Dance With Mr D Limited v Dirty Dancing Investments Pty Ltd

Supreme Court of NSW|2009-04-17|Before: Hammerschlag J

INTRODUCTION 1 HIS HONOUR: By Summons and accompanying Commercial List Statement sued out of this Court on 22 January 2009, the plaintiff seeks: a an order that the first defendant (or "DDI" as the case may be) account for and pay to it the First Production Royalty and the Merchandising Revenue Payment under and as defined in a written Lender's Agreement between them dated 18 November 2004; and b an order that the second defendant (or "DDUK" as the case may be) specifically perform the terms of a written Co-Producer Agreement between them, dated 24 August 2006, alternatively for damages. 2 Both the Lender's Agreement and the Co-Producer Agreement relate to the staging of a dramatico-musical stage play known as Dirty Dancing, which is currently playing at the Aldwych Theatre in London. 3 The first defendant moves by motion for an order that the Summons as against it be set aside or that the proceedings be stayed on the grounds that the dispute between it and the plaintiff falls within a dispute resolution provision (clause 20) in the Lender's Agreement which requires it to be referred to and determined by an expert. 4 The second defendant moves by motion for an order that the Summons as against it be set aside or that the proceedings be stayed on the grounds that under the Co-Producer Agreement (clause 21) the parties submitted to the exclusive jurisdiction of the English courts. 5 Mr G J Nell of Senior Counsel, together with Ms E Cheeseman of counsel, appeared for both defendants (applicants on the motions). 6 Mr D E J Ryan of Senior Counsel appeared for the plaintiff (respondent on the motions).

THE LENDER'S AGREEMENT, LETTER AGREEMENT AND DEED OF SETTLEMENT 10 Under the Lender's Agreement the first defendant (referred to in it as DDI) invited the plaintiff (referred to in it as the Lender) to invest in a loan to the first defendant to assist in the funding of "the Production" which is defined as the production and presentation by the first defendant and/or an entity known as Dirty Dancing Asia-Pacific Pty Ltd (or "DDAP") in Australia, New Zealand and Asia of the dramatico-musical Play entitled Dirty Dancing. 11 Clause 5 of the Lender's Agreement is in the following terms: 5. FIRST PRODUCTION ROYALTY DDI agrees with the Lender that: (a) the lenders who have made loans to fund the Capitalisation shall be entitled, as a class, to a First Production Royalty of 1.5% of the Gross Box Office Receipts from any other presentations of the Production, (which are a first class productions) after the first presentation of the Production at the Theatre Royal, Sydney, Australia ( "the Sydney Production" ) and which are presented in the United Kingdom, Germany, Japan, Canada, United States of America, Australia, New Zealand and Asia, whilever their loans, remain unpaid, until all lenders have been repaid in full according to the terms and conditions of their respective lender agreements with DDI relating to their loans to provide the Capitalisation, provided that (and subject to the provisions of paragraph (c) upon repayment of an amount equal to 125% of the amounts loaned by the lenders, the First Production Royalty shall be reduced to an amount equal to one-half of one percent (0.5%) of the relevant Gross Box Office Receipts; (b) the First Production Royalty shall be shared between and paid to the lenders pro-rata to those proportions (expressed as percentages) in which they have respectively made loans to fund the Capitalisation; (c) notwithstanding the provisions of paragraphs (a) and (b) of this clause and for the avoidance of doubt, the First Production Royalty for the purposes of clause 5(a) shall be, and always remain, an amount equal to 1.5% of Gross Box Office Receipts in respect of subsequent first class presentations of the Production, in Australia, New Zealand and Asia, presented after the Sydney Production; (d) for the further avoidance of doubt, the provisions of this clause do not apply to any subsequent presentations of the Production after the Sydney Productions which are not first class productions. 12 Clauses 7(b) and (e) of the Lender's Agreement make provision for the production to the Lender of "Production Accounts" and "Production books of account". 13 Clause 20 of the Lender's Agreement is in the following terms: 20. DISPUTE RESOLUTION Subject to any other provision of this Agreement to the contrary, if any dispute concerning this Agreement or its construction or interpretation or concerning the rights, duties or liabilities of the parties to this Agreement or as to any other matter in any way connected with or arising out of or in relation to this Agreement, which cannot be settled by agreement between the parties, the dispute shall be referred to and determined by a person to be agreed upon by the parties or failing agreement between them, within fourteen (14) days, a party to be nominated on the application of either party, by the President for the time being of the Law Society of New South Wales provided that any such nominee shall be a suitably qualified chartered accountant if the dispute is in respect of any financial or accounting matter. The decision of that person shall be conclusive and binding (except in the case of manifest error) upon the parties and shall be deemed to have been given and determined by that person acting as an expert and not as an arbitrator and the costs of that person shall be borne equally between the parties.

14 Clause 22 of the Lender's Agreement is in the following terms: 22. FUTURE PRODUCTIONS - FUTURE INVESTMENT OPPORTUNITIES (a) The Lender hereby request DDI to supply details to the Lender of any future production opportunities which may, from time to time, become available to DDI and in respect of which DDI is seeking to raise investment capital and/or locate a co-producing partner. (b) In the event that the Lender lends A$1million or more, the Lender shall have the right, but not the obligation, to furnish up to 20% of the available capitalisation for any production in respect of which TOML or DDI has the right to invest (at the sole discretion of TOML and DDI) on terms and conditions to be negotiated and agreed at that time.

15 Clause 25 of the Lender's Agreement is in the following terms: 25. GOVERNING LAW AND JURISDICTION This Agreement shall be read and construed in accordance with and shall be governed by the laws of New South Wales, Australia and the parties agree to submit to the non-exclusive jurisdiction of the courts of New South Wales and Australia in relation to this Agreement. 16 At the time of the Lender's Agreement, the plaintiff and first defendant entered into a further Letter Agreement which referred to the invitation to the plaintiff to invest in the Production, the plaintiff's agreement to provide a loan under the Lender's Agreement and the benefits that the plaintiff would receive as a result of making the loan as set out in the Lender's Agreement. The Letter Agreement conferred on the plaintiff certain additional benefits by way of profit share, calculated according to a formula.

17 Clause 11 of the Letter Agreement is in the following terms:

This Letter Agreement supercedes and replaces the prior Letter Agreement dated 20 September 2004. The terms and conditions of this Agreement are to be read with the terms and conditions of the Lender's Agreement which together comprise the agreement made between the parties in relation to the Initial Productions and in respect of your rights to any additional consideration, including your right to invest in and become a co-producer of the Play in the United Kingdom. 18 In or around 2006, a number of disputes arose between the plaintiff and the first defendant with respect to the Lender's Agreement and the Letter Agreement. The disputes were settled under the terms of a Deed of Release, Waiver and Settlement ("the Deed"), to which the plaintiff and both defendants were parties. The Deed recorded that the plaintiff and the second defendant concluded on the date of the Deed a "Co-Production Agreement". This was a reference to the Co-Producer Agreement.

THE CO-PRODUCER AGREEMENT 19 On 24 August 2006, the plaintiff (defined as the "Co-Producer") and the second defendant (defined as "DDUK") entered into the Co-Producer Agreement under which the plaintiff agreed to contribute to the budget capitalisation for the production of Dirty Dancing at the Aldwych Theatre, London, opening on or around 26 October 2006. 20 Clause 12 of the Co-Producer Agreement is in the following terms: 12. Further Production In the event that DDUK decides to present the Production on tour in the United Kingdom (a "Further Production "), DDUK shall offer the Co-Producer the opportunity to contribute an amount up to its Percentage Share of the Production Cost to the capitalisation of the Further Production Provided That where the Co-Producer has not entered into a binding agreement with DDUK within six weeks of receipt of notice in writing from the Producer detailing the budgets for that Further Production, the Co-Producer shall be taken to have declined such opportunity. Without prejudice to the generality of the foregoing and for the avoidance of doubt, in the event that a Further Production does not require any additional capitalisation the Co-Producer's entitlement to Net Profits shall apply in respect of the Further Production. 21 Clause 21 of the Co-Producer Agreement is in the following terms:

This Agreement shall be governed and construed in accordance with the laws of England, and the parties hereby submit to the exclusive jurisdiction of the English courts. THE NATURE OF THE DISPUTES

The Lender's Agreement dispute 22 In about the middle of 2008 the plaintiff and the first defendant fell into dispute with respect to the First Production Royalty and the Merchandising Revenue Payments payable to the plaintiff under the Lender's Agreement. 23 There are essentially two areas of controversy concerning the First Production Royalty. 24 Firstly, the plaintiff contends that on the proper construction of the Lender's Agreement the First Production Royalty payable under clause 5(a) is not to be applied to repayment of the 125% of the amounts loaned by it to the first defendant, whereas the first defendant contends that the First Production Royalty is to be so applied. 25 Secondly, under clause 5(a) the First Production Royalty is payable in respect of gross box office receipts from any other presentations of the Production after the Sydney production. The Production, as is set out above, is defined to mean production and presentation by DDI and/or DDAP. The plaintiff contends that its entitlement to the First Production Royalty extends to the presentations of the Production in the applicable territories (outside of the Nominated Territories of Australia, New Zealand and Asia) even if the Production is not presented by DDI and/or DDAP so long as it is presented by licensees or companies nominated or authorised by DDI. The first defendant contends that the royalty is not payable unless the Production is presented by DDI and/or DDAP and no one else. 26 The plaintiff also claims that it has not been paid all of the merchandising revenue payments due to it.

The Co-Producer Agreement dispute 27 The plaintiff contends that the second defendant repudiated the Co-Producer Agreement by refusing it the opportunity to contribute any amount to the capitalisation of further productions of the Production in the United Kingdom as contemplated by clause 12. The refusal is alleged to have been express and contained in a letter from the second defendant's solicitors to the plaintiff's solicitors dated 8 September 2008. CORRESPONDENCE BETWEEN THE PARTIES LEADING UP TO THE COMMENCEMENT OF PROCEEDINGS 28 As will appear below, submissions of the parties placed heavy reliance on the contents of pre-litigation correspondence. It is therefore necessary, albeit that some of the correspondence is lengthy, to set out the significant portions of it. 29 On 1 August 2008 the plaintiff's solicitors wrote to Mr Nicholas Weininger, the chief financial officer of the first defendant ("the 1 August 2008 letter") as follows: "I refer to our recent telephone conversation and to Amber Jacobsen's email to Karl Sydow of 29 July 2008. I confirm that you wish to have the maters in dispute between Dirty Dancing Investments Pty Limited and Dance with Mr D Limited regarding the proper construction and interpretation of the rights, duties and obligations of the parties to the Lenders' agreement dated 18 November 2004 ("the Agreement") determined by arbitration. Would you please confirm that request having regard to the provisions of clause 20 of the Agreement which provides for any dispute which cannot be settled by agreement between the parties, to be referred to and determined by, a person to be agreed by the parties, to be referred to and determined by, a person to be agreed by the parties, in the first instance, or failing an agreement by them a party to be nominated on the application of either of the parties to the agreement, by the President of the Law Society of NSW. The determination of the dispute by that person shall be deemed to have been given by that person acting as a expert and not as an arbitrator . If you wish to have the dispute determined by arbitration, as opposed to a person acting as an expert, out client will agree to arbitration. In either event, our client nominates the following persons to act as the expert or arbitrator in the following order of preference: Mr Tony Fitzgerald QC Mr David Catterns QC Mr Richard Cobden, Barrister. Please advise us of your nominees as soon as possible so that we can initiate the process without further delay." 30 On 15 August 2008 the first defendant's solicitor responded as follows: "I am in the process of obtaining instructions as to the way forward and will let you have a substantive response to your letter of 1 August 2008 with due expedition. In the meantime, my client would be grateful if your client would defer taking any further action in relation to the appointment of an arbitrator. In any event, we would ask that no further steps be taken without first notifying us." 31 On 8 September 2008 the first defendant's solicitors wrote as follows to the plaintiff's solicitors ("the 8 September 2008 letter"): "We regret the delay in responding to your letter dated 1 August 2008 and thank you for your understanding and courtesy in this matter. We are instructed to raise the matters below for your client's consideration. 1. FIRST PRODUCTION ROYALTY 1.1 We understand that a dispute has arisen between Dirty Dancing Investments Pty Limited (DDI) and Dance with Mr D Limited (DMD) in relation to the Lender's Agreement between DDI and DMD dated 18 November 2004 (Lender's Agreement) and the letter agreement between DDI and DMD entered into at or about the same time as the Lender's Agreement (Side Letter). 1.2 In particular, DMD disputes the quantum of the payments made by DDI to DMD in respect of DMD's alleged entitlement under the Lender's Agreement to a First Production Royalty in respect of presentations of the dramatico-musical play entitled "Dirty Dancing" (Play) outside of Australia, New Zealand and Asia. 2. DMD'S POSITION 2.1 We understand that DMD's position in respect of the payment of the First Production Royalty is as set out in your letter to Mr Sydow dated 20 June 2008, and may be summarised as follows: (a) Under clause 2(c) of the Lender's Agreement, DMD is entitled to be repaid 125% of its initial loan of $991,721.35, and that this amount is to be repaid only from the Total Revenue of the Production. (b) Under clause 5 of the Lender's Agreement, DMD is also entitled to its share of a First Production Royalty of 1.5% of the Gross Box Office Receipts of future presentations of the Play until 125% of its initial loan amount has been repaid. If and when DMD receives payment of 125% of its initial loan amount, DMD's entitlement to a First Production Royalty will reduce to a share of 0.5% of the Gross Box Office Receipts of future presentations of the Play. (c) The First Production Royalty cannot be applied to the repayment of the DMD's loan, and accordingly DMD has not been repaid 125% of its initial loan amount. (d) On this basis, DMD is entitled to a share of a First Production Royalty of 1.5% of the Gross Box Office Receipts of any presentations of the Play in the United Kingdom, Hamburg, Toronto, Holland and the United States of America. 2.2 We understand that DMD also contends that under the Lender's Agreement and the Side Letter DMD acquired the right to contribute to the capitalisation of all future productions of the Play in the United Kingdom on "100% terms". 3. DDI'S POSITION Repayment of DMD's loan amount 3.1 DDI does not agree that amounts paid to DMD in respect of the First Production Royalty are not to be applied to the repayment of 125% of DMD's initial loan amount. 3.2 As set out in your letter dated 20 June 2008, clause 4 of the Lender's Agreement provides for the repayment of DMD's loan amount out of the Total Revenue of the Production. However, clause 4 of the Lender's Agreement does not expressly provide that payments from the Total Revenue are to be the exclusive mechanism for the repayment of the loan. 3.3 In the event that the Total Revenue is insufficient to repay DMD's loan, DMD's entitlement to further repayment of its loan is set out in clause 9 of the Lender's Agreement, which provides: Subject to clause 5 on settlement of the Production Accounts, if there are insufficient assets to repay in full the loan made by the Lender, then there shall only be repaid to the Lender the proportion referred to in Item 3 of the Schedule of the Total Revenue and assets available for distribution as shown in the final Production Accounts prepared by the Production Accountant, as approved by the General Manager. 3.4 Accordingly, under clause 9 of the Lender's Agreement, in the event that the Total Revenue and assets of the Production are insufficient to repay DMD then, "[s]ubject to clause 5", DMD is not entitled to any further repayment from DDI. 3.5 The words "[s]ubject to clause 5" at the commencement of clause 9 will have no work to do unless clause 5 of the Lender's Agreement is capable of affecting the remainder of clause 9 of the Lender's Agreement. This will only be the case if the First Production Royalty is a mechanism by which DMD may be repaid its loan amount. 3.6 It follows that the effect of clauses 5 and 9 of the Lender's Agreement is that, if payments from the Total Revenue and the assets of the Production in proportion to DMD's contribution to the capitalisation of the Production are insufficient to repay DMD's loan amount, then DMD shall not be entitled to have its loan repaid other than by payments in respect of the First Production Royalty under clause 5 of the Lender's Agreement. 3.7 We are instructed that when the First Production Royalty Payments already made to DMD are taken into account, DMD received full repayment of 125% of its initial loan amount in about March 2008. Accordingly, as from the date on which full repayment occurred, DMD is entitled to a share of First Production Royalty of 0.5% of the relevant funds. We set out below DDI's position in relation to how that sum is to be calculated. Rectification 3.8 Under clause 3.1.1(d) of the Lender's Agreement, DDI represented and warranted that: DDI has disclosed to the Lender, fully and accurately, the following information and documents: (i) full production budgets for the Production including pre production budget, weekly running budgets, ticket price analysis, tour schedule, profit pool, royalty schedules and music publishing schedules; 3.9 By clause 3.1.2 of the Lender's Agreement, DMD acknowledged that it had been provided with that information and documents. The budgets DDI provided to DMD indicated that the First Production Royalty would be calculated on the basis of a profit pool and not on the basis of Gross Box Office Receipts. Accordingly, prior to entering into the Lender's Agreement, the parties contemplated and intended that the First Production Royalty would be calculated on the basis of a profit pool and not on the basis of Gross Box Office Receipts. 3.10 The reference to "Gross Box Office Receipts" in clause 5 of the Lender's Agreement was included by mistake. DDI was not aware that this mistake had been made. Further, DDI does not know whether DMD was aware that this mistake had been made. If DMD was aware of the mistake, DMD did not bring that mistake to DDI's attention. DMD stands to derive a substantial benefit to which it would not have been entitled if clause 5 had accurately reflected the parties' common intention that the First Production Royalty was paid out of a profit pool. 3.11 In the circumstances, DDI will continue to operate clause 5 of the Lender's Agreement in accordance with the parties' common intention in respect of the calculation of the First Production Royalty and will continue to pay the First Production Royalty calculated on the basis of a profit pool and not on gross revenue. Further, DDI does not propose to pay DMD any additional amount in respect of any alleged wrongful failure by DDI to pay the First Production Royalty on the basis of Gross Box Office Receipts in the past. 3.12 In the event that DMD presses its claim for payment of the First Production Royalty on the basis of Gross Box Office Receipts rather than profit pool, DDI will seek rectification of the Lender's Agreement. No entitlement to a First Production Royalty 3.13 Further, DMD has no entitlement to a First Production Royalty in respect of any past or current presentation of the Play outside of Australia, New Zealand and Asia. 3.14 The payment of the First Production Royalty is governed by clause 5 of the Lender's Agreement which relevantly provides: DDI agrees with the Lender that: (a) the lenders who have made loans to fund the Capitalisation shall be entitled, as a class, to a First Production Royalty of 1.5% of the Gross Box Office Receipts from any other presentations of the Production (which are a first class productions (sic)) after the first presentation of the Production at the Theatre Royal, Sydney, Australia ("The Sydney Production") and which are presented in the United Kingdom, Germany, Japan, Canada, United States of America, Australia, New Zealand and Asia, whilever (sic) their loans, remain unpaid … . (emphasis added) 3.15 Under clause 5 of the Lender's Agreement, DMD will only become entitled to a First Production Royalty if there are any "Gross Box Office Receipts from any other presentation of the Production … in the United Kingdom, Germany, Japan, Canada, United States of America, Australia, New Zealand and Asia". 3.16 The term "the Production" is defined under clause 1.1 of the Lender's Agreement to mean: the production and presentation by DDI and/or DDAP in the Nominated Territories of the dramatico-musical Play entitled "Dirty Dancing". (emphasis added) 3.17 Wherever a defined term is used in the Lender's Agreement it must be given its defined meaning, so far as that is possible in the context of the clause. 3.18 As clause 5 of the Lender's Agreement refers to "presentations of the Production" in the United Kingdom, Germany, Japan, Canada, United States of America, Australia, New Zealand and Asia, the term "the Production" in clause 5 of the Lender's Agreement cannot be read as being restricted to the Nominated Territories. However, the deliberate use of the defined term "the Production" in clause 5 of the Lender's Agreement must mean the production and presentation of the Play by DDI and/or Dirty Dancing Asia Pacific Pty Ltd (DDAP). 3.19 Accordingly, the reference to "presentations of the Production" in clause 5(a) must be read as referring to presentations of the Play by DDI and/or DDAP. 3.20 The term "Gross Box Office Receipts" is defined in clause 1.1 of the Lender's Agreement, which provides: "Gross Box Office Receipts" means the gross weekly sums received from the sale of tickets of admission to performances of the Production less any ticketing fees, credit card charges, block booking discounts, agency commissions, remote box office and computer booking commissions, goods and services tax, entertainment taxes and all other taxes payable out of such receipts. (emphasis added) 3.21 Reading the Lender's Agreement as a whole, the reference to "Gross Box Office Receipts" in clause 5(a) of the Lender's Agreement must mean gross weekly sums received from the sale of tickets of admission to performances of the production and presentation of the Play by DDI and/or DDAP, less the fees, charges, discounts, commissions and taxes referred to in the definition of that term. 3.22 Incidentally and relevantly, we note that the above approach to the interpretation of the terms "the Production" and "Gross Box Office Receipts" is consistent with the approach taken to the construction of the term "Total Revenue" in your letter dated 20 June 2008. In that letter you contend that the term "Total Revenue": is a defined term and means the aggregate of the following: (a) Gross Box Office Receipts (from the Australian Production) ; (b) all interest earned or accrued for the benefit of the (Australian) Production on the total Gross Box Office Receipts; (c) all cash sponsorships. (emphasis added) 3.23 For the reasons set out above, DMD will only be entitled to a First Production Royalty if DDI and/or DDAP present the Play in the United Kingdom, Germany, Japan, Canada, United States of America, Australia, New Zealand or Asia. 3.24 We are instructed that DDI and/or DDAP have not presented the Play outside of Australia, New Zealand and Asia, and that: (a) the presentation of the Play in London was by a partnership between Dirty Dancing UK Limited and Dirty Dancing Europe Pty Limited; (b) the presentation of the Play in Hamburg was by Stage Holdings (BV); (c) the presentation of the Play in Toronto was by Mirvish Productions, Dirty Dancing Toronto Management Inc and Ed Mirvish Enterprises Limited; and (d) the presentation of the Play in Chicago and on the First US Tour was by DD US Inc. 3.25 As the presentations of the Play in London, Hamburg, Toronto, Chicago and the First US Tour were not undertaken by DDI and/or DDAP, DMD is not entitled to a First Production Royalty in respect of any of those presentation of the Play. On this basis, DDI will not make any further payment of a First Class Royalty in respect of any presentation of the Play that is not undertaken by DDI and/or DDAP. 3.26 Further, DMD was at no time entitled to the payment of a First Production Royalty in respect of the presentation of the Play in London, Hamburg or Toronto, and any amounts paid to DMD in respect of those presentations of the Play were paid under a mistake. DDI reserves its right to demand repayment by DMD of all amounts mistakenly paid by DDI to DMD in respect of a First Production Royalty for the Hamburg, London and Toronto presentations of the Play. Utrecht production of the Play 3.27 In your letter dated 20 June 2008, you indicate that you understand a new production of the Play had opened in Utrecht, Holland, and assert that the production of the Play in Holland: will be charged with/liable to pay First Production Royalties at 1.5% … . 3.28 That claim is unsupportable on any reasonable construction of the Lender's Agreement. 3.29 Clause 5 provides an exhaustive list of countries and regions in which a presentation of the Production may attract a liability for DDI to pay a First Production Royalty to DMD. That list does not include Holland. Accordingly, DDI does not agree that DMD is entitled to any First Production Royalty in respect of any presentation of the Play in Utrecht, Holland, or any other presentation of the Play outside of the countries and regions listed in clause 5(a). Any amounts paid to DMD purportedly as a First Production Royalty for the Utrecht production of the Play have been paid by mistake and DDI reserves the right to seek repayment of these amounts. Investment in the UK Tour 3.30 Prior to August 2006, any entitlement your client might have had to invest in the UK Tour of the Play was provided by clause 20 of the Lender's Agreement and clause 7 of the Side Letter. DDI does not consider that clause 20 of the Lender's Agreement confers on DMD the right to invest in any future production on any particular terms, and in particular does not require DDI to give DMD 100% Terms for any investment. All that clause 20 requires is that DDI negotiate with DMD in respect of an investment by DDI of up to 20% of the capitalisation of future productions. As an agreement to agree, clause 20 of the Lender's Agreement is otherwise unenforceable. 3.31 Further, DMD's entitlements under clause 20 of the Lender's Agreement are expressed to be subject to a pre-condition that DMD "lends A$1million or more". Similarly, DMD's entitlements under clause 7 of the Side Letter are expressed to be granted "[in] further consideration of your agreement to contribute Your Investment Amount to the Capitalisation". The term "Investment Amount" is defined in clause 5(c) of the Side Letter as "an investment contribution to the Capitalisation in the sum of A$1 million". Accordingly, the offers in both clause 20(b) of the Lender's Agreement and clause 7 of the Side Letter were conditional on DMD contributing A$1,000,000 to the capitalisation of the Production. 3.32 The Lender Repayment Schedule in respect of DMD's investment for the period January to March 2008 indicates that DMD in fact contributed only $991,721.35 to the Capitalisation of the Production. Accordingly, DMD has failed to meet the pre-condition to its entitlement to be given investment opportunities granted under clause 20(b) of the Lender's Agreement and clause 7 of the Side Letter. 3.33 In any event, the Side Letter as a whole is unenforceable as no consideration was provided by DMD in exchange for the promises made by DDI under the Side Letter. At the time of execution of the Side Letter, DMD was already bound to contribute its loan amount according to the terms of the Lender's Agreement. Its promise to provide the Investment Amount under the terms of the Side Letter was past consideration and therefore not good consideration. 3.34 Alternatively, if clause 7 of the Side Letter was ever enforceable, it is no longer binding upon the parties. In about August 2006, DDI, Dirty Dancing UK Limited (DDUK), DMD and Mr Sydow and others, negotiated a Settlement Deed in relation to, amongst other things, DMD's entitlement to invest in the UK tour of the Play (Settlement Deed). The Settlement Deed extinguished any entitlement DMD might have had under clause 7 of the Side Letter. 3.35 We are instructed that DDI has not received an executed copy of the Settlement Deed from DMD or Mr Sydow. Notwithstanding this omission by DMD, the Settlement Deed is binding upon DMD and Mr Sydow. In reliance on a representation from DMD's legal representative that DMD had executed the Settlement Deed, DDUK entered into a Co-Producer Agreement dated 24 August 2006 and a Consultancy Letter Agreement dated 24 August 2006 with DMD. Under the Co-Producer Agreement and Consultancy Letter Agreement, DMD became entitled to receive substantial benefits to which it would not have been entitled if those agreements had not been executed. Accordingly DDUK acted to its detriment in entering into those agreements. In these circumstances, DMD is estopped from asserting that the Settlement Deed is not binding upon it. 3.36 DMD's entitlements to invest in future productions of the Play in the UK are now exclusively governed by the Co-Producer Agreement. Clause 12 of the Co-Producer Agreement provides: In the event that DDUK decides to present the Production on tour in the United Kingdom a ("Further Production"), DDUK shall offer the Co Producer the opportunity to contribute an amount up to its Percentage Share of the Production Cost to the capitalisation of the Further Production Provided That where the Co Producer has not entered into a binding agreement with DDUK within six weeks of receipt of notice in writing from the Producer detailing the budgets for that Further Production, the Co Producer shall be taken to have declined such opportunity. Without prejudice to the generality of the foregoing and for the avoidance of doubt, in the event that a Further Production does not require any additional capitalisation the Co Producer's entitlement to Net Profits shall apply in respect of the Further Production. 3.37 Clause 12 of the Co-Producer Agreement refers to a decision by DDUK to present "the Production" on tour in the United Kingdom. The term "Production" is defined in clause 1.1 of the Co-Producer Agreement to have a meaning "as defined in the Introduction". Clause A of the Introduction to the Co-Producer Agreement provides: DDUK intends but does (sic) undertake to present and produce a live stage production of the Work (as hereinafter defined) for an open ended run at the Aldwych Theatre, London opening on or around 26 October 2006 (the "Production"). 3.38 The defined term "the Production" must be given the meaning ascribed to it under the Co-Producer Agreement wherever it appears in the agreement unless the context requires otherwise. When this definition is applied in the context of clause 12 of the Co-Producer Agreement, it is clear that clause 12 was intended to give DMD a right to contribute to any additional capitalisation that may be required to take the production of the Play from the Aldwych Theatre on a tour of the UK. Clause 12 was not intended to apply to new productions of the Play for the purpose of a UK tour. 3.39 We are instructed that any future UK tour of the Play will be a new production of the Play. We are further instructed that this new production will require additional capitalisation. In these circumstances, DDI denies that clause 12 of the Co-Producer Agreement entitles DMD to invest in the capitalisation of the UK tour on 100% terms. 4. RESOLUTION 4.1 If DMD wishes to submit the matters in dispute between DDI and DMD to arbitration, DDI remains willing to agree to that course. However, DDI considers that it would be to both DDI and DMD's advantage if the time and expense of an arbitration can be avoided and a commercial agreement is reached to settle all matters in dispute between the parties. 4.2 Moreover, there are issues above that are beyond the competence of an arbitrator and will require adjudication by a Court of Equity. Consequently, any arbitration could only partly resolve the matters in issue between the parties. 4.3 To this end, our client proposes a meeting between the parties and their respective legal advisers in which each of the matters in dispute may be discussed. Please let us know what your client's position is in this regard." 32 On 17 September 2008 the plaintiff's solicitors wrote to the first defendant's solicitors as follows ("the 17 September 2008 letter"): "We refer to your letter dated 8 September 2008.

Our client rejects your client's position as set out in your letter, particularly in relation to: · the application of the First Production Royalty to repay the balance of the amount equal to 125% of our client's loan. · the matters referred to under the heading of "Rectification" asserting the "mistake". · the assertion that our client has no entitlement to the First Production Royalty. · The assertions made by your client under the heading of "Investment in the UK tour" While our client appreciates the suggestion of finding a resolution to this dispute by meeting to discuss the matters in dispute, our client considers that a resolution is unlikely to be achieved given the distance separating our respective clients' positions in relation to the matters in dispute. Our client can only see the meeting as a forum for the reiteration of our clients' respective positions. Having regard to the matters canvassed in your letter we agree that the matters in dispute, as argued in your letter, are well beyond the competence of an Arbitrator let alone an independent expert such as is contemplated by clause 20 of the Lender's Agreement. We agree that these issues demand adjudication by a Court. Our client considers that a satisfactory resolution of the matters in dispute can only be achieved by the adjudication of a Court.

requires a copy of the Production Accounts ie the Financial Accounts and Statements in respect of the Production prepared by the Production Accountant. On a previous occasion when our client requested a copy of the Production Accounts your client provided a copy of the Financial Statements and Accounts of Dirty Dancing Investments Pty Ltd. Those accounts are not the Production Accounts are client is requesting.

wishes to exercise its right to inspect, with its authorised professional agents, all Production Company books of account and records pursuant to clause 7(e) of the Lender's Agreement. In this respect we note the financial management and accounting obligations of your client referred to in clause 6 (f) of the Lender's Agreement. Please advise us when and where the books of account and records will be made available for this purpose."

33 On 14 October 2008 the plaintiff's solicitors wrote as follows ("the 14 October 2008 letter"):

"We refer to your letter dated 8 September 2008. Our client's response to the matters raised in your letter is set out below. We have adopted the abbreviations used in your letter.

As we understand it, there are essentially four matters in dispute between our clients.

The first dispute - payment of the "First Production Royalty"

This dispute centres upon the proper construction of clause 5 of the Lender's Agreement. It is not contentious that by that clause DDI agreed with DMD that it would be entitled, as a member of the class of lenders, to a "First Production Royalty" ( FPR ) of the "Gross Box Office Receipts" ( GBOR ) from any other first class presentations of "the Production" after the first presentation of the Production at the Theatre Royal in Sydney.

Accordingly, DDI agreed to pay the FPR on any such presentations in the UK, Germany, Japan, Canada, the United States of America, Australia, New Zealand and Asia.

Payment of the FPR was to be at the rate of 1.5% of the GBOR to the lenders "whilever their loans remain unpaid, until all lenders have been repaid in full". DDI was entitled, under the agreement to repayment of 125% of its loan.

After repayment of 125% of the loans, the FPR was reduced to an amount equal to 0.5% of the "relevant" GBOR except in relation to further presentations in Australia, New Zealand and Asia, where the FPR would remain at 1.5%.

DMD's position is that the FPR was intended to be a payment made by DDI to lenders additional to the repayment of the loans plus 25%. Accordingly, payments of the FPR should not be taken into account in reducing the loan balance. We note that DDI disagrees with this construction. Its position is that the proper construction of the Lender's Agreement shows that FPR payments were intended to reduce the loan account and when all payments to a lender, including the FPR payments, amounted to repayment of 125% of the loan, the FPR would (subject to the exception noted) be reduced to 0.5%.

Our client considers that its construction of the agreement is the correct one. It is DMD's case that the terms of the Lender's Agreement, both in themselves and in the commercial context of that agreement, show that the FPR was intended to be an independent and additional benefit to lenders and not merely a mechanism for repayment of the loan itself.

As we understand it, your client's reasoning in support of its case on clause 5 and the FPR is as follows: 7.1 It accepts that clause 4 provides for a mechanism and order for repayment of the loans. 7.2 It asserts that the same is not, however, the "exclusive mechanism for repayment of the loan". 7.3 Clause 9 provides for a pro rata repayment of the loans if there are insufficient assets to repay them in full. 7.4 The initial phrase of clause 9, "subject to clause 5" means that clause 9 "will have no work to do" unless the FPR is a mechanism whereby DMD can be repaid its loan.

We do not consider that this reasoning would be sustainable in any proceedings. The two clauses operate harmoniously on DMD's construction. The introductory words of clause 9 were, on an objective construction, included not to show that payments of the FPR were to be taken into account in relation to repayments of the loan but rather to emphasise that the ability of DDI to repay less than the 125% agreed to, in the circumstances contemplated in clause 9, was independent of the obligation to pay the FPR imposed by clause 5 and that the obligation to pay the FPR continued whether or not the circumstances contemplated by clause 9 pertained.

The natural and ordinary meaning of the Lender's Agreement, giving due weight to the context in which it was made, supports DMD's construction. The use of the term "royalty" to describe the FPR also supports such a conclusion. It is clear that the lenders were to be paid a sum that would depend upon the sale of tickets. The FPR therefore exhibits the commercial nature of a royalty. As such, payment of the FPR would not be expected to reduce the loan balance.

The Side Letter formed part of the Lender's Agreement, the two having to be read together; (clause 11 Letter Agreement). The Side Letter, clause 5, described the benefits to DMD from entry into the agreements. The first was repayment of 125% of the loan. However, the clause then goes on to refer to "all of the benefits" to DMD as an investor, set out in the Lender's Agreement. This also lends support to the treatment of the additional benefit of the FPR as being separate from the loan and its repayment.

The approach of the Court to construing and interpreting contracts such as the agreements here is one involving a commonsense non-technical approach. The Court will ask how business people would construe (or understand) the agreements in light of the commercial purpose or setting of the same.

We would not think it contentious that the starting point in the exercise of contractual construction of the agreements between DDI and DMC is the relevant context in which the agreement was made. The High Court has affirmed that the surrounding circumstances and the purpose and object of a transaction must be considered in determining what meaning is to be ascribed to the text.

The process of construction of the present agreements will also include an assessment of the reasonable expectations of the parties. The factual matrix here will result in a practical and purposive construction of commercial agreements. The expectations that DDI and DMD would reasonably have had, in entering into the Lender's Agreement, was that the FPR would be an additional royalty payment that was independent of repayment of the loan, albeit that the rate of the royalty would decrease when the loan was repaid by sums other than the royalty payments themselves.

In the present case the commercial background to the Lender's Agreement and the Letter Agreement are that investors were being asked to put in considerable sums of money into an untested and new production. The agreements expressly provided that if the returns were not enough to make repayments of the loans the lenders were to bear that loss (clause 9). The lenders were offered a "royalty" to provide an extra benefit.

This view is supported by the agreements read as a whole. Clause 5(a) itself suggests that the entitlement to the higher royalty, whilever loans remain unpaid, indicates that the royalty payment is separate from and additional to loan repayments. Clause 9 supports DMD's case, not that of DDI. The obligation to repay is expressly made independent of the royalty payment. If the interaction of the two clauses had the effect posited by your client then there would no relevant royalty at 1.5% at all, merely a provision for instalment repayments of the loans via such "royalties". The true royalty would only commence at 0.5%, when the loans were repaid in full.

On DDI's case the royalty payments would, until repayment of the loan, do double work, namely (i) reduction of the loan account by the amount of the FPR and (ii) satisfaction of the obligation to pay a royalty. There is no warrant in the wording of the agreements or the context in which they were made for such a construction.

Finally, there is nothing in the Settlement Deed that affects the position. Clauses 5 and 9 were "reserved Australian rights" and continue to operate between the parties.

The second dispute - can the Lender's Agreement be rectified?

Your client has asserted an entitlement to have the Lender's Agreement rectified so that the FPR "would be calculated on the basis of a profit pool" and not on the basis of GBOR. It is notable that the indefinite article is used and also that nowhere in the Lender's Agreement or the Side Letter is such a pool defined.

The only mention of "profit pool" appears in clause 3.1.1(d) of the Lender's Agreement in relation to the disclosure of certain matters. The phrase is used immediately before (but separated by a comma from) the phrase "royalty schedules". The reference to "profit pool" is therefore only as a component of elements in "full production budgets" for the Production.

The terms of clause 14 of the Lender's Agreement are also relevant. There the parties contemplated payments to third parties for goods or services. The clause permitted payments to such third parties by way of "a percentage of the Gross Box Office Receipts". This would be a "royalty" similar to the FPR. There is no reference to payment from any profit pool.

There is nothing to suggest that the parties shared the common intention now alleged by DDI or made any mistake in the recording of their agreement. Rectification on this basis requires a common (in the sense of shared) intention. The essential elements constituting an entitlement to rectification for common mistake are: 21.1 There must be an intention common to both parties at the time of contract to include in their bargain a term which by mutual mistake was omitted. 21.2 The plaintiff must advance convincing proof that the written contract does not embody the final intention of the parties. 21.3 The omitted ingredient must be capable of such proof in clear and precise terms. 21.4 The court must not assume for itself the task of making the contract for the parties.

We are instructed that there is no factual basis upon which DDI could meet these requirements. In particular, your client's asserted ingredient, a "profit pool" would fail to meet the third and fourth conditions set out above. Your letter does not provide any facts to support a case for rectification.

We note that DDI has made a veiled suggestion that DMD might have been aware of the "mistake" by DDI and exploited the same. This is clearly an attempt to argue that the case falls within the principles discussed by the High Court in Taylor v Johnson (1983) 151 CLR 422. Our client will deny any such awareness. Again, you have identified no factual matters that could possibly suggest that DMD induced or exploited a known mistake. On the contrary, our instructions are that DMD negotiated for and intended to obtain an FPR based upon GBOR. Equally, our instructions are that there is no industry or customary usage whereby such payments would only be made from a "profit pool".

Our client does not accept that DDI has any realistic basis for rectification. It has produced nothing in the way of convincing proof of the earlier common intention that is required for such a suit.

Third dispute -Is there any entitlement to a First Production Royalty in relation to presentations of Dirty Dancing in other territories?

The third dispute relates to whether or not DMD, in any event, has any entitlement to an FPR for any presentation of the Play outside Australia, New Zealand and Asia (defined as "the Nominated Territories"). As we understand it, DDI's argument is that: 25.1 The obligation to pay the FPR under clause 5 only attaches to presentation of the Production. 25.2 "The Production" is defined in clause 1.1 of the Lender's Agreement as "the production and presentation by DDI and/or DDAP in the Nominated Territories". 25.3 The definition of GBOR in clause 1.1 likewise involves weekly sums received for "performances of the Production". 25.4 This must be a reference to sales of tickets by DDI and/or DDAP. 25.5 Accordingly, the obligation to pay is confined to productions by DDI and/or DDAP. 25.6 Neither DDI nor DDAP has presented Dirty Dancing in the UK, Germany, Japan, Canada or the USA.

We note that DDI concedes that the literal wording of clause 5, incorporating the full definition of "Production" cannot work. The definition confines the "Production" to the Nominated Territories. This would produce an absurdity. Thus DDI accepts, as it has to, that at least part of the phrase "by DDI and/or DDAP in the Nominated Territories" must be read down if clause 5(a) is to be given a sensible meaning, as the parties clearly intended that it should.

Our client's position is that the agreement, properly construed, must also involve reading down the part of the phrase "by DDI and/or DDAP" so that a production of the Play overseas, by licencees of DDI or companies nominated or authorised by it, attracts the liability to pay the FPR.

The starting point of construction is, again, the commercial context and purpose of the agreements. It is clear from the agreement as a whole, and clause 5 in particular, that the parties to the agreement contemplated that there would be further productions of the Play or Work overseas and that the FPR would be payable in relation to such productions.

The broader context of the agreement is provided by the Recitals to the Lender's Agreement. These stated that: 29.1 TOML had the rights to "licence, produce and present" Dirty Dancing on the terms of the 18 February 2004 and 12 July 2004 licence agreements; Recitals A and B. 29.2 Those licences required TOML to provide the licensed rights to "an operating entity for each production (sic) of the Play in the Territories referred to in each of the licences"; Recital C. 29.3 TMOL granted DDI an exclusive licence for the exploitation of the Play in the Nominated Territories (Australia, NZ and Asia); Recital D. That licence permitted the production by DDI itself or via "a licence to a nominated entity of DDI".

29.4 DDI had granted a sub-licence to DDAP; Recital E.

DDI represented and warranted certain things to DMD; clause 3.1.1. Such disclosure included the licence agreements referred to in Recitals A, B, D and E.

The 18 February 2004 licence agreement was between TOML and Magic Hour Productions Inc ( Magic Hour ). The licence was sole, exclusive and worldwide; clause1. Magic Hour agreed not to grant any third party any rights which would interfere with the rights granted to TOML; clause 1(g). Clause 6(b) read, in part: "i. Producer [TOML] is a company that is holding the rights licensed hereunder and is not an operating company. For each production, Producer will assign the rights for the applicable territory to an operating entity whose assets will not be subject to the claims of any other operating company." 32. Clause 4(d) provided that royalties to be paid to Magic Hour "shall be computed on a company by company basis". These were, obviously, the companies that were to be the operating entities in each of the territories. 33. There is no suggestion in the licence agreement that the identity of the operating companies was important. They were simply to be corporate vehicles licensed or by TOML through which the local productions would be presented. Read as a whole, the licence agreement contemplated that there would be a separate operating company in the various territories (although it contemplated Australia and NZ as the same territory). 34. The 12 July 2004 licence agreement with Lions Gate Entertainment Corp ( Lions Gate ) recorded that TOML intended to present the Play throughout the world; clause 1. TOML was licensed to use the title of the Play in productions. These productions were to be presented by TOML but it was contemplated that the actual productions would be "under Producer's licence or control"; clauses 3, 5 and 10. Similarly, clause 3(e) contemplated performances by "any company". Lions Gate was to have the right, but not the obligation, to invest in the financing of such productions; clause 6. Lions Gate agreed not to grant any rights inconsistent with those provided to TOML; clause 9. 35. TOML licensed DDI by a written agreement dated 1 September 2004. The agreement recited the agreements with Magic Hour and Lions Gate. Recital C then provided that: "Under the terms of the Rights Agreement and the Title Agreement the rights licensed to TOML must be provided to an operating entity for each production of the Play in the relevant territory." 36. Recital D provided: "TOML has agreed to grant to DDI an exclusive licence to use and exploit the rights granted to TOML under the Rights Agreement and the Title Agreement ("Rights") for the promotion and exploitation of the Play worldwide, either by way of production or licence to produce ("Purpose") to DDI." 37. The exclusive licence was granted by clause 1.1. This, of course, shows that the parties to the Lender's Agreement contemplated that DDI's obligation to pay the FPR on productions outside Australia did not depend on DDI or DDAP presenting the Play. 38. Further support for DMD's position is provided by clause 1.2. This provided that TOML was not restricted or prohibited, and nor was "any other entity or person nominated by TOML" from using, sub-licensing, exploiting or further developing the Play but only where the rights under the agreement were terminated. 39. DDI was required to observe all of the obligations on TOML under its agreements with Magic Hour and Lions Gate; clause 1.3. TOML and DDI agreed that upon entry into the licence agreement DDI would sub-licence the rights to "a wholly owned operating company of DDI" for the purposes of producing the initial production. Consistently with the various agreements, DDI and TOML contemplated other operating companies being sub-licensed to produce the production in other territories. 40. DDAP was licensed pursuant to an agreement dated 1 September 2004. Importantly, DDAP was only licensed for Australia, New Zealand and Asia; clause 1.4. DDAP therefore had no right, under the various agreements, to produce the Play in any other territory such as in the United Kingdom or in the USA. DDI, DDAP and DMD were all aware of this at the time of entry into the Lender's Agreement and the Side Letter. 41. All of these key licence agreements were referred to in the Lender's Agreement and recorded as having been disclosed to DMD; clause 3.1.1(d)(i)-(v). The Lender's Agreement therefore has to be construed in the context that both DDI and DMD were contracting where they were aware of the scope and limitations on the licensing regime under the agreements. They knew and contracted in a context where: 41.1 DDAP was only licensed for Australia, New Zealand and Asia. 41.2 The agreements required the production in other territories to be by a specific operating company. 41.3 Such a company would not be DDAP. 41.4 Such a company could not be DDI. 41.5 The overseas operating companies, however, would be sub-licensed by DDI as it held an exclusive worldwide sub-licence from TOML. 41.6 In particular, whilst the licence agreement between TOML and DDI stood, TOML itself could not present the Play overseas. 41.7 The gross box office receipts for overseas productions would not include the proceeds of sales of tickets by DDI and/or DDAP. 42. In this context it is difficult to see how the Court could regard DDI's present argument as having any merit. Reading clause 5 in a sensible and commercial way, there was no requirement, before DDI's obligation to pay the FPR attached, for such a production to be by DDI, DDAP or the two companies in conjunction. Equally, there was no such obligation in relation to the sale of tickets for such overseas productions. 43. The reference to the "Production" and "Gross Box Office Receipts" could perhaps have been worded more clearly for the overseas productions, but the contractual intent of the parties, particularly where the context is taken into account, shows that DDI's obligation attached to productions of the Play overseas that took place under the aegis of its exclusive worldwide rights, regardless of what company or companies actually presented the Play in those territories. Fourth dispute - investment in the UK tour of the Play 44. DMD has claimed an entitlement to invest in any UK tour of the Play, following the initial run of the Play at the Aldwych Theatre, London. DDI has advanced a number of separate arguments against such a right, as follows: 44.1 Clause 20 (sic, but clearly meaning clause 22) of the Lender's Agreement and clause 7 of the Side Letter purported to provide a regime for such participation. 44.2 Such terms were too uncertain to be enforced, being an agreement to agree. 44.3 Such rights would only come into existence if DMD advanced $1 million or more. 44.4 DMD did not invest $1 million, the actual sum invested only being $991,721.35. 44.5 There was no consideration for the Letter Agreement. 44.6 Clause 7 did not survive the Settlement Deed. 44.7 Rights to participate in a UK tour, if any, are to be found in clause 12 of the Co-Producer's Agreement only. 44.8 Clause 12 referred to "the Production". 44.9 The Production meant the presentation of the Play at the Aldwych Theatre and did not apply to a "new productions of the Play for the purposes of a UK tour. 44.10 Any future tour of the Play, according to your instructions will be a new production. 44.11 Thus DMD has no rights to participate in any such tour. 45. DMD gives no weight to the argument that the Letter Agreement was not supported by consideration. It was expressed to be part of the total agreement including the Lender's Agreement and there was executory consideration supporting it. 46. Clause 22 was a "reserved Australian right". Our client does not accept that this clause is too uncertain to be enforced. The discretion afforded to DDI and/or TOML was one that had to be exercised reasonably, in good faith and honestly. These criteria, in turn, would be informed by the terms regulating the investment provided for by the Letter Agreement. 47. Our client accepts that Clause 7 was the subject of the releases in the Settlement Deed. 48. As for the argument that DMD did not contribute $1 million, the definition of the Loan in the Lender's Agreement contemplated that the actual amount could be greater or lesser than that sum and references to the investment that follow in the agreement have to be construed in that context. Furthermore, it was DDI who, on our instructions, limited the amount of the investment and it cannot rely on its own act to deny the operation of clause 20. 49. In any event, clause 12 of the Co-Producer's Agreement operates in and created binding obligations on DDUK. The clause has to be read in the broader commercial context and in light of the agreement as a whole. So read, the parties must have intended that the terms of their agreement would apply, mutatis mutandis, to the investment in a UK tour. 50. Since the parties intended the new agreement to be on the same terms as the old, mutatis mutandis, all that the clause contemplated was execution of a further agreement formally recording such terms as necessarily amended to deal with a tour of the UK. 51. DDI has also taken the point that a UK tour would involve a new production of the Play or Work. Although, as a hypothetical matter, there could be circumstances where a tour of a play is so different from the original run that it could not be described as the Play on tour, there is nothing to support any suggestion that the UK tour under discussion here would involve a "new" production in that sense. On our instructions this would be factually incorrect. Unless and until your client can identify the facts relied upon by it to support its "new production" assertion, our client will not regard it as likely that clause 12, if otherwise found to be enforceable, would not apply to the UK tour. Conclusions 52. To conclude, it is DMD's position that: 52.1 The FPR was to be paid in addition to repayment of 125% of the loan. Accordingly, the loan balance was not reduced by FPR payments. 52.2 There is no basis for an order rectifying the Lender's Agreement as asserted by BDW. 52.3 DMD is entitled to payment by DDI of the FPR on other productions overseas, notwithstanding that they are not presented by DDI or DDAP. 52.4 DMD has a right to participate in a proposed UK tour of the Play. Resolution

You have suggested that the costs of arbitration should be avoided if a commercial agreement can be reached to settle all matters in dispute. You have proposed a meeting between legal advisers.

We remain concerned that the positions of DMD and DDI are too far apart to make it likely that the meeting that you have proposed would achieve a commercial settlement. Whilst, of course, our clients will consider any proposal DDI may have to reach such a commercial settlement we do not think that it would be productive for the two legal teams to meet at present. We are concerned that such a meeting would simply involve both sides defending entrenched positions as to the law.

If your client does have a commercial settlement in mind, we would suggest that you write to us on a without prejudice basis setting out what it is.

In the meantime, we have given notice that our client requires access to the books and records of the Production for audit purposes. Your clients have failed to respond to that notice. In addition, we have requested a copy of the Production Budgets, referred to in your letter dated 8 September 2008 which have not yet been produced.

In the event that we do not hear from you in relation to these matters by 31 October 2008, our client has instructed us to commence proceedings to obtain appropriate orders in respect of the failure to properly account for and pay the First Production Royalty and in respect of its remedies in relation to these matters." 34 On 3 November 2008, the plaintiff's solicitors wrote as follows:

We note that we have had no reply and that your client has not provided access to the Production books of account and records as provided for in clause 7(e) of the Lender Agreement.

We are now instructed to commence proceedings for orders in relation to that matter and in connection with accounting for and recovery of the First Production Royalty.

Would you please take your client's instructions to accept service of those proceedings on behalf of your client(s)."

THE PROCEEDINGS 35 The plaintiff initiated proceedings on 22 January 2009. 36 Although it will contribute to the prolixity of this judgment, it is necessary to set out the substantive parts of the plaintiff's Commercial List Statement: "A NATURE OF DISPUTE

The Plaintiff and the First Defendant (DDI) entered into a number of agreements in 2004 relating to the staging of the dramatico-musical stage play 'Dirty Dancing' (the Production).

Pursuant to the agreements referred to in paragraph 1 above, the Plaintiff lent the sum of $1,000,000 to DDI to assist in the funding required for the staging of the Production in certain territories. In consideration of this loan, the Plaintiff was entitled to repayment of the loan out of the proceeds of performance of the Production together with payment of an additional amount equal to 25% of the loan and certain ongoing royalties. In addition, DDI granted the Plaintiff the right to invest in productions of the Production in the United Kingdom (the UK Investment Right).

Pursuant to further agreements between the Plaintiff, DDI and various other parties in 2006, the 2004 agreements between the Plaintiff and DDI were amended and the UK Investment Right was withdrawn by DDI and was instead granted to the Plaintiff by the Second Defendant (DDUK), being the entity responsible for productions of the Production in the United Kingdom.

DDI now denies that it is liable to pay certain royalties and other monies claimed by the Plaintiff.

Further, DDUK denies that the Plaintiff has any entitlement, in the circumstances which have now arisen, to exercise the UK Investment Right.

Whether the First Production Royalty payable to the Plaintiff pursuant to the Lender's Agreement it entered into with DDI dated 18 November 2004 (the Lender's Agreement) is to be applied towards the payment of 125% of the Plaintiff's initial loan amount, which payment DDI is required to make by reason of the terms of the Lender's Agreement.

Whether the First Production Royalty payable pursuant to the Lender's Agreement is to be calculated on the basis of gross box office receipts or whether the Lender's Agreement should be rectified so as to provide for payment of the First Production Royalty on the basis of a profit pool established by DDI.

Whether the Plaintiff is entitled to payment of the First Production Royalty in respect of any presentation of the Production outside Australia, New Zealand and Asia.

Whether the Plaintiff is entitled to invest in any production of the Production in the United Kingdom following the initial run of the Production at the Aldwych Theatre, London, and the terms upon which the Plaintiff is entitled to make any such investment.

The Plaintiff and DDUK are companies duly incorporated in the United Kingdom and entitled to sue and liable to be sued in their corporate names and styles.

DDI is a company duly incorporated in Australia and entitled to sue and liable to be sued in its corporate name and style.

On or about 18 November 2004, the Plaintiff entered into two agreements with DDI pursuant to which the Plaintiff agreed to invest in the Production and in consideration for which investment DDI agreed to pay certain royalties and grant certain other rights to the Plaintiff (jointly the Agreements). Particulars The Agreements are written and express and comprised in: (a) the Lender's Agreement; and (b) a further agreement between the Plaintiff and DDI entitled 'Letter Agreement made between you and Dirty Dancing Investments Pty Limited' dated "as at 18 November 2004" (the Letter Agreement).

It was a term and condition of the Agreements that DDI had invited the Plaintiff to invest in a loan to DDI to assist in the funding required for the mounting of the Production for presentation in Australia, New Zealand and Asia (the Nominated Territories) and that the Plaintiff had agreed to make a loan to DDI for that purpose on the terms and conditions set out in the Lender's Agreement, including an entitlement to a share of the net profits derived from the performances of the Production in the Nominated Territories and an ongoing benefit in regard to specified productions by DDI or its nominated licensees of the Production elsewhere in the Nominated Territories. Particulars The term and condition is written and express and contained in clause 2(a) of the Lender's Agreement.

It was a further term and condition of the Agreements that subject to and in consideration of the Plaintiff making the specified loan to DDI, the Plaintiff would be entitled to: (a) repayment of the loan, together with an additional amount equal to 25% of the amount of the loan, out of the Total Revenue (as defined in the Lender's Agreement) from specified performances of the Production in accordance with the provisions of clause 4 of the Lender's Agreement; and (b) 15.385% of the Merchandising Revenue (as defined in the Lender's Agreement) (the Merchandising Revenue Payment). Particulars The term and condition is written and express and contained in clause 2(c) of the Lender's Agreement and item 3 in the Schedule to the Lender's Agreement.

It was a further term and condition of the Agreements that DDI represented and warranted to the Plaintiff that it, Time of My Life Pty Limited (ACN 107 898 966) (TOML) and Dirty Dancing Asia Pacific Pty Limited (ACN 110 687 628) (DDAP) had all necessary licenses and sub-licences to produce and present the Production as a dramatico-musical work in the Nominated Territories. Particulars The term and condition is written and express and contained in clause 3.1.1(a) of the Lender's Agreement.

It was a further term and condition of the Agreements that DDI agreed with the Plaintiff that lenders (including the Plaintiff) who had made loans to fund the capitalisation of the Production would be entitled, as a class, to a royalty of 1.5% of the Gross Box Office Receipts (as defined in the Lender's Agreement) from any presentations of the Production which were first class productions and which occurred after the first presentation of the Production at the Theatre Royal in Sydney and were presented in the United Kingdom, Germany, Japan, Canada, United States of America, Australia, New Zealand and Asia (the First Production Royalty). The First Production Royalty would be payable to all lenders, including the Plaintiff, whilever their loans remain unpaid until all lenders had been repaid in full according to the terms and conditions of their respective lender agreements with DDI, provided that (and subject to the provisions of clause 5(c) of the Lender's Agreement) upon repayment of an amount equal to 125% of the amounts loaned by the lenders, the First Production Royalty would be reduced to an amount equal to 0.5% of the relevant Gross Box Office Receipts. Particulars The term and condition is written and express and contained in clause 5(a) of the Lender's Agreement.

It was a further term and condition of the Agreements that the First Production Royalty would be shared between and paid to the lenders (including the Plaintiff) pro rata to the proportions (expressed as percentages) in which the lenders made loans to fund the capitalisation of the Production. Particulars The term and condition is written and express and contained in clause 5(b) of the Lender's Agreement.

It was a further term and condition of the Agreements that notwithstanding the provisions of the balance of the Agreements, the First Production Royalty payable for the purposes of clause 5(a) of the Lender's Agreement would always remain an amount equal to 1.5% of Gross Box Office Receipts in respect of subsequent first class presentations of the Production in the Nominated Territories presented after the initial Sydney production at the Theatre Royal. Particulars The term and condition is written and express and contained in clause 5(c) of the Lender's Agreement.

It was a further term and condition of the Agreements that an accountant appointed by DDI was to provide to the Plaintiff a certified copy of the financial accounts and statements in respect of the performances of the Production in the Nominated Territories (the Production Accounts) showing the ultimate financial position of the performances of the Production after it had ceased its runs in the Nominated Territories. Particulars The term and condition is written and express and contained in clause 7(b) of the Lender's Agreement.

It was a further term and condition of the Agreements that the Plaintiff would be entitled to inspect all books of account and records relating to the performances of the Production in the Nominated Territories at any time on provision of reasonable notice of such request to DDI. Particulars The term and condition is written and express and contained in clause 7(e) of the Lender's Agreement.

It was a further term and condition of the Agreements that on settlement of the Production Accounts, and subject to the terms and conditions pleaded in paragraphs 7, 8 and 9 above, if there were insufficient funds to repay in full the loan made by the Plaintiff, then there would only be repaid to the Plaintiff 15.385% of the total revenue and assets available for distribution as shown in the final Production Accounts. Particulars The term and condition is written and express and contained in clause 9 of the Lender's Agreement and item 3 of the Schedule to the Lender's Agreement.

It was a further term and condition of the Agreements that the terms and conditions of the Letter Agreement are to be read with the terms and conditions of the Lender's Agreement and that the Agreements together comprise the agreement made between the Plaintiff and DDI in relation to the Production. Particulars The term and condition is written and express and contained in clause 11 of the Letter Agreement.

It was a further term and condition of the Agreements that in further consideration of the Plaintiff's agreement to invest in the loan referred to in the term and condition particularised in paragraph 4 above, DDI granted the Plaintiff the right to invest in and become co-producer of performances of the Production in the United Kingdom with DDI and/or with a nominee entity of DDI on the terms and conditions set out in the Letter Agreement. Particulars The term and condition is written and express and contained in clause 7 of the Letter Agreement.

In or about November and December 2004, the Plaintiff lent to DDI the sum of $1,000,000 pursuant to the terms and conditions of the Agreements.

In or about 2006, a number of disputes arose between the Plaintiff and DDI regarding the Agreements, which disputes were resolved in accordance with the terms of a document entitled 'Deed of Release, Waiver and Settlement' entered into in or about August 2006 (the Deed). Particulars The Deed was entered into between DDI, TOML, DDUK, DDAP, Kevin George Jacobsen, Amber Lucy Jacobsen, Michael Aaron Jacobsen, the Plaintiff and Karl Sydow.

It was a term and condition of the Deed that the Plaintiff and Karl Sydow release all of the other parties to the Deed from all claims arising out of or in connection with the Australian Disputes and the UK Disputes (as defined in the Deed) and arising from the Agreements save and except for such rights as the Plaintiff and Karl Sydow had in regard to specified clauses of the Agreements, including those clauses particularised in paragraphs 5, 7, 8, 9, 10, 11 and 12 above. Particulars The term and condition is written and express and contained in clauses 3, 4 and 9 of the Deed.

It was a term and condition of each of the Agreements and the Deed that they would be governed by and construed in accordance with the laws in force in New South Wales and that each party would submit to the non exclusive jurisdiction of the Courts of New South Wales in regard to any matters arising under the Agreements and the Deed. Particulars The term and condition is written and express and contained in clause 25 of the Lender's Agreement, clause 12 of the Letter Agreement and clause 14 of the Deed.

On the same date as the Deed was entered into, the Plaintiff (on its own behalf and on behalf of Karl Sydow) and DDUK (on its own behalf and on behalf of DDI, TOML, DDAP, Kevin George Jacobsen, Amber Lucy Jacobsen and Michael Aaron Jacobsen) entered into an agreement relating to performances of the Production in the United Kingdom (the Co Producer Agreement). Particulars The Co Producer Agreement is written and express and contained in an agreement entitled 'Co Producer Agreement "Dirty Dancing"' dated 24 August 2006.

It was a term and condition of the Co Producer Agreement that the Plaintiff would provide expert advice and assistance to DDUK in connection with matters relating to decisions to be taken in connection with performances of the Production in the United Kingdom specified in the Co Producer Agreement and that DDUK would fully and effectively consult in good faith with the Plaintiff in respect of all material decisions relating to those performances of the Production. Particulars The term and condition is written and express and contained in clauses 2.1 and 2.2 of the Co Producer Agreement and paragraph (A) of the Introduction to the Co Producer Agreement.

It was a further term and condition of the Co Producer Agreement that in the event that DDUK decided to present performances of the Production on a tour in the United Kingdom (a Further Production), then DDUK would offer the Plaintiff the opportunity to contribute an amount up to its Percentage Share of the Production Cost (as defined in the Co Producer Agreement) to the capitalisation of any Further Production and that if any Further Production did not require any additional capitalisation, then the Plaintiff's entitlement to Net Profits (as defined in the Co-Producer Agreement) would apply in respect of such Further Production. Particulars The term and condition is written and express and contained in clause 12 of the Co Producer Agreement.

It was a further term and condition of the Co Producer Agreement that it would be governed and construed in accordance with the laws of England and that the parties to the Co Producer Agreement would submit to the exclusive jurisdiction of English Courts. Particulars The term and condition is written and express and contained in clause 21 of the Co Producer Agreement.

Since in or about 2004, first class productions of the Production have been presented in Australia, New Zealand, countries within Asia including Japan, the United Kingdom, Germany, Canada, United States of America and other territories.

Since in or about 2005, DDI has paid to the Plaintiff the sum of $1,370,286.41 in relation to performances of the Production in Australia and other countries. Particulars Loan repayments $900,180.00 Merchandising Revenue Payments $92,406.26 First Production Royalty Payments $377,700.15 $1,370,286.41

In breach of the terms and conditions of the Agreements, as amended by the terms of the Deed, DDI has: (a) failed to pay to the Plaintiff 125% of its initial loan of $1,000,000; (b) failed to pay the Plaintiff 1.5% of the Gross Box Office Receipts of the presentations of the Production which have taken place in the United Kingdom, Germany, Japan, Canada, United States of America, Australia, New Zealand and elsewhere in Asia; (c) failed to pay the Plaintiff all of the Merchandising Revenue Payments due to it; (d) failed to provide a copy of the final Production Accounts to the Plaintiff in accordance with paragraph 7(b) of the Lender's Agreement despite request being made for provision of those documents by the Plaintiff; and Particulars The request was written and express and contained in a letter from the lawyers for the Plaintiff, TressCox, to the lawyers for DDI, Blake Dawson, dated 17 September 2008. (e) failed to allow the Plaintiff to inspect all books of account relating to the Production in accordance with clause 7(e) of the Lender's Agreement despite a request being made by the Plaintiff in this regard; Particulars The request was written and express and contained in a letter from TressCox to Blake Dawson dated 17 September 2008.

In breach of the terms and conditions of the Co-Producer Agreement, DDUK has refused to offer the Plaintiff the opportunity to contribute any amount to the capitalisation of Further Productions of the Production in the United Kingdom. Particulars The refusal is written and express and contained in a letter from Blake Dawson, solicitors for DDI and DDUK, to TressCox dated 8 September 2008.

Despite demands being made by the Plaintiff that DDI and DDUK remedy their breaches of the Agreements (as affected by the Deed) and the Co Producer Agreement pleaded in paragraph 25 above, DDI and DDUK have refused to do so. Particulars The requests are contained in the letters from TressCox to Blake Dawson dated 17 September 2008 and 14 October 2008 and the refusal is set out in the letter from Blake Dawson to TressCox dated 8 September 2008.

The Plaintiff seeks the relief sought in the Summons filed herewith.

What amount is payable by DDI to the Plaintiff pursuant to clause 2(c) of the Lender's Agreement.

What amount is payable by DDI to the Plaintiff pursuant to clause 5 of the Lender's Agreement." 37 The initiating process was served on the second defendant in the United Kingdom, the plaintiff relying on the provisions of UCPR r 11.2 and Sch 6 which provide as follows: 11.2 Cases for service of originating process

Originating process may be served outside Australia in the circumstances referred to in Schedule 6. Schedule 6 Proceedings in respect of which originating process may be served outside Australia

Originating process may be served outside Australia in relation to the following circumstances: … (i) if the proceedings are properly commenced against a person served or to be served in New South Wales and the person to be served outside New South Wales is properly joined as a party to the proceedings,

38 No point is taken that the service was incompetent under the Rules. 39 On 12 March 2009 the defendants invited the plaintiff to consent to the stay now sought. That invitation was declined on 12 March 2009. 40 No further steps with respect to any expert determination have been taken. 41 The motions (contained in one Notice of Motion) were filed on 13 March 2009. 42 The evidence on the motions consisted of two affidavits of Mr Bellgrove a solicitor admitted to practice in England and Wales and employed by the defendants' solicitors together with a bundle of documents including agreements and some correspondence, and an affidavit of Mr McCormack a partner in the plaintiff's solicitors, together with the initiating process, the Deed and some correspondence. 43 Before me, once the defendants had opened, and the evidence on the motions was read, the order of submissions was that the plaintiff went first and the defendants responded. This course was adopted with the agreement of counsel, because on both motions there was no issue that the decision whether to grant a stay involves exercise of the court's discretion and it is incumbent upon the plaintiff to show good reason for that exercise in its favour: with respect to a contractual alternative dispute resolution provision see Ipoh v TPS Property No 2 & Anor [2004] NSWSC 289 at [30]; Zeke Services Pty Ltd & Anor v Traffic Technologies Ltd & Anor [2005] QSC 135 at [21]; with respect to an exclusive foreign jurisdiction clause see Akai Pty Ltd v People's Insurance Co Ltd 188 CLR 418 at 427 - 429; FAI General Insurance Co Ltd v Ocean Marine Mutual Protection and Indemnity Association and Anor (1997) 41 NSWLR 559 at 569; Incitec Ltd v Alkimos Shipping Corporation and Anor (2004) 206 ALR 558 at [42] - [43]. 44 I propose to deal with the Lender's Agreement motion first and then with the Co-Producer motion.

THE LENDER'S AGREEMENT MOTION The plaintiff's submissions 45 Firstly, it was put on behalf of the plaintiff, that as a matter of construction, the true "dispute" between the parties in the present case does not fall within the meaning of that term in clause 20 and accordingly is not susceptible to it. This is because as a matter of substance the dispute includes the claim for rectification of the Lender's Agreement foreshadowed by the first defendant in paragraphs 3.8 - 3.12 of the 8 September 2008 letter, and a claim for rectification is not susceptible to expert determination under a provision such as clause 20. It was put that it follows that the dispute here is not a dispute within the meaning of clause 20. 46 Secondly, it was put that the first defendant had waived or abandoned any right to invoke clause 20 by: a what was contained in paragraphs 4.1 - 4.3 of the 8 September 2008 letter, because it had thereby made it clear that it wished to have the matters in dispute resolved other than by means of expert determination under clause 20; and b sitting by when the plaintiff foreshadowed proceedings in the Court. 47 Thirdly, it was put that the first defendant was estopped from invoking clause 20 because: a the statement by Amber Jacobsen, as recounted in the 1 August 2008 letter written by the plaintiff's solicitors, that the first defendant wished to have the matters in dispute determined by "arbitration", as distinct from expert determination, and the statements in paragraphs 4.1 - 4.3 of the 8 September 2008 letter, amounted to a promise (or at least a representation) on the part of the first defendant not to invoke clause 20, which resulted in a convention (even referred to by counsel for the plaintiff as "a solemn agreement") to that effect; b it was incumbent upon the first defendant once the plaintiff had foreshadowed its intention to commence proceedings (in paragraphs 53 and following of the 14 October 2008 letter and the 3 November 2008 letter) to warn it not to do so in the face of clause 20 and thereby to save the plaintiff from "cost, delay and annoyance"; c in reliance on the first defendant's conduct the plaintiff, to its detriment, commenced these proceedings and if they were stayed the plaintiff would suffer the detriment of cost, delay and annoyance; and d the only cure was to preclude the first defendant from now invoking clause 20. 48 Fourthly, it was put that the following are good reasons why the Court should exercise its discretion not to hold the parties to their contract and stay the proceedings: a the fact that the first defendant itself (through its solicitors' correspondence) had concurred in the view that alternative dispute resolution was unsatisfactory and that there were issues above and beyond the competence of an arbitrator which would require adjudication by a court of equity; b the questions of construction and operation of the Lender's Agreement, as disclosed by the correspondence between the parties, that would arise before an expert were of such complexity (including with respect to the factual matrix relevant to construction) that it would not be fair or just to the plaintiff to have them dealt with by the expert and the only fair or just thing was for those issues to be resolved curially. Those questions should be taken to clause 22(b) of the Lender's Agreement and clause 7 of the Letter Agreement were unenforceable; c an expert determination was unfair to the plaintiff because the procedures involved would not be adequate, for example, the expert could not make binding orders for discovery or the production of documents by the first defendant; d the entire dispute (that is, including rectification) should be heard in one place and that place was the Court; and e all the plaintiff wanted was, and it was just and fair that it should get, its day in court.

The first defendant's submissions 49 In response to the submission as to the true dispute it was put on behalf of the first defendant that: a the dispute which is to go to the expert for determination is the plaintiff's claims for the First Production Royalty and Merchandising Revenue as articulated in its Commercial List Statement, and the plaintiff's rights fall to be determined on the terms of the Lender's Agreement as it presently stands; b the plaintiff was making no claim under clause 20 of the Lender's Agreement, the Letter Agreement or the Deed and the dispute did not comprehend any issues in that regard; c the dispute between the parties which was to go to the expert for determination did not include any claim for rectification. The plaintiff was not seeking it. It was a matter for the first defendant, if it so chose, to seek rectification in the Court. Rectification could not be an issue before the expert; and d the issues (even if they involve construction and reference to the factual matrix against which the Lender's Agreement was entered into) were easily capable of expert determination and the parties should be held to their bargain as this was the mechanism chosen by them. 50 With respect to the plaintiff's submission as to waiver, it was put on behalf of the first defendant, that the 8 September 2008 letter cannot properly be characterised as abandoning any right to invoke clause 20 or deliberately choosing not to do so. Rather it was put in propositions, with a view to persuading the plaintiff through its legal representatives, to commercial resolution to avoid expense and inconvenience. It was put that the first defendant's subsequent behaviour could not fairly be characterised as a waiver or abandonment either. 51 With respect to the plaintiff's submission as to estoppel, it was put on behalf of the first defendant that: a the 8 September 2008 letter made no express or unequivocal representation that clause 20 would not be relied on; b the 17 September 2008 letter responding that the issues demand adjudication by a court (even if it was agreeing with the first defendant's solicitors that there were issues beyond the competence of an arbitrator which required adjudication by a court) did not elevate the parties' communications to an agreement, let alone one which had binding consequences; c there was no evidence that the plaintiff had relied on anything done by the first defendant; and d even if the plaintiff had relied on something done or not done by the first defendant there was no evidence of any real detriment sufficient to preclude reliance by the first defendant on clause 20. The applicable legal principles 52 When parties to a commercial contract agree, at the time of making the contract, and before any disputes have yet arisen, to refer to arbitration any dispute or difference arising out of the agreement, their agreement should not be construed narrowly. They are unlikely to have intended that different disputes should be resolved before different tribunals, or that the appropriate tribunal should be determined by fine shades of difference in the legal character of individual issues, or by the ingenuity of lawyers in developing points of argument: Francis Travel Marketing Pty Ltd v Virgin Atlantic Airways Ltd (1996) 39 NSWLR 160 at 165 per Gleeson CJ. The same considerations apply, in my view, to agreed alternative dispute resolution mechanisms such as expert determination. 53 The Court has a wide discretionary power to stay legal proceedings where the parties have by contract agreed to have the dispute determined by an expert. Each case is to be considered on its own circumstances. The starting point is, however, that the parties should be held to their bargain. It is for the party opposing the stay of proceedings to show that there is good reason to allow the action to proceed and the onus is a heavy one. 54 A stay will not be granted if it would be unjust to deprive the plaintiff of the right to have its claim determined judicially, that is where the justice of the case is against staying the proceeding. Examples of when a stay may be refused include where: a it would result in a multiplicity of proceedings; b the dispute is inapt for determination by an expert because it does not involve the application of his special knowledge to his own observations or the area of dispute is outside of the expert's field of expertise; or c the agreed procedures are inadequate for determination of the dispute that has arisen.

See Savcor Pty Ltd v State of New South Wales (2001) 52 NSWLR 587; Ipoh v TPS Property ; Badgin Nominees Pty Ltd v Oneida Ltd [1998] VSC 188; Zeke Services v Traffic Technologies . Consideration 55 The spectrum of disputes expressly covered by clause 20 is extremely wide. It expressly contemplates resolution by the expert of disputes concerning the construction or interpretation of the Lender's Agreement. It is significantly wider than the terms of the provision considered in Francis Travel Marketing v Virgin Atlantic Airways. The clause there referred to "Any dispute or difference arising out of this agreement". 56 The plaintiff placed substantial reliance on Zeke Services Pty Ltd v Traffic Technologies Ltd in which Chesterman J refused a stay in the face of an expert determination clause on the basis that only some of the disputes between the parties could appropriately be determined by an expert. There however the expert determination provision operated only in respect of claims by a purchaser for breach of warranties and provided that if the purchaser made a claim for such breach and the parties could not resolve it themselves it was to be referred to an expert appointed by the Australian Institute of Accountants. In addition to claims for breach of warranties, however, the purchaser had made claims concerning fictitious employment of staff and misrepresentations which the expert, His Honour held, was not equipped to determine because they involved mixed questions of fact and law which were more readily answered by a lawyer than an accountant. That is not this case. Clause 20 is in much wider terms than the narrow provision with which His Honour was concerned. 57 In IBM Australia Ltd v National Distribution Services Ltd (1991) 22 NSWLR 466 the Court of Appeal considered the ambit of an arbitration provision which referred to "Any controversy or claim arising out of or related to" an agreement. At 475 Kirby P referred to authorities which would give those words in an arbitration agreement an ambit sufficient to cover a claim for rectification on the reasoning that rectification involves bringing a written agreement into line with the parties' real agreement, and a dispute as to what the real agreement is is one arising out of or concerning the agreement. 58 Although counsel for the parties were in agreement that rectification cannot be granted by the expert under clause 20 (presumably because an expert determination only has contractual effect and cannot result in actual rectification of the agreement as it would where jurisdiction is exercised) the words of clause 20 are, as a matter of construction, undoubtedly wide enough to cover a claim for rectification. There is no readily apparent reason, it seems to me, why the expert could not decide that the agreement should be rectified and why the parties would not be bound as a matter of contract as if it had been. 59 However, it is not presently necessary to decide that matter because the dispute here does not, properly viewed, entail a claim for rectification and as I understood it, no assertion that rectification is appropriate is intended to be put to the expert. 60 If the first defendant at some point seeks rectification, it will have to approach the Court. 61 The dispute between the parties which is to go to the expert if a stay is refused does not, properly characterised, concern a claim for rectification. The fact that the plaintiff in its Commercial List Statement expresses an anticipation that rectification will be an issue, does not make it one. Only the first defendant can do that, and it has not done so. 62 The only claims which the plaintiff makes are those articulated in the Summons and Commercial List Statement. With respect to the Lender's Agreement it makes no claims other than for the payment of money in respect of the First Production Royalty and Merchandise Revenue Payment. With respect to the Co-Producer Agreement it makes a separate and distinct claim for specific performance of the Co-Producer Agreement, alternatively damages. It seeks no relief in respect of any other provisions of either agreement. 63 The fact that it may have an equity of rectification does not define the dispute which is to go to the expert. 64 If the first defendant presently has such an equity and nevertheless proceeds to an expert determination without first seeking to vindicate it, it may be that it will be unavailable to it at a later time, but that is its own risk. 65 Accordingly I do not accept the plaintiff's first submission. 66 Turning then to the plaintiff's submission of waiver. 67 A party may by deliberate act waive a defence to a claim which it otherwise may have had: see The Commonwealth v Verwayen (1990) 170 CLR 394 at 472-3 per Toohey J and 482 per Gaudron J. It is commonplace to speak of a person 'waiving' a right, for instance, by submitting to the jurisdiction of a court which otherwise has no jurisdiction over him, by not insisting upon arbitration, or by not pressing a particular argument that is available at trial. However, a defence available to a defendant, whether it be on the facts or on the law, is not waiver merely because the defendant does not initially plead it. It is commonplace for pleadings to change as an action progresses, whether by way of expansion or contraction: The Commonwealth v Verwayen at 472- 473 per Toohey J. A right is waived only when the time comes for its exercise and the party for whose sole benefit it has been introduced knowingly abstains from exercising it, a mere intention not to exercise a right is not immediately effective to divest or sterilise it: The Commonwealth v Verwayen at 427 per Brennan J. 68 In paragraph 4 of the 8 September 2008 letter the first defendant through its solicitors held out a willingness to agree to arbitration if that was the course the plaintiff wished. The first defendant's solicitors also indicated that there were issues that required the adjudication of the Court. Given that rectification was foreshadowed this was undoubtedly correct. But the statements relied on by the plaintiff as bringing about a waiver fell far short of the first defendant communicating that it would not rely on its contractual entitlement to an expert determination of issues susceptible to that process under clause 20 of the Lender's Agreement. Perhaps even more importantly paragraph 4 was in effect a proposal for settlement discussions to occur and sought to articulate reasons why that proposal was a good one. It made no express reference to clause 20. It was, in my view, at best expressing a preference.

69 The plaintiff found the proposal to be of unlikely value and said so in the 17 September 2008 letter. It saw the proposed meeting "as a forum for the reiteration of our clients' respective positions". Far from accepting the offer to go to arbitration, the view of its solicitors was that the matters in dispute were well beyond the competence of an arbitrator, let alone an independent expert and conveyed that the plaintiff considered that a satisfactory resolution of the matters could only be achieved by the adjudication of the Court. 70 In the 14 October 2008 letter the plaintiff's solicitors suggested that the first defendant's solicitors write on a without prejudice basis setting out any commercial settlement the first defendant had in mind, and called for certain documents. They stated that if they did not hear from the first defendant's solicitors "in relation to these matters by 31 October 2008" they had instructions to commence proceedings. The first defendant did not respond and the plaintiff's solicitors wrote on 3 November 2008 that they had been instructed to commence proceedings. There was no connection between the suggestion and foreshadowed action in the 14 October 2008 letter and the choice of a particular forum for ventilation of the dispute. In these circumstances the first defendant's "standing by" cannot be construed as an abandonment or waiver of anything. 71 In opposing the stay, the plaintiff's position is that what the first defendant did involved forfeiting the right to raise clause 20 as a hurdle to the resolution of all disputes which the plaintiff has chosen to litigate in this Court. But that result is inconsistent even with the first defendant's expression of willingness to arbitrate. Even if what the first defendant did was a waiver (which I do not think it was) it was not a waiver the effect of which was an unconditional abandonment of alternative dispute resolution of disputes susceptible to that process. 72 I accordingly do not accept the plaintiff's submission on waiver. 73 So far as estoppel is concerned, firstly for the reasons articulated with respect to waiver, I do not consider that the first defendant communicated any intention or agreement in any way, upon which the plaintiff could rely, not to rely on clause 20. 74 Secondly, I am not satisfied that the plaintiff did or refrained from doing anything on the basis of the first defendant's conduct. That this is so appears from the 17 September 2008 letter in which the plaintiff took the view that the only viable avenue was adjudication by the Court. In my view it was going to sue anyway. In addition there was no evidence from any witness on behalf of the plaintiff to the effect that it relied on anything done by the first defendant in suing. Mr McCormack's affidavit is silent in that respect. In my view, far from giving rise to an inference that the plaintiff relied on the first defendant (or its solicitors) in taking or not taking any course, the correspondence shows rather that each party was taking its own course advised by its own solicitors. 75 There is no suggestion by the plaintiff that it would have gone along with expert determination. Indeed its first submission before me was that the dispute is not susceptible to it as a matter of construction. 76 There was no evidence as to the amount of the costs the plaintiff has thrown away by commencing proceedings. Delay would be compensable by interest. In the circumstances I am also not satisfied that there has been sufficient detriment to preclude reliance on clause 20 in any event. 77 I turn then to the submission that the Court should exercise its discretion so as not to hold the parties to their bargain and refuse a stay. 78 I am not satisfied that the plaintiff has established sufficient reason why the parties should not be held to their bargain. To the contrary, in my view, they should. 79 Clause 20 of the Lender's Agreement is in the very widest terms. It expressly contemplates that disputes concerning the "construction or interpretation" of the agreement will be resolved under it. It goes further to comprehend disputes concerning the rights, duties or liabilities of the parties or any other matter connected with or arising out of, or in relation to, the agreement. 80 It does not seem to me that the questions of construction which have arisen are particularly complex. Although counsel for the plaintiff made reference to the relevant factual matrix against which the instrument is to be construed, nothing was put to suggest a complex matrix or complex disputes about it. 81 There is no reason why a suitably qualified lawyer, whether it be a solicitor, barrister or retired judge, could not easily determine the proper construction of the agreement and determine, according to that construction, the plaintiff's money claim. Where the dispute is one in respect of any financial or accounting matter a suitably qualified chartered accountant is to be the expert. Financial or accounting matters will often (if not always) comprehend the proper construction of the agreement, even if it is not in dispute. Although there are undoubtedly many commercial lawyers who are capable of dealing appropriately with financial or accounting matters there are undoubtedly also candidates who are both lawyers and qualified chartered accountants. 82 As the plaintiff's claim is currently framed it does not rely on clause 22(b) of the Lender's Agreement nor on clause 7 of the Letter Agreement. The parties' rights and obligations in relation to future productions are now embodied in clause 12 of the Co-Producer Agreement and that is the only provision of which the plaintiff alleges breach. However, even if the dispute was taken to comprehend those matters they would equally be properly susceptible to expert determination without any intrinsic difficulty. 83 So far as the procedures are concerned, none are specified in clause 20. That by no means connotes that the clause will not operate effectively. It is for the expert to proceed as he or she considers. Having regard to the width of clause 20 it does not seem to me that justice requires that the provision be bypassed to afford a party real or perceived forensic advantages which curial proceedings might provide but which expert determination will not. Both parties are in the same position and the expert determination procedure agreed has as its contemplation the quick disposition of the dispute without the procedural complexities of litigation. 84 There is presently no claim for rectification and the entirety of the dispute between the parties is susceptible to clause 20. 85 The submission that all the plaintiff wants is its day in court, leaves out of account the fact that the plaintiff expressly bargained away that right in a provision with the widest possible operation.

Conclusion 86 In my view the plaintiff has failed to establish that there are good reasons for the exercise of the Court's discretion to refuse a stay.

THE CO-PRODUCER AGREEMENT MOTION The plaintiff's submissions

87 The plaintiff submitted that the Court should refuse a stay because: a the disputes between the plaintiff and both defendants should be resolved in one set of proceedings in Australia because it would be efficient to do so in that the disputes involve a common factual substratum and because not to do so involves a risk of inconsistent factual findings in two different courts; b the dispute does not involve matters that are exclusively connected with England. The Co-Producer Agreement does not only concern English companies, and an English tour, but it emerged from the Letter Agreement and the Deed. Further, the second defendant has a close commercial connection with Australia and the commercial issues between the first and second defendant; c the alleged breach occurred in NSW; d the second defendant has not raised any procedural disadvantage it would suffer if the dispute was litigated in NSW; e the second defendant has not suggested it would be inconvenient for Amber Jacobsen to give evidence in Australia, or that it would be necessary to call evidence from the English solicitors who acted on the Co-Producer Agreement; and f the issues involved in the dispute do not raise any factual issues that would require any oral evidence from witnesses, and thus there is nothing to suggest that litigating in NSW would involve any additional inconvenience or expense. The second defendant's submissions 88 It was submitted on behalf of the second defendant that: a the parties, and the subject of the dispute are substantially connected with England given that the plaintiff and the second defendant are both companies incorporated and carrying on business in England; the dispute is only concerned with the Co-Producer's Agreement, which was negotiated and executed in London, deals with the production in England (and not NSW), and is expressly subject to and governed by English law; the circumstances which will give rise to the right or entitlement the plaintiff seeks to enforce against the second defendant under clause 12, are circumstances that are most likely to occur in England; and the evidence in relation to the occurrence of circumstances that will give rise to a right or entitlement under clause 12 will come from England; b the plaintiff and the second defendant made a free and deliberate choice that the governing law and jurisdiction should be that of England; and c the plaintiff's claim under the Co-Producer's Agreement was a distinct one under that instrument alone, irrespective of the instrument's connection with the Lender's Agreement, Letter Agreement and the Deed. The applicable legal principles 89 Where parties to a contract have agreed by an exclusive foreign jurisdiction clause to submit to the exclusive jurisdiction of a foreign court, such a clause does not operate to exclude the forum court's jurisdiction. However, the courts of this country will hold the parties to their bargain, and grant a stay of proceedings, unless the party seeking that the proceedings be heard can show that there are strong reasons against doing so. In considering such an application the court should take into consideration all the circumstances of the particular case, but the application is not to be assimilated to cases where a stay is sought on the principle of forum non conveniens, nor is it a matter of mere convenience. See Huddart Parker Ltd v The Ship "Mill Hill" (1950) 81 CLR 502 at 508 - 509; Oceanic Sun Line Special Shipping Co Inc v Fay (1988) 165 CLR 197; FAI General Insurance v Ocean Marine Mutual Protection and Indemnity Association; Akai Pty Ltd v People's Insurance Co; Incitec Ltd v Alkimos Shipping Corporation and Anor; Owners of cargo on vessel Eleftheria v Owners of Ship Eleftheria [1969] 2 All ER 641 at 645. Consideration 90 Once again I am not satisfied that the plaintiff has established good reason why the parties should not be held to their agreement. Both parties to the Co-Producer Agreement are English corporations. The enterprise with which the agreement is concerned is the production of Dirty Dancing in that country. Their relationship is administered in that country. 91 I do not consider that there is any real risk of inconsistent factual findings given the clear dividing line between the Lender's Agreement claim and the Co-Producer Agreement claim. 92 In any event I have concluded that the plaintiff's legal proceedings with respect to the Lender's Agreement should be stayed. 93 Even if convenience were to be taken into account I do not consider that it favours a stay. Leaving aside that Karl Sydow is resident in England and Amber Jacobsen often visits there, the Production is taking place there and the Co-Producer Agreement is administered there. Conclusion 94 In my view the proceedings with respect to the Co-Producer Agreement should likewise be stayed. FINAL CONCLUSION

95 The proceedings will be stayed. The parties may bring in short minutes to reflect this conclusion with any appropriate conditions to be imposed with respect to the Lender's Agreement claim. I will stand the matter over to enable the parties to bring in such minutes. 96 The plaintiff is to pay the defendants' costs of the motion. **********

11/05/2009 - Heading after par 44 - word "Motion" changed to singularHeading after par 86 - add word "Motion"par 52 delete words "any even" and insert "my view"par 61 add comma after characterised - Paragraph(s) par 52, 61 12/05/2009 - par 71, line 1 - add word "first" before defendantNote: that previous amendment to par 52 should read delete words "any event" - Paragraph(s) 71

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.

CITATION : Dance With Mr D Limited v Dirty Dancing Investments Pty Ltd [2009] NSWSC 332 This decision has been amended. Please see the end of the judgment for a list of the amendments.

Ipoh v TPS Property No 2 & Anor [2004] NSWSC 289 Zeke Services Pty Ltd & Anor v Traffic Technologies Ltd & Anor [2005] QSC 135 Akai Pty Ltd v People's Insurance Co Ltd 188 CLR 18 FAI General Insurance Co Ltd v Ocean Marine Mutual Protection and Indemnity Association and Anor (1997) 41 NSWLR 559 Incitec Ltd v Alkimos Shipping Corporation and Anor (2004) 206 ALR 558 Francis Travel Marketing Pty Ltd v Virgin Atlantic Airways Ltd (1996) 39 NSWLR 160 CASES CITED : Savcor Pty Ltd v State of New South Wales (2001) 52 NSWLR 587 Ipoh v TPS Property; Badgin Nominees Pty Ltd v Oneida Ltd [1998] VSC 188 IBM Australia Ltd v National Distribution Services Ltd (1991) 22 NSWLR 466 The Commonwealth v Verwayen (1990) 170 CLR 394 Huddart Parker Ltd v The Ship "Mill Hill" (1950) 81 CLR 502 Oceanic Sun Line Special Shipping Co Inc v Fay (1988) 165 CLR 197 Owners of cargo on vessel Eleftheria v Owners of Ship Eleftheria [1969] 2 All ER 641

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