A.C. j AND PRIVY COUNCIL.

87

This, I think, disposes of t h e claim so far as it relates to H. L. (N.I.)

purchases by t h e Minister. The Minister having bought t h e pigs 1959
had only one buyer to whom he wished to sell, t h e society. I
SCOTTISH
agree with Lord MacDermott t h a t these sales were n o t torts as CO-OPERATIVE
against t h e plaintiffs. T h e seller h a d found his buyer and h a d WHOLESALE
SoPIPTV XJTT)
no need t o take his goods t o market. „.
There is a proviso to t h e above general principles in t h a t a ULSTER ^
m a n m a y commit the tort of disturbing market rights if h e takes MART CO.
advantage of the market in order to find a buyer, or goods which k™ -
TTr STER
he wants t o buy. A simple case is t h a t of a buyer who waits for FARMERS'
and buys an animal on its way to t h e market. I n t h e present MART CO.
transactions it seems to m e t h a t no advantage was taken of t h e t,.
market. Everything would have happened as it did if there had „ S c 0 T T I S H
4-1 i i CO-OPERATIVE
been no market in Enniskillen and previous sales had been done WHOLESALE
direct between producers and curers. SOCIETY LTD.
For these reasons I would allow t h e appeal and dismiss t h e Lord Somervell
cross-appeal, and I agree with t h e order suggested by m y noble
and learned friend on t h e Woolsack.
Appeal allowed.
Cross-appeal dismissed.

Solicitors: Linklaters & Paines for the Chief Crown Solicitor

jor Northern Ireland; Stephenson, Harwood & Tatham for E. C.
Ferguson, Enniskillen.
J . A. G.

[HOUSE OF LORDS.]

CHAPPELL & CO. L T D . AND ANOTHER . . APPELLANTS; H . L . (E.)*

AND 1959
April 2 7 , 2 8 ,
NESTLE CO. L T D . AND ANOTHER . . . EESPONDENTS. .29;1Q
June 18.
■Copyright—Infringement—Musical work—Gramophone records—Distri­
bution for cash price to members of public sending chocolate
wrappers—Whether sale "by retail"—"Ordinary retail selling
price "—Meaning—Copyright Act, 1956 (4 & 5 Eliz. 2, c. 74), s. 8—
Copyright Royalty System (Records) Regulations, 1957 (S.I. 1957,
No. 866), para. 1.

* Present: VISCOUNT SIMONDS, LOUD E E I D , LORD TUCKER, LORD

KEITH OF AVONHOLM and LORD SOMERVELL OF HARROW.
88 HOUSE OP LORDS [1960]
H. L . (E.) The H . Co. manufactured and sold to the N. Co., who were
„ Q m a n u f a c t u r e r s of milk chocolate, a number of gramophone records
of a work which was " m u s i c a l " w i t h i n the meaning of the
CHAPPELL Copyright Act, 1956, a n d t h e copyright of which belonged to t h e
& Co. LTD. appellants. The recording was made on a t h i n film of cellulose
N "• acetate adapted for mounting on cardboard discs which were sup-
Co. LTD. plied by the N . Co. and bore m a t t e r advertising their chocolate,
the price charged to the N . Co. being fourpence per record. The
N . Co. advertised the records for sale to the public a t the price
of Is. 6d. each, but with a s t i p u l a t i o n to the effect t h a t intending
purchasers must in respect of each record send, i n addition, three
wrappers from sixpenny packets of their milk chocolate. The
company made a profit on each transaction. The wrappers when
received were worthless and were thrown away.
By a motion, which was treated by consent as the t r i a l of t h e
action, the appellants sought to r e s t r a i n the two companies from
m a n u f a c t u r i n g and selling the records on the ground t h a t the
transactions involved breaches of copyright in t h a t in the circum­
stances they were not protected by the provisions of section 8 of the
Copyright Act, 1956 »: —
Held, (1) t h a t for the purpose of section 8 of the Copyright
Act, 1956, the transactions i n question were sales by retail.
1
Copyright Act, 1956, s. 8: " (1) "provisions of this section. (2) Sub-
" The copyright in a musical work is " ject to the following provisions of
" not infringed by a person (in this " this section, the royalty mentioned
" section referred to as ' the manu- " in paragraph (d) of the preceding
" ' facturer ') who makes a record of " subsection shall be of an amount
" the work or of an adaptation thereof " equal to 6£ per cent, of the ordinary
" in the United Kingdom, if—(a) " retail selling price of the record,
" records of the work, or, as the case " calculated in the prescribed manner:
" may be, of a similar adaptation of " Provided that, if the amount so cal-
" the work, have previously been " culated includes a fraction of a
" made in, or imported into, the " farthing, that fraction shall be
" United Kingdom for the purposes of " reckoned as one farthing, and if,
" retail Bale, and were so made or " apart from this proviso, the amount
" imported by, or with the licence of, " of the royalty would be less than
" the owner of the copyright in the " three-farthings, the amount thereof
" w o r k ; (b) before making the record, "shall be three-farthings."
" the manufacturer gave to the owner The Copyright Boyalty System
"of the copyright the prescribed (Eecords) Eegulations, 1957: " 1 (1)
"notice of his intention to make it; " T h e notice required by subsections
" (c) the manufacturer intends to sell " (1) and (5) of section 8 of the Act
" the record by retail, or to Bupply it " shall contain the following par-
" for the purpose of its being sold " ticulars ...(f) the ordinary retail
" by retail by another person, or in- " selling price (as hereinafter defined)
" tends to use it for making other " of the records, or, where it is in-
" records which are to be sold or " tended to reproduce the work on
"supplied; and (rf) in the case of a " m o r e than one type of record, the
"record which is sold by retail, the "ordinary retail selling price of each
" manufacturer pays to the owner of " type of record the manufacturer in-
" the copyright, in the prescribed " tends to make and the amount of
" manner and at the prescribed time, " the royalty payable on each record.
" a royalty of an amount ascertained " . . . ' 3 : The ordinary retail sell-
" in accordance with the following " ing price of any record shall be
 8&
A.C. AND PRIVY COUNCIL.

(2) (Viscount Simonds and Lord Keith of Avonholm dissent- H. L. (B.)

ing), that part of the consideration for the sale of the records
was the acquisition and delivery of the wrappers; that section 8
contemplated that the " ordinary retail selling price" would be CHAPPELL
a money sum only, constituting the entire consideration for the & Co. LTD.
sale, and that, accordingly, the respondent companies' operations NESTLI*.
were not within the ambit of the section, and there was, therefore, Co. LTD.
infringement of the appellants' copyright.
Per Viscount Simonds and Lord Keith of Avonholm. The
wrappers formed no part of the selling price, but their production
was merely a qualification for purchasing records.
Decision of the Court of Appeal [1958] Ch. 529; [1958] 2
W.L.R. 657; [1958] 2 All E.R. 155 reversed.

APPEAL from the Court of Appeal (Jenkins and Ormerod L . J J . ,

Eomer L . J . dissenting).
This was an appeal from an order of the Court of Appeal
dated March 19, 1958, who allowed an appeal from an order of
Upjohn J . dated November 14, 1957, restraining the respondents,
the Nestle Co. L t d . and H a r d y Record Manufacturing Co. L t d . ,
from infringing the copyright in a musical work entitled " Eockin'
Shoes " under the copyright in which an exclusive licence had
been granted to the first appellants, Chappell & Co. L t d . , by
the second appellants, Winneton Music Corporation. The facts
shortly stated were as follows:
The H a r d y Record Manufacturing Co. L t d . , the second
respondents, made gramophone records consisting of thin films of
cellulose acetate. They entered into an agreement with the first
respondents, the Nestle Co. L t d . , who were manufacturers of
milk chocolate, to supply t h e m with a number of records of a
dance tune called " Rockin' S h o e s , " the copyright of which was
vested in the first appellants, Chappell & Co. L t d . , as sole
licensees and in the second appellants, the Winneton Music
Corporation, as owners. The price to Nestle1 of the records was
fourpence; they were mounted on cardboard discs supplied by
Nestle1 containing advertising m a t t e r . Nestle sold the records to
the public at the price of I s . 6d., subject to a condition t h a t the
purchaser m u s t also send three wrappers from their sixpenny milk
chocolate bars. These wrappers were of no value in themselves
and were thrown away when received. NestM made a profit on

" calculated at the marked or cata- " at the highest price at which single
" logued selling price of single records " records are ordinarily to be sold to
" to the public, or if there is no such " the public, exclusive of purchase tax
" marked or catalogued selling price, " in either case."
90 HOUSE OF LORDS [1960]

H. L. (E.) each sale, but the purpose of the scheme was to advertise and
1959 promote the sale of their milk chocolate.
~ ' The H a r d y company gave notice of their intention to manu-
& Co. LTD. faeture, in accordance with section 8 (1) (6) of the Copyright
"• Act, 1956, stating I s . 6d. to be the ordinary retail selling price,
Co. LTD. and offered to pay royalties, which the appellants refused. I n
the action the appellants (the plaintiffs) alleged t h a t these trans­
actions constituted a breach of copyright, as they did not involve
a sale " by retail " within the meaning of the section. An inter­
locutory motion for an injunction was treated, by consent, as
the trial of the action. At the hearing of the motion Upjohn J .
gave judgment for the appellants. The Court of Appeal by a
majority (Jenkins and Ormerod L . J J . , Eomer L . J . dissenting)
reversed t h a t decision.

K. E. Shelley Q.O. and P. Stuart Bevan for the appellants.

The questions on this appeal a r e : (i) Do the facts as set out
above constitute the supply of a record " for the purpose of its
" being sold by retail " within the meaning of those words in
section 8 (1) (c) of the Copyright Act, 1956? (ii) W a s the notice
of intention to manufacture given by the second respondents, the
Hardy Record Manufacturing Co. L t d . , a valid notice having
regard to the requirement under regulation 1 (1) (/) of the Copy­
right Royalty System (Records) Regulations, 1957, to state the
" ordinary retail selling price " (as defined in regulation 3), t h a t
is, in the circumstances set out above, was there any ascertain­
able " ordinary retail selling price " or any selling price of records
" to the public " ?
The history of this branch of the law of copyright is as follows.
I t was decided in Booscy v . Whight2 t h a t perforated discs form­
ing parts of a mechanical contrivance whereby musical sounds
could be reproduced did not infringe the composer's copyright
under the Copyright Act, 1842. I n consequence of that decision
a very large industry in gramophone records and other mechanical
contrivances for the reproduction of musical works was built up.
I n 1910 the opposing interests of this industry and of composers
was considered by a parliamentary committee. Under the Copy­
right Act, 1911, a copyright owner could prevent altogether the
manufacture of mechanical contrivances by which his work could
be performed, but by section 19 it was provided t h a t if the
copyright owner granted to any person a licence to make such

2 [1900] 1 Ch. 122.

A.C. , AND PRIVY COUNCIL. 91

mechanical contrivances, any other person automatically had the H- L - (E-)

right to make such contrivances on giving a prescribed notice and ^959
paying a prescribed royalty. Section 8 of the Copyright. Act,
1956, has substantially retained this principle, subject to the & Q 0 - L m
important modifications t h a t the original permitted records m u s t "•
have been for the purposes of retail sale and the right to other Q0 X,TD.
persons to m a k e records, once permission has been given to one
manufacturer, is only for the purpose of the record being sold by
retail.
As to the first point set out above, the appellants submit t h a t
as under section 8 (2) the royalty is to be calculated on " the
" ordinary retail selling price of the r e c o r d , " the word " retail "
in the expressions " sell the record by retail " and " for the
" purpose of its being sold by retail " m u s t refer only to an
ordinary retail sale, t h a t is, having the normal characteristics of a
retail sale of the commodity in question, namely, records. These
characteristics include the following: (a) The total consideration
moving from the purchaser is an ascertainable money price.
(b) No conditions with which the purchaser m u s t comply before
he can effect a purchase are attached to the sale, (c) The sale
of the record m u s t be an independent transaction, complete in
itself, and unconnected with the sale or purchase of any other
article or commodity.
Section 8 is not concerned with any contrast between a
wholesale sale and a retail sale. Paragraph (d) of section 8 (1)
does not postulate t h a t the ultimate seller of a record shall be in
contractual relationship with the manufacturer. The reason for
the emphasis of the word " retail " is that, in order t h a t the
protection given by the section might apply, there m u s t have
been, in each case, a sale of a record by retail, and, therefore,
it is convenient t h a t the royalty payable should be assessed on
the retail price.
As to the second point, the kernel of the m a t t e r i s : are the
three wrappers, which have to be tendered by the customer
before he can obtain a record, part of its selling price? Upjohn J .
and E o m e r L . J . 3 accepted the appellants' submission t h a t the
wrappers represent something of value to Nestles, t h a t the owner
of the copyright is entitled, under section 8, to a royalty based
on the full purchase price of each record sold by retail, and that,
since the copyright owner receives a royalty assessed upon the
cash part only of each sale, the provisions of section 8 have not
been complied with.
3
[1958] Ch. 529, 548.
92
HOUSE OF LORDS [1960]

H. L. (E.) On the other hand, Ormerod and Jenkins L.JJ. 4 took the view
1959 that the possession of three wrappers represented the necessary
~~ qualification of entry to the class of persons who alone were
& Co. LTD. entitled to a record for Is. 6d. But that is a very artificial way
*■ of looking at this question. It may be asked, why should Nestles
Co. LTD. wish to create a restricted class of persons entitled to a record?
The motive for the scheme is surely relevant. I t is submitted
that the creation of the " class " is simultaneous with the
acceptance of Is. 6d. Once the record has been dispatched on
receipt of Is. 6d. and three wrappers, which are then destroyed,
the purchaser is demoted from the " class," he is disqualified
and, if he wishes to obtain a further record, he must begin again
by getting three more wrappers. The whole transaction is, in
effect, a double sale and is the very antithesis of an ordinary
retail sale. I t follows that the notice was defective in that
regulation 1 (1) (/) of the statutory regulations was not complied
with, for it is impossible in the circumstances for the manufac­
turer to state the " ordinary retail selling price " of the records.
The appellants concede that if a shopkeeper were to sell a line
of goods at lower than their ordinary market price, or even at
a loss, in order to attract customers into his shop, such a sale
would be a perfectly valid transaction for the purposes of section 8.
The reason is, that there is no condition imposed on the would-be
customer to buy any other goods displayed in the shop, although,
of course, the shopkeeper hopes that by means of this device the
customer will be persuaded so to do.
It is plain that not every sale of a record comes within section
8. Take this example: suppose a man decides to give a novel
form of Christmas present to certain members of his family. He
has a daughter, who is having singing lessons, and he arranges
with a recording company for her to record a popular song which
is the subject of copyright. The father subsequently sends copies
of this record to the family as presents. There has not been a
" sale " within the meaning of section 8, although, in one sense,
there has been a " sale " by the manufacturer. Paragraph (c)
of section 8 (1) is complied with if the manufacturer supplies
records wholesale, provided some person into whose hands the
records will come intends to sell the records by retail. Every
record is intended to come into the hands of an ultimate user.
Therefore, if " sale by retail " merely means sale to an ultimate
user, paragraph (c) would always be complied with if the record

* [1958] Ch. 529, 537,.544, 545.

 A.C. AND PRIVY COUNCIL. 93

was sold. Section 8 is designed to cover all ordinary sales but H. L. (E.)
not special sales or " stunts " such as the advertising campaign ^59
here in question. The majority of the Court of Appeal in coming
to their decision have overlooked the second sentence of section 8 & Q 0 - L T D .
(1) (c): the manufacturer intends " t o supply the record . . . "•
" for the purpose of its being sold retail by another person . . . " Co. LTD.
The respondents contended below t h a t under the general law
a work once published is free to the public, and that, since the
Copyright Acts restrict t h a t freedom and impose penalties for
infringement, they should be construed so as not to restrict the
, public more than necessary. The appellants' answer is t h a t copy­
right is a product of the common law, and that as section 8 is an
enabling section and not a restrictive section, t h a t is, its effect
is to make an exception to the broad right of copyright, it should
in consequence be construed narrowly against the manufacturer.
As to the meaning to be attributed to the words " retail sale "
in section 8, G. J. Dawson (Clapham) Ltd. v . H. & G. Dutfleld 5
is of no assistance and is distinguishable as being a case of the
sale of second-hand goods. Turpin v . Middlesbrough Assessment
Committee 6 is also unhelpful, for t h a t decision turned on the
precise words of the relevant statute, which are quite different
from those of the Copyright Act, 1956. I n t h a t case the question
was whether a garage and motor repair depot was a " retail
" s h o p , " and the references to " retail trade " in t h a t connection
can have no possible bearing on the construction of section 8 of
the Act of 1956.
I n conclusion, it is emphasised t h a t the price of a record is
I s . 6d. plus an indeterminate " x , " to adopt Jenkins L . J . ' s 7
paraphrase of the appellants' submission on this question. Once
t h a t position is reached, the transaction is not a sale at an ascer­
tainable money price, and, accordingly, it is not a sale within
the meaning of section 8 of the Act of 1956.
Guy Aldous Q.C. and John Whitford for the first respondents.
The primary question is what is m e a n t , for the purposes of
section 8 (1) of the Copyright Act, 1956, by the words " sale by
" r e t a i l . " Do they m e a n a sale to the public, or to the con­
suming customer, or do they m e a n an " ordinary retail sale " as
defined by the appellants? I n general, it is submitted t h a t the
section cannot be construed with reference to subsequent regula­
tions made thereunder. Paragraph (a) of section 8 (1) contains

s [1936] 2 All E.E. 232. ' [1958] Ch. 529, 544.

6
[1931] A.C. 470; 47 T.L.B. 308.
94 HOUSE OF LORDS [1960]

H. L. (E.) the words " retail sale," and paragraph (c) the words " sell the
1959 " record by r e t a i l . " B o t h those expressions m u s t have a similar
meaning and be construed in the same sense. Accordingly, if
& Co. LTD. the word " ordinary " is to be read into the subsection a t all, it
"• m u s t be read into paragraphs (a) and (c).
Co. LTD. I t is submitted t h a t under section 8 (1) (6) and (c) a manu-
facturer wishing to sell his records to a wholesaler m u s t give the
prescribed notice before any records are sold. If t h a t is done he
is not guilty of infringement whatever the wholesaler or retailer
does with the record thereafter.
If the appellants' contention as to the meaning to be attached
to the words " sale by retail " be correct, then it m u s t lead
to results which, in the respondents' submission, are plainly
unreasonable and which would further be contrary to the very
interests of the copyright owners which it is in part the object
of the section to protect. I t is to be observed t h a t a work made
pursuant to the provisions of section 8 and in compliance with
the formalities therein described is not an infringing work.
Eoyalty is not payable on manufacture, but only becomes due
and payable under section 8 (1) (d) when the record is " sold by
" r e t a i l . " If a record is made by a manufacturer in the normal
course of business and with an intention to supply it for the
purpose of sale by retail, and if the proper notice is given speci­
fying the ordinary retail selling price and otherwise conforming
with the provisions prescribed by section 8, t h e n such record,
when made, in the hands of the manufacturer or any retailer or
any other person, is not an infringing work. If the appellants'
contention be right and some retailer subsequently sells such a
non-infringing record subject to a condition upon sale, or to some
limited class of qualified purchasers, then such sale would not be
a " sale by r e t a i l , " with the consequence t h a t a copyright owner
would not be entitled to claim any royalty in respect of such sale
and at the same time would be unable to allege t h a t his copyright
had been infringed.
The words " ordinary retail selling price " in section 8 (2) do
not m e a n the price paid on ordinary retail sales but the ordinary
price paid on retail sales. This provision t h a t royalty shall be
calculated on the " ordinary " retail selling price as above defined
is inserted to ensure t h a t the return to the copyright owner is
not diminished in cases where certain of the records are, for
example, disposed of at cut prices. I t is to be observed t h a t
section 8 (1) (d) provides for p a y m e n t of royalty only subsequent
to sale. Section 8 (2) is thus designed to ensure that, when a
A.C. AND PRIVY COUNCIL. 95

sale takes place, the royalty is in fact paid on the basis of the H. L. (B.)
normal selling price, the catalogue price, and not upon any ^959
exceptional price paid in exceptional circumstances. I t was not
the intention of the legislature to exclude from the p a y m e n t of & Q0 L T D
royalties transactions which are not " ordinary retail sales " "•
NESTL£
within the meaning given to t h a t phrase by the appellants. Co. LTD.
A " sale " in this connection includes any transaction in which
the consideration for the transfer of the property in the goods
consists partly of money and partly of other valuable property:
see Sheldon v . Cox8 and Chalmers' Sale of Goods, 10th ed.,
p p . 5 and 6. A " retail sale " i s properly defined in section 41
of the Finance (No. 2) Act, 1940, where it states t h a t " ' selling
" ' by retail ' means selling goods by way of business otherwise
" than by wholesale . . . " T h a t definition accords with the view
of Viscount Dunedin in Turpin v . Middlesbrough Assessment
Committee 9 t h a t it is a sale to the consuming customer.
As to the regulations, they cannot govern the construction of
the Act. [Eeference was made to regulations 1, 2 and 3.] There
is nowhere to be found any provision which gives the regulations
the force of a s t a t u t e : see sections 8 (11) and 47 of the Copyright
Act, 1956. The phrase " ordinary retail selling price " in regula­
tion 3 is a reference back to the provisions of section 8 (2) of
the Act. I n the present case the catalogue price is the price of
I s . 6d. specified on the back of the record. The wrappers are
of no value and form no part of the price of the record at all.
So far as the purchase of wrappers is concerned, it has never
been suggested t h a t the money paid for the chocolate was not
the full price of the chocolate. Further, it is not suggested t h a t
any part of the I s . 6d. paid for a record is p a y m e n t for chocolate.
" Price " in this connection is the fixed marked price; any per­
sonal element is irrelevant, t h a t is to say, t h a t the test of price
is an objective test. Thus, if two persons each buy three 6d.
bars of Nestle's chocolate, and one of t h e m wants a record and
the other does not, the price of the record to the person who
wants it is I s . 6d., no more, no less; the value of the record to
him is irrelevant.
On the question whether the wrappers form any part of the
price of the record, it is to be observed t h a t a contract for the
purchase of chocolate is plainly a transaction within section 1 (1)
of the Sale of Goods Act, 1893, and the consideration is plainly
6d. per bar of chocolate. Once the price has been paid and the

s (1824) 3 B. & C. 420. a [1931] A.C. 470, 473.

96 HOUSE OF LORDS [1960]

H. L. (E.) chocolate in its wrapper handed over, then the consideration for
1959 * na * P r i ° e is past, and that past consideration cannot found any
further consideration for any subsequent contract. Accordingly,
& Co. LTD. ^ a purchaser of Nestle's chocolate sends three wrappers, together
"• with Is. 6d., for a record, no part of the consideration for the
Co. LTD. chocolate and wrappers can form part of the consideration for
the record, for it is a past consideration, and in this connection
no valid distinction can be made between persons who buy
chocolate with knowledge of Nestl^'s scheme and those who buy
without such knowledge.
It is no doubt true that the persons who buy a record at the
marked price of Is. 6d. are a limited class, namely, those persons
who forward three wrappers. Those wrappers are admittedly of
no value; they are wrappers to bars of chocolate the full purchase
price of which has been paid by someone. But the limitation of
a sale to certain persons does not mean that it is not a retail
sale to the public like any other sale to the public where a con­
dition is imposed, for example, sales by a co-operative society to
members only. In all these cases the " price " paid is the sum
of money handed over by the purchaser in exchange for the goods
in question.
Before the Copyright Act, 1911, it was not an infringement
of the copyright in a musical work to make a record by means
of which such work could be mechanically performed. But the
effect of the Copyright Acts of 1911 and 1956, so far as is material,
has been to prevent any person from manufacturing records of a
copyright work without the copyright owner's consent, unless
such person could bring himself within section 19 of the Act of
1911 or section 8 of the Act of 1956. The courts will not, unless
forced to do so, construe widely Acts which take away public
rights: see Walsh v. Secretary of State for India10 and David
v. De Silva.11 Accordingly, the respondents submit that it is
to be presumed that the legislature did not intend to restrict
the activities of manufacturers of records more than is expressly
stated in the Acts, and that, therefore, if there is any doubt as
to the meaning of section 8 (which should be read in conjunction
with section 19 (2) of the Act of 1911 (see Maxwell on Inter­
pretation of Statutes, 9th ed., p. 165)), such doubt should be
resolved so as to restrict manufacturers of records as little as
possible. Further, under the Copyright Acts of 1911 and 1956
(sections 11 and 21 respectively), if there is an infringement by

10
(1863) 10 H.L.C. 367. " [1934] A.C. 106; 50 T.L.B. 165.
A.C. AND PRIVY COUNCIL. 97

a manufacturer of records, it may involve penal consequences, H. L. (E.)

and in such case it is even more important that any doubt upon ^59
construction should be resolved in favour of the manufacturer.
CHAPPELL
Whitford following. The appellants contend that section 8 & co. LTD.
of the Copyright Act, 1956, only protects ordinary retail sales of '• ,
records and that the acts of the respondents are not such sales Co. LTD.
and are consequently infringements of the appellants' copyright.
It is to be observed that the word " ordinary " is used in section
8 (2) in relation to the "selling price." I t is submitted that
in relation to the phrase " ordinary retail selling price " the
word " ordinary " qualifies " price " and " price " alone, and
it has no relation to the retail sale contemplated by section 8 (1).
So far as section 8 (1) is concerned, there is no mention of the
word " ordinary " in relation to a retail sale at all. If the legis­
lature had contemplated a special category of "retail sales,"
namely, an " ordinary retail sale," nothing could have been easier
than for the legislature to have inserted the word " ordinary "
into subsection (1). " Section 8 (1) (c) refers to the selling of
" the record ' by retail ' simpliciter, with no superadded require-
" ment to the effect that the sales referred to must be retail sales
" in the ordinary course of business " : -per Jenkins L.J. 12 Any
other construction of section 8 would place a manufacturer in
the greatest difficulty, for if it is only certain sales to the public
which come within the protection of the section, what guidance
does the section afford him?
The appellants further contend that the notice purporting to
be given by the respondents pursuant to the Copyright Eoyalty
System (Kecords) Eegulations, 1957, was defective in that there
was no "ordinary retail selling price," and that therefore the
price stated in reference to regulation 1 (1) (f) was not the
ordinary retail selling price. The regulation envisages the marked
price as being conclusive for the purposes of the regulations: see
regulation 3. It was done in that way because it was presumed
that that would be the price the public would be prepared to pay,
and, therefore, the royalty is based on that price. It follows
that, if a retailer sells a record at a price greater than the marked
price, the copyright owner is nevertheless entitled only to the
royalty based on the marked price.
John Cope, for the second respondents, adopted the arguments
advanced on behalf of the first respondents.

" [1958] Ch. 529, 545.

A.C. 1960. 7
98 HOUSE OF LORDS [1960]

H. L. (E.) Shelley Q.C. in reply. The cards on which the records are
X95Q mounted contain, inter alia, the information that a record can
be obtained by sending to Nestle's Is. 6d. together with three
& Co. LTD. wrappers. That is stating as clearly as possible that part of the
"■ consideration for a record is three wrappers. The question arises
NBSTL6 wnv
CO. LTD. do Nestle's want the wrappers? The answer is, because
they have some value to Nestle's. If this were not so, Nestle's
would supply a record without the requirement for wrappers. It
follows that the whole of the price is not stated as prescribed by
section 8, and the provisions of the section have therefore not
been complied with.
By section 2 (5) of the Act of 1956 there is granted to the
copyright owner a monopoly in the reproduction of his work,
for example, by records (see section 48). That is a' restrictive
provision and if doubt arose as to its true construction it is con­
ceded that it should be resolved in favour of an alleged infringer.
But that is not this case. Section 8 is an exception to the
general grant of copyright, and, therefore, if it is alleged that its
provisions have been infringed, it should be read narrowly, that
is, in case of doubt in favour of the copyright owner. ,
The words " ordinary retail selling price " in regulations 1
(1) (/) and 3 connote an ordinary sale at an ordinary price. In
the present case the conduct of the sale of these records has not
been ordinary, because there has been an advertising scheme to
advance the sale not of records but of chocolates. From the sale
of a record there accrues to Nestle's an advantage other.than the
payment of Is. 6d. Accordingly, the regulations have not been
complied with, because the "ordinary retail selling price " as
defined above has ,not been properly stated on the notice the
manufacturer has to give to the copyright owner. In these
circumstances it is impossible to say that the manufacturer has
given the prescribed notice under section 8 (1) (b), and therefore
he has not brought himself within the protection of section 8,
and there has been an infringement.

Their Lordships took time for consideration. •

1959. June 18. VISCOUNT SIMONDS. My Lords, this appeal

raises a question of construction of the Copyright Act, 1956,
upon which there has been a difference of opinion in the courts
below, the Court of Appeal by a majority (Jenkins and •Ormerod
L.JJ., Eomer L.J. dissenting) having reversed the decision of
Upjohn J.
A.C. AND PRIVY COUNCIL. 99

The facts are not in dispute and the action was tried without -H;. L. (E.)
pleadings upon an interlocutory motion which by consent was ig5g
treated as the trial of the action. The appellants Winneton
Music Corporation are the owners, and the appellants Chappell & C o L T D .
& Co. Ltd. their exclusive licensees, of the copyright in a musical "•
NFSTIJF
work entitled " Bockin' Shoes." The question is whether the Co. LTD.
respondents the Nestle Co. Ltd. and Hardy Eecord Manufactur-
ing Co. Ltd. (whom I will call " the respondents Nestle " and Simonds.
" the respondents Hardy ") have infringed this copyright. I t is
common ground that they have done so unless they are protected
by section 8 of the Copyright Act, 1956. I will therefore set out
that section and then state such further facts as appear to be
relevant. Section 8 is as follows:
'' 8.—(1) The copyright in a musical work is not infringed
" by a person (in this section referred to as ' the manu-
" ' facturer ') who makes a record of the work or of an
" adaptation thereof in the United Kingdom, if—(a) records
" of the work, or, as the case may be, of a similar adaptation
" of the work, have previously been made in, or imported
" into, the United Kingdom for the purposes of retail sale,
" and were so made or imported by, or with the licence of,
" the owner of the copyright in the work; (b) before making
" the record, the manufacturer gave to the owner of the
" copyright the prescribed notice of his intention to make it;
" (c) the manufacturer intends to sell the record by retail1,
" o r to supply it for the purpose of its being sold by retail
" by another person, or intends to use it for making other
" records which are to be so sold or supplied; and (d) in the
" case of a record which is sold by retail, the manufacturer
" pays to the owner of the copyright, in the prescribed
" manner and at the prescribed time, a royalty of an amount
" ascertained in accordance with the following provisions of
" this section. (2) Subject to the following provisions of this
" section, the royalty mentioned in paragraph (d) of the pre-
" ceding subsection shall be of an amount equal to six and
" one-quarter per cent, of the ordinary retail selling price of
" the record, calculated in the prescribed manner: Provided
" that, if the amount so calculated includes a fraction of a
" farthing, that fraction shall be reckoned as one farthing,
" and if, apart from this proviso, the amount of the royalty
" would be less than three-farthings, the amount thereof
"shall be three-farthings."
100
HOUSE OF LORDS [1960]

H. L. (B.) ; The Copyright Eoyalty System (Eecords) Begulations, 1957,

1939 were made under the Act, of which I think it necessary only to
~~ mention regulation 1 (1) (/), which provides that the notice
& Co. LTD. required by subsections (1) and (5) of section 8 shall contain
!
"• the ordinary retail selling price (as thereinafter defined) of the
Co. LTD. records or, where it is intended to reproduce the work on more
~~~ than one type of record, the ordinary selling price of each type
simonds. 0 f record the manufacturer intends to make and the amount of
the royalty payable on each record, and regulation 3, which
provides that the ordinary retail selling price of any record shall
be calculated at the marked or catalogued selling price of single
records to the public or, if there is no such marked or catalogued
selling price, at the highest price at which single records are
ordinarily sold to the public exclusive of purchase tax in either
case.
The respondents Hardy are manufacturers of records, the
respondents Nestle are manufacturers of chocolate. The respon­
dents Hardy make use of a process by which a recording can be
produced on a thin film of cellulose acetate at a cost enabling them
to sell records at a wholesale price of 4d. each. By this process
they have produced film records of the musical work " Eockin'
'' Shoes '' and sold them to the respondents Nestle" mounted upon
cards supplied by the latter. A film so mounted is sold by Nestle
to any member of the public who sends to them a postal order
for Is. 6d. with three wrappers from 6d. bars of Nestld milk
chocolate. A typical offer appeared in the " Daily Mirror " of
September 11, 1957, in the words—" Here's how to get each new
" stars record. Collect three sixpenny wrappers from Nestle's
" milk chocolate. Fill in the coupon and send it with a postal
"order for Is. 6d., the price of the record, and your three
" wrappers. You may order as many records as you like on this
" coupon, but for each record you must send three wrappers
" and Is. 6d. P.O., crossed, payable to the Nestle Company,
" Limited." Next to the script that I have cited was a coupon
containing the names of a number of musical works including
" Eockin' Shoes." All this was part of a full-page advertisement
of Nestle's milk chocolate and no one can doubt that Nestle1 's
interest in the sale of records was in order to promote the sale of
their chocolate, but presumably they were not averse from making
such profit as they seem to have made from the sale of records
also. The film, as I have said, was mounted on a card supplied
by Nestle, whose name appears prominently upon it. On the back
were the words—" Eemember, all you have to do to get each new
A.C. AND PRIVY COUNCIL. 101

" stars record is to send three wrappers from Nestle" 's sixpenny H. L. (E.)
" milk chocolate bars together with postal order for I s . 6d. and 1959
" stating which record you want to Nestle Eecord Offer P . O .
" Box 14 Hayes, Middlesex. D o n ' t forget, three wrappers and & co PP Sro.
" p o s t a l order for I s . 6 d . " «■
Before, however, making or permitting a public offer such as Co LTD
I have referred to, it was necessary t h a t the notice prescribed
Viscour.t
by section 8 of the Act should be served. This duty falls on the simonda.
manufacturer, and accordingly the respondents Hardy entered
into correspondence with the Mechanical Copyright Protection
Society L t d . who were, as I assume, acting on behalf of the
appellants. I n the first letter which passed between them, dated
September 12, 1957, but referring to other musical works than
" Eockin' S h o e s , " H a r d y stated " the retail price of the record,
" and they are being sold individually not collectively, is one shil-
" ling plus three wrappers. Wrappers are valueless and normally
'' thrown a w a y . ' ' I n the ensuing correspondence the society
objected t h a t the proposal m a d e by H a r d y did not constitute a
sale by retail and t h a t therefore the proposed records could not
be made under the provisions of section 8 of the Act. Hardy
nevertheless on July 17, 1957, proceeded in relation to " Rockin'
Shoes " to give a notice which purported to be the statutory
notice. I n it they said: " The ordinary retail selling price of each
" record will be not greater than 8fd. exclusive of purchase tax
" and not greater t h a n I s . inclusive of purchase t a x . " B y a sub­
sequent letter those figures were amended to I s . l£d. and I s . 6d.
respectively. No mention was made of any wrappers. Nestle" then
proceeded to p u t the proposal into effect and sold the record to
members of the public who sent a postal order for I s . 6d. together
with three chocolate wrappers. Forthwith the appellants chal­
lenged the validity of their claim to be protected by section. 8.
Upjohn J. supported their contention and granted the appropriate
injunction. The Court of Appeal, on the other hand, taking by
a majority the view t h a t the respondents had complied with the
section, allowed the appeal and dismissed the action.
Faced by this conflict of opinion among learned judges, from
any of whom I am reluctant to differ, I feel at liberty to say
t h a t I have found unusually great difficulty in reaching m y own
conclusion.
I t appears to me that, in order to comply with the provisions
of section 8 and thus obtain its protection, there are three relevant
conditions to be satisfied by the manufacturer of an article which
would otherwise be an infringement of copyright. B y " relevant
!02 HOUSE OP. LORDS [1960]

H.iL. ;(B-.) y• conditions " I mean those conditions about which an issue
X909 arises in this case. First, there must be a sale " of the article
~~ in question: secondly, the sale must be a " retail " sale: thirdly,
& Co. LTD; i* must be possible to predicate of it that there is an " ordinary
"■ , " retailing selling price " of it, for if there is not, an essential
Co. LTD; P a r * of the prescribed notice cannot be given.
v ~ v Upon the first point I cannot feel any doubt. It had not been
simond;.: contended in the course of the case that there was not a sale,
until during the debate in your Lordships' House that suggestion
was made, and I think that, beyond doubt, anyone, who in
answer to the advertisement acquired a record, would say that
he had bought it and would be surprised that any doubt should
be cast upon what he regarded as an obvious fact. Whether the
consideration or the price that he paid was Is. 6d. only or Is. 6d.
and three wrappers is a matter not for him but for your Lordships
to determine.
Secondly, I think it is clear that the sale is a retail sale. I t is
a sale to a consuming member of the public and I know of no
other factor which distinguishes a retail sale from other sales.
Put negatively, it is not a sale wholesale to a purchaser who
proposes himself to sell it retail. In considering this second point,
I do not ignore the argument that in its context in the section
" retail sale " means only what was sometimes called an " ordin-
'.' ary " retail sale, by which, as I understood, was meant a sale
in which there was no other element than on the one side an
article sold and on the other a payment of money made, and that
the transaction was not an " ordinary " retail sale if the purchaser
was required to produce three chocolate wrappers in addition to
his postal order. This argument is so closely linked with the
third condition that there must be an " ordinary retail selling
''price " that I will consider the two points together.
I think, my Lords, that upon this last matter some confusion
has arisen from treating the word " ordinary " as if it qualified
" retail " rather than " price." If there is no retail sale, there
can, of course, be no ordinary or other retail selling price. But
given a retail sale, there is no difficulty in ascertaining the ordin­
ary selling price upon such a sale. The problem, therefore, and
the only problem, is whether there is a retail sale with a retail
selling price within the meaning of the section. The contention
that it is not is stated urvarious ways. Upjohn J., in a passage
cited with approval by Bomer L.J., said 1 : " The vital part of

, 1 [1958] Ch. 629, 548.

A.C. | AND PRIVY COUNCIL. 103

" this transaction is to get in three wrappers and that represents H. L. (B.)
" a great deal of value to Nestle's, because it is evidence of an lg5 g
" advertising campaign pushing up their sales. That is the value ~~"~
" to them. This bears no resemblance at all to the transaction & Co. LTD.
0;
" to which, in my judgment, the section is pointing, that is, an
" ordinary retail sale with an ordinary retail selling price. I think c 0 . ij TD-
" i t is quite wrong to suppose that the retail selling price here is ——
" Is. 6d. The purchaser has to purchase three bars of chocolate simonds.
" a n d that is the real value of this transaction to Nestle's.";
Eomer L.J. himself states the proposition thus: 2 " I cannot
" help thinking that the owner of the copyright was entitled,
" under section 8, to a royalty assessed upon the full purchase
" price of each record sold by retail. Under Nestle1 's method
'' of selling them the copyright owner gets a royalty assessed upon
" the cash part only of each sale, and he gets nothing in respect
" of the consideration which, although indirect, passes from the
" customers and is received by the company." There are here
two somewhat different conceptions. First, the transaction is not
such an ordinary retail sale as contemplated by the section,
because the vendor gets something of value, viz., the evidence of
an advertising campaign pushing up the sales: secondly, it is not
within the section, because the vendor gets from the purchaser a
consideration for the sale of the record which the copyright owner
does not share, for it is not included in the retail selling price
upon which the royalty is based. In the latter case the wrappers
are treated as part of the consideration moving from the pur­
chaser, in the former as evidence of a collateral advantage which
has already accrued to the vendor. It is necessary to distinguish
these two aspects of the matter. In the contention that the sale
is not an ordinary retail sale and therefore not within the section
because the vendor gets not only the cash price but also evidence
of an advantage already accrued, I see no merit. It is irrelevant
what is the vendor's motive for selling a record for Is. 6d. if that
is the. selling price. It may be part of an advertising campaign
for the sale of other goods: but there is nothing in the Act which
impels me to read into the section a qualification that the selling
price is to be disregarded and the article denied protection if
the vendor's motive in fixing it is anything but to obtain the
maximum amount commercially possible. The alternative view
is that the production of three chocolate wrappers is part of the
price of the record and that, as it is incapable of valuation, the

2 [1958] Ch. 529, 548.

!04 HOUSE OP LORDS [1960]

H. L. (E.) necessary particulars cannot be given and the statutory require-

1959rnents satisfied. This view is to some extent supported by the
fact t h a t in the advertisement and offer, to which I have already
& CO^LTD. referred, the postal order for I s . 6d. and three wrappers are in
e. one passage included in a single demand. B u t in the same
Co. LTD. document the postal order for I s . 6d. alone is referred to as the
price of the record. I cannot draw any safe conclusion from the
Viscount
simomis. documents: the question remains open whether the wrappers
are part of the selling price.
In my opinion, my Lords, the wrappers are not part of the
selling price. They are admittedly themselves valueless and are
thrown away and it was for that reason, no doubt, that Upjohn J.
was constrained to say that their value lay in the evidence they
afforded of success in an advertising campaign. That is what
they are. But what, after all, does that mean? Nothing more
than that someone, by no means necessarily the purchaser of
the record, has in the past bought not from Nestle1 's but from
a retail shop three bars of chocolate and that the purchaser has
thus directly or indirectly acquired the wrappers. How often he
acquires them for himself, how often through another, is pure
speculation. The only thing that is certain is that, if he buys
bars of chocolate from a retail shop or acquires the wrappers from
another who has bought them, that purchase is not, or at the
lowest is not necessarily, part of the same transaction as his
subsequent purchase of a record from the manufacturers.
I conclude, therefore, that the objection fails, whether it is
contended that (in the words- of Upjohn J.) the sale " bears
" no resemblance at all to the transaction to which the section
" . . . i s pointing " or that the three wrappers form part of the
selling price and are incapable of valuation. Nor is there any
need to take what, with respect, I think is a somewhat artificial
view of a simple transaction. What can be easier than for a
manufacturer to limit his sales to those members of the public
who fulfil the qualification of being this or doing that? It may
be assumed that the manufacturer's motive is his own advantage.
It is possible that he achieves his object. But that does not
mean that the sale is not a retail sale to which the section applies
or that the ordinary retail selling price is not the price at which
the record is ordinarily sold, in this case Is. 6d.
An argument was addressed to the House by counsel on
either side which appeared to be based on the difficulties that are
likely to ensue if the one contention or the other is accepted. It
may be so. It is probable that the draftsman of the Eegulations
A.C. AND PRIVY COUNCIL. 105

foresaw some of t h e m and did his best to avoid t h e m . B u t these H. L. (E.)

are not considerations t h a t have weighed with me in interpreting jggg
the words of a section which appear to be written in plain English. —■
Nor do I need to have recourse to the principle t h a t since the & Q0 L TI) _
Act takes away something heretofore of common right, it m u s t "•
NESTT $
be strictly and narrowly construed, nor to the principle that, Co. JJTD.
since section 8 constitutes an exception upon a general grant,
it is the exception which is to be narrowly construed. These simonds.
are maxims to which it is necessary to have recourse as a last
resort. I n the present case, though I take a different view from
your Lordships with great diffidence, I do not find it necessary
to do so.
I would dismiss the appeal.

LORD E E I D . My Lords, the respondents, the Nestle" Co.,

manufacture chocolate, including wrapped bars of milk chocolate,
which are sold to the public at 6d. per bar. As an advertising
scheme to promote the sale of their chocolate they published
advertisements in September, 1957, in which they offered to
supply any one of six named gramophone records in return for a
postal order for I s . 6d. and three wrappers. The advertisement
produced said: " Save the wrappers from 6d. blocks. They will
" help you to get smash hit recordings of skiffle, calypso, swing
" and ballad by Britain's newest stars all exclusive to N e s t l e s . "
Any member of the public could obtain as m a n y records as he
wished by sending I s . 6d. and three wrappers for each record.
One of these records was a reproduction of a dance t u n e
■' Eockin' Shoes " of which the copyright belonged to the appel­
lants the Winneton Corporation, the other appellants, Chappell
and Co., being sole licensees under the copyright. The appellants
maintained t h a t the manufacture and sale of this record was an
infringement of their copyright and they seek an injunction and
damages. The respondents maintain t h a t they were entitled to
supply records in this way without the permission or licence of
the appellants because they were authorised to do so by section 8
of the Copyright Act, 1956. The relevant part of that section is
as follows: [His Lordship read section 8 (1) and (2) and con­
t i n u e d : ] Before dealing with these provisions it m a y be helpful
to state briefly the history behind t h e m and the steps which
the respondents took to comply with "them. Before 1911 it had
been held t h a t the reproduction of copyright musical works by
mechanical means such as rolls for player pianos was not an
infringement of copyright, and gramophone records had been
106 HOUSE OP LORDS [1960]

H. L. (B.) manufactured on a considerable scale and sold without licence or

1959 payment of royalty. By the Copyright Act, 1911, it was enacted
t h a t copyright included the sole right to make any record or
& Co. LTD. other contrivance by means of which a work might be mechanic-
"• ally performed. B u t it was provided by section 19 of the Act
Co. LTD. that making any such contrivance should not be an infringement
L Titeid ^ * n e m a ' £ e r ' inter alia, gave the prescribed notice and paid
royalties calculated in accordance with the section in respect of all
such contrivances sold by him. The provisions of this section
are broadly similar to the provisions of section 8 of the 1956 Act.
The respondents, the H a r d y Co., operate a novel process
whereby records which play for about I f minutes are made on
thin films of cellulose acetate. These films can then be suitably
mounted and played in the ordinary way on gramophones. The
process is inexpensive and the H a r d y Co. sold to the Nestle" Co.
a large number of these recordings at 4d. each. The Nestle" Co.
then had them mounted on cardboard mounts which also carried
advertisements for their chocolate.
The Hardy Co. informed the Mechanical Copyright Protection
Society of the project in J u n e , 1957. They said t h a t the retail
price of the records was to be one shilling plus 3 wrappers. This
society stated t h a t the proposal did not constitute a sale by retail
and in consequence the proposed records could not be made under
the provisions of section 8 of the Copyright Act, 1956: they
further stated that they could not countenance the reproduction
of their m e m b e r s ' copyright music on records for the purpose of
advertising the products of another company. After some corre­
spondence the Hardy Co. gave a notice purporting to be under the
1956 Act and Kegulations made under it. This notice included
a paragraph: " F . The ordinary retail selling price of each record
" will be not greater than 8fd. exclusive of purchase tax and not
" greater than I s . inclusive of purchase t a x . " On July 25, 1957,
these figures were altered to I s . l^d. exclusive of purchase tax
and Is. 6d. inclusive of purchase tax. The society maintained
their views and the appellants now contend t h a t this notice, was
not a valid notice under section 8 of the Act or the Eegulations.
The scheme of section 8 appears to m e to be clear. To avoid
infringement four conditions m u s t be complied with. Condition
(a) limits the class of works for the reproduction of which the
manufacturer can rely on this section and I need not further
consider it: (b) requires notice to be given: (c) requires t h a t the
manufacturer shall intend the records which he makes to be
dealt with in one or other of three ways: and (d) requires t h a t
 107
A.C. AND. PRIVY COUNCIL.

if the intention is to deal with them in either of the first two H - L - (E-)
of these ways a royalty shall be paid. Then subsection (2) pro- 1959
vides for the amount of the royalty. Condition (b) refers to the —
prescribed notice and subsection (2) refers to royalty calculated & co. LTD.
in the rprescribed manner. " Prescribed " means prescribed. in _NESTLU
T "• ,

Eegulations made by the Board of Trade, and the Copyright Co. LTD.
Eoyalty System (Eecords) Eegulations, 1957, have been so made. Lord~Reid
On the view which I take of the case it is unnecessary to base
my judgment on the terms of these Eegulations. One argument
submitted for the respondents would, if correct, mean that some
of them are ultra vires. My view of the section does not involve
any such result in the present case, and it would not be right to
speculate whether in some other case some inconsistency might
emerge between the provisions of the Act and those of the
Eegulations.
I t appears to me that all four statutory conditions are intended
to be complied with before a record is made or anything is done
which, apart from section 8, would amount to an infringement.
Otherwise it could not be known when the record was made and
sold by the manufacturer whether making the record was an
infringement or not: that would depend on whether the condition
was subsequently complied with or not. The respondents con­
structed a powerful argument on the basis that condition (d) only
comes into operation after a record has been sold by retail and
that no royalty is payable until then. But I do not so read the
section. I think that the Eegulations rightly provide that in his
notice under (6) the manufacturer must state what is to be the
ordinary retail selling price of the record and that determines
the amount of the royalty. And again I think that the Eegula­
tions rightly provide for the manufacturer paying the royalty
at a much earlier stage than after sale by retail. The manufac­
turer pays royalty on records which he intends to be sold by
retail. Apart from the last purpose set out in condition (c) he is
not entitled to make for any other purpose. And if later some­
one disposes of a record in some other way no part of the royalty
can be recovered.
I can now turn to what appears to me to be the crucial
question in this case: was the Is. 6d. an " ordinary retail selling
" p r i c e " within the meaning of section 8? That involves two
questions, what was the nature of the contract between the
Nestle Co. and a person who sent Is. 6d. plus 3 wrappers in
acceptance of their offer, and what is meant by " ordinary retail
" selling price " in this context.
108 HOUSE OP LORDS [1960]

H. L. (E.) To determine the nature of the contract one must find the
jggg intention of the parties as shown by what they said and did.
The Nestle" Co.'s intention can hardly be in doubt. They were
CHAPPETJJ • •

& Co. LTD. n o * setting out to trade in gramophone records. They were using
"• these records to increase their sales of chocolate. Their offer
Co. LTD. w a s addressed to everyone. It might be accepted by a person
—— who was already a regular buyer of their chocolate; but, much
more important to them, it might be accepted by people who
might become regular buyers of their chocolate if they could be
induced to try it and found they liked it. The inducement was
something calculated to look like a bargain, a record at a very
cheap price. I t is in evidence that the ordinary price for a dance
record is 6s. 6d. It is true that the ordinary record gives much
longer playing time than the Nestle records and it may have
other advantages. But the reader of the Nestle offer was not
in a position to know that.
It seems to me clear that the main intention of the offer was
to induce people interested in this kind of music to buy (or
perhaps get others to buy) chocolate which otherwise would not
have been bought. It is, of course, true that some wrappers
might come from the chocolate which had already been bought
or from chocolate which would have been bought without the
offer, but that does not seem to me to alter the case. Where
there is a large number of transactions—the notice mentions
30,000 records—I do not think we should simply consider an
isolated case where it would be impossible to say whether there
had been a direct benefit from the acquisition of the wrappers or
not. The requirement that wrappers should be sent was of great
importance to the Nestle Co.; there would have been no point
in their simply offering records for Is. 6d. each. It seems to me
quite unrealistic to divorce the buying of the chocolate from the
supplying of the records. It is a perfectly good contract if a
person accepts an offer to supply goods if he (a) does something
of value to the supplier and (b) pays money: the consideration
is both (a) and (b). There may have been cases where the
acquisition of the wrappers conferred no direct benefit on the
Nestle Co., but there must have been many cases where it did.
I do not see why the possibility that in some cases the acquisition
of the wrappers did not directly benefit the Nestle Co. should
require us to exclude from consideration the cases where it did.
And even where there was no direct benefit from the acquisition
of the wrappers there may have been an indirect benefit by way
of advertisement.
A.C. AND PRIVY COUNCIL. 109

I do not think that it matters greatly whether this kind of H. L. (B.)

contract is called a sale or not. The appellants did not take the 195g
point that this transaction was not a sale. But I am bound to
say that I have some doubts. If a contract under which a person & C o LTD
is bound to do something as well as to pay money is a sale, then »■
either the price includes the obligation as well as the money, c 0 . L T D .
or the consideration is the price plus the obligation. And I do „ 7 7 , ,
r r
° Dord Reid.
not see why it should be different if he has to show that he has
done something of value to the seller. It is to my mind illegiti­
mate to argue—this is a sale, the consideration for a sale is the
price, price can only include money or something which can be
readily converted into an ascertainable sum of money, there­
fore anything like wrappers which have no money value when
delivered cannot be part of the consideration.
The respondents avoid this difficulty by submitting that
acquiring and delivering the wrappers was merely a condition
which gave a qualification to buy and was not part of the con­
sideration for sale. Of course, a person may limit his offer to
persons qualified in a particular way, e.g., members of a club.
But where the qualification is the doing of something of value
to the seller, and where the qualification only suffices for one
sale and must be re-acquired before another sale, I find it hard
to regard the repeated acquisitions of the qualification as anything
other than parts of the consideration for the sales. The purchaser
of records had to send 3 wrappers for each record, so he had first
to acquire them. The acquisition of wrappers by him was, at
least in many cases, of direct benefit to the Nestle Co., and
required expenditure by the acquirer which he might not other­
wise have incurred. To my mind the acquiring and delivering of
the wrappers was certainly part of the consideration in these
cases, and I see no good reason for drawing a distinction between
these and other cases.
Is such a transaction within the contemplation of section 8?
I proceed on the view that it was a sale, and, if so, it was a sale
by retail and not by wholesale. But subsections (1) and (2) must
be read together in light of the apparent object of the section.
Its object appears to me to be twofold, to benefit the public
and to protect the financial interest of the owner of the copyright.
The section makes it possible for records to be available to the
public for the manufacture of which the owner might not have
granted a licence. And it protects the copyright owner by requir­
ing royalties to be paid on the ordinary retail selling price. Where
records are sold in the ordinary way of business it can be assumed
no HOUSE OP LORDS [1960]
!>
H. L. (E.) t h a t in his own interest the manufacturer will fix a full price to
1959 cover not only the cost of production and his own profit but also
the profit required by retailers. B u t where there is a special
& Co. LTD. order and none of the records made are to be sold in the ordinary
v. w a y D U t a l l are to be sold, as here, in an unusual way in order
NFSTT F
Co. LTD. *° promote a scheme for advertising quite a different business
LorTSeia * r o m s e u ^ n 8 records, the protection of the copyright owner is not
at all secure. I n such a case the retailer will get the manufac­
turer to fix such a retail selling price as will best suit him, and
this m a y be something quite different from an ordinary economic
price.
If the respondents are right, the owner of the copyright gets
nothing in respect of the advantage to the retailer arising from
the requirement t h a t wrappers m u s t be acquired and delivered,
and he would get nothing in respect of any collateral advantage
accruing to an advertiser however clear or however valuable.
I t is true t h a t the price of I s . 6d. left the Nestle' Co. with a profit
after paying the cost of mounting, postage, and other expenses,
though we do not know whether the profit was as great as retailers
normally require. B u t the original proposal in this case was
to sell at I s . plus three wrappers and it might have suited the
Nestld Co. to sell at 9d. or 6d. plus six wrappers. I t might even
suit a particular advertiser to sell at less t h a n the price he paid
the manufacturer.
I n its context I cannot interpret the phrase " ordinary retail
" selling price " as applying to all sales however extraordinary
in character and as m e a n i n g whatever money price m a y be
charged irrespective of the type of transaction or of conditions
attached to the sale or of collateral advantages accruing to the
seller or of whether the money price is really the whole considera­
tion for the sale. I am of opinion t h a t the H a r d y Co.'s notice
t h a t the ordinary retail selling price was I s . 6d. was invalid, t h a t
there was no ordinary retail selling price in this case and t h a t the
respondents' operations were not within the ambit of section 8.
They were therefore infringements of the appellants' copyright
and in my judgment this appeal should be allowed.

LORD TUCKER. My Lords, this case has in its course through

the courts resulted in a very narrow division of judicial opinion
which shows t h a t t h e point in issue, though short, is one of con­
siderable difficulty. The conclusion which I have reached can,
however, be stated quite shortly. I do not doubt t h a t these
records were supplied by the manufacturers " for the purpose of
 1 U
A.C. AND PRIVY COUNCIL.

" being sold by retail " within the meaning of section 8 (1) (c) of H - L - <E-)
the Copyright Act, 1956. I think the contrast throughout the 1959
section is between retail and wholesale sales and I can find no —
justification for limiting the sales to ordinary retail sales, nor do I & co. LTD.
find it easy to define what is an ordinary retail sale, b u t this does °- ,
not, in my opinion, conclude the m a t t e r . The royalty has, by Co. LTD.
subsection (2), to be calculated on the basis of the " ordinary L ^ f ^ ] ^ , .
" retail selling p r i c e . " This does not m e a n the price prevailing
on an ordinary retail sale but the ordinary price obtainable on a
retail sale, and I think the ordinary price so obtainable envisages
a money sum constituting the entire consideration for the sale.
Otherwise it would be impossible t o calculate the royalty per­
centage payable in cases where the money value of the additional
consideration is incapable of valuation. The fact t h a t the retailer
m a y choose to sell a t a loss cannot affect t h e proper interpreta­
tion of the section or justify a sale by him for a sum of money
plus the delivery of a number of wrappers or other articles which
h e desires to obtain for reasons which he considers beneficial to
his trade. The ordinary retail selling price as prescribed by Eegu­
lation 3 of t h e Copyright Eoyalty System (Eecords) Eegulations,
1957, provides t h a t it is to be calculated " at the marked or
" catalogued selling price of single records to the p u b l i c . " The
records in question are marked as follows: ' ' E e m e m b e r all you
" have to do to get each New Stars record is to send three
" w r a p p e r s of NestUVs 6d. milk chocolate bars together with postal
" o r d e r for I s . 6 d . " Under Eegulation 1 (1) (/) the notice re­
quired by subsection (2) of section 8 m u s t state the ordinary retail
selling price as defined by Eegulation 3. I n the present case the
notice, as amended, stated t h a t " the ordinary retail selling price
" of each record will not be greater than I s . l | d . exclusive of
" purchase t a x and not greater t h a n I s . 6d. inclusive of purchase
" t a x . " This s t a t e m e n t does not disclose the entire consideration
but only t h a t p a r t of it t h a t is expressed in terms of money and
is therefore, in my opinion, defective. . I t is necessarily defective
because it is impossible to state ' ' the ordinary retail selling price ''
envisaged by subsection (2) if the money price is only part of the
consideration.
If this is not the correct view it follows t h a t there would be
no infringement if the retailer sold each record for a penny plus
one hundred wrappers, and I cannot believe t h a t this could have
been intended by those who framed this section and fixed the
percentage of royalty on the basis of the ordinary retail selling
112 HOUSE OP LORDS [1960]

H. L. (B.) price which m u s t , I think, envisage a retail sale where t h e whole

±<j5g consideration is a s u m of money.
I t being conceded t h a t if t h e notice given under Begulation
& Co. LTD. 1' (1) (/) is defective t h e protection of section 8 is lost, and t h e
„ "■ , notice given being, in m y view, necessarily defective in view of
Co. LTD. the nature of the consideration, it follows t h a t there h a s in this
Lordlrucker c a s e been an infringement of t h e appellants' copyright.
I should add t h a t I do not feel able to accept t h e view t h a t
the requirement with regard to t h e wrappers merely constituted
a limited class of t h e public who having qualified for inclusion
in t h e class then became entitled to purchase for I s . 6d. This
seems to m e an unnecessarily artificial description of what is on
its face one indivisible transaction.
For these reasons I would allow t h e appeal.

LORD K E I T H OF AVONHOLM. My Lords, were it not t h a t a

majority of your Lordships think differently I would have con­
tented myself with expressing m y complete concurrence with
the judgment of Jenkins L . J . in t h e Court of Appeal.
I find the appellants' case somewhat elusive as it seems to
oscillate between considering whether t h e sale of t h e record here
is an ordinary retail sale and considering whether there is an
ordinary retail selling price of t h e record. I can find no warrant
in section 8 of t h e statute for t h e view t h a t it contemplates two
kinds of retail sale, ordinary retail sale and some other kind of
retail sale which is not ordinary. Subsection (1) of t h e section
refers four times to retail sales, and when in subsection (2) refer­
ence is made to ordinary retail selling price t h e only meaning I can
take from t h a t is a reference to t h e ordinary selling price of t h e
retail sales mentioned in subsection (1). As Jenkins L . J . points
out, this is also t h e view taken in t h e Eegulations made under
the Act where, in t h e absence of a marked or catalogued selling
price, t h e phrase is defined as " the highest price at which single
" records are ordinarily to be sold to t h e p u b l i c . " I n m y opinion
there is or is intended to be a sale of t h e record here and it is a
retail sale. The only question, as I see it, i s : " I s there an
"' ordinary retail selling price on which t h e royalty can be
" calculated?
As I agree with Jenkins L . J . t h a t t h e production of three
wrappers of three sixpenny bars of chocolate is merely a qualifica­
tion for purchasing t h e record I will say only a few words on the
contrary view t h a t it is part of t h e consideration for t h e purchase
of the record incapable of monetary assessment. To Nestle these
 113
A.C. AND PRIVY COUNCIL.

pieces of paper are worthless. Nestle" are no doubt pleased to see H. L. (E.)
t h a t somebody has been buying their chocolate. They would 1959
know t h a t anyhow, without the production of chocolate wrappers,
from the figures of their turnover. The wrappers represent an & Co_ L x D
obligation on Nestle rather t h a n an extra consideration if it be «•
assumed, as I think it must, t h a t on presentation of the wrappers Co j ^
and the tender of I s . 6d. Nestle are bound to sell the record. I,ord
——
i - i i Keith of
B u t t h a t is because of the offer they have made being accepted by Avonhoim.
a member of the public. If it be said t h a t the sale of the record
is of value to Nestle because it promotes the sale of their choco­
late, the same can be said of advertising their chocolate in the
Press or in a number of other ways. Such overheads, like other
overheads, go to increase the cost of production and, unless
compensated by increased sales, m a y go to increase the price of
the chocolate. B u t the retail price of 6d., or whatever it is, is
just the price of the chocolate and nothing else. I n the present
case there is no reason for assuming t h a t the price paid by the
purchaser is paid for anything but the chocolate. As the facts
show, there is ample profit to Nestle in the sale of the record
alone and no reason to attribute something extra in the sale of
the chocolate.
I t was suggested t h a t for six wrappers and I s . 3d. they might
sell the recc'rd for I s . 3d. They might if it was a business proposi­
tion and they chose so to encourage the sale of their chocolate.
T h a t would leave the problem as before. If for some reason which
it is difficult to imagine they were to make alternative offers of
a record for I s . 6d. on production of three wrappers or for I s . 3d.
on production of six wrappers, t h a t might suggest t h a t the wrap­
pers for some reason were worth one penny each. B u t t h a t would
certainly not mean t h a t someone could compel a sale of a record
for I s . 9d. and no wrappers. The suggestion t h a t these wrappers
represent some intangible consideration seems to m e to be
entirely unreal. I t only makes sense if it be assumed t h a t in
the sale of the chocolate the purchaser was paying something less
t h a n I s . 6d. for the chocolate and the balance towards the pur­
chase of the record. I have already dealt with t h a t argument.
I would only add t h a t the purchase of the chocolate is (or would
normally be) a contract with the retailer and there is nothing
to suggest t h a t the I s . 6d. is anything more t h a n the ordinary
retail selling price of the chocolate sold, as other chocolate and
other comestibles often are, in wrappers to keep t h e m clean or to
identify t h e m or for advertising purposes. There m a y be some
cases where containers have some intrinsic value which increase
A.C. 1960. 8
114 HOUSE OP LORDS [1960]

H. L. (E.) t h e selling price, b u t t h a t is not this case. I agree with Jenkins

1959 L . J . t h a t t h e price of I s . 6d. was wholly attributable to and
exhausted by t h e purchase of the chocolate.
CHAPPBLL
& Co. LTD. The letter press in t h e advertisement " Fill in t h e coupon
,, "• . " and send it with a Postal Order for I s . 6d., t h e price of t h e
NESTLE
Co. LTD. " record, and your three wrappers " and on t h e cardboard m o u n t
L rdlTiti] °^ ^ e r e c o r ( i " Send three wrappers from Nestle's 6d. milk
of Avonhoim. " chocolate bars, together with postal order for I s . 6 d . " is, in m y
opinion, entirely consistent with, indeed, in m y opinion, goes
to support, t h e view t h a t t h e ordinary retail selling price of t h e
record is I s . 6d.
I would dismiss t h e appeal.

LORD SOMERVELL OF H A R R O W . My Lords, section 8 of t h e

Copyright Act, 1956, provides for a royalty of an amount, subject to
a minimum, equal to 6£ per cent, of t h e ordinary retail selling
price of the record. This necessarily implies, in m y opinion, t h a t a
sale to be within t h e section m u s t not only be retail, b u t one
in which there is no other consideration for t h e transfer of pro­
perty in the record but t h e money price. Parliament would never
have based the royalty on a percentage of a money price if t h e
section was to cover cases in which part, possibly t h e main part,
of t h e consideration was to be other t h a n money. This is in no
sense a remarkable conclusion, as in most sales money is t h e sole
consideration. I t was not argued t h a t t h e transaction was not
a sale.
The question, then, is whether t h e three wrappers were part
of t h e consideration or, as Jenkins L . J . held, a condition of
making t h e purchase, like a ticket entitling a member to buy
at a co-operative store.
I think they are p a r t of t h e consideration. They are so
described in t h e offer. " T h e y , " t h e wrappers, " w i l l help you
" t o get smash hit recordings." They are so described in t h e
record itself—" all you have to do to get such new record is to
" send three wrappers from Nestle's 6d. milk chocolate bars,
" together with postal order for I s . 6 d . " This is not conclusive
but, however described, they are, in m y view, in law part of
the consideration. I t is said t h a t when received t h e wrappers
are of no value to Nestle's. This I would have thought irrelevant.
A contracting p a r t y can stipulate for what consideration he
chooses. A peppercorn does not cease to be good consideration
if it is established t h a t t h e promisee does not like pepper and
will throw away t h e corn. As t h e whole object of selling t h e
A.C. AND PRIVY COUNCIL. 115

record, if it was a sale, was to increase t h e sales of chocolate, it H. L. (E.)

seems to m e wrong not to treat t h e stipulated evidence of such 195 g
sales as part of t h e consideration. For these reasons I would
,, ,, , CHAPPELL
allow t h e appeal. & Co LTD
Appeal allowed with costs. .•«•
Co. LTD.
Solicitors: Syrett & Sons; McKenna & Co.; Howe & Rake.

J. A. G.

ABEBFOYLE PLANTATIONS LTD. . . APPELLANT; J. C*

AND 1959
Dec. 1.
KHAW BIAN CHENG EESPONDENT.
ON APPEAL FROM THE COURT OF APPEAL OF THE FEDERATION OF MALAYA.
Vendor and Purchaser—Completion—Date of—Conditional agreement—
Condition to be performed by date fixed for completion of sale—
General principles applicable to performance of conditional con­
tracts—Malaya.
Contract—Time for performance—-Conditional contract—Date fixed for
completion of sale—Condition then unfulfilled.
At the date of a conditional agreement of November 8, 1955, for
the sale by the appellant company to the respondent of a rubber
estate totalling 1,336 acres in the State of Perak, the appellant
vendor had a good title to 1,154 acres, but its title to the other 182
acres depended on the success of its negotiations with the Ruler of
Perak for the renewal of seven previously expired leases. Clause 4
of the agreement provided that " The purchase is conditional on the
" vendor obtaining . . . a renewal of the seven (7) leases . . . so as
" t o be in a position to transfer the same to the purchaser and
" if for any cause whatsoever the vendor is unable to fulfil this
" condition this agreement shall become null and void and the
" vendor shall refund to the purchaser the . . . deposits already
"made . . ." The agreement, in clause 9, stipulated that com­
pletion was to take place on or before April 30, 1956 (subsequently
extended by the purchaser to May 31, 1956), and that on " t h e
" purchaser paying the balance of the purchase price . . . the vendor
"shall as soon as possible thereafter" execute a transfer of the
property to the purchaser. The condition not having been fulfilled

* Present: LORD DENNING, LORD JENKINS, the R T . HON. L. M. D.

DE SILVA.