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	England and Wales Court of Appeal (Civil Division) Decisions
You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> Northern & Shell Plc v Champion Children Of The Year Awards Ltd [2001] EWCA Civ 1638 (26 October 2001) URL: http://www.bailii.org/ew/cases/EWCA/Civ/2001/1638.html Cite as: [2001] EWCA Civ 1638

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IN THE SUPREME COURT OF JUDICATURE
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE QUEEN'S BENCH DIVISION
(Mrs E Slade QC sitting as a Deputy High Court Judge)

		Royal Courts of Justice Strand London WC2 Friday 26 October 2001

Friday 26 October 2001

1. LORD JUSTICE MANTELL: This appeal is about the construction and application of a sponsorship agreement.
2. From 1977 until 1996 a company calling itself Champion Children of the Year Awards Ltd ("Champion") had operated an award scheme based on the achievements during the current year of children aged between 8-16. I am not entirely clear what was in it for Champion, except that the company was run for profit, but it does seem that any income which the scheme generated was devoted to charitable objects. The highlight of the scheme in any given year was an award ceremony attended by a prominent person, to present the awards, and other notable individuals, generally from the worlds of sport, stage, screen and television.
3. Each year Champion would set out to find a sponsor for the scheme, being an organisation which was prepared to foot the bills in return for favourable publicity. So it was in 1997. Champion's originator and chief executive, James Campbell, approached a number of possible sponsors and eventually persuaded the publishers of OK! Magazine ("OK!") to participate. That was in June. At that time what was proposed was a contest culminating in a gala celebrity event at the Savoy Hotel at which the prizes were to be presented by HRH Diana, Princess of Wales with the proceeds going to the Landmines Appeal. The cost to OK! would be £160,000 but the resulting publicity was likely to be immense, particularly as the whole ceremony was to be shown on television prior to Christmas.
4. Unfortunately the Princess of Wales was not able to take part and Champion offered HRH the Duchess of Kent and the charity UNICEF in her place. Without disrespect to the Duchess, it was recognised that there might be less public interest as a result of the Princess of Wales having withdrawn. Fresh terms were negotiated. Those were embodied in an agreement dated 27 August 1997. The agreement contained 19 clauses. By clause 7:

"THE Sponsor will part finance the OK! CHAMPION CHILDREN AWARDS in the sum of £90,000 (ninety thousand pounds) plus VAT at standard rate to be paid in two instalments ie 50% on signing this Agreement upon receipt of a VAT invoice, and 50% in November 1997."

5. The preceding six clauses set out what OK! was to get for its money. They read as follows.

"1. THE scheme will be entitled 'OK! CHAMPION CHILDREN AWARDS'. The campaign will be launched in September 1997 and will culminate in a one hour networked programme in the presence of Her Royal Highness The Duchess of Kent, on BBC Television to be transmitted as a pre Christmas 1997 special ('the Event') The Event will be a benefit in support of UNICEF (The United Nations Children's Fund). The Programme grants to the Sponsor the sole and exclusive right to have duly appointed photographers present at the Event for the purpose of visually recording the Event for the purpose of exclusive publication rights in the print media. The Programme warrants that no third party photographers are present at the Event. [References to "the programme" mean, in the context of this judgment, Champion.]

2. THE Programme shall use its best endeavours to provide the Sponsor with a minimum of six celebrity interviews with pictures, featuring the celebrities listed in schedule 1 attached hereto, suitable for publication in OK! (such suitability to be within the reasonable discretion of the Sponsor). The interviews and pictures shall be provided at the request of the Sponsor between September and December 1997 and the Programme shall use its reasonable endeavours to ensure that the celebrity is of the Sponsor's choice (from the celebrities listed in schedule 1)."

6. In interpose that schedule one contained a list of well-known individuals. It is right to say that during the weeks following the signing of the agreement some adjustments were made to the composition of that list. Clause 2 continues:

"The Sponsor shall have exclusive worldwide publication rights to the features in print media, in perpetuity.

3. THE programme in conjunction with the Sponsor will create a generic logo for the Campaign. The logo will prominently feature the Sponsor's name, colours and type face and will be agreed by the Sponsor prior to production. The agreed logo will be prominently displayed during the television programme, and will appear on all relevant material including, but not limited to, Press packs, letterhead, brochures, mailshots, invitations, tickets, sweat shirts, medallions, stage set etc.

4. THE Programme will promote the Sponsor's name in every way possible, within the normal constraints imposed by the broadcasting authorities, and in any event to the same extent as the coverage obtained by Iceland, the sponsor of the Champion Children of the Year Awards in 1996.

5. ALL copy, ie printed matter, press statements or interviews on radio, television, or in the press will contain reference to the Sponsor. The Sponsor will approve all such reference prior to production. However, the Programme will not be held responsible for the inadvertent failure of a third party to use or display this credit after the relevant material has been distributed, save that the Programme shall use its best endeavours to ensure that the agreed logo is not altered in any way when used by any third party."

7. And now clause 6, which has featured prominently in this appeal:

"IN the event that the Event does not proceed for any reason or that it is not broadcast by the BBC at a time and date acceptable to the Sponsor in its reasonable discretion, all monies paid under this Agreement by the Sponsor shall be repaid upon demand by the Sponsor, and no further sums shall be due."

8. I think I may have said already that the chief distinctions between the original agreement and the agreement entered into after the Princess of Wales indicated that she could no longer take part were the change of the charitable object and the fact that the original viewing figures mentioned were not included in the agreement at all. Indeed, neither in clause 6 nor elsewhere in the agreement is there any reference to the likely viewing figures to be achieved when eventually the matter was presented on television by the BBC.
9. Clauses 8-19, though not unimportant in themselves, have no relevance on this appeal.
10. So it will be seen that the proposal accepted by OK! was on an altogether less ambitious scale than had been contemplated originally. The sponsorship had come down from £160,000 to £90,000. The charity to benefit was no longer the Landmines Appeal but UNICEF. And, quite importantly, whereas originally what had been envisaged was a one-hour pre-Christmas BBC network special to be transmitted on a Sunday afternoon slot after the East Enders omnibus, with an anticipated audience of approximately six million viewers, that was no longer seen as capable of attainment and all that was specifically provided for was the transmission of a one-hour network programme to be transmitted as a pre-Christmas 1997 special. It is perhaps not without importance that nowhere in the agreement does there appear any estimate of the likely viewing figures.
11. On 27 August OK! made the first sponsorship instalment of £45,000 plus VAT. Unhappily the launch of the campaign was delayed until October but on 18 November the awards event did take place at the London Marriott Hotel with HRH the Duchess of Kent as guest of honour. On 28 November Champion asked OK! for the second instalment of the sponsorship monies, but it is right to mention here that we have been shown today correspondence which precedes that request in which the chairman of OK! was threatening, I think as early as 13 November, to exercise his right (as he claimed it to be) possibly to seek the return of the monies paid thus far.
12. On 16 December Mr Campbell wrote to the chairman of OK! enclosing the video of the awards event and informing him that the television broadcast was to take place on Monday 22 December at 11.10 am. The television broadcast went out as promised. Nothing much seems to have happened after that until 26 January when Champion again asked for the balance of the sponsorship monies. The response was a letter from OK!'s legal department, dated 3 February 1998, stating that OK! considered Champion to be in repudiatory breach of the agreement by reason of its failure to provide the celebrity interviews referred to in clause 2 of the agreement or, more particularly, a failure to use its best endeavours to arrange the interviews. Also there was a complaint about the venue for the ceremony not having been the Savoy, a grumble about the paucity of references to OK!'s sponsorship in the televised broadcast, and then this:

"Fourthly, the scheduling of the broadcast of the event on BBC1 did not live up to your pre-contractual proposal and other representations upon which we relied in entering into the Agreement with you. Your written proposal, and oral representations, indicated that the event would be broadcast at peak time and would have an audience of at least six million people, most of whom would be adults. In the event, the awards were broadcast on a Monday morning and, we understand, attracted an audience of less than 700,000 adults."

13. The letter continued by seeking repayment of the £45,000 and VAT which had been paid on the signing of the agreement. This last claim was resisted with the result that OK! launched proceedings in the High Court claiming the return of that sum and also damages for breach of clause 2 of the agreement. It is right to say, at this point, that as a matter of fact Champion had failed to secure the interviews in spite of an extension of time in which to do so. In the same proceedings Champion counterclaimed for the second instalment of sponsorship money said to be due under clause 7 of the agreement.
14. The action came on for hearing in the Queen's Bench Division, resulting in a judgment on 16 June 2000 by Mrs E Slade QC sitting as a Deputy High Court Judge. By that judgment the Deputy High Court Judge found that Champion had been in breach of clause 2 (a conclusion not disputed in this appeal) although OK! had failed to establish an entitlement to more than nominal damages. Further, the learned judge found that OK! had acted reasonably in treating the time and date of the television broadcast as unacceptable and was consequently entitled to the return of its money. It followed, of course, that Champion's counterclaim failed.
15. The challenge to the judgment rests entirely upon the learned Deputy Judge's application of clause 6 to the facts of the case. Neither at trial nor, as I have understood the submissions, before us has any objection been taken to the Deputy Judge's interpretation of the clause. In reaching her conclusion, the Deputy Judge observed that clause 6 placed no restriction upon OK! as to when objection should be taken which it was within OK!'s discretion to make, provided always that the discretion was exercised reasonably. The point had been taken on behalf of Champion at the trial that the reason offered in the letter of 3 February was invalid because, of course, it harked back to the proposed arrangements which were to be set in place were the Princess of Wales to officiate. The Deputy Judge rejected that argument, stating:

"... in my view, the reasonableness of any reason given is not necessarily material in judging the reasonableness of the objection."

16. I pause simply to highlight the use of the word "necessarily". The Deputy Judge went on to consider the background to the invocation of clause 6, noting on the way that by the time the letter of 3 February came to be written it had been established that the viewing figures were a disappointing 710,000. Eventually her conclusion was as follows:

"In my judgment, the fact that the claimant did not object until the 3rd February 1998 did not affect its right to do so. No question akin to waiver arises on these facts. The viewing figures were no doubt material to the claimant's decision and these could not have been available immediately. The decision as to whether the claimant's objection was reasonable is finely balanced. Plainly, objection could have been taken to a broadcast in the very early morning or very late at night. Equally plainly, no objection could have been taken to a peak time broadcast. If the broadcast had been 11.10 [you suggested that that should be 10 pm but I think the writer meant 10 am on a Monday not in the week preceding Christmas?] on a Monday before Christmas week, in my judgment it would have been reasonable to object to it. Does the fact that the Monday was in Christmas week make it unreasonable to object to the 11.10 broadcast?

In my judgment, having taken into account all the facts and the evidence to which I have referred, Mr Campbell having himself described the slot as 'disappointing' and also having regard to the viewing figures of 710,000, in my judgment it was reasonable for the claimant to object to the broadcast."

17. In his grounds of appeal Mr Rushbrooke for Champion points out that, even allowing for the Deputy Judges's construction of the clause, she misapplied it to the facts of this case, having regard to the commercial purpose of the agreement. He also revives the submission to the trial judge that there was no proper exercise of the discretion in view of the fact that it was based on a manifestly false assumption. For OK! Miss Prevezer QC supports the judgment below for the reasons advanced by the Deputy Judge, further to which she suggests that viewing figures were not altogether immaterial, given that the letter in which the alternative arrangements were proposed simply said that "the audience will not be as strong without POW". She points out that although the clause as operated by the Judge was harsh from the point of view of Champion, nevertheless that is not a proper consideration when looking to how it ought to have been applied. After all, she submits, Champion had really no alternative but to accept OK!'s terms unless it was to lose the promotion for 1997 altogether.
18. As the Judge acknowledged, the reasonableness or otherwise of OK!'s attitude is to be tested against objective standards. It is to be noted that clause 6 itself says nothing at all about viewing figures. In the ordinary way one would expect time and date to be objected to as soon as they had become known if it could be predicted that in combination they would result in a disappointing public response. Although I quite accept that on a fair reading clause 6 does not require the sponsor to make its objection known by any particular time, the fact that it failed to comment on the time and date until after the viewing figures become known rather suggests to me that in themselves neither the date nor the time were considered to be outside the terms of what had been agreed. It seems quite clear, to me at any rate, that disappointing viewing figures in themselves could not provide the opportunity for OK! to back out of the agreement. One might test that by asking what the position would have been had a prime viewing slot been allocated - let us say, as originally suggested, on a Sunday afternoon of the week preceding Christmas. Suppose then that by some freak - perhaps a competing attraction or a national disaster - viewing figures fell far below those which had been expected. Is it to be said that in those circumstances it would have been reasonable for OK! to renege?
19. But it is not for that reason alone that I would disturb the finding of the Judge. It is, I think, important to view clause 6 in the context of the agreement as a whole, having regard to the benefits not only which the agreement conferred upon OK! but those which it actually received as a result of its partial implementation. On any view OK! did not receive all that it had bargained for. Hence the claim for damages for breach of clause 2. At the same time it did receive significant benefits, some of which have been identified either in argument or in the evidence of Mr Campbell. The event did take place. HRH the Duchess of Kent did attend. There was some publicity at the time and there was a television broadcast which did attract a significant number of viewers. To take the attitude that OK! was entitled to back out would mean that it had received significant benefits without any cost to itself. Moreover, on the application of clause 6 as upheld by the Deputy Judge OK! was left with alternative remedies for the alleged breaches of other terms of the agreement. Indeed, on the argument presented on behalf of OK! it would have made no difference at all if Champion had fulfilled its obligations under clause 2 and provided a very significant part of the consideration which was at stake. It really makes no difference that in the event OK! was unable to prove any significant loss with regard to those breaches.
20. So in my view if one does have regard to clause 6 within the context of the agreement as a whole, bearing in mind the commercial objectives of both sides to this agreement and applying an objective standard of reasonableness, it does appear to me that in the circumstances it was not reasonable of OK! to seek to invoke clause 6. That does not mean, of course that OK! was left without any alternative remedy in so far as Champion may have failed to deliver under the rest of the sponsorship agreement.
21. Accordingly I would allow this appeal, with the result that Champion will succeed on both the claim and the counterclaim.
22. LORD JUSTICE SEDLEY: For my part I am disposed to accept Miss Prevezer QC's submission that the reference in clause 6 to the time and date of the broadcast was, in the context of the agreement and in the light of its purpose, a reference in effect to the size of the audience. I accept too that, while objection might legitimately have been taken to the slot the moment it was scheduled, it would equally have been sensible, other things being equal, to wait for the viewing figures in order to see if the audience had been as poor as had been feared.
23. What I cannot accept, any more than Mantell LJ can, is that it was a reasonable exercise of the "discretion" - that is to say the choice which clause 6 gave to OK! - to demand its money back when the slot turned out to be on the morning of the Monday before Christmas. It is accepted that this was by no means a graveyard slot, tantamount to non-transmission. The fact that it was not the peak viewing slot for which both parties had hoped is in my view neither here nor there. OK! was getting what it had bargained for: free publicity from a public service channel on the back of an emotionally charged event watched by hundreds of thousands of adults; that is to say, hundreds of thousands of potential readers of OK! Magazine.
24. No use of language which I recognise can make it reasonable in these circumstances for OK! to demand its money back. The sponsorship money was not made conditional on any specific range of slots or viewing figures. The meaning for which Miss Prevezer so courageously contends would place in OK!'s hands a two-headed penny: heads OK! wins, tails Champion Children loses. It is not a question of the court rescuing the defendant from the grip of a predatory bargain into which it had unwisely entered. It is a question simply of what in its context the claimant company's reasonable discretion can in these circumstances encompass. In my judgment, as in my Lord's, whatever its ambit it cannot possibly entitle OK! to get its money back simply because it was not satisfied with the perfectly decent slot that the programme had. I agree that this appeal succeeds.
25. LORD JUSTICE SIMON BROWN: The critical point to make about clause 6 is that it is to be construed and applied in the context of the agreement as a whole. The agreement as a whole gave the respondent benefits well beyond the viewing figures to be attained by the broadcast. Miss Prevezer QC's skeleton argument says, "For £90,000 it was reasonable for [Northern & Shell] to expect more than 710,000 viewers." That is to overlook the further substantial benefits available to the respondent under this agreement: its association with a high-profile charitable event, its exclusive coverage of the event and (to my mind of great significance) its entitlement to the advantages of the appellant's obligations under clause 2 to use its best endeavours to provide celebrity interviews. True it is that such interviews were not in fact obtained, but that is not to deny the value to the respondent of clause 2. Indeed, quite independently of its claim under clause 6, the respondent sued for breach of clause 2 and sought (albeit in the event unsuccessfully) very substantial damages for such breach, damages only limited to £100,000.
26. Whether, therefore, it was objectively reasonable for the respondent (retrospectively, I may point out, by reference to the viewing figures obtained) to regard the time and date of the broadcast as having been unacceptable is to be judged in the light of the fact that, were the respondent to invoke clause 6, the consequence would be that it would pay nothing whatever for all the advantages it obtained. On the contrary, the appellant would be funding the event and yet nevertheless remaining liable to the respondent under other clauses of the agreement.
27. It should also be borne in mind that the other circumstance entitling the respondent to the return of its sponsorship money under clause 6 was the event not proceeding, for whatever reason. That, of course, would be an entirely understandable and reasonable basis for a claim to repayment. Ought not the same sort of justification to underlie the proper invocation of the second limb of clause 6? I think it should.
28. With these various considerations in mind, it seems to me plain that an altogether more disappointing slot for this broadcast would have been required to make it reasonable for the respondent to demand its money back. I too would allow this appeal.
ORDER: Appeal allowed. Judgment given for the defendant/appellant on the counterclaim. The defendant to have its costs of the appeal and in the court below. (Order not part of approved judgment)