tax) per sale and for each unit in excess of ten thousand (10,000) sales you shall be entitled to a royalty of ten pounds (£10) (net of withholding tax) per unit. We shall account to you within thirty (30) days of each month for such royalty. You may audit our books and records on request to verify your entitlement hereunder. As a non-returnable, non-recoupable guaranteed payment of such royalties we shall on 31st August 1998 pay to you the sum of one hundred and twelve thousand five hundred pounds (£112,500) (net of withholding tax). VAT shall be paid on such monies if applicable....
20. The construction, performance and validity of this agreement shall in all respects be governed by English law.
21. This agreement constitutes the entire agreement between you and us with respect to our sponsorship of the Tour....
For and on behalf of
APRILIA WORLD SERVICE BV
Accepted and agreed
For and on behalf of
SPICE GIRLS LIMITED"
45. Under the agreement the principal benefits conferred on AWS were set out in clauses 6,8 and 10.6 to 10.10 and 13. Moreover the rights to produce the Spice Sonic scooter under clause 13 were to last until SGL gave two months' notice, which it could not do before 31 January 1999. (Although clause 13 refers to the minimum royalty payment of £112,500 being non-recoupable, as well as non-returnable, this was an error as it was to be recouped out of sales of the first 7,500 Spice Sonic scooters). Thus the production rights under clause 13 were to last until at least 31 March 1999, even though the European Tour would last only until 29 May 1998. What is also clear is that the agreement involved a considerable amount of co-ordination between the parties in order that (for example) the promotional material could be approved and the commercial shoot completed. The agreement therefore offered many opportunities for the parties to communicate with each other.
46. In her witness statement, Ms Fuzzi said that had she known that one of the Spice Girls was going to leave during the period of the agreement AWS would not have entered into the agreement Likewise Mr Brovazzo said that Aprilia would not have entered into the agreement and invested several hundred thousand pounds into the project if it had known "from the outset" that Ms Halliwell would leave the group during the term of the agreement.
47. Ms Fuzzi said, and I accept, that it did not make sense in marketing terms for Aprilia to enter into the deal knowing that there would be a change in the line up at the end of September. Much of the marketing material that I have seen incorporated images of all five girls. Aprilia took the view that the market which it was targeting was discriminating and would not buy a product with an out of date image, and that marketing material had to be consistent. It would follow that the marketing material would have to be redesigned and reissued: there was no budget to do this. The publicity for the Spice Sonic scooter made much use of the five girl image, not simply on a sticker on the side of the scooter but also in the brochure and a beauty bag, video of the backstage at the shooting of the television commercial, the posters, postcards and so on. In any event it would be a formidable task, especially in relation to the scooter, to redesign this material. Ms Fuzzi explained that it would take a long time to redesign the graphics for the scooter. On the other hand, if Aprilia decided not to enter the agreement it would lose some credibility with its market because it had already announced its association with the Spice Girls and its intention to issue the Spice Sonic scooter. It had also incurred considerable expenditure on the television commercial, which was principally to be used while the Spice Girls were on tour (i.e. before the end of September in any event). Nonetheless, I accept the evidence of Ms Fuzzi that Aprilia would probably not have gone ahead if it had known that Ms Halliwell had stated that she intended to leave the group at the end of September. For marketing reasons it was important that there should be no change in the line-up.
48. The photoshoot referred to in clause 10.10 of the agreement took place in Stockholm on 19 or 20 May 1998. There has been virtually no evidence about this shoot. As regards clause 5 of the agreement, Aprilia delivered all but one of the scooters and all but two of the "Moto" bikes.
(i) The Wembley Management Meeting
49 The date originally arranged for the commercial photoshoot was 25 April 1998 but as stated above that date had to be changed. In the event, however, the Spice Girls did have an important meeting on that date in their dressing room at Wembley. The Spice Girls had been abroad and Ms Halliwell had arranged a meeting in order to discuss some business matters, and so it was not called specifically to discuss Ms Halliwell's intentions. They had called Mr Thompson and the group's accountant, Charles Bradbrook, to the meeting. Ms Phillips also attended the meeting. Also, somewhat curiously, SGL made no written record of the meeting. This suggests that the participants at the meeting did not appreciate its significance. Indeed Ms Halliwell did not appreciate that the deal with AWS could not be terminated until March 1999.
50. At the start of the meeting Ms Halliwell told the Spice Girls that she was going to leave the group at the end of the US tour. As Ms Halliwell perceived it, her departure was the main item of business at the meeting. She says that this led to a discussion which took up about half the meeting. Her intention was not expressed to be qualified. Ms Bunton confirmed that Ms Halliwell said she would be leaving at the end of September. She added " ...everything was fine with us, so it didn't seem real". I am satisfied that the announcement was an unqualified one, Ms Halliwell did not say that she was probably going to leave or that she might leave but that she would leave then. Mr Thompson thought there was a possibility that she might change her mind. In my judgment, that was not by this stage a likely possibility.
51. So definite was Ms Halliwell in her announcement that Mr Thompson advised that it would be better for the group to make an immediate announcement in case the matter leaked out to the press. The Spice Girls rejected this advice. In the witness box Mr Thompson described his suggestion as "ludicrous" and that "it was shot down in flames". The Spice Girls did not want the press to make use of the information and in any event Ms Halliwell would not be leaving until the end of the US tour.
52. In consequence of the decision at the Wembley management meeting not to make any public announcement but to keep Ms Halliwell's decision to leave confidential, no-one was told about her decision, not even KLP.
53. Mr Thompson's evidence was also that there was no discussion of the effect of Ms Halliwell's decision on Aprilia's position at the Wembley management meeting. I accept this evidence. I think that the members of the group are likely to have had many concerns arising from Ms Halliwell's decision and they were not familiar with the precise terms of the deal with AWS. . Even Ms Halliwell who was the member of the Spice Girls responsible for sponsorship and endorsement deals was not aware of the detail of the agreement, and in particular when she gave evidence she was unaware that Aprilia's rights lasted until March 1999. In addition, Ms Halliwell's departure was an emotional event: Ms Halliwell described it as like the end of a marriage. She also felt that the Spice Girls would continue notwithstanding her departure. But, as she said in cross-examination, her own mind was made up.
54. Although Mr Mill did attempt at an early stage in the trial to argue that Ms Halliwell had merely stated that she might leave the group and that the Spice Girls were hoping that she would change her mind, I am satisfied that Ms Halliwell had made up her mind to leave the group by 25 April 1998 and that this fact was known to SGL no later than the date of this meeting. Certainly there was no evidence to show that any attempt was made to persuade Ms Halliwell to stay after the end of the September and little evidence that she ever showed any sign of changing her mind.
55. There is no evidence that anyone at KLP knew of Ms Halliwell's intentions before the agreement was signed. Mr Thompson became aware of the intentions of Ms Halliwell on 17 April 1998 because she sought advice from him on that date in her personal capacity in that connection. However he did not know of her intentions before that date.
(j) Ms Halliwell's departure
56. On 27 May 1998, Ms Halliwell told Mr Thompson that she was leaving the band that day and left Mr Thompson to tell the other Spice Girls. She did not complete the European tour and missed two concerts in Oslo. Accordingly Ms Halliwell left the band at a much earlier date than the date she announced at the Wembley management meeting. However the fact that she left earlier than the end of the US tour has to be ignored when considering whether SGL was in breach of contract or made any misrepresentation before the date of the agreement.
57. Ms Halliwell's departure was reported in the press on 31 May 1998. There was extensive television and press publicity. After some prevarication, on 1 June 1998, Mr Pettett informed Aprilia that she had left the Spice Girls. In his letter of the same date Mr Pettett said
"Aprilia's relationship is unaffected and they will continue to be seen as a key commercial partner of the girls and have the benefit of limited branding and press opportunities during the US tour."
KLP assured Aprilia that they could continue to use the image of Ms Halliwell. However Ms Fuzzi considered that this was unrealistic and that Aprilia would lose credibility with the target audience. Ms Fuzzi considered that while there could have been another commercial shoot, new promotional material could have been created and the Spice Sonic scooter re-styled, the costs of doing so would have been prohibitive and could not have been recouped through sales. I accept Ms Fuzzi's views on these matters.
58. At this stage the Spice Sonic scooter was ready for production but production had not actually begun.
(k) Subsequent communications between the parties' legal advisers
59. These communications are important because SGL contends that Aprilia agreed to abandon any claim that it had arising out of Ms Halliwell's departure.
60. On 2 June 1998, Mr Vianello, an Italian lawyer in private practice acting for Aprilia, wrote to Lee & Thompson seeking information and informing them that Aprilia reserved its rights "to evaluate and claim any damages it might suffer as a consequence of" Ms Halliwell's departure. KLP confirmed to Aprilia that they could continue to use Ms Halliwell's image in their advertising. Lee & Thompson wrote on 3 June 1998 stating that Ms Halliwell's departure did not give rise to a breach of contract on the part of SGL and that SGL remained ready, willing and able to comply with all of its obligations. On 5 June 1998, Mr Vianello requested a meeting with Lee & Thompson. In the same letter he requested further publicity opportunities with the Spice Girls during the US tour.
61. Mr Thompson replied on 5 June 1998 as follows:-
"Dear Mr Vianello
Thank you for your extraordinary fax of June 5.
It is complete nonsense to suggest that your clients may be losing credibility because Geri has left the group. On balance, I imagine that Aprilia will benefit from the increased publicity surrounding the group as a result of Geri's departure.
I have already confirmed to you (although this is quite plain from the agreement itself) that your clients may continue to make use of Geri's image. Accordingly, there is no need for any new artwork or other materials to be produced.
You make the point that Aprilia is having to 'cope with the sponsorship that no longer is up to date'. My view is that Aprilia will not suffer as a result of this, but whether or not this is the case is irrelevant. The fact is that the possibility that there may be changes to the line-up in the group is one of the commercial risks which Aprilia assumed when it made the decision to sponsor a pop group. There is nothing in the agreement which compels Spice Girls Limited to ensure that there would be no changes to the line up and, indeed, the agreement was drafted in very specific terms so that Spice Girls Limited would not be in breach of contract in the event that circumstances of this kind were to arise.
You may rest assured that Spice Girls Limited will do whatever is reasonably possible to support Aprilia and (as I have already confirmed) certainly Spice Girls Limited will comply with all of its contractual obligations.
However, I am not prepared to entertain any further discussions with you or your clients so long as there is any threat on your part of a claim for damages and therefore before we take matters forward you must let me have your unequivocal confirmation that Aprilia accepts that Geri's departure does not give rise to any claim on Aprilia's part for breach of contract."
Mr Thompson repeated his request for an unequivocal assurance that Aprilia accepted that Ms Halliwell's departure from the group did not give rise to a breach of contract. On 8 June 1998, Mr Vianello replied as follows
"Dear Mr Thompson,
Aprilia / Spice Girls
Thank you for your fax of today.
As per your request, I wish to inform you that Aprilia doesn't consider Geri's departure a breach of contract.
The above notwithstanding Aprilia intends to avoid, with Spice Girls Limited help, any kind of damage which could derive from such event.
To this extent, while Aprilia is still evaluating a possible existence of such damage, we are willing to cooperate with you with the aim to decrease as much as possible any kind of inconvenience.
All that considered Aprilia still believe that, with your client's assistance, it could benefit from the increased publicity and interest around the group ..."
Mr Thompson then wrote in response to this on 9 June 1998 as follows:
"Dear Mr Vianello
Thank you for your fax of June 8. I am slightly confused by this because whilst you accept that Geri Halliwell's departure does not constitute a breach of contact, nevertheless you say that Aprilia is still evaluating the possible existence of some kind of damage deriving from her departure. Nevertheless, I assume from your letter that you accept that Aprilia does not have a valid claim against Spice Girls Limited in relation to any damage suffered.
In any event, I confirm that my clients will assist your clients by trying to ensure that Aprilia is given reasonable prominence on the US tour. However, you will appreciate that there is a limit to what may be done (beyond of course what is contractually due), given that any favouritism shown to Aprilia may lead to ill feelings so far as other sponsors are concerned.
I am sure that we will be able to find a practical solution to all of these difficulties and Rozanna Fuzzi should continue to deal with Adrian Pettett at KLP in this respect."
62. Mr Vianello did not challenge the assumption on which Mr Thompson was proceeding. After this letter, KLP discussed additional publicity opportunities for Aprilia with Ms Fuzzi and agreed to admit television crews to the press photocall in Miami at Aprilia's request.
63. In his witness statement (in respect of which a Civil Evidence Act notice was served) Mr Vianello said when he wrote on 8 June 1998 that "Aprilia doesn't consider Geri's departure a breach of contract", he intended to confirm that Aprilia did not wish to terminate the contract but wished to reserve its right to claim damages for breach of contract. In a later letter dated 8 August 1998, Mr Vianello sought other deductions from the amounts payable to SGL in respect of the cancellation of the New York photoshoot and the fact that only 2,000 Spice Sonic scooters had been produced and sales had been disappointing. On 17 September 1998, he wrote "... Aprilia is ready to remit to your client most of the amounts due ...". On neither occasion did Mr Vianello mention any claim for damages due to Ms Halliwell's departure. Mr Vianello makes no reference to this further correspondence in his witness statement. In those circumstances I cannot accept Mr Vianello's statement in his witness statement about his intention at the time of writing his letter dated 8 June 1998.
(l) The New York photo call
64. The four Spice Girls commenced the US tour on about 15 June 1998. KLP agreed that the Spice Girls would attend a photo call in New York on 1 July 1998. Aprilia then instructed its agents, Pringle Dixon Pringle, to book the Four Seasons Hotel but on 23 June 1998 SGL cancelled the arrangements. However, on 2 June KLP had stipulated that photocalls would take place at the same venue as the concert because of the distances between concert venues and the Spice Girls' hotels. In my judgment this was a reasonable stipulation. Ms Fuzzi was not informed of this and arranged it at the Four Seasons Hotel where the Spice Girls were staying. Mr Pettett explained that KLP took the view that this was not a suitable venue. The Spice Girls had an obligation to attend a photo call in New York but they were not bound to do so unless the request was a reasonable one. In my view KLP withdrew consent to the photo call in a reasonable manner and on reasonable grounds and accordingly I do not consider that these actions constituted a beach of the agreement. They offered an alternative venue in Long Island, but Aprilia did not accept this as Ms Fuzzi took the view that this would not have the same impact as a photocall in New York. After that Aprilia decided not to request any more of the photocalls in the USA which Aprilia was entitled to under the terms of the agreement.
65. Other complaints are made in respect of the US tour, namely that Ms Halliwell failed to attend meets and greets at up to 15 US concerts, but there has been no claim in respect of this or in respect of her failure to attend the concerts in Oslo and Helsinki. However the USA was an important market for Aprilia and the Spice Girls US tour was very disappointing to Aprilia.
(m) What if KLP had been informed after the Wembley Management meeting of Ms Halliwell's declared intention to leave the group?
66. Mr Morrison gave evidence about the importance and relevance of the information that Ms Halliwell was leaving the group to a person producing a marketing campaign. He considered that where the name is being branded on the individual product, as with the Spice Sonic scooter, the information was very important because it could well affect production plans and sales. (The information might he thought go either way: it could turn the product into something that was extremely desirable). He considered that if KLP had had the information at the time, KLP "would have absolutely told them - one hundred per cent, unless we had been told ... unless we had a reason not to."
(n) Mr Drinkwater
67. I now turn to the evidence of Mr Drinkwater, who, as I stated, is director of Bravado International Group Ltd. That company was the official merchandising agent for the Spice Girls World Tour in 1998. He stated that after Ms Halliwell left there was concern in the industry that the group would split up, but once the US tour was underway confidence was restored. Merchandising sales on the US tour were the highest that he had ever worked on in his 25 years in the business. Some merchandise bore images of all the Spice Girls and they sold well. Ms Halliwell's image remained on the merchandise. The spend per individual attending the shows in the United States was $11 which was particularly high (it was only £3 per head in Europe). There was increased publicity as a result of Ms Halliwell leaving the group and the best-selling item was a T-shirt bearing the image of the five Spice Girls.
68. One of the purposes no doubt in adducing this evidence was to seek to demonstrate that the Spice Sonic scooter could have been readily marketed without any change in design or promotional literature. However, in my judgment such an inference cannot be made. The US audiences were on the evidence from a lower age group. Mr Drinkwater's experience is based on sales to a captive audience at a concert venue, whereas scooters would be sold at a retail outlet and would be at much greater cost.
Issues arising on damages
69. On the question of the amount of loss which AWS had suffered, both sides called accountancy experts. AWS called Mr Nicholas Whitaker, a chartered accountant and a partner in the firm of Pannell Kerr Foster, and SGL called Mr Emile Woolf, also a chartered accountant and a partner in the firm of Kingston Smith.
On the basis that its claims in misrepresentation succeeds, AWS claims:
The Fee paid pursuant to clause 5 of the Agreement
The first 2 instalments of the Fee have been paid by AWS
|Value of goods delivered pursuant to clause 5 of the Agreement|
|(a) 19 scooters||17,097.00|
|(b) 8 Philip Stark Aprilia 'Moto' bikes||
|(a) In respect of 160 'Spice Sonic' scooters manufactured and held in stock unsold as 'Spice Sonic' scooters:|
(i) Production costs
(ii) Storage and handling costs
|(b) In respect of 373 'Spice Sonic' scooters which were adapted into 'Sonic' scooters:|
costs of adapting the scooters
(c) credit for profit earned on the 1,988 scooters which have been manufactured and sold or otherwise disposed of either as 'Spice Sonic' or as adapted 'Sonic' scooters.
|4.||Advertising and promotional material|
|5.||The cancelled New York photo call|
|(a) Pringle Dixon Pringle costs||5,841.46|
70. I have already found that the costs of the cancelled New York photocall are not recoverable from SGL.
71. On this basis that its claim for damages for breach of contract succeeds, AWS claims:
|The scooters||Amount (£)|
|(a) 160 'Spice Sonic' scooters have been manufactured but remain unsold and held in stock as 'Spice Sonic' scooters. Inrespect of these AWS claims:|
(i) loss of net profit (giving credit for the royalty payable at the rate of £15 per unit under clause 13 of the Agreement;in respect of 160 'Spice Sonic' scooters)
(ii) production costs
(iii) storage and handling costs
|(b) 373 'Spice Sonic' scooters have been adapted into 'Sonic' scooters. In respect of these scooters AWS claims the costs of adapting the scooters.||52,593.00|
|(c) 5,343 of 7,500 'Spice Sonic' scooters have not yet been manufactured. In respect of these scooters [AWS] claims loss of net profit (giving credit for the royalty payable at the rate of £15 per unit under clause 13 of the Agreement in respect of 5,343 scooters).||982,578.00|
|(d) 1,988 scooters have been manufactured and sold or otherwise disposed of as 'Spice Sonic' scooters or adapted Spice scooters. In respect of these scooters AWS gives further credit for the royalty payable at the rate of £15 per unit under clause 13 of the Agreement in respect of the 1,988 scooters manufactured and sold.||29,820.00|
72. At an early stage in these proceedings SGL pointed out that there were insufficient accounting records made available to enable it to verify its claims for wasted expenditure and lost profit in connection with the Spice Sonic scooters. The evidence established that production was started in June 1998 and ceased in about September 1998. The figures for the number of Spice Sonic scooters claimed by AWS to have been made but now remain unsold has been varied from 596 down to 446 and now 160. The deficiencies in the accounting records have led SGL to ask for an account of the royalty payments due in accordance with the terms of the agreement.
73. There are a number of issues that arise on damages.
AWS or Aprilia - whose loss?
74. As I explained at the start of this judgment, AWS is a subsidiary of Aprilia. By an agreement in writing dated 2 April 1998 AWS agreed to handle the publicity for Aprilia's products but to use Aprilia's marketing department for this purpose. In return Aprilia agreed to pay AWS remuneration in the amount of its costs plus 10%. The agreement, however, contains no provision enabling Aprilia to recover its costs from AWS and indeed such a provision would be circular since Aprilia would have to reimburse AWS for the costs that it had had to pay out to it.
75. Mr De Benetti in his evidence suggested that it was sufficient if Aprilia produced group accounts showing the liabilities of Aprilia and AWS. This however would not affect the legal question of which company had suffered the loss. It follows that AWS cannot claim as against SGL amounts which SGL owes Aprilia. One possible solution is for AWS to acquire the right to do so.
Schedules 1 and 2
76. I now turn to the items claimed above. As appears above some Spice Sonic scooters were adapted and sold as Sonic Scooters. Some 3,000 Spice Sonic scooters were manufactured. The figures have been changed in the course of the hearing and accordingly I will direct a further hearing to deal with issues relating to the amount to which any party is entitled.
77. For the purposes of the claim in misrepresentation, Aprilia is entitled to receive damages for its loss (see, for example East v. Maurer  1 WLR 461). This schedule has been drawn on the basis that Aprilia would not have entered into the agreement. For the reasons given above, I do not consider that if Ms Halliwell's departure had been revealed to Aprilia it would have re-negotiated the contract. Hence this schedule proceeds on the correct basis.
(1) Fees paid pursuant to the agreement and (2) Value of scooters.
78. SGL submits that Aprilia received the benefit of being the official sponsor of the Spice Girls European tour and that accordingly should give credit for this, and any increase in the sales of Sonic scooters in consequence of the Spice Girls' branding of Aprilia's products. Under section 2(1) of the Misrepresentation Act 1967, set out below, damages are calculated on the basis of fraud (Royscot v. Rogerson  2 QB 297) and as no authority has been produced to support this credit, I shall not direct it to be taken into account.
(3) The scooters
79. The figures of 160, 373 and 1,988 scooters have been checked by Mr De Benetti, and I accept his evidence.
(a) Production costs have been worked out by Mr Whitaker on the basis of an average of the written down value and the value as adapted. The underlying stock records have not been made available but as the production costs were checked by Mr De Benetti, these can be accepted. Credit should be given for any residual value in the scooters retained. I accept Mr Whitaker's figure on storage and handling costs (£17,506).
(b) Adaptation costs: Mr Woolf points out that these costs are evidenced by one composite internally generated voucher, which does not indicate who carried out the work. However, Mr Whitaker does not regard the method of calculation as unreasonable, and accordingly this figure can be accepted.
(c) SGL should receive (if it has not done so already) the benefit of its royalty. The records supporting this figure are unsatisfactory. However I approve Mr Whitaker's methodology.
(4) Advertising and promotional material
80. Mr Woolf considers that this should not include material which was actually used during the Spice Girls European tour to promote Aprilia as opposed to the Spice Sonic scooters. However, expenditure on all such material is loss directly flowing from the misrepresentation and should therefore stand. The claim for this expenditure should be limited to £311,406 which Mr Whitaker considered to be the correct figure.
Schedule 1 generally
(1) Credit should be given for profit earned on Spice Sonic scooters that were sold.
(2) Credit should be given (if not already given) for the profit on Spice Sonic scooters that were sold or Spice Sonic scooters manufactured but remaining in stock as adapted.
81. Paragraphs 1(a)(ii) and (iii) are the same as paragraphs 3(a)(i) and (ii) of schedule 1. Paragraph 1(b) is the same as paragraph 3(b) of schedule 1.
82. Paragraph 1(c): Mr Woolf considers that this figure is without merit. There were no written sales projections, business plans, forecasts or other documents evidencing "Spice Sonic" scooters. The loss of profit claim was as originally pleaded over £5,000,000 but has since been reduced to £982,578. Mr De Benetti gave evidence that he checked the amounts claimed against Aprilia's production and accounting records. I accept this evidence. Mr Whitaker has calculated the figure shown above. He uses the figure of projected Spice Sonic scooters which Aprilia planned to make and applied the unit profit adjusted to reflect the higher profit on sales in Italy. I accept this evidence. The unit profit has been supplied by Aprilia. Likewise I accept Mr Whitaker's calculation on a consistent basis of the figure in paragraph 1(i)(a).
Submissions and Conclusions
83. Aprilia's principal case is in misrepresentation. Contrary to Mr Sutcliffe's submissions, its alternative case in contract is in my judgment precluded by the agreement between Mr Thompson and Mr Vianello in their correspondence set out above.
84. By letter dated 5 June 1998, Mr Vianello approached Mr Thompson with a request that the Spice Girls should agree to a further press function. This was outside the agreement. On the same day, Mr Thompson replied that he was not prepared to entertain any discussions while there was a threat of a claim for damages for breach of contract arising out of Ms Halliwell's departure. Mr Vianello replied on 8 June 1998 that Aprilia did not consider Ms Halliwell's departure to be a breach of contract. The balance of his letter was ambiguous. It referred to damage. It is evident that Mr Thompson interpreted this to mean that Aprilia was giving up any claim to damages for breach of contract and in my judgment he acted reasonably in doing so. He set out his understanding in his reply dated 9 June 1998 to Mr Vianello. Mr Vianello did not correct Mr Thompson's understanding, and the Spice Girls granted Aprilia further privileges at the Miami press conference in consequence. In those circumstances, Aprilia must in my judgment be taken to have entered into a binding agreement to release its claim for breach of contract. However, that agreement is in my judgment limited to any claim for breach of contract. No other claim was referred to and there was no attempt to sweep up all claims.
85. In those circumstances, it is not necessary for me to deal with the question of collateral warranty or implied term.
86. I now turn to the question of misrepresentation: did the failure by SGL to disclose to Aprilia that Ms Halliwell had stated that she intended to leave the group at the end of the US tour amount to a misrepresentation (issue 1) which induced the agreement (issue 2) and if so is there a remedy in damages (issue 3)? The misrepresentation is alleged to have been made expressly in the 30 March fax and in the preamble to the agreement (by the use of the words "currently comprising") and impliedly by conduct.
87. Aprilia submits that the 30 March fax is a misrepresentation as to the intentions of the Spice Girls. Mr Sutcliffe submits that a statement of intention is a representation of fact if there is not the will to put it into effect: Edgington v. Fitzmaurice (1885) 29 Ch.D 459, 483 per Bowen LJ. He further submitted that it did not matter that the representation was made by an agent who did not know that the representation was untrue: Smelter Corporation v. O'Driscoll  IR 307, 311. Mr Sutcliffe submits that it is plain that SGL intended Aprilia to rely on the representations in the fax in order to induce Aprilia to enter into the agreement. Ms Fuzzi did rely on the fax.
88. Mr Sutcliffe also submits that a special relationship, giving rise to a duty of care, may arise between the parties negotiating a contract if information is given in connection with the contract: Esso v. Marden  1 QB 801. Mr Mill submitted that no such claim could arise.
89. As regards the preamble to the agreement, Mr Sutcliffe submits that the words "currently comprising" were literally true at 6 May 1998, when the agreement was signed, but they were misleading given that Ms Halliwell had declared an intention to leave the group and that the obligations in clauses 10.8, 10.9 and 10.10 of the agreement were to last until March 1999. These clauses involved the creation of sales material and television and press advertising using the images and logo of the five girl band, followed by a period of time in which Aprilia was permitted to sell its Spice Sonic scooters. Those rights could not be effectively exercised if Ms Halliwell left the group at the end of September 1999. Therefore entry into the agreement amounted to an implied representation that none of the members of the group had an existing or declared intention to leave before the end of the period.
90. Mr Sutcliffe also relies on misrepresentation by conduct. He submits that the supply of logos, images and designs for the five girl band, coupled with the participation of the five Spice Girls in the press conference, photocalls and the shooting of the television/cinema commercials amounted to a representation by conduct that none of the Spice Girls had an existing declared intention to leave before the end of the twelve month period to March 1999. SGL must have known that the material would become outdated on Ms Halliwell's departure. As Mr Sutcliffe put it on Day 1, SGL:-
"... allowed Aprilia to believe that the commercial shot with the five would be a commercial that would be of value to them for the duration of their right, when plainly that was not the case because they knew that one of the members was going to leave long before those rights had been fully exploited."
91. Mr Sutcliffe relies on Schneider v. Heath (1813) 3 Camp 506, where a ship was sold "to be taken with all faults". In fact the vendor knew that she was unseaworthy. The particulars of sale stated that her hull was "nearly as good as when launched". In fact the hull was rotten and the captain took her to a place where he kept her constantly afloat. Mansfield CJ held that the knowledge of the captain should be imputed to the owner of the ship, and that the contract should be set aside for misrepresentation. Mr Sutcliffe also cited Reynell v. Sprye (1852) 1 De G M & G 660, and Walters v. Morgan (1861) 3 De G F & J 718,723. There is no doubt that a person may make a representation or statement by conduct.
92. Mr Sutcliffe also submitted that SGL came under a duty to disclose to Aprilia the material fact of Ms Halliwell's impending departure. On his submission, Ms Halliwell's announcement was a significant event and a matter which would be material to Aprilia's decision as to whether it should enter into the agreement. By not disclosing that fact, they misrepresented the position. Mr Sutcliffe accepts that as a general rule, a person about to enter an agreement is under no duty to disclose material facts. However, he submits that there are exceptions to this rule. First, he submits that a person may make a representation by conduct if he fails to correct an impression given by his conduct (Walters v. Morgan, above). Second, Mr Sutcliffe submits that a person may have a duty to disclose material facts which come to his notice before the conclusion of a contract if they falsify a representation previously made by him: With v. O'Flanagan  1 Ch 375, Traill v. Baring (1864) 4 De G J & S318). Thus, in With v. O'Flanagan, it was held that a representation as to the profits of a medical practice made with a view to inducing purchasers to buy the practice was a continuing representation. The vendor had a duty to communicate a change in circumstances to the purchaser. Third, Mr Sutcliffe submits that a person is guilty of misrepresentation, though all the facts stated by him are true, if his statement is misleading as a whole because it does not refer to other facts affecting the weight of those stated (see for example Nottingham Patent Brick Co v. Butler (1886) 16 QBD 778). In that case a solicitor stated that he was not aware that property was subject to any restrictions, but his failure to add that he had not read the relevant deeds made his statement a misrepresentation.
93. Mr Sutcliffe places particular reliance on Brown v Raphael  Ch 636. This concerned the sale of an absolute reversion in a trust fund. The particulars stated that: "Estate duty will be payable on the death of the annuitant who is believed to have no aggregable estate" and the name of the solicitors who prepared the particulars was given. The solicitors made the statement of belief honestly but they had no reasonable grounds for so believing. The solicitors were better equipped with information or the means of information than the purchaser. In those circumstances, the Court of Appeal, applying the earlier decision of the Court of Appeal in Smith v London and House Property Corporation (1884) 28 Ch.D 7 held that the statement of belief not merely implied that the solicitors held that belief, but also by implication that the solicitors knew facts which justified their opinion; that is that they had reasonable grounds for their belief. Here KLP, in sending the fax, and I assume SGL, in making the representations by conduct relied on by Aprilia, had superior access to the information about Ms Halliwell's stated intention to leave the group.
94. SGL made a number of submissions about the interpretation of the fax. In particular, SGL contends that this fax was concerned specifically with the Spice Girls' attitude to photocalls and does not deal with Aprilia's position generally. It was certainly written in the context of Aprilia's concerns about photocalls. The fax in terms refers to all activities, and "TV ad production works." However, it was written by KLP for the specific purpose of meeting Ms Fuzzi's concerns about photocalls, and it should not in my judgment be construed as having a wide and general effect. In the alternative SGL also contends that the commitment was limited to activities during the tours which required the group's involvement and participation and draws attention to the reference to the Spice Girls' "involvement" with Aprilia. This point assists SGL's case for the obvious reason that Ms Halliwell had stated that it was her intention to leave at the end of the US tour and the 30 March fax did not misrepresent the position if it was talking solely about the Spice Girls' activities before that date. However the Spice Girls could be asked to approve promotional material after the tour had ended or for use after the tour had ended and there is nothing in the fax to indicate that the commitment in the fax did not apply to any such activity as well.
95. In the alternative SGL adopts a point made by Mr Pettett in his evidence that in the penultimate sentence quoted above the "We" referred to was KLP not SGL. What KLP appears to have been doing is adding its own endorsement to the Spice Girls commitment but that does not affect the fact that the fax had already given commitments on behalf of the Spice Girls.
96. In my judgment, SGL is to be taken to know that Ms Halliwell intended to leave the group from 25 April 1998, the date of the Wembley management meeting. At that time the directors of SGL were the Spice Girls and Ms Phillips. I accept Mr Mill's submission that before that date Ms Halliwell's statements of intention were too uncertain to lead to misrepresentations. As I see it, SGL were not bound on any basis to disclose to Aprilia the statements made by Ms Halliwell on 3 and 9 March. They were not taken seriously by the other Spice Girls, and they were said on informal occasions. There was no proper discussion of the implications.
97. Clearly, to determine whether there was any misrepresentation in the agreement, it is necessary to find the true meaning of the agreement. Likewise, in my judgment, to establish whether (say) participation in the commercial shoot amounted to a misrepresentation, it is necessary to consider the obligations in the agreement because in participating in the commercial shoot, SGL were doing no more and no less than the agreement required. Accordingly, I now turn to the interpretation of this agreement.
98. It is common ground that in construing a contract the court is not restricted to the terms of the contract. The court can take into account the factual matrix and purpose of the agreement. In Investors Compensation Scheme Ltd v. West Bromwich Building Society  1 WLR 896, Lord Hoffman (with whom Lord Goff, Lord Hope and Lord Clyde agreed) stated the law thus:-
"My Lords, I will say at once that I prefer the approach of the judge. But I think I should preface my explanation of my reasons with some general remarks about the principles by which contractual documents are nowadays construed. I do not think that the fundamental change which has overtaken this branch of the law, particularly as a result of the speeches of Lord Wilberforce in Prenn v. Simmonds  1 W.L.R. 1381, 1384 1386 and Reardon Smith Line Ltd v. Yngvar Hansen-Tagen  1 W.L.R. 989, is always sufficiently appreciated. The result has been subject to one important exception, to assimilate the way in which such documents are interpreted by judges to the common sense principles by which any serious utterance would be interpreted in ordinary life. Almost all the old intellectual baggage of 'legal' interpretation has been discarded. The principles may be summarised as follows.
(1) Interpretation is the ascertainment of the meaning which the document would convey to a reasonable person having all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract.
(2) The background was famously referred to by Lord Wilberforce as the 'matrix of fact,' but this phrase is, if anything, an understated description of what the background may include. Subject to the requirement that it should have been reasonably available to the parties and to the exception to be mentioned next, it includes absolutely anything which would have affected the way in which the language of the document would have been understood by a reasonable man.
(3) The law excludes from the admissible background the previous negotiations of the parties and their declarations of subjective intent. They are admissible only in an action for rectification. The law makes this distinction for reasons of practical policy and, in this respect only, legal interpretation differs from the way we would interpret utterances in ordinary life. The boundaries of this exception are in some respects unclear. But this is not the occasion on which to explore them.
(4) The meaning which a document (or any other utterance) would convey to a reasonable man is not the same thing as the meaning of its words. The meaning of words is a matter of dictionaries and grammars; the meaning of the document is what the parties using those words against the relevant background would reasonably have been understood to mean. The background may not merely enable the reasonable man to choose between the possible meanings of words which are ambiguous but even (as occasionally happens in ordinary life) to conclude that the parties must, for whatever reason, have used the wrong words or syntax: see Mannai Investments Co. Ltd. v. Eagle Star Life Assurance Co. Ltd A.C. 749.
(5) The 'rule' that words should be given their 'natural and ordinary meaning' reflects the common sense proposition that we do not easily accept that people have made linguistic mistakes, particularly in formal documents. On the other hand, if one would nevertheless conclude from the background that something must have gone wrong with the language, the law does not require judges to attribute to the parties an intention which they plainly could not have had. Lord Diplock made this point more vigorously when he said in Antaios Compania Naviera S.A. v. Salen Rederierna A.B.  A.C. 191, 201:
'if detailed semantic and syntactical analysis of words in a commercial contract is going to lead to a conclusion that flouts business commonsense, it must be made to yield to business commonsense.'"
99. Mr Mill referred me to the doubts about recourse to surrounding circumstances where the meaning of a contract is clear expressed by the Court of Appeal in National Bank of Sharjah v. Dellborg (9 July 1997, unreported). However, despite those doubts, the Court of Appeal recognised that evidence of surrounding circumstances should be admitted even in that case.
100. Mr Sutcliffe submits that the words "currently comprising" should be given an extended meaning. He relies on the commercial purpose of the agreement, Aprilia was to get a large amount of publicity out of the sponsorship arrangements and the possibility of producing a special limited edition "Spice Sonic" scooter. He also relies on background knowledge known to both parties, namely: that the Spice Girls were the leading girl band and the launch of the Sonic scooter was an important new product providing entry into a new category of scooters for young drivers. The five Spice Girls had distinctive images, styles and personality to appeal to a wide cross-section of girls.
101. Mr Mill submits that the words "currently comprising" support his case and that accordingly the rights conferred by the agreement could go no further than give Aprilia a right to use approved promotional material of the group for the time being. . Clause 21 provides that the agreement constitutes the entire agreement between the parties but Mr Mill does not contend that this excludes a claim for misrepresentation in principle.
102. In short, Mr Mill's case is that the approval of promotional material, and by parity of reasoning participation in the commercial shoot, merely confirms that Aprilia could use the material, if it wished, pursuant to the terms of the agreement. He also submits that Ms Halliwell stated that she would stay until the end of the US tour. Aprilia intended to use the television commercial during the Spice World Tour, but its contractual right was to use all such material down to March 1999. I have found above that Aprilia attached considerable importance to having the images of the five girls throughout the period to March 1999, and that it would not have entered in the agreement if it had known that Ms Halliwell would leave in September.
103. The words "currently comprising" clearly throw the risk of any change in the composition in the band during the period of the agreement on to Aprilia. If the parties had wanted some different result they could have provided for relevant information to be supplied to Aprilia. There was no provision in the agreement for SGL to keep Aprilia informed about any plans of the Spice Girls which might be relevant to the exercise by them of their rights under the agreement. (This can be contrasted with another document, albeit evidencing a somewhat different commercial transaction, which was in evidence. In the draft agreement between KLP and SGL appointing KLP its sponsorship consultants, which was never signed, SGL agreed to give KLP information relevant for its purposes). On the face of it the agreement looks to be incomplete and to make no provision for the eventuality that a band breaks up during the period of the contract. In fact the agreement appears to have been deliberately left incomplete in this respect, because as Mr Brovazzo accepted in his witness statement and as Mr Sutcliffe accepted in his opening, AWS accepted the commercial risk that the group might break up after the agreement had been made. So it would appear that in that event the loss was to lie where it fell. In that situation, therefore, AWS would be left with any wasted expenditure and would not be able to recover any damages for anticipated profit that it lost and was unable to make in the changed circumstances.
104. I would add that there appear to be other gaps in the agreement. For instance it does not actually say what the group are to do at any photocall or when they attend a commercial shoot. The answer is too obvious to state. They were to do that which might reasonably be expected of them on such an occasion to endorse Aprilia's products. If it had been suggested to the parties that such a clause had to be inserted into the agreement they would have said "Of course, that's the deal.". The agreement has to be seen as one which imposes some obligations by implication on SGL.
105. A distinguishing feature of the Spice Girl's participation in the commercial shoot, or their approval of promotional material, as opposed to (say) their participation in a "meet and greet" (a celebrity reception), was that it required them to do something now to be used at a date in the future. However, as I have said, the agreement specifically allows promotional material to be used to promote the Spice Sonic scooter (clause 8). Clause 10.9 also specifically allows the commercial shoot to be broadcast in the specified countries until 4 March 1999, and likewise clause 10.10 specifically allows the press advertising to be used to promote the Spice Sonic scooter in the specified countries until the same date.
106. There must be many situations where one party has superior, even secret, knowledge which the other party did not have when it entered into the contract. A skilled buyer may spot a valuable painting in a flea market and buy it at a ridiculously low price because the vendor did not have this knowledge. In such a situation, one would expect the general rule that there is no general duty to disclose to apply. In the example just given, one would expect the information on which the value of the painting was based to be generally available. But that is not this case. Knowledge of Ms Halliwell's stated intention to leave the Spice Girls at the end of the US tour was not information which Aprilia could acquire. It was agreed to be kept confidential to those who attended the Wembley management meeting. Mr Morrison in his evidence recognised that the information was or might be material to Aprilia and that in principle it ought to be disclosed to them.
107. With these factors in mind, I return to Brown v. Raphael, above. Mr Mill did not address me on the passages on which Mr Sutcliffe relied. In that case, as I have said, the Court of Appeal applied a passage from the judgment of Bowen LJ in Smith v. Land and House Property Corporation. Lord Evershed MR set out the passage in his judgment and added some important observations of his own:-
"For present purposes the guidance I seek to get is to be found in the language of Bowen L.J. who said [Ibid.15]:
'In considering whether there was a misrepresentation, I will first deal with the argument that the particulars only contain a statement of opinion about the tenant. It is material to observe that it is often fallaciously assumed that a statement of opinion cannot involve the statement of fact. In a case where the facts are equally well known to both parties, what one of them says to the other is frequently nothing but an expression of opinion. The statement of such opinion is in a sense a statement of a fact, about the condition of the man's own mind, but only of an irrelevant fact, for it is of no consequence what the opinion is. But if the facts are not equally known to both sides, then a statement of opinion by the one who knows the facts best involves very often a statement of a material fact, for he impliedly states that he knows facts which justify his opinion'
It is that last sentence which is particularly pregnant for present purposes
I observe two things; first that the Lord Justice is not laying down a universal rule. His language is:
'a statement of opinion ... involves very often a statement of a material fact.'
Second, he observes that for that possibility to arise one party must know the facts better than the other. Observe that he is not saying that one party must know all the facts; it suffices for the application of the principle if it appears that between the two parties one is better equipped with information or the means of information than the other.
It is very often said, and truly said, that each case must depend upon its own facts; and I apprehend that the real question for the court is to say, on the basis of the facts and the context of this case, whether this is an instance in which the representation that the vendor has reasonable grounds for his belief out to be imported."
108. The particular facts on which Lord Evershed MR relied in reaching his decision were: the materiality to a purchaser of a reversion of a representation as to the impact of estate duty on the annuitant's death; and the fact that the name of the solicitors was added. Lord Evershed considered the effect of this language on the mind of a possible purchaser. He concluded that :-
"it would flow from the language used and would be intended to be understood by a reader of the particulars that persons who know the significance of this matter and who were experienced and competent to look into it were expressing a belief founded upon substantial and reasonable grounds:
Romer LJ gave a concurring judgment, Ormerod LJ agreed in the result.
109. In my judgment, however, Brown v Raphael does not assist Aprilia. In that case, there was a statement of belief. The words "currently comprising" in the preamble to the agreement do not constitute a statement of belief. Those words were literally true and signal the possibility of future changes in the line-up of the group. There is as I see it no representation in the agreement as to the preservation of the composition of the group. There is therefore no representation in the agreement which is falsified by the failure to disclose the stated intention of Ms Halliwell to leave the group. In those circumstances, the words "currently comprising" cannot in my judgment constitute a misrepresentation on any of the bases put forward by Mr Sutcliffe.
110. Accordingly I now turn to the question whether participation in the commercial shoot amounted to a representation by conduct that SGL did not know and had no reasonable grounds to believe at or before the time of entry into the agreement that any of the Spice Girls had an existing declared intention to leave the group.
111. SGL knew the importance which Aprilia attached to having the right to endorse their products with images of the Spice Girls down to March 1999. Without those rights, Aprilia could not manufacture and sell the limited edition Spice Sonic scooter or use promotional literature for its products which used images of the Spice Girls. SGL knew the very considerable expense involved in the shoot. SGL did not consider what effect a change in the line up would have on Aprilia and in my judgment SGL could not reasonably form the view that there would be no or no significant adverse effect. SGL would not be prevented from passing the information to Aprilia. It could have done so in the strictest confidence.
112. Given that the benefits of the commercial shoot could not be enjoyed by Aprilia if one of the Spice Girls left the group before March 1999, participation in the shoot in my judgment carried with it a representation by conduct that SGL did not know, and had no reasonable ground to believe, that any of the Spice Girls had an existing declared intention to leave the group before that date. Nothing was done to correct that representation which was a continuing representation. It was on the facts found material to Aprilia's decision to enter into the agreement that none of the Spice Girls was intending to leave in the contract period. Accordingly, SGL had a duty to correct its misrepresentation. What I have said about the commercial shoot must equally apply to other promotional material depicting the five Spice Girls which was intended to be used at any time during the period of the agreement.
113. I next turn to the question whether the representations by conduct induced the agreement. This is a necessary requirement for an action in misrepresentation (see Horsfall v. Thomas (1852) 1 H & C 90 and see the Misrepresentation Act 1967 section 2(1)). Mr Mill submits that there is no evidence that AWS relied on any representation by conduct in entering into the agreement. No one gave evidence on behalf of AWS. Mr Brovazzo was part of the team who took the decision to cause AWS to enter into the agreement, but he does not state that he relied on these representations. In certain limited circumstances, reliance can be inferred. In Smith v. Chadwick (1884) 9 AC 187, Lord Blackburn stated:
"I think if it is proved that the defendants with a view to induce the plaintiff to enter a contract made a statement to the plaintiff of such a nature as would be likely to induce a person to enter into a contract, and it is proved that the plaintiff did enter into the contract, it is a fair inference of fact that he was induced to do so by the statement."
114. Ms Fuzzi and Mr Bravazzo both gave evidence that Aprilia would not have entered into the agreement if it had been known that Ms Halliwell had declared an existing intention to leave the group in September 1998. This would have deprived Aprilia of the full benefits of the five girl promotional material, and I have no doubt that AWS would have consulted Aprilia's marketing department if it had been told of Ms Halliwell's intentions.. Before the agreement was made, Aprilia incurred expenditure on the commercial shoot. I have held that SGL's participation in this carried with it an implied representation that SGL did not know and had no reasonable grounds to believe that any of the Spice Girls had an existing declared intention to leave the group and that this was a continuing representation which SGL had a duty to correct if it was falsified before Aprilia entered into the agreement. Given that Aprilia had to sign the agreement to get the right to use the commercial shoot (and that there was no other reason for it to sign the agreement except to get the rights thereunder), it seems to me that the court can infer that indirectly it was induced to enter the contract by the representation made to it when it made the shoot. The same would apply to other promotional material which constituted a representation by conduct. I am satisfied that SGL participated in the commercial shoot and provided logos, images and so on of the Spice Girls in order that Aprilia should sign the agreement. I am also satisfied that the representations by conduct were such as to be likely to induce a person to enter into the agreement. An inducement to enter into a contract need not of course be the sole inducement.
115. Section 2(1) of the Misrepresentation Act 1967 provides:-
""2.—(1) Where a person has entered into a contract after a misrepresentation has been made to him by another party thereto and as a result thereof he has suffered loss, then, if the person making the misrepresentation would be liable to damages in respect thereof had the misrepresentation been made fraudulently, that person shall be so liable notwithstanding that the misrepresentation was not made fraudulently, unless he proves that he had reasonable ground to believe and did believe up to the time the contract was made that the facts represented were true."
116. The onus then shifts to SGL to show that it had reasonable ground to believe, and did believe that at the date of the agreement the representation was true. It cannot discharge this onus. SGL is accordingly liable in damages to Aprilia. I have set out my findings on damages above. Schedule 1 applies.
117. In the circumstances, there is no need for me to deal with the alternative claim based on misrepresentation at common law.
118. SGL also seeks an account of the royalty paid. It is entitled to this under clause 13 of the agreement. I will stand over for further consideration the question of the other orders to be made on SGL's claim and the amount of the damages payable by SGL.
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