Joyce v. Morrissey Decision - Waller, L.J.
DECISION
Waller L.J.:
Introduction
"The Smiths" were a very successful pop group formed towards the end of 1982. The group was a partnership comprising four members: the plaintiff (Mr Joyce), the first defendant (Mr Morrissey), the second defendant (Mr Marr), and Andy Rourke (Mr Rourke). Mr Rourke was initially a party to the litigation but settled his claim very shortly after the writ was issued. The group disbanded in 1987.
Mr Joyce was the drummer for the group. In March 1989 he issued proceedings claiming a declaration that he was a partner in The Smiths, entitled to one- quarter share of all net profits arising out of the activities (other than songwriting or publishing) of The Smiths. He sought an account on that basis. By order of Deputy Master Price made on July 8, 1993 it was directed that Mr Joyce's entitlement to the relief set out in paragraphs 1-4 of the prayer to his statement of claim be tried as preliminary issues. The trial of those preliminary issues took place between December 2-11, 1996 before His Honour Judge Weeks Q.C. sitting as a judge of the Chancery Division. By the time the issues came to be tried it was not in dispute that Mr Joyce was a partner; it was accepted that the partnership was dissolved as from May 31, 1987 and it was further accepted that the affairs of the partnership should be wound up. The only contentious issue was whether Mr Joyce was an equal partner entitled to one-quarter of the profits arising out of the activities (other than songwriting or publishing) of The Smiths.
It was that issue which the judge, after a seven-day trial, decided in favour of Mr Joyce. At the trial Mr Morrissey and Mr Marr were separately represented. It is only Mr Morrissey who has pursued an appeal against the judge's decision being now represented by Mr Murray Rosen Q.C. and Mr Tim Penny.
It was common ground both before the judge and before us that the*237 starting point was section 24 of the Partnership Act 1890 which provides as follows:
The interests of partners in the partnership property and their rights and duties in relation to the partnership shall be determined, subject to any agreement express or implied between the partners, by the following rules: (a) all the partners are entitled to share equally in the capital and profits of the business, and must contribute equally towards the losses whether of capital or otherwise sustained by the firm ...
It was Mr Joyce's case that apart from the agreement that he should not be entitled to share in the profits resulting from songwriting and publishing there was no other agreement which disentitled him from sharing equally in the capital and profits of the business.
It was the defendants' case that it was a term of the partnership that profits would be shared in the proportions Mr Morrissey 40 per cent, Mr Marr 40 per cent, Mr Joyce 10 per cent and Mr Rourke 10 per cent. They did not assert or seek to establish an express agreement to that effect but alleged that the same was to be inferred from conduct, relying on various matters including certain alleged discussions between the parties. They in the alternative alleged that the same conduct and/or discussions gave rise to an estoppel by convention by which it was alleged that Mr Joyce was estopped from asserting a partnership otherthan one which shared the profits 40 per cent, 40 per cent, 10 per cent and 10 per cent.
The facts relied on by the defendants to support the agreement and the estoppel were in substance the same and the judge held that the estoppel argument added nothing because if, on the facts, there was no agreement, then there could be no common shared assumption on which to found an estoppel. That part of the judgment is not appealed against, and although Mr Rosen referred in his submissions to estoppel, he ultimately accepted that if he did not succeed in establishing an agreement he could not succeed on estoppel. That was a concession in my view he was bound to make.
In his skeleton argument Mr Rosen summarised conveniently in paragraph 9 the matters relied upon by Mr Morrissey and Mr Marr in order to rebut the presumption in section 24 of the 1890 Act.
First, they relied upon a wide range of matters showing that Mr Morrissey and Mr Marr alone controlled the management and organisation of the band and had a far greater contribution and commitment thereto.
Second, Mr Marr alleged that during a recording session at Pluto Studio in or around October 1983, he threatened to leave the band because Mr Morrissey was insisting on a 40/40/10/10 split. Mr Marr*238 alleged that Mr Joyce persuaded him to stay and in the process accepted the stated division.
Third, Mr Marr alleged that on the evening of The Smiths appearance on Top of the Pops on January 26, 1984, he watched television at Mr Joyce's flat and Mr Joyce asked for an increase in his 10 per cent. Mr Marr said that he spoke to Mr Morrissey, and that the idea was rejected.
Fourth, Mr Morrissey claimed that in or around early 1986 Mr Marr telephoned him to say that Mr Joyce and Mr Rourke were angry that they were only receiving 10 per cent, that Mr Marr had informed them that the 10 per cent share would not be increased.
Fifth, Mr Morrissey claimed that in or around spring of 186 during a car journey from Manchester to London, Mr Joyce asked Mr Morrissey how he could earn a 25 per cent share and offered to act as a manager for the band, but this suggestion was rejected.
Sixth, Mr Morrissey claimed that shortly thereafter he and Mr Marr informed Mr Joyce that if he was not happy with his share he should leave the band, but Mr Joyce decided to remain.
Seventh, Mr Morrissey and Mr Marr relied upon the receipt by Mr Joyce and Mr Rourke of sums equivalent to 10 per cent of the profits from the activities of the band.
Eighth, Mr Marr and Mr Morrissey relied upon the receipt by Mr Joyce of a set of 1983/84 accounts on or around July 4, 1986 and the fact that Mr Joyce did not mention the fact that the accounts showed the profits of the band being split 40/40/10/10.
Ninth, Mr Marr and Mr Morrissey each relied upon a conversation between an accountant, Mr Patrick Savage of O. J. Kilkenny & Co., recently appointed by Mr Marr and Mr Morrissey to act for The Smiths, which Mr Savage said he had with Mr Joyce and Mr Rourke, in the kitchen of the Woolhall Studio in or around May 1987. Mr Savage said that he asked on that occasion Messrs Rourke and Joyce as to their understanding of the percentage split, in response to which Mr Rourke said in the presence of Mr Joyce, "We get 10 per cent". Mr Savage said that Mr Joyce made no comment or protest when Mr Rourke so stated.
It will be seen that the matters relied on involved almost exclusively questions of fact for the judge. In relation to the background facts, the management and organisation of the band, the judge accepted the position as described by Mr Morrissey and Mr Marr but found that they did not give rise to any inference rebutting the presumption in section 24. Mr Rosen accepts that those facts do not give rise to any inference that the presumption is rebutted, but he criticises the judge for failing to take the background matters into account in considering*239 the probabilities as to whether the four members of the band agreed a split of profits on an unequal basis.
Mr Rosen further criticises the judge for taking each of the above matters separately instead of looking at the matter overall. In taking the matters separately the judge found that there was no reference to specific percentages at the Pluto Studo in October 1983 albeit there may have been some conversation during which Mr Marr threatened to leave the band. It should be said in relation to this Pluto Studio incident: (1) that Mr Marr had not even in a re- amended defence originally made any reference to discussions at the Pluto Studio; (2) that in Mr Marr's witness statement some reference was made to Mr Marr threatening to leave the band whilst recording at the Pluto Studio in October 1983 and to him "understanding" that as part of the persuasion to get Mr Marr to stay, Mr Joyce and Mr Rourke accepted that they were junior members of the group; (3) that Mr Morrissey has never pleaded or relied on any incident or conversation at the Pluto Studio in October 1983 having any relevance to anything, even following Mr Marr's evidence, to which I refer next; (4) after Mr Morrissey had completed his evidence at the trial, Mr Marr commenced his and in answer to questions from Mr Morrissey's counsel suggested for the first time that what had happened in October 1983 was that Mr Morrissey had threatened not to continue with the band unless Mr Joyce and Mr Rourke agreed that the split should be 40/40/10/10, and that although Mr Marr did not think that very fair and wished to leave, Mr Joyce and Mr Rourke agreed the split so that the band could continue. If that is what had happened that would have been the clearest express agreement, but, (5) (and this may be the reason why Mr Morrissey has never sought to rely on anything said at the Pluto Studio) Mr Marr accepted in cross-examination by Mr Joyce's counsel that in truth he could not remember whether he mentioned percentages and further accepted that the indications were that Mr Bowen (to whose letters I shall turn in a moment) and Arthur Young (to whose draft accounts I will turn in a moment) were never told of any agreed split and indeed were informed to the contrary.
In relation to January 26, 1984 incident, the judge preferred the evidence of Mr Joyce that Mr Marr was not at his flat on that evening. In relation to the claims by Mr Morrissey in relation to conversations in early 1986 and spring of 1986, if they took place at all they would have to have taken place in 1985, but the judge rejected Mr Morrissey's evidence. Indeed in cross-examination Mr Morrissey was driven to accept that although in his own mind he wanted a split of 40/40/10/10:
(1) the position of the group must still have been "up in the air" at the*240 time of the meeting with the solicitor Edward Bowen on January 25, 1984, and that there was certainly no agreement formal or oral reflecting anything other than equality at that time;
(2) the position was the same at the meeting held with Arthur Young in the spring of 1984. All four members of the band were there at that meeting. Mr Joyce and Mr Rourke were suggesting equality and neither Mr Morrissey nor Mr Marr suggested there was already an agreement for a 40/40/10/10 split, and indeed nothing was said by either to suggest that that should be the split.
As regards the allegation that Mr Joyce and Mr Rourke throughout received sums equivalent to 10 per cent of the profits from the activities of the band, the judge found that this was factually incorrect. He held that in one year the drawings of Mr Rourke and Mr Joyce amounted to one-quarter of those of Mr Marr, but that no clear pattern emerged. Mr Rosen has not sought to challenge that matter on appeal.
The truth is that the evidence was overwhelming that, in any event, up to July 1985 there was no agreement rebutting the presumption of equality contained in section 24 of the Partnership Act. That that is correct can be most easily established by reference to the two letters from Mr Bowen and the letter and accounts of Arthur Young. Mr Bowen was a solicitor consulted by Mr Morrissey and Mr Marr on January 25, 1984 and he wrote two letters, one dated February 6, 1984 to Mr Scott Piering and another dated February 10, 1984 to Mrs Dwyer, Mr Morrissey's mother, both of which letters Mr Morrissey accepted he saw at the time and discussed with Mr Marr. In the letter of February 6 Mr Bowen suggested the setting up of two companies, one relating to publishing income and the other relating to recording income and said in relation to the latter:
with regard to the recording company, Messrs Morrissey and Marr will be its shareholders and directors. The other two band members will become employees of the company. It is proposed that they all draw a salary out of the company at a rate which will have to be agreed, but in principle they will be equally entitled to the net profits of the business.
In the letter of February 10, 1984 to Mrs Dwyer he said amongst other things:
Towards the end of last year when it became clear that The Smiths were going to be successful, I discussed with Geoff Travis my concerns about the constitution of the band. He in turn discussed this with Morrissey and Johnny Marr both in England and whilst they were in New York. I was concerned that no agreement appeared to have been reached between the band and Joe Moss either financially or legally. [Joe Moss was the then manager.] I was also concerned that there was no agreement between the individual members of the band. I took the view that as a matter of law the members of The*241 Smiths were all equal partners although I was of course aware that this kind of arrangement was not acceptable to Morrissey or Johnny Marr.
In the spring of 1984, all four members of the band were at a meeting with Arthur Young, accountants instructed on behalf of the band. Mr Morrissey accepted in evidence that the split was discussed, and he accepted that neither he nor Mr Marr told the accountants that the split should be 40/40/10/10. In the result the accountants produced draft accounts under cover of a letter dated May 8, 1985 which drafts clearly indicated equality as between the partners.
On the appeal Mr Rosen really concentrated on the receipt by Mr Joyce, in July 1986, of the 1983/84 accounts and the alleged conversation between Mr Savage, Mr Rourke and Mr Joyce in May 1987. The judge accepted Mr Joyce's evidence in relation to the accounts that he did not look at the figures and further found that in any even Mr Joyce would not have understood them without some explanation. In relation to the Mr Savage/Mr Rourke/Mr Joyce alleged conversation the judge found simply that Mr Rourke did not say the words attributed to him. Those findings are attacked by Mr Rosen.
It will be noted that Mr Rosen's main attack has had to be on findings of fact by the judge. He appreciated the difficulties he faced in an appellate court, and drew our attention to various authorities including Smith New Court Ltd v. Scrimgeour Vickers [1997] A.C. 254 and in particular the speech of Lord Steyn at 276 where he approved the approach of the Court of Appeal in that case to reversing a finding of fact by the trial judge. Hefurther drew our attention to the article by Sir Thomas Bingham (as he then was) published in (1985) C.L.P. 1, "The Judge as Juror: the Judicial Determination of Factual Issues". Mr Rosen's criticisms of the judge were in summary
(i) that he appeared to have formed unfairly a general adverse view of Mr Morrissey saying, "Mr Morrissey is a more complicated character. He did not find giving evidence an easy or happy experience. To me at least he appeared devious, truculent and unreliable where his own interests were at stake."
(ii) that he then went through the individual matters rejecting Mr Morrissey's evidence simply because of the adverse impression he had formed, and
(iii) that he failed to come back and look at the matter overall.
CONT.............
