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Elton Hercules John V Price Waterhouse Page: 1 Wednesday, April 11, 2001 Elton Hercules John v Price Waterhouse Page: 1 IN THE HIGH COURT OF JUSTICE HC 9900100 CHANCERY DIVISION B E T W E E N (1) Sir Elton Hercules John (2) Happenstance Limited (3) William A Bong Limited (4) J Bondi Limited Claimants -and- (1) Price Waterhouse (a firm now carrying on business under the name PricewaterhouseCoopers) (2) Andrew Mansel Haydon Defendants A N D B E T W E E N Price Waterhouse (a firm carrying on business under the name PricewaterhouseCoopers) Part 20 Claimants -and- (1) Frere Cholmeley (a firm) (2) Frere Cholmely Bischoff (a firm) Part 20 Defendants JUDGMENT OF The Honourable Mr Justice Ferris Mr G Pollock QC and Mr N Calver instructed by Eversheds appeared on behalf of the Claimants. Mr M Hapgood QC and Mr C Kinsky instructed by Barlow Lyde & Gilbert appeared on behalf of the First Defendant and Part 20 Claimants. Mr A Fletcher instructed by LeBoeuf Lamb Greene & MacRae appeared on behalf of the Second Defendant. Mr M Kallipetis QC and Mr S Monty instructed by Ince & Co. appeared on behalf of the Part 20 Defendants. Hearing Dates: 30/31 October, 1/3/7-9/13-17/20-23/29-30 November, 1/4-8/11-15/18-19/December 2000 and 12/16-17/22-26/29-31 January, 1February 2001. Judgment Handed Down: 11th April 2001. JUDGMENT: APPROVED BY THE COURT FOR HANDING DOWN (SUBJECT TO EDITORIAL CORRECTIONS). INDEX Para Outline of the proceedings 1 http://wood.ccta.gov.uk/courtser/judgements.nsf/ 6ff876ba66f8361a8025683c00411386/ Wednesday, April 11, 2001 Elton Hercules John v Price Waterhouse Page: 2 General Background 3 The management agreements in summary (1) The 1973 Agreements 14 (2) The 1977 Agreements 15 (3) The 1986 Agreement 18 (4) The 1992 Agreement 22 (5) The 1997 Agreement 23 Sir Elton's relationship with John Reid and JREL and his attitude to business matters 24 PW's involvement with Sir Elton, the EJ companies and JREL 31 Breakdown of relations with John Reid and JREL and termination of the 1977 Management Agreement 36 The claims in the present proceedings (1) The tour expenses claim against PW 43 (2) The salaries and expenses claim against PW 44 (3) The tour expenses claim against Mr Haydon 45 (4) The salaries and expenses claim against Mr Haydon 47 Touring and tour expenses (1) General 49 (2) Tour producer (JRE Inc and CC) 56 (3) Booking Agent (HRA) 67 (4) Local Promoters 75 (5) Accountants (Neal Levin & Co) 77 (6) Booking Agents for tours outside North America 87 Incidence of the tour agents' costs (1) Introductory 90 (2) Clause 7 of the 1986 Agreement 93 (3) The law as to construction of the 1986 Agreement 97 (4) The scheme of Clause 7 102 (5) "The discharge of any of JREL's obligations under the Agreement" 107 (6) "As agents to act on JREL's behalf" 115 (7) "Appointed by JREL" 119 (8) Special arguments as to booking agents 121 http://wood.ccta.gov.uk/courtser/judgements.nsf/ 6ff876ba66f8361a8025683c00411386/ Wednesday, April 11, 2001 Elton Hercules John v Price Waterhouse Page: 3 (9) Other factors 128 (10) Conclusion as to the meaning of Clause 7.2 133 Quasi Rectification (1) Introductory 135 (2) The evidence relied upon (i) The position under the 1977 Agreement 143 (ii) The early negotiations down to July 1984 144 (iii) The Lee/Eadie conversation 149 (iv) The subsequent negotiations down to July 1984 158 (v) The St. Tropez Meeting 161 (vi) The September 1984 Heads of Agreement 165 (vii) The old basis/new basis memorandum 167 (viii) The revised draft agreement 171 (ix) The execution of the 1986 Agreement 173 (x) The memorandum of understanding 178 (3) PW's quasi-rectification argument 180 (4) Mr Haydon's quasi-rectification argument 192 Estoppel by Convention 193 Private dictionary meaning of 'agent' 208 Did PW owe a general duty of care to Sir Elton? 210 (1) Duty of care by reason of PW's capacity as auditors 212 (2) Duty of care by reason of PW's capacity as Sir Elton's financial advisers 216 (3) Can Sir Elton sue in respect of loss of the kind alleged? 218 Were PW in breach of their duties of care in respect of the tour agents' fees and expenses? (1) Introductory 224 (2) The 1989 audit: general 229 (3) The 1989 audit: chronology of events 233 (4) The 1989 audit: conclusions 246 (5) PW's liability in respect of audits before and after the 1989 audit 258 The case of the EJ companies against Mr. Haydon in respect of the tour agents' costs (1) Capacities in which Mr. Haydon acted 270 (2) The case against Mr. Haydon: general 276 (3) The "giving comfort" case 279 http://wood.ccta.gov.uk/courtser/judgements.nsf/ 6ff876ba66f8361a8025683c00411386/ Wednesday, April 11, 2001 Elton Hercules John v Price Waterhouse Page: 4 (4) The "CC fee" case 285 (5) Scope of Mr. Haydon's duties and the capacity in which he was acting 289 (6) Conclusions in respect of the tour agents' costs claim against Mr. Haydon 300 The staff salaries and expenses claim (1) The obligations assumed by JREL 301 (2) Implementation of JREL's obligations 305 (3) The case against PW 309 (4) The case against Mr. Haydon 319 Causation 325 Limitation 338 (1) When did the claimants' cause of action arise 342 (2) Are the claimants assisted by Section 14A? 357 (i) Sir Elton's personal claim against PW 360 (ii) The EJ companies' claim against PW 368 (iii) The EJ companies' claim against Mr. Haydon 372 The settlement with JREL and John Reid (1) Preliminary 378 (2) The Settlement Agreement 382 (3) The recent authorities 384 (4) Was the settlement full satisfaction of all the claimants' claims? 392 (5) Conclusion on the argument concerning the settlement agreement 410 PW's contribution claim against FC (1) Preliminary 412 (2) Failure to obtain instructions direct from Sir Elton in relation to the September 1984 Heads of Agreement 417 (3) Failure to consider and advise Sir Elton on the Memorandum of Understanding 423 (4) and (5) Conduct of FC in relation to the 1992 and 1997 Agreements 428 (i) The congruence check 432 (ii) The ambiguity 438 (iii) The 1997 renewal 441 (iv) Conclusion 442 (6) Failure of FC to advise the claimants that JREL was breaking the http://wood.ccta.gov.uk/courtser/judgements.nsf/ 6ff876ba66f8361a8025683c00411386/ Wednesday, April 11, 2001 Elton Hercules John v Price Waterhouse Page: 5 management agreements by procuring the EJ companies to appoint tour agents 443 (7) Conclusion on the Part 20 claim 445 Residual Points 446 Overall Conclusion 448 Mr Justice Ferris : Outline of the proceedings 1. In this action the claimants, who are Sir Elton John and certain companies closely connected with him, claim damages for negligence against the first defendants, Price Waterhouse. Price Waterhouse are the well-known firm of accountants now practising under the name PricewaterhouseCoopers. I will refer to them as "PW". The corporate claimants (that is to say the second third and fourth claimants), but not Sir Elton, make a somewhat similar claim in negligence against the second defendant, Andrew Haydon. I will explain who Mr Haydon is after I have set out some further matters of background. 2. PW and Mr Haydon, in addition to denying liability to the claimants, have brought contribution proceedings against Sir Elton. In addition PW have brought proceedings under Part 20 of the CPRs against Frere Cholmeley, a firm of solicitors, and its successor firm Frere Cholmeley Bischoff. I will refer to both firms as "FC". FC were at all material times the solicitors to Sir Elton and the claimant companies. The firm ceased to exist as a practising entity in 1998. Some of its former partners are now partners in the firm of Eversheds, who represent the claimants in these proceedings. Others of the former partners have joined different firms. General Background 3. Sir Elton John is an internationally famous writer composer and performer of popular music. He was born in Pinner, Middlesex, in 1947 and his career began in this country in the late 1960s. His international fame dates from about 1970 and has been continuous since then. He was awarded the CBE in 1996 and a knighthood was conferred upon him in 1998. Many of the events with which this action is concerned occurred before 1998 but I will refer to him throughout as "Sir Elton". 4. Like other artists engaged in the fields of entertainment and popular music, Sir Elton has needed the services of a manager to organise his career. In his early years he was managed by an organisation named Dick James Music. However by 1973, and perhaps as early as 1971, he placed his career in the hands of an individual named John Reid and a company formed by John Reid to provide management services which was named John Reid Enterprises Limited ("JREL"). John Reid, through JREL, continued as Sir Elton's manager until the relationship was terminated in May 1998. 5. While John Reid himself was at all times the individual principally concerned in JREL, the work involved in the administration of Sir Elton's affairs was considerably more than could be handled by a single individual. A number of other persons were, therefore, from time to time concerned with those affairs on behalf of JREL. There was little evidence before me about the position during the 1970s, although the general picture seems to be one in which inadequate financial controls were applied in the management of the businesses of Sir Elton and his companies and of JREL itself.
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