Bulletins Story: SEAL ORDERED TO PAY COMMISSION TO EX-MANAGER: WADLOW v SAMUEL pka SEAL

Date: 29.06.2006

Multi-million selling solo artist Seal was managed by John Wadlow under a management agreement signed in 1990. In 1995 Seal wanted out. The two of them signed a settlement agreement that year terminating the management agreement and providing for continuing commission to be paid to Wadlow on Seal's first two albums, "Seal" and "Seal II". Seal stopped paying the commission in around 2001. Wadlow issued proceedings. Seal defended the claim alleging amongst other things undue influence and restraint of trade. The judge (Mr Justice Gray) found that Wadlow was entitled to his commission.

Under the management agreement Wadlow received commission at the customary rate of 20%. But the agreement was, by today's standards, unusual in two respects.

Firstly, Wadlow's entitlement to commission after the end of the term of the management agreement went on forever at the full rate. Almost always these days, there is a tapering or "sunset" provision reducing and then extinguishing the former manager's post-term commission over a period of years. 

Secondly, Wadlow was entitled to commission on Seal's income from a publishing deal signed in 1989 between Seal and a Wadlow co-owned company. So Wadlow was receiving management commission on Seal's publishing income under the management agreement and also part of the publisher's share of income under this publishing agreement. This is popularly referred to in the music industry as "double dipping" and was even then, as it is now, unusual.

The settlement agreement preserved Wadlow's right to perpetual post-term commission for the songs and recordings on the albums "Seal" and "Seal II". It also allowed Wadlow to continue to retain his part of the publisher's share (via his co-owned publishing company) of Seal's publishing income but only for the album "Seal".

Here is a brief look at some of the interesting aspects arising from the judgment:

1. Interpretation of the management agreement

The judge considered the wording of the management agreement in some detail. The agreement only gave Wadlow entitlement to commission for songs and recordings made pursuant to agreements entered into during the currency of the management agreement, ie during its term. Seal's publishing agreement with Wadlow's company and Seal's record deal with ZTT were signed before the management agreement. Seal's position was that Wadlow should not be entitled (and should never have been entitled) to any commission at all on any of the songs and recordings on "Seal" and "Seal II" or any others written or made pursuant to those agreements. The judge reckoned that although this is what the words of the management agreement actually said it could not, in the circumstances, have been the intention of the parties. Elsewhere in the agreement the judge found that there was a strong implication that Wadlow should receive commission on these albums. It looks like an example of the law applying common sense to ambiguous drafting.

2. Perpetual Post-Term Commission - Not Necessarily a Restraint of Trade

Seal's lawyers argued that the obligation to pay commission at 20% forever on the first two albums after the end of the term of the management agreement stopped Seal from effectively plying his trade as a recording artist and was unreasonable. This is because Seal would not be able to afford to pay a new manager commission on his old records and songs. The judge disagreed as did the two experts, Julian Turton of Swan Turton for Wadlow and Richard Bray of Bray & Krais for Seal. They felt that the perpetual post term commission in this instance could not amount to an unreasonable restraint of trade, partly because a new manager would not usually expect to commission old records and songs which were commissionable by a former manager. The judge also differentiated Seal's position from that of Joan Armatrading in a leading 1980s case.

3. Manager Side-Stepping the Artist's Lawyer - Potential Undue Influence

Seal's advisors contended that Wadlow took advantage of his position of trust to persuade Seal to agree the provisions about perpetual post term commission and double dipping in both the management and settlement agreements. The judge did not believe this to be the case for the settlement agreement because Seal had independent legal and managerial advice at the time and the relationship between Wadlow and Seal had broken down before the settlement agreement was concluded. In other words, Wadlow was not in a position of trust at the relevant time.

With the management agreement, it looked as though Wadlow had persuaded Seal, through direct discussions with him, to accept the double dipping provision against the advice of Seal's lawyer and the reasons for double dipping had not been satisfactorily explained by Wadlow. The judge thought Wadlow had abused his position of trust in this instance. However, because the judge found that it was the settlement agreement and not the management agreement that gave Wadlow his entitlement to post-term commission this did not affect Wadlow's claim.

Managers should nevertheless be careful about persuading artists to act against the advice of their lawyers by having direct discussions. Managers should appoint a lawyer themselves (which Wadlow did not do on a formal basis) to negotiate these issues on their behalf with the artist's lawyer.

4. Public Interest - Delay by Seal

The judge commented that it is generally in the public interest that settlements entered into between parties should be upheld and not revisited. Especially where there is a lengthy delay in bringing the claim: nine years in this case.

The full extent of the commission due to Wadlow is to be decided at a later hearing.

Julian Bentley

Music

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