Showtime Management Australia Pty Ltd v Showtime Presents Pty Ltd [2008] NSWSC 594 | Case summary

1443/08 SHOWTIME MANAGEMENT AUSTRALIA PTY LTD & ANOR V SHOWTIME PRESENTS PTY LTD & ORS JUDGMENT 1 HIS HONOUR: The first defendant, Showtime Presents Pty Ltd ("the Company"), has been described in submissions as a joint venture company for the Van Grinsven and Anderson interests. The Company is trustee of the Showtime Presents Unit Trust ("the Trust"). The directors and sole equal shareholders of the Company are the second plaintiff/second cross-defendant, Mr Van Grinsven, and the third defendant/second cross-claimant, Mr Anderson. Half of the units in the Trust are owned by Showtime Management Aus Pty Ltd ("SMA"), the first plaintiff/first cross-defendant. Mr Van Grinsven is the director of SMA, and the sole shareholder is his wife. The other half of the units in the Trust is owned by RockCity Event Management Pty Ltd ("REM"), the second defendant/first cross-claimant. The sole director and shareholder of REM is Mr Anderson. 2 The Company conducted and promoted entertainment events in Australia and abroad, and in particular, tribute concerts for a rock band known as "Queen". Its Queen tribute show was marketed in Australia as "Queen - It's a Kinda Magic", which is referred to in the evidence as "QIAKM". The Company has also produced another Queen tribute show called "Champions of the World" ("CW"). Mr Van Grinsven brought to the business his production and presentation skills and contacts with the cast, and Mr Anderson brought to the business his skills and contacts in promotion and in the accounting aspects of the production. Unfortunately, the relationship between Mr Van Grinsven and Mr Anderson has broken down. 3 In these proceedings the plaintiffs seek orders for the winding up of the Company on the "just and equitable" ground. REM and Mr Anderson have brought a cross-claim against the plaintiffs, seeking relief of various kinds on grounds including grounds relating to claims of ownership of intellectual property in respect of QIAKM and CW, oppression under the Corporations Act, breach of fiduciary duties of joint venturers and company directors, breach of statutory provisions reflecting the general law fiduciary duties of company directors, and accessory liability for breach of fiduciary duty. Mr Anderson has made an application under s 237 of the Corporations Act for leave to bring proceedings on behalf of the Company against each of the plaintiffs for breach of fiduciary and statutory duties and accessory liability. 4 The Company had made plans for a Queen tribute concert tour in South Africa, scheduled for May and June 2008. In circumstances that I shall describe, Queen tribute concerts are going ahead in South Africa but under the auspices of a new South African company associated with Mr Van Grinsven, called Calshelf Investments 196 Pty Ltd. REM and Mr Anderson have sought interlocutory relief that would bring the profits of the South African concerts into Australia, to be held securely pending the outcome of the proceedings. 5 Two applications came before me for hearing on 4 and 5 June 2008. The first was Mr Anderson's application for leave to constitute derivative proceedings under s 237. I shall address that matter in a separate judgment. The second was the interlocutory application by REM and Mr Anderson for continuation and modification of existing orders concerning the profits of the South African concerts. This is the application addressed in the present judgment. Facts 6 My judgment on the application under s 237 of the Corporations Act will deal more fully with the facts alleged by the parties with respect to their business relationship and its breakdown. For the purposes of the interlocutory application, the following summary facts are sufficient to deal with the business relationship of the parties, entry into their joint venture agreement and termination of the relationship: (a) Mr Van Grinsven has been in the entertainment industry for over 22 years, working, through his company SMA, on the production of popular entertainment and developing contacts with suppliers and cast; (b) he developed the concept for QIAKM in about 2000 and QIAKM performances commenced in late 2001; (c) Mr Anderson, who has a Bachelor of Commerce degree, has been the managing director of REM for at least 27 years, promoting Newcastle as a destination for major national and international attractions, working closely with all major Australian-based promoters and overseeing touring attractions to theatres and outdoor winery stages in the Hunter region; (d) Mr Van Grinsven and Mr Anderson and their companies entered into a limited joint venture for the production of QIAKM in the period from July to September 2003, and Mr Anderson claims to have caused Mr Van Grinsven to improve the show in various ways for the purposes of production during that period; (e) under the written agreement for that joint-venture, REM was the presenter and promoter of the concerts, and SMA agreed to deliver the act to the venues nominated by REM, and to supply all production requirements; REM agreed to make all financial arrangements including advance marketing and venue deposits or payments; and profits were to be shared on an equal basis; (f) during the joint venture period REM handled all financial matters for the QIAKM performances and received a performance fee, and provided Mr Van Grinsven with draft budgets and weekly reports and full show settlements; (g) after September 2003 parties went their separate ways but they came together in the second half of 2004 and early 2005 to stage QIAKM performances in Canada and Singapore, under arrangements for division of responsibilities that were very similar to the 2003 joint venture; (h) Mr Van Grinsven claims that he developed the "Champions of the World" show so as to provide understudies for QIAKM and as a separate performance, and the show was performed from 2004 until December 2007, but Mr Anderson gives a different version of the development of CW, claiming that it was created by him and REM; (i) after discussions about their future working relationship, the parties met with an accountant on 21 April 2005 and agreed to establish a corporate and trust structure under the name "Showtime Presents Pty Ltd" for the future staging of QIAKM performances, and the Company was formed on the next day; (j) Mr Anderson maintains that during discussions leading up to that decision, he made it clear that all intellectual property rights to QIAKM would be held by the Company, but Mr Van Grinsven denies this and says that at all relevant times all intellectual property rights with respect to QIAKM, and also CW, if there are any, have remained with SMA; (k) the evidence before me includes a minute of a meeting of the directors of the Company on 22 April 2005, according to which the directors agreed that the intellectual property of QIAKM would vest with the business structure that the directors had formed to undertake the development and promotion of the show; (l) on 6 April 2006 Mr Anderson arranged for the business name "Queen - It's a Kinda Magic" to be registered in New South Wales as the business name of the Company; (m) on 12 April 2006 Mr Anderson provided a letter on the Company's letterhead to IMG Artists, stating that the Company had created and owned all exclusive worldwide rights to QIAKM, and later the Company entered into a contract with International Management Group dated 18 May 2006; (n) Mr Anderson alleges that he read out the words of the letter to Mr Van Grinsven and that Mr Van Grinsven agreed with it; (o) the breakdown of the relationship between Mr Van Grinsven and Mr Anderson seems to have begun in about mid-2006, when QIAKM was proposing to perform in Hamburg; (p) issues between the parties included the amount of REM's management fees, Mr Van Grinsven's expenses, Mr Van Grinsven's use of material in the QIAKM show in breach of the copyright of Mayqueen, and Mr Van Grinsven's presentation of other shows unconnected with QIAKM under the auspices of the Company; (q) there was also a measure of disagreement between the parties, indicated by e-mail correspondence in February 2007, as to business strategy for 2007, in which Mr Van Grinsven complained Mr Anderson made all the decisions; (r) disagreements came to a head in August 2007 when the parties were planning a major US tour for QIAKM, which was said to need substantial retained capital, leading to Mr Anderson proposing a board meeting on 15 August 2007 and Mr Van Grinsven declining to attend, and then Mr Anderson's e-mail of 16 August 2007 proposing a name change for the Company; (s) then on 20 August 2007 Mr Anderson wrote to Mr Van Grinsven a more formal letter, complaining about his use of the Company for unassociated shows and his breach of Mayqueen's copyright, referring to the duties of company directors to act honestly and with due care, and inviting Mr Van Grinsven to respond within 7 days as to why he should continue to act as a director of the Company; (t) further correspondence between the parties and between their solicitors included a letter dated 27 August 2007 written by Mr Van Grinsven's solicitors, Henry Davis York, which denied Mr Anderson's claim that intellectual property rights with respect to QIAKM had been transferred by Mr Van Grinsven and SMA to the Company when it was formed; (u) the correspondence also addressed REM's discontinuation of weekly financial reports to Mr Van Grinsven, but eventually a substantial amount of financial information was provided by Mr Anderson on 16 November 2007; (v) Mr Weston's letter of 26 November 2007 made detailed allegations of breaches of fiduciary and contractual duties by Mr Van Grinsven, and allegations that SMA dishonestly assisted Mr Van Grinsven in breach of his duties, and threatened legal proceedings; (w) Mr Weston's letter of 26 November 2007 said that his client, Mr Anderson, elected to terminate the joint venture agreement having regard to the words and conduct of Mr Van Grinsven and SMA; (x) on 3 December 2007 Henry Davis York purported to provide notice of termination of the joint venture agreement on the ground that the agreement had been repudiated by Mr Anderson and REM, and asserted that neither Mr Anderson nor the Company had any further authority to represent Mr Van Grinsven's and SMA's Queen tribute band shows (Ex A5). 7 The disagreements between Mr Van Grinsven and Mr Anderson obviously had an effect on planning for QIAKM performances for the remainder of 2007 and 2008. By an e-mail dated 16 November 2007 Mr Anderson made various proposals for 2008 and 2009. One proposal was to return to the USA in 2008. Another was for a two-week season in 2008 at the Johannesburg Civic Theatre, and possibly performances in Cape Town as well. The evidence shows that the South African tour had been under development by Mr Anderson for some little time. Mr Van Grinsven's reply, by e-mail on the same day, was quite hostile, based on the proposition that he had lost trust in his business relationship with Mr Anderson (Ex R1, page 226). He said he was bitter and very angry and that there would need to be very strict guidelines for future work. He said he would commence to set up tour dates for the 2008 year. On the same day Mr Anderson responded, accusing Mr Van Grinsven of misrepresenting the joint venture to his lawyers by taking the position that there was no joint ownership of QIAKM (Ex R1, page 225). Mr Anderson suggested a buyout, a suggestion greeted negatively by Mr Van Grinsven. 8 That exchange of e-mails represented no constructive progress, to say the least. In an e-mail to his solicitor dated 27 November 2007, Mr Van Grinsven said the company was in a "real stalemate", with no new bookings, leaving the prospect of the cast having no work in 2008 (Ex R1, page 223). 9 On 30 November 2007 Henry Davis York wrote to Nicholas Weston, Mr Anderson's solicitor, saying that Mr Van Grinsven had been informed on that day that QIAKM had been advertised as being performed in South Africa in May 2008 for three weeks, as a show produced by "Showtime Aust". The letter said Mr Van Grinsven had no knowledge of those arrangements, and sought to be provided with details immediately (Ex R1, page 266). In later correspondence Mr Van Grinsven's solicitors said that he first became aware of the South African shows "independently" on 30 November. 10 That Mr Anderson on behalf of the Company was arranging for a South African tour was confirmed 3 December 2007, if not earlier, because on that day Mr Anderson sent an e-mail to Mr Van Grinsven headed "Queen - It's a Kinda Magic - South Africa", in which he reported that ticket sales had opened on the previous Thursday, and he reported on sales volume. There is other evidence (including a report to Mr Anderson from the Johannesburg Civic Theatre on 16 January 2008) that ticket sales continued at a very positive rate. Mr Anderson's e-mail said "prime-site billboard goes up today". On 14 December 2007 Mr Anderson sent another e-mail to Mr Van Grinsven, headed "Queen Billboard South Africa", saying that the Queen billboard went up in the previous week, and attaching a photograph. 11 On 15 January 2008 Henry Davis York wrote to Mr Weston asserting that as the joint venture had been terminated, the joint venture had no authority to continue to promote or present any future Queen tribute band productions (Ex R1, page 273). The letter alleged that Mr Anderson had agreed to deliver Queen shows in South Africa in May 2008 without Mr Van Grinsven's consent, and asserted that as the joint venture had been terminated, Mr Van Grinsven did not agree to those shows being conducted by the joint venture, but that he was prepared to negotiate for the delivery of the South African shows on the basis of arrangements entirely separate from the joint venture. 12 The letter of 15 January 2008 addressed the question of intellectual property rights in consequence of termination of the joint venture. It asserted that neither the Company nor Mr Anderson had any intellectual property rights relating to Queen tribute band shows, and that Mr Anderson was precluded from using information or intellectual property in relation to the Queen shows on an ongoing basis. The letter proposed an undertaking by Mr Anderson not to operate a Queen tribute band show for two years, and proposed the appointment of a receiver to the Company. 13 Mr Weston responded to the letter of 15 January by a facsimile dated 18 January 2008. Apart from denials of various matters, the letter contended that the relationship between the parties was not merely contractual, but was reflected in a corporate and trust structure that had not been terminated. The letter asserted that the intellectual property rights for operation of the QIAKM and CW tribute acts were the main trust assets. It contended that the trust had the exclusive right to operate the QIAKM and CW tribute acts and that Mr Van Grinsven could not do so for his own benefit. 14 The terms of this letter suggest that by 18 January Mr Anderson may have developed a concern that Mr Van Grinsven would seek to stage the South African shows outside the joint venture arrangement, but the evidence does not point to any particular proposals to do so at that stage. Mr Anderson's concern may have been based on nothing more than the assertions in the letter of 15 January, implying that in Mr Van Grinsven's view, after termination of the joint venture he and SMA had unrestricted intellectual property rights with respect to QIAKM and CW. 15 On the other hand, Mr Anderson's own evidence is that, until the court made some interim orders on 18 February 2008 referred to below, he was endeavouring to preserve the QIAKM act by arranging shows in Johannesburg and Cape Town and in Canada. He said that up until 18 February he had arranged for two weeks of performances of QIAKM in Johannesburg to be on sale, and he was negotiating a third week for Johannesburg performances and was also negotiating two weeks of performances of QIAKM in Cape Town. He signed a lease on behalf of the Company with Johannesburg Civic Theatre in September 2007. 16 There was also correspondence in December/January about the Company's cash assets. On 21 December 2007 Henry Davis York wrote to Mr Weston alleging that the Company had substantial cash assets in excess of $500,000 and demanding a copy of a current bank statement for the Company's account and an undertaking that Mr Anderson would make no payments out of the account other than for existing Showtime accounts from third parties in the usual course of business. Although it appears that the demanded bank statement was not provided, on 14 January 2008 Henry Davis York wrote again alleging that Mr Anderson had made unauthorised transfers of Showtime funds to REM, in excess of $45,000, as "management fees". The letter demanded that Mr Anderson repay those amounts and undertake to make no payments out of the Showtime account other than to third parties in the usual course of business (Ex R1, page 271-2). 17 SMA and Mr Van Grinsven commenced the present proceedings by originating process filed on 12 February 2008. They also filed an interlocutory process, made returnable on 18 February, seeking the appointment of a provisional liquidator and seeking to restrain Mr Anderson and REM from dealing with funds of the Company and from representing that the Company is capable of performing or producing QIAKM. 18 Mr Anderson gave evidence that he discovered, by conducting an internet search on 17 February 2008, that SMA had booked the QIAKM act to play at Twin Towns (Gold Coast) and a theatre in Bundaberg in March 2008. He said he did not consent to SMA making those bookings. He said he also became aware at about this time, by internet search, that SMA was taking steps to put on the CW show under a slightly different name, "Queen - We are the Champions". Additionally, Mr Anderson has received and has tendered a copy of an e-mail from Mr Van Grinsven to cast members of QIAKM about future performance dates, referring to the Bundaberg and Twin Towns dates and also some dates in South Australia in April 2008, without including REM and the Company in the planning for these events. 19 On 18 February 2008 Hammerschlag J made interlocutory orders, inter alia, requiring REM and Mr Anderson to pay certain monies into a jointly controlled bank account, and restraining the parties from drawing on the Company's bank accounts without the consent of the other parties. He made orders restraining both the plaintiffs and REM and Mr Anderson from representing that the Company is capable of performing or producing QIAKM. 20 Mr Anderson's evidence is that once those orders were made, he took the view that he and REM were prevented from taking further steps to produce and present the South African QIAKM shows, as they would be presentations by the Company. As at 18 February (and also as at 5 March 2008, when the cross-claim was filed), while there was evidence indicating that SMA was producing QIAKM shows in Australia, there was nothing to suggest in any positive way that Mr Van Grinsven would seek to take over the performance of the South African shows. In cross-examination Mr Anderson said that as at 14 March 2008, the fate of what was happening in South Africa was not "sealed", but there was a "distinct possibility" that some form of show entitled "Queen It's a Kinda Magic" could still be staged in South Africa (T 57). Counsel for Mr Van Grinsven and SMA placed some emphasis on this cross-examination but in my view it does no more than to confirm what emerges from other evidence, namely that in mid-March there was nothing to cause Mr Anderson to believe that Mr Van Grinsven and SMA would take over the production of the South African tour for themselves, even though that may have been a possibility. 21 Mr Anderson and REM filed their cross-claim on 5 March 2008. It was amended on 17 April 2008. In its amended form it seeks remedies based on contract, the "oppression" provisions of the Corporations Act, the fiduciary duties of joint venturers, the fiduciary and statutory duties of company directors to their company, liability for knowing assistance in a breach of fiduciary duty, and unconscionable conduct under the Trade Practices Act. The cross-claim seeks declaratory relief against Mr Van Grinsven and SMA to establish that: (a) the Company owns all of the goodwill and intellectual property rights with respect to QIAKM and CW (particularised in para 22 of the amended cross-claim); (b) SMA and/or Mr Van Grinsven were in repudiatory breach of the joint venture agreement as at 26 November 2007 and that the joint venture agreement was validly terminated by Mr Anderson and REM on or about that date; (c) Mr Van Grinsven breached his fiduciary duty to the Company and his statutory duties to the Company under s 181 and 182 of the Corporations Act, and that he and SMA breached their fiduciary duties to their joint venture partners and are accordingly liable to account for profits; (d) there is a constructive trust over any profits or benefits or business opportunities received by Mr Van Grinsven and/or SMA in relation to the QIAKM or CW acts by way of diverted business opportunities of the Company in breach of their fiduciary duties; (e) REM is entitled to receive a management fee up to the date of termination of the joint venture agreement, and that Mr Van Grinsven and SMA are liable to contribute to any shortfall in the Company's ability to pay that fee; (f) Mr Van Grinsven and SMA have engaged in unconscionable conduct contrary to s 51AA or s 51AC of the Trade Practices Act 1974 (Cth). 22 The cross-claim seeks an injunction to restrain Mr Van Grinsven from promoting or conducting the QIAKM or CW acts or similar acts or diverting any business opportunities in relation to Queen tribute acts away from the Company; and an order under the "oppression" provisions of the Corporations Act requiring Mr Van Grinsven or SMA to purchase Mr Anderson's shares in the Company or the units held by REM in the Showtime Presents Unit Trust, or other alternative relief under s 233. It also seeks an account of profits, damages or equitable compensation. 23 By an interlocutory process filed on 14 March 2008, REM and Mr Anderson as applicants sought (in addition to an order for leave to bring a derivative action on behalf of the Company, and orders for other relief) an order that SMA "quarantine settlements from any performances of the QIAKM and/or CW acts or any other Queen tribute act and keep full and adequate records of costs and expenses and receipts in respect of such performances and tours", and that profits received from any such performances be paid into court or into a controlled monies account jointly controlled by the solicitors for the parties. The evidence supporting the application for that order was Mr Anderson's two affidavits, which did not identify any concern about Mr Van Grinsven and SMA taking over and promoting the South African tour. 24 The hearing of that application was set down for 27 March, but on that day a hearing was not required and orders were made "by consent and without admissions". It is evident from the short minutes of orders made on that day, which is a typed page with many handwritten corrections and addenda, that there was considerable debate inter partes about the wording of the orders. So far as relevant to the present interlocutory application, the orders made (upon the usual undertaking as to damages and until further order) were: "1. The plaintiffs give the second and third defendants 7 days' advance written notice of any proposed performance conducted by either of them after the date of this order of: a. the 'Queen - it's a Kinda Magic' act; b. the 'Champions of the World' act; or c. any Queen tribute act under the name 'We are the Champions'; or d. any Queen tribute act using any of the words 'It's a Kinda Magic' or 'Champions' ('Performance'). 2. The plaintiffs keep records of all payments received and all costs and expenses incurred in respect of each Performance. 3. Within 14 days after each Performance the plaintiffs give the second and third defendants written notice of the profit derived from the Performance (being and providing details of the gross receipts less costs and expenses incurred in respect thereof) ('Profit'). 4. Grant liberty to any party to apply on 3 days' notice. 5. Order until further order that the plaintiffs, by themselves their servants and agents be restrained from, disposing of, dealing with or diminishing the value of their assets up to the unencumbered value of all Profits." 25 Three points should be made about the short minutes of order. First, the typescript of order 1 would have extended to "any other Queen tribute act", but the word "other" was deleted by hand and the qualifying words in para 1c and 1d were added. I infer that the parties actively considered whether to extend the "advance notification" requirement to any Queen tribute act or only an act bearing one of the designated names, and consented to the latter course. Secondly, the typescript of order 3 had two components, but the second component, which required payment of the amount of the Profit into court or into a controlled monies account, was deleted. The typescript of order 5 described it as an alternative to that part of order 3, but that description was deleted by hand. These changes imply that the parties actively considered whether there should be a requirement for payment of the profit or merely an asset preservation order, and they consented to the latter. Thirdly, the words "and providing details of" were inserted by hand into order 3, implying that the parties actively considered whether the written notice of Profit should provide details of receipts, costs and expenses and decided that it should. 26 On 30 May 2008 REM and Mr Anderson as applicants filed a further interlocutory process, in which they sought to vary those parts of the orders of 27 March that I have extracted above, having regard to the proposed South African tour. It is unhelpful to set out the prayers for relief in their original form, since the drafting has subsequently been modified. Essentially, however, the interlocutory process sought: · to make it clear, by redrafting, that the substance of order 5 of 27 March applies to the profits of the South African tour proposed for late May and early June 2008; · to require the plaintiffs to pay into the bank account that had been established under the orders of 18 February, or into court, the gross receipts from the South African performances, less reasonable third-party expenses and the sum of $440 per performance in respect of the plaintiffs' costs in relation to the performance; · alternatively, to require the plaintiffs to "repatriate" to Australia the profits from the South African tour; · to make it clear that the "advance notification" established on 27 March extends to the South African tour, and that it requires information identifying the venue name and address, and copies of all source documents in relation to the calculation of Profit; · to require the plaintiffs to supply notice of, and details of, the profit derived from each South African performance within 14 days of the performance. 27 The interlocutory process of 30 May 2008 was supported by an affidavit made on 29 May 2008 by Mr Weston, who explained that the application was for further orders relating to performances of the Queen tribute act that were being promoted by the plaintiffs in a tour of South Africa in late May and early June 2008, and the plaintiffs' failure (according to his allegation) to comply fully with the court's orders on 27 March (specifically, order 5) in relation to those performances. Mr Weston's affidavit annexed correspondence and documents relating to the South African tour, to which I now turn. 28 On 28 March 2008 Mr Weston wrote to Henry Davis York pointing out (inter alia) that the Company had sold 20% of the tickets for the two week season planned in Johannesburg, that advance sales remained strong, with the option of a third week, and that the Company had been negotiating for performances in Cape Town. He said that the orders of 18 February had restrained his clients from continuing to arrange the tour, but he proposed that the tour should proceed. He said that failing a mutually agreed process for doing so, his clients would reserve the right to inform the Johannesburg and Cape Town venues that the Company was not in a position to proceed with the tour, and in that event they would hold Mr Van Grinsven and SMA responsible for the resulting damages. The letter added: "In the event your clients seek to take up these corporate opportunities of Showtime Presents for his or its own benefit, similarly we will hold them, or each of them, to account for any damages so caused." 29 Henry Davis York's reply dated 1 April 2008 alleged that Mr Anderson first became aware of the South African shows on 30 November, and that the details of the arrangements demanded in their letters of 30 November 2007 and 15 January 2008 had not been provided. That claim evidently overlooks Mr Anderson's e-mails to Mr Van Grinsven of 3 and 14 December 2007, referred to above. The letter asserted that after the termination of the joint venture Mr Anderson had continued to encourage the South African parties to expect that the Company would continue with the proposed tour, and that he did so without the authority of the Company or the agreement of Mr Van Grinsven, exposing the Company to a potential claim for damages. The letter said that only by SMA and Mr Van Grinsven arranging and delivering a cast could any performance in South Africa, or anywhere else, proceed, but as the joint venture had been terminated, Mr Van Grinsven and SMA were under no obligation whatever to Mr Anderson or REM or the Company to do so. Nevertheless, the letter said that Mr Van Grinsven was prepared to proceed with a South African tour of QIAKM provided the tour was conducted on terms (to be negotiated) entirely removed from the terminated joint venture and the Company. 30 Mr Weston evidently interpreted the letter of 1 April 2008 as an assertion that Mr Van Grinsven had reserved the right to pursue the South African tour for his own advantage or the advantage of SMA without the consent of Mr Anderson or REM. In his letter dated 10 April 2008 Mr Weston alleged that there were surviving fiduciary obligations, and he said that if this occurred, compensation and/or an account of profits would be sought. Thereafter there was further correspondence in which, sadly, the parties locked themselves into their positions and no progress was made towards any sensible resolution of interim arrangements for the South African tour. 31 Significantly, it appears to have been the letter of 1 April that first alerted Mr Anderson and REM to the prospect that, although they regarded themselves as prevented by the court's orders from further developing the South African tour for the benefit of the Company, Mr Van Grinsven and SMA might regard themselves as at liberty to take over the project for their own benefit. Later correspondence from Henry Davis York did nothing to remove that concern and, indeed, promoted it. In their letter of 18 April 2008, Henry Davis York reiterated their proposal for a meeting of the parties and said that in the absence of any positive indication by 21 April, Mr Van Grinsven would "proceed independently with a tour of South Africa in order to avoid a potential claim again Showtime Presents Pty Ltd". In their letter of 9 May 2008 Henry Davis York asserted that the South African performances were not being presented by the Company because Mr Anderson and REM had terminated the joint venture. The letter added that Mr Van Grinsven and SMA were not producing the show under the banner "QIAKM" in order to avoid any allegation by Mr Anderson and REM that they had somehow appropriated intellectual property owned by the Company. 32 On 1 May 2008 Mr Anderson sent an e-mail to "Bernard", the manager of the Johannesburg Civic Theatre, informing him that a "contractual dispute" had arisen between the joint venturers of the Company, that had caused the Company to be unable to perform its contract with the Theatre. The e-mail said that Mr Van Grinsven was operating the QIAKM act through his own company. Mr Anderson urged Bernard to take immediate steps to mitigate any loss caused by the inability of the Company to perform its contract. Bernard replied on 6 May saying that he had been in regular contact with Mr Van Grinsven over the past few weeks, and acknowledged Mr Van Grinsven's commitment to deliver QIAKM in Johannesburg. Bernard sent another e-mail to Mr Anderson on 22 May saying that in light of Mr Anderson's e-mail of 1 May, he regarded the lease agreement signed in September 2007 as "null and void". 33 Mr Weston's letter of 19 May 2008 raised various issues about compliance with the orders made on 27 March 2008. In summary, the letter expressed concerns relating to the following: (a) obtaining accurate information about the money derived from the operations of the South African tour, supported by financial records, so that compliance with order 5 could be assessed; (b) preservation of the anticipated substantial profit from the South African tour pending final determination of the proceedings; (c) compliance by the plaintiffs with para 5 of the orders in respect of the South African performances; (d) repatriation of the South African Profits to Australia; (e) compliance with order 1 by providing the venue details for performances, as well as dates; (f) compliance with order 3 by providing a breakdown of financial information rather than merely "bottom line" figures, in circumstances where costs and expenses for some performances seemed to be unduly high. 34 On 21 May 2008 Henry Davis York replied to Mr Weston's letter. As to alleged non-compliance with the orders, the letter merely said that Mr Van Grinsven and SMA were aware of the orders made and intended to comply with them. The letter said it was unacceptable that counsel for Mr Anderson and REM had drafted the orders made on 27 March and were later seeking to amend them. It said that if details regarding venues or specific financial information regarding profit were wanted, those things should have been incorporated into the orders proposed on 27 March. The author of the letter appears not to have grasped the change of circumstances that occurred after the orders of 27 March, with respect to conduct of the South African tour by Mr Van Grinsven. The letter also appears to acknowledge that the plaintiffs were taking the point that the orders did not literally require venue details and a breakdown of financial totals. 35 Mr Weston's affidavit of 29 May annexed some information available on the internet with respect to promotion of the Johannesburg performances. One of the promotional notices states that QIAKM is presented in South Africa by "Showtime Australia". There appears to be no indication of promotion under some name other than the QIAKM name. 36 On 30 May Hamilton J made some interim orders and stood the interlocutory process over to 2 June 2008. The only substantive order was to restrain the plaintiffs, until 2 June, from dealing with the value of their assets up to the unencumbered value of all profits in respect of the South African performances. On 2 June 2008 Hammerschlag J extended that order to 4 June, and then I extended it to 5 June. At the end of the hearing on 5 June, I made some further interim orders up to Friday 13 June, to make it clear that · the "order 5" restraint extends to any Queen tribute act held in late May or early June 2008 in South Africa with which they the plaintiffs are associated, · the advance notification regime requires notification of venue names and addresses of all performances of Queen tribute acts with which the plaintiffs are associated, whether in Australia or elsewhere, and · the obligation to keep records of costs and expenses of performances extends to performances with which the plaintiffs are associated in South Africa. The purpose of my interim orders was to preserve the status quo, in circumstances where my the hearing commitments made it likely that I would not be ready to deliver judgment on the application for about a week after the hearing. In part, my orders responded to some evidence that a new South African company, Calshelf Investments 196, was organising and managing the performances in South Africa. 37 That new evidence was provided, in part, in an affidavit by Eric Herman made on 3 June 2008. In addition to annexing copies of correspondence between the solicitors for the parties, Mr Herman said that Mr Van Grinsven was currently in South Africa "for the purpose of operating or assisting with the operation of the business of Calshelf Investments 196 Pty Ltd, a company registered in South Africa, which organises and manages stage performances known as 'Queen: The Show Must Go On', by a Queen tribute rock band". He annexed to his affidavit a copy of a promotional flyer in that name. He said that Calshelf Investments 196 was a party to an agreement with the operator of an unspecified stage venue for the purpose of these performances and that it was responsible for all income and expenditure of the performances of that venue. 38 A company search of Calshelf Investments 196 in South Africa made on 4 June 2008 shows that the company was registered on 22 April 2008 and that the director is Mr Van Grinsven. Alan Lewis, a South African attorney, gave affidavit evidence that on 3 June 2008 he purchased a ticket for the performance of QIAKM held at the Johannesburg Civic Theatre on 4 June 2008. He annexed a copy of the ticket, which clearly states the name "Queen It's a Kinda Magic" rather than "Queen: The Show Must Go On". Mr Lewis also provided photographs of billboards and wall posters which, though not particularly clear, appear to use the title "Queen It's a Kinda Magic". Serious question to be tried 39 The interlocutory relief sought by Mr Anderson and REM is directed towards preserving the profits of the South African tour and other QIAKM performances pending resolution of the proceedings, and to establishing some monitoring mechanisms in connection with performances and profits. Therefore they must establish that there is a serious question to be tried as to their entitlement to relief that would give them access to those profits. Although the application was not made on behalf of the Company, it was heard concurrently with the application for leave under s 237 of the Corporations Act for Mr Anderson to pursue the corporate claims in the cross-claim on the Company's behalf. Pending the resolution of that application, it is appropriate, in my view, to assess the question whether there is a serious issue to be tried on the assumption that Mr Anderson will be granted leave to pursue those claims. 40 In those circumstances, it is necessary to focus on those parts of the cross-claim that, if established, would entitle the cross-claimants or the Company to access to profits made by Mr Van Grinsven and SMA through performances of QIAKM or CW or other Queen tribute acts. There are essentially three such claims. The first is the claim that the Company has intellectual property rights in respect of QIAKM and CW that entitle it to prevent the plaintiffs from staging performances of those shows other than for its benefit, and to demand an accounting of profits if the plaintiffs do so without its consent. The second is the Company's claim (as trustee of the Trust) that by causing or procuring the staging of QIAKM or CW for his own benefit or for the benefit of SMA or some other entity, Mr Van Grinsven is diverting away from the company a corporate opportunity that belongs to it, in breach of his fiduciary and statutory duties as a director of the Company, and associated with that, SMA is knowingly assisting in those breaches of duty. The third is the claim of Mr Anderson and REM, as joint venturers with Mr Van Grinsven and SMA, that it is a breach of their fiduciary duties as joint venturers for Mr Van Grinsven and SMA to divert away from the Company the corporate opportunity that belongs to the Company (as trustee of the Trust) as the joint venture vehicle. The second and third claims rely on the same allegedly wrongful conduct but they are based on the assertion of different fiduciary relationships. 41 As to the intellectual property claim, in his second affidavit Mr Van Grinsven said, in what is to be considered as a submission, that he considered that no intellectual property rights exist in QIAKM. The reasons he gave were based on the assertions that QIAKM is simply a name given to a Queen tribute band rock concert, which is a performance of the collection of songs that were performed by the original Queen band by performers wearing costumes copying those worn by the original Queen band members, with no set script or set song list and changeable props etc. Those claims are not entirely consistent with contentions made on Mr Van Grinsven's behalf by his solicitors, and there is some evidence that, contrary to Mr Van Grinsven's assertion, there has at least on some occasions been a script for performances. 42 In contrast with Mr Van Grinsven's claims, paragraph 22 of the cross-claim sets out particulars of the goodwill and intellectual property rights said to have arisen in relation to QIAKM and CW (echoing Mr Weston's letter of 26 March 2008: Ex A10). The cross-claim asserts with some specificity that there are various common law trade marks, and copyright in respect of various matters including visual and sound recordings, posters and promotional materials, scripts, website etc, and performance rights under Part XIA of the Copyright Act, and "moral rights" protecting the acts. 43 This is not the occasion to determine whether those claims are valid. It seems to me, however, that on the evidence presented on the interlocutory application, there is a least a serious question to be tried as to whether, notwithstanding Mr Van Grinsven's assertions, rights of those kinds exist and are capable of protection in the manner sought in the cross-claim. There is ample evidence to meet the "serious question" standard that if such rights exist, they are now vested in the Company. I refer, in particular, to Mr Anderson's evidence, though still untested, as to what was said at the time of formation of the Company, to the minute of the directors' meeting held on 22 April 2005, signed by Mr Anderson and possibly also signed by Mr Van Grinsven, and to the "To Whom It May Concern" letter dated 12 April 2006 provided to IMG, which Mr Anderson says was approved by Mr Van Grinsven. 44 As to the fiduciary claims, senior counsel for Mr Anderson and REM relied upon a passage from the High Court's judgment in Chan v Zacharia (1984) 154 CLR 178. In that case Dr Zacharia had previously conducted a medical practice on his own account in certain premises in South Australia, and then entered into a partnership with Dr Chan to conduct a partnership medical practice in the same premises. The owner of the property granted a lease to both doctors for three years, with an option to renew for a further period. The partnership was dissolved by notice given by Dr Chan before the time arrived for exercising the option, and he declined to join with Dr Zacharia in exercising the option. After the time for exercising the option had expired and after dissolution of the partnership, but before the partnership's affairs had been wound up, the owner agreed to lease the premises to Dr Chan. The High Court held that in those circumstances, the agreement for the new lease obtained by Dr Chan was held upon constructive trust for those entitled to the property of the former partnership. This was on the principle that a fiduciary cannot keep for himself and take advantage of an opportunity which has come to him in the course of or as a result of the fiduciary relationship, and a constructive trust will be imposed in respect of that advantage even if it is one that no other person could have taken up. 45 Deane J (at 197) explained the position thus: "The relationship between the partners was curtailed and altered by the dissolution of the partnership. It did not however cease. In particular, and with the exception of the 'goodwill' of the practice … each doctor, by reason of his position as a former partner, remained under fiduciary obligations in respect of the partnership property which was to be realised and applied in paying or discharging partnership debts and liabilities and expenses of an incidental to the winding up of the partnership affairs and, subject thereto, 'in paying each partner any unpaid profits which may be due to him and the balance (if any) … divided between the partners equally' (cl 26). Notwithstanding the dissolution of the partnership, 'the good faith and honourable conduct due' from each partner to the other persisted for the purposes of winding up the affairs of the partnership and each partner remained under a fiduciary obligation to co-operate in and act consistently with the agreed procedure for the realisation, application and distribution of the partnership property. …" 46 Joint venturers stand in a fiduciary relationship to one another: United Dominions Corporation Ltd v Brian Pty Ltd (1985) 157 CLR 1. Therefore the principles enunciated by the High Court concerning the continuation of fiduciary duties of partners after termination of the partnership are applicable in the context of termination of a joint venture: Liquor National Wholesale Pty Ltd v The Red Rock Co Pty Ltd [2007] NSWSC 392; Lawfund Australia Pty Ltd v Lawfund Leasing Pty Ltd (2008) 66 ACSR 1, [2008] NSWSC 144. 47 In the present case it appears that the joint venture was terminated either on about 26 November or about 3 December 2007, but later correspondence makes it plain that the affairs of the joint venture have not been wound up and there are still some disputes about the distribution of its property, including matters before the court in these proceedings. Importantly, in this case the opportunity for the Company as trustee to exploit the QIAKM act profitably by a South African tour had been planned and partly implemented before the termination of the joint venture. The South African tour was not a remote possibility but was contemplated in the short-term future. There is, in my view, at the very least a serious question to be tried that in these circumstances the exploitation of the South African tour was a business opportunity of the Company, so that profits derived from the South African tour belong in equity to the company, and on the application of the Company the court may order an accounting for those profits and may impose a constructive trust on them. It is arguable that the Company's equitable rights with respect to the South African tour have continued notwithstanding the termination of the joint venture. Plainly those equitable rights do not depend upon establishing trademarks or copyright or any other form of intellectual property with respect to QIAKM. 48 There is a similar analysis available with respect to the fiduciary obligations owing by one set of joint venturers to the other, though in some respects the analysis is more difficult. 49 It is striking that the possibility that the Company may have such rights does not seem to have been taken seriously in the correspondence on behalf of Mr Van Grinsven and SMA, notwithstanding that the case was articulated by the solicitor for Mr Anderson and REM in correspondence (see Mr Weston's letter of 10 April 2008). Balance of convenience 50 In my opinion the evidence points to the need to establish a sound interlocutory regime that will allow the South African tour and other QIAKM performances to go ahead on a basis that preserves the profit from those performances pending the determination of the present proceedings. The need for interlocutory orders is reinforced by the evidence that Mr Van Grinsven is purporting to conduct the South African tour under the auspices of a new company, and while there is some evidence that he is using a new performance title, there is also evidence that the QIAKM name is still being used to promote the South African performances. 51 The orders made on 27 March 2008 addressed, to a substantial degree, the subject matter of the present application. The problem that has arisen is not whether orders should be made at all, but whether there is a case for variation of the orders made at that time. 52 The orders of 27 March were made by consent. But they were made in a state of affairs that was not directed to the circumstances of the South African tour. I have dealt in some detail with the evidence that indicates that on 27 March there was no positive reason to believe that Mr Van Grinsven would seek to take over the South African project for the benefit of some entity other than the Company. In my opinion there is nothing in the terms of the consent orders of 27 March to lead to the inference that there was a contract made at that time containing any express or implied term that would prevent an application such as the present one in the event that circumstances were to change as they have changed. There is nothing in the rest of the evidence to lead to any such inference. In my view, on the particular facts of this case, the order granting liberty to apply suggests that another application would be appropriate if circumstances changed. 53 By his solicitors, Mr Van Grinsven provided information about performance dates that did not include performance venues and therefore did not give Mr Anderson and REM any opportunity to monitor audience size or performance content or quality of performance or any other matter. It is unnecessary for me to decide whether omission to supply venue particulars amounted to non-compliance with order 1. What is plain is that on the balance of convenience, in order to create a sensible workable interlocutory regime, it is appropriate to make it clear for the future that such information should be supplied. The way to do so is by amendment of the order. 54 One of the changed circumstances is that Mr Van Grinsven is apparently purporting to conduct the South African tour in the name of another entity, Calshelf Investments 196, and may be using another name for the performance. That points to the need to review the orders so as to make sure that they extend to the South African performances, and to Queen tribute performances in other names than the ones listed in order 1, and to Queen tribute performances produced or managed by any entity with which Mr Van Grinsven and SMA or either of them may be associated. That implies the need to amend the order 1, and to vary the definition of "Performance" for the purposes of the orders. 55 By his solicitors, Mr Van Grinsven has supplied only "total" information under order 3, without any information breaking down gross receipts and costs and expenses. Again, it is unnecessary to decide whether that constitutes a failure to comply with the court's orders. It does, however, seriously limit the utility of the information supplied and make it virtually impossible for Mr Anderson and REM to use that information for any monitoring of performances with a view to ensuring that profits which arguably belong to the Company are properly preserved. That points to the need to alter order 3. 56 Although the orders of 27 March did not require that the profits of the South African tour be paid into an Australian bank account, in the circumstances my view is that it is desirable for such an order to be made, and the argument against doing so is not strong, subject only to one consideration. That consideration is that there needs to be an appropriate allowance made for the skill and the effort of Mr Van Grinsven, SMA and Calshelf in attending to the performances thereby producing the profit. 57 Having regard to these considerations and in light of the proffered continuation of the usual undertaking as to damages by Mr Anderson and REM, my view is that substantial alterations to the orders of 27 March 2008 should be made. Senior counsel for Mr Anderson and REM provided me with some redrafting of the proposed orders during the course of the hearing. I made some suggestions for changes to the drafting, but on reflection, it seems to me wise for the court to focus its attention on whether the applicants for orders have made out the case for the orders that they propose, and for the court to leave the drafting to counsel. 58 I am prepared to make orders 1, 3, 4, 5 and 6 in the draft short minutes of order proffered on behalf of Mr Anderson and REM, subject to some extension of the definition of "Performance" in order 1 and appropriate allowance for skill and effort. I shall direct Mr Anderson and REM to bring in short minutes of orders to reflect these reasons for judgment. On the occasion when orders are made, I shall hear the parties on the question of costs. **********

Showtime Management Australia Pty Ltd v Showtime Presents Pty Ltd

At a glance

Court

Decision date

Before

Source

Judgment (10 paragraphs)

Parties

Legislation Cited (2)

Cases Cited (4)

Cited By (1)