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Spice Girls Ltd v. Aprilia World Service BV [2000] EWHC Ch 140 (24th February, 2000) IN THE HIGH COURT OF JUSTICE CHANCERY DIVISION

CH 1998 S 5419.

Royal Courts of Justice Strand London WC2A 2LL 24 February 2000 Before THE HONOURABLE MRS JUSTICE ARDEN DBE

Between

SPICE GIRLS LIMITED

Claimants

and APRILIA WORLD SERVICE BV

Defendants

JUDGMENT

Mr Ian Mill QC and Mr Vernon Flynn (instructed by Lee & Thompson, Green Garden House, 15-22 St Christopher's Place, London W1M 5HE) appeared on behalf of the Claimants Mr Andrew Sutcliffe (instructed by CMS Cameron McKenna, Mitre House, 160 Aldersgate Street, London EC1A 4DD) appeared on behalf of the Defendants. Hearing: 7, 8, 9,11 and 14 February 2000

Judgment: 24 February 2000

Mrs Justice Arden Introduction 1. Aprilia World Service BV ("AWS") is a member of a group of companies of which the parent company is Aprilia Spa ("Aprilia"). AWS is not itself a manufacturing company. Aprilia is a substantial company based in Italy which produces a wide range of motorbikes, mopeds, scooters, including scooters for teenagers, and its products are sold throughout Europe and in the United States of America. Spice Girls Limited (which I will call "SGL") is an English company formed to promote the services of the celebrated group of girl singers known as the Spice Girls. At the start of 1998, the Spice Girls consisted of five singers, Geri Halliwell, Emma Bunton, Victoria Adams, Melanie Brown and Melanie Chisholm. 2. A fact which plays a part in these proceedings is that each of the members of the Group took a professional name which portrayed their individual character. Thus Emma Bunton is known as "Baby Spice", Victoria Adams as "Posh Spice", Melanie Brown as "Scary Spice", Melanie Chisholm as "Sporty Spice" and Geri Halliwell as "Ginger Spice". Ms Halliwell left the band on 29 May 1998. This dispute arises as a result of her departure. 3. At the time of Ms Halliwell's departure the group were in the final stages of the European leg of the Spice World Tour. AWS had agreed to sponsor the Spice Girls on this tour. In return it received rights to use the logos and images of the Spice Girls. The detailed arrangements are set out in a written agreement signed on 6 May 1998. I will refer to this agreement as "the agreement". SGL claims that AWS owes it money under the agreement but AWS has responded by claiming damages for misrepresentation or breach of contract arising out of the departure of Ms Halliwell. In short AWS claims that Ms Halliwell had declared her intention to leave the group to SGL before the agreement was signed and that because it (AWS) was not told about this it incurred expenditure and suffered loss in a number of ways. For example it arranged for a television commercial to be made immediately before the agreement was signed featuring the Spice Girls and Aprilia's scooters (this is referred to below as "the commercial shoot"). AWS also abandoned plans for the sale of a limited edition of "Spice Sonic" scooters targeted at teenage girls. AWS accepts that it had to take the commercial risk that the composition of the group (the "line-up") might change during the agreement. Its complaint is essentially that when it made the agreement with SGL it did not have the information about Ms Halliwell's intentions which SGL had. The case raises questions of fact and of law. I will set out the pleaded issues, the factual background, issues arising on damages, the submissions and finally my conclusions.

The pleaded issues 4. The parties' contentions in the pleadings have changed as facts have emerged and cases been refined. I am not concerned with those changes but with the case as currently pleaded. 5. SGL claims £100,000 (plus VAT) in respect of the third instalment of sponsorship fees payable under the agreement, £112,500 (plus VAT) a guaranteed royalty payment pursuant to clause 13 of the agreement and the market value of the one Spice Sonic scooter (worth £900) and two Phillip Stark Aprilia "Moto" bikes (worth £5,650) which Aprilia agreed to deliver under clause 5 of the agreement. 6. AWS's response (its defence and Part 20 claim) claims damages of £434,564.46 alternatively £1,016,541 (depending on whether it establishes its claim for misrepresentation or its claim for breach of contract), and further claims that it is entitled to set off these damages against SGL's claims. AWS puts its case in a number of ways. Primarily, it alleges that SGL represented to it that it did not know and had no reasonable ground to believe (either when or before it entered into the agreement) that any of the Spice Girls had an existing declared intention to leave the group during the minimum term of the licence, i.e. before 31 March 1999. It claims that that representation was made expressly in a fax dated 30 March 1998, which I set out below, and by use of the words "currently comprising" in the first paragraph of the agreement. It accepts that the words "currently comprising" were literally true but contends that (and this is one of its alternative ways of putting its case) the agreement, when interpreted in the light of its commercial purpose, contained a promise by SGL that no member of the group had an existing declared intention of leaving the group. In a yet further way of putting its case, AWS contends that there was an implied term or collateral warranty that SGL did not know and had no reasonable grounds to believe that any member of the group had an existing declared intention to leave the group prior to 31 March 1999. AWS makes no claim that SGL is estopped from claiming any monies due under the agreement. 7. AWS's case is that if it had known what SGL knew about Ms Halliwell's intention to leave the group it would not have signed the agreement. 8. AWS has given further details of its claim in misrepresentation. It relies on SGL's conduct in the course of negotiations. It made available marketing material – logos, images and designs - for use in Aprilia's marketing material. SGL's material "emphasised the distinct and individual image, style and personality of each of the five Spice Girls ... [and] each of the individual members of the Group and the

character type she represented was given as much prominence as the image which the Group portrayed as a whole". For instance, the Spice Girls' logo, which was supplied for use on the scooters, was the word "SPICE" with each letter incorporating the likeness of a different Spice Girl. Posters, postcards, brochures, life-size cardboard cut-outs and videos advertising Aprilia's products were produced showing the image of one or all five Spice Girls. Furthermore, all five Spice Girls made themselves available for the commercial shoot, the press shoot, and the three photocalls. Moreover before the agreement was signed the commercial had to be deferred because not all the Spice Girls were available to take part in it. SGL also knew that AWS was incurring substantial expenditure, such as the costs of the photoshoots and the commercial shoot. Accordingly SGL, says AWS, knew that the departure of one of the girls was a matter of fundamental importance to AWS when considering the commerciality of a sponsorship and endorsement deal involving the scooters. 9. SGL in its reply relies on an agreement said to have been made in correspondence between Mr Thompson and Mr Vianello in June 1998 that Ms Halliwell's departure did not give rise to any claim for damages and that in return SGL would not insist on strict adherence by AWS to the restrictions imposed by the agreement on promotional activities which it could require of the Spice Girls in the USA. I will set out the relevant parts of this correspondence later in this judgement. SGL previously relied also on estoppel and waiver but this defence is not now relied on. SGL denies that it had any obligation to inform AWS before the agreement was signed that Ms Halliwell had declared an intention to leave the group. SGL admits that Ms Halliwell mentioned the possibility of leaving to the other Spice Girls during a conversation on 3 March 1998; that she told the other Spice Girls that she definitely wanted to leave the group on 9 March 1998 but that she would stay with the group until the end of September; that she stated that she was going to leave after the US tour at a general management meeting in late April 1998. 10. I will set out the applicable law later, but it can be seen that the sheet anchor of AWS's case is SGL's failure to disclose what it knew but AWS did not. It is wellestablished, however, in English law that, as a general rule, a person who is about to enter into an agreement is under no duty to disclose material facts which he knows but which the other party does not know. However there are exceptions to this general rule, for instance where a party makes a misrepresentation by words or conduct which induces the other party to enter into the agreement. A party must correct that impression if he knows that it is not true before the agreement is made. These rules are indicative of a basic principle of contract law that parties should be bound by contracts to which they freely agree unless their consent was obtained by a misleading process. The courts are not concerned with the substance of the contract but with whether the negotiating process was in some way abused. It is now common ground that Ms Halliwell stated an intention to leave the group before 6 May 1998, the date

on which the agreement was signed. But in its reply SGL contends that it was not under any obligation to inform AWS of this fact. 11. There is separate and comparatively minor claim made by AWS for wasted expenditure amounting to £5,841.46 relating to a photocall in New York that had to be cancelled. SGL claims that it is not liable for this sum and has not disputed the calculation of this amount. The factual background 12. I set out below the facts as I find them to be. AWS bears the onus of proof and accordingly it called its witnesses first as there is no dispute as to the amounts claimed by SGL. It called the following witnesses of fact: Rossanna Fuzzi, advertising manager, Roberto Brovazzo, head of Aprilia's marketing department, Federico De Benetti, a financial controller with Aprilia, and (pursuant to a witness summons) Nancy Phillips, a director of SGL. It has served Civil Evidence Act notices in respect of the evidence of Alessio Vianello, a partner in the law firm of Studio Legale Vianello-Bortoluzzi-Molesini-Gentilomo, and Marco Ferro, head of Aprilia's Communication and Press Department. SGL called Emma Bunton, Geri Halliwell, Paul Morrison, a director of KLP (Scotland) Ltd ("KLP"), Barry Michael Drinkwater, a director of Bravado International Group Ltd (exclusive merchandise agents for the Spice Girls' European and US tours), Adrian Pettett, John Simidian and Andrew Thompson. Mr Pettett and Mr Simidian were at the material time project managers with KLP. Mr Thompson is a partner in Lee & Thompson, SGL's solicitors. At Aprilia, Ms Fuzzi reported to Mr Ferro and Mr Ferro reported to Mr Brovazzo. (a) The initial negotiations between Aprilia and SGL 13. The events begin in early 1998. By this stage the Spice Girls were one of the most successful groups of girl singers. They had begun in 1994, and had been highly successful. They had had two successful albums and had a world wide reputation. In early 1998 they were about to start a tour which would take them initially to Europe and then perhaps to the USA and then possibly to Japan. Mr Brovazzo said, and it has not been challenged, that the Spice Girls were the creators of a new "girl power" concept and were "symbolic for the fashionable, fresh and a bit cheeky image that Aprilia wanted to convey for the Sonic scooter which it had recently launched," and that Ms Halliwell was a "core member of the Spice Girls and the embodiment of the "girl power" concept in the public eye." 14. In January 1998, SGL appointed KLP as their consultant to find sponsors for the Spice World Tour. The appointment was made by Lee & Thompson because at that date the Spice Girls had no manager and throughout the events material to these

proceedings Mr Thompson was fulfilling some of the functions that might be carried out by the manager, as well as acting as solicitor to the Spice Girls. The principal contacts at KLP were Paul Morrison ("Mr Morrison") and Adrian Pettett ("Mr Pettett"). As the European tour was from 24 February to 29 May 1998, KLP had little time to find sponsors. KLP were to be remunerated by a commission on fees received and sponsorship income. By 11 February 1998, Mr Morrison had made contact with Aprilia with a view to its becoming a sponsor for the Spice World Tour. Ms Fuzzi emerged as the principal contact at Aprilia. In December of the previous year Aprilia had launched its new range of scooters called "Sonic scooters" which were targeted at 14 to 17 year olds. (In some European countries teenagers can drive scooters at 14 years). An association with the Spice Girls was an attractive idea as the Spice Girls appealed to young girls. Aprilia wanted to use the images of the five girls to promote its new product. The Sonic scooter was an important new product for Aprilia in that it provided the entry into a new product range (compact scooters for young drivers) in which Aprilia was not previously sufficiently represented and it was also the first product that Aprilia intended to sell world-wide. Aprilia had previously worked successfully with Italian pop artists. 15. On 20 February 1998, Mr Morrison wrote to Ms Fuzzi enclosing a proposal for Aprilia's involvement with the Spice World European Tour and "extension marketing activities". He stated in his letter that he believed that there could be "... a mutually beneficial partnership and would like to stress the fact that you can use the tour to make the Aprilia/Spice Girls connection famous before having a 12 month opportunity to have the biggest band in the world endorse your products and appear in your advertisements".

The proposal enclosed with this letter stated that Aprilia would receive access to the Spice Girls for a one-day television/cinema commercial shoot, a twelve-month period for television and cinema advertising, access to the Spice Girls for a one-day trade press shoot, four opportunities in European cities for outdoor photocalls, two thirtysecond commercials in auditorium screens and a full colour half-page advertisement in the tour programme of which an initial run of 50,000 had already been printed. In the event, Aprilia did not get the promised publicity in brochures or on tickets, but no complaint is made about that. 16. Mr Morrison's proposal stated that Aprilia would provide a rights fee of £650,000 for these rights. Mr Morrison subsequently produced a summary of agreement, stating that the photo call should feature the Spice Girls together, ideally each on her scooter. It listed the commercial rights as being: first, authority to promote the Aprilia Sonic scooter as "Official Sponsor of the Spiceworld Tour" in all Sonic promotional literature for a period of twelve months from the commencement of activity; second, that Aprilia should have access to the Spice Girls for one day for the filming of a

television/cinema commercial for the Aprilia Sonic scooter on a date to be arranged, the commercial so made being capable of being distributed in Italy, Spain, France and Holland for a period of twelve months; and, third, access to the girls for a one day photo shoot for press advertising to promote the Sonic scooter, the advertising so produced to be capable of being used for a period of twelve months in Italy, Spain, France, Holland, Greece and Portugal. In his summary of agreement, Mr Morrison further notes that "Aprilia are very keen to produce a limited number of Sonic scooters with a Spice sticker on them to be called 'Sonic Spice'" and that royalty terms would have to be agreed for the limited edition Sonic Spice scooter. Apparently Aprilia had expressed its wish to market 2,000 Sonic scooters with a Spice sticker attached next to the Sonic logo. Aprilia for its part clearly saw the potential for linking its product, a scooter for "fun loving girls" as one whose sales could be enhanced by being linked with "the spirit of 'girl power' made famous by the Spice Girls." Aprilia attached considerable importance to those parts of the deal which would enable it to manufacture the Spice Sonic scooter. Aprilia had frequently marketed limited editions of its models. Such editions have additional exclusive features which distinguish them from the standard model and they sell at a higher retail price (about 10% above the price for the standard product) and they generally sell very well. The Spice Sonic scooter was to be sold in two fashion colours, light blue and orange, which were associated with the public image of Baby Spice and Ginger Spice. ( b) The Noale meeting on 4 March 1998 17. On 4 March 1998 there was an important meeting in Noale attended by Mr Morrison, Mr Pettett, Ms Fuzzi and three other representatives of Aprilia. They were Mr Ferro, Ms Fuzzi's immediate superior, Mr Leo Mercanti and Ms Roberta da Ros. By the conclusion of this meeting the parties had agreed on heads of agreement for Aprilia to have sponsorship and endorsements rights for the Spice Girls' European Tour. These rights included : the right to sell a limited edition of Spice Sonic scooters; the right to issue sales literature mentioning Aprilia as the sponsor of the tour; access to the Spice Girls for one day for the filming of a television/cinema commercial; the right to broadcast the commercial for the Spice Sonic scooter on Music Television ("MTV") throughout Europe and the right to promote the Spice Sonic scooter in trade and consumer press advertising in the same specified European countries. 18. In relation to the Spice Sonic scooters, the heads of agreement said that Aprilia was to have the right to produce and market a limited edition scooter in return for a guaranteed royalty payment of £150,000 and noted for immediate action that Aprilia's desire to market the scooter with a Spice sticker attached to the Sonic logo should be clarified. Aprilia estimated at that point that some 10,000 would be sold. The royalty was to be payable by the end of August. The heads of agreement envisaged that there would be a formal agreement. The licence to use the word "Spice" for the purpose of

producing the limited edition scooter was an important factor for Aprilia when considering whether the deal with the Spice Girls would make sense for it. 19. It is common ground that at no stage in the negotiation did Aprilia (or AWS) ask KLP or SGL directly whether one of the group was thinking of leaving the group during the period of the agreement. However there was no evidence as to whether its representatives ever thought to do so. 20. On 8 March 1998, Aprilia announced its association with the Spice Girls at a press conference in Milan, and, as the tour was then beginning in Italy, it was permitted to take advantage of that association even before the agreement was signed. There is no evidence as to precisely when SGL approved promotional material and delivered it to Aprilia to advertise its association with the Spice Girls, but it must have been soon after the Noale meeting as promotional material was required for display at the Spice Girls' concert venues. SGL contends that Aprilia failed to prove with any precision when the marketing material was provided and by whom it was provided. There has been no suggestion that Aprilia used any promotional material without the requisite approval. I find that it was delivered to Aprilia at various dates as from 8 March 1998. I also find that when SGL approved material to be used by Aprilia, it did so in the belief that it was doing so in accordance with the rights to be conferred by the agreement 21. In the next few weeks negotiations took place over the terms of the formal agreement. Aprilia considered that these differed from the heads of agreement that had been agreed so there was further negotiation on new matters. These negotiations principa...