AMW Promotions Pty Ltd v Diek

First agreement

1. The contract is contained in a document on AMW Promotions letterhead and it purports to record a "Contract agreement" between "Party One: Mark Yazbeck AMW Promotions" and "Party Two: Ali Al Deek". No issue was taken in the defence, which was struck out, about any difference between "Mark Yazbeck AMW Promotions" and AMW.
2. The terms of the contract are brief and are as follows: "1. Party Two and his two band members to make themselves available to perform for four parties for AMW Promotions. Dates are as follow: the 23rd of August till the 17th September 2012, in Australia (To be confirmed) 2. Party One to pay a total amount $30,000 AUD (Thirty Thousand Australian Dollars) to Party Two, for the four parties $7,500 AUD (Seven Thousand Five Hundred Australian Dollars) per party. 3. Party One to organize flight tickets, accommodation, security, insurance, meals and travel for Party Two and his accompanies. 4. Party Two cannot perform in any other event/performance other than the events organized by Party One. 5. Party Two must not perform less than two hours in each appearance. 6. Party One to be responsible for all advertising. 7. Party One has the right to expand the advertising campaign. 8. Party One has the right of first option for any future Australian tours, events or visits, providing Party One complies with all aspects of this contract. 9. This contract shall be governed by the laws of New South Wales Australia." The contract contains signatures by Party One and Party Two. Mr Diek's signature is apparently written in Arabic. The date section of the contract is not completed. The copy in evidence shows fax markings of the date 31 July 2012.
3. In 2014 Mr Diek performed at concerts organised by another promoter, Double Eight Productions Pty Ltd ("Double Eight"). Those performances are said to constitute the breach of contract.
4. The statement of claim indicates, and counsel for AMW confirmed, that no breach of cl 4 of the 2012 contract is alleged. The obligation is not limited geographically or in time. However, the 2012 contract identified a period during which there were to be concerts in Australia. In the context of the 2012 contract, cl 4 operates in respect of performances in Australia during the period covered by the agreement, namely from 23 August to 17 September 2012. This may be why AMW does not allege a breach of cl 4.
5. AMW relies on cl 8 and alleges a breach of the "right of first option" given by that clause. A right of first option or right of first refusal in AMW would ordinarily entitle it to accept or reject an offer by Mr Diek for a tour before Mr Diek contracts to tour with some other promoter on the same terms.
6. Clause 8, like 4, has an unconfined period of operation. It speaks of "any future Australian tours, events or visits" and is not limited to a particular type, time period or number of tours. It may seem extreme for Mr Diek to have bound himself to AMW for life in respect of Australian tour events or visits. However, AMW sought only to rely upon this clause in respect of the 2014 tour by Mr Diek.
7. The terms of cl 8 and its brevity raise a number of questions. Does "any" mean "all"? Does the word "future" refer to the period after the 2012 tour only, or are events before the tour included within its operation? And what are the terms that govern this "right of first option"?
8. The first question is whether any legally binding obligation arose. In Goldmaster Homes P/L & Anor v Johnson & Ors [2004] NSWCA 144, the Court of Appeal stated at [39] (see also [1] and [44]): "In the context in which it is now found 'first refusal' is as clearly a loose and colloquial expression as it ever is. The terms are so loose and colloquial that it could not be supposed that they would be employed in [a] professionally drafted document unless the means by which effect is to be given to them are also carefully spelt out. There is no sign of careful use of language in the telephone conversation as found by Brownie AJ or in the terms of the letter of 30 September 1996; there is indeed no sign that careful consideration was given to the nature of the obligation to which those words referred. The brevity and imprecision of expression support the conclusion that no binding obligation was intended. If a binding obligation was intended there were obviously more details which needed to be established and expressed."
9. Clause 8 refers to a "first option" rather than a "first refusal" but these words in Goldmaster still have application. However, I am reluctant to find that no binding obligation was created in the circumstances of this case where judgment has already been awarded in favour of AMW and that has not been challenged. In addition, this case, unlike Goldmaster, was not one where AMW was given an opportunity to secure a deal with Mr Diek on the same terms as the deal Mr Diek secured with Double Eight.
10. Nevertheless, the Court in construing this clause should not "erect a high tower of implication on the slight foundation of the brief expression" found in the clause (see Goldmaster at [22]).
11. The clause should be given some meaning. It must have been intended to restrict the freedom of Mr Diek to contract and tour in Australia as he wished. Rather, the proper construction of the clause is that before Mr Diek proceeded to tour with another promoter on certain terms and conditions AMW was to be given an opportunity to accept or decline an offer to promote Mr Diek's tour on the same terms and conditions.
12. This conclusion is reached bearing in mind expert evidence of the practice in the industry. A first right of refusal is common because initial tours are often less profitable and the promotion of a tour only realises a profit or a significant profit on future tours.
13. As events transpired, in April and May 2014, Mr Diek toured Australia and performed in Sydney and Melbourne with another promoter, Double Eight. In purporting to comply with a "right of first refusal" Mr Diek's solicitor put the following offer via email to AMW at about 10am on 7 March 2014: "The Dates of the concerts between April, 25 2014 and May 5, 2014. Number of the concerts: three concerts between Sydney and Melbourne. The price of each concert is Fifty Thousand American Dollars. The number of people band: 12 persons in addition to me. The travel expenses, one ticket First Class and 12 economy tickets with full accommodation in four star hotel shall be bourne [sic] by the abovementioned company. A good level of Audiovisual advertisements. The amount of 50% will be paid upon the signature of the contract and the remaining amount will be paid one week before the date of travel from Lebanon to Australia. The above mentioned company shall be responsible of the issuance of the requested visas and declarations in order to execute the musical parties and the payment of all the Fiscal due fees. We request that you urgently obtain your client's [instructions] and reply to us by 4pm today, Friday, 7 March 2014 as to whether or not your client intends on exercising its alleged 'right of first refusal'. In the event that we do not receive a reply from you, then our client will be at liberty to proceed to accepting the above proposal by Double Eight Productions Pty Ltd in finality. We look forward to hearing from you on an urgent basis as to whether or not your client wishes to proceed or not."
14. There is no evidence that this offer was accepted and I must infer that it was not. Questions may arise as to whether the time of acceptance of some six hours after the offer was made was reasonably sufficient to discharge the right of first refusal obligation. For the reasons which follow, the answer to this question is not critical.
15. Other evidence established that this offer by the solicitor did not accurately represent the contract reached (or proposed) between Mr Diek and Double Eight. In a document called a "Contract Agreement" between the Ali Diek Group and Double Eight Productions Pty Ltd, signed by both parties and apparently lodged with the Department of Immigration and Border Protection, were recorded terms in the following form: "The two parties agreed on the following: Number of concerts and payments: - 3 concert[s] for 16,000$ (sixteen thousand Australian dollars) - The payment will take place in Australia after the concert. Event, date and location: - 25 April 2014 & 3 May 2014 in Bellevue Bankstown NSW - 26 April 2014 La Mirage Lounge VIC Number of personnel international airfares: - Total of 5 people - 1 first class ticket - 4 economy class tickets The second party will provide at her [sic] own expenses: The advertising in radios, televisions, websites, newspapers, posters, flyers and any form that help the concert and that is up to the standard of the singer prestige after the approval of the later [sic] in writing. The sound system and light requirements that follow the artist technical riders. The second party will provide full board 5 stars hotel accommodation for the artist and his manager and 4 stars hotel accommodation for the band. The second party will also provide at its own expenses all meals as well as domestic airfares if any, workers compensation, medical insurance, transportations, visa and all the government taxes and fees. Also the second party will provide the first party with 12 complimentary tickets to each show. In case of an unsecured situation, or natural disaster, or war, or terrorist attack, or government decision or immigration decision that prevent this event from happening then both parties will agree on a settlement between them. In case of an unfulfilled [sic] of part or whole of the contract from any of the party, it [sic] will be it liability to pay the whole amount of this contract. Both parties have a copy of this contract as legal evidence."
16. I accept that this document records the contract between Mr Diek and Double Eight.
17. A number of differences between the solicitor's offer of 7 March 2014 and the Double Eight contract appear. The Double Eight contract speaks of "3 concert[s] for 16,000" Australian dollars, which in context must mean $16,000 per concert. This differs from the solicitor's offer where "The price of each concert is Fifty Thousand American Dollars". Even if, contrary to its apparent meaning, that statement by the solicitor was intended to include a total price for the three concerts, it differs from the Double Eight contract. The Double Eight contract price is higher than $48,000 (3 x 16,000), and the currency is American dollars, which in 2014 was of higher value than Australian dollars.
18. In addition, the solicitor's email speaks of 12 or 13 persons in the band rather than five persons as reflected in the Double Eight contract. Also, the solicitor's email speaks of 50% being paid upon the signing of the contract and the remaining amount one week before travel to Australia (so that the entire amount is paid before Mr Diek arrives in Australia) whereas the Double Eight contract contemplated that, "payment will take place in Australia after the concert".
19. It follows that the offer in the Double Eight contract was not put to AMW and thus AMW had no opportunity to exercise a "right of first option" in respect of it. The offer by the solicitor is quite different from the Double Eight contract and does not fairly represent an opportunity for AMW to accept or refuse a competing offer to conduct the tour for Mr Diek. By denying AMW the "right of first option", Mr Diek has breached cl 8 of the 2012 agreement.
20. Assessing damages flowing from this breach by Mr Diek involves assessing what would have occurred had AMW had that opportunity. Had AMW refused an offer in the terms of the Double Eight contract, Mr Diek then would be free to contract with Double Eight as he did. In that event, the damages to AMW would be nominal.
21. What are the prospects of AMW accepting an offer in those terms? A relevant factor in assessing what AMW would have done had that offer been made to it is to compare the terms of the Double Eight contract with the terms of the offer made by AMW in about early 2014. The AMW offer and the Double Eight contract differ in the following respects. First, in the Double Eight contract there was no requirement for a wedding performance. Secondly, there is no additional payment of $15,000 for a wedding performance but there is a slightly higher amount of $16,000 (rather than $15,000) offered in respect of each performance. Thirdly, the Double Eight tour involved two concerts in the Sydney region and one in Melbourne, like the AMW offer, but the Double Eight tour involved different venues to those preferred and likely to be used by AMW. Fourthly, Double Eight promised to supply a first class air ticket to Mr Diek, which was not part of AMW's offer. Fifthly, Double Eight promised to provide five star accommodation for Mr Diek and his manager and four star accommodation for the band, whereas AMW made no promise to Mr Diek regarding the level of accommodation for Mr Diek, his manager or any member of the band. Finally, Double Eight promised to provide 12 complimentary tickets to Mr Diek for the show.
22. The wedding in the AMW proposal was significant as it initiated the original proposal by AMW to have Mr Diek tour in 2014. But there was apparently no profit in the wedding for AMW. Accordingly, the absence of a wedding performance might not have impacted upon AMW's decision as to whether to have Mr Diek tour.
23. The different dates and venues complicate the matter for AMW. And the higher standard of travel and accommodation and extra ticketing undoubtedly reflect an increased benefit to Mr Diek.
24. AMW did not provide any evidence that it was prepared to accept such an arrangement and no reason was proffered to excuse this omission. The rule in Jones v Dunkel precludes the drawing of inferences on a matter in favour of a party when that party could have led direct evidence about that matter but declined to do so. However, the evidence did indicate that AMW was willing to pay a little more, some $5,000, than it had first offered in relation to the wedding. I take that into account, but it is not strong evidence of the likelihood that AMW would have accepted the different dates and venues and apparently higher costs of the Double Eight offer.
25. In the circumstances, I assess the value of the chance of AMW accepting an offer in the terms of the agreement reached with Double Eight at 20%.

The second contract?

1. AMW also relies on an alleged oral contract in January 2014. Mark Yazbeck, the director of AMW, gave evidence of a conversation with Mr Diek in response to a proposal of $15,000 per concert. Mr Diek made a request for more musicians and crew to be brought and stated: "'Please make sure you organise everything for them.' I [Mr Yazback] said: 'That's fine.' Ali [Diek] said: 'I am very busy right now recording my television show. Can you come to Lebanon and we will finalise the contract here?' I said: 'Yes I'll be coming in early January.'"
2. In my view, that conversation does not constitute a contract. The lack of detail in the discussion about "organise everything for them" and the need to "finalise the contract" indicated that no final agreement had been reached. This was not a circumstance within the first class of negotiations referred to in Masters v Cameron (1954) 91 CLR 353 at 360 where the terms were agreed and intended to be operative and binding pending a written agreement. On the contrary, here the terms were to be worked out in an agreement to be finalised in the future.
3. Palmer J in RT & YE Falls Investments Pty Ltd v The State of New South Wales and Ors [2001] NSWSC 1027 at [57] stated that allegations of an oral contract on a significant commercial transaction, in advance of a written document, often constitute the "last refuge of the desperate". Here there was much still to be done to reach a final agreement. Mr Yazbeck travelled to Lebanon for the purpose of securing the signature of Mr Diek on a note of the terms of the agreement and also to prepare a work visa application. Whilst Mr Yazbeck was in Lebanon, Mr Diek required more money for the wedding. Without recording the terms of the conversation, Mr Yazbeck said that he agreed to that. Mr Yazback further states, "We arranged to meet for lunch in the following few days to finalise the contract document and visa application." Although there was further contact that meeting did not happen. There was no finalising of a contract document or visa application and nothing was signed. In these circumstances, no concluded agreement was reached and therefore there could be no breach of it.
4. Nor did the discussions include any undertaking by Mr Diek not to deal with Double Eight. In the initial discussion Mr Yazbeck stated, "The other terms of the agreement will be the same as the last tour contract," and Mr Diek said, "OK but I need to bring more musicians and crew with me this time. I need four of them," as I referred to earlier.
5. I am not persuaded that this conversation established an agreement that the terms or the relevant terms of the previous contract became contractual in 2014 between Mr Diek and Mr Yazbeck. "OK" in this context seems to be an expression of understanding of a proposal rather than unequivocal acceptance of it.
6. It follows that Mr Diek has not breached any 2014 agreement, first, because there was not one and second, because there was no agreement of a right of first option term alleged to have been contravened.
7. In any event, if the 2012 contract terms were incorporated, the deal with Double Eight was not a tour in the "future" after AMW had "complied in all respects with the [2014] contract". The Double Eight tour occurred before the 2014 tour contemplated by AMW.
8. The statement of claim asserted implied terms about Mr Diek being compelled to execute a written note of the agreement and that he would not "undertake any concert dates in Australia for any other promoter which would adversely effect [sic] the benefit to the plaintiff of the concerts, the subject of the [2014 agreement]".
9. In my view, neither of these implied terms can be established: there was no contract and in any event, the proposed terms do not satisfy the test in Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337 that the term be obvious, reasonable, capable of clear expression, consistent with the contract and necessary for business efficacy. None of these elements appear to be satisfied.
10. Accordingly, damages are to be assessed under the first contract.

Quantum

1. AMW asserts that it would have made in excess of $450,000 profit on the tour. That assertion rests on the evidence and belief of its director, Mr Yazbeck. An independent expert, Danny Yassine, assessed damages at about $350,000. However, that assessment assumes the same sold out performances as appears to have been achieved by Double Eight but without adopting the expenses incurred by Double Eight. There was no reference in the evidence to the Double Eight contract, the costs of its venues, or the inclusions in the tickets. This ticket may have included a meal, and did include a performance by another recognised artist, expenses which were not part of the expert assessment.
2. In addition, the average ticket price assumed by the expert, Mr Yassine, was $200, which seems excessive since there were far more seats available at $150 than $250.
3. The statement of claim claimed a lost profit of $150,000 from the tour. Mr Yazbeck swore to the accuracy of that fact in his verifying affidavit to the statement of claim.
4. Finally, there was no evidence of the profit, costs, revenue or other financial details of the tour in 2012 conducted by AMW. No explanation for this failure was advanced, yet it would clearly be helpful evidence in assessing the costs and income of a second tour by the same artist.
5. In those circumstances, I do not accept that the method of calculating the damage adopted by Mr Yassine is an appropriate method. Whilst it relies on the success achieved by Double Eight to assess how much revenue would be obtained, it adopts a more basic approach to costs. The assessment of costs is unconnected with what Double Eight may have spent.
6. The Court is obliged to do the best it can on the question of damages. It must take account of the verified assertion in the statement of claim of lost profits of $150,000. It must consider the absence of other more direct evidence of how the AMW tour by Mr Diek fared in 2012, which would be of assistance in calculating the lost profit of a future tour. I also consider the matters raised by Mr Yassine.
7. Bearing all these matters in mind, I am satisfied that $100,000 is the proper assessment of the profit that AMW would have made had it accepted the offer agreed to by Double Eight.
8. As there was a 20% likelihood of this profit being achieved, the proper amount of damages is $20,000. This sum reflects what I consider to be the likely damages of Mr Diek not extending the Double Eight offer to AMW for it to accept or reject.
9. AMW is entitled to interest on this amount of $20,000 from 15 June 2014 to date, a sum of $1,518.08.

Costs

1. As the amount of the quantum is less than $40,000, r 42.35 of the Uniform Civil Procedure Rules 2005 is enlivened. Under that rule, an order for costs may be made, but will not ordinarily be made unless the Court is satisfied that the commencement and continuation of the matter in this Court, rather than the Local Court, was warranted. I am not satisfied of that.

Orders

1. Accordingly, the orders of this Court will be: 1. Judgment for the plaintiff in the sum of $21,518.08. 2. No order as to costs.

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