Sunshine Records (Pty) Ltd v Frohling and Others

• Jurisdiction: South Africa

Sunshine Records (Pty) Ltd v Frohling and Others
1990 (4) SA 782 (A)

1990 (4) SA p782

Citation	1990 (4) SA 782 (A)
Court	Appellate Division
Judge	Corbett JA, Trengove JA, Hoexter JA, E M Grosskopf JA, Nestadt AJA
Heard	November 10, 1986
Judgment	November 28, 1986

Flynote : Sleutelwoorde

Contract — Legality — Restraint of trade — Recording H contract between pop group (respondents) and recording company (appellant) — Contract I specifying that respondents perform for purpose of recording whenever required to do so by appellant — Results of their work becoming property of appellant, and third company obtaining option to acquire copyright therein — Complete control over exploitation of recorded works and copyright therein retained by appellant and third company — Respondents barred from recording elsewhere during subsistence of agreement (three years

1990 (4) SA p783

A renewable at instance of appellant), this prohibition being extended in case of works recorded by appellant under contract to period of seven years after publication thereof by appellant — Respondents in turn entitled to royalties from sale of records and exercise of copyright — Nature, extent and duration of obligations and restrictions on B respondents, together with absence of any reciprocal obligation on appellant (save the obligation to record one album of respondents' music per year, which did not include the obligation to release such recordings), created such a serious restraint on respondents' freedom to pursue their profession that the contract was rendered unenforceable thereby.

Contract — C Legality — Restraint of trade — Order sought declaring agreement in restraint of trade partially enforceable — Such order granted when in interests of public policy to do so — Party seeking such order obliged to raise matter pertinently in trial Court — Court will have regard, inter alia, to matters such as whether restraint clause D was designed to be unduly oppressive or to act in terrorem, and whether partial enforcement would not operate harshly or unfairly towards person(s) bound by the restraint — Court's power not unrestricted, and proposed amendments must not be so far-reaching as to alter contract materially. E

Headnote : Kopnota

The respondents, members of a pop group, had signed a recording contract with one B, who ran the appellant, a recording company, as well as with B M (Pty) Ltd, a publishing company and the second plaintiff in the Court a quo. The recording contract between appellant and respondents specified inter alia: (1) that the respondents would perform for the purpose of recording whenever required to do so by appellant, (2) that results of their work would become the property of the appellant, and F that B M (Pty) Ltd would obtain the option to acquire copyright therein, (3) that complete control over exploitation of recorded works and copyright therein would be retained by the appellant and B M (Pty) Ltd, (4) that the respondents would be barred from recording elsewhere during the subsistence of the agreement (which was for three years, renewable at instance of the appellant) and (5) that this prohibition would be extended in the case of works recorded by the appellant under the G contract to a period of seven years after publication thereof by the appellant. The respondents were in turn entitled to royalties from the sale of records and the exercise of copyright. The appellant's only reciprocal obligation was contained in clause 16 of the contract, viz to 'record the equivalent of one album per annum'. The respondents were not happy with the performance of the appellant and especially B himself, and purported to cancel the agreement on the ground of alleged breach of contract. B and his companies contended, in an action in a Local Division, that the purported cancellation amounted to a wrongful H repudiation of the contracts, and claimed, inter alia, payment of damages for the alleged breach of the recording contract. The Local Division dismissed the claim on the ground that the recording contract was in undue restraint of trade and therefore void and unenforceable. In an appeal counsel for the appellant conceded that the recording contract, read as a whole, was unenforceable due to the restraints it imposed on respondents' freedom to trade, but argued that, if certain I clauses were deleted and the ambit of certain others restricted, the resultant amended contract would be enforceable against the respondents.

Held, that a literal interpretation had to be attached to the wording of clause 16, and that the appellant was obliged to record only, without necessarily releasing, the equivalent of one album per annum.

Held, further, that this rendered the obligation imposed on the J appellant an insignificant one.

1990 (4) SA p784

Held, A further, that the nature, extent and duration of obligations and restrictions imposed on the respondents, together with the absence of any real reciprocal obligation on the appellant, created such a serious restraint on the respondents' freedom to pursue their profession that the contract, if read as a whole, was rendered unenforceable thereby.

Held, further, that the question of possible alterations to the contract in order to render it partially enforceable had to be pertinently raised B before the trial Court for them to be canvassed on appeal.

Held, further, that, although a Court may, when the public interest requires it, order that an agreement in restraint of trade be only partially enforced, while having regard, inter alia, to matters such as whether the restraint clause was designed to be unduly oppressive or to act in terrorem and whether partial enforcement would not operate harshly or unfairly towards the person(s) bound by the restraint, such power was not unrestricted, and the amendments suggested should not be C so far-reaching as to materially alter the contract.

Held, further, that the alterations proposed by the appellant were so extensive as to render them unenforceable under any circumstances.

Held, further, that, even if such extensive amendments were possible in particular circumstances, the effect of the proposed amendments in the present case was to transform the contract into an enforceable one which D did not grant any undue privileges to the appellant or restrict the respondents' right to have recordings made elsewhere, whereas B's objective had clearly been to obtain, through the contract, complete control over the professional activities of the respondents without offering anything in return, and without at any time indicating that he would be amenable to the type of alterations now proposed on his behalf.

Held, further, that it would consequently have been grossly unfair vis-à-vis the respondents to assist B by holding the contract to be E partially enforceable in the manner submitted by the appellant.

Held, accordingly, that the contract was unenforceable in whole and in part and that the respondents were fully entitled to resile therefrom. Appeal dismissed.

The decision in the Witwatersrand Local Division in Sunshine Records (Pty) Ltd and Another v Frohling and Others confirmed. F

Case Information

Appeal from a decision in the Witwatersrand Local Division (Spoelstra J). The facts appear from the judgment of E M Grosskopf JA.

C M Eloff for the appellant referred to the following authorities: Inhambane Oil and Mineral Development Syndicate Ltd v Mears and Ford (1906) 23 SC 250; Clarke v Durban and Coast SPCA 1959 (4) SA 333 (N); Probert v Baker 1983 (3) SA 229 (D); Svorinic and Others v Biggs 1985 (2) SA 573 (W) G ; Magna Alloys and Research (SA) (Pty) Ltd v Ellis 1984 (4) SA 874 (A).

B E Doctor for the respondents referred to the following authorities: National Chemsearch (SA) (Pty) Ltd v Borrowman and Another 1979 (3) SA 1092 (T); Magna Alloys and Research (SA) (Pty) Ltd v Ellis 1984 (4) SA 874 (A); H Bobrow v Meyerowitz 1947 (2) SA 885 (T); Tucker v Conn 1952 (3) SA 476 (W); Christie NO v Mudaliar 1962 (2) SA 40 (N); Halsey and Others v Jones 1962 (3) SA 484 (A); Esso Petroleum Co Ltd v Harpers Garage (Stourport) Ltd [1967] 1 All ER 699; SA Wire Co (Pty) Ltd v Durban Wire & Plastics (Pty) Ltd 1968 (2) SA 777 (D); Rhodesian Milling Co (Pvt) Ltd I v Super Bakery (Pvt) Ltd 1973 (4) SA 436 (R); Nel v Drilec (Pty) Ltd 1976 (3) SA 79 (D); Instone v A Schroeder Music Publishing Co Ltd [1974] 1 All ER 171 (CA); A Schroeder Music Publishing Co Ltd v Macaulay [1974] 3 All ER 616 (HL); Probert v Baker 1983 (3) SA 229 (D).

Cur adv vult.

J Postea (28 November 1986).

1990 (4) SA p785

Judgment

E M Grosskopf JA:

A This appeal concerns the interpretation and enforceability of a recording contract concluded on 12 December 1979 between the appellant and members of a pop music group called the 'Rag Dolls'. This group consisted of five young musicians, and although its membership varied somewhat from time to time, it is admitted that the present respondents were members of the group and parties to the B contract when the present dispute arose.

The history of the Rag Dolls was traced in the evidence from about 1979. It appears that the group's first experience in the field of professional contracts was on 6 July 1979 when they signed a management contract with Mr William C Boardman (also known as Billy Forrest) and Mr C Selwyn Miller, representing a company known as Selroy Music (Pty) Ltd. In terms of this contract Boardman was to be the group's creative manager and Selroy Music (Pty) Ltd its business manager. Selroy Music then arranged for the conclusion of a recording contract between the Rag Dolls and EMI-Brigadiers (Pty) Ltd, the largest recording company in the D Republic. This contract was concluded on 1 August 1979.

Some time later Mr Graeme Beggs heard a final master tape which the Rag Dolls had composed and...