Just one month after the Supreme Court of NSW ruled in favour of Universal Records in a case against Stephen Pavlovic, founder of iconic Australian record label Modular Recordings, the highest bench of the NSW Court of Appeal have overturned the decision.
According to a press statement, the Appeal Court decision was unanimously reached by the Chief Justice of the Supreme Court of NSW His Honour Bathurst CJ, the President of the Supreme Court of Appeal Her Honour Beazley and His Honour Meagher JA.
The Chief Justice concluded, “Whichever way the matter is looked at, I do not think that a binding agreement was reached.” Universal have been ordered to pay the costs of both the lower court and appeal court hearings.
The case itself related to the fulfilment of a contract between Universal and Pavlovic, which the latter claimed he never signed. The initial decision by the Supreme Court found that while Pavlovic never put pen to paper, he acted in a manner that indicated compliance.
Universal’s suit centred on an intriguing legal question: is an agreement binding if it’s never signed but both parties act as though it has been? Pavlovic argued that the agreement was never binding because he never signed it.
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Universal argued that Pavlovic’s lawyer’s representation to Universal that his client would sign was a clear indication of the finality of the agreement, it was not contingent on pen touching paper. The Court agreed, but now that decision has been overturned.
The draft settlement deed was intended to square away various commercial claims the parties had against each other. While Modular was previously one of Australia’s most prestigious music brands, by 2014, the relationship between Pavlovic and Universal had become “untenable”.
The deed would have forced Pavlovic to give away his directorship and shareholding in Modular Recordings, which he founded 18 years ago and used to develop the careers of artists such as The Avalanches, Wolfmother, The Presets, and Tame Impala.
As a result of this new judgement, Pavlovic remains a 50 percent shareholder and director of Modular Records Pty Ltd. “I’m obviously greatly relieved that my position has been vindicated by such powerful minds,” said Pavlovic in a statement.
“I built Modular out of sheer passion and a belief in unique creativity. I regret terribly that the bands I have nurtured and adored all these years were caught in the cross-fire between Universal and I.”
“It’s stressful to be one man staring down a corporate giant the size of Universal however I felt I had no choice but to fight for myself, the label I created and for the bands that we represent.”
Meanwhile, the Southern District Court of New York have reportedly dismissed German publishing giant BMG’s case against Pavlovic, which was centred on the recovery of mechanical royalties related to Tame Impala’s overseas sales, a sum later revealed to total over $1 million.
“I’m pleased that the misunderstanding about the US statutory rate for calculation of mechanical royalties has been resolved in the commercial manner always intended by the parties,” said Pavlovic in a statement.
“I’m deeply sorry for any upset caused to Tame Impala given that I’ve always been a staunch supporter and fan of the band; and to BMG given the relationship we’ve always enjoyed with them.”
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“I also regret the heavy handed press coverage of this aspect of Modular’s affairs which was completely inaccurate and out of hand. However I hope that with Universal and Modular’s respective obligations to BMG on behalf of Tame Impala now resolved that a line can finally be drawn under this unfortunate chapter.”
It’s not clear at this point whether Universal intends to pursue an appeal. What also remains unclear is just where the royalties lost in the misunderstanding between Modular and Universal have gone and whether they will ever get to Tame Impala.
Speaking to Billboard back in June, Pavlovic claimed that Tame Impala had in fact received “considerable international advances from BMG, Universal and Modular” as payments against future royalties.
