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Cite as: [2006] EWHC 1492 (QB)

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Neutral Citation Number: [2006] EWHC 1492 (QB)
Case No: HQ05X01564

IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION

Royal Courts of Justice
Strand, London, WC2A 2LL
22 June 2006

B e f o r e :

THE HON. MR JUSTICE GRAY
____________________

Between:
JOHN WADLOW
Claimant
- and -

HENRY OLUSEGUN ADEOLA SAMUEL (p.k.a. SEAL)
Defendant

____________________

Ian Mill QC and Mark Vinall (instructed by Clintons, Solicitors) for the Claimant
Andrew George (instructed by Russells, Solicitors) for the Defendant

Hearing dates: 6-12 June 2006

____________________

HTML VERSION OF JUDGMENT
____________________

Crown Copyright ©

    Mr Justice Gray:

    The parties

  1. The Defendant in this action, Mr Henry Samuel, is an internationally well-known singer and songwriter professionally known as "Seal", by which name I shall refer to him in this judgment. The Claimant, Mr John Wadlow, is his former manager.
  2. The broad issues

  3. This is the trial of liability only. Mr Wadlow's claim is for an account of the commission allegedly due to him in relation to two albums ("the First Album" and "the Second Album"). Both the First and the Second Albums reached number one in the UK Albums Chart.
  4. Mr Wadlow's primary case is that the commission is payable pursuant· to a Management and Publishing Settlement Agreement with Seal dated 31 March 1995 ("the Settlement Agreement"). He contends in the alternative that sums are due to him byway of commission pursuant to an earlier management agreement dated 1 September 1990 ("the Management Agreement").
  5. In answer to Mr Wadlow's claim Seal contends, firstly, that on their true construction neither the Settlement Agreement nor the Management Agreement entitles Mr Wadlow to any commission on the First or the Second Album. Further or alternatively it is said on behalf of Seal that the Management Agreement and the Settlement Agreement are unenforceable as being an unreasonable restraint of trade. A further alternative argument is advanced on behalf of Seal that the two agreements were procured by undue influence with the result that Seal is entitled to avoid them on that ground. Mr Wadlow denies undue influence and relies in addition on various equitable defences to meet both the claim of undue influence and the claim in restraint of trade.
  6. Summary of the factual background

  7. The factual background which is relevant for the determination of the issues which I have described may be summarised as follows. Mr Wadlow and Seal first met in 1987 when Seal was aged 24. At that time Mr Wadlow was a partner with Mr Julian Spicer in a recording studio business known as Beethoven Street Studios. Both Mr Wadlow and Seal had some experience in bands. Seal was a singer and songwriter but he had not at that stage attracted any interest from record companies or publishers. Mr Wadlow had virtually no experience of managing a recording artist.
  8. Mr Wadlow (and Mr Spicer) made available free studio time to Seal and provided him free of charge with the use of equipment and musicians. Mr Wadlow helped Seal to produce a demonstration tape of recordings of songs which he had written. According to the evidence (which includes his diaries for this period), Mr Wadlow devoted a good deal of his time between 1987 and 1989 to performing what might loosely be described as managerial services for Seal. In particular he attempted to promote Seal's music to record companies but at that time without success.
  9. On 9 May 1988 Seal and Beethoven Street Music ("BSM"), which was a partnership between Mr Wadlow and Mr Spicer formed for the purpose, entered into a publishing agreement ("the Publishing Agreement"). By the terms of that agreement Seal assigned to BSM the publishing rights in all compositions written by him during the period of the Agreement in return for a right to royalties. In broad terms Seal received 70% of the royalties actually received by BSM in respect of printed copies and recordings of Seal's works. BSM was entitled to the balancing 30%. Seal received legal advice in connection with the Publishing Agreement from Ms Helen Searle, a specialist music lawyer. The papers include a printed version of the Publishing Agreement with her manuscript amendments indorsed upon it.
  10. It is common ground that at the time when the Publishing Agreement was made in May 1988 neither Mr Wadlow nor Mr Spicer had ever acted as a music publisher. Mr Wadlow's case, supported by his own evidence and by that of Mr Spicer, is that the Publishing Agreement was designed, in part at least, to compensate them for the free studio time and other assistance provided by them to Seal and which they intended to continue to provide and did provide for about a year.
  11. Seal remained undiscovered until 1989, when he collaborated with an artist professionally known as "Adamski" on a song entitled "Killer". "Killer" was released, under the name of Adamski but with Seal as the lead vocalist, in April 1990. It reached number one in the UK singles chart and remained so for four weeks. This naturally generated interest in Seal both from recording and publishing companies.
  12. It is common ground that from the summer of 1989 until September 1990 Mr Wadlow continued to act as Seal's de facto manager, as well as performing tasks which would ordinarily have been undertaken by an artist's recording company. Mr Wadlow was instrumental in negotiating for Seal a 50% share of the copyright in "Killer" and he advised on the contracts which followed.
  13. Following the release of "Killer" Mr Wadlow had meetings with a number of record companies who wanted to offer a record deal to Seal. He resisted on behalf of Seal overtures from the recording-company, MCA, who wanted to sign a "singles only" agreement with Seal. Mr Wadlow judged that from Seal's point of view an album deal was both preferable and achievable.
  14. On 17 July 1990 Seal entered into a recording agreement with ZTT Records Limited ("the Recording Agreement"), the terms of which were more favourable to Seal than those offered by MCA. Mr Wadlow recommended ZTT to Seal partly because ZTT was co-owned by a highly successful producer, Mr Trevor Horn, and partly because ZTT was itself partly owned by Warner Brothers, whose resources therefore became indirectly available to Seal. Mr Wadlow negotiated the main commercial terms of the Recording Agreement on behalf of Seal. Ms Searle attended to the drafting on his behalf.
  15. Although Mr Wadlow had been providing managerial and other services to Seal since 1987 and was devoting an increasing proportion of his time to Seal's interests, as I have described, there was still no management agreement in place when "Killer" was released in 1989. Mr Wadlow felt that he needed the security of a written agreement with Seal. He also took the view that a written agreement was desirable because it could form the basis for the engagement of the separate North American manager who would be needed to help Seal "break" the USA and Canada.
  16. I shall have to return later in this judgment to the genesis and detailed terms of the Management Agreement which, as I have said, was entered into on 1 September 1990. Suffice it for the present to say that the initial period of the agreement was one year and continuing thereafter until terminated by either party giving three months notice to the other. Under the agreement Mr Wadlow was entitled to commission at the rate of 20% of Seal's earnings as defined in clause 7(a). There is a crucial dispute between the parties as to the true meaning and effect of that sub-clause. Mr Wadlow was further entitled by virtue of clause 7(c) to continue to be paid commission as defined in that sub-clause post-termination ("'post-term commission") in perpetuity. It is common ground that under the terms of the Management Agreement Mr Wadlow's entitlement to commission extended to the income which Seal received from BSM pursuant to the Publishing Agreement to which I have referred in paragraph 7 above.
  17. In January 1991 the arrangements contained in the Publishing Agreement, referred to at paragraph 7 above, were altered. BSM entered into an administration agreement with Perfect Songs (ZTT's sister publishing company) on 18 January 1991 and on the same date the terms of the Publishing Agreement were varied. BSM thereby subcontracted its publishing obligations to Perfect Songs. Copyright in Seal's compositions was licensed to Perfect Songs and royalties (including advance payments on account) were payable by Perfect Songs to BSM at the rate of 65% of income actually received. The term of the Publishing Agreement with Perfect Songs was the same as the term of the Recording Agreement with a retention period of five years. The post-term rights retention period was reduced. It is Mr Wadlow's case that these arrangements substantially improved the publishing terms from Seal's point of view.
  18. It is agreed that, if Seal was to realise his potential as a singer, it was essential for him to break into the North American market. To this end, as had been contemplated by clause 2B of the Management Agreement, Mr Wadlow and Seal in May 1991 engaged Direct Management Group Inc as Seal's North American manager. That engagement was formalised by an agreement dated 7 May 1992. Because of dissatisfaction with the performance of Direct Management that agreement was terminated in May 1993. Seal's North American management was taken over by Roven Cavallo Entertainment Inc in June 1993. A formal agreement to that effect was signed on 1 May 1994.
  19. According to the evidence of Seal, it was in large part as a result of what he regarded as the superior managerial skills and experience of Bob Cavallo of Roven Cavallo Entertainment Inc that he became disenchanted with Mr Wadlow's performance as his manager. Seal told Ms Searle in January 1995 that he was thinking of replacing Mr Wadlow as his manager with Mr Cavallo because working with Mr Cavallo had exposed Mr Wadlow's limitations and inadequacies as a manager.
  20. In February 1995 Seal flew to London from the United States where he had been spending an increasing amount of his time. He and Mr Wadlow met over dinner at the Star of Bombay restaurant in London. There are issues about what was and was not said in the course of the meeting. It is, however, common ground that Seal made clear to Mr Wadlow that he wanted the management relationship with Mr Wadlow and the publishing relationship with B8M to come to an end. It is also common ground that Mr Wadlow accepted that both agreements should be terminated. There is a dispute as to the extent to which, if at all, there was discussion of the terms on which they would part company.
  21. It appears that following the meeting at the Star of Bombay in February 1995 Mr Cavallo took over as Seal's global manager. A company of his, Atlas/Third Rail Management Inc, was formally appointed with effect from 1 March 1995.
  22. In the meantime discussions had been taking place between Mr Wadlow and Ms Searle as to the terms of what I have called the Settlement Agreement. It will be necessary to examine later the nature of those discussions and the role played in them by Ms Searle. A draft settlement agreement Was sent by Ms Searle to Mr Wadlow on 13 March 1995. She suggested in a covering letter that Mr Wadlow might wish to take independent legal advice as to its terms. Mr Wadlow thinks he may have done so, albeit on an informal basis.
  23. The Settlement Agreement was signed and dated 31 March 1995 .. The principal issue in this litigation turns on the effect of the provisions of that agreement. One key question is whether it terminated and in effect replaced the Management Agreement or whether it simply varied the earlier agreement. To that issue I will in due course turn.
  24. To complete the history, Seal continued to pay commission to Mr Wadlow in respect of earnings on the First and Second Albums until the end of 2000. Another payment was made in 2001 but, apart from that payment, Mr Wadlow has received nothing from Seal since the end of 2000. Eventually, after he had made sporadic attempts to obtain payment on occasion but without success, Mr Wadlow instructed solicitors and this action was commenced. The issues of construction sumrnarised above and the defence of unreasonable restraint of trade were raised for the first time after the proceedings had been issued.
  25. The agreements

  26. Before coming to the parties' respective submissions, I will set out what appear to me to be the relevant provisions of the various contracts. I will take them in chronological order because, as will be seen, some significance attaches to the order in which they were entered into.
  27. The Recording Agreement

  28. I start with the Recording Agreement dated 17 July 1990, noting, as I do so, that the Publishing Agreement between Seal and BSM signed on 9 May 1988 (the effect of which I have summarised in paragraph 7 above) had already come into existence. By the Recording Agreement Seal granted to ZTT exclusive rights to manufacture, distribute and sell records made by him throughout the world. By the First Schedule the initial period of the agreement was one year from the date of the agreement. Seal granted to ZTT four independent consecutive irrevocable options to extend the initial period. Seal further agreed to record two singles and one album during the initial period and during each of the option periods. The renewal options were agreed to be extended if Seal failed to deliver the minimum quantity in any contract period.
  29. The Management Agreement

  30. The Management Agreement is dated 1 September 1990, that is, six weeks after the Recording Agreement. By its terms Seal appointed Mr Wadlow as his sole and exclusive manager throughout the -world. As I have said, its initial period was one year from 1 September 1990 and continuing thereafter until terminated by either party giving three months notice in writing to the other. It is unnecessary for me to recite the various obligations undertaken by Seal and Mr Wadlow respectively.
  31. I should, however, set out in full the relevant remuneration provisions which are to be found in clause 7:
  32. "7(a) By way of remuneration for his services hereunder the Manager shall be entitled to commission as hereinafter specified based on the gross total earnings of the Artist from the activities including without .prejudice to the foregoing all royalties of whatsoever kind and all pecuniary considerations of any nature whatsoever paid or payable (provided always that commission will not be deducted until payment is received) to the Artist or to anyone on his behalf during the Term hereof or to which the Artist or any party on her (sic) behalf may become entitled as a result of agreements engagements performances or bookings entered into negotiated or procured during the currency of this agreement or any modifications of or substitutions for such agreements performances or bookings including any products of the Artist's services (no matter where the same may have been rendered). " ...

    (b) The remuneration shall be a sum equal to twenty per cent of the relevant earnings referred to in this Clause.

    (c) After the expiration of the Term hereof the Manager's commission shall be limited to monies arising and recordings made and compositions written and residual fees arising from performances given or negotiated during the period hereof."

    . ..."

    The sub-publishing Agreement

  33. There followed agreements the effect of which (as set out in paragraph 15 above) was to vary the terms of the Publishing Agreement between Seal and BSM by means of a sub-publishing agreement entered into between BSM and Perfect Songs Limited dated 18 January 1991. Nothing turns on the detailed provisions of those agreements. Nor is it necessary for me to set out the terms of the successive agreements by which Direct Management and Roven Cavallo Entertainment Inc were successively appointed as Seal's North American managers.
  34. The Settlement Agreement

  35. I come finally to the Settlement Agreement dated 31 March 1995 (see paragraphs 2021 above. The following are the material provisions:
  36. "A. IN RELATION TO THE MANAGEMENT

    AGREEMENT

    1. In consideration of the mutual promises herein contained and other good and valuable consideration it is agreed that with effect from the 28th day of February 1995 the Management Agreement is terminated. Subject as hereinafter appearing [Seal] and [Mr Wadlow] agree to release each other from their respective obligations under and the further performance of the terms of the Management Agreement.

    2.(a) Notwithstanding the termination of the Management Agreement [Mr Wadlow] shall be entitled to his commission entitlement as defined in Clause 7 of the Management Agreement (as attached hereto in the First Schedule) ("the Commission Entitlement") as the same is or may be reduced by the commission payable pursuant to the terms of the First US Management Agreement and/or the Second US Management Agreement (the relevant extracts of which are attached hereto in the Second Schedule setting out the calculation of commission payable) on recordings made compositions written and performances rendered during the term of the Management Agreement. For the avoidance of doubt [Mr Wadlow's] ongoing Commission Entitlement shall be limited to income arising on all those recordings and compositions appearing on [Seal's] first and second albums recorded- and released by ZIT ("the First Album" and "the Second Album" respectively) as more particularly defined in the Third Schedule hereto ("the Commissionable Material"). Furthermore notwithstanding that [Mr Wadlow] is a fifty percent shareholder of BSM [Mr Wadlow] shall be entitled to retain the full amount of his Commission Entitlement on publishing income arising from the exploitation of the First Album and subject as hereinafter provided to the full amount of his Commission Entitlement on publishing income arising from the exploitation of the Second Album.

    5. Notwithstanding the termination of the Management Agreement [Mr Wadlow] confirms that [Seal] shall continue to be entitled to inspect audit and take copies of all or any of [Mr Wadlow's] books and records of account in relation to income or monies earned by [Seal] or otherwise arising during the term of the Management Agreement.

    ...

    6. Subject always to the continuing rights of audit and inspection and any findings thereof [Mr Wadlow's] Commission Entitlement on the Commissionable Material and the arrangement reached between [Seal] [Mr Wadlow] and BSM in relation to [Seal's] publishing copyrights and other interests as more particularly set out below [Seal] and [Mr Wadlow] agree that there are no outstanding claims that either [Mr Wadlow] or [Seal] had has or may have against the other arising pursuant to the provisions of the Management Agreement.

    B. IN RELATION TO THE PUBLISHING AGREEMENT

    7(a) In consideration of the mutual promises herein contained and other good· and valuable consideration it is agreed that with effect from 28th February 1995 the term of the Publishing Agreement (as the same has been amended) is terminated. Subject as hereinafter provided [Seal] and BSM agree to release each other from their respective obligations under and further performance of the terms of the Publishing Agreement.

    8. In consideration of the mutual promises herein contained and pursuant to a verbal agreement made between BSM and [Seal] in 1994 it is now agreed and confirmed that:

    a) BSM reassigns (to the extent that it has not done so) to [Seal] all those copyrights currently vested in BSM pursuant to the Publishing Agreement which have not been recorded and released by ZTT on the First Album or the Second Album. BSM shall have no further right or interest in or to such copyrights and SHS shall be free to exploit such copyrights as he shall think fit.

    b) The royalty payable by BSM to [Seal] for the Second Album pursuant to the terms of the Publishing Agreement (as amended) shall increase to seventy-five percent of the amount arising "at source" save for cover recordings where the amount of royalty shall increase to sixty percent of the sums arising "at source".

    ...

    9.(a) Notwithstanding the termination of the Publishing Agreement and subject to the increased royalty payable to [Seal] as set out in Clause 8(b) BSM shall continue to be entitled to receive its pro-rata share of publishing income arising from the" exploitation of the compositions on the First and Second Albums directly from [Perfect Songs] ...

    c) Notwithstanding the above and in consideration of the payment of the Commission Entitlement for the Second Album [Mr Wadlow] hereby surrenders his fifty percent interest in and to his share of publishing income payable to BSM from [Perfect Songs] for the Second Album after deducting [Seal's] royalty entitlement and transfers such share of income directly to [Seal]."

    Further Publishing Agreement

  37. For reasons which will appear later, it is necessary to refer finally to an agreement which post-dated the Settlement Agreement. It is an agreement dated 30 April 1996 made between Seal and Perfect Songs. Under it Seal engaged Perfect Songs to administer his compositions for a further period. In consideration of the payment to him of £2million, Seal granted to Perfect Songs an exclusive licence in his existing compositions for the term of the agreement plus an additional five years.
  38. The construction issues

  39. The parties agreed that there are in broad terms two construction issues. The first is whether it is the Management Agreement or the Settlement Agreement which is the relevant one for the purpose of determining the entitlement of Mr Wadlow to commission. Seal says it is the former. Mr Wadlow says that it is the latter.
  40. The second construction issue is to what commission, if any, is Mr Wadlow entitled under whichever of the two agreements is the relevant one.
  41. Submissions on the construction issues on behalf of Mr Wadlow

  42. The primary case advanced by Mr Ian Mill QC for Mr Wadlow is that his entitlement to the commission sought to be recovered by these proceedings derives not from the Management Agreement but rather from clause 2(a) of the Settlement Agreement (which I have set out at paragraph 28 above). Mr Mill submits that it is clear from the wording of the Settlement Agreement and in particular of clauses 1 and 6 that the parties intended that the Management Agreement be terminated. He argues that the parties intended a "complete extinction" of the Management Agreement: see Morris v. Baron & Co. [1918] AC 1. Mr Mill points out that specific provision is made in clause 2(a) for Mr Wadlow to receive future commission; that right is conferred by and arises by virtue of the Settlement Agreement and not under the Management Agreement. According to Mr Mill's argument the fact that clause 2(a) of the Settlement Agreement includes the phrase "as defined in clause 7 of the Management Agreement" does not mean that the obligation to pay derives from the Management Agreement; the reference to clause 7 is included as a convenient way of defining the commission to which Mr Wadlow is to be entitled under the Settlement Agreement.
  43. As regards the amount of commission to which Mr Wadlow says he is entitled by virtue of the Settlement Agreement, Mr Mill says that it is clear from the terms of clause 2(a) that he is entitled to commission at the rate of 20% on all income arising out of the recordings and compositions appearing on the First and Second Albums (which is referred to as "the Commissionable Material") but nothing else.
  44. Submissions on the construction issues on behalf of Seal

  45. The contention of Mr Andrew George on behalf of Seal is that Mr Wadlow's entitlement to commission arises under clause 7(a) of the Management Agreement (set out above) and not under the Settlement Agreement. Mr George maintains that the Settlement Agreement did not purport to create any new rights; it merely provided that, despite the general release by the parties of their mutual obligations under the Management Agreement, Mr Wadlow would remain entitled to his "commission entitlement, as defined in clause 7 of the [Management Agreement]".
  46. As to the amount of commission payable, Mr George argues that, so long as the Management Agreement subsists, Mr Wadlow is entitled by virtue of the first part of clause 7(a) to commission on royalties paid or payable to Seal. He contends that, after termination, by virtue of the words "or to which [Seal] or any party on her (sic) behalf may become entitled as a result of agreements engagements performances or bookings entered into negotiated or procured during the currency of this Agreement", Mr Wadlow's entitlement to commission is confined to earnings from agreements etc. entered into during the currency of the Management Agreement.
  47. Mr George points out that Seal's income from the First and Second Albums arose under the Publishing Agreement and the· Recording Agreement, both of which predated the Management Agreement. Although these two albums were recorded, and the songs contained within them written by Seal were written, pursuant to agreements made before the before the date of the Management Agreement, namely I September 1990. It follows, says Mr George, that the Management Agreement confers no entitlement on Mr Wadlow to Seal's earnings from those albums.
  48. Response on behalf of Mr Wadlow

  49. As to Mr George's argument that Mr Wadlow's entitlement to commission arises out of the Management Agreement and that the Settlement Agreement confers no independent right to commission, Mr Mill's primary contention is that if on its true construction the Settlement Agreement confers no entitlement to commission on earnings from the two albums, Mr Wadlow is entitled to fall back on the Management Agreement and to recover commission under that agreement. This contention was reintroduced as an alternative case by an amendment to the Reply and Defence to Counterclaim made shortly before trial.
  50. Mr Mill's principal contention, however, is that, properly construed, the terms of the Management Agreement do .entitle Mr Wadlow to commission on the First and Second Albums. He maintains that, in the light of the circumstances which obtained at the time when the Management Agreement was entered into, it would be absurd to construe it as not entitling Mr Wadlow to commission on the First and Second Albums. He suggests that it is inconceivable that the parties should have intended that Mr Wadlow would agree to manage Seal (who at that time had not yet released an album) without obtaining any commission on his recording or publishing income.
  51. Mr Mill draws attention to a number of matters which he submits are part of the "relevant background" to the Management Agreement and which support the construction for which he contends: the fact that the Recording Agreement had been entered into only a few weeks before the Management Agreement was eventually signed; the fact that the Recording Agreement was a five-album deal which could be expected to last for many years during which all of Seal's recording income would arise under that agreement; the fact that the Recording Agreement had been negotiated by Mr Wadlow and the fact of exchanges which took place between the parties when the Management Agreement was being negotiated about the inclusion within it of a clause precluding Mr Wadlow from commissioning Seal's publishing income. These are all matters which form part of the background to be taken into account when construing the Management Agreement: see Investors Compensation Scheme Limited v. West Bromwich Building Society [1998] 1 WLR 896 per Lord Hoffmann at 912-3.
  52. In the alternative Mr Mill argues that Seal is estopped by convention from relying on a construction of either agreement which denied the entitlement of Mr Wadlow to commission on the First and Second Albums. The case on estoppel by convention is founded on what is said to have been an assumption common to both parties that such commission was payable by Seal. Mr Mill relies on the following facts: that Mr Wadlow had received commission on those albums throughout the currency of the Management Agreement; that he had received commission on Seal's earnings in respect of the albums under the Publishing Agreement; that, when entering the Settlement Agreement, Mr Wadlow believed he would be entitled to continuing commission on those two albums and that Seal continued to pay Mr Wadlow commission on both albums for five years after the Settlement Agreement was signed. Mr Mill referred me to Chitty on Contracts paragraph 3-107 and to a number of authorities, including The Vistafjord [1988] 2 Lloyd's Rep. 332; Baird Textile Holdings Limited v. i\1arks '& Spencer Plc [2002] 1 All ER (Comm) 737 and Amalgamated Investment & Property Co. Limited v. Texas Commerce International Bank Limited [1982] QB 84.
  53. Seal's answer to the case of estoppel by convention

  54. Mr George has two answers to Mr Wadlow's case based upon estoppel by convention. The first is that the parties had no shared assumption as to the extent of Mr Wadlow's entitlement to post-term commission. Seal, according to his evidence, understood at the material times (wrongly) that Mr Wadlow's entitlement to post-term commission subsisted for only seven years after the determination of the Management Agreement. There was therefore in this respect no genuine shared understanding.
  55. The second answer advanced by Mr George is that the doctrine of estoppel by convention cannot found a cause of action: see Chitty on Contracts paragraph 3-113; Amalgamated Investment and Property v. Texas Commerce (lac. cit) and Russell Brothers (Paddington) Limited v. John Elliott Management Limited [1995] 1 Const LJ 377. Mr George also submits, in reliance on Hiscox v. Outhwaite [1992] AC 562 and Phillip Collins Limited v. Davis [2000] 3 All ER 808, that estoppel by convention does not operate prospectively.
  56. Restraint of trade

  57. If he is wrong about the construction of the Settlement and Management Agreements, Mr George has a second string to his bow: he contends that each of those agreements is unenforceable as being in unreasonable restraint of trade. The features of the Management Agreement upon which Mr George principally relies in support of his contention that it is unenforceable include the absence in clause 7 of any provision either tapering the rate at which post-termination commission was to be payable or limiting the time for which it was to be payable (i .e. the absence of a "sunset clause"). The result is said to be a restriction on Seal's profitability and a consequent limitation on his ability to employ a new manager with the result that Seal's ability to conduct his business properly is restricted. Similar arguments are advanced in support of the contention that the Settlement Agreement is also unenforceable.
  58. Mr George relies strongly in this connection on an unreported decision of Leggatt J (as he then was) in Armatrading v. Stone & anor, 17 September 1984, in which case an agreement by the 'artist to' pay post-termination commission to her manager was held to be an unreasonable restraint of trade.
  59. Mr Mill disputes that the Management Agreement restricts Seal's ability to carry out his trade in any way. He contends that the post-term commission provision in Armatrading is distinguishable from the provision in the Management Agreement. Adopting the analysis of Jonathan Parker J (as he then was) in Panayiotou v. Sony Music Entertainment (UK) Limited [1994] EMLR 229 at 321, he maintains that it is counter-intuitive to describe a mere obligation to pay money as a restraint of trade, particularly in circumstances where Mr Wadlow's post-term entitlement does not purport to extend to recordings made or compositions written after the term (cf the position in Armatrading). Mr Mill further argues that, even if the post-term commission provision is in the popular sense restrictive, it has, in the words of Lord Wilberforce in' Esso Petroleum Limited v. Harper's Garage (Stourport) Limited [1968] AC 269 at 333, "passed into the accepted and normal currency of commercial or contractual or conveyancing relations" with the result that it does not require justification.
  60. In relation to the Settlement Agreement, Mr Mill invites the Court to bear in mind that the effect of that agreement was to release Seal from an exclusive relationship rather than to create one.
  61. The third stage of Mr Mill's argument is that obligation to pay post-term commission passes the test of reasonableness in the public interest. In regard to the Settlement Agreement Mr Mill suggests that it requires to be considered as a whole and, so considered, is overwhelmingly for the benefit of Seal.
  62. Undue influence

  63. About two weeks before this trial started the Defence was amended to add a plea that both the Management Agreement and the Settlement Agreement were procured by undue influence. Mr George argues that, at the date the parties entered into the Management Agreement, there was a fiduciary relationship between Mr Wadlow and. Seal and that the terms of that agreement are in at least two respects so unusual as to give rise to a presumption of undue influence. Those two respects are, firstly, the provision for perpetual post-term commission and, secondly, Mr Wadlow's entitlement to be paid commission on Seal's share of the royalties payable under the Publishing Agreement (the so-called "double dipping" provision). Mr George submits that Mr Wadlow is unable to rebut that presumption in relation to either agreement.
  64. Mr Mill rejects the suggestion that Mr Wadlow acted improperly or unconscionably. He points out that Mr Wadlow insisted that Seal take independent advice from Ms Searle at every stage. Seal specifically agreed to Mr Wadlow commissioning his publishing income. That of itself suffices to rebut any presumption of undue influence. Given that it was Seal who decided to terminate the Management Agreement and the Settlement Agreement was designed to reflect that decision, Seal's case on undue influence in relation to the latter agreement was described by Mr Mill as "bordering on the incoherent". Mr Wadlow contends that both agreements are readily explicable by ordinary motives, so that no presumption of undue influence arises. Both the provision as to post-term commission and the provision entitling Mr Wadlow to commission Seal's income under the Publishing Agreement are reasonable in the particular circumstances of the Management Agreement and a fortiori the Settlement Agreement respectively.
  65. Mr Wadlow's equitable defences

  66. In answer to Seal's contentions that the agreements between himself and Mr Wadlow are unenforceable as being in restraint of trade, or alternatively should be set aside as having been procured by undue influence, Mr Wadlow raises a number of equitable defences.
  67. 51 . If the commission entitlement arises under the Management Agreement, Mr Mill contends, firstly, that Seal is debarred from reliance on either contention on account of his acquiescence or laches, as described in Taylors Fashions Limited v. Liverpool Victoria Trustee Co. Limited [1982] QB 133. It is further submitted that Seal is evidentially estopped by the terms of the Settlement Agreement from asserting an 'entitlement to challenge the Management Agreement: see E.A. Grimstead & Son Ltd v McGarrigan [unreported 27.10.99]. In addition it is argued that, by entering into the Settlement Agreement rather than seeking to have the Management Agreement set aside or declared unenforceable, Seal affirmed the latter. Similar equitable defences are relied on if the commission entitlement arises under the Settlement Agreement. Mr Mill further prays in aid the public policy in favour of settlement: see Panayiotou (lac cit) at 342-7.

  68. In reply, Mr George submits that the Settlement Agreement was not in truth settling any dispute between the parties, rather it was regularising in an amicable manner the termination of the parties' relationship. He contends that Seal has not acquiesced in the undue influence or restraint of trade. The reason why these issues were not raised earlier is that Seal mistakenly believed that his obligation to pay post-term commission was limited to seven years.
  69. The relevant agreement: the Management Agreement or the Settlement Agreement?

  70. I now return to the construction arguments summarised at paragraphs 31-38 above. I approach these issues mindful of the principles of contractual construction set out by Lord Hoffmann in Investors Compensation Scheme Ltd v West Bromwich Building Society (loc cit) 912-3:
  71. " ... 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 made 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 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 [1997] AC 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 SA v. Salen Rederierna AB [1985] AC 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.' "
  72. The first question is whether the contention of Mr Wadlow that his commission entitlement arises under the Settlement Agreement is correct. Answering that question involves considering first the proper construction of the Management Agreement and then deciding what material effect, if any, the Settlement Agreement had on Mr Wadlow's commission entitlement under the Management Agreement.
  73. As summarised at paragraphs 34-36 above, Mr George contends that Mr Wadlow's commission entitlement during the currency of the Management Agreement arises under clause 7(a) which I have set out at paragraph 26 above. He says that Seal's income from the First and Second Albums is not covered by clause 7(a) because that sub-clause applies only to "agreements engagements performances or bookings entered into negotiated or procured during the course of the [Management) Agreement". Seal's income in respect of those albums arose under the Publishing Agreement and the Recording Agreement both of which pre-dated the Management Agreement. Of clause 7... c) Mr George says that it is on its face a limiting provision and cannot be construed as creating new rights. Mr George further points out, correctly, that Mr Wadlow was already entitled by virtue of the Publishing Agreement to a half share in BSM's royalties.
  74. If one focuses on clause 7(a) in isolation, I accept that there is force in Mr George's argument. The agreements which generated the income for Seal from the First and Second Albums were not entered into during the currency of the Management Agreement. But the agreement has to be construed as a whole. On its face clause 7(c) entitles Mr Wadlow to post-termination commission on the two albums since they were both recorded during the period of the Management Agreement. Clause 7( c) is an independent stipulation. The fact that it is expressed a limiting provision supports the view that the parties cannot have intended clause 7(a) to bear the meaning for which Mr George contends. The parties cannot have intended that Mr Wadlow should be entitled to commission on the two albums post-term,. but not during the term of the Management Agreement.
  75. I am also of the opinion that Seal's construction of clause 7 ignores the factual background which I am entitled and indeed bound to take into account in accordance with the principles enunciated in the Investors Compensation Scheme case (see paragraph 53 above). That background includes in the present case the following facts:
  76. i) that, to the knowledge 'of Seal Mr Wadlow, acting as his de facto manager, had negotiated the Recording Agreement;
    ii) that the Recording Agreement was being negotiated at the same time as the Management Agreement and there was no knowing which would be signed first. It seems to have been fortuitous that in the event the Recording Agreement came first by a margin of six weeks;
    iii) that, to the knowledge of Mr Wadlow, Seal had received an advance of £60,000 on entering the Recording Agreement;
    iv) that the Recording Agreement, being a five album deal, was likely to last a long time throughout which (on Seal's construction) Mr Wadlow would be denied commission on albums delivered under it;
    v) that Ms Searle had sought (unsuccessfully, as it turned out, and unnecessarily on Seal's construction of the Management Agreement) to include in the Publishing Agreement a clause precluding Mr Wadlow from commissioning Seal's publishing income under that agreement;
    vi) that the mistaken reference in clause 7(a) to "on her behalf" indicates that the wording of the agreement had been taken by Ms Searle from a previous unconnected agreement involving a female artist in whose case the strong likelihood is that there would not have been any anterior recording agreement; and
    vii) that it is inherently unlikely that Mr Wadlow, who plainly wanted a management agreement, would have agreed terms under which he might receive no management commission for many years and perhaps for ever. Given their relationship at the time, it is highly unlikely that Seal would have wanted this either.
  77. For the above reasons I reject the construction of the Management Agreement for which Seal contends. In my judgment Mr Wadlow was entitled under that agreement to commission in respect of the First and Second Albums both during its term and post-term. I should make clear that, in arriving at that conclusion, I have ignored the terms and effect of the Settlement Agreement subsequently entered into.
  78. The next question is whether the Settlement Agreement superseded the Management Agreement (as Mr Wadlow, contends) or whether it merely varied it (as Seal maintains). In Morris v. Baron & Co[1918] AC 1 the difference was explained by Viscount Haldane at 19 as follows:
  79. "What is, of course, essential [for a termination] is that there should have been made manifest the intention in any event of a complete extinction of the first ... contract, and not merely the desire of an alteration, however, sweeping, in terms which still leave it subsisting."

    Lord Dunedin said at 25-26:

    "The difference between variation and rescission is a real one, and is tested, to my thinking, by this: in the first case there are no such executory clauses in the second arrangement as would enable you to sue upon that alone if the first did not exist; in the second you could sue on the second arrangement alone, and the first contract is got rid of either by express words to that effect, or because, the second dealing with the same subject-matter as the first but in a different way, it is impossible that the two should be both performed."
  80. I have set out at paragraph 28 above the material provisions of the Settlement Agreement. Mr George's position in relation to this agreement is that, even if (as I have held) he is wrong in his construction of the Management Agreement, there is no justification for construing the later agreement as conferring on Mr Wadlow a greater entitlement to post-term commission than he had under the earlier agreement. In support of this contention Mr George relies heavily on the opening words of clause 21(a): "Notwithstanding the termination of the Management Agreement [Mr Wadlow] shall be entitled to his commission entitlement as defined in clause 7 of the Management Agreement ... ". Those words make clear, says Mr George, that the post term commission entitlement is to remain limited as it was by clause 7(c) of the Management Agreement. Mr George further argues that the reference to "Commissionable Material" in clause 2 of the Settlement Agreement serves to confirm that no other material shall be commissionable than that which attracts commission by virtue of clause 7 of the Management Agreement.
  81. Mr Mill is plainly right when he says that my task is to construe the Settlement Agreement as a whole. It appears to me that it is clear from several parts of the Settlement Agreement that it was intended by the parties to terminate the Management Agreement and to replace it with a fresh set of contractual terms. Thus clause 2 of the Settlement Agreement states that the earlier agreement "is terminated" and goes on to release the parties from their respective obligations there under and from further performance of its terms. Clause 6 concludes with these words: "[Mr Wadlow] and [Seal] agree that there are no outstanding claims that [either of them] had has or may have against the other arising pursuant to the provisions of the Management Agreement". These provisions point strongly in favour of construing the Settlement Agreement as replacing, rather than varying, the Management Agreement.
  82. Mr George, emphasising the opening words "Notwithstanding the termination of the Management Agreement", argues that the effect of clause 2(a) makes clear that the parties did not intend to create extra rights for Mr Wadlow than those which he enjoyed under the Management Agreement. He relies also on clause 6 and its reservation of Mr Wadlow's Commission entitlement.
  83. I do not accept that argument. Clause 2(a) is not happily drafted but I think that the effect of it is not to preserve Mr Wadlow's right to commission under the Management Agreement but to create a new entitlement, adopting as a matter of convenience the definition of commission entitlement which had been used in the earlier agreement. In any case Mr Wadlow's entitlement to on-going post-term commission is spelled out clearly; it is "limited to income arising on all those recordings and compositions appearing on [Seal's] first and second albums recorded and released by ZTT".
  84. The effect of these words is to diminish Mr Wadlow's entitlement to post-term commission because songs written and recordings made during the term, insofar as they did not feature on the First or Second Album, are excluded. Also excluded was "Killer". Another concession made by Mr Wadlow was the surrender of his 50% share of BSM's entitlement under the Publishing Agreement, which is expressly described in clause 9( c) as the consideration for the commission payable on the Second Album.
  85. The purpose and effect of the Settlement Agreement as a whole has to be taken into account. Its agreed purpose was to implement Seal's wish to bring to an end his longstanding relationship with Mr Wadlow and to be managed in future by Mr Cavallo instead. Mr Wadlow was agreeing to the termination of what might otherwise have been substantial future earnings as Seal's manager. In my judgment the Settlement Agreement replaced the Management Agreement and the effect of it is that Mr Wadlow has a continuing entitlement to commission in respect of the First and Second Albums.
  86. Estoppel by convention

  87. Such being my conclusion on the construction issues, the issue whether Seal is estopped by convention from denying Mr Wadlow's entitlement to commission does not arise. That being so, I will confine myself to two comments. The first is that, it is far from clear to what extent, if at all, this form of estoppel may be used as a sword as opposed to a shield: see Chitty on Contracts 29th ed #3-113; Russell Brothers (Paddington) Ltd v John Elliott Management Ltd [1995] 1 Const LJ 377 and Smithkline Beecham v. Apotex [2006] EWCA Civ 658. My second comment is that, on the unchallenged evidence of Seal, namely that his understanding was that post term commission was payable for only seven years after the Settlement Agreement, it would seem that the shared assumption (if indeed there was one at all) would be limited to that period. If so, it might well be that any estoppel would run, if at all, for that period and no longer.
  88. The evidence

  89. If! have hitherto said nothing about the oral evidence (apart from the neutral narrative at paragraphs 5-22 above), it is because the subjective intentions of the parties and their advisers are irrelevant on issues of construction. The evidence of the witnesses does, however, have a bearing on the remaining issues which I have to decide.
  90. The protagonists both gave evidence. I found Seal (who gave evidence first) an impressive witness. I am in no doubt that his account of events was an honest attempt on his part to recollect events, most of which took place long ago. He has had little formal education but he is clearly an intelligent man. His answers in cross-examination were thoughtful, modest and fluently expressed. It appeared to me that, at least in the early years of his career as an artist, he had little interest in its financial aspects and preferred to concentrate on his music. He has now come to feel strongly - and, I believe, genuinely - that Mr Wadlow, someone whom he once regarded as his mentor and (as he put it) a father figure, has betrayed him, in particular by "emotionally coercing" him into entering the Settlement Agreement.
  91. I found Mr Wadlow to be a reliable witness. His recollection of events, whilst far from perfect, was for understandable reasons better than that of Seal. I suspect that his involvement in the music business came about as a result of his love of music rather than a desire to make money. There is no doubt that in the early days he did a great deal to help Seal to build a career. Once Seal's career took off, he felt himself entitled to share in that success. He was not at the time of the Management Agreement to know that Seal would become a true superstar. It is important in cases of this kind to beware of hindsight. By the time of the Settlement Agreement Seal's success was assured.
  92. Ms Searle would, if memory served her, have been in a position to assist me on several contentious aspects of the case. In particular she might have been able to assist as to the advice which she gave Seal and the extent to which she could be said to have been giving independent advice. Seal, for whom she acted in relation to both principal agreements, waived his legal privilege. In the ordinary course of events I would in that event have expected Ms Searle to have been called to give evidence on behalf of Seal. I was told that both sides approached Ms Searle to see what evidence she might have been able to give. In the event she did not go into the witness box for reasons which remain unclear. The problems caused by her non-appearance were compounded by the fact that, judging by the disclosure made in this action, her files are woefully incomplete. I make clear that this is through no fault of Seal's English solicitors, Russells, who have disclosed all that was passed on to them by Seal's lawyers in the US. Unsatisfactory though the position in relation to Ms Searle lU1doubtedly is, I have decided, having considered Lewis v Eliades [2005] EWHC 488 (Ch) and the cases there referred to, that I would not be justified in drawing any inference adverse to Seal from her non-attendance.
  93. Each side called an expert: Mr Julian Turton for Me Wadlow and Mr Richard Bray for Seal. Both are experienced and highly respected lawyers who· have practised for many years in the field of the music business. In the event (as will appear) it turned out that the areas of disagreement between them were relatively limited. Both gave evidence in a clear and helpful manner.
  94. Restraint of trade

  95. The case for Seal is that both the Management and the Settlement Agreements are unenforceable as being in restraint of trade. I have summarised the submissions by Mr George on his behalf at paragraphs 43 and 44 above ..
  96. Several questions or "stages" arise. As Jonathan Parker J (as he then was) put it in Panayiotou (loc cit) at 321:
  97. "The court's approach to the application of the doctrine of restraint of trade to a particular contract falls into two stages. The first stage is to determine whether the contract is one which attracts the doctrine of restraint of trade at all: for not every contract which is 'in restraint of trade' (using that expression 'in a broad popular sense' to mean 'any contract which limits the free exercise of trade or business' ... ) will attract the doctrine ... the second stage is to determine whether it satisfies the Nordenfelt test [i.e. whether it is reasonable]".
  98. As Mr George acknowledges, the doctrine of restraint of trade is concerned with substance and not form. The substance of both the Management and the Settlement Agreements appears to me to be that Seal undertook an obligation to pay over to his manager, in consideration of the performance by him of his duties as manager, a percentage of his earnings from a specified source, namely the First and Second Albums. I agree with Mr Mill that it is counter-intuitive to describe an obligation of that kind, even where the obligation endures after the term of the management agreement, as being restrictive or in restraint. The risk of Seal having to pay double commission on the appointment of new manager appears to me to be minimal, given that, according to the evidence, the new manager would be likely to forgo his commission on activities of the artist commissionable by the old manager.
  99. In saying that I do not overlook the decision of Leggatt J in Armatrading (loc cit). He held:
  100. " ... there is no provision for reduction of the rate at which, or limitation of the time for which commission was to be payable to the manager after the termination of the management agreement. The result would be a restriction thereafter on profitability from the artiste's point of view and a limitation on her ability to employ a new manager. Since the evidence is that an artiste fares better with a manager than without one, this would constitute a restriction on [Ms Armatrading's] ability to conduct her business properly ...
    Renouncing hindsight, I look at the management agreement with reference to the position of the parties and the practice of the industry at the time when the agreement was made. When I do so, I find restrictions imposed by the management agreement in relation to the period after the agreement was ended which were in my judgment unreasonably onerous. They were not reasonably required for the protection of the Defendant's legitimate interests in being properly remunerated for services rendered to the Plaintiff during the currency of the agreement. "
  101. The provisions of the manager's contract in Armatrading were materially different from those in the present case. The manager in that case was entitled to commission on the artist's professional activities carried on after the termination of the management agreement if those activities had been negotiated by the manager, arose at any time from agreements made during the management agreement, or arose from agreements in substitution, extension or renewal of agreements made during the management agreement. Such a wide-ranging entitlement to post-term commission could potentially cover virtually all an artist's earnings for many years after the termination of the management relationship. An obligation upon an artist of that kind might well make it very difficult for him to engage a new manager (and in that sense have a restraint imposed upon the artist's trade): the artist might be unable to afford to pay commission to two managers on the same income stream (totalling 40% of the gross, perhaps more) and there would be no prospect of a substantial income stream arising which was not being commissioned by the previous manager.
  102. In their joint "Points of Agreement and Disagreement" Mr Turton and Mr Bray expressed the opinion that the continuing commission provisions contained in neither the Management Agreement nor the Settlement Agreement were reasonably capable of restricting Seal's ability to engage new management by reason of the fact that they restricted Seal's profitability at the dates of either of those agreements. In the light of that evidence I do not accept that in the present case the doctrine of restraint of trade is engaged.
  103. Nor do I believe that, to the extent that the perpetual post-term commission entitlement can properly be termed restrictive, it is in the circumstances of the present case unreasonable. The highest that Mr Bray, the expert retained on behalf of Seal, felt able to put it in his report was that it was "unusual" not to find some "sunset" (i.e. cut-off) or tapering provision in the post-term period. Unusualness is not to be equated with unreasonableness. In any case Mr Turton's opinion is that the absence of such limiting provisions was not unusual in 1990. In the "Points of Agreement and Disagreement" both experts gave it as their opinion that any restrictions that are to be found in the Management and Settlement Agreements are reasonable.
  104. I reject the contention that either of the impugned agreements is unenforceable on restraint of trade grounds. I note that, despite the entitlement of Mr Wadlow to ongoing post-term commission, it does not appear that in the event Seal encountered any difficulty in appointing Mr Cavallo as his new global manager.
  105. Undue influence

  106. As I have indicated in paragraphs 48-49 above, Seal contends that both the Management and the Settlement Agreements were procured by the undue influence of Mr Wadlow. Although I have held that Mr Wadlow's entitlement to commission arises under the latter agreement, it is, for the reason which I explain at paragraphs 96-100 below, necessary to consider the question of undue influence in relation to each of the agreements.
  107. The overall approach to the question whether a transaction has been procured by undue influence was described by Lord Nicholls in Royal Bank of Scotland v Etridge (No 2) [2002] 2 AC 773 at 775 as follows:
  108. "13. Whether a transaction was brought about by the exercise of undue influence is a question of fact. Here, as elsewhere, the general principle is that he who asserts a wrong has been committed must prove it. The burden of proving an allegation of undue influence rests upon the person who claims to have been wronged. This is the general rule. The evidence required to discharge the burden of proof depends on the nature of the alleged undue influence, the personality of the parties, their relationship, the extent to which the transaction cannot readily be accounted for by the ordinary motives of ordinary persons in that relationship, and all the circumstances of the case.
    14. Proof that the complainant placed trust and confidence in the other party in relation to the management of the complainant's financial affairs, coupled with a transaction which calls for explanation, will normally be sufficient, failing satisfactory evidence to the contrary, to discharge the burden of proof. On proof of these two matters the stage is set for the court to infer that, in the absence of a satisfactory explanation, the transaction can only have been procured by undue influence. In other, words, proof of these two facts is prima facie evidence that the defendant abused the influence he acquired in the parties' relationship. He preferred his own interests. He did not behave fairly to the other. So the evidential burden then shifts to him. It is for him to produce evidence to counter the inference which otherwise should be drawn.
    ...
    16. Generations of equity lawyers have conventionally described this situation as one in which a presumption of undue influence arises. This use of the term 'presumption' is descriptive of a shift in the evidential onus on a question of fact. When a plaintiff succeeds by this route he does so because he has succeeded in establishing a case of undue influence. The court has drawn appropriate inferences of fact upon a balanced consideration of the whole of the evidence at the end of a trial in which the burden of proof rested upon the plaintiff. The use, in the course of the trial, of the forensic tool of a shift in the evidential burden of proof should not be permitted to obscure the overall position. These cases are the equitable counterpart of common law cases where the principle of res ipsa loquitor is invoked. There is a rebuttable evidential presumption of undue influence."
  109. In the same case Lord Scott said at paragraphs 219-221:
  110. "The presumption of undue influence, whether in a category 2A case, or in a category 2B case, is a rebuttable evidential presumption. It is a presumption which arises if the nature of the relationship between two parties coupled with the nature of the transaction between them is such as justifies, in the absence of any other evidence, an inference that the transaction was procured by the undue influence of one party over the other. This evidential presumption shifts the onus to the dominant party and requires the dominant party, if he is to avoid a finding of undue influence, to adduce some sufficient additional evidence to rebut the presumption. In a case where there has been a full trial, however, the judge must decide on the totality of the evidence before the court whether or not the allegation of undue influence has been proved. In an appropriate case the presumption may carry the complainant home. But it makes no sense to find, on the one hand, that there was no undue influence but, on the other hand, that the presumption applies. If the presumption does, after all the evidence has been heard, still apply, then a finding of undue influence is justified. If, on the other hand, the judge, having heard the evidence, concludes that there was no undue influence, the presumptions stands rebutted. A finding of actual undue influence and a finding that there is a presumption of undue influence are not alternatives to one another. The presumption is, I repeat, an evidential presumption. If it applies, and the evidence is not sufficient to rebut it, an allegation of undue influence succeeds.
    In the present case, the judge's conclusion that there had been no actual undue influence was reached after considering all the evidence. There was evidence of the relationship between Mr and Mrs Etridge ... But there was no evidence of abuse by Mr Etridge of that relationship, or of any bullying of Mrs Etridge in order to persuade her to support his decisions .... In my view, the judge's conclusion that there had been no undue influence was well justified on the evidence. That conclusion should have been an end of the case."

    Undue influence in relation to the Management Agreement

  111. Mr Mill concedes that at the time when the Management Agreement was entered into there existed a relationship of trust and confidence between Mr Wadlow and Seal. Seal reiterated many times in his evidence that he trusted Mr Wadlow to look after his interests. I accept that evidence.
  112. As appears from Etridge (loc cit), the next question is whether the terms of the Management Agreement are such as to call for an explanation. I accept Mr George's submission that account should taken, when answering this question, of the provisions of the Publishing Agreement. As Mr Turton was inclined to accept, the 70/30 royalty split was by no means generous to Seal. Moreover Mr Wadlow agrees he had no previous experience as a publisher; he intended to sub-contract the pure publishing function.
  113. Mr Mill is of course correct when he says that the Management Agreement must be considered as a whole. However, the two features of that agreement which Mr George contends are not readily explicable by the relationship between the parties are, firstly, the provision (as I have found) for perpetual post-term commission on the First and Second Albums; the second is the "double-dipping" provision which entitled Mr Wadlow to commission the income accruing to Seal under the Publishing Agreement (see paragraph 7 above).
  114. There was a measure of agreement between the experts about the provision for perpetual post-term commission. Mr Bray said that such a clause was unusual in 1990. Mr Turton's evidence was that, when acting artists at this time, he tended to succeed in getting sunset or tapering provisions. Both experts agreed that a lot turns on the status and experience of the manager in question. As I have noted, Mr Wadlow had little, if any, previous experience as a manager prior to acting for Seal.
  115. As for double-dipping, it is Mr Bray's opinion that for the reasons given in paragraph 5.6 of his report this provision is unreasonable. It is apparent that Ms Searle was of the same opinion: see paragraph 89 below. Mr Turton drew attention to what he considered to be distinguishing features of the relationship between the parties in 1990, namely the fact that Mr Wadlow had for some time been performing managerial functions for Seal without the benefit of a management agreement and, secondly, the fact that the Publishing Agreement materially preceded the Management Agreement. Although that is right in terms of chronology, it seems to me that Mr Wadlow's pre-existing entitlement to royalties under the Publishing Agreement was a reason for him not to double dip rather than a justification for a contractual provision entitling him to do so. Mr Turton accepted that an entitlement to double-dip would not usually have occurred in 1990.
  116. Accepting, as I do, that account must be taken of all the terms of the Management Agreement, I have come to the conclusion that because of the two features identified by Mr George, the bargain struck between the parties is not readily explicable by ordinary motives. In my judgment there is therefore a presumption of undue influence in relation to the Management Agreement. The question which then arises is whether the evidential presumption has been rebutted on behalf of Mr Wadlow. In regard to this question, it is in my view important to consider carefully what steps were taken by Mr Wadlow to safeguard Seal's interest.
  117. As to that, Mr Wadlow's case is that he insisted at every stage that Seal take independent advice from Ms Searle. In many cases that would of itself suffice to rebut the presumption of undue influence. It is, however, necessary to examine in a little detail what happened. It emerged in the evidence that Ms Searle had acted and later continued to act for Mr Wadlow. I am nonetheless content to accept that she did provide Seal with advice which was independent. According to the evidence, her unequivocal advice was that Mr Wadlow should not be permitted to commission his publishing. Mr Wadlow accepts that he tried to persuade her that it was fair for him to commission the publishing income but her advice to Seal remained the same. What then happened, according to Mr Wadlow's own account, is that he had a discussion with Seal, in the course of which he pointed out to Seal what he had done for him in the past two years and that his publishing income was to recompense him for that and for his risk in investment on such things as studio time. Mr Wadlow was not prepared to accept that it was a matter of persuading Seal but the outcome of their discussion was that Seal agreed to the double dipping.
  118. In the light of that evidence I am unable to accept that Mr Wadlow has rebutted the presumption of undue influence. In my view he misused his influence over Seal. The Management Agreement was in my judgment procured by undue influence.
  119. Undue influence in relation to the Settlement Agreement

  120. Although I have dealt at some length with the question whether the Management Agreement was procured by undue influence, I have already decided that it is not the relevant agreement pursuant to which Mr Wadlow's entitlement to commission arises. I must now consider whether the Settlement Agreement was procured by undue influence.
  121. In my judgment the Settlement Agreement was plainly not procured by undue influence. I can state my reasons for that conclusion quite shortly. Whilst I readily accept that over the previous four-and-a-half years Seal and Mr Wadlow had had a close relationship as artist and manager, it is plain on the evidence that by February 1995, and probably earlier, that relationship had effectively come to an end. Seal had come to realise what he considered to be Mr Wadlow's limitations and shortcomings as a manager. Seal had told Ms Searle that he had it in mind to terminate his relationship with Mr Wadlow. He had already effectively replaced Mr Wadlow as his manager with Mr Cavallo. In my view the relationship had ceased to be one of trust and confidence by the time of the meeting at the Star of Bombay restaurant (see paragraph 18 above).
  122. I am furthermore wholly unpersuaded that the terms of the Settlement Agreement are such as to call for an explanation. The agreement gave effect to Seal's unilateral decision to terminate the Management Agreement. The terms of severance as finally agreed do not appear to me to be unreasonable or oppressive from Seal's point. The continuing obligation to pay post-term commission has to be taken in conjunction with the other provisions of the agreement. I have noted at paragraph 64 above some of the significant concessions made by Mr Wadlow under the terms of the agreement. Further concessions were made in relation to the Publishing Agreement: Mr Wadlow agreed to its premature termination (which had the effect that there were to be no albums 3-5) and to an increased royalty for Seal.
  123. Moreover, Seal received independent legal advice from Ms Searle in relation to the Settlement Agreement. It is to be inferred that Seal would also have received advice from Mr Cavallo who, although not a lawyer, was well versed in artist management. For the reasons already explained (see paragraph 70 above) the evidence as to the role played by Ms Searle" is far from satisfactory. An attendance note reveals that she spent 10 hours with Mr Wadlow in connection with the proposed settlement agreement (albeit without disclosing anything of what passed between them). Seal had left it to her to negotiate on his behalf after he returned to the US. On 2 February 1995 she wrote at some length to Seal and Mr Cavallo explaining the contractual position. Her letter tells them that in her view there were strong grounds for arguing that the Management Agreement was not valid or subsisting because the issue of Mr Wadlow's entitlement to commission Seal's publishing income had never been resolved to her satisfaction. The letter also makes reference to breaches on the part of Mr Wadlow of his duty to act in good faith and of his fiduciary obligations to Seal. The letter does not mention restraint of trade or undue influence. However, given the strong line which she had taken about double dipping at the time when the Management Agreement was being negotiated, there is a clear inference that she would have advised Seal in 1995 about the possibility of asserting that that agreement was voidable on the ground of undue influence.
  124. Even if (contrary to my view) a presumption of undue influence arose in the case of the Settlement Agreement, I would hold on the evidence that that it is rebutted by Mr Wadlow.
  125. The effect of the void ability of the Management Agreement on the validity of the Settlement Agreement

  126. Although I have held that Mr Wadlow's entitlement to commission arises under the Settlement Agreement and have rejected the claims that it was in unreasonable restraint of trade or procured by undue influence, Mr George argues that that is not fatal to his case on undue influence. I say that because of an authority to which Mr Mill, very properly, drew my attention, namely Yorkshire Bank v. Tinsley [2004] 1 WLR 2380.
  127. The facts in Tinsley where these. The defendant and her husband had executed a mortgage of their home as security for the husband's debts under an account with the claimant bank, which had constructive notice of the husband's undue influence over the defendant. Later, when the defendant had petitioned for divorce, an arrangement was entered into under which the matrimonial home was sold and a new home purchased for the defendant. In replacement of the mortgage over the matrimonial home, the defendant executed in favour of the claimant a mortgage of her new home as security for the husband's current and future business debts. Payments under the new mortgage having become overdue, the Judge made an order for possession of the defendant's home in favour of the claimant. The defendant's appeal was allowed on the ground that, since on the facts the two mortgages were inseparably connected and, since the first mortgage was voidable for undue influence, the second mortgage was also voidable.
  128. Longmore LJ, giving the judgment of the Court, expressed the view at paragraph 18 that, just as a new obligation arising out of the release of a former void contract will itself be void, so too may an agreement be voidable if it arises out of the release of a former voidable agreement; "nothing comes from nothing". He continued:
  129. "A substitute contract will often come into existence in a different factual context from an earlier contract, and that factual context may show that the second contract is not a true substitute for the first. But if the factual situations are materially similar, and if it is a condition of the rescission or release of the original void or voidable bargain that the parties enter into a new bargain, that new bargain must be as open to attack as the old one. No doubt the question is partly (if not mainly) a question of construction of the new contract but it is too simplistic to say, as [counsel for the claimant] did say, that a misrepresentation will suffice to avoid a varied contract but never suffice to avoid a new contract. One approach, where no fresh misrepresentation is made at the time of the substitute contract, would be to ask if the original representation is to be deemed to be repeated when the new contract is made ...
    19. So also, in my judgment, it must be for undue influence. If a mortgage or guarantee is voidable for undue influence as against a husband and against a bank, a replacement mortgage, even if undue influence is not operative at the time of such replacement, will itself be voidable, at any rate if the replacement mortgage ,is taken out as a condition of discharging an earlier voidable mortgage. This should be the case even if there is a new contract rather than a mere variation of an old contract" .

    Agreeing with the judgment of Longmore LJ, Rix LJ said:

    " ... I would underline the points that the '1994 mortgage was inseparably connected with the 1988 and 1991 mortgages and that there was nothing to render the past abuse by Mr Tinsley amounting to undue influence, of which the bank had constructive notice, cease to be operative in connection with the 1994 mortgage".
  130. In my judgment the present case is materially different from Tinsley. The Management Agreement and the Settlement Agreement were connected in the sense that the latter terminated the former but the very fact that such is the nature of the connection renders the present case is distinguishable in my opinion. The factual context in which the settlement agreement came into existence was fundamentally different from the factual context of the earlier Management Agreement. The latter was not a substitute for the former; its purpose and effect was (as I have held) to terminate the Management Agreement. Besides, as I have held (see paragraphs 92-96 above) Seal, unlike the wife in Tinsley, had· the benefit of independent legal advice before entering into the later transaction. A further material consideration is that the Settlement Agreement terminated not only the Management Agreement but also the Publishing Agreement, the validity of which has not been questioned. If the Settlement Agreement is avoided, it might be supposed that the rights of the parties to the Publishing Agreement would revive which would give rise to the difficult question how to reconcile that revived agreement with the later publishing agreement to which I have referred at paragraph 29 above.
  131. Although I accept that I am bound by the decision in Tinsley, I am satisfied for the reasons which I have given that it is distinguishable on its facts from the present case.
  132. The equitable defences

  133. It follows from the conclusions at which I have arrived earlier in this judgment that the question whether Mr Wadlow can avail himself of the equitable defences relied on does not arise. I should nevertheless express briefly my view about them. In the circumstances of the present case it seems to me to be legitimate to take the defences of laches and acquiescence together. . I adopt the same approach as did Nicholls J (as he then was) in John v. James [1991] FSR 397 at pages 456-457.
  134. As I have found, Mr Wadlow's influence over Seal ceased at the latest in early 1995.
  135. According to the evidence Seal paid the commission due until 2000 but then (with the exception of one instalment) payments ceased. The stance adopted on behalf of Seal was at one stage that he was not able to pay. The claim of undue influence was not advanced until shortly before this trial commenced.

  136. The evidence of Seal was unchallenged that he believed, mistakenly, that his obligation to pay post-term commission was for seven years only. However, I have already found that there is a clear inference that Ms Searle would have advised Seal about the possibility of raising undue influence at the time when the Settlement Agreement was being negotiated. Given his wide experience of the music business, Mr Cavallo may have raised this question with Seal also. I am not persuaded that there is any legitimate excuse or explanation for the fact that the issue of undue influence was not raised until 2006, that is, eleven years after the Settlement Agreement had been concluded. As Nicholls J observed in John v James (loc cit): "it behoves a party who wishes to claim the return of such property to act promptly when he becomes dissatisfied". A further consideration (although not, I accept, a decisive one: see 0 'Sullivan v. Management Agency and Music Limited [1985] QB 428) is that in the meantime Perfect Songs has by virtue of the agreement dated 30 April1996 referred to in paragraph 29 above, become the licensee of a large number of copyrights which have been registered with societies round the world.
  137. In these circumstances I am satisfied that Mr Wadlow is entitled to rely on the defences of laches and acquiescence to defeat the claim (which I have rejected) that the Settlement Agreement was procured by undue influence.
  138. That conclusion is reinforced by the public policy which favours the finality of settlements: In Panayiotou the Judge accepted at 342-7 that:
  139. "where disputes have arisen and those disputes have been disposed of by means of an interpartes settlement, public policy favours giving effect to that settlement and to refusing to allow a party thereto to resurrect issues whether identical or similar to those which the settlement had been intended to lay to rest".

    Conclusion

  140. For the reasons set out above there will be judgment in favour of the Claimant. I direct that an account be taken of the commission to which Mr Wadlow is entitled in accordance with this judgment. The counterclaim is dismissed.
  141. I would like finally to thank counsel for the high quality of their oral and written submissions.


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