Entertainment Law

• Author: International Law Group

In April and June 2001, the High Court of Justice Chancery Division entered orders that dismissed a lawsuit brought by Sir Elton John and three associated companies (the EJ companies) mainly against Price Waterhouse (PW). Plaintiffs had alleged that PW had breached its duties under a 1986 contract relating to a management company known as John Reid Enterprises Ltd. (JREL). From the 1970s, Reid had been a close personal friend of Sir Elton as well as the manager and administrator of his business affairs.

In essence, the claims were that PW, as auditor and financial adviser, had failed to make sure that JREL bore certain costs and expenses of Sir Elton's highly successful musical activities rather than the EJ companies and Sir Elton. The Chancery Court disagreed, however, and dismissed plaintiffs' case as not borne out by a sound interpretation of the 1986 contract. Plaintiffs took their appeal to the Court of Appeal (Civil Division) only on the issue of the tour agents' costs. In a two-to-one vote, the appellate court dismisses the appeal.

PW's main legal defense was that the 1986 contract (correctly interpreted) did require the EJ companies to bear these costs and not JREL. PW also raised several other defenses, for example, the denial of any loss caused by the alleged breaches, and reliance upon the "booking agent" exception in paragraph 7.2 of the contract.

Sir Elton started his highly successful career in the late 1960s. From the early 1970s, John Reid via JREL has been managing Sir Elton's career. During this decade, the financial controls both of Sir Elton's business affairs and of JREL itself turned out to have been inadequate. There is evidence that Sir Elton himself was indifferent to the business details of his foreign tours.

In a witness statement in the lower court, Sir Elton had declared as follows. " ... I trusted John Reid absolutely. We had a personal relationship for five years from 1970 until 1975 and, even after that relationship came to an end, we were extremely close throughout the time of his management of my affairs until, really, the last year. I relied upon him and the advisers he employed, in particular [PW] and Andrew Haydon [a chartered accountant] to look after my business affairs properly and to do all that was necessary to act in my best interests. I left business matters entirely to [JREL] and the professionals they retained to act and advise on my behalf and on behalf of my companies." [para. 16]

The appellate court decides that, in construing the 1986 agreement, it was entitled to take account not only of Sir Elton's generosity and long-standing friendship with Reid, but also of JREL's indebtedness to the EJ companies (which the agreement itself...