Biscayne Partners Pty Ltd v Valance Corp Pty Ltd & Ors - [2003] NSWSC 874 - NSWSC 2003 case summary — Zoe

NSWNSWSC

Biscayne Partners Pty Ltd v Valance Corp Pty Ltd & Ors

[2003] NSWSC 874

Supreme Court of NSW|2003-10-03|Before: Einstein J

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Source facts

Court

Supreme Court of NSW

Decision date

2003-10-03

Before

Einstein J

Source

Original judgment source is linked above.

Judgment (360 paragraphs)

[1]

CITATION : Biscayne Partners Pty Ltd v Valance Corp Pty Ltd & Ors [2003] NSWSC 874 HEARING DATE(S) : 15/09/03, 16/09/03, 17/09/03, 18/09/03, 19/09/03, 22/09/03, 23/09/03, 24/09/03 JUDGMENT DATE : 3 October 2003

[2]

JURISDICTION: Equity Division Commercial List JUDGMENT OF : Einstein J DECISION : Purported termination of Management Agreement by Valance parties held invalid. Plaintiff's causes of action in tort for wrongful inducement of breach of contract and for conspiracy to injure by unlawful means not made out. Leave to further address on disparate issues including quantum of damages.

[3]

CATCHWORDS : Contracts - Contract of agency for personal services - Artist and artist's company ["the Company"] enter into contract appointing Managing Agent ["the agent"] as sole and exclusive manager of artist in the entertainment industry - Date from which contract bound the parties - Principles of construction - Principles governing implication of terms - Termination clause providing that no breach of the contract is a material breach giving the other party the right to terminate unless written notice is given followed by failure to cure breach within 30 days of notice - Proper construction of termination clause - Purported termination by artist and company of contract without giving the 30 day notice to agent - Subsequent notice given eight months later without prejudice to validity of earlier termination and purporting to give the 30 day notice - Repudiation of contract - Necessity to draw a distinction between on the one hand, a circumstance involving a repudiation by one of the parties in terms of the evincing of an intention no longer to be bound by the contract and on the other hand, a circumstance where the claimed repudiation falls short of an express repudiation - Tort - Interference with contractual relations - Inducement of breach of contract - Principles - Person committing the tort must be a third party standing outside the contractual relation being interfered with - Company having only one appointed director - Artist found to be a de facto director - Whether artist as de fact director liable for the tort of inducing breach of contract where artist and sole appointed director determine that company should wrongly terminate the contract - Conspiracy - Conspiracy to injure by unlawful means - Principles - Intent to injure is a reference to the real purpose which the conspirators are trying to achieve - Equity - Remedies - Action for taking of an account - Plaintiff suing on cause of action for breach of contract - Where a breach of contract is established, it must be shown that there is also a breach of an equitable obligation (such as breach of a fiduciary duty, or breach of an obligation concerning the use of confidential information) before an account of profits will flow - Damages the only remedy which the common law provides for breach of contract - Damages - Damages for loss of chance Conveyancing Act 1919 Corporations Act 2001 (Cth) LEGISLATION CITED : Evidence Act 1995 Fair Trading Act 1987 Supreme Court Act 1970 Trade Practice Act 1974 AG Spalding Bros v AW Gamage Ltd [1914-15] All ER Rep 147 Aiton Australia Pty Ltd v Transfield Pty Ltd (1999) 153 FLR 236 Alcatel Australia Ltd v Scarella (1998) 44 NSWLR 349 Amann Aviation Pty Ltd v Commonwealth (1990) 22 FCR 527 Ankar Pty Ltd v National Westminster Finance (Australia) Ltd (1987) 162 CLR 549 Ansett Transport Industries (Operations) Pty Limited v Commonwealth (1977) 139 CLR 54 ASIC v Adler [2002] NSWSC 171 Attorney General v Blake [2000] UKHL 45; [2001] 1 AC 268 Australian Broadcasting Commission v Australian Performing Right Association (1972) 129 CLR 99 Australian Securities Commission v AS Nominees Ltd (1995) 133 ALR 1 Batson v De Carvalho (1948) 48 SR (NSW) 417 Beaton v McDivitt (1987) 13 NSWLR 162 Bennett v Minister of Community Welfare (1992) 176 CLR 148 BP Refinery (Westernport Port) Pty Ltd v President, Councillors and Ratepayers of the Shire of Hastings (1977) 180 CLR 266 Briginshaw v Briginshaw (1938) 60 CLR 336 British Motor Trade Association v Salvadori [1949] Ch 556 Bunge Corporation, New York v Tradax Export SA Panama [1981] 1 WLR 711 Burger King Corporation v Hungry Jack's Pty Ltd [2001] NSWCA 187 Butt v M'Donald (1896) 7 QLJ 68 Butts v O'Dwyer (1952) 87 CLR 267 Byrne v Australian Airlines (1995) 185 CLR 411 Castlemaine Tooheys Ltd v Carlton and United Breweries Ltd (1987) 10 NSWLR 468 Chaplin v Hicks [1911] 2 KB 786 Coal Cliff Collieries v Sijehama Pty Ltd (1991) 24 NSWLR 1 Codelfa Constructions Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337 Colbeam Palmer Ltd v Stock Affiliates Pty Ltd (1968) 122 CLR 25 Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 64 Con-Stan Industries of Australia Pty Ltd v Norwich Winterthur Insurances (Australia Ltd) (1986) 160 CLR 226 Corporate Affairs Commission v Drysdale (1978) 141 CLR 236 Deta Nominees Pty Ltd v Viscount Plastic Products Pty Ltd [1979] VR 167 Devico Pty Ltd v Sydney Cove Redevelopment Authority (unreported, Supreme Court of New South Wales, 15 April 1990, BC9102111) Direct Acceptance Finance Ltd v Cumberland Furnishing Pty Ltd [1965] NSWR 1504 Electronic Industries Ltd v David Jones Ltd (1954) 91 CLR 288 Fatimi Pty Ltd v Bryant [2002] NSWSC 750 Ferguson v Wilson (1866) LR 2 Ch App 77 Fightvision Pty Ltd v Onisforou (1999) 47 NSWLR 473 Fink v Fink (1946) 74 CLR 127 First Energy (UK) Ltd v Hungarian International Bank Limited [1993] 2 Lloyd's Report 194 Forslind v Bechely-Crundall [1992] SC (HL) 173 Foxeden Pty Ltd v IOOF Building Society Ltd [2003] VSC 356 George Hudson Holdings Ltd v Rudder (1973) 128 CLR 387 George v Pottinger [1969] Qd R 101 Gold Coast City Council v Pioneer Concrete (Qld) Pty Ltd (1998) 157 ALR 135 Hamlyn & Co v Wood & Co [1891] 2 QB 488 Hardwick Game Farm v Suffolk Agricultural Poultry and Producers Association [1969] 2 AC 31 Heimann v Commonwealth (1938) 38 SR (NSW) 691 Hide & Skin Trading v Oceanic Meat (1990) 20 NSWLR 310 Himbleton Pty Ltd v Kumagai (NSW) Pty Ltd (1991) 29 NSWLR 44 H L Bolton (Engineering) Co Ltd v T J Graham & Sons Ltd [1957] 1 QB 159 Hospitality Group Pty Ltd v Australian Rugby Union Ltd (2001) 110 FCR 157 Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41 Hughes Bros Pty Ltd v The Trustees of the Roman Catholic Church for the Archdiocese of Sydney (1993) 31 NSWLR 91 Hungry Jacks v Burger King [1999] NSWSC 1029 Idoport Pty Ltd v National Australia Bank Limited [2001] NSWSC 328 Idoport v National Australia Bank [2001] NSWSC 123 International Life Assurance Society, ex parte Blood, Re (1870) LR 9 Eq 316 Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 WLR 896 Kitchen v Royal Air Force Association [1958] 1 WLR 563 Lagunas Nitrate Co. v Lagunas Syndicate [1899] 2 Ch 392 Lakatoi Universal Pty Ltd v LA Walker [2000] NSWSC 113 Laurinda Pty Ltd v Capalaba Park Shopping Centre Pty Ltd (1989) 166 CLR 623 Liverpool City Council v Irwin [1977] AC 239 LMI Australasia Pty Ltd v Baulderstone Hornibrook Pty Ltd [2003] NSWCA 74 CASES CITED : Lohar Corporation Pty Ltd v Dibu Pty Ltd (1976) 1 BPR 9177 Lonrho Plc v Fayed [1992] 1 AC 448 Lumley & Gye (1853) 2 E & B 216 L Schuler AG v Wickman Machine Tool Sales Ltd [1974] AC 235 Luxor (Eastbourne) Ltd v Cooper [1941] AC 108 McCann v Switzerland Insurance Australia Limited (2000) 203 CLR 579 Mackay v Dick (1881) 6 App Cas 251 McCutcheon v David MacBrayne [1964] 1 WLR 125 McRae v Commonwealth Disposals Commission (1951) 84 CLR 377 McWilliam v Penthouse Publications Ltd [2001] NSWCA 237 Maggbury Pty Limited v Hafele Australia Pty Limited (2001) 76 ALJR 246 Malec v J C Hutton Pty Ltd (1990) 169 CLR 638 Mallett v McMonagle [1970] AC 166 Manifest Shipping Co Ltd v Uni-Polaris Shipping Co Ltd [2001] 2 WLR 170 Maritime Union of Australia v Geraldton Port Authority (1999) 93 FCR 34 Marshall v Colonial Bank of Australia (1904) 1 CLR 632 Mistmorn Pty Ltd (in liq) v Yasseen (1996) 21 ACSR 173 Mobile Innovations Limited v Vodafone Pacific Limited [2003] NSWSC 166 Moorhouse v Angus & Robertson (No 1) Pty Ltd [1981] 1 NSWLR 708 Multi-Malls Inc v Tex-Mall Properties Ltd (1980) 108 DLR (3d) 399 Nordland Papier AG v Anti-Dumping Authority (1999) 93 FCR 454 Northern Territory of Australia v Mengel (1995) 185 CLR 307 New South Wales Cancer Council v Sarfaty (1992) 28 NSWLR 68 O'Brien v Dawson (1941) 41 SR (NSW) 295 O'Brien v Dawson (1942) 66 CLR 18 Overlook v Foxtel [2002] NSWSC 17 Penvidic Contracting Co Ltd v International Nickel Co of Canada Ltd [1976] 1 SCR 267 Pratt v British Medical Association [1919] 1 KB 244 Prenn v Simmonds [1971] 1 WLR 1381 Prior v McNab (1976) 78 DLR (3d) 319 Prior v Lansdowne Press Pty Ltd [1977] VR 65 Reardon Smith Line Ltd v Hansen-Tangen [1976] 1 WLR 989 Renard Constructions v (ME) v Minister for Public Works (1992) 26 NSWLR 234 Robinson v Harman (1848) 1 Ex 850; 154 ER 363 Rossfield Group Operations Pty Ltd, Re (1980) 5 ACLR 237 Ross T Smyth & Co Ltd v T.D. Bailey Son & Co [1940] 3 All ER 60 Royal Botanic Gardens and Domain Trust v South Sydney City Council (2002) 186 ALR 289 Rutherford v Poole [1953] VLR 130 Said v Butt [1920] 3 KB 497 Sapwell v Bass [1910] 2 KB 486 Secured Income Real Estate v St Martin's Investments Pty Ltd (1979) 144 CLR 596 Sellars v Adelaide Petroleum NL (1992) 179 CLR 332 Shell UK v Lostock Garage Ltd [1976] 1 WLR 1187 Shepherd v Felt and Textiles of Australia Ltd (1931) 45 CLR 359 Shirlaw v Southern Foundaries (1926) Limited [1939] 2 KB 206 Short v City Bank of Sydney (1912) 15 CLR 148 State of New South Wales v Bannabelle Electrical Pty Limited [2002] NSWSC 178 Surrey County Council v Bredero Homes Ltd [1993] 1 WLR 1361 TCN Channel Nine v Hayden Enterprises Pty Limited (1989) 16 NSWLR 130 The Moorcock (1889) 14 PD 64 Thiess Watkins White Constructions Ltd (in liq) v National Mutual Life Nominees Ltd (unreported, Supreme Court of New South Wales, 20 October 1991, BC910152) Tito v Waddell (No. 2) [1977] Ch 106 Town & Country Property Management Services Pty Ltd v Kaltoum [2002] NSWSC 166 Tramways Advertising Pty Ltd v Luna Park (NSW) Ltd (1938) SR 632 Trans-Pacific Insurance Co (Australia) Ltd v Grand Union Insurance Co Ltd (1989) 18 NSWLR 675 Tricontinental Corp Ltd v HDFI Ltd (1990) 21 NSWLR 689 Tsaprazis v Goldcrest Properties Pty Ltd (2000) 18 ACLC 285 Tymshare Inc v Covell 727 F2d 1145 (1984) United States Surgical Cooperation v Hospital Products International Pty Ltd [1982] 2 NSWLR 766 Walden Properties Ltd v Beaver Properties Pty Ltd [1973] 2 NSWLR 815 Wenham v Ella (1972) 127 CLR 454 White Trucks Pty Ltd v O'Reily (1948) 66 WN (NSW) 101 Wood v Grand Valley Railway Co (1915) 51 SCR 283 Wrotham Park Estate Co v Parkside Homes Ltd [1974] 1 WLR 798 Yango Pastoral Co Pty Ltd v First Chicago Australia Ltd (1978) 139 CLR 410 Biscayne Partners Pty Ltd (Plaintiff) PARTIES : Valance Corp Pty Ltd (First Defendant) Holly Rachel Vukadinovic (also known as Holly Valance) (Second Defendant) Rachel Jane Stevens (Third Defendant) FILE NUMBER(S) : SC 50199/02 COUNSEL : Mr JJ Garnsey QC, Mr R Lancaster, Mr JP Donohoe (Plaintiff) Mr R Cobden, Ms R Rana (Defendants) SOLICITORS : Tress Cocks & Maddox (Plaintiff) Henry Davis York (Defendants)

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12.1 The Company warrants in favour of the Manager that it will ensure that the Artist: (a) will make herself available at all times to undertake the Artist's Activities, unless otherwise agreed with the Manager; (b) will observe and perform all the terms of any agreements entered into relating to the Artist's Activities to the best of her ability; (c) will not enter into any agreements relating to the Artist's Activities without the Manager's prior approval; (d) will, subject to Clause 2.5, refer all offers to undertake Artist's Activities to the Manager as soon as is practicable upon receiving any such offers; (e) has full power and authority to enter into this Agreement and has granted no rights inconsistent with this agreement. Valance Corp 7 Valance Corp, which was incorporated on 10 August 1999, was regarded as Ms Valance's management company. There was however no written agreement to this effect. Ms Stevens is the sole registered director. Ms Valance is the legal and beneficial owner of all of the issued capital of Valance Corp. The defendants admit on the pleadings that the business and affairs of Valance Corp were at all material times controlled and directed by Ms Valance's mother, the third Defendant, Ms Rachel Stevens. Biscayne had pleaded in the alternative: · that the business and affairs of Valance Corp were controlled and directed by Ms Stevens up to the time when Ms Valance turned 18 years of age, from which date it is alleged that Ms Valence was a de facto officer within the meaning of section 9 of the Corporations Act 2001 (Commonwealth); and · that the business and affairs were thereafter controlled by both Ms Stevens as well as Ms Valance. [a late decision not to press the de facto director claim was announced during final address] 8 It seems clear [cf Transcript 307-308] that at least on and after 11 May 2001 Ms Valance dictated her own activities and those of Valance Corp, albeit consulting with Ms Stevens who often dealt with the lawyers, was copied with formal draft agreements and gave assistance of a backroom nature. The termination for breach provision 9 The provision governing termination for breach is as follows:

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"[Biscayne] fails to rectify the following material breach of the Agreement within that time: "during the period March 2000 to date Biscayne has failed to perform at all times its obligations pursuant to clause 4.1 of the Agreement."" 12 It is convenient to note that the term "second termination letter" which I have used as an internal dictionary to describe the letter of 27 September 2002 is not altogether accurate because the letter in terms [but without prejudice to the claim that the Agreement had already been validly terminated], gave notice of intention to terminate pursuant to clause 14.1 at the expiration of 30 days in the event of a failure to rectify. In fact following the expiration of 30 days from 27 September 2002 no notice of termination was given. During the hearing counsel tended to refer to the 30 January and 27 September letters as "letters of termination" and this judgment simply adopts the same terminology although, of course, there is a question as to whether one may regard the second letter as being one purporting to terminate the Agreement. The Valance parties put forward the proposition that clause 14.1 simply operated to suspend for a 30 day period, what would otherwise be regarded as a material breach. The proposition was that if the breach was rectified within the 30 day period following the giving of a clause 14.1 notice, then as between the parties, clause 14.1 simply provided a deeming provision so that in that circumstance there never was a material breach. The proposition was that for that reason, following the giving of a clause 14.1 notice not rectified within 30 days, there was no necessity to give a further notice terminating the Agreement. Hence at least one approach taken by the Valance parties was that there was a termination notice given on 30 January or alternatively on 27 September 2002 [transcript 62]. The question of the proper construction of clause 14.1 is dealt with below. 13 The second termination letter was said to have been given without prejudice to the entitlement of Valance Corp and Ms Valance to act in accordance with the position that the 30 January 2002 notice of termination was validly given [that is, that on 30 January 2002 Ms Valance repudiated the Agreement with the effect that the Agreement was voided ab initio, or in the alternative, that Valance Corp and Ms Valance then terminated the Agreement with immediate effect]. The causes of action 14 No case was pleaded or pursued grounded upon the proposition that Ms Valance was entitled to avoid the Agreement ab initio on any of the bases alleged in the termination letters raising questions as to: · her age at the time when the Agreement was signed; · its content not being for her benefit; · the terms not being properly or fully explained to her; · her failing to have understood the terms; · her vesting of trust and confidence in Mr Michaelson such that he was in a position of significant actual and/or presumed influence over her; · her having allegedly been deprived by Mr Michaelson of her freedom to appoint legal and financial advisers of her own choice or being pressurised into appointing a particular solicitor to represent her in connection with the Agreement; or · the Agreement not being to her benefit. 15 The several causes of action appear to reduce to: · breach of contract as against the Valance Corp and Ms Valance (Summons paras 32, 33, 34, 35, 36 and 37); · wrongful repudiation of the Agreement on 30 January 2002 or on 27 September 2002 as against Valance Corp and Ms Valance (Summons paras 23, 26); · against Ms Stevens and Ms Valance for inducing Valance Corp to breach the contract by wrongfully purporting to terminate it (Summons para 24, 27); · against Ms Stevens for inducing Ms Valance to breach the contract by wrongfully purporting to terminate it (Summons para 25, 28); · conspiracy pleaded as follows:

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The evidence 23 It has to be said that a very substantial amount of evidence was given concerning the events covering the period from the first meeting between Mr Michaelson and Ms Valance and the point in time where their relationship and relevant communications ended. By reason of the holding as to the proper construction of the termination clause a great deal of this evidence which was put forward by the Valance parties as justifying the termination letters and in support of the proposition that the Agreement was either terminated on 30 January 2002 or on the 31st day following 27 September 2002, simply falls away as irrelevant. Without being exhaustive, essentially that evidence sought to make good the proposition that the conduct of Biscayne by its alter ego Mr Michaelson did not amount to: · the discharge of the suggested obligation that Biscayne fulfil the usual functions of a manager for an artist [cf the use of those words in clause 2.2 of the Agreement, there used to identify that which Valance Corp agreed that it would not do (ie it could not "engage any other manager, agent or representative to fulfil the usual functions of a manager for the Artist")]; · representing Valance Corp and Ms Valance in negotiations regarding the terms of all contracts for personal services arising in relation to her career in the entertainment industry; · negotiating and liasing with film and television producers, record companies, publishers, distributors, sponsors, merchandisers or other similar entities, as the case may be; and · otherwise discharging the manager's obligations stipulated for in clause 4.1. 24 Evidence was given by number of witnesses including Mr Michaelson and Ms Valance. Broadly it may be said that much of the evidence reduces to the following categories: The validity of the Agreement · Detailed evidence of the negotiation of the Agreement leading to the signing of the Agreement suggested as relevant to the date from which the Agreement commenced to bind the parties. The work and activities undertaken by Mr Michaelson on behalf of Biscayne · Extensive evidence given by Mr Michaelson as to the inception of his arrangements leading to entry into the Agreement and as to the particular work and activities which he undertook in what is said to have been an entirely proper discharge of the contractual obligations of Biscayne under the Agreement. The evidence as to work and activities is set out in extensive detail in two affidavits, the first of which contains 252 paragraphs and covers a number of years. Whilst there appear to be some matters which are in issue going to the accuracy of this evidence a great deal of it was not in issue. Failure to perform · A bracket of evidence covering a number of various matters said by the defendants to make good the proposition that prior to the first and/or the second termination letters, Biscayne had been shown to have failed to fulfil even the most basic of management responsibilities. Disparate issues · Evidence going to sundry disparate issues usually by way of adjectival background but including material going to quantum of damages. Chronology 25 Pursuant to the pre-hearing directions, a detailed chronology was produced by the plaintiff covering a deal of the vast volume of evidence which had been given on affidavit or statement going to the work and activities of Mr Michaelson who for relevant purposes may generally be regarded as the alter ego of Biscayne. [For obvious reasons the Judgment often uses references to Mr Michaelson and to Biscayne interchangeably.] The chronology identified the date of the relevant event, the plaintiff's version of that event, the source from which that version was taken, the defendants' version of the relevant event and the source from which that version was taken. The defendants then checked the chronology indicating additional matters and matters of agreement by ticks and additional references. The plaintiff's version of events was accepted only as amounting to a proper reflection of the plaintiff's evidence and no more. 26 It seems to me that efficiency dictates utilising the chronology in this form where so many of the relevant events were not in issue and where, by reference to the chronology and to matters which may have been in issue, the Court is able in the Judgment proper, to make findings as to which version of events is accepted as reliable. That chronology in reformatted form is set out as Appendix "A" to the Judgment and is noted up in relation to many of the rulings on evidence. I have in dealing with the evidence relied upon my own notes as to the rulings so that should there be any inadvertent errors made by my research assistant in noting up the chronology, they do not infect the approach taken by me to the evidence in the Judgment proper. Reliability of witnesses 27 As so often happens there was very little in the way of direct conflict of evidence as between the versions of evidence given by factual witnesses. It is possible to shortly give some findings in this regard: · Mr Michaelson is generally regarded as a reliable witness. His evidence across an extensive and detailed cross-examination was usually consistent with contemporaneous documents and generally fitted with evidence given by other relatively independent witnesses. Whilst he was clearly deeply affected emotionally through the hearing and at times over-exaggerated in his own favour, by and large his evidence was given firmly and as necessary he conceded where sometimes shown to be in error as to his recollection. · Ms Valance's evidence is not always accepted as reliable. This is not to say that she was not doing her best on oath to recall what had happened. The experience of the court is that very often, particularly in litigation of high order or involving high emotions, litigants as they prepare for a hearing and as they think back over past events, have a tendency to over-exaggerate in their favour and come to believe a version of events which is then accordingly coloured. No doubt Ms Valance now strongly believes that Mr Michaelson fell down in the proper execution of relevant obligations to be found in the Agreement. The Court of course makes its findings on the basis of the whole of the evidence including contemporaneous documents and the evidence of all witnesses. Lack of material complaint to Mr Michaelson also affects her credit - a matter dealt with below. · In one particular respect the evidence of Ms Valance is plainly rejected. This concerns the issue of the conversation with Ms Valentine. She gave evidence of a conversation with Ms Valance in around late January or early February 2002 when they were both in the Green Room at the Neighbours studio in Melbourne. Although Ms Valentine could not recall the exact words, the conversation had been along the lines that Ms Valance was feeling bad, she was "a bit stressed out" because she was leaving Mr Michaelson as her manager. She questioned Ms Valance in terms of her contract with Mr Michaelson and on her evidence the substance of what Ms Valance said was that the solicitors for the record company would get her out of that contract and they would be faxing the paperwork to Mr Michaelson in order to do so. In the course of the discussion Ms Valance had referred to terminating Mr Michaelson as her manager. Ms Valance had said that the record company did not really need Mr Michaelson any more and that they could take care of her now. Ms Valentine was closely tested in relation to this conversation in cross-examination. Her evidence was that she was overwhelmed because she knew how serious this was and she knew how much time Mr Michaelson had invested in Ms Valance and she knew "that this was going to be a very big deal". Under cross-examination her evidence was that she believed that the conversation was more towards January than in February. Under cross-examination it was put to her that Ms Valance had not mentioned anything to do with her record company and Mr Michaelson or the contract but her answer was quite firm to the effect that this was certainly mentioned to her. I formed a very clear view that Ms Valentine was telling the truth. Notwithstanding the clear denial by Ms Valance of this conversation having taken place the Court accepts Ms Valentine as having given reliable evidence. No motive has been shown for any reason why the evidence was not reliable. The evidence of Ms Valance denying the conversation is rejected. · Ms Stevens' evidence is not always accepted as reliable. Again this is not to say that she was not doing her best on oath to recall what had happened. Precisely the same comment in relation to high emotions as has been made in relation to the evidence of Ms Valance, can be made in relation to the evidence of Ms Stevens. Curiously her evidence conflicted in a number of areas to that given by Mr Kirby who could not recall detail of conversations or discussions with Ms Stevens. · Mr Klippel was a particularly impressive witness and his evidence is almost always, but with one or two particular exceptions, entirely accepted as reliable. His evidence was given carefully and conscientiously. His evidence was patently not given with an eye to assisting either of the combatant litigants. Generally his evidence fitted with contemporaneous written material and was consistent with the evidence given by other witnesses. · Likewise Mr Hollingworth was also a particularly impressive witness and his evidence is almost always entirely accepted as reliable. On rare occasions his evidence may not be accepted where inconsistent with other evidence. It was also given carefully and conscientiously and patently not given with an eye to assisting either of the sides of the bar table. Generally his evidence fitted with contemporaneous written material and was consistent with the evidence given by other witnesses. · Mr Kirby was not an impressive witness. He seemed to have a very great deal of difficulty in recollecting very much at all in terms of the conversations which he had with Ms Stevens and in terms of other matters where one might have expected him to be in a position to assist. It is difficult to assess why this was the case. Ultimately his evidence is simply not accepted as reliable and where Ms Stevens gave evidence of conversations with him about material matters, her evidence is to be preferred as accurate even though Mr Kirby gave evidence that he could not recall these conversations. · There was no serious challenge to any particular of the other witnesses' credit. The evidence of other witnesses is simply weighed and dealt with against all of the evidence where obviously there will sometimes be some conflict and the Court's findings take all the evidence into account.

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28 The convenient course in dealing with the evidence is to relatively shortly provide an overview of the Court's findings in that regard. Obviously it is unnecessary to set out findings in relation to every piece of the evidence before the Court. The central purpose of the exercise is to thumbnail sketch what the evidence amounted to in terms of the pleaded issues. Short Overview February 1999 to July 1999 29 At the commencement of this period Ms Valance was 'discovered' by Mr Michaelson. After some discussions relating to matters such as acting and acting classes and the like, Mr Michaelson arranged for Ms Valance to attend her first audition for Neighbours. In this period of time Ms Valance was offered a contract on Neighbours, and notwithstanding real resistance from Ms Valance, she eventually agreed to accept the role on Neighbours. The contract which was signed was a three-year contract dated in about mid 1999. 30 Ms Valance commenced on the Neighbours cast in July 1999. 31 Also during this period a meeting took place on 2 July 1999 at which it was agreed that Mr Michaelson will be Ms Valance's manager and will receive a 15 percent commission on her income from Neighbours and a 20 percent commission on her income from all other activities in the entertainment industry. The oral arrangement was replaced in the early months of 2000 by the Agreement. August 1999 to May 2000 32 From around December 1999 negotiations took place which lead to the execution of the Agreement in April/May 2000. Mr Michaelson retained Mr Oaten, to prepare a draft management agreement. In January 2000, Ms Stevens retained Mr Richards to represent the interests of the Valance parties. Mr Richards was recommended by Mr Oaten. 33 On 24 February 2000 a meeting was held between Mr Michaelson, Ms Valance, Ms Stevens, Mr Richards and Mr Oaten (who participated via telephone). During the meeting, there was discussion and agreement as to the terms of the contract. It was at this time that the provisions were explained to Ms Valance. 34 The Valance parties executed the Agreement on 26/27 March 2000 and Mr Michaelson received the executed document in early April 2000. The Agreement was then executed by Biscayne. Mr Michaelson returned the now fully executed copy of the Agreement to the Valance parties [by their solicitor, Mr Richards] on 18 May 2000. 35 During this period Mr Michaelson also arranged promotional activities for Ms Valance, including a photo shoot resulting in her appearance on the cover of FHM magazine in April 2000. Mr Michaelson also liased with other companies including Cutting Edge (in respect of a photography session), Red Earth Cosmetics (a proposal for Ms Valance to become the face of Red Earth) and International Management Group (endorsement opportunities) in an attempt to promote Ms Valance. 36 It was also during this period that Mr Michaelson began to pursue record companies, with the aim of securing a record deal for Ms Valance. These companies included Two Up Records, and Engine Room Music. March 2000 to 7 December 2000 37 The major event during this period was the signing of the Engine Room Music contract. 38 During this period, Mr Michaelson was liasing, and negotiating with a number of record companies in an attempt to secure a music recording contract for Ms Valance. These companies included Standard Records, through Mr Carr; Engine Room Music, through Messrs Klippel and Wagstaff; and Mr Caplice (a director of Caplice Management [including Human Nature]) who had indicated that Warners may also have been interested in Ms Valance. 39 From July to November 2000 various meetings took place between Messrs Michaelson, Wagstaff and Oaten and Ms Stevens to discuss signing Ms Valance with Engine Room. Messrs Michaelson, Oaten, Klippel and Wagstaff attended a meeting on 3 November, where the main terms of the Engine Room contract were concluded. Mr Michaelson then discussed the meeting with Ms Valance. The Engine Room Music contract was signed on 7 December 2000. 40 Other events of note during this period include: · towards the end of 2000, Ms Valance appeared in a film clip for the pop group Human Nature; · in November 2000 Ms Valance carried out a Neighbours promotional tour to London. During this trip, Ms Valance spent time at London Records [which is part of the Warner group, one of the four or five major record companies in the world] and began recording the single Kiss Kiss; and · in December 2000 Messrs Wagstaff and Klippel arranged for Ms Valance to fly to Los Angeles and to visit the studios of a production company to start making some recordings. December 2000 to December 2001 41 Various key events took place in the year between December 2000 and December 2001. Of principal significance is the negotiation and signing of the London Records contract, and the gradual shutting out of Mr Michaelson. 42 Negotiations between Engine Room and London Records began in mid-2001. On 11 August 2001 Ms Valance performed a showcase at studios in Sydney for Mr Hollingsworth. This was organised by Engine Room, and Mr Michaelson did not attend. A dinner was also held at the Establishment restaurant attended by Ms Valance, Mr Michaelson, Mr Hollingsworth and Mr Klippel. The day's events represented an important opportunity for Ms Valance and others to convince Mr Hollingsworth to consider signing Ms Valance to London Records. 43 Negotiations continued between London Records and Engine Room towards a worldwide recording distribution agreement. During the period of negotiation between September and October 2001, it was made clear to Mr Michaelson that his participation was not required as the deal was to be between the record companies. 44 As the negotiations reached the final stages, Ms Stevens engaged in daily and weekly discussions with Mr Oaten, Mr Kirby (who was appointed as Ms Valance's and Valance Corp's accountant in February 2001), Mr Klippel and Mr Wagstaff. Around this time, Mr Michaelson was attempting to contact Mr Hollingsworth to discuss matter, but was unsuccessful. 45 On 15 December 2001 the London Records deal was signed in Melbourne. The effect of the London Records contract was to put London Records in the place of Engine Room, with Engine Room still retaining a percentage pursuant to a replacement agreement. 46 A music publishing agreement was signed between Engine Room, Ms Valance and Valance Corp on 19 December 2001. 47 Ms Valance turned 18 years of age on 11 May 2001. 48 From at least mid 2001, it appears that Mr Michaelson was beginning to be shut out of the activities of Ms Valance and Engine Room. The events in relation to the negotiation of the London Records deal bear this out. Corresponding with this gradual shut out, is the shift towards the search for a UK manager for Ms Valance. At a meeting held at the Bambini Trust Café in Sydney on 26 July 2001, it was put to Mr Michaelson by Mr Wagstaff that in order to secure a deal for Ms Valance in the UK, it might be better to retain an experienced UK manager. Mr Michaelson gave evidence that he was being asked to step aside as Ms Valance's managing agent in the United Kingdom. Mr Michaelson's evidence on the issue is accepted as reliable. His removal as managing agent became a certainty in the minds of everyone with whom Mr Klippel dealt while the London Records Agreement was being negotiated. [Transcript 522] 49 During this period, despite not being fully informed of the affairs of Ms Valance and Engine Room, Mr Michaelson continued to liase with the producers of Neighbours on behalf of Ms Valance. 50 Mr Michaelson, from about mid-2001 had plans to relocate to the UK in order to manage Ms Valance's career. He informed Ms Valance of this on numerous occasions and also discussed it with Ms Stevens in December 2001, just prior to Ms Stevens seeking legal advice about terminating the Agreement. Mr Klippel's evidence [Transcript 531] which is accepted as reliable in this respect was that Mr Michaelson said at the Bambini Trust Café that: · he would go to the UK when Ms Valance moved there; and · if necessary he would use the advice of experienced UK Managers when the time came. January 2002 51 In January 2002 Ms Valance travelled to London where she recorded Kiss Kiss and films the video clip for the track. Mr Michaelson did not accompany Ms Valance. 52 In December 2001 Ms Stevens sought legal advice from Louis Davis Shapiro & Lewit in relation to whether, in light of the Agreement, Ms Valance is able to obtain alternative professional management. 53 As a result of discussions with Louis Davis Shapiro & Lewit, the first termination letter was drafted on behalf of Ms Valance and Valance Corp. The letter, dated 30 January 2002, was faxed to Mr Michaelson, who received it on 1 February 2002. 54 In summary, the facsimile stated that Mr Michaelson has failed to perform his role as manager under the Agreement, and it is on this basis that the contract is terminated. It is significant to note that prior to receipt of the facsimile, Mr Michaelson had not received any significant complaint about his performance from the Valance parties. 30 January 2002 to 27 September 2002 55 The period between 30 January 2002 and 27 September 2002 marks the time between the first and second notices of termination of the Agreement. During this period certain significant events occurred. 56 Following receipt of the first termination facsimile, dated 30 January 2002, Mr Michaelson sought legal advice. As at that time he maintained that he and Biscayne were ready, willing and able to perform the obligations pursuant to the Agreement. Mr Michaelson gave evidence that Ms Valance changed her telephone number, making her uncontactable. [Transcript 291]. 57 During this intervening period, the Valance parties sought out and retained for Ms Valance an alternative manager, Mr John Fowler, who was recommended to Ms Stevens by Mr Hollingsworth who said he had "a project" and would Mr Fowler be interested in looking at it, first met Ms Valance mid January 2002 at the Trafalgar hotel. Mr Fowler was engaged as Ms Valance's manager by contract signed on 4 May 2002. 58 In mid-2002 Ms Valance left the cast of Neighbours. 27 September 2002 onwards 59 On 27 September 2002, Mr Michaelson received the second termination letter from Allens Arthur Robinson. This letter purported to terminate the Agreement, although was written without prejudice to the rights of Ms Valance and Valance Corp as presented in the 30 January facsimile. The letter purported to give Mr Michaelson 30 days notice of the Valance parties' intention to terminate the Agreement if Biscayne Partners fails to rectify a material breach, such material breach being described as "during the period March 2000 to date Biscayne has failed to perform at all times its obligations pursuant to clause 4.1 of the Agreement". 60 Following the second termination letter, the evidence appears to indicate that Ms Valance and/or Valance Corp entered into a number of contracts involving Ms Valance taking part in promotional and modelling work. On the evidence before the Court, these contracts include a contract with 1800/0800 Reverse [Ex PX Tabs 169, 176, 181; Transcript 69]. She also recorded vocals for her second album. Questions of principle 61 Before returning to the more detailed factual findings, it is convenient to next address questions of principle arising on certain disparate matters where appropriate particular issues may be shortly determined by application of these principles. The date from which the Agreement bound the parties 62 It is clear that those who ultimately executed the Agreement manifested an intention to contract. The only question which arises is seen to have been as to their intention in terms of the date on and after which the Agreement was to be binding upon parties. The answer to that question turns upon the objective intent as was made plain in the following passage from the speech of Lord Wilberforce: "When one speaks of the intention of the parties to the contract one speaks objectively - the parties cannot themselves give direct evidence of what their intention was-and what must be ascertained is what is to be taken as the intention which reasonable people would have had if placed in the situation of the parties. " [ Reardon Smith Line Ltd v Hansen-Tangen [1976] 1 WLR 989] [emphasis added] 63 Where an issue arises as to whether or not an agreement came into existence at all, a fundamental question falling for consideration is whether the conduct of the parties viewed in the light of surrounding circumstances, shows or is indicative of such an agreement having come into existence. Precisely the same approach is to be taken where the question falling for consideration is what is the point in time which the conduct of the parties, viewed in the light of the surrounding circumstances, shows the parties to have objectively intended as the date from which the contract was to commence to bind them. 64 The authorities and contract texts are replete with cases involving different facts and circumstances generally dealing with offer and acceptance situations. Hence one may for example find support for the following propositions: · where an offer has been made, a contract binding the parties will result when, and only when, the offeree has clearly accepted the offer; · the general rule is that an acceptance must correspond with the offer; · normally acceptance is not effective until it has been communicated to the offeror; · a contract is formed at the time when acceptance is effective, usually the time of receipt: Halsbury's Laws of Australia, Butterworths vol 6 [110-445]; · acceptance must take place within the period of duration of the power of acceptance created by the offeror in making the offer. A purported acceptance occurring outside of this period can at best be a counter-offer: Carter and Harland Contract Law in Australia, 4th ed, Butterworths, Sydney 2002 at [242]; and · the offeror may prescribe the manner in which acceptance is to be made, and if the offeror has insisted upon this as the prescribed method of acceptance, a purported acceptance in any other manner is not an effective acceptance. 'The offeror creates the power of acceptance; and he has full control over the character and extent of the power that he creates.': Carter and Harland Contract Law in Australia supra at [228] citing Corbin on Contract, vol 1, 1963, at 88. Carter and Harland continue however to make the point that in most cases, an offeror, in indicating that acceptance may be made in a particular manner, will not be taken to have insisted that that is the exclusive method of acceptance. The proposition is that if an offeror wishes the prescribed method of acceptance to be the only method permissible, this intention must be made quite clear and if it is made quite clear, the direction is effective. 65 White Trucks Pty Ltd v O'Reily (1948) 66 WN (NSW) 101 (cited in Halsbury's Laws of Australia [110-405] footnote 3) is an example of a holding that the mode of acceptance contemplated was not exclusive so that the offeree was bound by a letter of acceptance even though it had not signed a written memorandum as contemplated. 66 George Hudson Holdings Ltd v Rudder (1973) 128 CLR 387 [cited in the same footnote to Halsbury's Laws of Australia] involved an offer to sell shares which did not stipulate for acceptance by post, being held to have been validly accepted by the personal delivery of an acceptance. 67 First Energy (UK) Ltd v Hungarian International Bank Limited [1993] 2 Lloyd's Report 194 at 201 per Steyn LJ with whom Evans and Nourse LJJ agreed [cited in the same footnote to Halsbury's Laws of Australia], is an example of a case where although the relevant hire purchase documents had specified a mode of acceptance, the Court of Appeal held that this was overridden by a letter to which the documents were attached. The particular facts before the Court 68 The salient feature presented by the clear evidence concerns the simple fact that the parties were content at the time each of them executed the document to execute a document which included the following provision:

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17.4 The Manager is not contractually bound by the terms of this Agreement until a copy of the Agreement is fully executed by all parties and delivered to the Artist. 69 Clearly clause 3.1 provided that the term of the Agreement would commence on the date of the Agreement. Equally clearly the first line, following the heading "Management Agreement," was left incomplete. 70 To my mind the whole of the matrix of circumstance covering the period anterior to the signing by the parties of the Agreement and the sundry communications between the parties and their solicitors, permits the Court to infer that the objective intent of the parties was that clause 17.4 would operate in accordance with its terms. 71 The Valance parties contended that Mr Michaelson, following his receipt of the Agreement executed by the Valance parties, could theoretically have simply held onto the Agreement without himself signing and returning it to Ms Valance and could thereby have dictated the occasion when it would be contractually binding upon the parties. The short answers to this proposition are: · the Court is concerned with ascertaining the objective intent of the parties discerned from the relevant facts, matters and circumstances. In this case that objective intent is most clearly manifested in the wording of the clause within the Agreement which they signed having had the benefit of legal advice in relation to the document; and · whilst there is no evidence of their having been made aware of this matter, as a matter of principle different causes of action, usually [but not necessarily solely] estoppel based, spring into operation to prevent an unjust departure by one person from an assumption adopted by another as the basis of some act or omission which, unless the assumption be adhered to, would operate to that others detriment. In appropriate circumstances such an estoppel could have prevented Biscayne from denying that a contract had become binding upon it notwithstanding that it may not have executed the Agreement. The Trade Practice Act 1974 and the Fair Trading Act 1987 have provisions which can also be mobilised in relation to this general area of wrongdoing. Construction principles 72 There is no particular issue in relation to the principles to be applied to the construction of the Agreement. To my mind the following matters are unexceptional: · the court is dealing with a commercial document albeit a contract of agency for personal services. In endeavouring to discern the parties intent and in construing the meaning of the words used, the Court will strive to give the document a commercial, reasonable and rational operation: Australian Broadcasting Commission v Australian Performing Right Association (1972) 129 CLR 99 at 109; Hide & Skin Trading v Oceanic Meat (1990) 20 NSWLR 310; · the court will strive in dealing with a commercial contract to discern the objective intent of the business relationship or other parameters of a contract in order to give effect to that which the parties may be seen to have bargained for. But always it is to the words of the document that the court must attend, looking in that regard to the whole of the document to discern the parties' intent; · in interpreting the expressions used by the parties, the Court will consider them in their context and as a whole. The court should as a matter of course take into account the objective background of the transaction, that is, its factual matrix, its genesis and aim, and the common assumptions: TCN Channel Nine v Hayden Enterprises Pty Limited (1989) 16 NSWLR 130; Royal Botanic Gardens and Domain Trust v South Sydney City Council (2002) 186 ALR 289; · where mechanical provisions intended to operate over an extended period of time are concerned the court endeavours to follow the mechanics and provisions expressed in the contract in the endeavour to follow, always by looking at the manner in which the matter is expressed, how the parties saw the contract as a working guide to the way forward; · most recently, the High Court has observed in Royal Botanic Gardens and Domain Trust v South Sydney City Council (2002) 186 ALR 289 at 292-293 that: "In Codelfa , Mason J (with whose judgment Stephen J and Wilson J agreed) referred to authorities which indicated that, even in respect of agreements under seal, it is appropriate to have regard to more than internal linguistic considerations and to consider the circumstances with reference to which the words in question were used and, from those circumstances, to discern the objective which the parties had in view. In particular, an appreciation of the commercial purpose of a contract: "presupposes knowledge of the genesis of the transaction, the background, the context, the market in which the parties are operating". Such statements exemplify the point made by Brennan J in his judgment in Codelfa : "The meaning of a written contract may be illuminated by evidence of facts to which the writing refers, for the symbols of language convey meaning according to the circumstances in which they are used.""; · to similar effect is the observation of Gleeson CJ, Gummow and Hayne JJ in Maggbury Pty Limited v Hafele Australia Pty Limited (2001) 76 ALJR 246 at 248 (para 11), quoting with approval Lord Hoffmann in Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 WLR 896 at 912-913 to the effect that interpretation of a written contract involves the ascertainment of the meaning which the document would convey to a reasonable person having all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of contracting;

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14.1 No breach of this Agreement is a material breach giving the other party the right to terminate, unless: (a) the party allegedly in breach is given written notice specifying the nature of the breach (this notice must be clearly headed "Breach of Agreement - Notice to Cure"); and (b) the party receiving the notice fails to rectify the breach within 30 days of receipt of such notice. 78 The commencement provision that no breach "is a material breach" seems to me to be a deeming provision. Effectively the parties have been content to regulate their respective entitlement to claim any breach to be a 'material breach' by this requirement for the giving of notice. They have effectively conditioned their entitlement to rely upon any breach as a material breach, upon the giving of the notice provided for in clause 14.1. The parties have a right [proscribed by exceptions not presently material] which the law protects, to bind themselves by contract to such terms as they see fit. 79 In terms of contracts which expressly provide for an entitlement to rescind in the event of a specified failure by the other to perform, The Law of Contract, 6th ed by G H Treitel makes plain [at 586-587], that the very purpose of such clauses which make express provision for determination is to prevent disputes from arising as to the often difficult question whether a particular failure in performance is sufficiently serious to justify rescission and they take effect, even though there is no substantial failure. The willingness of the courts to give effect to express provisions for determination in that sort of circumstance is based on the assumption that the parties have bargained on more or less equal terms. To my mind, subject only to one matter, precisely the same type of reasoning underpins the proposition that once the parties have bargained, as here, for the clause 14.1 procedure, they should be held to their bargain. 80 The matter to which I refer concerns the necessity to draw a distinction between on the one hand, a circumstance involving a repudiation by one of the parties in terms of the evincing of an intention no longer to be bound by the contract, and on the other hand, a circumstance where the claimed repudiation falls short of such of an express repudiation. Clause 14.1 did not deal with the former situation but it did deal with the latter. And this is a latter situation case in which the claimed repudiation is to be inferred from a range of conduct said to constitute breaches of the Agreement [cf defendants' final submissions MFI D4 at paragraph 26]. Because that is so, the Valance parties were obliged to utilise the clause 14.1 procedure before being entitled to terminate. 81 In my view clause 14.1 provided a comprehensive procedure for the termination of the Agreement, at least in the circumstances which applied here. Outside of situations of an express repudiation, the provisions of the common law were intended by the parties not to apply. But if contrary to this view, the common law had applied concurrently with the provisions of clause 14.1, in my view none of the alleged breaches of the Agreement put forward by the Valance parties justified them in any view that Biscayne had so conducted itself as to evince an intention no longer to be bound by the Agreement.

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86 The other two particular points to note are: · the use of the words "Notice to Cure" as part of the heading to be included in the written notice provided for in clause 14.1 (a); and · the use of the words "rectify the breach" in clause 14.1 (b). 87 Save in the case of an express repudiation by one of the parties by the evincing of an intention no longer to be bound by the contract, upon the proper construction of clause 14.1 and applying the approach taken in the above set out authorities cited by the Court of Appeal in Hungry Jack's, the giving of a 30 day notice can be seen to be a condition precedent to the right to terminate for material breach. 88 A separate question arises going to whether the party with the right to terminate has exercised that right. Conventionally the exercise of that right would be a matter of some formality as by a second communication explicitly terminating the contract (although in some circumstances it may be possible to infer the exercise by other conduct). To 'remedy' or 'rectify' a breach is to cure so that matters are put right for the future, that is to say, to fix upon the effect of the default in the given circumstances rather than upon the historical fact of its occurrence. 89 As to whether the requirement to give a particular form of written notice with the particular clear heading provided for in clause 14.1 (a) can be said to be only procedural and not a matter of substance the following may be said: · there is much to be said for the view that in this particular context this requirement should be regarded as one of substance and as a condition precedent to the entitlement of a party giving the notice to contend that a particular breach constituted a material breach giving it an entitlement to terminate, following a failure to rectify a breach within 30 days of the giving of the notice. The parties were obviously astute to ensure that they would have the clearest possible notice if either of them sought to engage the clause 14.1 procedure. That is understandable in the circumstances. I see no reason why the parties should not be bound to comply with the clause 14.1 (a) procedure which they had stipulated for; and · ultimately the present case does not turn upon the clear failure by the Valance parties to comply with clause 14.1 (a). Even if the failure to give the requisite notice in the form provided for in clause 14.1 (a) may properly be disregarded as a matter of form, the Valance parties failed to give proper notice within the meaning of clause 14.1 for the reasons which follow. 90 Finally the circumstances which applied in the case presently before the Court are seen clearly to be covered by clause 14.1 by way of a comprehensive procedure for the termination of the contract. And of course it has to be borne in mind that far from any express repudiation of the Agreement, Biscayne by Mr Michaelson was at all material times asserting that it intended to carry out the Agreement and was willing and able to do so. 91 The first termination letter purported to terminate the Agreement with immediate effect. Hence the notice cannot be described as in substance a "Notice to Cure". 92 All that the first termination letter purported to do was: · first, upon a number of grounds [going inter alia, to capacity, actual and/or presumed influence, and lack of advice] to give notice on Ms Valance's behalf of her election to treat the Agreement as void; and · secondly, to set out claims that Biscayne had failed to discharge its obligations in accordance with the Agreement in relation to what were said to be numerous failures to fulfill even the most basic of management responsibilities in respect of which several non-exhaustive examples of such failures were said to have been set out. 93 Clearly enough the first termination letter was in substance the very antithesis of a notification which could fairly have put Biscayne on notice that unless matters were put right for the future within the next 30 days, the Valance parties were entitled to terminate the Agreement for material breach. What the first termination letter was calculated to achieve was quite simply an understanding in the recipient that the Agreement had been terminated. [Cf by analogy the proposition that an ineffective notice of rescission will not be treated as some other form of notice, for example as a notice effective to make time of the essence (George v Pottinger [1969] Qd R 101, 113 (affirmed at (1967) 41 ALJR 85))] 94 As to the second termination letter, this completely failed to specify within the meaning of clause 14.1 (a), the nature of the alleged breaches of the Agreement. What was required in the relevant notice was a specification of "the nature of the breach". In my view the notice purported to be given in the second termination letter in identifying the relevant material breach requiring to be rectified within a period of 30 days as:

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an allegation that Biscayne had, during part only, of the relevant bracket of time, performed its clause 4.1 obligations and during some other part of the relevant bracket, failed to perform those obligations. 95 The giving of a notice stipulated for in a provision conditioning as a matter of contractual agreement, any breach of the Agreement as amounting to a material breach justifying a right in one party to terminate, is a matter of a signal significance. Upon the proper construction of clause 14.1, the second termination letter did not comprise the giving of the necessary notice to rectify a particular breach as it failed to specify the nature of the breach. If this holding be incorrect, an alternative ground for holding the letter as failing to have comprised the giving of the necessary notice is to be found in the fact that the notice was not clearly headed in the form prescribed by clause 14.1 (a). 96 Further and even if the second termination letter could be properly described as a valid clause 14.1 notice, the fact is that there never was an exercise by the Valance parties of any right to terminate which may have accrued to those parties 30 days following the giving of such clause 14.1 notice. 97 There is an altogether different reason for a holding that the second termination letter cannot be regarded as a valid clause 14.1 notice to cure. This is to be found in the fact that as the evidence discloses, the letter was given after a period of some seven months, following the first termination letter, by the terms of which the Valance parties had purported to terminate the Agreement. But very significantly the evidence discloses that during that seven-month period, the manager-artist relationship between Mr Michaelson and Ms Valance was effectively shut down by the Valance parties. Granted that Biscayne had at all material times maintained that the Agreement remained on foot, in an environment where as the Court finds there had effectively been a shutting down of the ability of Mr Michaelson to discharge the obligations which he had undertaken under clause 4.1 of the Agreement, it was all the more necessary for the second termination letter to be precise in terms of identifying the nature of the alleged breach. This it failed to do. As with notices making time of the essence of a contractual obligation, contractual notices purporting to terminate for material breach are matters which are "measured out by coffee spoons": cf K E Lindgren, Time in the Performance of Contracts, Butterworths, 1982 and in particular at [419] and [499.15], dealing with the requirement that notices be in order as to form and content. 98 Yet a further obstacle in the way of the Valance parties in terms of the attempt to rely upon the second termination letter lies in the Court's holding that on the evidence, those parties in sending that letter, were not ready, or willing to proceed to perform the contract, having made that absolutely clear both by the sending of the first letter and by their conduct in shutting down the relationship following the sending of the first letter. Biscayne, upon receipt of the second letter, had every entitlement to view it as a document written in a context in which there was no suggestion that the relationship which had been as a matter of practicality closed down by the Valance parties, was now intended by those parties to be reopened. The second termination letter dealt with a period of time when Biscayne had, on the Court's findings, been prevented by the Valance parties from carrying out its obligations under the Agreement. Yet the letter made no explicit offer to restore the relationship and was patently a communication sent with a view to simply improving the Valance parties prospects of making good in a court of law, a claim both to have validly terminated the Agreement by the first termination letter and/or to have become entitled to terminate the Agreement following the expiration of 30 days from the sending of the second termination letter. Whilst in a conveyancing context it is possible for a vendor, having first purported by notice to make time of the essence of a contract and thereafter purported to terminate the contract for failure to comply with the time so delimited, to then without prejudice to the claimed validity of the termination, give a second notice purporting to make time of the essence of the contract, such a second notice is properly construed as an "offer to start up again" [that is to say as an offer to re-instate the contract, being an offer capable of being accepted by the purchaser]: Lohar Corporation Pty Ltd v Dibu Pty Ltd (1976) 1 BPR 9177. The present context however is quite different and if the second termination letter was to be regarded as a notice to start up again in terms of re-instating the stalled relationship, some form of communication of what precisely was intended by the Valance parties was necessary either in the notice or as part and parcel of the environment immediately anterior to or immediately following the giving of the notice. No such communication took place [save for such few contacts as could only be regarded as a pretence]. 99 Ultimately the Court is satisfied from the evidence that as at the date of sending of the second termination letter, the Valance parties were not ready or willing to carry out the Management Agreement in any way, shape or form. The second termination letter was for that reason alone, invalid and ineffective in purporting to invoke and mobilise the clause 14.1 procedure. Interference with contractual relations - the principles 100 It is convenient to commence with an examination of the relevant principles dealing with this tort and in particular the requirement that the defendant be in the position of an outsider influencing the independent volition of a contracting party. 101 The matter received some detailed attention in Idoport Pty Ltd v National Australia Bank Limited [2001] NSWSC 328. That judgment [Einstein J] includes at [13] - [29] the following statements of principle which are adopted:

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Jordan CJ in O'Brien v Dawson [41 SR (NSW) 295 at 307-308] put the matter as follows: "The next question is whether, if an ordinary limited liability company is a party to a contract, and its directors acting as such, and in the course of conducting the company's business at a Board meeting, resolve that the company shall refuse to perform a contract to which it is a party, the directors knowing that the refusal cannot be legally justified, and effect is given to this resolution, the directors concerned are guilty of the tort-and presumably also of the crime-of conspiracy. I am of opinion that in such a case it is entirely artificial to speak of the directors as "procuring" the company to break its contract in the sense in which this word used in the Lumley v Gye type of case. An incorporated company is a figment of the law. It is incapable of acting except through agents. Its directors are persons who have been authorised by the constituent members of the corporation to cause acts to be done on its behalf. They are its agents who have power to control it's acts. It cannot act at all except through them or through some other authorised agents . They are not in the position of outsiders who are influencing the independent volition of a contracting party who is capable of exercising volition for himself. It is their volition and theirs only which determines the making, the performance or the breach of the company's contract. In my opinion on the state of facts assumed, they stand in the same position as regards liability to a charge of conspiracy as do joint contractors. This is not to say that every boardroom constitutes an Alsatia in which persons may conspire to their heart's content and with complete impunity so long as they do so in the character of directors of a company and employ the machinery of their company for carrying their conspiracy into effect. It means only that the mere fact that the directors who determine whether or not a company shall perform the obligations of a contract are several in number makes them no more subject to the law of conspiracy then would be a single managing director if it were he who determined it…. Directors of a company are, however, personally responsible for any torts committed by their company in the procuring of which they are personally implicated … But there is authority for the proposition that the fact that one or more directors of a company acting as such , are the instruments by which the company, without just cause, refuses to perform a contract does not confer on the other party to the contract a right to sue directors in tort on the footing that they have procured a breach of contractual rights…" [emphasis added]

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Although the plaintiffs cited a number of authorities said to support their submissions as to the appropriate principles, in my view the O'Brien v Dawson principle is binding upon a court of first instance in this country. 102 Clearly had Ms Valance at the material time been appointed a director of Valance Corp and had she in that capacity and together with Ms Stevens, also acting in her capacity as director, determined that Valance Corp should breach the Agreement, then it could not be said that Ms Valance or Ms Stevens could be liable for the tort of inducing breach of contract. They would simply, in exercising their functions as directors and acting within authority, have caused Valance Corp to breach its contract. 103 The particular question raised here for decision concerns how one is to characterise the position of and actions of Ms Valance in this regard. The matter arises as follows: · as already mentioned, Biscayne pleaded that at all material times after she had attained the age of 18 years Ms Valance had been a director within the meaning of section 9 of the Corporations Act 2001 (Commonwealth). That definition relevantly provides that for the purposes of the Act [cf section 6 (1)] , unless the contrary intention appears, the definition of "director" extends to include a person who is not validly appointed as a director, if: (b) (i) they act in the position of a director, or (b) (ii) the directors of the company are accustomed to act in accordance with the person's instructions or wishes, Paragraph (b) (ii) does not apply merely because the directors act on advice given by the person in the proper performance of functions attaching to the person's professional capacity, or the person's business relationship with the directors or the company; · during closing address senior counsel for Biscayne indicated that it no longer pressed its allegation that at all material times after she had attained the age of 18 years Ms Valance had been a director within the meaning of section 9 of the Corporations Act. · The evidence however is quite clear and supports the finding which is made that at all material times after Ms Valance had attained the age of 18 years, Ms Valance dictated any specific action which would affect Valance Corp, albeit first closely discussing the relevant alternatives with Ms Stevens. · It was however Ms Stevens who was the only appointed director and who carried out on a day-to-day basis the general business and administrative steps. 104 The evidence of Ms Valance's conduct reflects a position whereby: · Ms Valance was the 'guiding mind' of the company; · after Ms Valance turned 18 [and likely, albeit of little relevance, prior to that date] Ms Stevens, as director acted only in accordance with Ms Valance's wishes; and · where Ms Stevens did act independently of Ms Valance in some aspects of management of the company, this was only in respect of administration and similar matters.

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105 The submission put by Biscayne is that it is necessary to look at the relationship of Ms Valance and Valance Corp in the context of the management agreement with Biscayne where of course, Ms Valance was herself a party being the Artist. The submission was that: · although Ms Valance could and did "call the shots", she did this not because she was a company officer, but because she was the sine qua non for the activities of Valance Corp, it not being suggested that she attended directors meetings for example; · as the artist and notwithstanding that she was the beneficial owner of the whole of the issued capital, when she may say that the company should terminate the Agreement, she was not acting as an organ of the company; · in the same way, if the sole shareholder of a company telephoned the directors and demanded that they terminate a particular agreement under threat that otherwise they would be sacked, such a shareholder would not be acting as a director or officer of the company; · particular significance is required to be placed upon the distinctions between the artist and the management company, the obligations of each and the deliberate structure chosen whereby the artist was the product exploited by the management company; · attention required to be given to the manner in which the first termination letter had commenced by the solicitors advising that they were instructed by Valance Corp and by Ms Valance. This it was submitted showed that they had been treated as separate parties; · whether or not Ms Valance was a de facto director, she was separate from Valance Corp because of her capacity in terms of her status as an artist and also because of her capacity in terms of her status as the controlling shareholder; and · she had simply not acted as a director in relation to the termination. 106 A recent decision by the New South Wales Court of Appeal has, albeit by way of obiter dicta, had occasion to examine aspects of these questions. LMI Australasia Pty Ltd v Baulderstone Hornibrook Pty Ltd [2003] NSWCA 74 dealt with the question of the application of the tort of inducing breach of contract where the facts involved a certain commonality in the directorships of holding company and subsidiaries. One question which arose was whether those bare facts were sufficient without more to justify an inference that the holding company induced a breach of contract. 107 The judgment of Hodgson JA made the point that it was insufficient for a court to find an inducement by the holding company of breach of contract by the subsidiaries, where all that one had was some commonality of certain directors. His Honour appears to be discussing prevention of breach by directors and concentrated on the knowledge of the directors alleged to have induced the breach. In particular his Honour made the point that simply because the holding companies if they knew the facts and had had sufficient time could have prevented the subsidiary from acting as they did, was likewise insufficient to justify an inference that the holding companies or either of them induced a breach of contract. His Honour further expressly referred to the fact that it had not been shown that the common directors knew the relevant facts. The holding was clearly that the mere failure to take steps which might have been taken to prevent a breach of contract was insufficient for the tort of inducement of breach of contract. So much is unexceptional as it seems to me. 108 At first instance Barrett J had dealt with the matter. A summary of his Honour's relevant reasons as recited in the separate judgment of Young CJ in Eq, were as follows:

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His Honour then quoted extensively from O'Brien v Dawson (1941) 41 SR (NSW) 295 at 307-8 and continued at para [98]: "Central to this notion is recognition that the directors of a corporate contracting party are not in the position of outsiders influencing the independent volition of a contracting party capable of exercising volition for himself; and that it is the directors' volition which determines the making, the performance or the breach of the company's contract. The directors' volition is thus the company's volition." 91 Mr Sullivan QC accepts that proposition. His Honour, however, continued: "Within the confines of a group of companies where a holding company such as AW Baulderstone Holdings Pty Limited possesses, in relation to each of several wholly-owned subsidiaries, full and sole capacity to control the content of a corporate constitution (even to the extent of allocating to itself powers otherwise exercisable by the directors), to relieve the directors of the consequences of breach of duty by advance authorisation or retrospective ratification and to change at will the composition of the board of directors, it seems to me to be the case that the holding company like the subsidiary's directors, is not in the position of an outsider influencing the independent volition of the subsidiary." 92 Mr Sullivan challenges what his Honour wrote from "It seems to me". His Honour continued: "In such a situation, it is the holding company's volition which, sometimes formally by exercise of legal powers but often informally ... determines the making, the performance or the breach of the subsidiary's contract. The holding company does not engage in what in Herring CJ described in Rutherford v Poole [1953] VLR 130 as 'actionable intervention'. There is really no 'intervention' at all. The subsidiary makes the relevant decision but that decision proceeds from an exercise of the holding company's will within and through the subsidiary, rather than upon it." 93 His Honour then found that if it were necessary to do so, he would conclude that neither the first nor the third respondent induced or procured any breach of contract by the second respondent. 109 Young J continued:

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11 The mere circumstance that DSC was a wholly owned subsidiary of BH International with some common directors, and that SOL was a wholly owned subsidiary of BH also with some common directors, is insufficient without more to justify an inference that either BH International or BH, or both of them, induced a breach of contract. It could be inferred that BH International and BH, if they knew the facts, could given time have prevented DSC and SOL acting as they did, if only by calling meetings to dismiss directors or threatening to do. But the directors of DSC and SOL are not liable as such for inducing breach of contract ( O'Brien v. Dawson (1942) 66 CLR 18), and in any event it is not shown that common directors knew the relevant facts. Furthermore, in my opinion the mere failure to take steps which might, given time, have been taken to prevent a breach of contract, is insufficient for the tort of inducement of breach of contract or interference with contractual relations. 111 Whilst of course a court of first instance will endeavour to follow an approach taken by the Court of Appeal even where the manner was then dealt with only by way of obiter, it seems to me that there are difficulties with discerning a common holding as between the three judges sitting on the Court of Appeal. But more particularly the facts presently before the Court are somewhat different and likely distinguishable. 112 The judgment of Young CJ in Eq focuses upon the appellant's case being that the relevant breaches could only have taken place with the knowledge of the common directors of all the respondents. His Honour then perceived problems reposing in the fact that anything which the directors had done represented inaction rather than action and in terms of the difficulties of working out which company in the Group was the relevant tortfeasor. 113 The particular portion of the reasoning which is here in focus concerns the disapproval by Young CJ of the proposition by Barrett J that the holding company, like the directors of the subsidiaries, was not in the position of an outsider influencing the independent volition of the subsidiary and that the subsidiary made the relevant decision which however proceeded from an exercise of the holding company's will within and through the subsidiary, rather than upon it. [cf per contra Santow J in ASIC v Adler [2002] NSWSC 171 at [62] and Foxeden Pty Ltd v IOOF Building Society Ltd [2003] VSC 356 per Habersberger J at [329]] Dealing with the issue 114 In my view there is no doubt but that on the occasions when the first and then the second termination letters were sent, the directors of Valance Corp were Ms Stevens and Ms Valance [the latter, after attaining the age of 18 years on 11 May 2001 becoming, as Biscayne had or originally pleaded, a director within the meaning of section 9 of the Corporations Act 2001 (Cth)]. It follows that the claims that Ms Stevens and Ms Valance caused, induced and procured Valance Corp wrongfully to purport to terminate the Agreement on or about 30 January 2002 or on or about 27 September 2002 must fail by dint of the principle described in the extract from Idoport as "the O'Brien v Dawson principle": Ms Stevens and Ms Valance being directors of Valance Corp were not liable for the tort of inducing breach of contract where, in exercising their functions as directors, and in acting within authority, they have caused Valance Corp to breach its contract. 115 Once a person becomes a de facto director within the meaning of Corporations Act section 9 they become exposed to the same common law and statutory duties as are applicable to directors, including of course the duties imposed by the Corporations Act itself. [cf Australian Securities Commission v AS Nominees Ltd (1995) 133 ALR 1 at 51-53] It is also possible for a person to become a de facto director as a result of a defect in appointment: Corporate Affairs Commission v Drysdale (1978) 141 CLR 236 or where there is simply a failure to formally appoint: Mistmorn Pty Ltd (in liq) v Yasseen (1996) 21 ACSR 173. There is no reason in principle for regarding such a person as acting otherwise than a director where the question which arises is whether the acts of that person were the acts of the company. 116 On the evidence the Court is satisfied that Ms Stevens and Ms Valance at all material times acted only by exercising their functions as directors. Neither of them was at any time in the position of an outsider influencing the independent volition of a contracting party who is capable of exercising volition for himself. There is no question of their being personally responsible for any tort committed by Valance Corp in the procuring of which they could be said to be personally implicated. They were no more and no less than directors of Valance Corp acting as such, being together the instrument by which Valance Corp, on the Court's finding without just cause, purported to terminate the Agreement. 117 The further claim which is pleaded [Summons paragraphs 25, 28] that Ms Stevens caused, induced and procured Ms Valance wrongfully to terminate the Agreement also fails. Ms Valance needed and received no inducement, nor prompting in this regard. The claim for conspiracy 118 This is a claim in respect of the sub-species of the tort of conspiracy commonly called "conspiracy to injure by unlawful means." 119 In Fatimi Pty Ltd v Bryant [2002] NSWSC 750 Campbell J in a careful analysis of this sub-species of the tort put the matter as follows:

[129]

"... a plaintiff in a case such as the present must establish intent to injure the plaintiff. It is not enough to establish that the acts of the conspirators necessarily involved injury to the plaintiff or that the plaintiff was a person reasonably within the contemplation of the conspirators as a person likely to suffer damage ..." 181 This element of "intent to injure" needs to be understood, in my view, as referring to the real purpose which the conspirators are trying to achieve. The tort of conspiracy to injure (the first sub-species of the tort) reflects an uncontroversial moral view that for A and B to gang up with the principal objective of hurting C is wrong, regardless of the means which are used, and a policy judgment that if such conduct occurs and occasions damage, then an action for damages should lie. In this second sub-species of conspiracy, the policy judgment being made is that, if A and B gang up with one of their objectives being to hurt C, and where they intend to achieve that objective by the use of unlawful means, an action for damages should likewise lie. The policy judgment is made that the additional element of agreement to use unlawful means to effect the harm justifies lowering the bar from a "principal purpose to harm" to a "purpose (not necessarily principal) to harm" test. However, the "purpose to harm" must still be what is actuating the defendants in acting. That the defendants realise that damage to the plaintiff is a likely, or indeed an inevitable, consequence of their action is not enough to satisfy this element of the tort. Rather, damage to the plaintiff must be one of the things which the defendants are trying to achieve. 120 In my view the evidence before the Court does not establish that the Valance parties were trying to achieve damage to Biscayne in the sense of a purpose to harm being what actuated the Valance parties in acting. The fact that the Valance parties realised that damage to Biscayne was an inevitable consequence of their action is plainly insufficient to satisfy this element of the tort. I reject the proposition that the evidence given by Ms Valance should, in context, be read as proving that the Valance parties were trying to achieve damage to Biscayne. In particular the evidence that when the termination letter was sent: · she knew and intended that Biscayne would be cut out of commission in respect of her activities from that point in time; and · she appreciated that this meant that Biscayne/Mr Michaelson would be terminated as her managing agent; proves no such thing. 121 This is not to say that the Valance parties are not shown on the evidence to have been involved in a calculated disregard of the rights of Biscayne and in a cynical pursuit of benefit. That conduct does not amount to a purpose to harm. 122 Likewise the evidence given by Ms Stevens and pointed to by Biscayne does not prove that the Valance parties were trying to achieve damage to Biscayne in the sense of a purpose to harm being what actuated them. This evidence was summarised in final address [Transcript 774-775] as follows:

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The second category is subject to a further division: · terms which the law finds in a certain class of contract, either by common law or statute, although those terms may not find specific expression in the contractual statements or documents of the parties. ["category "A" terms"] · terms which are to be implied into a contract to give effect to the presumed intention of the parties: Castlemaine Tooheys Ltd v Carlton and United Breweries Ltd (1987) 10 NSWLR 468 at 486 - 487 per Hope JA, Byrne v Australian Airlines (1995) 185 CLR 411 at 448 per McHugh and Gummow JJ. ["category "B" terms"] 44. Terms which are to be implied into a contract to give effect to the presumed intention of the parties can be further sub-divided as follows.: · terms implied into a contract to give effect to the presumed intention of the parties can be implied according to a notorious custom or usage in a particular trade, industry or locality: Con-Stan Industries of Australia Pty Ltd v Norwich Winterthur Insurances (Australia Ltd) (1986) 160 CLR 226 at 236 per Gibbs CJ, Mason, Wilson, Brennan and Dawson JJ. ["category "B(i)" terms"] · terms implied into a contract from a prior course of dealing: McCutcheon v David MacBrayne [1964] 1 WLR 125 at 134 per Lord Devlin, Hardwick Game Farm v Suffolk Agricultural Poultry and Producers Association [1969] 2 AC 31 at 90 per Lord Morris of Borth-y-Gest, at 113 per Lord Pearce. ["category "B (ii)" terms"] · terms implied into certain contracts familiar to courts where the principal terms of the agreement are settled but necessary subsidiary terms are absent: Coal Cliff Collieries v Sijehama Pty Ltd (1991) 24 NSWLR 1 at 38 per Handley JA. ["category "B (iii)" terms"] · terms which are implied to give efficacy to the particular contract: BP Refinery (Westernport Port) Pty Ltd v President, Councillors and Ratepayers of the Shire of Hastings (1977) 180 CLR 266 at 282 - 283. ["category "B (iv)" terms"] Implication of Terms Ad Hoc 45. The principles upon which a Court will imply a term into a contract as a matter of fact are not in doubt and have been stated and re-stated authoritatively many times. In BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266, the Privy Council, on appeal from the Supreme Court of Victoria, listed the five requirements necessary to be satisfied as follows (at 282 - 283): 'Their Lordships do not think it necessary to review exhaustively the authorities on the implication of a term in a contract which the parties have not thought fit to express. In their view, for a term to be implied the following conditions (which may overlap) must be satisfied: (1) it must be reasonable and equitable; (2) it must be necessary to give business efficacy to the contract, so that no term will be implied if the contract is effective without it; (3) it must be so obvious that 'it goes without saying;' (4) it must be capable of clear expression; (5) it must not contradict any express term of the contract.' 46. This statement has been approved by the High Court many times: Secured Income Real Estate v St Martin's Investments Pty Ltd (1979) 144 CLR 596 at 605 - 606. Codelfa Constructions Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337 at 347; Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41 at 66, 117 - 118, Byrne v Australian Airlines Ltd (1995) 185 CLR 410 at 422, 441. The onus for showing that the criteria have been satisfied lies on the party that asserts the implied term; that onus is heavier where, as here, the subject contract is a detailed and complex one. In Codelfa Construction Pty Ltd v State Rail Authority of NSW (supra, at 346) Mason J said: '[t]he more detailed and comprehensive the contract the less ground there is for supposing that the parties have failed to address their minds to the question at issue. And then there is the question of identifying with any degree of certainty the term which the parties would have settled upon had they considered the question .' [emphasis added]

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Upon the first requirement - reasonableness and equitableness - it is possible to say two things. First, it is clear that such a requirement refers to fairness as between the parties. In Byrne v Australian Airlines Ltd (supra, at 442) McHugh and Gummow JJ rejected the suggested implication because [t]he contractual term propounded by the appellants would operate in a partisan fashion.' Second, it is clear that reasonableness and equity is to be judged by reference to the benefits and burdens each party can expect to enjoy or undertake under the contract. So, in BP Refinery v Shire of Hastings (supra, at 284) the majority of the Privy Council rejected the proposed implication into a rating agreement requiring a continuity of corporate identity on the ground that such an implication would deprive the appellant of a benefit which induced it to make a major capital investment in the defendant's Shire. Necessary to give business efficacy to the contract 48. Upon the second requirement, it is clear that the requirement that the term be 'necessary to give business efficacy to the contract' is a formula calculated to reject the requirement of mere reasonableness. Thus, in Codelfa Constructions v State Rail Authority of NSW (supra, at 346) Mason J commented that '[a]ccordingly, courts have been at pains to emphasize that it is not enough that it is reasonable to imply a term, it must be necessary to do so to give business efficacy to the contract.' However, to my mind, the comment of the editors of Chesire and Fifoot, Law of Contract (7th Australian Edition, para 10.48) is entirely justified: '[i]t cannot be the case that a term must be necessary in the sense that the contract cannot be carried out at all without its incorporation. However, the cases offer little explicit analysis of the phrase 'effective operation' or 'business efficacy.' In Butts v O'Dwyer (1952) 87 CLR 267 at 280 Dixon CJ, Williams Webb and Kitto JJ commented that 'the law raises an implication from the presumed intention of the parties where it is necessary to do so in order to give the transaction such efficacy as both parties must have intended it should have.' Their Honours had previously referred to the comments of Bowen LJ in The Moorcock (1889) 14 PD 64 at 68, where his Lordship said 'what the law desires to effect by the implication is to give such business efficacy to the transaction as must have been intended at all events by both parties who are business men.' These words were quoted with approval by Gibbs CJ in Hospital Products v United States Surgical Corporation (supra, at 66). In Hamlyn & Co v Wood & Co [1891] 2 QB 488 at 491 Lord Esher MR commented that a court 'has no right to imply in a written contract any such stipulation, unless, on considering the terms of the contract in a reasonable and business manner, an implication necessarily arises that the parties must have intended that the suggested implication should exist.' The judgment of Priestley JA in Renard Constructions v (ME) v Minister for Public Works (1992) 26 NSWLR 234 at 257 - 258 is a recent, and if I may respectfully say so, lucid expression of this view.

[160]

To my mind, these authorities indicate that the requirement that a term be 'necessary to give business efficacy to the contract' does not mean that the term must be so necessary that without the term the contract would, for all purposes be ineffective, but that the term must be necessary to make the contract effective and workable according to the presumed intention of the parties, as disclosed by the terms of the contract and the admissible surrounding circumstances. So obvious it goes without saying 50. The requirement of obviousness has been tested by asking whether the parties would have readily agreed on the proposed implied term if it had been suggested to them in the course of their negotiations: Shirlaw v Southern Foundaries (1926) Limited [1939] 2 KB 206 at 227 per MacKinnon LJ, Codelfa Constructions Pty Ltd v State Rail Authority for NSW (supra, at 374 per Aickin J). The requirement involves a considerable degree of overlap with that of business efficacy and in that sense addresses itself not to the actual intentions of the parties but to their presumed intention as reasonable persons as disclosed by the contract and surrounding circumstances: Heimann v Commonwealth (1938) 38 SR (NSW) 691 at 695 per Jordan CJ. Capable of clear expression 51. The requirement that a term be capable of clear expression is one which has two elements. First, the term upon which the parties would have agreed had the matter at issue been drawn to their attention must be clear. Thus, in Codelfa (supra, at 356) Mason J rejected the term which it was contended should be implied because 'it was a case in which the parties made a common assumption which masked the need to explore what provision should be made to cover the event which occurred. In ordinary circumstances negotiation about that matter might have yielded one of a number of alternative provisions, each being regarded as a reasonable provision .' [emphasis added] Similar comments appear in the judgment of Aickin J (at 375).

[161]

The second element of this requirement is that the term to be implied must be one capable of being 'formulated with a sufficient degree of precision:' Shell UK v Lostock Garage Ltd [1976] 1 WLR 1187. In Ansett Transport Industries (Operations) Pty Limited v Commonwealth (1977) 139 CLR 54 at 62 Gibbs J nominated the 'width and lack of precision' of the suggested implied term as an argument against its implication. It was upon this basis that Viscount Simon LC in Luxor (Eastbourne) Ltd v Cooper [1941] AC 108 at 115 - 117 rejected a suggested implication which applied in the absence of 'reasonable cause' because of the difficulty of determining what is a reasonable cause: see also the comments of Rolfe J in Hungry Jacks v Burger King [1999] NSWSC 1029 (unreported, 5 November 1999 at para 432). However, given the willingness of the Court of Appeal to imply a qualification of reasonableness on the exercise of certain contractual powers, it seems probable that a less stringent view of the requirement of certainty than that adopted by Viscount Simon is appropriate: Renard Constructions (ME) Pty Ltd v Minister for Public Works (1992) 26 NSWLR 234, Hughes Bros Pty Ltd v The Trustees of the Roman Catholic Church for the Archdiocese of Sydney (1993) 31 NSWLR 91, Alcatel Australia Ltd v Scarella (1998) 44 NSWLR 349. It would appear the modern approach is that stated by Bridge LJ (as his Lordship then was) in Shell UK Ltd v Lostock Garage Ltd (at 1204): 'It is said that lack of precision in the criterion to be embodied in the implied term is fatal to any implication. But it is no novelty in the common law to find that a criterion on which some important question of liability is to depend can only be defined in imprecise terms which leave a difficult question for decision as to how the criterion applies to the facts of a particular case. A clear and distinct line of demarcation may be impossible to draw in abstract terms; yet the court does not shrink from the task of deciding on the facts of any case before it on which side of the line the case falls. This kind of pragmatism is so deeply entrenched in the common law's approach to a multitude of legal problems that I decline to accept that the difficulty of defining with precision what term is to be implied in this case is an insuperable obstacle to the implication of any term limiting the plaintiffs freedom to discriminate.'

[170]

A subsequent decision of the High Court in Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd (1979) 144 CLR 596 illustrates the limits of the obligation to co-operate. There the appellant sold to the respondent land on which was situated a large office block. The purchase price was stipulated as a certain amount, but was subject to a reduction if evidence to the reasonable satisfaction of the purchaser was not produced showing that aggregate rents reached a certain sum. If the latter sum was not reached, the purchase price was subject to a reduction equal to the proportion by which the rents fell short of that certain sum. When it appeared that the vendor would not be able to produce evidence showing aggregate rents had reached a certain sum, the vendor offered to lease part of the building itself to permit aggregate rents to reach the stipulated sum. The purchasers refused. It was common ground that the contract imposed an implied obligation on each party to do all that was reasonably necessary to secure performance of the contract. After quoting Lord Blackburn in Mackay v Dick and Griffith CJ in Butt v M'Donald , Mason J (with whom Barwick CJ, Gibbs Stephen and Aickin JJ agreed) said (at 607 - 608): 'It is easy to imply a duty to co-operate in the doing of acts which are necessary to the performance by the parties or by one of the parties of fundamental obligations under the contract. It is not quite so easy to make the implication when the acts in question are necessary to entitle the other contracting party to a benefit under the contract but are not essential to the performance of that party's obligations and are not fundamental to the contract. Then the question arises whether the contract imposes a duty to co-operate on the first party or whether it leaves him at liberty to decide for himself whether the acts shall be done, even if the consequence of his decision is to disentitle the other party to a benefit. In such a case, the correct interpretation of the contract depends, as it seems to me, not so much on the application of the general rule of construction as on the intention of the parties as manifested by the contract itself.'

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18.5 That each of Valance and Valance Corp would act in good faith in the exercise and performance of their respective rights, powers and obligations in and under the Management Agreement. 131 Clearly it may be said of both the first and second terms [Summons paragraphs 18.1 and 18.2] that each is appropriate to be implied to give efficacy to the particular contract here in focus. Indeed the obligation or benefit provided for by each of the first and second terms is of such a fundamental nature that it may be said that the parties would not have entered into the Agreement without an assurance of strict or substantial performance of the obligation or an assurance of the benefit or a real and genuine chance to gain the benefit, so that each such term is appropriate to be implied as satisfying the test for the implication of terms in fact without further analysis. 132 Insofar as the third and fourth terms [summons paragraphs 18.3 and 18.4] are concerned this is an area in respect of which it is necessary to tread warily. The matter received extensive treatment in Mobile Innovations Limited v Vodafone Pacific Limited [2003] NSWSC 166 in particular at [695]-[728] by way of a survey of case law with respect to the implication of a term in connection with the maintenance of a business. For present purposes neither of the third or fourth terms seems to me to have any particular special significance and Biscayne's case in contract is precisely the same even had neither of these terms been pleaded. The repudiation of the Agreement which is established goes the full distance of giving to Biscayne its entitlement to damages for breach of contract. And likewise the proven breaches of the first two implied terms embrace and include any form of contractual damages which might, if the third and fourth terms were held to be implied, have been available for breach of those terms. The difficulty raised by the third and fourth terms is more usually something which arises where in a commercial relationship, a claim is made for a breach of an implied term in contract in connection with the business of which the defendant had made the plaintiff an agent. The question which arises is whether the defendant is obliged to carry that business on. Can the business or relevant entity simply cease its activities as by going out of business? Those cases usually concern a business or entity coming to an end by independent circumstances not created by the defendant themselves. 133 It is sufficient for present purposes to accept that the Valance parties having entered into the subject Agreement which could only take effect by the continuance of a certain existing state of circumstances, the court will imply a term on their part that they will do nothing of their own motion to put an end to that state of circumstances under which alone the arrangement can be operative. This likely means that in this particular case both of the third and fourth terms may be implied and are seen as satisfying the 5 point test enunciated in BP Refinery (Westernport). Each is implied in fact, as necessary to enable the Agreement to operate according to its terms and being reasonable, by reason of the nature and terms of the whole of the Agreement. And in my own view each of these terms is also appropriately implied as a matter of necessary implication from the other terms of the Agreement. 134 As to the fifth term it may clearly be implied. As a general proposition, the current state of the law in New South Wales is that there will usually be implied by law into commercial contracts made between parties at arms length, a term requiring the exercise of good faith in the performance of such contracts. Such a term takes its place alongside the implied obligations: · to do all such things as are necessary to enable the other party to have the benefit of the contractual promise; · not to hinder or prevent the fulfilment of the purpose of express promises made in the contract. [ Alcatel Australia Ltd v Scarella (1998) 44 NSWLR 349, Burger King Corp v Hungry Jack's Pty Ltd [2001] NSWCA 187] 135 The recent decision of the New South Wales Court of Appeal in Burger King Corp v Hungry Jack's Pty Ltd [2001] NSWCA 187 includes some particular focus upon the implied term of reasonableness, making the point that the Australian authorities make no distinction of substance between that term and the implied term of good faith. The close association of ideas between the terms 'unreasonableness', 'lack of good faith' and 'unconscionability' is emphasised in Burger King at para 170 and para 171 where the judgment of Priestley JA in Renard Constructions (ME) Pty Ltd v Minister for Public Works (1992) 26 NSWLR 234 at 263 and 265 is cited. 136 In Burger King, the Court said at paragraph 171: 'Rolfe J observed that in Alcatel, Sheller JA at 369 appeared to equate the notions of "reasonableness" and "good faith". Whilst Sheller JA did not say that in terms, his review of the case law and academic and extra-judicial writings on the topic, clearly support the proposition." 137 The nature and extent of the duty was recently considered by Barrett J in Overlook v Foxtel [2002] NSWSC 17:

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Standing back from the detail/Overview perspective 138 Ultimately it is necessary for the Court to stand back from the detailed evidence and to reach findings on the material issues. A number of findings have already been set out in summary form. 139 By far the vast volume of the evidence adduced went to the general question as to whether or not Biscayne, [by Mr Michaelson], by a relevant failure of performance of contractual obligations imposed by the Agreement, has so deprived the Valance parties of what they had bargained for as to justify termination out of hand and without notice. That is to say, was that conduct repudiatory so as to justify termination. The repudiation was said to be justified by past breaches of contractual obligations. 140 Albeit the finding that the failure of the Valance parties to comply with the clause 14.1 procedure removes this as an issue, I propose to deal with the matter in deference to the amount of evidence called on the issue. 141 It is convenient to commence by summarising some of the relevant basal principles. Repudiation 142 The following propositions are taken from the joint judgment of Deane and Dawson JJ in Laurinda Pty Ltd v Capalaba Park Shopping Centre Pty Ltd (1989) 166 CLR 623: · "[R]epudiation of contract is a serious matter and is not to be lightly found or inferred ": Ross T Smyth & Co Ltd v T.D. Bailey Son & Co [1940] 3 All ER 60; · An issue of repudiation turns upon objective acts and omissions and not upon uncommunicated intention: Laurinda at 658; · The question is as to what effect the conduct of the entity said to have repudiated would be reasonably calculated to have upon a reasonable person: Laurinda at 658; · "It is not necessary for repudiation of a contract that the repudiator make plain that he will never perform his contractual obligations at all. What Lord Dunedin described (Forslind v Bechely-Crundall [1922] SC (HL) 173 at 190] as the assumption of 'a shilly-shallying attitude in regard to the contract' and what Lord Shaw of Dunfermline [Forslind at 192] called 'procrastination…persistently practised' can, in some circumstances, reach the stage of repudiation even though accompanied by assurances of ultimate performance at some future time. In that regard, the law was correctly stated by Lord Shaw in the following extract from his judgment in Forslind [at 191-192] which is directly in point to the circumstances of the present case: "If, in short, A, a party to a contract, acts in such a fashion of ignoring or not complying with his obligations under it, B, the other party, is entitled to say: 'My rights under this contract are being completely ignored and my interests may suffer by non-performance by A of his obligations, and that to such a fundamental and essential extent that I declare he is treating me as if no contract existed which bound him'…In business over and over again it occurs - as, in my opinion, it occurred in the present case - that procrastination is so persistently practised as to make a most serious inroad into the rights of the other party to a contract. There must be a stage when the person suffering from that is entitled to say: 'This must be brought to an end. My efforts have been unavailing, and I declare that you have broken your contract relations with me:"" [Laurinda at 658-659]; and · "The question whether the stage has been reached when procrastination or non-performance constitutes repudiation is essentially one of fact. The question will, as has been said, only be properly answered in the affirmative when procrastination or non-performance has reached the stage of conveying to a reasonable person, in the situation of the other party, repudiation or disavowal either of the contract as a whole or of a fundamental obligation under it.": Laurinda at 659.

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143 The test for anticipatory breach so carefully examined in Amann Aviation would of course require the Court to determine whether it may be inferred that the conduct of the party said to have repudiated was such as to lead a reasonable man to conclude that he did not intend to fulfil his part of the contract. Dealing with the issue Finding 144 The Court's ultimate finding is that the proposition that by the date of the first termination letter Biscayne had repudiated the Agreement is not made out on the evidence. I turn to deal with that matter. In doing so it is necessary to focus upon the first termination letter and its allegations as well as such other repudiatory conduct as appears to have been litigated. There are some difficulties in relation to the pleading in this regard which simply asserted that the Agreement had been terminated by the first termination letter, there being no particulars as to any complaints extending outside of what was said in that letter [and which in some circumstances one might find pleaded as giving additional facts and reasons even if not dealt with in the letter but being put forward also to justify the validity of the first termination letter]. [cf Shepherd v Felt and Textiles of Australia Ltd (1931) 45 CLR 359 at 377-378] 145 Nevertheless at an evidentiary level it is proper for the Court to infer that careful instructions were taken in relation to the drafting of the first termination letter and that the first termination letter was generally seen at the time as putting forward the real gravamen of those complaints which were thought to be available to be put forward. I interpolate to note a finding that the letter was clearly specious insofar as the initial allegations said to justify the avoidance ab initio by Ms Valance were concerned. The cross examination of both Ms Valance and Ms Stevens read in the light of the evidence as a whole, including the detail of separate legal representation, supports a finding that not one of the grave allegations of misconduct in relation to the negotiations leading to and entry into of the Management Agreement had a shred of substance. 146 The reservation of non exclusivity in relation to the identification of the complaints is noted but it would be unlikely that some other very specific form of complaint which was believed by the Valance parties at the time to be a proper ground of complaint would not have been put forward in this letter. 147 The difficulty is because the first termination letter was so very wide in its general allegations, indeed purporting to give non-exhaustive examples of failures to discharge basic management responsibilities. If one was to endeavour to extract from the first termination letter the precise heads of complaint they appear to be: · a failure to show any meaningful interest in Ms Valance's career in the entertainment industry ["allegation 1"]; · a complaint with respect to lack of involvement in the securing or negotiating of Ms Valance's publishing agreement with Engine Room ["allegation 2"]; · a complaint with respect to lack of involvement in the securing or negotiating of Ms Valance's recording agreements with Engine Room ["allegation 3"]; · a complaint with respect to lack of involvement in the securing or negotiating of Ms Valance's recording agreements with London Records ["allegation 4"]; [in relation to allegations 2-4 the complaint appears to be that the relevant negotiations on behalf of Ms Valance were overseen by Ms Stevens who was frequently unable even to contact Mr Michaelson or to persuade him to take an interest]; · a complaint as to Mr Michaelson having failed to play any part in the activities of Ms Valance as a recording artist [non exhaustive examples being given by way of his alleged failure to make any contact whatsoever with London Records; his failure to organise or accompany Ms Valance on three trips to Europe or to make alternative arrangements for anyone to accompany her and his alleged general lack of interest in terms of recording activities] ["allegation 5"]; and · a complaint that Mr Michaelson's limited efforts to secure employment for Ms Valance had exclusively involved her appearing in a state of semi-undress in salacious and titillating advertisements and promotional events which invaded her privacy and significantly damaged her long-term career prospects ["allegation 6"]. 148 In the course of final submissions the Valance parties submitted as follows:

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The breaches by Biscayne of its core obligations in clause 4.1 of the Management Agreement were that it failed to: · represent Valance Corp and Holly Valance in negotiations regarding terms of the various contracts between Valance Corp or Holly Valance with any of London Records and Engine Room during the latter half of 2001 [ I interpolate that the matters litigated suggest that this claim may be regarded as a restatement of allegations 2,3 or 4]; · supervise Holly Valance's professional employment ["allegation 7"]; · negotiate and liaise with record companies, publishers and distributors [I interpolate that here again the matters litigated suggest that this claim may be regarded as a restatement of allegations 2,3 or 4]; · keep Valance Corp informed of all matters which arose for consideration in relation to Holly Valance's career; and be reasonably available to consult with Valance Corp ["allegation 8"] [I interpolate that this allegation appears to extend somewhat outside of, but to overlap with, the matter described above as allegation 4]. 149 I proceed below to deal with each of these allegations as well as with some of the other matters which, if they be open on the pleadings, were the subject of some cross-examination. Lack of complaint 150 Even before turning to the specific allegations there is one matter which is pervasive as an indicator in many respects. Where serious grounds for complaint exist in most walks of life, including the world of breach of contract, it is unusual in the extreme to find that there are no or only minimal complaints of wrongdoing. And notwithstanding the few suggestions in the evidence of Ms Valance to the effect that she had sometimes made a complaint of things that had not been done [as in relation to arrangements for flights or the particular name in which a ticket had been issued, or where she asked why Mr Michaelson was not there or had not come to see her], bearing in mind the type, nature and range of complaints upon which the Valance parties have relied in these proceedings in support of the proposition that Mr Michaelson had repudiated the Agreement, the simple fact of the matter which cries out for attention is that on the evidence there was never an occasion when Mr Michaelson was stood up either by Ms Valance or by Ms Stevens, and when these complaints or anything remotely like them were squarely put to him. Indeed on the one occasion in early 2002 when events were coming to a head, and when Ms Stevens had a lengthy conversation with Mr Michaelson, she did no such thing. One example in the evidence confirmatory of this finding is Mr Wagstaff's evidence that prior to 26 July 2001 Ms Valance had never complained to him of Mr Michaelson's performance. [Transcript 647] Lack of capacity [not put as a ground in the first termination letter] 151 It is quite clear from the evidence that at some time Ms Valance formed the view that Mr Michaelson was not capable of managing her in relation to her recording career [Transcript 398.48]. Under cross-examination her evidence was:

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COBDEN: For example, or an employee. It is a management company. Coming out of its share, it could have for example on the days when, on our case, Ms Valance was left to record or do a showcase for Mr Hollingsworth of London Records without a shred of management assistance for support, could have had somebody there to do it. It doesn't have to turn on his lack of supplying the requisite expertise. [Transcript 54] Experience 156 It cannot be suggested that Mr Michaelson had the background experience or capacities of Mr Fowler in relation to managing recording artists. However Mr Michaelson did have some, albeit limited, experience in working with record companies [Transcript 168-169]. When asked under cross-examination which were the record companies he had dealings with prior to August 2001, Mr Michaelson made reference to Standard Records (Ralph Carr), Edel Records (through Phillip Moross of Cutting Edge), Engine Room and Warners (through Mr Caplice). [Transcript 167, 184] Mr Michaelson liased with these people and companies on behalf of Ms Valance. 157 Mr Michaelson met Mr Caplice for the first time on a flight on 21 November 1999. [Michaelson, 1, 62-63] It was Mr Caplice who put Mr Michaelson in touch with Engine Room representatives. Mr Caplice also provided Mr Michaelson with advice and information about Messrs Carr and Klippel and their respective record companies at a meeting on 6 June 2000. [Michaelson, 1, para 115] 158 He had also dealt on behalf Ms Nicola Charles and in his capacity as for manager, with Tony Cochran, London Records label out of England. Ms Charles had recorded a White Label. Inference 159 Significantly the Valance parties seek that the Court infer this lack of capacity from the evidence generally relating to the manner in which, once the Engine Room contract had been entered into, Mr Michaelson stepped back and permitted Mr Klippel and Mr Wagstaff on to centre stage in terms of handling and dealing with the next stage in Ms Valance's career. That inference cannot appropriately be drawn from these circumstances. The evidence discloses that Mr Michaelson was put in contact with Mr Klippel by Mr Caplice; that Mr Klippel was known to him as the lead singer in Euphoria; that he knew of Mr Klippel and that he was someone who had good vision and was a good songwriter, someone who had worked with "great people" all around the world and was very well-respected in Los Angeles and London and had been involved in a lot of great tracks and was "an up-and-coming person" [Transcript 290]. He had had an initial meeting with Mr Klippel and was fairly impressed with him and his vision and gave evidence that "he seemed like someone who was moving in the right direction". He knew of the band of four girls known as 'Lash' which Mr Klippel had just been promoting and was happy with the music. [Transcript 290]. His evidence was:

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· arranging night club appearances [Valance, paras 39-40]; · photographic shoots, including FHM, Inside Sport [Michaelson, 1, para 91] and Shout magazines; · liasing with representatives from Foxtel about Ms Valance obtaining work on Foxtel [Michaelson, 1, para 91]; and · clothing deal with Cutting Edge [Michaelson, 1, paras 29-30]. Allegation 2 - lack of involvement re Ms Valance's publishing agreement with Engine Room 163 There was very little evidence given in relation to this issue. Such evidence as was given in particular by Mr Klippel [Transcript 535-536] makes clear that Mr Michaelson was in fact involved in the negotiation of the Engine Room Music publishing agreement and had initially refused to be prepared to have Ms Valance and Valance Corp sign the agreement in the first form in which it had been put up because it was a long form publishing contract with which he was dissatisfied in terms of a number of aspects. Mr Klippel also accepted that Mr Michaelson negotiated with himself and Mr Wagstaff to a degree in relation to the agreement. 164 Mr Michaelson was not a lawyer. He put Ms Valance and Ms Stevens and by them, Valance Corp in touch with an experienced entertainment lawyer, Mr Oaten. Mr Klippel gave evidence that Mr Oaten was a prominent music industry lawyer who was known to him before he began to deal with him in relation to Ms Valance; that he had not had any doubts about Mr Oaten's capacity to represent Ms Valance; that Mr Michaelson informed him he had retained Mr Oaten to represent Ms Valance in dealings with Engine Room; and that it was his experience that managers of recording artists negotiating an agreement brought in lawyers and accountants [Transcript 522]. The Agreement whilst obliging Mr Michaelson to represent Valance Corp and Ms Valance in negotiations regarding the terms of all contracts for personal services did not mean that he and he alone would be knee deep in those negotiations. Mr Klippel gave evidence that in his experience sometimes managers or managing agents negotiated directly with Engine Room and sometimes they, by reference to the solicitor for the artist, kept an eye on and were in touch with the negotiation. [Transcript 523] 165 Mr Michaelson was entitled to assume, as in fact happened, that Ms Stevens [in close communication with Ms Valance] would be advancing these negotiations towards achieving a publishing agreement, by a very close solicitor client relationship with Mr Oaten. There does come a stage when a managing agent is entitled to step back having satisfied itself that proper arrangements are in place for the settling by close negotiation of the relevant publishing agreement with the entity [Engine Room] to which the managing agent, in a skilful exercise of its obligations, has succeeded in introducing the Artist. 166 The evidence of course quite plainly establishes that Mr Michaelson carried out a deal of close activity in the primary role of interesting Engine Room in Ms Valance. 167 There is no substance in allegation 2. Allegation 3 - lack of involvement in the securing or negotiating of Ms Valance' s recording agreements with Engine Room 168 Nor is there any substance in this allegation, and for much the same reasons as have already been treated with in relation to allegation 2. Mr Michaelson gave the following evidence which is accepted as reliable in his first affidavit [141-143]:

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170 Here again Biscayne cannot in my view be said to have breached its relevant contractual obligation and for the above reasons. Again it was in association with Mr Oaten that the Valance parties carried out the fine-tuning in terms of the negotiations and this was relevantly unexceptional. Allegation 4 - lack of involvement in the securing or negotiating of Ms Valance's recording agreements with London Records 171 It is convenient to commence with a general overview of the evidentiary landscape in relation to this allegation which overlaps with allegation 5 and in relation to which a very great deal of the cross-examination took place. Stepping back - the evidentiary landscape 172 It is clear from the evidence that once the Engine Room contract had been signed Mr Michaelson stepped back and generally thereafter substantially restricted his further involvement in the nuts and bolts of Ms Valance's recording career. A major issue litigated was whether he had stepped back too far in this respect. Perhaps he had, as a matter of general discourse, but this judgment does not deal with general discourse. For the Court the question is whether, in the approach which he took, his actions, are shown within the principles outlined in Laurinda, to have constituted a repudiation of the Agreement. To answer that question the Court must look at the whole of the evidence. In short terms the evidence on this issue may be said to amount to the following: · At the time when the Agreement was executed, it was not known whether, and if so to what extent, Ms Valance's career would be one of a pop singer, although clearly the possibility of a singing career, perhaps in tandem with an acting career, was on the cards. · In relation to the singing career possibility, as already stated, there can be no criticism of Mr Michaelson's promotion to Valance Corp and Ms Valance of Engine Room and of the Engine Room Contract. Engine Room was a perfectly acceptable, albeit relatively small production company. Mr Hollingsworth gave the following evidence: Q. Mr Hollingsworth, you had apparently quite a deal to do with Mr Klippel and Mr Wagstaff. Can you please in relation to each of them shortly tell us what you from your dealings with them perceived to be their competence, ability, field of endeavour and the like, because, well, you seem to have had a lot of dealings with similar persons in your life, and I'd like to know your assessment in that regard?

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Q. And at all times Engine Room has had ample funds to develop artists that were considered worth developing? A. Yes. [Transcript 520] · Ms Stevens gave evidence that she formed the views that Mr Klippel was experienced in the music industry in relation to recording and the promotion of recording artists; that he was a suitable person to further the development of Ms Valance and her career in that area; that at all times he was doing his best to do that; that she considered him to be a person who would give appropriate guidance concerning music to Ms Valance; that she considered him to be a person who would give appropriate guidance concerning the sort of music which would further Ms Valance's career, hopefully, to make her a recording artist of note; that so far as she was aware Mr Klippel always did that; that as far as she was aware Mr Wagstaff always did what he had to do in that connection to further Ms Valance's career; that she did not have any complaints in relation to Mr Klippel's or Mr Wagstaff's efforts to get a deal with London Records and Mr Hollingsworth; that she did not have any complaints with the substance of the deal which they got and found Mr Klippel to be a pleasant person and someone with whom she could work in relation to the business affairs of Ms Valance; and that the position was the same in relation to Mr Wagstaff. [Transcript 316-317] · Ms Valance gave evidence that after she initially met Mr Klippel, she attended at a number of meetings with him before the Engine Room Music agreement was signed in December 2000; that they would talk about creative things, styles of music, signing to majors and the like; that she found him to be a person who she thought was knowledgeable in relation to music in general; that she regarded as someone who appeared to know what he was talking about in relation to popular music and the development of her career, and that he was a person upon whom she was happy to rely in relation to her recording career and its development. [Transcript 369] · Ms Valance also gave evidence in relation to the role which Engine Room had in persuading a major, namely London Records to take her on: Q. And you knew at that time [11 August 2001] that Engine Room had the worldwide rights to you as a recording artist, to put it broadly? A. Yes.

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Q. And you, yes. And you, that's so. But Engine Room to your mind at the time was a necessary participant in any deal to get a major in? A. They were very important, yes. · Mr Michaelson gave evidence that at the time of the negotiations of the agreement with Engine Room he had been told by Engine Room that they had the capability of releasing worldwide with their contacts. [Transcript 172] · It is clear that the whole issue of the possibility of being introduced to London Records occurred by reason of the contacts, approaches and suggestions of Mr Klippel leading to the opportunity of Engine Room to deal with London Records in terms of the negotiation for the replacement contract. Mr Klippel gave evidence that his view [which developed from the middle of 2000 and firmed up by the end of 2000] was that it was not appropriate for Mr Michaelson to be involved in the negotiations to obtain a United Kingdom major. His evidence which is accepted in this regard was that this had also been the view expressed to him by Mr Wagstaff at the time. Importantly it was also Mr Klippel's view that Engine Room had the main responsibility for the conduct of the negotiations with the United Kingdom major, that this was how it had turned out and that this was how Engine Room had wanted it to be. His evidence was that Engine Room had wanted this to be the case not only because it had the contractual rights to Ms Valance, but also because of Engine Room's expertise in dealing with majors in respect of recording artists and that as far as he was aware this was also Mr Wagstaff's view at the time. [Transcript 525-527]. It was put to Mr Klippel that he had suggested to Mr Michaelson that he would not need to be involved in negotiating the deal with London Records. When the question was first put to him, as the transcript records, there was a reasonable length of time before he responded effectively that he could not recall. He later accepted that he could not deny that this may have been said although he could not recollect putting the matter in those terms. The Court's finding is that Mr Klippel gave reliable evidence of his best recollection but that in this particular instance, he clearly could not be certain of what he had said. To the contrary Mr Michaelson's evidence [first affidavit paragraph 223] is accepted as reliable: he recalled a conversation with Mr Klippel who informed him: "The deal with London Records will be between Engine Room Music and London Records. Valance Corp and you will not need to be involved in negotiating the deal". His further evidence, also accepted as reliable on this matter, was that he understood at that time and until the middle of November 2001 that there was no need for him to be involved directly in the negotiations as it was to be a deal between the two record companies whereby Engine Room shared its world wide exclusive recording rights with London Records. Likewise his evidence, also accepted as reliable (first affidavit paragraph [224]), was that in about the middle or late November Mr Wagstaff telephoned him and said "We have virtually finalised our deal with London Records but London Records now want to do the deal in London Records name and Ms Valance's name. The deal is going to be better for Holly". · The Court also accepts as reliable the evidence given by Mr Michaelson [in paragraph 227 of his first affidavit] that in October 2001 Mr Oaten told him to wait until the London Records deal was finalised before meeting with Mr Hollingsworth. Based on this advice Mr Michaelson whose evidence is accepted in this regard, did not arrange to meet with London Records when in London so as not to jeopardise the deal. · Albeit that Mr Michaelson was generally very much on the outer edge of the arrangements and dealings concerning selection of tracks to be or being recorded, his evidence which is accepted, is that he did have occasion to meet with Mr Klippel and was given a CD of all the tracks which had been recorded overseas and gave his opinion of what he thought was good and did not think was good, his opinion being the same as that of Ms Valance, so that his opinion was "taken on board" [Transcript 182]. His evidence was that Ms Valance was recording many different songs and he was comfortable with Engine Room coming up with a variety of songs and for him to listen to those songs when the tracks were received which were played to him on many occasions and to give his opinion on them. [Transcript 215]. Having said that, it does appear from the evidence that Mr Michaelson to use his words: "[f]elt as time went on that, in hindsight, that they [Engine Room] had left me out of vital communication,.." [Transcript 182.50] A deal of the evidence justifies this view. · The negotiations between Engine Room and London Records which resulted in the London Records Agreement critically involved what was in effect a replacement of the Engine Room Contract. For that reason it is hardly surprising that Engine Room were so very much involved in the negotiation of the Agreement. There is no doubt but that Valance Corp by Ms Stevens (whom the evidence discloses was in very close communication at all material times with Ms Valance in relation to the affairs of and contracts being negotiated by Valance Corp - [Transcript 387.42, 397.29]) was obtaining close advice in relation to the terms of the London Records Agreement, inter alia, from Mr Oaten who gave legal advice and also gave advice as to matters such as percentages [Transcript 304.52] and on her evidence also from Mr Kirby who was Valance Corp's accountant [Transcript 323] . In those circumstances there is a strong complaint in relation to Mr Michaelson's relevant absence from being involved in the negotiations as to the precise terms of the London Records Agreement. To my mind, although the criticism in this regard does have some substance, the proper perspective is to view the whole of the re-negotiation against the background that it is correct to say that Engine Room which had the relevant worldwide rights, would necessarily always have been integrally involved as the moving party where the Replacement Agreement which was in effect diluting and altering the anterior Agreement, required Engine Room's consent and acquiescence. The fact that the London Records Agreement included significant provisions which, in dealing with the rights and obligations of Ms Valance and Valance Corp, went further than those to be found in the Engine Room Agreement, does suggest a particular materiality in Biscayne playing a part in the negotiation. However Mr Michaelson had been the one who introduced the Valance parties to Mr Oaten initially. It is correct to say that by the time the London Records Agreement was being negotiated, to a certain extent it was only Engine Room which had the necessary muscle/bargaining power to press particular provisions where they may affect its anterior rights under its Agreement. Likewise it is fair to say that Mr Michaelson, who was also a client of Mr Oaten, continued to be in contact with Mr Oaten, learning in a general way of developments. But ultimately this is an area where Biscayne had an obligation to represent Valance Corp and Ms Valance in negotiations regarding the terms of the contract [Agreement Clause 4.1]. There is a deal to be said in relation to Biscayne having fallen down in terms of discharge of this obligation, but to my mind in weighing this failure in terms of suggested repudiatory conduct, one critically needs to bear in mind the already identified statements by both Mr Klippel and Mr Oaten each to Mr Michaelson's knowledge in close contact with Ms Stevens (with whom Ms Valance was in close contact), warning him to keep clear. One also needs to turn to more of the evidence to follow the circumstances in which this failure occurred. 173 There can be no doubt but that the achievement of the London Records Agreement represented a signal enormous step in terms of Ms Valance's career and possibilities. And it had all come about through Mr Michaelson having initially introduced Ms Valance to Engine Room which, through the care and careful husbanding of Ms Valance's career by Mr Klippel, had led to London Records. Mr Klippel gave the following evidence in this respect:

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Q. Yes. Someone from London Records, presumably, if that's what you're saying happened . A. Someone would have - it would have been spoken about after the period of the Alfie Hollingsworth dinner, after that kind of period, but I was aware of it preceding that personally . [Transcript 528-529] 177 The Court's finding on the evidence is that for a considerable part of 2001 but most particularly from mid year onwards, the writing was on the wall for Mr Michaelson in terms of Biscayne's Management Agreement. The whole tenor of much of the evidence bears this proposition out. In particular the Court accepts the evidence given by Mr Michaelson to the effect that he only learned that Mr Hollingsworth was coming to Australia about a week before 11 August 2001, had been told that he had to be present on the Saturday night, and either had not been told about the arrangement that Ms Valance perform a showcase on the same day (learning of it only after the event, on the night in question) or could not recall even having been told that. [Transcript 176] 178 The close out mindset of both Ms Valance as well as Ms Stevens colour many of the complaints as to Mr Michaelson's conduct during a deal of the 2001 year but most particularly during the period from mid-year onwards. What was happening surfaced at least on 26 July 2001 when Mr Michaelson met with Mr Klippel and Mr Wagstaff at the Bambini Trust Cafe in Sydney to discuss Ms Valance's recording deal. Whilst there is some degree of conflict in relation to the relevant evidence before the Court, the Court's finding is that Mr Klippel and Mr Wagstaff expressed the strong view that they needed a United Kingdom manager to look after Ms Valance or would not be able to do a deal with a United Kingdom major. On the Court's findings they tried to insist that Mr Michaelson step aside as Ms Valance's managing agent in the United Kingdom but he refused. There is no doubt that reference was made to the vastly improved prospects of having an established manager in United Kingdom in terms of Ms Valance's career. 179 Returning for the moment to the meeting at the Bambini Trust Cafe Mr Klippel accepted under cross-examination [Transcript 531] that at this meeting Mr Michaelson had said words to the effect:

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"I will be Holly's United Kingdom manager and I will go to the United Kingdom when she moves over there. If necessary, I will use the advice of experienced United Kingdom managers when the time comes." 180 For Mr Michaelson, "it was a turning point because they changed their direction with me" [transcript 142]. The reality of the change was however not to be communicated to him until he received the much later first termination letter. He was still liaising with the producers of Neighbours on behalf of Ms Valance in relation particularly to obtaining time away from the cast. 181 Bearing in mind the very close and increasingly frequent contacts and communications which had for some time already been the order of the day, between Mr Klippel and Mr Wagstaff of the one part and Ms Valance and sometimes Ms Stevens of the other part, and the continuance and increased frequency of those communications from this point in time onwards, the Court is able to infer that the perceptions of Mr Klippel and Mr Wagstaff as to the need for a United Kingdom manager were shared at all material times with Ms Valance as well as Ms Stevens. This is a very important matter to keep in mind because across the whole of the period from mid-2001 up to the first termination letter, any suggested shortcomings by Mr Michaelson/Biscayne in the discharge of contractual obligations imposed by the Agreement are coloured by the dice being so heavily weighed against Mr Michaelson/Biscayne, and importantly, on the Court's findings, being so weighed in the absence of any communication to Mr Michaelson of that fact. He continued to be entirely unaware of what was happening in this regard. The one glimmer of light came from a call in which [on Mr Michaelson's evidence which is accepted as reliable on this matter] Mr Wagstaff said that Mr Michaelson would not be around much longer as her manager. But this was completely deflected both by Ms Valance [Michaelson first affidavit paragraph 241] and by Ms Stevens [Michaelson first affidavit paragraph 242], neither giving Mr Michaelson a hint as to the hidden [from him] agenda. 182 Mr Klippel gave the following further evidence [Transcript 552]: HIS HONOUR: Q. This statement in this e-mail that you read, "Obviously London Records will decide how they want to play this", was it your perception that that was the case, that it was London Records who would decide how they wanted to play the whole scene concerning termination of the management and call the shots? A. Well, yeah. I mean, London Records were directly affected because their investment is so high in an artist of this nature that they would be expecting to be working with somebody that could bring a lot to the equation in terms of television and radio and promotion, to working with the label. All these big pop artists have that ability and, I mean, they were kind of sold on that at that dinner, so I think that, you know, that's why London Records were important in the equation. If it was Australia, then it could be - it could have worked with Scott, I think, you know, in that sense.

[240]

Q. Well, at the time that the London Records agreement was being negotiated and signed, as you recall it, was it or was it not the case that the real backdrop to the whole enterprise was that everyone that you dealt with from the London Records side of the equation were clear that Scott Williamson [sic] would not be the manager; there would be a London manager ? A. Yes. 183 Much of the cross-examination involving not only the 11 August 2001 meeting and showcase with Mr Hollingsworth, but also involving suggested shortcomings by Mr Michaelson in failing to assess or to be relevantly involved in the selection of which songs should be recorded, and in relation to the recording of Kiss Kiss, might be entirely differently assessed in terms of suggested repudiatory conduct but for the fact that Ms Valance and Ms Stevens were on the Court's findings, already in mindset that Mr Michaelson was to go. It was not a question of whether he was to go. The only question was when and how. And the evidence even answers that question reasonably clearly in terms of a contemporaneous e-mail dated 20 December 2001 from Ms Stevens to Mr Klippel: "Obviously London Records will decide how they want to play this and we will wait to hear from you" [Transcript 333]. It is a short step for the Court to infer that London Records actually had the running, the clear evidence being that London Records wanted the Agreement terminated [Transcript 334]. As the evidence discloses, clearly by late December 2001 knowledge of 'this accident waiting to happen' was being shared by Ms Valance, Ms Stevens, Mr Klippel, Mr Wagstaff and Mr Oaten. Under cross-examination Mr Klippel recalled that towards the later part of 2001, Ms Stevens discussed with him the desirability of terminating Mr Michaelson and the Biscayne Management Agreement. He accepted that Ms Stevens had said to him words to the effect "we are going to terminate the contract" and that he had said words to the effect "okay". He indicated to her that the appropriate course would be to speak to a lawyer with a view to terminating the Agreement. [Transcript 533-534] [cf Transcript 547.26] 184 The matter had been germinating certainly from July/August 2001 and in the mind of Ms Valance, had already been well and truly alive much earlier than that. For those reasons on the Court's findings the evidence given by Mr Michaelson as to his having been left out of the loop on so many matters during the second half of 2001 is accepted as both credible as well as reliable. That evidence fits perfectly with the close out picture and considerably clouds any suggestion that Biscayne/Mr Michaelson can fairly be charged with acts of omission or commission in terms of repudiatory conduct during this period. Mr Michaelson was to go - he just did not know it at the time. All of this is entirely consistent with his evidence of not being informed of the January London trip involving the making of the music video clip of Kiss Kiss. It is noted that Mr Klippel under cross-examination in relation to conversations with Mr Hollingsworth about the Ms Valance trip proposed for January was asked whether there was any mention made of making a music video clip of "Kiss Kiss ". He believed that this was to be part of the trip and that Mr Hollingworth had told him as much, although his recollection was a little cloudy. [Transcript 545] 185 Mr Klippel gave the following further evidence [Transcript 546]:

[249]

Q. And so far as you are aware, no-one else did ? A. No. 186 In all those circumstances allegation 4 fails to qualify for the description repudiatory conduct. The question is essentially one of fact. The circumstances could not be seen to be such as to convey to a reasonable person in the situation of the Valance parties, a repudiation or a disavowal either of the contract as a whole or of a fundamental obligation under it. Allegation 5 - failing to play any party in the activities of Ms Valance as a recording artist 187 Here again it is necessary to stand back from such an allegation which requires to be examined against the whole of the evidence, importantly involving the mindset of Ms Valance that Mr Michaelson was not up to the task of being her Manager and critically from the middle of 2001, involving the close out already referred to. The allegation is not of substance when weighed in that way and particularly bearing in mind the context where Engine Room were so closely integrally involved in Ms Valance's relevant recording artist activities, it not being the case that Mr Michaelson could be said not to have communicated with Engine Room. The matter is one degree of contact and detail. He did not have to metaphorically at all times "hold her hand". Allegations 6 and 7 - limited efforts to secure employment exclusively involving appearances in state of semi undress etc. 188 This allegation is not made out. Neighbours represented a significant role. Mr Michaelson was responsible in a real sense for this opportunity coming forward. It is all very well to say that he was not-but he was. There are numerous actors, tens of thousands seeking such a role all over world. Mr Michaelson saw the talent. He had the contacts. In this matter he discharged the responsibilities of managing agent in spades. The Engine Room contract ultimately finessed into the London Records contract bears testimony to the range and significance of Mr Michaelson's relevant activities. The complaints as to semi-undress appearances were of minor significance hardly worthy of note against the big picture of the general attempts to climb into being noticed. Mr Klippel under cross examination [transcript 565] gave evidence dismissive of the allegation where the publicity was used as a promotional tool rather than as a tool to originate a career. The same matters require the rejection of allegation 7. Allegation 8 - failure to keep Valance Corp informed of matters which arose for consideration in relation to Ms Valance's career and to be reasonably available to consult with Valance Corp 189 This allegation is not made out when one takes the whole of the context into account. It should not be forgotten that across almost the whole of the period of concern Ms Valance was tied to the Neighbours contract. The allegation also requires to be weighed against the, from mid to late 2001, "hidden agenda" - at least hidden from Mr Michaelson. The close out evidence is pervasive in terms of weighing the significance of this allegation. It suited the Valance parties for example to be in close and regular communication with representatives of Engine Room and with Mr Oaten concerning the negotiations for the London Room contract. It now suits them to claim that Mr Michaelson should have been knee deep in the same negotiations. But he was far from wanted. He was expressly asked to keep out of those negotiations. Everyone but he seems to have realised that he was on the way out. It should not be forgotten that Ms Valance's evidence included that: "[H]is people relationships were terrible…if he did come somewhere he rubbed everyone the wrong way. It was embarrassing. He didn't seem to know a lot of the time what he was talking about. He does talk a lot but not about anything that was particularly relevant" [Transcript 440]. These are not the words of someone likely to have wanted Mr Michaelson [who was not prepared to countenance an outside London Managing Agent], being at close quarters with the negotiations with London Records, whose requirement in that regard was made extremely clear over a period of time. Delegation 190 Mr Cobden submitted that either: · a close examination of the evidence disclosed that Mr Michaelson did not in fact delegate any obligations under the Agreement to Engine Room and to Mr Oaten; or · to the extent that Mr Michaelson on the evidence purported to delegate such obligations to Engine Room and to Mr Oaten, the nature of the relevant obligations was such that they simply could not be delegated. 191 The Court's finding is that here again, the proper discharge of the contractual obligations thrown up by the Agreement can only be weighed against the whole of the evidence. The situation was a very unusual one and the close out was part and parcel of the agenda to have Mr Michaelson removed, albeit that he did not know it at the time. In the particular circumstances which obtained he was entitled to accept from both Mr Klippel and from Mr Oaten the indications that he should not be involved in the London Records negotiation. It is true that Mr Michaelson did step away from a very close involvement in the recording aspects of Ms Valance's career once Engine Room came onto the scene. And it is also true that Mr Michaelson fell far short of having, for example, Mr Fowler's dimension of excellence in terms of discharge of the obligations of managing agent. Under cross-examination Mr Fowler accepted that the task of managing someone like Ms Valance, who had already had an exposure as an actor, having secured a recording deal and being about to launch a single with other recordings, was a far different matter for a manager than would be the case if the manager took an unknown and had to obtain employment in acting engagements and contracts with a music company, let alone a major recording company. He gave the following further evidence:

[259]

Moreover, there is a threshold issue that also determines the application of clause 18.4(b) against Biscayne. The clause requires that Valance Corp "fails or is unable to make" Holly Valance's "services in respect of this Agreement available". It does not say "available to Biscayne", indeed there is no obligation in the Management Agreement that Holly Valance provide make such services available to Biscayne. Dealing with the issue 197 It is necessary to closely consider both sub-clauses of clause 18.4. The subject with which sub-clause (a) deals, is the failure of Valance Corp "to properly observe and perform any of its obligations or conditions (sic) under [the] Agreement". The subject with which sub-clause (b) deals is either the failure or inability of Valance Corp, during the term, to make Ms Valance's services in respect of the Agreement available or one of a number of events generally concerning matters fundamental to the affairs or status of Valance Corp, such as dissolution or rearrangement or liquidation or assignment for the benefit of creditors. 198 Certainly the failure or inability of Valance Corp to make Ms Valance's services in respect of the Agreement available will also constitute a failure to properly observe and perform the particular obligation to make Ms Valance's services in respect of the Agreement available. 199 To my mind there is a special significance in clause 18.4 (b) because what it is about is the effecting of a novation of the principal contractual obligations as between Valance Corp and Biscayne whereby Ms Valance in the particular circumstances, subjects herself to assuming the otherwise liability of Valance Corp under the Agreement. In the event that Biscayne exercises its option provided for in clause 18.4, a complete novation will have taken place such that Valance Corp is released from liability under the Agreement. So much follows from the use of the words "be substituted as contracting party": cf Re International Life Assurance Society: ex parte Blood (1870) LR 9 Eq 316 and The Laws of Australia, LBC, 8.6 at [2] and cases cited in footnote 4. 200 So approaching the proper construction of clause 18.4 (b) to my mind reinforces the fact that upon the proper construction of clause 18.4 (a), any suggestion of a conditional performance guarantee analogy is seen to be inapt. In Direct Acceptance Finance Ltd v Cumberland Furnishing Pty Ltd [1965] NSWR 1504 the Full Court dealt with a recourse agreement under which a dealer had agreed, on default by the customer, to pay all amounts that would be paid if the customer's agreement with the financier ran its full course. This was held not to be a guarantee. Notwithstanding the matter having turned upon the necessity, in order for an obligation to amount to a contract of guarantee, that the liabilities of the debtor and guarantor be co-extensive, to my mind the issue will always turn upon the proper construction of the relevant provision in the relevant contract. 201 Dealing more specifically with clause 18.4 (a), there is authority for the proposition that the suggested condition precedent to a guarantor's liability, namely that the creditor will make a demand on the guarantor before enforcing the guarantee, will not be implied unless the recitals or the general terms of the guarantee indicate otherwise: cf The Laws of Australia, LBC, 8.6 at [142] and authorities noted at footnote 8. 202 Prior to the filing of the Summons Valance Corp had failed to properly observe and perform its relevant obligations under the Agreement. It had breached a contractual obligation by wrongly purporting to terminate the Agreement. It had breached a contractual obligation by wrongly participating in the engagement of a United Kingdom manager as the exclusive worldwide manager of Ms Valance and Valance Corp in place of Biscayne. Upon the proper construction of clause 18.4, immediately upon those breaches of the Agreement Ms Valance become contractually obliged to ensure performance of those obligations. Valance Corp's default gave rise to the liability of Ms Valance. There was no need for anterior demand. 203 Returning to the defendants' submissions in terms of the so-called 'threshold' issue, the words "to Biscayne" are clearly appropriate to be written into the second line of clause 18.4(b) so that the relevant phrase refers to the contingency that during the term, Valance Corp fails or is unable to make the Artist's services in respect of the Agreement 'available to Biscayne'. So much is obvious from the whole of the Agreement: cf for example the warranty given by Ms Valance in clause 18.2. 204 The defendants seek to rely on Devico Pty Ltd v Sydney Cove Redevelopment Authority (unreported, Supreme Court of New South Wales, 15 April 1990; BC9102111) ["Devico"] in support of the proposition that Ms Valance's liability only arises as a result of Valance Corp's default. 205 In Devico the Court was required to construe the following clause in a deed of agreement:

[260]

"2(b) In the event that the Developer commits a breach of this Agreement which is not remedied to the reasonable satisfaction of the Authority, the Authority shall be entitled, without prejudice to any other right or remedy of the Authority, to enforce the Bank Guarantee and apply the money or part thereof thereby obtained towards satisfaction of the obligations of the Developer under CL7." 206 In that case it was held that "[t]he entitlement of [the guarantor] to call upon the guarantee under CL2(b) depends upon it establishing breach by Devico." (BC9102111 at 14) It was held that no relevant breach was alleged. 207 The clause under consideration in Devico is in any event distinguishable from clause 18.4(a) under present consideration. The Devico clause specifically requires a breach under the agreement which is not satisfactorily remedied to invoke the liability of the guarantor. Presumably under the Devico clause the Authority would be required to give reasonable notice requiring the remedy of the breach. 208 Clause 18.4(a) is much less specific and operates without requiring notice being given to Ms Valance. Action on the part of Ms Valance to ensure that Valance Corp perform such obligations and conditions as it is failing to properly perform or observe, is required "immediately" on the occasion of such failure. 209 On the subject of clause 18.4 (b) and the option to substitute Ms Valance as contracting party in place of Valance Corp, in my view paragraph 37 of the Summons constituted an exercise of an option, the words "is thereby substituted" being appropriately read as "is hereby substituted". The service of the Summons can constitute a contractual act or election. Formal concerns 210 When the matter was first raised in the opening address by Mr Garnsey QC appearing for Biscayne [transcript 47, 48] it was made plain that the word "thereby" was sought to be read as "hereby". The Court indicated that the question of a cause of action arising after the filing of the summons would not then be a concern to be dealt with during the opening. Had an application for leave to amend accordingly been pressed it is clear that the Court had the power to permit the amendment and further that the date of commencement of the proceedings, so far as that cause of action was concerned, would be the date on which the amendment was made [Part of 20 rule 1 (1), (2) and (3A)]. Further and had this be necessary, Part 20 rules (4) and (5A) may have been engaged with an otherwise order being made pursuant to sub-rule (5A). Part 20 rule 1 (2) makes very plain that all necessary amendments are to be made for the purpose of determining the real questions raised by or otherwise depending on the proceedings and in particular for the purpose of avoiding multiplicity of proceedings. [cf also section 63 of the Supreme Court Act 1970] Further the Overriding Purpose Rule [Part 1 rule 3] may have been appropriately invoked in terms of the purpose of the rules being to facilitate the just, quick and cheap resolution of the real issues in civil proceedings. The issue may be agitated on the occasion when the parties further address on disparate issues. Damages for loss of chance The Principles 211 The principles were set out in Lakatoi Universal Pty Ltd v L A Walker [2000] NSWSC 113 [1386]-[1482] which is adopted in that regard:

[325]

[In final address the defendants accepted that the matter of the clause 8.1 claim had been litigated and that no pleading issue was taken. Save for this concession the Court would have allowed an amendment to be made to the summons] Finding 219 There are some textual difficulties in construing the material provisions dealing with commission. 220 It seems to me that clause 7 should be read as dealing with the subject of pre-termination commission to be contraposed to clause 8 which deals with the subject of post-termination commission. 221 The definition of "Gross Receipts" in its application to clause 7.1 is a reference to the total of all amounts in whatever form as are: · received by the Artist during the Term; but also being · received in respect of the Artist's Activities during the Term. 222 Clause 8.1 then deals with payments which are to be made following the termination of the Agreement. In this regard: · clause 8.1 (a) deals with the commissions provided for in clause 7, but now deals with: · income earned [in the sense of the artist having carried out the work in relation to the relevant activities], and being so earned from those activities during the Term, but being · income only received after the expiration or termination of the Agreement; · an expansion from the entitlement to commission is now provided for by clause 8.1 (b) [commission based upon the formula set out in Schedule 1 becomes payable, in the sense that where certain matters have been fully organised by the Manager prior to the expiration of the Term, then subject to the deductions provided for in clause 7.2, 7.3 and 7.4, commission based upon the formula set out in Schedule 1 ("clause 8.1 (b) commission") is so payable]; · Clause 8.1 (b) commission is payable on all income received [by Valance Corp or by Ms Valance] after the expiration or termination of the Agreement from: · any performance by Ms Valance which had been fully organised by Biscayne before the expiration of the Agreement, but where the performance occurred after the expiration of the Agreement, and · the exploitation of any sound recording which had been recorded during the Term, where such exploitation was fully organised by Biscayne prior to the expiration of the Term, and · the exploitation of any musical composition which had been written during the Term, where such exploitation was fully organised by Biscayne prior to the expiration of the Term. 223 Generally these findings appear to follow and accept certain of the plaintiff's submissions in this regard including the following:

[328]

15 The meaning and effect of clause 7.1 set out above is confirmed by clause 8.1(a). Clause 8.1(a) can and should be read consistently with clause 7.1 and the definition of " gross receipts ". Clause 8.1(a) is confirmatory of the entitlement of the plaintiff to the commission described in clause 7.1 and the words in clause 8.1(a) " of all income earned during the Term from the Artist's Activities, but received after the expiration or termination of this Agreement " is no more than the contract's own gloss on what clause 7.1 means when read with the definition of " gross receipts ". There is no good reason to suppose a new concept of " income earned during the Term " was regarded by the parties as necessary or desirable to introduce into clause 8.1(a) and the Court should not read that clause as introducing ambiguity and potential inconsistency into the terms of the agreement. 224 The present context of course concerns the prevention or cutting out by Valance Corp and by Ms Valance of the managing agent from its otherwise entitlement to organise performances by Ms Valance before the end of the term and from its entitlement to organise for the exploitation of sound recordings recorded or musical compositions written during the Term. But for the wrongful purported termination by the first termination letter, Biscayne had the exclusive rights as manager of Ms Valance as artist for the Term, and Valance Corp had covenanted not to execute, negotiate, or agree to any contract or undertaking whatever regarding her career without the prior written consent of Biscayne. 225 One question which arises concerns whether or not, and if so in what way, Biscayne puts forward the proposition that in relation to the assessment of damages, it does not lie in the mouth of the Valance parties to rely upon their own wrongdoing. [cf written submissions on damages para 44]. This is one of a number of areas requiring clarification and specificity in respect of which the parties will be given leave to further address on damages including loss of opportunity. In terms of the precision of the breaches of contract terms litigated and made out, the Court labours under some difficulty because of the uncertainty as to what particulars have been furnished, there being a number of references to particulars "to be provided in due course" to be found in the breach of contract paragraphs in the Summons. Further in "the manner in which the matter was litigated" there appear to have been a number of specific matters in respect of which evidence has been adduced and with which both parties have treated in final address. For those reasons the precise findings in respect of the breaches of contract terms which "have been litigated" and made out will be handed down following the parties having had an opportunity to read this judgment and to address in relation to that matter. Suffice it to say that as the judgment makes plain, in general terms at the least the following breaches have been made out: · Valance Corp and Valance have since from a period in 2001, excluded the plaintiff from the management of or involvement in the activities of Valance in the entertainment industry throughout the world; · Valance Corp and Valance have from a period in 2001, failed to refer all enquiries regarding the activities of Valance within the entertainment industry to the plaintiff; · Valance Corp has not paid commissions due to the plaintiff; · from a period during 2001 Valance Corp continued negotiations for, and subsequently agreed to and executed sundry agreements relating to the activities of Valance in the entertainment industry, without the notification or prior approval of the plaintiff; and · Valance Corp failed to properly observe and perform its obligations or conditions under the Management Agreement and Valance did not immediately ensure the performance of such obligations or conditions. 226 Whether the plaintiff still presses a finding of breach on the basis that Valance Corp had not, at least until discovery, provided the plaintiff with a full statement of income and expenditure in respect of the activities of Valance in the entertainment industry may be the subject of further address. 227 In the result the very close attention given to the proper construction of clauses 7 and 8 dealt with above arguably becomes relevant only in relation to activities post the expiration of the term. The breaches of Agreement prior to the term expiring give rise to a separate head of damages and no double counting is permissible. The taking of an account 228 Biscayne has claimed an entitlement to an order for the taking of an account of the commission due to it under the Agreement. 229 The issue received attention in Town & Country Property Management Services Pty Ltd v Kaltoum [2002] NSWSC 166 where Campbell J put the matter as follows: 78 The remedy which the plaintiffs seek in relation to this breach, is damages or an account of profits. The cause of action on which the plaintiffs sue is breach of contract. The only remedy which the common law provides for breach of contract, is damages.

[344]

What is the problem of principle with the Blake approach? The remedy of account of profits is for cases where someone misuses a position of ascendancy or influence or trust and obtains something that ought to have gone to a person in a position of protection, vulnerability or beneficial entitlement. Appreciation and accommodation of parties' positions in those comparative terms is not something with which pacta sunt servanda is concerned." 236 Whether Attorney General v Black may be resurrected by the appellate tribunals in Australia as otherwise than heretical remains to be seen. Presently the trenchant criticisms of the House of Lord's decision have considerable weight as it seems to me. 237 The present is a case where the conventional remedy for damages is aptly engaged - Biscayne being unable to demonstrate a supererogatory extra-contractual interest, should be compensated by placing it, so far as money can do it, in the same position as it would have been in if the contract had been fully performed on both sides. It cannot be said that not to order an account would abort Biscayne's rights. The matter ultimately inheres in compensatory damages. Rulings on evidence 238 During the course of the hearing the Court reserved a decision upon whether or not particular witnesses had been shown within section 79 of the Evidence Act 1995, by their training, study or experience, to have acquired specialised knowledge on the basis wholly or partly of which to be in a position to express particular opinions, such opinions having been included in their affidavits or in supplementary evidence in chief given in the witness box. Cross-examination took place upon the accepted basis that the final judgment would include a ruling as to whether any of the evidence going to such specialised knowledge and opinions would be allowed. 239 This is not an occasion when the parameters of section 79 require detailed examination. The section was the subject of close examination in Idoport v National Australia Bank [2001] NSWSC 123 and the approach there taken as to the principles which inform the proper construction of section 79 is adopted. Mr Hollingsworth 240 Mr Hollingsworth was put forward as having specialised knowledge in relation to what were the usual functions of a manager especially in dealings with record companies. He had worked in the music business for some 17 years from the age of 21, his experience being with major record companies in promotions and Artist and Repertoire ("A & R"). The position he started in was initially radio promotions with Sony UK. This involved the taking of artist's recordings to radio stations and convincing radio stations to play records, to promote the artist and arrange interviews and setting up a media campaign for radio. During that period of time of approximately 12 to 13 years, he had dealt with managers for popular artists. Those dealings included sitting down and discussing game plans and strategies with the artist's manager, generally pertaining to radio promotions. 241 Following that period he went into the A & R area which involved the establishing, finding and developing of artists and the presenting of those artists to the record company to buy into, support, and then to market. His evidence was that there was a particular category of experience and real-world job activity which can be described as "artist and repertoire", and that there was another area to that, which was different, and which could be described as a "managing agent" to artist field of endeavour and area of specialty. In relation to the second and different area he had never himself been in a managing-agent relationship. He gave the following further evidence:

[357]

HIS HONOUR: Q. Without, presumably, is that right, studying at all the management agreements which those particular artists have with their managers? A. Yes. [Transcript 465-470] 242 In my view Mr Hollingsworth is not shown by his training, study or experience to have acquired specialised knowledge on the basis wholly or partly of which to be in a position to express the views for which he was put forward as to the usual functions of a manager or as to the usual functions of a manager especially in dealings with record companies. He seemed especially to accept that he would not know about what a manager should do in looking after an artist but that his particular area of A & R was that in which he was qualified to express a view. It was not within his knowledge or experience to say that a particular manager was or was not negligent in that he had not studied extensively nor at all, the different types of terms which may appear in one contract between a managing agent and an artist and those which may appear in another such contract. His evidence was that he would not know as between an artist and a manager, what the manager should do: "That's between the artist and the manager. It's obviously… not anything to do with myself in that respect". Granted that he did have views which were based on his observations of particular managers and the work that they had carried out for particular artists on particular occasions, I am not satisfied that he has been shown to have acquired the specialised knowledge requisite to give an opinion on the usual functions of a manager in a managing agent-artist contractual relationship. In consequence his evidence, to the extent it was put forward as grounded upon section 79 specialised knowledge, is disallowed. Mr Klippel 243 Mr Klippel on the other hand does seem to me to have been shown by his training, study or experience to have acquired the necessary specialised knowledge upon which wholly or partly to be in a position to express an opinion as to the usual functions of a manager/managing agent in contract with an artist. He had been involved in the Australian music industry for 14 years, largely as a songwriter/music producer. On a number of occasions he personally had had managers. He had worked with other managers often. His world was far wider than that of A & R. In consequence all of his evidence is allowed. Mr Fowler 244 Mr Fowler was also put forward as having specialised knowledge upon the basis of which to be in a position to express opinions as to the usual functions of an artist's manager in particular in dealings with recording companies. It does seem to me that his identified training, study or experience, having been an artist's manager since about 1985 and having managed a number of bands and being aware of the activities being undertaken for and on behalf of many artists, shows that he has acquired the specialised knowledge upon the basis of which to be in a position to express opinions as to the usual functions of an artist's manager, in particular in dealings with record companies. In consequence all of his evidence is allowed. Mr Kirby 245 Ultimately the defendants do not put Mr Kirby forward as a person with section 79 specialised knowledge. [Transcript 827] Mr Benson 246 Mr Benson had been involved in the music industry in the United Kingdom, Europe and elsewhere for the past 30 years in both an artistic and professional capacity. He was a musician, songwriter and producer for most of those years and had been a manager for the past 15 years. He had had extensive experience as a manager in the music industry. He was clearly a person who had had the training, study or experience from which he had acquired the specialised knowledge on the basis of which wholly or partly to be in a position to express opinions as to the usual functions of an artist's manager. In consequence all of his evidence is allowed. 247 It is appropriate to note that even had the evidence given by Mr Hollingsworth which had been put forward a satisfying section 79 of the Evidence Act been held to be admissible as based upon the requisite specialised knowledge, the findings of the Court would have been no different. Indeed all of the evidence given by those put forward as having specialised knowledge as to the usual functions of an artist's manager in dealings with others including the artist, has had to be weighed against the very particular set of circumstances here thrown up by the evidence for reasons clearly spelled out in the judgment. Leave to further address/ Short Minutes of Order 248 As was made plain during the course of the taking of final submissions, it does seem convenient to leave a number of remaining questions for further address once the parties have had an opportunity to read the above judgment. The particular questions which remain for further address generally go to causation and damages and to one or two matters mentioned in the Judgment. Notwithstanding that detailed written and oral submissions going to relief were received, it may well be that those submissions can be more narrowly focused once the parties have had an opportunity to read the judgment. There is always an opportunity that the parties may now reach agreement on some of the calculations. Short minutes of Order will of course also require to be brought in. Transcript anomalies 249 Preparation of the judgment has regrettably thrown up some transcript anomalies which were not apparent to me during the hearing of the proceedings. Sometimes the hardcopy version on which I was working may be one or two pages out from the softcopy version from which I was also working. My Research Assistant generally worked from her own hardcopy version which we intended to be regarded as the official version, along with the softcopy version. However, careful checking has now revealed that her hardcopy version was even somewhat different from the two versions from which I worked. As she was responsible for the transcript references now included in the chronology appended to the judgment, it is her version which correctly identifies that pagination. In all the circumstances the convenient course will be to include in the official court file both the hardcopy version from which I worked as well as the hardcopy version from which she worked, as well as a CD with the softcopy version.