Eden Productions Pty Ltd v Southern Star Group Limited [2002] NSWSC 1166 | Case summary

Claim 6 91 There are two separate heads of claim. · Excess over 5% Cap 92 Clause 11.1 of the Second Service Agreement provided that SSE was responsible for the marketing and distribution of all Projects and would actively consult with Eden in relation to such marketing and distribution and use its best endeavours to exploit Projects to the maximum commercial advantage of both Eden and SSE. Clause 11.5 provided that it was the intention that its distribution and marketing provisions would be no less advantageous to Eden and Mr McElroy than the terms upon which SSE had agreed with any third party to undertake the distribution and marketing of a Project. 93 In the Distribution Agreements for Water Rats 1, 2, 3 and 4 and Murder Call 1, it was provided that marketing expenses and sales costs were not to exceed 5% of gross receipts without the Network's prior approval. Eden claimed that it was entitled by reason of the above provisions to have added back to the income of the Division the amount of these expenses in excess of 5% both in relation to the above Projects and in relation to Blue Heelers 3,4, and 5 on the basis that 5% established a reasonable cost for other Projects. It was SSD that recouped the marketing and distribution expenses. Eden submitted that SSE had an obligation to ensure that SSD did not exceed the 5% cap. 94 SSE's obligation under cl 11.1 of the Second Service Agreement to use its best endeavours required it to do all that was reasonable in the circumstances (Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 46 at 64). Eden did not establish that SSE was in breach of this provision. By entering into a Distribution Agreement with SSD on terms acceptable to the Network and, in particular, on terms that enabled the Network to control the level of marketing expenses suggests that the commercial advantages of both Eden and SSE were satisfied. 95 Eden submitted that under cl 11.5 of the Second Service Agreement, the consent of Eden was required to any excess over the cap. The provision did not say so. In cl 11.2, where no third party fees were incurred in relation to marketing and distribution of a Project, it was provided that SSE was entitled to deduct fees at specified rates. Clause 11.5 provided for the adjustment of those rates if SSE agreed with any third party to undertake distribution and marketing of a Project at lower rates. 96 In any event, the provision in the Distribution Agreements enabled charges above the cap to be recouped by SSD with the prior approval of the Network. That approval was forthcoming albeit after the event. The Network agreed to the charges in return for a re-negotiation of SSD's commission. Furthermore, it was not shown that the excess charges were to the detriment of the Division. Mr Sullivan said that increased marketing expenses were incurred for a purpose and would be expected to have a positive effect on income. Hugh John Marks was corporate counsel for Nine Network Australia Pty Ltd ("Channel 9"), the Network in question. He said he considered the expenditure to be a justifiable marketing expense. 97 Mr Marks and Ms Barron referred to the fact that marketing costs often exceed a cap in the initial stages of a Project but reduce as marketing progresses and revenues are received. While revenues are still being received for any of the Projects in question it is not possible to determine whether the 5% cap provision has been breached. 98 With respect to Eden's claim for Blue Heelers 3, 4 and 5 there was no 5% cap in the Distribution Agreements and the marketing expenses deducted by SSD were acceptable to HSV Channel 7 Pty Ltd ("Channel 7"), the Network in question. 99 Eden has failed to establish the first head of claim. · Sales Servicing Costs 100 The Licence Agreements for the Blue Heelers series enabled SSE to recoup all marketing costs approved in advance by Channel 7. Eden submitted that this did not allow deduction for sales servicing costs. In the Distribution Agreement for Blue Heelers, SSD was permitted to recoup marketing expenses defined in a schedule to the agreement. Eden claimed that $104,977 was wrongly claimed. Included in that total, however, were marketing costs of $57,494 that should be excluded from the claim because Eden accepted that marketing costs were properly recoupable. 101 There was no definition of marketing costs for the purpose of cl 14(d)(iii) of the Licence Agreement. Mr Clark said that sales costs are typically included within marketing costs and that sales servicing costs are merely a subset of marketing costs. 102 The evidence tendered by Eden did not support the second head of claim. I reject Claim 6. Claim 7 was abandoned. Claim 8 103 Eden pleaded that in calculating the net profit of the Division, production costs in excess of those actually incurred, or, if actually incurred, costs which were not auditable, out of pocket and reasonably accounted for once only, were deducted. The claim was significantly reduced before trial and was further reduced in Eden's submissions and confined to an alleged duplication with respect to business affairs charges in relation to services provided by SSD's in-house lawyers to the production companies and included in production costs. The amount claimed was $131,731, Eden's share of which is $65,865.50. 104 Eden submitted that departmental services bought and sold, identified as part of central services in the schedule to the Second Revenue Sharing Deed, included business affairs and that included internal lawyers and the charges made to the production companies for the provision of SSD's in-house lawyers were necessarily duplication. 105 In my opinion no such duplication existed. The scheduled charge was for the services of SSE's chief executive, financial controller and business affairs manager. The charges to the production companies were for legal services provided by SSD's in-house lawyers. I reject Claim 8. Claim 9 106 The description of departmental services bought and sold in the schedule to the Second Revenue Sharing Deed was as follows: "Departmental Services Bought & Sold - (includes: (a) 25% of Southern Star Entertainment Pty Limited operating expenses, being the contribution for services provided by Chief Executive, Financial Controller and Business Affairs Manager; and (b) the Division's proportionate share of Southern Star Group Pty Limited operating expenses, being for services provided by the receptionist, payroll and accounts payable clerk, which proportionate share shall not exceed 6% of Southern Star Group Pty Limited operating expenses)." 107 Eden contended that the charges were limited to those of the specified persons and did not include on-costs. SSE calculated the charge to include on-costs being support staff together with overheads associated with employing those staff such as rent, electricity and the like. Services were provided by SSE's chief executive, financial controller and business affairs manager. Likewise, services were provided by SSD's receptionist, payroll and accounts payable clerk. 108 In my opinion it is not the expense of the identified person that is the gravamen of the provision. It is the expense of the services provided by those named persons. Hence what is comprised in the contribution is an aliquot part of the operating expenses incurred in providing the services of the named persons. While the formula in the schedule to the Second Revenue Sharing Deed operated, I am of the view that the deductions were properly calculated. I have already indicated that following Mr Sullivan's memorandum of 21 May 1997, SSE was entitled to make deductions in accordance with the formula contained therein. 109 As previously indicated, central management fees under the central services heading in the schedule to the Second Revenue Sharing Deed were set at 1% of annual turnover of the Division. Mr Anderson explained that revenue attributable to facilities provided by Channel 7 had not been included in the annual turnover of the Division in relation to Blue Heelers 4 and Blue Heelers 5. The amount involved was $7,540,777. When the final accounting between the parties is taken, it may be that an additional $75,407.77 should be taken into account as a charge to the Division, Eden's share of which is $37,703.89. Claim 10 110 Under administration and co-publishing agreements, SSE appointed PolyGram Music Publishing Australia Pty Ltd ("PolyGram") as its sole and exclusive agent and administrator throughout the world in respect of SSE's right in and to all musical works owned or controlled in whole or in part by SSE. Under those agreements, PolyGram was entitled to retain 40% of music royalties collected and the balance was payable to SSE. 111 Music royalties with respect to Water Rats 1 and Murder Call 1 were subject to a further reduction of 25% by SSD which totalled $46,352 in the former case and $13,601 in the latter case. Music royalties with respect to Blue Heelers were subjected to a further 10% recoupment by SSD totalling $13,376. Eden submitted that SSE was in breach of contract in permitting these withholdings. 112 With respect to Water Rats 1 and Murder Call 1, Channel 9 held a 40% interest in the underlying rights to the Projects and was entitled to its share of royalties paid by PolyGram. The defendants submitted that under the Distribution Agreements SSD was charged with the exploitation of the underlying rights and was entitled to its commission. 113 Polygram was given all rights of publication, control, printing, broadcasting and performance mechanical or other reproduction, synchronisation, sale, use, loan to the public and exploitation. It was given the right to make arrangements, adaptations or translations and it was given the right to exercise all other rights of whatsoever nature and to use and exploit the same in and by any means. It was not a mere agent to collect royalties. There was no other function to be performed by SSD in exploitation of the music rights. 114 In my opinion, SSE was not entitled to purport to grant exploitation rights with respect to its 60% share of the musical content of a Project. It should not have allowed SSD to withhold commission in relation to that share. If the amount of that withholding with respect to Murder Call 1 was $13,601, Eden's Share is $6,800.50. 115 If the amount of that withholding with respect to Water Rats 1 was $46,352, Eden's share is $23,176. The defendants submitted that Eden was not entitled to judgment in that amount because of my finding that Water Rats 1 and Water Rats 2 are two separate Projects. It was argued that unless and until the Distribution Advance for Water Rats 1 had been recouped, there were no funds to be paid by SSD to SSE. I reject that submission. The music royalties were payable to SSE and not to SSD. In allowing SSD to recoup the commissions, SSE was in breach of cl 11.1(b) of the Second Service Agreement. In my view, Eden is entitled to damages for breach of contract. 116 The position with Blue Heelers is different. Mr Anderson explained that until 1995 the processing of cheques for these music royalties was undertaken by SSE staff. The servicing of the collection of music royalties for all SSE Projects required a significant amount of administration as it required music royalty cheques to be processed and distributed and required the provision to PolyGram of music cue sheets, sales reports for Projects of the Division as to the share of revenues to which SSE was entitled. In 1995 it was decided that SSD should assume the responsibility for this work in consideration for a 10% handling fee. 117 In my opinion, SSE was not entitled to take this course. The schedule to the Second Revenue Sharing Deed contained an item for central services as part of the operating costs of the Division. SSE could not unilaterally add a cost of production for services covered by that operating cost. $13,376 was not a proper charge to the Division. Eden's share of this amount is $6,688. Claim 11 118 The defendants admitted that $185,000 in the year ended 31 March 1999 was omitted from income of the Division and Eden was entitled to have that amount included in the calculation of net profit of the Division for that year. Eden's share of that inclusion is $92,500. Claim 12 119 Clause 2.4 of the Termination Deed provided that Eden was entitled to 50% of the net profit of the Division based on revenues received in relation to all episodes of, amongst other Projects, Blue Heelers completed as at 31 December 1997. Eden claimed that episodes 39, 40, 41 and 42 of Blue Heelers 5 were completed at that date and that $88,193 should have been included in the net profit. 120 Clause 4.1 of the Second Revenue Sharing Deed provided that SSE would be obliged to pay only 50% of the net profit of the Division in respect of Projects completed prior to termination or those parts of the Project completed prior to termination. There was no definition of this concept. To me, the ordinary meaning of the words required an episode to be finalised and capable of immediate delivery to the Network. While there were tasks still to be done with respect to an episode, albeit that Mr McElroy was not involved, one could not say, in ordinary parlance, that the episode had been completed. 121 In an earlier agreement with SSE to which Mr McElroy was a party, the term "completed projects" was defined to mean Projects in respect of which principal photography was completed prior to the effective date. I do not regard that circumstance as significant in determining the meaning of the term in Second Revenue Sharing Deed. It did not accord with any of the evidence as to industry usage and smacks of a special definition. 122 Eden pointed out that cl 5.1 of the Termination Deed provided for credits to be included in episodes delivered by SSE after the Termination Deed. It was submitted that a contrast was drawn between completion on the one hand and delivery on the other. I do not read the Termination Deed as raising such a dichotomy. There is nothing inconsistent between completion in cl 2.4 requiring delivery and inclusion of credits on delivery required by cl 5.1. 123 I am fortified in my view by the preponderance of the evidence of industry usage of the concept of completion. Mr McElroy said his tasks were completed at final editing of the photographed scenes. He was not involved in sound post-production. Mr Sullivan rejected a suggestion put to him in cross-examination that an episode was completed at the end of principal photography. Edwin Dudley Roberts was a freelance writer and producer in the film and television industry. He rejected the suggestion that producers required payment at the completion of principal photography. He agreed that Mr McElroy's involvement was completed by the time one got to track laying, mix, audio review and audio re-stripe. He said that in the television industry, completed meant when the Project had been delivered to the Network. 124 Riccardo Pellizzeri was the supervising producer of Blue Heelers. He, too, said that in his experience in the television series production industry a project or part of a project was completed when it was delivered to the Network. In cross-examination, Mr Pellizzeri also said it was another accepted industry standard for a producer to be paid on completion of principal photography. 125 Since the episodes in question were not capable of being delivered to the Network on 31 December 1997, I hold that Eden was not entitled to any adjustment to the net income of the Division under Claim 12. In those circumstances it is unnecessary for me to resolve a dispute as to the appropriate amount to be included in net income. 126 Claims 13 and 14 were abandoned. Claim 15 127 Clause 7.2 of the Second Service Agreement provided that all moneys paid by SSE towards development funding for a Project would be fully recoupable only from the production of that Project on a Project by Project basis. SSE recouped development funding on Projects that did not go ahead. Eden claimed that it was not entitled to do so. The amount involved was $460,978 of which Eden's share is $230,489. The amounts were not in dispute. 128 The accounting treatment adopted by SSE was to write off development expenses as they were incurred as unrecouped development. If a Project went into production, all development costs were included in the production budget and, wherever possible, at a premium. 129 The defendants submitted that cl 7.2 of the Second Service Agreement had nothing to do with the definition of operating costs deductible from the income of the Division. That was a matter for the Second Revenue Sharing Deed. The purpose of cl 7 was to define services to be provided by SSE. Clause 7.1 provided that SSE would provide the Division with funding for development of Projects agreed by the parties. It was submitted that this was no different from the obligation of SSE in cl 12 to provide premises from which the Division could operate. 130 It was submitted that cl 7.2 addressed the question of recoupment and not the question of a charge against income of the Division. In that respect its purpose was to maintain the integrity of production budgets with respect to Projects by confining recoupment of development expenditure to the Project in question. 131 The Second Revenue Sharing Deed defined operating costs of the Division by reference to the schedule and the schedule contained under a heading for other expenses, unrecouped development. 132 I accept those submissions. If it had been the intention of the parties to exclude development expenditure from operating costs of the Division, one would have expected a specific exclusion to have been included in the definition. That interpretation makes sense. The business of the Division was both development and production and it would be odd to exclude a core activity expense on the basis of a provision in another agreement when that provision speaks not of deducting development expenditure from income of the Division, but rather the recoupment of such expenditure confined to a Project by Project basis. 133 The defendants pleaded an estoppel in the alternative. It is unnecessary for me to address that issue. I reject Claim 15. Claim 16 134 Eden elected to provide the services of Mr McElroy as executive producer for Murder Call 2. On 5 December 1997 an executive producer agreement ("Murder Call Agreement") was executed by Eden, Mr McElroy, SSE and SSG with respect to a further 32 episodes. 135 Clause 4.1(a) of the Murder Call Agreement provided that SSE would pay to Eden in respect of Murder Call 2, 50% of all amounts received by SSE on its own behalf by way of producer fees and cost recoveries from the production budget of that series. The defence conceded that it recovered but did not account to Eden for overhead recoveries of $269,440, film vault recoveries of $16,000 and fixed asset rental recoveries of $15,259, a total of $300,699. 136 SSE incurred hiatus costs of $76,543 and wrap costs of $177,576 that were not included in the production budget. It alleged it was entitled to setoff these amounts as operating costs. If it was entitled to take that course, it failed to account to Eden for its 50% share of net cost recoveries of $46,580. It conceded it was indebted to Eden in the amount of $23,290. 137 There was a budget underage on Murder Call 2 of $81,481. Eden submitted that this constituted a cost recovery and it was entitled to a further $40,740.50. The Murder Call Agreement said nothing about a contribution by Eden to budget overruns. The defence put its argument on the basis that a cost recovery was a net concept allowing budget overruns to be offset against revenues. I reject that submission. 138 Under the Licence Agreement for Murder Call 2, the budget for production and delivery of the Project was agreed between the producer and the Network. The term "overage" was defined to mean any amount over the budgeted cost required to complete and deliver the Project. Hiatus costs and wrap costs occurred as a result of the Network not undertaking a further series. On one view they did not constitute an overage because they were outside the costs of production and delivery. If that is the case, I am of the view that SSE was not entitled to offset the costs under the Murder Call Agreement. 139 If, on the other hand, the hiatus costs and wrap costs fell within overage, SSE was, again, debarred from offsetting the amounts because cl 12.1 of the Licence Agreement for Murder Call 2 provided that the producer, at its sole expense, was required to meet any overage. 140 Eden is entitled to the benefit of 50% of the hiatus costs and wrap costs ie $127,058.50. 141 The term "underage" was defined in the Licence Agreement for Murder Call 2 to mean any part of the budgeted cost or the budgeted start up costs not spent on production of a Project. Clause 12.2 provided that SSE and the Network were entitled to any underage to be applied as gross receipts in accordance with the application schedule. 142 An underage is not a cost recovery. Eden argued that it served the same purpose and should be treated as a cost recovery. I reject that submission. Eden is not entitled to participate in the budget underage. 143 With respect to Claim 16 Eden is entitled to $150,349.50. Claim 17 144 Under cl 11.1 of the Service Agreements, SSE was obliged to consult with Eden in relation to marketing and distribution arrangements and to use its best endeavours to exploit Projects to the maximum commercial advantage of both Eden and SSE. Eden alleged that by allowing SSD to charge commissions on pre-sales of Water Rats, SSE was in breach of this provision and in breach of fiduciary duty. 145 Eden submitted that the Distribution Agreements for Water Rats did not entitle SSD to a commission on sales effected before the date of the agreement. I reject that submission. Clause 9.1 provided that SSD was entitled to fees and commissions for marketing the Project and might deduct and retain those fees and commissions from gross receipts. Marketing the Project included promoting, distributing and exploiting the copyright and ancillary rights in all languages throughout the world. In my view, SSD was entitled to retain the prescribed commissions from gross receipts received after the execution of the Distribution Agreements. 146 Eden argued that the evidence established a notorious trade custom that commission was not charged on pre-sales where the distributor was involved. 147 In order to imply a term into a contract on the basis of trade custom or usage, the evidence must establish that the custom relied on is so well known and acquiesced in that everyone making a contract in that situation can reasonably be presumed to have imported that term into the contract (Con-Stan Industries of Australia Pty Ltd v Norwich Winterthur Insurance (Australia) Ltd (1985-1986) 160 CLR 226 at 236). The evidence did not satisfy that requirement. 148 Ian Charles Bradley is a producer of film and television programmes. He said a pre-sale was an agreement to sell rights to broadcast a future production in respect of which principal photography had not commenced. He said in his experience distributors did not charge producers a commission on such pre-sales. In a later statement he said that a commitment to purchasing a television production prior to the commencement of principal photography where the formal Licence Agreement was not signed until afterwards, constituted a pre-sale. 149 On the other hand, Mr Marks said the term pre-sale had a variety of meanings but generally referred to a sale of a Project prior to the completion of its production. The sale could be made by a producer or by a distributor. If a distributor made a pre-sale, in some instances it would be commissioned and in other instances it would be commission free. Whether a commission was charged on a pre-sale was a matter of negotiation and would depend on a number of factors. 150 With respect to Water Rats, Channel 9 was party to the Distribution Agreements that provided a commission to SSD as distributor on overseas sales effected prior to completion of production. 151 Douglas Geoffrey Newman was the general manager, finance and administration of Southern Star. Like Mr Marks, he said the term pre-sale had a number of meanings. His understanding was of a sale of rights to broadcast a Project in advance of its actual production with the proceeds being used to meet the costs of production. If such sales were made directly by the producer of the Project, they would usually be commission free. He said the sale of Water Rats to Channel 9 was a kind of pre-sale in this regard because it was negotiated by Mr Sullivan and Mr McElroy and it was used to fund the production. 152 Mr Newman drew a distinction between this type of pre-sale and one that did not fund the production because moneys were payable by instalments with little paid on execution of the contract. He said that if this type of pre-sale was initiated and concluded by the distributor, the distributor would ordinarily charge a commission on the sale. 153 Ms Barron said her understanding of the term was the sale of incomplete programmes and in her experience, distributors frequently sold rights to incomplete programmes for which they received a commission. 154 Mr Sullivan said the term had a variety of meanings. A sale to a broadcaster by a producer to fund a production was usually effected by the producer and not commissioned. On the other hand, sales by a distributor in advance of the provision of a completed Project might or might not fund the production and such pre-sales by distributors were usually commissioned. 155 Catherine Patricia Payne was a sales executive at SSD for the territories of Asia, New Zealand, North America, Latin America and Africa. Her experience was that, whether a pre-sale funded a budget or did not fund a budget, a distributor would look to receive a commission. 156 The preponderance of the evidence was against an industry custom that distributors did not charge commission on pre-sales. I find that no term to this effect should be implied in the Distribution Agreements. 157 Eden argued that Southern Star had negotiated sufficient pre-sales for Water Rats for which a commission would not have been payable to fund the production deficit and deliberately refrained from doing so to enable SSD to obtain commissions. 158 On 18 July 1995 Mr Sullivan had said that gross sales of $272,000 per episode for a 26 episode series would be needed to fully recoup the budget deficit for Water Rats and that gross pre-sales, which would be non-commissioned, were then around $150,000 an hour. By 15 August 1995, SSD had arranged pre-sales for Water Rats totalling $258,544. It does not follow, however, that those funds were available to fund the budget deficit. The evidence was to the contrary. They were pre-sales for payments by instalment after production. In a submission to the board of directors of Southern Star of 10 August 1995, total production costs were shown as $12.35 million. Channel 9 was to contribute $6.5 million, leaving a budget deficit of $5.85 million. Pre-sales at that time were only expected to generate $67,000 in the first quarter of the year ended 31 March 1996 and only $612,000 in that financial year. It was not until the quarter ended 31 March 1997 that cumulative expected pre-sales covered the budget deficit. For 18 months, therefore, the budget deficit had to be funded by other means. 159 Mr Newman's submission to the board contained the following: "Initial response to the promotional reel shown to potential foreign buyers at the last Cannes festival was very strong and it was initially felt that much of the budget deficit could be funded by pre-sales, however, doing this would have denied Group of significant commissions and profit shares. So, after examining sales estimates from Southern Star Sales, it was agreed that the best position for the Group would be for Sales to provide a distribution advance of the deficit for each series. This would be recouped from net sales proceeds after costs and commissions. In order not to deplete the Group's financial resources, it was then decided to apply to FFC for a loan to fund the production, which would be repaid from net sales proceeds." 160 Mr Newman explained that he was referring to Southern Star's position vis à vis the Network and any other external investor. To the extent to which the budget was funded by pre-sales, there would be potentially less commissioned funds and more participants sharing the same lower profits. That makes sense. The provider of funds to the production budget would demand an equity interest and a distribution commission (as Primetime initially sought), a distribution commission (as Primetime subsequently sought) or a profit share (as European Communication Management sought). I do not regard Mr Newman's board statement as evidence of a determination on the part of SSE to abandon pre-sales to the detriment of the Division. 161 In cross-examination, Mr Newman explained that funding the budget by way of pre-sales was abandoned because there were insufficient pre-sales to fund the budget deficit. That answer is totally consistent with the cash-flow estimates attached to the board paper. That evidence was also supported by the evidence of Ms Payne, Mr Sullivan, Ms Barron and Mr Newman. 162 There was no evidence that Southern Star rejected any pre-sale on other than commercial grounds. For example, negotiations with Daro were brought to an end when it was discovered that Daro had been using the reel provided to it in an attempt to obtain interest in territories different from those being discussed with Mr Sullivan and Mr McElroy. 163 Negotiations with Taurus came to nothing. But that was not because of reluctance on the part of Southern Star to negotiate a pre-sale. Mr Sullivan extended the time within which Taurus might put a proposal on a number of occasions. It was inevitable that no proposal would be forthcoming. SAT.1, Taurus's related broadcaster, told SSD that it was only interested in taking the series after it was made. 164 France 2/3 was ultimately achieved as a pre-sale by SSD as distributor and not by Southern Star as producer. Its quantum was insufficient to contribute significantly to the budget deficit. 165 Emphasis was placed upon a memorandum from Chand Pandit, the financial controller of Southern Star, to Robyn Watts who was in charge of sales at SSD to the effect that Mr Balnaves wanted the cash flow schedule for Water Rats re-worked with no German pre-sale but a German licence fee instead. The correspondence reveals, however, that Mr Pandit had prepared a draft cash flow for Water Rats that contained no German pre-sales and revealed a deficit approximately $2 million. Robyn Watts asked him to revise his budget with and without a German pre-sale, which he did. In that context, the attribution of an intention to Mr Balnaves to cancel a German pre-sale is unfounded. The evidence simply revealed an exploration of various ways in which the budget deficit might be financed. Indeed, Mr Balnaves made further inquiry of Mr Pandit for a comparison between Southern Star guaranteeing the deficit as against a German equity partner. 166 I was invited to draw the inference that the evidence of Mr Balnaves, Ms Watts and Ms Helen Thwaites who worked at SSD would not have assisted the defence case because of the failure to call them. 167 The rule in Jones v Dunkel (1959) 101 CLR 298 only applies where a party is required to explain or contradict something. In the absence of evidence requiring an answer, the failure to call evidence has no prohibitive significance (Schellenberg v Tunnel Holdings Pty Ltd (2000) 200 CLR 121 at 141-143). Furthermore, the rule does not require a party to give cumulative evidence. The rule does not compel time to be wasted in calling unnecessary witnesses (Cubillo v Commonwealth (2000) 103 FCR 1 at 120). The defence called Mr Sullivan, Mr Newman, Ms Barron and Ms Payne. Eden did not call any evidence suggestive of a deliberate decision to cancel pre-sale negotiations in order that SSD might earn commissions. Upon a proper analysis, the documents relied upon by Eden do not support that inference and I refuse to draw such an inference from the absence of testimony from additional witnesses. 168 It was submitted that the documents indicated no attempt to consult with Mr McElroy on these issues. I reject that submission. The documents referred to in par 65 of the defendants' written submissions with respect to this claim clearly demonstrate Mr McElroy's involvement in the pursuit of pre-sales. 169 I find that SSE was not in breach of its obligations to consult with Eden or to use its best endeavours to exploit Projects to the maximum commercial advantage of both Eden and SSE under cl 11 of the Service Agreements. 170 In view of this finding, Eden's claim that there was a breach of fiduciary duty must fail. If such a duty was owed by SSE, its actions were not to benefit it at the expense of Eden or to act in its own interests at the expense of the common interests of it and Eden in the Division. I reject Claim 17. Claim 18 171 Eden claimed that by execution of a Distribution Agreement for Blue Heelers that varied an earlier Distribution Agreement, SSE granted to SSD rights to Blue Heelers 2 and all future Blue Heelers series in perpetuity. It alleged that in so doing, SSE was in breach of cl 11 of the Second Service Agreement and in breach of fiduciary duty. 172 Mr Bradley said in his experience a producer who intended to produce a production which had the potential for several series for which it had not obtained a distribution guarantee or advance, would invariably retain the distribution rights to the subsequent series until initial sales of the production had been achieved or the Network in Australia had committed to purchasing the subsequent series. He said that this enabled the producer to exploit the later series to maximum advantage. He had never encountered a situation in which a producer granted rights in perpetuity to a distributor for all the series prior to production of the first series. 173 That was not, however, the situation with respect to the grant of rights under the Distribution Agreement. At the time of its execution, Blue Heelers 1 had already been produced and sold to Channel 7 and Blue Heelers 2 had also been sold to Channel 7. 174 Mr Bradley gave as an example of a producer selling a subsequent series directly to a foreign television Network, Home and Away. Ms Barron contradicted this assertion. She said that Home and Away was distributed by SSD through a United Kingdom subsidiary and continues to be distributed as a successful series. To the same effect was the evidence of Ms Payne. 175 Mr Marks contradicted Mr Bradley. He said that, like Southern Star, Beyond was both a producer and a distributor and in respect of Good Guys Bad Guys and Stingers, distribution rights in perpetuity were granted for all subsequent series prior to the production of the first series. 176 Like Beyond, Southern Star was a tied house in the sense that productions by SSE were distributed by SSD. That was the context in which Mr Marks had experienced the grant of Distribution Rights in perpetuity. That Southern Star was a tied house was well known to Mr McElroy. In that climate, there was no lost opportunity in the sense addressed by Mr Bradley. SSE did not have the infrastructure necessary to distribute Projects so that if there had not been the initial grant of rights in perpetuity, the reality of the situation was that future distribution rights would inevitably flow to SSD. 177 Eden failed to demonstrate any prejudice suffered by Eden or, indeed, the Division. The commission rate for major markets other than the US under the Distribution Agreement was 20%. The same rate appeared in the Licence Agreements for Blue Heelers 1 and Blue Heelers 2. It was in Channel 7's interests to maintain commission rates at as low a level as possible. Rates negotiated with SSD were at arm's length. The rate was less than the standard rate of 25% to which SSE was entitled under cl 11.2 of the Second Service Agreement. 178 In my view, Eden has not established a realistic commercial opportunity available to the Division had the distribution rights not been granted SSD in perpetuity. There was no evidence that any other distributor was prepared to undertake the task at a lower commission rate. 179 Eden has failed to establish a breach of cl 11 of the Second Service Agreement or a breach of any fiduciary duty that might exist. 180 The plea was raised by an amendment allowed by Bergin J on 30 November 2001. The time at which the amendment is to take effect was reserved to the trial judge. The defendants alleged that the cause of action accrued more than six years prior to the date on which the claim was brought and was not maintainable pursuant to the Limitation Act 1969. 181 Because of my findings, it is unnecessary for me to decide this issue. In view of the reservation to the trial judge, however, I set out my views on the matter. 182 Eden asserted that the breach of contract arose on 26 June 1995. The amendment was made more than 6 years later. Under the Supreme Court Rules 1970, Pt 20 r 4(5) the court might order that a party have leave to make an amendment having the effect of adding or substituting a new cause of action arising out of the same or substantially the same facts and a claim for relief on that new cause of action. This might be done notwithstanding the expiration of a limitation period under r 4(1). Rule 4(5A) provided that an amendment made under the rule related back to the date of filing the statement of claim unless the court otherwise ordered. 183 Eden pointed out that there is no statutory limitation period, except by analogy, with respect to a breach of fiduciary duty (Williams v Minister Aboriginal Land Rights Act 1983 (1994) 35 NSWLR 497). Eden submitted that the amended claim was primarily a claim for breach of fiduciary duty. I do not regard it in that light. In my view, the claim was basically one of breach of contract. 184 Eden also argued that the circumstances giving rise to the claim only came to the notice of Eden after the commencement of the proceedings and after discovery. The proceedings were commenced within the limitation period. In those circumstances, I am not prepared to make an order varying the course which would otherwise apply under the Supreme Court Rules 1970, Pt 20 r 4(5A). I would have rejected the limitation defence. I reject Claim 18. Claim 19 185 FFC lent $3.9 million to SSD and it made a Distribution Advance to SSE for Water Rats 1. A legal and administrative fee of $46,750 paid by SSD to FFC, sequel fees of $199,325 paid to FFC by SSE and SSD and interest of $206,215 paid by SSD to FFC were deducted from the income of the Division as operating costs for the purposes of the Second Revenue Sharing Deed. Eden claimed that they were costs internal to SSD and SSE and ought not to have been charged to the Division. 186 The legal and administrative fee was included in the production budget for Water Rats 1. Indeed, the amount in the budget was $50,250. It was a budget approved by Mr McElroy. As a budget item its payment constituted production costs under the first item in the schedule to the Second Revenue Sharing Deed. It was, in my opinion, properly charged against the income of the Division as an operating cost of the Division. 187 The sequel fee for Water Rats 2 was paid by the production company by cheque drawn by the line producer and the production accountant. Mr Sullivan wrote to Mr McElroy saying the only way to accommodate the payment was to incur an episodic overage as the fee was payable on delivery of each episode. This was reiterated by a letter from Mr Anderson to Mr McElroy when he indicated that the sequel fee for Water Rats 2 would be an additional cost of production to be borne by the Division and the same treatment would apply to the sequel fee due for Water Rats 3. Mr Anderson requested Mr McElroy to let him know if he had any questions and received no response. 188 In my view, the sequel fees were also properly charged to the Division as an overage borne by the production company and constituted production costs under the first item in the schedule to the Second Revenue Sharing Deed. 189 Under the arrangement with FFC, an interest bearing account was opened into which FFC advances were paid and held prior to disbursement of advances to the production company. The account was opened in the name of SSD. Interest earned on the account was credited to the Division. In the same way as I regarded the 2.5% commission payable to Film Victoria as constituting an operating cost of the Division, so I regard interest payable to FFC. If these charges were not to the account of the Division, it would mean that SSD was to advance $3.9 million to the production of Water Rats 1 with no compensation for risk or for the use of the moneys. Its return on investment would be exactly the same as Eden's from the moment it had recovered half of its Distribution Advance. 190 The defence raised estoppel as an alternative. In light of my findings it is unnecessary for me to consider this issue. Since my views on this matter differ from those previously mentioned with respect to estoppel issues, however, I comment as follows. 191 So far as the legal and administrative fee was concerned, Mr McElroy approved a budget containing the item without demur. So far as the sequel fees were concerned, Mr McElroy was asked whether he had any questions and did not avail himself of the opportunity. Both were silences contributing to an assumption on SSE's part. When FFC financing was sought on the basis of an equity injection, it was known that the Project could not go ahead unless the funding was forthcoming. The common assumption was that the costs of raising the funds were legitimate operating expenses of the Division. The fact that Mr McElroy did not raise any objection when the basis of funding changed to a loan at interest, contributed to the continuation of the assumption on SSE's part that the costs of raising the funds, now including interest, were legitimate operating costs of the Division. 192 Were it necessary for me to do so, I would have found that Eden was estopped from asserting that the legal and administrative fee, sequel fees and interest were not operating costs of the Division. I reject Claim 19. Claim 20 193 Colin Friels and Catherine McClements were the lead actors for Water Rats. Water Rats 4 episodes 1 to 8 were Projects of the Division. The remaining episodes Water Rats 4 were not. Before the termination of the Division, new rates of pay were agreed for Mr Friels and Ms McClements which took effect from the first episode of Water Rats 4. Eden claimed that the increases with respect to episodes 1 to 8 were not costs of the Division. 194 The contracts establishing the new rates was signed in February 1998. The new rates had, however, been included in the production budget prepared by Mr Popplewell as at 5 August 1997. Although Mr McElroy said that he did not recall receiving any of the relevant correspondence, it reveals that he was informed of the changes. 195 On 17 June 1997, Mr Sullivan wrote to Mr McElroy stating that Southern Star and Channel 9 had accepted the budget prepared on 14 May 1997 for Water Rats 4 but that the budget might be affected by cast re-negotiations. The amount being sought by Mr Friels was set out in a memorandum from Anthony Mrsnik of 18 June 1997, a copy of which was dispatched to Mr McElroy. Mr McElroy wrote on the agenda for a status meeting of 8 July 1997 against Water Rats the words: "Status. Friels/McClements?" Mr McElroy denied that this was a reference to an increase in their rates. I found this portion of Mr McElroy's evidence most unsatisfactory. The series of documents clearly indicated his knowledge of the negotiations with the stars. His denial that he was aware of this and his statements that he did not believe he received the documents, was unconvincing. I find that Mr McElroy was well aware that the production budget was likely to be affected by current negotiations with Mr Friels and Ms McClements. 196 On 5 August 1997, Mr Popplewell sent a memorandum to Mr McElroy enclosing the final budget with a note: "Budget is finally locked down now that Catherine McClements and Colin Friels final deal is confirmed". I do not accept Mr McElroy's evidence that he did not recall receiving this memorandum. 197 The evidence of Mr Sullivan, Ms Barron and Mr Marks was that the retention of lead actors for future series was beneficial to commercial prospects both of the future series and of the existing series. The increased fees achieved that purpose. 198 In my view, the increased fees paid to Mr Friels and Ms McClements formed part of the production costs and were, in consequence, operating costs of the Division under the first item in the schedule to the Second Revenue Sharing Deed. The fact that Mr McElroy was to cease to have any connection with the Division in December 1997 made no difference to the quality of the outgoings in question nor, indeed, did his knowledge or lack of knowledge of the proposed increases. In the end, it is the nature of the outgoing that justifies its inclusion in the operating costs of the Division. I reject Claim 20. Claim 21 199 Under the Distribution Agreements, the term "gross receipts" was defined to mean all money resulting from marketing the Project. Eden claimed that this encompassed any interest earned by SSD and it was entitled to claim an account of such interest receipts. In written submissions in reply it was contended that this entitlement arose either because of a breach of cl 11 of the Second Service Agreement or because of a breach of fiduciary duty. 200 Eden was not a party to the Distribution Agreements. Their structure was that SSD should distribute gross receipts no later than 60 business days after the end of each reporting period. There was no requirement to account for interest, nor was SSD entitled to interest on the outstanding balance of its Distribution Advance. 201 Eden's entitlement arose under the Second Revenue Sharing Deed under which income of the Division was limited to moneys received by the Division. Any interest that SSD might have earned but not distributed, falls outside that definition. 202 Furthermore, Eden did not adduce any evidence that SSD received and retained interest. SSD is not a party to these proceedings. 203 I reject Claim 21 and decline to make an order for an account. Claim 22 204 Clause 2.2 of the Second Revenue Sharing Deed limited Eden's rights for any default by SSE to damages for breach of contract. Clause 3.3 provided that SSE would pay as soon as possible after calculation together with interest for the period from the last day of the year in relation to which the net profit of the Division related to the date of payment at the bank interest rates payable by Southern Star from time to time. Eden submitted that interest should be calculated in terms of the Supreme Court Act 1970, s 94. Eden submitted that the Southern Star rates were lower and the defendants should not be permitted to take advantage of their own wrong. 205 Eden adduced no evidence with respect to this claim. My ultimate determination of amounts due to Eden will constitute a debt due by SSE in various years. Under cl 3.3 of the Second Revenue Sharing Deed, Eden will be entitled as a right to interest on that debt. In those circumstances the Supreme Court Act 1970, s 94(2)(b) operates to exclude a discretion in the court to determine any other interest rate. 206 Eden sought an account of interest earned by SSE. SSE identified and conceded interest sums that were not credited to the Division. In final submissions, Eden did not press this claim. Claim 23 207 SSE calculated the net profit of the Division under the First Revenue Sharing Deed by including the amounts received from SSD in relation to Blue Heelers 1, Blue Heelers 2 and four episodes of Blue Heelers 3. SSD had deducted commissions in accordance with the levels set out in the relevant Distribution Agreements. Those commission levels were lower than those contained in cl 11 of the First Service Agreement. In May 2002, SSE re-calculated the net profit of the Division for each of the financial years up to 31 March 2001 taking into account the increased commission levels. $605,580 was calculated as representing the difference between commissions calculated in accordance with the First Service Agreement and the commissions charged by SSD under the Distribution Agreements. Eden argued that this course was not open to SSE. 208 Clause 11 of the First Service Agreement, after providing that SSE was responsible for marketing and distribution of all Projects, provided for two distinct situations. 209 First, if SSE or a related company undertook the marketing and distribution, Southern Star was entitled to specified rates of commission under cl 11.2. It provided that where no third party fees were incurred, distribution fees would be calculated in accordance with the specified rates. The distribution fees included the costs of sub-distributors. Third party fees were defined in cl 11.4 to mean those charged by distributors not being part of Southern Star or owned or controlled by members of Southern Star. 210 Secondly, if SSE was to retain a third party distributor, cl 11.3 required it to consult with Eden as to the level of fees and consider Eden's suggestions regarding preferred distributors and only appoint distributors with Eden's consent which was not to be unreasonably withheld. 211 The former situation applied under the First Service Agreement because SSD was part of Southern Star. Prima facie, therefore, SSE was entitled to deduct from the gross receipts of the Division, the difference between the specified commission rates and those charged by its sub-distributor, SSD. 212 Under the Second Service Agreement, cl 11.5 provided that if SSE agreed with a third party distributor to rates lower than those specified in cl 11.2, those rates would be reduced to the lower level. That provision was not present in the First Service Agreement. Eden submitted that it recorded the intent under the First Service Agreement and it should be interpreted accordingly. I reject that submission. There is nothing to indicate that the introduction of cl 11.5 in the Second Service Agreement served to record what had already been agreed. It stands in sharp contrast to the regime under the First Service Agreement and that is to be read according to its tenor. 213 Eden submitted that cl 11.2 of the First Service Agreement only operated if SSE was in receipt of gross receipts from marketing and distribution and since they were the receipts of SSD, it did not enable SSE to make the additional deduction. I reject that submission. If it were correct, Eden would not be protected from a claim by SSD to commissions in excess of those specified. The term gross receipts in cl 11.2 is not defined. There is no reason to restrict it to gross receipts from marketing and distribution. That suggestion would run counter to the inclusion of costs of sub-distributors who would be expected to be the recipients of gross receipts from marketing and distribution. In my view, the gross receipts referred to are those of the Division. 214 Eden argued that the claim breached cl 11.1(b) of the First Service Agreement. It required SSE to use its best endeavours to exploit Projects to the maximum commercial advantage of both Eden and SSE. I reject that submission. The inclusion of specified commission rates in cl 11.2 must mean that they were regarded as satisfying the maximum commercial advantage of both Eden and SSE. 215 Eden argued that additional deductions were only available with respect to receipts up to 31 March 1995 when the First Service Agreement came to an end. I reject that submission. The First Revenue Sharing Deed governed the determination of the net profit for the Division in the relevant period. In making those calculations, the First Service Agreement enabled deductions to be made for the difference in commissions from the income of the Division. That figure having been established, there is nothing in the First Service Agreement that would prevent a re-calculation of net profit based upon the income of the Division for a Project whenever received. 216 Finally, Eden submitted that the claim was the invention of Ms Barron and not made in good faith but for the purpose of thwarting Mr McElroy. Ms Barron may have been the author of the claim and she gave evidence that she did not wish Mr McElroy to be paid any figure to which he was not entitled. But that does not alter the nature of the claim based upon the proper construction of the First Service Agreement. I reject Claim 23. SSE Claims 217 There were two claims. · Blue Heelers Commission 218 In its proceedings, SSE was given leave to amend to include a claim that the net profit of the Division in the years ended 31 March 1994 to 31 March 2001 had been over-stated in total by $605,580 as a result of the under-calculation of Blue Heelers commissions and excess payments had been made to Eden as a result thereof under a mistake of fact or law as the consequence of which Eden had been unjustly enriched and was liable to refund the excess payments together with interest thereon. 219 Eden submitted that if it had been enriched, the enrichment was not unjust. 220 Restitution does not depend upon some subjective evaluation of whether enrichment is unjust. Receipt of a payment that has been made under a fundamental mistake is one of the categories of case in which the facts give rise to a prima facie obligation to make restitution in the sense of compensation for the benefit of unjust enrichment to the person who has sustained the countervailing detriment (Australia and New Zealand Banking Group Ltd v Westpac Banking Corporation (1987-1988) 164 CLR 662 at 673, David Securities Pty Ltd v Commonwealth Bank of Australia (1991-1992) 175 CLR 353 at 379). 221 Eden was the trustee of the McElroy family trust and in that capacity it received distributions from the Division. The trust made distributions to Mr and Mrs McElroy as beneficiaries of the trust. Mr McElroy said that if it had been suggested to him that portion of the moneys had been received in error, he would have taken legal advice before permitting Eden to make the distributions. 222 Eden relied upon the defence proposed by Brennan J in David Securities at 398-399 of the honest claim of right which he stated as: "It is a defence to a claim for restitution of money paid or property transferred under a mistake of law that the defendant honestly believed, when he learnt of the payment or transfer, that he was entitled to receive and retain the money or property." 223 The defence of honest claim of right did not, however, appeal to the majority in David Securities. At 385 they saw the defence as a change of position. That was so because its central element is that the defendant has acted to his or her detriment on the faith of the receipt. But the mere spending of money received under a mistake of fact or law does not constitute a change of position defence (Lipkin Gorman v Karpnale Ltd [1991] 2 AC 548 at 580). 224 In the instant circumstances, distributions were made to Mr and Mrs McElroy and returned by way of loan to Eden to fund these proceedings. The mere payment by Eden of legal expenses does not, in my opinion, constitute a change of position in defence. In Ing v Stewart (1892) 66 LT 339 a payment by mistake was made to a trustee who had distributed to the beneficiary. The trial judge gave judgment for the defence on the basis that, by analogy with the agent and principal cases, the action ought to have been brought against the beneficiary. That decision was reversed on appeal, it being held that the trustee was the appropriate defendant. 225 Eden incurred liabilities for legal expenses. It discharged them in part from funds advanced to it by Mr and Mrs McElroy. That does not, in my opinion, constitute a change of position defence. 226 Furthermore, a trustee is protected against the detriment arising upon a change of position. It has an indemnity enforceable against the assets of the trust. Eden adduced no evidence that the assets of the trust were insufficient to indemnify it if called upon to refund moneys paid by mistake. 227 Eden submitted that the claim was not made in good faith. I have already dealt with this matter with respect to the contractual construction question. So far as restitution is concerned, the right arises, prima facie upon payment by mistake. There are recognised defences to that prima facie position. An assertion of male fides is not one of them. 228 Eden referred to Mason and Carter, Restitution Law in Australia Butterworths, Sydney, 1995, at par 228 where it is said: "It is clear that mistake on the plaintiff's part is a recognised basis for an award of restitution based on unjust enrichment. It is also clear that, although mistake may arise from the conduct of the defendant, that is, a case of fraud or misrepresentation, the primary use of mistake in restitution arises where the mistake is spontaneous, or the fraud or misrepresentation is at the hands of a third party." 229 Eden submitted that the mistake in the instant circumstances was not spontaneous. It was the invention of Ms Barron for the purpose of thwarting Mr McElroy after an informed decision was made as to the operation of the First Service Agreement and payment made under the First Revenue Sharing Deed. 230 This approach to the concept of spontaneity misunderstands the text in which the contrast is between mistake instigated by a defendant and spontaneous mistake, that is, a mistake made by the plaintiff. In this case the import of cl 11 of the First Service Agreement was overlooked or misunderstood. That was a spontaneous mistake. 231 What lacked spontaneity was the bringing of the claim. It was allowed by amendment. If the question when that amendment should take place was reserved to me, I would not depart from the ordinary consequence of the Supreme Court Rules 1970, Pt 20 r 4(5A) that the amendment took effect from the date of filing the Statement of Liquidated Claim in the District Court. 232 The amended claim involves the computation of the net profit of the Division which is the subject matter of numerous claims by Eden. In substance, no cause of action different from Eden's claims was raised by the amendment and in those circumstances it is appropriate to allow the rule to take its course (Holmark Construction Co Pty Ltd v Kekatos (1994) 12 ACLC 400 at 403). The consequence is that the defence under the Limitation Act fails. 233 In my view, SSE is entitled to recover from Eden the moneys totalling $605,580 which, in error, were not charged against the net income of the Division in the years in question. · Net Profit Advance 234 Clause 3.4(c) of the Second Revenue Sharing Deed required SSE to pay Eden as an advance against its share of the net profit of the Division for the year ended 31 March 1997 the sum of $225,000. Clause 3.8 required that if the amount paid exceeded Eden's share of the net profit of the Division for that period, the excess would be repayable by Eden and Eden would pay interest on the excess at the bank interest rates payable by Southern Star. 235 Depending upon the effect of this judgment, SSE claimed that Eden's share of the net income of the Division for the year ended 31 March 1997 was nil and it was entitled to a refund of $225,000 together with the interest at the stated rate. 236 Eden offered no separate defence to this claim. If Eden was entitled to less than $225,000, SSE is entitled to a refund of that excess together with interest at the Southern Star rate. The final resolution of this amount must await a further hearing of this matter at which stage I will consider appropriate orders. Fiduciary Duty 237 It has not been necessary for me to determine whether a fiduciary relationship existed between SSE and Eden. A separate claim for breach of fiduciary duty was not articulated. Eden claimed that moneys were due and owing under, or for breach of, specific terms of the contracts or, in the alternative, for breach of fiduciary duty. 238 If it were necessary for me to decide this issue, I would have found that no fiduciary relationship existed. 239 Fiduciary duties, other than those arising from the relationship of principal and agent, arise where there is a relationship of ascendancy or influence by one party over another or dependence or trust on the part of that other (Breen v Williams (1995-1996) 186 CLR 71 at 82). As Gibbs CJ observed in Hospital Products at 68 the authorities contain guidance as to the duties of one who is in a fiduciary relationship with another, but provide no comprehensive statement of the criteria by reference to which the existence of a fiduciary relationship may be established. As Mason J said in Hospital Products at 102 the categories of fiduciary relationships are infinitely varied and the duties of the fiduciary vary with the circumstances which generate the relationship. 240 In the instant circumstances, Eden's contract with SSE was one for the provision of consultancy services. The Service Agreements excluded partnership, joint venture or principal and agent in cl 32.1 as did the Revenue Sharing Deeds in cl 13.1. 241 The relationship between SSE and Eden did not create ascendancy of one party over the other, nor dependence or trust by one party in the other. It was a commercial relationship entered into by Eden with the advantage of legal advice. The fact that Mr McElroy relied upon Mr Sullivan and Mr Anderson to ascertain with accuracy the net profit of the Division is beside the point. SSE was subject to precise duties in calculating and remitting Eden's share of the net profit of the Division. Inspection and auditing rights were vested in Eden to ensure that performance. There was no vulnerability in Eden nor was there any power entrusted to SSE, the exercise of which might affect Eden's position. There is an absence in the in the instant relationship of those elements which one would expect in a fiduciary relationship (see Pilmer v Duke Group Ltd (in liq) (2001) 207 CLR 165 at 217-218, Breen at 108, Hospital Products at 68). Implied Terms 242 Eden did not plead an implied term of good faith in any of the contracts independently of its claims for breach of fiduciary duty. For the reasons discussed in Commonwealth Bank of Australia v Spira [2002] NSWSC 905, I may be bound by Burger King Corporation v Hungry Jack's Pty Ltd [2001] NSWCA 187 to hold that such a term was implied in each of the commercial contracts between the parties in these proceedings. Barrett J took that view in Overlook v Foxtel [2002] NSWSC 17 at par 62. 243 In Spira I discussed the nature of the implication of the term. I did not discuss its content. Suffice it to say for present purposes that I regard its content as no more extensive than the statement in positive form of a proscriptive and negative duty imposed on a fiduciary. Viewed in that light, no additional duty in the performance of obligations or the exercise of rights under the contracts before me arose than a fiduciary relationship would require. 244 Nor were the claims by Eden founded upon duties of that kind. As I have said, Eden's claims were for moneys due and owing under, or for breach of, overt terms of the contracts. Waiver of Privilege 245 In the course of the proceedings, Mr Hammerschlag sought access to documents produced to the court under a notice to produce addressed to the defendants for which legal professional privilege was claimed. I gave short reasons for dismissing that application, indicating that I would give fuller reasons in due course. 246 The notice to produce sought any legal, accounting or other advice received by SSE, SSD, SSG or any officer as to the entitlement or otherwise of SSD or SSE to recoup from or make allowance from profits of the Division, any unrecouped Distribution Advance. Legal professional privilege was claimed with respect to eight documents. 247 The notice to produce also sought all documents (including any board papers, minutes or agendas) touching upon, concerning or relating to or recording any consideration, determination or decision by SSE, SSD, SSG or any officer to amend the profit share report for the year ended 31 March 2001 and to adjust the commissions charged to the Division in relation to Blue Heelers 1, 2 or 3, as recorded in a letter from Southern Star to Eden of 2 May 2002. The notice further sought any legal, accounting or other advice received by SSE, SSD, SSG or any officer as to the entitlement or otherwise of SSE, SSD or SSG to adjust the commissions charged to the Division in respect to Blue Heelers 1, 2 or 3 and which were recorded in the amended profit share report for the year ended 31 March 2001. In answer to that notice, six documents were identified for which legal professional privilege was claimed. 248 In cross-examination, Mr Anderson was asked whether he discussed the profit share report for the year ended 31 March 2001 with lawyers. Over objection, I allowed him to answer the question and he identified the lawyer as Ms Barron. He said he was asked by Ms Barron to perform some calculations, which he did. He was asked what she said to him. No further objection was taken and the following answer was given: "Q: What did she say to you? A: She wanted me to look at the issue of commissions on Blue Heelers series one and two and three, as to whether we had charged the correct commissions, and her view was that we hadn't."

Eden Productions Pty Ltd v Southern Star Group Limited

At a glance

Court

Decision date

Before

Source

Judgment (10 paragraphs)

Parties

Legislation Cited (2)

Cases Cited (24)