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Title: Why Frankie, Elton and Gilbert went to court
Author: Patricia Wynn Davies
Source: The Law Magazine
Publish date: 4 March 1988

Why Frankie, Elton and Gilbert went to court

Patricia Wynn Davies investigates the troubled legal relationship between rock stars and their record companies

Lawyers, record companies and, perhaps most of all, rock fans may take a more cynical view, but from the tabloid newspapers’ standpoint the recent court tussle between ex-Frankie Goes to Hollywood singer Holly Johnson and producer Trevor Horn had everything.

After all, this was the case which revealed that newcomer Johnson “relaxed” all the way to the top of the charts, while session men and technicians worked on the backing of No. 1 hits Relax and Two Tribes, and that Johnson’s voice was polished up using a piece of electronic wizardry, the Synclavier. It was all something of a far cry from the descriptions, heard in the High Court just over two years ago, of Elton John’s early creative efforts in his mum’s front room.

To those in the know, all this, and the fact that the judge had to pay a visit to the Sarm West studios in Notting Hill to find out exactly how it was done, is but a sign of the times. Nonetheless, though loose parallels can be drawn with the Monkees’ clash 20 years ago with their creator Don Kirschner, it was the first British case involving a band whose success (their first three singles and their first album all reached No. 1 in the charts, a record not be sniffed at) owed much, some say very much, to the efforts of its record producer and his quest for electronic perfection.

Johnson admitted in court that Horn’s contribution was significant. But Zang Tumb Tuum, the record company formed by Horn, his wife Jill Sinclair and pop writer Paul Morley, and associated music publishers Perfect Songs, failed to hold Johnson to recording and publishing contracts signed in 1983. And despite the talk of Johnson’s shortcomings, he also won his counter-claim, that ZTT had breached an implied term in the recording contract by spending an excessive amount - about £780,000 - on the band’s second album Liverpool and associated singles.

Mr Justice Whitford found the contracts an unreasonable restraint of trade. As such, the case is another application of principles developed in 1972 when songwriter Tony Macaulay successfully challenged an exclusive publishing agreement which he had signed when he was an unknown 21-year-old. The agreement lasted five years, but if royalties topped £5,000, it was automatically extended for a further five years.

Among the terms favourable to the publishers, A Schroeder Music Publishing, was one allowing them to end the agreement by giving one month’s notice and another giving the right to assign it. Two years later, the House of Lords confirmed that the agreement was unduly restrictive because of (1) its likely duration, (2) the assignment provision, which destroyed the argument that the publishers would be unlikely to act oppressively, (3) the fact that the publishers were not bound to actually publish or promote any of Macaulay’s work, and (4) the lack of any provision entitling Macaulay to bring the agreement to an end if they didn’t. In the absence of any justification for such a “one-sided” agreement, especially since it had not been entered into as the result of negotiation between parties in equal bargaining positions, the agreement was an unreasonable restraint of trade, the Lords said.

The Macaulay case, described by music lawyers as the first of four “watershed” decisions, was applied the same year by the Court of Appeal when Fleetwood Mac song writers Christine McVie and Robert Welch successfully beat off a copyright action launched by former manager Clifford Davis. McVie and Welch had signed contracts in 1971 giving Davis world copyright in all their compositions for five years, extendable by Davis to ten. Davis paid no retaining fee, paid only one shilling for the copyright in each song, could assign the copyrights to anyone, and failed to tell McVie and Welch to get independent advice. The Court of Appeal had no hesitation in discharging an interlocutory injunction aimed at stopping them from getting their work published elsewhere.

In 1984 Gilbert O’Sullivan took on former manager Gordon Mills. O’Sullivan had signed an exclusive management agreement with Mills, and disadvantageous publishing and recording contracts with associated Mills companies. The Court of Appeal found that the singer had signed the agreements in reliance on Mills and without being advised to seek independent advice, that Mills and the companies and O’Sullivan were in a fiduciary relationship and that the agreements were therefore to be presumed to have been obtained by undue influence and could be set aside.

A year later, in a 50-day trial, Elton John and lyricist Bernie Taupin tried to get recording and publishing agreements made in 1967 with Dick James, set aside on grounds of undue influence, and so recover the copyright and master tapes of 136 of their early compositions. Mr Justice Nicholls found that the agreements, which tied the artists to James for six years on disadvantageous terms, and which had been signed by Elton John’s mother without the benefit of negotiation and because of the trust placed in James, operated as unfair transactions.

Though John and Taupin failed to get them set aside (on the grounds, broadly, of lapse of time), they won the second string of their case, that companies in the Dick James Organisation had broken an implied term that they would not enter into agreements which would have the effect of unfairly diminishing receipts in the hands of the artists. The upshot was a substantial settlement, confidentially negotiated, but believed to be several million pounds.

In the Johnson case, the judge found fault with three aspects of ZTT’s deal with the band: first, its open-ended nature, based on a series of options to extend, exercisable by the company alone, designed to cover the group’s progression from first single to albums, but which included no obligation to record and no get-out for the artists either; secondly, a clause which provided that if one member of the group left it, the company could exercise an option to bind him individually; and thirdly, clauses which said that the recording budget, producer and composition to be recorded were to be decided after consultation with the band, but if there was a dispute the opinion of the company would prevail.

The judge’s finding on the third point is the one which is likely to give record companies most food for thought. Entertainment lawyers say this is standard practice and most think there’s some justification for it. “Someone has to make a decision at the end of the day,” says Stuart Bond of Simon Olswang & Co, ZTT’s solicitors. “In the real world it is very difficult to work with artists who are unhappy, so inevitably there’s discussion, as there was here, where four members of the band wanted to produce rock-type music and one, Holly Johnson, wanted dance-type music. That can cause difficulties for the record company which means that someone has to decide - and it’s standard that the company should do so.”

Be that as it may, the combination of this and the other clauses was fatal. The main plank of ZTT’s case on the duration point was that it was a critical part of the contract that recordings took place. Says Bond: “Irrespective of whether there is a cut-off point, if the company did not make records it would be open to the artist to make time of the essence, treat any breach of that as repudiatory, and so bring the contract to an end.” The judge rejected that notion, and rightly so, says Brian Howard of Russells, Johnson’s solicitors. “By the time a new artist got to the end of the litigation he would have died a death.”

The indefinite contract was becoming less standard anyway, says William Booth of Harbottle & Lewis. He cautiously predicts that the case will be viewed by the industry as turning on its own facts, but that more contracts will have cut-off periods and that “final say” clauses will be well hedged with consultation provisions, especially where record companies and studios have a close relationship.

And, adds Brian Howard, companies may be more cautious about budgets: “One hopes they will have budgets in the first place and that if they’re exceeded the difference won’t all fall on the artist.” As one not yet successful band put it: “Trevor Horn may have made Holly Johnson, but the price he was expected to pay was too high.”

But whatever bullish sentiments the case may evoke among young hopefuls, it will not, any more than any other, bring about a dramatic rethink. “What you see in these cases are the high points in the rock and roll area of the law,” says Mark Stephens of Stephens Innocent. “But the typical bargain is very onerous. New artists can expect to be tied up for three to five years, with smallish advances and with everything weighted in favour of the record company.”

Stephens agrees that to some extent this is understandable. It can take possibly five years or more for a band to come good. Meanwhile the record company is concerned about the money they are pouring into it. Even so, record companies don’t seem to get their fingers burned all that often. When they do, it’s arguably because of an overdose of their own marketing hype.

The progress and decline of Sigue Sigue Sputnik is perhaps one example. What people also forget, says Stephens, is that the working life of an artist is very short. “In that period he’s trying to get in an entire lifetime’s earnings if he is to avoid spending the rest of his days on the dole in a council flat.” Fortunately for the minnows, fairly big fish come along from time to time and ruffle a few feathers. “The law gets refined with each major case,” says Stephens, “and contracts are made slightly more reasonable because everyone gets frightened that their contracts are going to be found unenforceable. The smarter guys in the legal world start putting in their own refinements and the contracts get tightened up again.”

Signing of new artists, William Booth points out, involves a ritual dance routine. “Contract number one is bashed out by the record company’s solicitor, invariably a standard one very much in their favour. This goes back and forth and gets amended to redress the balance a little. The company knows it has to give on some points because it knows its original position is untenable.” This, he says, makes a mockery of arguments based on what is standard practice.

One thing the Johnson case does seem to make clear, again perhaps a sign of the times, is that the fact that an artist takes legal advice before entering into a deal is something of a red herring (though not having it is not). Frankie Goes to Hollywood had taken advice from Gentle Jeyes (now Gentle Mathias), one of the most experienced firms of solicitors in the business.

But while most new artists have independent advice, recording contracts still don’t drop off trees. “Unless a deal is a complete rip-off it is very unlikely that an artist will be advised not to go ahead,” says Booth. “The solicitor will assess the artist’s position, and advise that he will be able to get so far now, but that if everything goes brilliantly, the company will be amenable to change later.” Booth agrees that’s not an ideal situation. But for the ultimately successful, some sort of rough justice usually flows from the uneven starting stakes. The gamble is that the artist might have to go to court to get it. That can mean him doing nothing for two years, as Bruce Springsteen discovered when he took on Mike Appel. And even the successful don’t always win on all points. Elton John didn’t. He also ended up paying the personal costs of Dick James who died shortly after their case ended. David Bowie is still paying for the privilege of parting company with Mainman Records in 1975.

But in the greater scheme of things Holly Johnson, helped on his way by MCA records, for whom he will record solo and who underwrote his legal costs up to the level of £150,000 plus VAT, did rather well. Despite the relative flop of the album that caused so much trouble, and despite the fact that as far as the record buying public was concerned, this was a singer who had died with the demise of Frankie Goes to Hollywood in March last year, the gamble seems to have paid off handsomely.