Drip World Pty Ltd v Dardy Touring Corp

Supreme Court of NSW|2020-12-03|Before: Stevenson J

Solicitors: Piper Alderman (Plaintiff) Baker McKenzie (Second Defendant) File Number(s): 2020/149917

Background

The plaintiff, Drip World Pty Ltd, commenced these proceedings on 18 May 2020 against the first defendant, Dardy Touring Corp ("Dardy"), a company incorporated in New York, and the second defendant, William Morris Endeavour Entertainment, LLC ("WME"), a company incorporated in Delaware.
The proceedings arise out of a proposed hip hop festival to be known as "Ra!se Tha Roof" ("the Festival") in Australia during 2019 and, in particular, with the proposed involvement in the Festival of the hip hop artist French Montana ("the Artist").
Dardy is a touring company that acts on behalf of the Artist. WME is a talent agency which represents musicians and other artists, including the Artist.
Drip World has not yet served Dardy. It served WME by delivery to its agent in the United States.

WME's application

On 13 July 2020 WME filed a notice of motion seeking an order pursuant to Uniform Civil Procedure Rules 2005 (NSW) r 11.6(1) that the proceedings be either dismissed or stayed permanently. UCPR r 11.6 provides: 11.6 Court's discretion whether to assume jurisdiction (1) On application by a person on whom an originating process has been served outside of Australia, the court may dismiss or stay the proceeding or set aside service of the originating process. (2) Without limiting subrule (1), the court may make an order under this rule if satisfied-- (a) that service of the originating process is not authorised by these rules, or (b) that the court is an inappropriate forum for the trial of the proceeding, or (c) that the claim has insufficient prospects of success to warrant putting the person served outside Australia to the time, expense and trouble of defending the claim.

The proposed amended claim

Difficulties with the case pleaded as set out at [5] are that: 1. the Deposit was in fact lodged with WME on 24 January 2019 and not in June 2019 as alleged in the List Statement; and 2. Drip World did not exist on 24 January 2019 and was not registered until 11 April 2019.
Drip World has recognised those difficulties and now, by Amended Notice of Motion filed in court on 3 December 2020, seeks an order granting it leave to file an Amended Summons and Amended Commercial List Statement to: 1. substitute a related company, Yellow Presents Pty Ltd, as plaintiff; 2. allege that Yellow Presents lodged the Deposit with WME on 24 January 2019; 3. allege that this was pursuant to a "Stakeholder Agreement" made in an exchange of emails and in "conversations" between 17 and 19 December 2019 between Ms Lui Spedaliere for Yellow Presents and Mr Simon Clarkson for WME; 4. abandon the "$1,000,000" contract claim against Dardy; and 5. substitute against Dardy a claim in restitution for that part of the Deposit that it has received.
According to the proposed Amended List Statement there were terms of the "Stakeholder Agreement" that WME: 1. held the Deposit as stakeholder for Yellow Presents and Dardy; 2. was required to hold the Deposit until a concluded agreement had been reached between Yellow Presents; or an entity related to Yellow Presents and Dardy for the Artist to perform at the Festival; 3. was required to hold the Deposit until that occurred; 4. was only able to pay out the Deposit with the consent of Yellow Presents and Dardy [1] ; and 5. was, in the event of a dispute between Yellow Presents and Dardy Touring, required to hold the deposit until the dispute was settled.

Leave to amend?

On behalf of WME, Mr Sulan submitted that either the Court had no power to make the amendments sought or, alternatively, that the Court should not exercise its power to permit the amendments sought because Drip World was, in effect, abandoning its claim against WME and against Dardy.
In those circumstances, Mr Sulan submitted that the appropriate course would be to dismiss the current proceedings, and leave it to Yellow Presents to commence fresh proceedings.
Section 64 of the Civil Procedure Act 2005 (NSW) provides: 64 Amendment of documents generally (1) At any stage of proceedings, the court may order - (a) that any document in the proceedings be amended, or (b) that leave be granted to a party to amend any document in the proceedings. (2) Subject to section 58, all necessary amendments are to be made for the purpose of determining the real questions raised by or otherwise depending on the proceedings, correcting any defect or error in the proceedings and avoiding multiplicity of proceedings ….
The section is to be construed broadly. [2]
One of its stated objects is to avoid the "multiplicity of proceedings".
One consequence of my refusing to grant Drip World the leave it seeks is that there would be likely be a multiplicity of proceedings as, in all likelihood, Yellow Presents would commence proceedings against WME and Dardy seeking the relief now sought to be propounded by the amendment.
In my opinion, s 64 is apt to allow the amendment sought and, but for the matters that follow, I would have been inclined to allow that amendment.

Would the amendment be futile?

Were the amendment to be allowed, it would be necessary for Yellow Presents to serve the Amended Summons and List Statement on WME and Dardy in the United States, thus giving rise to the issues that WME seeks to agitate in its 13 July 2020 motion concerning the proceedings as presently constituted.
In those circumstances, counsel agreed that I should consider, now, whether service of such Amended Summons and Amended List Statement would be set aside upon the same bases as WME now seeks to agitate in relation to the Summons and List Statement as presently constituted.
If such service would be set aside: 1. there would be no utility in granting Drip World leave to amend; and 2. as Drip World does not, and cannot propound the case presently pleaded, the proceedings should be dismissed.
The critical question is whether, for the purposes of UCPR r 11.6(2)(a), such service would be liable to be set aside upon the basis that it is not authorised by the Rules. That in turn depends on whether the proposed amended proceedings would fall within any of the categories specified in Schedule 6 to the UCPR.

Is any category in Schedule 6 enlivened?

In his written submissions, Mr Elliott, for Drip World, submitted that the claims proposed to be made by Yellow Presents against WME were the enforcement of the Stakeholder Agreement which is a contract that: 1. "was to be wholly or in part performed in Australia" thus within cl (b)(iii) of Schedule 6; or 2. "was by its terms or by implication to be governed by Australian law or to be enforceable or cognizable in Australian Court" thus enlivening cl (b)(iv) of Schedule 6.
In oral submissions, Mr Elliott did not press the first of these bases and accepted that the alleged Stakeholder Agreement was not to be performed wholly or in part in Australia but, rather, in the United States.
However, Mr Elliott submitted that it was at least arguable that the Stakeholder Agreement was one that would be governed by Australian law, thus enlivening cl (b)(iv) of Schedule 6.
Consideration of that submission requires examination of the circumstances leading up to the making of the alleged Stakeholder Agreement.

The events leading to the alleged Stakeholder Agreement

The proposed contract for the Artist's appearance at the Festival was to be between Dardy and Yellow Presents.
The Artist's fee for appearing at the Festival was $US800,000.
Negotiations for the payment of the Deposit, being half of the Artist's fee, took place between Ms Spedaliere for Yellow Presents and Mr Clarkson from WME
At all relevant times Ms Spedaliere was in Sydney and Mr Clarkson was in California.
The first draft of that contract was circulated on 21 December 2018. Although it was expressed to be between Dardy Touring and Yellow Presents, it was engrossed on WME letterhead.
Between 17 December and 19 December 2018 Ms Spedaliere and Mr Clarkson exchanged the emails and had the conversations referred to at [8(c)] above. Those emails were directed to the term to be included in the contract between Yellow Presents and Dardy concerning the Deposit.
Ms Spedaliere wrote: "Payment terms as expressed in the last offer: 50% [$400k] upon signing and balance [$400k] one month prior to events."
Mr Clarkson replied: "The 50% deposit will need to be sent on our issuing of contract and before ANY announcement of the Artist, as this is a landed deal I would assume artist will need funds released to them to meet costs of travel etc." (Mr Clarkson's emphasis)
Ms Spedaliere replied: "Deposit will be immediately released after reviewing and signing off on the contract." (Ms Spedaliere's emphasis.)
Mr Clarkson replied: "This clause will not work, as I understand it you are asking for a full executed contract prior to deposit being sent, this will not be possible. As I have been clear on our calls, we have never worked together and us holding 50% while completing the contract process is the only way this can work."
Ms Spedaliere replied: "Festival announcement has been re-scheduled to 2019, no announcement will be made until the 50% deposit has been received by [WME]."
Mr Clarkson replied: "Thanks."
It is this exchange of emails, and the conversations referred to by Mr Clarkson in the email at [34] ("as I have been clear on our calls") that allegedly constitutes the Stakeholder Agreement.
Mr Clarkson's assistant sent a copy of the draft contract to Ms Spedaliere under cover of an email of 22 December 2018 which read: "Attached, please find invoice and contract for French Montana's upcoming engagements in Australia. Note that the 50% deposit is due upon issuance of this contract, and the money must be received prior to any announcement or on-sale. Please review, sign and return as soon as possible."
That draft provided that the "Payment Terms" included the payment of a $400,000 deposit.
The document also provided that the contract would be governed by the law of the State of California.
As the email stated, the deposit was due on the "issuance" of the proposed contract between Yellow Presents and Dardy Touring, and not upon its execution.
There were further negotiations as to the detail of the contract between Dardy and Yellow Presents including that the Deposit would be $US400,000 "minus any amount required to be withheld pursuant to … applicable taxation law". This explains why the Deposit ultimately paid was $US240,000, rather than $US400,000. Mr Elliott informed me that the difference was to be retained in Australia for withholding tax.
On 9 January 2019, Yellow Presents' solicitor, Mr Matt McCormick, wrote to Mr Clarkson's assistant: "We are not far away from getting this back to you. The hold-up is from my end, partly due to the Xmas holiday shut-down. I intend to have it to you around COB your time. I need to update the agreed offer terms to be included as annexure to your contract as the WME terms have missed a few of them which are important from our end…"
On 18 January 2019 Yellow Presents' bank, National Australia Bank Ltd, confirmed that "280,000 USD has been processed today 18/01/2019 to William Morris Endeavour Entertainment LLC".
The amount was credited to WME's "Client Trust Account" in Beverly Hills California on 24 January 2019.
Negotiations thereafter continued in relation to the proposed Dardy/Yellow Presents contract.
At one point, another company, Yellow Live Pty Ltd, was proposed as the counter party to Dardy.
Ultimately Drip World was proposed as counter party.
All drafts of the proposed contract were on WME letterhead.
Negotiations ceased at the end of May 2019 without any contract being entered.
On 28 May 2019 Mr McCormick wrote to Mr Clarkson: "We confirm that the contract is not finalised and we are unable to delay the process any further. As such the client won't be proceeding at this time with the Artist. The details for the return of the refundable deposit is [sic] listed below. Please confirm the transfer. Hope to see if something can be done next time around."
Mr McCormick then set out details of his trust account.
At a time not precisely identified in the evidence, but evidently around December 2019, WME released part of the Deposit to Dardy Touring and appropriated the balance, apparently for commission.
On 16 December 2019 Ms Spedaliere sent an email to Ms Michelle Katz at WME stating: "We confirm the escrow holder is not to release any of the funds as they are disputed funds."
On 22 December 2019 Ms Katz replied, denying the existence of any escrow arrangement or agreement and stating: "The agreement is between you and our client [ie the Artist] and these are our client's funds. We have a fiduciary obligation to our client and they may be released upon receipt of instructions from our client."
Ms Spedaliere replied: "Your client did not fulfil his obligations to get a visa in time along with other issues. Those funds are NOT your client's. You are holding those funds in trust for us on behalf of your client and would be released to client if the agreement was fulfilled. As there are disputes on both sides those funds stay put and are FUNDS IN DISPUTE. You do not have any right to release them." (Ms Spedaliere's emphasis)
Ms Katz replied on 23 December 2019, stating that the Artist was entitled to his fees and stated: "This breach remained uncured entitling our client to the full $800k, not just the $280k received."
There the matter rested.

Proper law

Mr Elliott pointed to the fact that the Stakeholder Agreement was created in the context of the proposed participation by the Artist in the Festival which was to take place in Australia and submitted that there was at least a prima facie or arguable case [3] that the proper law of the Stakeholder Agreement was Australia.
Mr Elliott pointed to authority that the requirement to establish a "prima facie case" has been described as "not particularly onerous" [4] and that the inquiry "neither requires nor permits an assessment of the strength (in the sense of likelihood of success)" of the contention. [5]
However, I am not satisfied, even to this relatively undemanding standard, that the proper law of the Stakeholder Contract was Australia.
The Stakeholder Agreement was entered in anticipation of, and as an integral aspect of, the proposed contract between Dardy and Yellow Presents, as illustrated by the fact that each of the draft Dardy/Yellow Presents contracts was engrossed on "WME" letterhead.
As the course of negotiations to which I have referred above show, agreement as to the terms upon which the Deposit would be paid and held for the purposes of the proposed Dardy/Yellow Presents contract was a matter specified by Mr Clarkson for WME as being necessary on the "issuance" of the proposed Dardy/Yellow Presents contract.
The Dardy/Yellow Presents contract was to be governed by the law of California.
The deposit the subject of the Stakeholder Agreement was to be paid in California. WME was to perform its obligations under the Stakeholder Agreement in California.
Further, the Stakeholder Agreement was made in California.
Where contracts are created by the exchange of electronic communications, the contract is made at the place where the message of acceptance is received by the offeror. [6]
The message of acceptance received by the offeror here was Ms Spedaliere's message set out at [35] above accepting Mr Clarkson's proposal at [34]. Mr Clarkson received Ms Spedaliere's message in California.
I do not regard Mr Clarkson's response "thanks" as having any contractual implications. He was merely acknowledging Ms Spedaliere's acceptance of his proposal.
For those reasons, my opinion is that the proper law of the Settlement Agreement was the law of California.
It follows that, were I to grant Drip World leave to amend the Summons and List Statements so as to substitute Yellow Presents as plaintiff, Yellow Presents would not be entitled to serve the originating process on WME without leave.
If service were nonetheless effected, the proceedings would be liable to be dismissed under UCPR r 11.6 on the basis that none of the circumstances referred to in Schedule 6 are enlivened and that, accordingly, service is not authorised by the Rules.
Further, in these circumstances, I would not be prepared to grant Yellow Presents leave under UCPR r 11.5 to serve the proposed Amended Summons and Amended List Statement on WME.
UCPR r 11.5(5) states that the Court may grant such leave if satisfied that: 1. the claim has a real and substantial connection with Australia; and 2. Australia is an appropriate forum for the trial; and 3. in all the circumstances the Court should assume jurisdiction.
Although the alleged Stakeholder Agreement has a connection with Australia, in that it was allegedly entered against the backdrop of the proposed participation by the Artist in the Festival in Australia, I am not satisfied that it has a "real and substantial" connection.
In any event, in my opinion, WME has been unduly vexed by the manner in which these proceedings have been conducted to date.
WME was faced with a claim by Drip World that Drip World now accepts is not maintainable and must be abandoned.
It appears that it was only when WME's solicitors drew attention to the fact that Drip World was not incorporated until 11 April 2019 that the amendment now proposed was agitated.
As Mr Sulan put it in oral submissions: " … we have been put to an enormous amount of cost in dealing with pleading issues on the basis of material that was always available to my learned friend so that the Drip World/Yellow Presents' … problem is not something that they couldn't have worked out had they looked at the materials closely, they ought to have known who was incorporated when within their own camp, who had paid the money and my client has been put to a huge amount of expense in dealing with all of these pleading issues and we are in the Commercial List, your Honour, and really it ought be incumbent on parties to get these matters right because of the costs and burden and expense that is put on my client in having to deal with an ever evolving set of allegations."
Thus, even had I been satisfied that the requirements of UCPR r 11.5(5) were otherwise engaged, I would not, as a matter of discretion, grant Yellow Presents leave to serve WME outside the jurisdiction.
For those reasons, my conclusion is that I ought not to grant Drip World leave to amend the Summons and List Statement as it seeks.
As Drip World does not intend to prosecute the claim as presently formulated, the proceedings should be dismissed.

Decision

I make the following orders: 1. The plaintiff's notice of motion of 3 December 2020 is dismissed. 2. The proceedings are to be dismissed as against the second defendant.
I will hear the parties as to costs.

Endnotes

The draft says the consent was that "of the First Defendant and the Second Defendant" but presumably this is a mistake.
For example, see McInnes v Wingecarribee Shire Council (1987) 10 NSWLR 660 at 668 (Priestley JA).
See News Corporation Ltd v Lenfest Communications Inc (1996) 21 ACSR 553 at 558 (Giles J).
Australian Competition and Consumer Commission v Yellow Page Marketing BV [2010] FCA 1218 at [25] (Gordon J).
Agar v Hyde (2000) 201 CLR 552; [2000] HCA 41 at [50]-[51] (Gaudron, McHugh, Gummow and Hayne JJ).
M Davies, A S Bell, P LeG Brereton, M Douglas, Nygh's Conflicts of Laws in Australia (10th ed, 2020), LexisNexis Butterworths at 3.60 and see the authorities at Footnote 194. 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. Decision last updated: 09 December 2020

At a glance

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Judgment (12 paragraphs)

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Legislation Cited (2)

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