Churchers Pty Ltd v Cosentino
[2015] VCC 1967
•9 December 2015
| IN THE COUNTY COURT OF VICTORIA | Revised (Not) Restricted Suitable for Publication |
AT MELBOURNE
COMMERCIAL DIVISION
Case No. CI-14-03542
| CHURCHERS PTY LTD | Plaintiff |
| v | |
| PAUL CAMERON COSENTINO | Defendant |
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JUDGE: | HIS HONOUR JUDGE MACNAMARA | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 9, 10, 11, 12, 13, 16, 17, 25, 26, November 2015 | |
DATE OF JUDGMENT: | 9 December 2015 | |
CASE MAY BE CITED AS: | Churchers Pty Ltd v Cosentino | |
MEDIUM NEUTRAL CITATION: | [2015] VCC 1967 | |
REASONS FOR JUDGMENT
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Subject: Contract
Catchwords: Contract; artist and manager; whether postponement of business meetings by manager pending decision on renewal of management contract amounting to repudiation or fundamental breach; election; construction of terms; calculation of commission and trailing commission on gross earnings; misleading and deceptive conduct alleged against manager preventing it relying on terms of contract.
Legislation Cited: Sections 131(1), (2) of the Evidence Act 2008; ss 4, 18 of the Australian Consumer Law;
Cases Cited:Commonwealth v Verwayem (1990) 170 CLR 394; Associated Newspapers Ltd v Bancks (1951) 83 CLR 322; National Australia Bank Ltd v Rice [2015] VSC 10; Tramways Advertising Pty Ltd v Luna Park (NSW) Ltd (1938) 38 SR (NSW) 632; Progressive Mailing House Pty Ltd v Tabali (1985) 157 CLR 17; DTR Nominees Pty Ltd v Mona Homes Pty Ltd (1978) 138 CLR 423; Koompahtoo Local Aboriginal Land Council v Sanpine Pty Ltd (2007) 233 CLR 115; Sargent v ASL Developments Ltd (1974) 131 CLR 634; Tropical Traders Ltd v Goonan (1964) 111 CLR 41; Ovidio Carrideo Nominees Pty Ltd v The Dog Depot Pty Ltd (2006) V Conv R 54-713; David Securities Pty Ltd v Commonwealth Bank of Australia (1992) 175 CLR 353; David Securities Pty Ltd v Commonwealth Bank of Australia (1992) 175 CLR 353; McDonald v Dennys Lascelles (1933) 48 CLR 457
Judgment: 1. By 20 January 2016 the parties must bring in short minutes to give effect to these reasons. 2. Costs reserved.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr D.J. Williams QC with Mr D.P. Manly | Dwyer & Co Legal |
| For the Defendant | Mr C.E. Shaw | Mills Oakley |
HIS HONOUR:
Background
1 Mr Cosentino is an illusionist. Illusionists are sometimes popularly referred to as magicians. Mr Cosentino described his calling thus:
“…as a professional, [I] create live stage shows. I create television shows, and it ranges from close-up, sleight-of-hand, street magic to grand illusions, to death defying escapes…we even do dance in the show and dance is a form of illusion.” (Transcript (“T”) 596, Line(s) (“L”) 8-14)
2 When he was 12 years of age he came across a book of magic in the school library. His mother, who was a school principal, read to him from it and she taught him his first tricks. He began performing illusions as an occupation at the age of 17.
3 He commenced university studies at his parents’ insistence, but he “took a leave of absence that I’m still absent from”. (T597, L12 & 13)
4 While he was studying at university he did “a gig” at least once a week. (T597, L17) These shows were initially put on for school groups ranging from 150 to 500 and were described as “school incursions”. (T596-7) He also performed at shopping centres and on cruise ships. His brother, Adam, became his production manager.
5 During this time, he and his brother undertook all the measures available to them to promote his career, approached organisations who might engage his services, sought assistance through agency and management companies, and so forth.
6 The year of 2011 was a breakthrough year. Mr Cosentino entered the national television talent show, “Australia’s Got Talent”, and was the runner-up in the final of the quest. This entailed a large number of television performances which raised his national profile. At that time, he was seeking assistance on a relatively informal and unofficial basis from Mr Chris O’Meara, a former chief executive of the Seven Television Network. (T599-600)
7 Speaking of the talent quest, Mr Cosentino said:
“The year that I did it was their most successful year…on that show. 3.1 million people saw that show. Still to this day I think it stands as one of the highest rating reality shows…” (T600, L15-19)
8 Mr Cosentino’s success in the show:
“…changed everything, it opened the doors for everything. It opened the doors for management, it opened the doors to talk to television companies, it opened the doors – basically people were coming to me now. Corporate gigs, sponsorship, talking with Freemantle Media [production company], magazines, newspapers. You go from being basically – you almost – you become a household name, you really do.” (T601, L21-28)
9 Ralph Carr is the principal of an entertainment management company, Churchers Pty Ltd, which carries on business under the name “Ralph Carr Management” or “RCM” for short. He has been in the entertainment management business for 24 years. He describes his agency as a “boutique” agency which generally manages the careers of singers and musicians but also provides management services for television personalities and footballers.
10 At one time, Mr Carr was married to one of the most prominent entertainers which his company managed, Tina Arena, but that marriage ended in 1998. He says his management company has received 28 ARIAS (Australian Recording Industry Awards) (T142, L31), though in strictness the awards were made to the artists which his company was representing. (T143, L7)
11 RCM had never managed a magician or illusionist before its association with Mr Cosentino. (T144, L26-27)
12 A key to the success of a management company and the artists which it manages, are the contacts which the company has to key people in the entertainment industry. (T143, L20-27) RCM claimed connections with major players in television production who produced program material for sale to Australian television networks and licensing worldwide, such as Shine International, Matchbox and Fremantle Media. (T143-4)
13 In the years preceding his success on “Australia’s Got Talent”, Mr Cosentino approached a large number of agency and management companies in the entertainment industry without eliciting much interest. Following his success on “Australia’s Got Talent”, he sent an email to RCM seeking to engage its services as manager. He received an email response on the same day from Mr Carr’s personal assistant, inviting him to a meeting that very day. (T607, L19-23)
14 Mr Carr met Mr Cosentino in his personal office at the company’s premises in Richmond. Mr Carr’s office was a very impressive space. It was well-furnished, including a Chesterfield leather couch, gold records, and ARIA awards. (T608, 610) The premises also included an impressive boardroom. (Ibid)
15 Mr Cosentino says he was introduced to a number of staff members, including Mr Adrian Marchesani, whom Mr Carr described as the company’s in-house lawyer. Mr Carr denied giving this description of Mr Marchesani.
16 According to Mr Cosentino, Mr Marchesani’s employment by the company meant that “they had an internal lawyer which seemed like a great thing” to assist with contractual issues. (T608, L29-31, T609, L2-6)
17 Mr Cosentino said that at this meeting Mr Carr handed him a blank copy of the company’s standard management contract. (T609, L7-11)
18 Mr Cosentino remembers a second meeting at the company’s premises where he was accompanied by his brothers, John and Adam. Mr Carr took them on a tour of the company’s premises which he found to be beautifully appointed. (T610)
19 Mr Cosentino’s brother, John, had reviewed the draft form contract and commented at the second meeting that this contract was appropriate for a singer or musician but not for a magician. According to Mr Cosentino, Mr Carr’s response was, “It is what it is”. (T611, L3-7)
20 The Cosentinos do not seem to have proposed any particular amendment to the form of contract. (Ibid)
21 Mr Cosentino said that Mr Carr, referring to the terms of the contract, said, “If you can’t get along, it means nothing at all. You can’t – if you can’t work together then nothing’s going to happen.” (T612, L5-7) When Mr Carr handed Mr Cosentino the form of contract he said, according to Mr Cosentino, “It doesn’t really matter what the contract says, because if we don’t work off each other, if we don’t vibe off each other, then it’s meaningless.” (T611, L31, T612-L1-3)
22 Mr Cosentino also said that Mr Carr invoked the marriage relationship as an analogy for the relationship between artists and management.
23 Mr Cosentino remembers attending yet a third meeting at the company’s premises, at which time the Cosentinos provided Mr Carr with a plan to advance his career styled “Ralph Carr Plan”. He provided a printout from his computer which he said indicated the progress of the preparation of this plan, showing that it was created on 28 September 2011 and modified on 2 October 2011. (Defendant’s Court Book (“DCB”) 324)
24 Mr Cosentino put three pages of the document into evidence, (DCB 325-327) referring to a large number of connections, tours and proposed tours, corporate engagements and so forth.
25 In 2011, Mr Cosentino was undertaking a tour in a number of Victorian locations known as “The Distortions Tour”. (DCB 327) Around the same time, he was also performing on a cruise ship.
26 Mr Carr and Mr Marchesani deny that the Cosentinos produced this document to them.
27 Amongst the items mentioned on the plan was “The Illusionists’ Show”. According to Mr Cosentino, “The Illusionists’ Show was an ensemble magic show with a bunch of magicians from around the world”. (T614, L31 - T615, L1-2) The “Illusionists’ Show” had offered Mr Cosentino $10,000 a week for two weeks and Mr Cosentino said he wanted Mr Carr to negotiate a higher fee for him, which Mr Carr sought to do. (T615, L2-9)
28 Mr Cosentino signed a management agreement in the form of the draft which had been handed to him at the first meeting dated 31 October 2011. (DCB 290, et seq)
29 Mr Cosentino signed the document without amendment and without having a legal practitioner review it. (T616)
30 RCM thereupon took over control of Mr Cosentino’s diary. (Ibid)
31 Aside from The “Illusionists’ Show”, the most important matter which Mr Cosentino had in hand and which RCM, as his manager, had to deal with, was a proposed television special for the Seven Network. Mr O’Meara had been involved in negotiation with the Seven Network until that time. (T617)
32 The management agreement provided for payment of commission to RCM at the rate of “20 per cent of gross earnings (exclusive of agency fees) received throughout the world in the entertainment industry during the term of this Agreement”. (DCB 292, Clause 7)
33 There was also provision in clause 7.1 on the same page for the payment of trailing commissions after the end of the management period of 20 per cent for the first year, 15 per cent for the second year, 12.5 per cent for the third year and 10 per cent for the fourth year.
34 Clause 6.1 of the agreement (DCB 292) provided for the artist, that is, Mr Cosentino, to establish and operate a bank account in his own name with RCM depositing monies received by it for the benefit of Mr Cosentino into that account forthwith with RCM rendering invoices to the artist for its commission.
35 The first project undertaken under RCM’s management was relative to a special on the Seven Network. Perhaps unsurprisingly, the parties were at odds as to how far matters were advanced when RCM took the helm. According to Mr Carr, his company did most of the work in arranging the first Seven Network TV Special. According to Mr Cosentino, however, the staging of that first special was a “done deal” when he signed with RCM. Mr Carr said that arranging the special was difficult because, “They [Seven] were reluctant to put up fees for a show – an illusionist show, basically, because history showed them that they don’t work.” (T150, L14–16) According to Mr Carr, Mr Cosentino had already sought to have a TV special produced before he signed with RCM but “with no avail” (L26).
36 The proposal entailed Mr Cosentino staging a live show at the Regent Theatre, which necessitated Mr Cosentino putting up the cost and obtaining a live audience. (T151) Mr Carr’s evidence seemed to suggest that RCM had put up some working capital for the staging of this performance, but I did not understand that he persisted in that evidence, and it was denied by Mr Cosentino. There was a $50,000 fee payable to Mr Cosentino by the Seven Network. According to Mr Carr, RCM had a co-ordinating role in the production. (T152, L14–18)
37 Mr Cosentino said that he got the ball rolling in arranging the first special with Channel Seven through Mr Chris O’Meara. (T604) Mr Cosentino flew to Sydney to make a presentation to Mr Brad Lyons, the head of the Seven Network. The meeting was also attended by Mr O’Meara. (T605) It took place in early September. Mr Cosentino said that following this presentation he regarded the special as “locked in”, “because, as Mr Carr said, it all comes down to that first impression, that first pitch.” (T605, L29–31) According to Mr Cosentino, all that the Seven Network had to do was film the production. He agreed with me that the task for the television channel was no more than “point and shoot”. (T606, L16)
38 Once Mr Cosentino had signed with RCM he put Mr Carr in touch with Mr O’Meara. (T617, L11) According to the arrangements with RCM, Mr Adam Cosentino sent out his brother’s invoices. Mr Cosentino said, and I did not understand Mr Carr to disagree, that Mr Carr was not well informed on the world of illusionists. Mr Cosentino provided him with material about the performances and doings of world-renowned illusionists such as David Copperfield. (T619, L9–10) Mr Cosentino said he saw the staging of illusionist shows as quite different from musical performances – the sort of shows with which Mr Carr was most familiar. According to Mr Cosentino:
“From what I understand, I’m not a musician, we do hours of rehearsing and structuring things together to make it what I would call a theatre show. Whereas musicians tend to just – they don’t need all the rehearsal period, ...” (T619, L25–29)
39 As an illusionist, according to Mr Cosentino, “You are relying on a lot more equipment to do the shows”. (T620, L4–5) Mr Cosentino’s brother Adam continued as his production manager. (L6-11)
40 The live performance was filmed at the Regent Theatre, Melbourne, on 17 March 2012. (T621, L2–4) Street Magic was separately filmed, and there was a major stunt entailing an underwater escape which was separately filmed and edited-in. Finally, there was a “behind the scenes” segment. (T621) Grant Rule of the Seven Network deputed Mr Rob Peile from Coda TV to work with Mr Cosentino on behalf of the network. (T622) He acted as director/producer, reviewed the lighting design and co-ordinated Street Magic.
41 Mr Cosentino could not remember if any written agreement was signed between him and the network. (T623, L25-30) Certainly, none was put into evidence before me. According to Mr Cosentino, the first special rated well. (T624) Later in 2012, Mr Cosentino undertook a tour organised either by “Premier Artists” or “Frontier Touring”. He was unclear about this. He knew, however, that Mr Carr dealt with a Mr Frank Stivala. (T624, L21–28) Again, according to Mr Cosentino, this tour was “very successful”. (T625, L15)
42 Late in 2012 and running into the first months of 2013, Mr Carr made contact with the Seven Network, bringing Mr Cosentino and Mr O’Meara with him to pitch a new show to the network. (T625–6) The proposed title of the show was “Cosentino the Grand Illusionist”. There might be as many as six episodes, “as many as we could get”. (T626, L8–9)
43 Through the early months of 2013 negotiation was slow and difficult with the Seven Network. The Seven Network was seeking to obtain, as a benefit from Mr Cosentino, 50 per cent of his share of the fees from a live tour that he was undertaking in 2013 with the promoter, Live Nation, presumably on the basis that the tour and the TV specials would cross-promote one another. (T155, L24–31) Negotiations proceeded with a Ms Therese Hegarty of Channel Seven’s legal department. (Plaintiff’s Court Book (PCB) 954–964) Mr Cosentino and RCM were seeking to modify that requirement to 50 per cent of the net receipts by Mr Cosentino, but were making no progress.
44 Eventually Mr Ian Robertson, an entertainment lawyer with Holding Redlich, Sydney, was engaged. (T157, L6–7) Mr Robertson’s fee was for Mr Cosentino’s account. (L18–20) On Mr Carr’s account, it was his idea to engage Mr Robertson. Mr Adam Cosentino had a different recollection of matters. He said that with the lack of progress on the 50 per cent profit share clause, his brother, John, suggested that a lawyer should be retained and, “Ralph stormed out of the room because supposedly John had offended him because of the fact that we didn’t believe that he could negotiate the deal.” (T841, L14–16)
45 The agreement was eventually signed on 11 July 2013. It included as clause 9.1 a provision entitling the network to receive 50 per cent of net proceeds arising from Mr Cosentino’s live touring and events for a period of two years from the date of execution of this agreement. This clause did not extend to receipts by Mr Cosentino from private events or corporate events. The net receipts were calculated by deduction from the total ticket sales of costs incurred by Mr Cosentino and Live Nation in staging live events, any commission to Live Nation not exceeding 25 per cent, and agreed costs to RCM not exceeding 10 per cent. (DCB 297–304) By the time the contract was signed, according to Mr Adam Cosentino, “the show budget had been slashed” (T841, L7–8) and some 50 per cent of the filming had been undertaken already. (L24–25) According to Mr Adam Cosentino his brother had no alternative but to sign. He said:
“Well, you know at the time – so by the time Paul signed the contract, as I said, 50 per cent of the TV show had been filmed, money had been paid to us, we had paid money out. That contract kind of had to be signed because if it wasn’t, I mean, can you imagine, Channel 7 would have wanted all their money back, all the money they outlaid to the production company to do it. So we kind of signed it, he signed it.” (T842, L8–16)
46 There was no fee payable to Mr Paul Cosentino at all (T842, L17), though there was a $300,000 fee toward the cost of the props. (DCB 297, Clause 3.1)
47 According to Mr Cosentino, the upshot of the Seven Network contract of July 2013 was the airing of some three television specials which did well. (T645, L9- 10)
48 Also in 2013, Mr Cosentino appeared on and won the national television show, “Dancing With The Stars”. According to Mr Cosentino, he was initially very keen to appear on this program but became more reluctant later. According to Mr Carr, he was reluctant throughout and had to be persuaded by Mr Carr. The other contestant in the final was singer and recording artist, Tina Arena, whom, it will be recalled, is Mr Carr’s ex-wife.
49 Mr Grant Rule, a Seven Network executive, requested that Mr Carr not attend the filming of the final episode, it would seem because of a concern to avoid “any distractions for the three finalists”, presumably, in particular, Ms Arena. Mr Carr did not attend though another member of RCM did. It seems Mr Cosentino was somewhat aggrieved at Mr Carr’s non-attendance.
50 The other major event in Mr Cosentino’s career in 2013 was the “Live Nation Tour”. Live Nation Australasia Pty Ltd is a tour promoter. It entered into an agreement with Mr Cosentino in 2013 for the promotion of a national tour that year. (DCB 306) Clause 4 of the “terms and conditions” attached to the agreement (DCB 308) provided:
“Live Nation will pay to Company, as consideration for Artist’s performance hereunder, the greater of the total guarantee for the initial ten [10] shows in the amount of [AUD$325,000] (“the Total Guarantee”) versus [seventy five percent (75%)] of Net Tour Revenues…”.
51 Mr John Cosentino raised a query with RCM’s business affairs manager, Mr Marchesani, by email of 19 May 2013, whether this term entailed the guaranteed figure (at that stage $300,000) and 75 per cent of the net tour income (ie plus 75 per cent net) or “$300,000 or either 75 per cent of the net tour income”). Mr Marchesani responded to this query, “Answer A”. (PCB 966).
52 The Cosentinos said they took this to mean that Mr Cosentino would receive the guaranteed sum which eventually reached $390,000 because of the addition of further performances to the tour, together with 75 per cent of the surplus without deduction from gross ticket sales of the amount of the initial guarantee.
53 Both Mr Adam Cosentino and Mr John Cosentino said that they spent more lavishly on the expenses for the show in 2013 to make it as spectacular as possible, spending a total of $501,172.08, leading to a tour loss of $33,672.08. (Exhibit 2) The Cosentinos said that they could have had a satisfactory though less lavish tour with a better financial outcome as witnessed by total expenses for that 2015 tour of $353,782.56. (Exhibit 13)
54 One of the performances on the 2013 “Live Nation Tour” was at Wollongong. Mr Carr attended the performance, travelling business class return to Sydney from Melbourne with a limousine transfer to the venue in Wollongong. The limousine was held on standby to await Mr Carr’s departure from the venue. (PCB 1381)
55 According to Mr Adam Cosentino:
“…so this was our first show. Ralph then leaves. Doesn’t stay for the meet and greet and here I am trying to bump out the first show and I have to attend to – attend a meet and greet because of that.”
56 He also complained about Mr Carr’s, “taking a limousine…from Sydney to Wollongong, having it sit there for five hours or however long he was there.” (T854, L19-26)
57 The year 2013 ended on a high note for Mr Cosentino. His specials had aired on the Seven Network. He had enhanced his national profile by the victory on “Dancing With The Stars”. He had successfully undertaken and completed the “Live Nation Tour”. The financial arrangements described indicate that his financial result was less impressive than the narration of these events might lead one to suppose. Nevertheless, it could be said that in terms of his enhanced profile he had, in that year, in the showbiz phrase, taken his career “to the next level”.
58 By the beginning of 2014, however, in the words of Mr Adam Cosentino, his brother’s career “came to a standstill. In January 2014 …there was not much going on…we didn’t have any TV at the time and it just – everything stopped.” (T850, L1-15)
59 The next strategy adopted to advance Mr Cosentino’s career was to approach a number of production companies, namely, Shine, Matchbox and Freemantle Media. (T850, L28) Mr Adam Cosentino said that he regarded the approach to the production companies as a “backwards step”. (T772, L25) The overhead cost of making an episode with a production company would be greater. (L13-16) As will appear, Mr Cosentino is now self-managed and this is the policy which he has adopted, making his approaches directly to the television networks albeit without immediate success. (T774, L4-7)
60 Therefore, said Mr Cosentino, approaching the production houses “was a course of desperation”. (T774, L26) It was adopted only after an approach to the Nine Network through one of RCM’s other artist clients, Mr Richard Wilkins, had proved unsuccessful. (L27-31)
61 In early April 2014 the Cosentinos had attended the launch of “Extreme Television” in Singapore. Mr Cosentino was to make appearances on that newly launched network. (T643, L16-18) A meeting was held at RCM’s offices primarily as a “debrief” for the Singapore visit. (L28-31) Mr Cosentino, Mr Marchesani and Mr Carr attended. According to Mr Cosentino, Mr Carr “seemed withdrawn from it and then there was…tension between Adam, myself and Ralph…there was tension…when we first walked in”. (T644, L16-19) Mr Cosentino supposed that Mr Carr’s cool reception might have been the result of “a lot of pressure” which he had put on Mr Carr to “get these TV shows done”. (L29-30) Mr Cosentino did not concede that he and his brother, Adam, were displaying any hostility but:
“…we were just disappointed at this stage that we’d done all this work up until 2014 with the three television specials, Dancing With The Stars, and we still at this stage had not landed any television. But we didn’t come in there aggressively by any means”. (T645, L8-12)
62 Aside from the “debrief” the issue of the RCM invoice to reimburse Mr Carr’s expenses for attendance at the Wollongong performance was raised. At that stage, all parties debated this on the basis that the amount invoiced was $1,800. Mr Carr regarded this as a matter of triviality which should not prejudice the relationship between the Cosentinos and RCM. Mr Cosentino said his grievance here was not so much the expenditure on the limousine but the failure of Mr Carr having incurred this expenditure to make himself available to schmooze the VIPs at the show. (T646, L9) The Cosentinos said that Mr Carr “got very flustered and…left the room”. (T647, L13-14) In his account of the meeting, Mr Carr did not mention leaving the room in these circumstances.
63 According to the Cosentinos, in Mr Carr’s absence Mr Marchesani adopted the role of peacemaker and urged the Cosentinos not to make a big issue over a relatively minor matter. (T647, L19-28) On his return, according to Mr Cosentino, Mr Carr smoothed things over and apologised, though there seems to be no suggestion that the invoice was withdrawn. In fact, it remains outstanding and unpaid. Mr Carr then urged everyone to get things off their chest and establish or re-establish clear and candid communications.
64 Mr Carr then raised the issue of the Cosentinos’ employment of a Mr MF as Mr Cosentino’s publicist. Mr MF had been employee of RCM. According to Mr Carr, he left RCM’s employment by mutual agreement and Mr Carr believed that Mr MF had sought to poach RCM’s clients. He had evidently expostulated earlier about Mr MF’s role with the Cosentinos in January. Ultimately, however, he seems to have acquiesced in the situation.
65 The debrief meeting, according to evidence from Mr Carr and Mr Marchesani, took place on 11 April. The Cosentinos put the date at 4 April and produced an extract from their diary which supported that. (Exhibit 3) The plaintiff and its counsel ultimately accepted that the meeting took place on 4 April rather than 11 April, and the chronology of the crucial events which played out in the immediate aftermath of the meeting make more sense based on the view that the meeting was on 4 April.
66 By the end of the meeting it seems that the tension evident at the start had largely dissipated.
67 Mr Cosentino and Mr Carr had had a brief telephone conversation on Monday, 7 April. According to Mr Cosentino:
“Ralph called me and that was very, very positive. He was just checking up on me, seeing how my weekend was and that, once again, we were all good to go for these meetings. It was very brief, very short, very positive and it was all good.” (T651, L30 - 31, T652, L1-4)
68 The meetings referred to were meetings which had been appointed with the production houses. Meetings had been scheduled for Monday, 14 April in Sydney with representatives of production companies Matchbox and Freemantle Media in execution of the production house strategy which had been adopted in the circumstances described as an alternative to further direct approaches to the network. Mr Carr said that his highest hopes were with production house, Shine, which was headed by one of his friends and contacts, Mr Mark Fennessy, but no appointment had been made at that stage with Shine.
69 On 10 April Shine advised it needed more time “to pitch this properly to Seven”. This email was copied to the Cosentinos.
70 There followed an exchange of emails between the parties which, of central significance to the outcome of this proceeding, I set out in full. Following the Monday morning telephone discussion between Mr Carr and Mr Cosentino, Mr Marchesani sent an email to the Cosentinos headed “Moving Forward” in the following terms:
“Hi Cos
I understand you have had a positive discussion with Ralph this morning. We are all go with continuing on with you guys.
We need a few things clarified though, to secure everyones (sic) investment in the project
1. We need the management agreement to extend for a further three years form (sic) when it ends in October
2. We need to have all activity move through RCM, that means all promo, communication with all third parties ie publicists etc, opportunities for shows etc .. as discussed there needs to be a unified front, no fracturing.
3. Ralph is happy to have you across all correspondence on all deals etc this is normal practice for all clients of RCM.
I am open to discussion with you about any issues you may have and we can work through them togehter (sic) but I need to know that it is all together and agreed. If you can come back to me with this agreement and to the above things then lets (sic) go on to make you a global star.
Adrian” (DCB 239)
71 Mr Cosentino responded at 9.37 the following morning in the following terms:
“Hi Adrian,
1. We are agreeable to discuss and review management agreement closer to the term of the contract.
2. Yes we agree a unified front is imperative. You will be kept up to date and informed on all movements and insist to open communication by all parties.
3. Excellent, and to reiterate I should be in attendance for all TV discussions/meetings.
Regards,
Cos” (DCB 240)
72 The same day, Mr Marchesani responded in a further email:
“Hi Cos
Thanks for the note very glad we remain a team.
In order for us all to have security, both you and RCM, we must discuss and resolve point one.
Adrian” (DCB 241)
73 Matters came to a head on 11 April 2014. Mr Marchesani sent an email to the Cosentinos as follows:
“Hi Cos, Adam
As mentioned to you on the phone yesterday we have a lot set up including the meetings in sydney (sic) on Monday. Regarding the management term as we discussed you were going to send an email to Ralph confirming this, please let me know if there is any issue with this. Ralph is happy to push the meetings back a week if you need more time.
Adrian Marchesani” (DCB 242)
74 Late in the morning, Mr Cosentino responded:
“Hey Ralph,
Adrian asked me to email you.
We are not looking at new management and are agreeable to discuss and review the management agreement closer to the term of the contract. There are a number of items in the contract that need thorough discussion and time to review. It is not necessary at this stage to discuss contract negotiation with a remaining 6 months term.
Thanks,
Cos” (DCB 249)
75 The response this time came from Mr Carr:
“thanks Cos
In view of things becoming clearing (sic) on the way I think it should operate
lets (sic) move the meetings back a week
this will also help us getting a clearer picture from SHINE
we really need to clarify the way we work as per our meeting i.e. with [Mr MF] etc
I really don’t feel comfortable moving forward without clear direction on our management services and future…
Just being honest
R” (DCB 248)
76 In the early afternoon, Mr Cosentino responded at some length:
“Hey Ralph,
I just want to be clear on our position going forward.
Adrian has suggested that we need to discuss a three year extension to the management contract to enable us to ‘all have security’. I am a little concerned by this as my understanding is that we have six months left on the existing agreement and we fully expect this to be a very successful and important six months for both me and you. I hope that you feel the same way and that your commitment to the cause isn’t contingent on us immediately signing an extension, without having any opportunity to discuss or negotiate that agreement. The way it read in the email Adrian sent, sounded a bit like an ultimatum. I hope that’s not the way you look at it.
I have every intention of giving the extension my full and positive consideration, but I need to do that a little closer to the end of the current term. We have a lot to achieve together in the meantime.
I certainly don’t want to be rushed into a three year extension just because there are deals to do now that are in the in (sic) both our interests to get done.
With all that being said the meetings on Monday will continue. If you Ralph, feel that you cannot attend then you should let me know asap.
Thanks,
Cos” (DCB 247)
77 Mr Cosentino said that this email, like the others transmitted around this time from his camp, were the result of consultations with his brother, Adam. It is fair to say, however, that it seems to be a more carefully thought out email displaying a better prose style than the generally abrupt tone of the other communications.
78 The response came from Mr Carr:
“Hi Cos
The meetings have been postponed, gives us time to get full response from Shine and for everyone to be positive about what we are doing.
We cannot put the meetings back on for Monday at this point as it will look unproffessional (sic)
R” (DCB 246)
79 The tone darkened in Mr Cosentino’s response:
“Not happy at all. Very disappointed. You should not have cancelled the meetings without my consent.
We now have a big problem. I will look after the meetings from here.
Cos” (DCB 245)
80 Mr Carr’s further response was fairly abrupt:
“I disagree Cos
we need to be careful
feel free to call me on the weekend” (DCB 244)
81 This led to the last transmission of the day from Mr Cosentino:
“Ralph,
I’m very unhappy with that response.
I will stress again these meetings should not have been cancelled with out (sic) my consent.
From this point forward, I will set up and conduct my own meetings with local and international TV companies/production houses/networks and will keep you informed with relevant progress.
Cos” (DCB 243)
82 The Cosentinos seemed to be adopting the stance that they would take control of negotiations with the production companies.
83 Mr Richard Beck of Super Nova Entertainment, who operates in the United Kingdom on behalf of RCM, forwarded an email from Georgia Brown of Shine in the United Kingdom advising Mr Beck that she had received an email from Mr Cosentino “last night saying that they would be the main point of contact moving forward for all negotiations. What’s happening?” (PCB 1022)
84 This led Mr Marchesani to send an email to Mr Adam Cosentino on 17 April 2014.
“Hi Adam
We have been told by Shine UK that they have had a directive from you to direct all further communication to you as the ‘main point of contact for all negotiations moving forward’
This is not in the spirit of our discussions with you and Cos, and moreso (sic), we still have a management contract in place until the end of October which says that you will not do this (clause 10). This type of thing sends a terrible message to the people we are dealing with, it weakens the Cosentino brand in a world where weak things get consumed and thrown away. Bottom line, this sort of thing is not good for Cos and as mentioned it is agreed by Cos that he will not do this. We need you to send a (sic) email to Georgia and anyone else who you may have emailed with this type of note to clarify asap.
Please copy me on the note.
Ralph and Cos have had discussions about the management agreement since our meeting and if circumstances dont (sic) change in relation to things Ralph has made clear to you and Cos, then he will not be seeking a new management agreement when the current one ends. Obviously though until this time we will be maintaining our professional approach to all aspects of our management arrangement with Cos which is our expectation of you.
Adrian Marchesani” (DCB 258)
85 Mr Adam Cosentino responded on 22 April 2014:
“Hi Adrian,
We received your email on Thursday afternoon and have considered its content.
Cos had emailed Ralph on April 11 and advised him that we would be conducting negotiations with television networks/production companies directly. We considered this to be an amendment to the management arrangement and we considered the absence of a reply from Ralph to be his acceptance of the change in arrangements. Further more (sic), on Monday morning of April 14, Cos reconfirmed this arrangement with Ralph to which he agreed that he would have no objections to Cos contacting the relevant parties.
With respect to the Management Agreement we consider that there have been numerous breaches of that agreement by RCM during the term and we also consider that RCM has given a clear indication that it does not intend fulfilling its obligations under the agreement unless Cos agrees to an extension of the term. As we have previously stated, Cos will not agree to such an extension without detailed negotiations about such an agreement. The current agreement is deeply flawed and very inappropriate to an artist of Cos’s type and we would need to substantially re-work that agreement rather than simply extend it, as you have suggested.
In the current circumstances you will understand why we are not willing to give this extension, especially when your email suggests that Ralph is not enthusiastic about renewing the agreement, ‘if circumstances dont (sic) change in relation to things Ralph has made clear to you and Cos’.
In short, we will continue to move forward in our discussions with networks and production companies. We will copy RCM in on correspondence but we will maintain our position that all creative and contractual discussions will be directed to us.
Alternatively we are willing to consider any proposal you may have in relation to the early termination of the Management Agreement.
Regards
Adam” (DCB 257)
86 Mr Marchesani wanted the Cosentinos to withdraw their notices to the production companies. When it became obvious that they would not do this, without reference to the Cosentinos, he emailed Georgia Brown of Shine on 28 April apologising for the delay and stating that there was to be no change to the communication arrangements relative to Mr Cosentino and that RCM remained “your main point of contact, please continue business as usual, and copy in Adam on any communications”. (DCB 250)
87 In his email to Shine International, Mr Adam Cosentino had included a statement, “As a courtesy we ask that you keep the RCM office cc’ed on any written correspondence, as we will also do”.
88 He also sent an email on 23 April 2014, stating:
“Hi Adam
We dont (sic) accept anything in your note below. In particular Ralph rejects the statement about an agreed change in arrangements.
RCM has given no indication, nor will it, that it does not intend to fulfil its obligations under the management contract.
I reiterate that it is important for Cos’s international reputation to rectify the notes sent to Shine UK and anyone else that may have received one. As I have mentioned, whilst it is in the agreement that Cos has agreeed (sic) not to do this. (clasue (sic) 10.3, 10.4) Moreover, if an international partner, with whom we have been building an association for nearly 12 months, receives a note from you saying you are now the primary contact, without any notification from us, they will consider the Cosentino organisation in disarray. It will affect the confidence that has been established in Cosentino and impact on the confidence they have in investing in the project at all.
Please copy me on the notes.
Adrian Marchesani” (DCB 259)
89 On 29 April 2014, Mr Cosentino sent an email which, as will appear, he says constitutes the acceptance of a repudiation of contract by RCM. The email stated:
“Ralph,
Over the last 2 weeks much light has been shed on our relationship and its (sic) become apparent to me that we are in very different head spaces. We both clearly have different opinions of how my career should be managed and how our business activities should be conducted. Of course we are both entitled to our own opinions.
You always stipulated to me that the manager and artist relationship is like a marriage. If its doen’t (sic) feel right then its best that we be honest and tell one another. So that’s what I am doing.
I feel our relationship has broken down and based on that I believe it would be best for both of us if we go our separate ways. I hope you understand and respect my position.
I thank you for all the work you put in and wish you nothing but the very best for the future.
Thanks,
Cos” (DCB 264)
90 On 29 April 2014, Mr Carr sent an email to Mr Cosentino stating that he would not be seeking a further management term “if the things I mentioned to you didn’t change”. He continued:
“We have a contract which stands until October and, as previously mentioned, I will fulfil all management responsibilities until then.
There is also the issue of post-term commissions which I expect you to abide by according to the agreement. I have invested a lot of money into he (sic) promotion and furtherment of your career. I have facilitated in placing you in a position whereby you can take the next step onto a higher plane and look forward to you reaching it.” (DCB 265)
91 Mr Cosentino wrote a letter to Mr Carr dated 9 May 2014 which he said had been settled by his solicitor.
92 Mr Shaw, on behalf of the defendant, objected to the tender of this document by the plaintiff. I ruled that in the circumstances it should be regarded as an attempt to settle a dispute and was therefore prima facie inadmissible by virtue of s131(1) of the Evidence Act 2008. Nevertheless, the exception to that rule set out in sub-s(2)(c) applied because the defendant had put into evidence a response to the letter which, by its terms, implies much about the without prejudice proposal. (DCB 266)
93 Mr Cosentino’s letter of 9 May 2014 stated, amongst other things:
“The legal advice I have received indicates that I would be able to terminate the agreement now – either on the basis of your unwillingness to act in my best interests going forward or on the basis of various breaches of the agreement that have already occurred.”
94 The letter continued, offering a compromise which would have the management agreement continue to its original scheduled termination with RCM being “kept in the loop” until 31 October 2014 and receiving commission on income actually received by Mr Cosentino during that time. Day-to-day running of Mr Cosentino’s business and negotiations, however, would be handled by himself and his family.
95 The remaining five months of the management agreement term was to be regarded as “a transition period”. Inferentially, there would be no trailing commission payable to RCM after 31 October 2014. The letter concluded:
“Ralph, you have always said to me that when the relationship stops working then it should be ended and I hope you will maintain this position now. If you are in agreement with this proposal (which I think is honorable from both sides) I will have my lawyers draft a short Deed of Release that allows us to both move forward with certainty and clarity.” (PCB 1042)
96 RCM’s letter over the signature of Mr Carr dated 16 May 2014 essentially rejected the points made in Mr Cosentino’s letter point by point.
Termination
97 Both parties agree that the management agreement was terminated prematurely around this time. They are at odds as to precisely when the termination occurred and as to which party repudiated and which party accepted the repudiation.
98 Mr Cosentino’s solicitors, Gibsons, wrote a lengthy letter to RCM dated 3 June 2014. In that letter, they announced that they acted for Mr Cosentino and alleged numerous and important breaches of its obligations under the management agreement by RCM which it said were “incapable of remedy by RCM”.
99 The breaches alleged related, first, to the Seven Network agreement which they said was negligently negotiated by RCM and included terms that were not in Mr Cosentino’s best interests. They complained of the grant of broadcast rights to the Seven Network “for a lengthy term” and complained that the agreement unreasonably restricted Mr Cosentino from having his performances filmed by any other party with no countervailing benefit. They complained that the agreement provided Mr Cosentino with no “meaningful creative control over the proposed television specials and no creative control over the marketing or promotion of those specials”.
100 Next, they complained as to the entitlement granted to the Seven Network of a 50 per cent share of Mr Cosentino’s net receipts from touring and events for two years following the signing of the agreement. The grant of those rights, they said, severely diminished Mr Cosentino’s future earning capacity. They complained that, whilst RCM was a party to the management agreement and Mr Cosentino was required to give extensive general indemnities to the Seven Network, RCM undertook no such obligation. They complained that RCM negligently advised Mr Cosentino to sign the agreement, continuing:
“We are instructed that RCM only elected to engage the services of expert lawyers experienced in the television industry when the majority of the terms have been agreed between the Seven Network and RCM and our client’s bargaining position had been severely compromised.”
101 As to the Live Nation agreement, complaint was made as to the advice given relative to the operation of the financial terms. The understanding which the Cosentinos were left with following the advice from RCM proved to be incorrect.
102 There was also complaint about an agreement relative to Nicabate with GlaxoSmithKline Australia Pty Ltd. These matters were not pursued at trial and so I pass on from them.
103 As to negotiations with the television production houses, the letter alleged that RCM put its interest in extending the terms of its management agreement with Mr Cosentino ahead of its obligation to act in Mr Cosentino’s best interests. Despite his protest, it postponed the meetings with the production house.
104 There was also complaint about unprofessional conduct. The letter stated:
“We are instructed that you recently conducted completely unprofessional, threatening and abusive communications with a person known by you to be a contractor to our Client’s company. Our Client regards this as being contrary to his best interests, definitely not ‘businesslike’ and detrimental to our Client’s professional integrity.”
105 The letter attached a series of texts transmitted by mobile phone to Mr MF which were highly abusive and laced with obscenities.
106 As a result of these matters, the letter stated that Mr Cosentino, “considers the Management Agreement to have been repudiated by [RCM]”. The repudiatory conduct alleged was the cancellation by RCM of scheduled meetings with [the production company], “thereby evincing an intention not to perform its obligations pursuant to the Management Agreement”. The letter stated that the repudiation was accepted and the management agreement was terminated. (DCB 267-273)
107 Dwyer & Co Legal responded on behalf of RCM by letter dated 9 July. They noted, first, that termination of the management agreement was provided for in clause 12 thereof but, “Curiously you do not go on [to] terminate the Management Agreement by serving RCM with a written notice as required [by that clause]”. They continued, asserting that RCM had at all times been ready, willing and able to perform its obligations. They asserted that Mr Cosentino had been guilty of breaches under some nine paragraphs of the management agreement and had thereby evinced:
“…an intention…not to perform his obligations thereunder or to perform them in a manner that is substantially inconsistent with his obligations, thereby repudiating the Management Agreement.”
108 The letter continued, stating that RCM “accepts your client’s repudiation”. (PCB 1067-1068)
Plaintiff’s claim
109 The plaintiff’s solicitors commenced the present proceeding. In the plaintiff’s Further Amended Statement of Claim, it alleged that in breach of the management agreement from at the latest April 2014, Mr Cosentino engaged the services of his brother, Adam, as his manager, agent, representative or consultant in violation of the terms in the management agreement.
110 Further, it said that on or about 14 April, Mr Cosentino informed Shine International that Mr Adam Cosentino would be, “the main point of contact moving forward for all negotiations with that organisation’. It alleged that in or about May 2014, Mr Cosentino informed the Australian Dental Association that it should direct all potential or confirmed bookings to Mr Adam Cosentino in connection with a proposed performance by his brother at the Australian Dental Congress.
111 Next, it said that Mr Cosentino had received payments for his services as an entertainment artist since at least April 2014 without accounting to RCM for its entitlement to remuneration under the management agreement. It was said that Mr Cosentino persisted in all this conduct, “despite [on] numerous [occasions] being placed on notice in writing by RCM to the effect that such conduct was in breach of the Agreement and should be stopped”.
112 Finally, it alleged that the letter from Gibsons purporting to terminate the management agreement was itself repudiatory conduct.
113 All these things, it was said:
“…evinced an intention [on the part of Mr Cosentino] no longer to be bound by the Agreement, alternatively to perform it only in a manner that was substantially inconsistent with [his] obligations thereunder and [he] thereby repudiated the Agreement.”
114 It was said that by no later than 9 July 2014, RCM became entitled to terminate the agreement and by letter from its solicitors of 9 July it had exercised that right.
115 RCM claimed it continued to be entitled to remuneration in accordance with the terms of the agreement and that such remuneration extended to income derived by Gumball Enterprises Pty Ltd on behalf of Mr Cosentino. RCM sought a declaration that it continued to be entitled to remuneration, an order for proper accounts or, alternatively, damages, costs and interest.
Defence and counterclaim
116 In his fourth Further Amended Defence and Counterclaim, Mr Cosentino relied upon certain express terms of the management agreement and also alleged that the management agreement had an implied term that each party would act in good faith in performance, which term was said to be implied by law.
117 Next, he alleged an oral and implied condition that in the case of income derived by him from sales of merchandise, his obligation to pay commission was on the amount received after expenses were deducted. He said this term derived from a conversation between him and Mr Carr on behalf of RCM in October 2012. He said, insofar as it was to be implied, it was to be implied:
“…by reason of the fact that during the course of the agreement, RCM charged commission on merchandise sales after taking account of expenses and to give business efficacy to the Agreement”.
118 Mr Cosentino next alleged breaches of agreement which were said to be the basis of a finding as to repudiation. The first matter alleged was a breach relative to the July 2013 agreement with the Seven Network. It was said that RCM negotiated that agreement on behalf of Cosentino but that it included terms which were, “unfavourable, prejudicial [and] not in the best interests of Cosentino and placed the interests of RCM well ahead of the best interests of Cosentino.”
119 Specifically, he complained of the provision in clause 4.1(h) of the agreement with the Seven Network, giving them the exclusive right to film Mr Cosentino performing, “for a period concluding on 30 June 2014, such restriction being unreasonable restraint on Cosentino’s standing to enter into further commercial arrangements.”
120 He complained that the agreement imposed no obligation on the Seven Network to broadcast the television specials, “in a manner that would benefit the career of Cosentino”. Mr Cosentino was given no, “meaningful creative control over the content or presentation of the television specials…”. There was no talent fee payable to Cosentino and Cosentino had no approval or consultation rights with respect to sponsorships and advertising sold by the Seven Network relative to the specials.
121 Further, Mr Cosentino complained of the term which granted the Seven Network 50 per cent of his event rights net receipts for a period of two years from the date of the agreement, “such entitlement being an unreasonable diminution of Cosentino’s entitlement to future earnings”.
122 Finally, he complained that RCM was entitled to recoup costs of 10 per cent from the event rights net receipts prior to the calculation of the amount due to the Seven Network and Cosentino, “such entitlement being unfair and prejudicial to Cosentino”.
123 The next particular complaint related to the agreement between Mr Cosentino and Live Nation Australasia Pty Ltd relative to the 2013 national tour. Mr Cosentino complained that RCM gave negligent advice as to the operation of the agreement to the effect that Mr Cosentino:
“…was guaranteed revenue of $325,000 plus 75 per cent of the tour income, when in fact Cosentino was entitled to the amount of $325,000 as guaranteed against 75 per cent of the tour net income.”
124 This advice was said to have been given orally and in writing, orally by Mr Carr and in writing by Mr Marchesani of RCM.
125 There was also a complaint about an agreement with GlaxoSmithKline Pty Ltd relative to the promotion of “Nicabate”, but this matter was not pursued in evidence at trial.
126 Finally, complaint was made as to the abusive and obscene texts referring to Mr MF, who had been employed by Mr Cosentino.
127 These breaches, it was said, caused loss and damage to Mr Cosentino in that his remuneration was reduced by reason of the operation of the terms of the Seven Network agreement. In relation to the Live Nation agreement, it was said that Mr Cosentino, “structured his costs of the Tour based on inaccurate revenue projections which caused Cosentino to incur a loss on the tour”. It was said that the abusive and obscene complaints about Mr MF had caused Mr Cosentino to lose the prospect of obtaining a contract with the Sony Corporation.
128 Mr Cosentino said that in breach of the terms of the management agreement RCM did not use its best endeavours to procure engagements for Mr Cosentino. He referred to the events of 8 April to 11 April 2014 described in detail above. As a result, he said that he had, “lost the opportunity of obtaining a contract with the prominent television production companies because meetings were cancelled”.
129 In the period 11 to 28 April 2014, according to the pleading, “RCM evidenced an intention not to be bound by the [Management] Agreement and thereby repudiated the Agreement” or alternatively committed a fundamental breach of clause 9 of the agreement. This entitled Mr Cosentino to terminate it when RCM advised him that it would not fulfil its obligation under the management agreement, until Mr Cosentino had agreed to extend it for a further period of three years. RCM informed Shine International without reference to Mr Cosentino that they, “remained its point of contact in relation to Cosentino”. Again, this refers to the events that have been described in detail above.
130 It was said that the alleged breach relative to the obscene and abusive emails about Mr MF, “evidenced an intention by RCM not to be bound by the Agreement and thereby RCM repudiated the Agreement” and was a fundamental breach of the agreement which entitled Mr Cosentino to terminate it without notice.
131 By reason of these matters, it was said that Mr Cosentino became entitled to terminate the management agreement on 29 April 2014 or, alternatively, on 3 June 2014 and, in accordance with those entitlements, he accepted RCM’s repudiation. The acceptance was said to have been communicated to RCM in Mr Cosentino’s email to Mr Carr on 29 April 2014 and a letter from Gibsons on Mr Cosentino’s behalf to RCM of 3 June 2014.
132 Next, it was said that the breaches alleged relative to the Seven Network agreement, the Live Nation agreement, the Nicabate matter, the texts relative to Mr MF, the cancellation of the meetings, and events generally before 11 April 2014:
“constituted a breach of the [Management] Agreement by RCM not capable of remedy and entitling Cosentino to terminate the Agreement in accordance with Clause 12 of the Agreement”.
133 The letter of 3 June 2014 from Mr Cosentino’s solicitors was said to be written notice of those breaches and that they were incapable of remedy. On that basis, it was said that the agreement was terminated on 3 June 2014, 3 July 2014 or at whatever time this Court might determine.
134 As to the allegations of breach of the agreement against him, Mr Cosentino denied these and said that his conduct was not in breach of the agreement, “as the Agreement had been lawfully terminated by [him] before such alleged acts, which are not admitted, occurred”. His actions were not inconsistent with his obligations under the agreement because the agreement had been lawfully terminated.
135 Mr Cosentino admitted that RCM had purported to terminate the agreement but he denied RCM’s entitlement to do that. Therefore, RCM’s termination or purported termination of the management agreement, “was not lawful as the Agreement had been lawfully terminated by Cosentino before the purported termination…”.
136 As to the claims for commission, apart from the generality of the case already outlined in the defence and counterclaim, Mr Cosentino challenged the correctness of certain specific items claimed, alleging that some had already been paid, others constituted duplications and so forth. More generally, he said that by reason of the breaches of contract he alleged against RCM and the actions which he said he had taken to terminate the agreement, RCM was not entitled to the commission amounts claimed.
137 Further, according to Mr Cosentino, RCM had overcharged him for commission which he had already paid to the tune of $171,206. He said that applying the proper interpretation of the management agreement before commission was applied to his receipts, there should have been deducted live event expenses and merchandise expenses, whereas the commission had in fact been calculated and invoiced on gross figures.
138 Mr Cosentino also alleged that, prior to entering into the management agreement, he had been the victim of misleading and deceptive conduct contrary to s18 of the Australian Consumer Law. He said Mr Carr had told him that if at any time during the term of the management agreement Mr Cosentino was dissatisfied with the level of service provided to him by RCM, “then Cosentino could dissolve the Agreement with immediate effect” and “each party could walk away from the Agreement without any future obligations to the other”. These statements were said to have been made by Mr Carr to Mr Cosentino in or about September/October 2010, “when [Mr] Carr said words to the effect ‘management is like a marriage, if it’s not working then you can just walk away’”.
139 This representation was false insofar as RCM now denies any entitlement of Mr Cosentino simply to cancel the operation of the management agreement. Insofar as the representation was as to a future matter, Mr Cosentino said that neither RCM nor Mr Carr had, “[any] reasonable grounds for making [that representation] and as such is misleading pursuant to s4 of the [Australian Consumer Law]”.
140 Mr Carr was also said to be a person involved in the contravention of the Australian Consumer Law, “in that he aided, abetted, counselled, procured or was directly or indirectly knowingly concerned in the contravention…”.
141 By virtue of these matters, Mr Cosentino said he was entitled to recover his damages for the misleading and deceptive conduct, “Any sum that RCM is found entitled to under the Agreement post-termination”.
142 Mr Cosentino alleged further misleading and deceptive conduct against RCM and Mr Carr after the execution by them of the management agreement. He said that prior to his entry into the agreement with the Seven Network and with Live Nation, RCM and Mr Carr had told him that it was in his best interests to enter into the Seven Network agreement and he should sign it. They misstated the fee entitlements of Mr Cosentino under the Live Nation agreement. In reliance on these matters, Mr Cosentino entered into the agreements with the Seven Network and Live Nation.
143 As to the representation relative to the Seven Network, the matters already complained of relative to the Seven Network agreement were relied on as giving the lie to any advice that the Seven Network agreement was in Mr Cosentino’s best interests. He said he was thereby misled and deceived. Mr Carr was said to have aided, abetted, counselled and procured RCM’s contraventions of the Australian Consumer Law relative to misleading and deceptive conduct.
144 By reason of the misrepresentation, the terms of the Seven Network agreement reduced Mr Cosentino’s remuneration and, by reason of the misrepresentation relative to the Live Nation agreement, Mr Cosentino had suffered loss and damage by reason of having, “structured his costs of the [2013] Tour based on inaccurate revenue projections”.
145 Mr Cosentino seeks to set off his entitlement to damages for these matters against any liability which he might otherwise have to RCM. By way of counterclaim, he sought damages and a declaration under the Australian Consumer Law varying clause 12 of the management agreement, “so it provides the Agreement can be dissolved by Cosentino without cause or words to that effect”; that clause 7.1 of the agreement is unenforceable. Alternatively, that clause 7.4 be varied to read, “In the event of the earlier termination of this Agreement the post term provisions in Clause 7.1 will be null and void”.
146 This relief is sought against RCM and damages were sought against Mr Carr.
Reply and defence to counterclaim
147 In their reply and defence to counterclaim, aside from generally joining issues, RCM and Mr Carr referred to the history of the negotiation of the Seven Network agreement, noted the involvement of Mr Robertson of Holding Redlich in the negotiation, and asserted that in June 2013, Mr Cosentino told Mr Carr to accept the agreement negotiated by Mr Robertson:
“…and stated as his reason for doing so that his main imperative at that time was to advance his career by gaining the prime time television exposure that would come from having his first very own prime time television special and to broaden his international reach.”
148 They noted, further, that pursuant to clause 4.1(h) of the agreement with the Seven Network, Mr Cosentino could seek the Seven Network’s consent to another party filming Mr Cosentino in the restricted period until 30 June 2014. They also noted clause 6.2 of the agreement in which the Seven Network was required to “consult with Cosentino in relation to the editing of television specials”.
149 As to the Live Nation agreement, they said that, “on the proper construction of the Live Nation Agreement as a whole, the advice given by RCM was in substance correct”. In any event, they said that RCM was not obliged to provide Mr Cosentino, “with any specialist professional advice and counsel in relation to taxation matters, investment matters, legal and/or accounting advice”. They relied on clause 9.3(d).
150 Therefore, even if the advice were incorrect, it fell outside the scope of RCM’s obligations and any error “did not amount to a breach of the retainer”. They denied the allegations relative to the draft Nicabate agreement.
151 As to the events of April 2014, they said:
“…meetings were not cancelled, but rather were postponed pending receipt of further particulars from Shine International with which RCM was negotiating the production of a television program featuring Cosentino.”
152 They said the emails were not to the effect alleged in the defence and counterclaim and were not repudiatory in character and, until 9 July, when RCM lawfully terminated the agreement, RCM continued to perform its obligations under the agreement and Mr Cosentino continued to receive the benefits of RCM’s services after both the events of 11 April 2014 and 28 April 2014.
153 If Mr Cosentino were held entitled to terminate the management agreement for repudiatory conduct by RCM in April 2014 then, they said, by continuing to take the benefit of RCM’s services:
“…Cosentino elected not to do so [viz not to accept RCM’s repudiation] and instead exercised his right under the Agreement to continue to have RCM act as his manager and undertake negotiations and other activity on his behalf as manager and thereby elected to maintain the Management Agreement on foot.”
154 Mr Cosentino, they said, was “bound by that election”.
155 They referred, by way of particulars, to some six matters in which “RCM conducted discussions and negotiations on behalf of Cosentino” on and after 14 April 2014.
156 As to the claim by Mr Cosentino to “claw back” part of the commission already paid, they said such claim was:
“…premised on an erroneous interpretation of the Agreement (in that commissions under the agreement are payable on gross earnings not earnings net of production expenses and merchandise expenses).”
157 They noted that the commissions charged were charged progressively and contemporaneously with the derivation of income by Mr Cosentino and, at that time, were not disputed or challenged. Therefore, these matters constituted, “a settled account between the parties”. Therefore, as a matter of law, it was not open to Mr Cosentino to seek to reopen the settled account.
158 Insofar as oral terms were alleged under the management agreement, they said such terms were not binding by reason of the “entire agreement”. (Clause 13.7 in the agreement) Mr Cosentino was not entitled to rely on any prior representations warranted under clause 10.1 in that there were no current oral or implied agreements with any parties which would interfere with the rights of RCM under the agreement. Therefore, these oral terms were oral representations and could not be relied upon by Mr Cosentino.
159 They said that as a result of the agreement with the Seven Network, Mr Cosentino’s career and his commercial worth as an artist were advanced by his gaining exposure to 1.2 million viewers per show and by having his special broadcast overseas. He gained exposure to viewers in India, Indonesia, Thailand, Central and South America and in Spain. He increased his bookings overseas with live performances in Bangkok and Singapore and a live performance at the Singapore Grand Prix.
Conclusions
Pre-agreement misrepresentation
160 According to Mr Cosentino’s fourth Further Amended Defence and Counterclaim and before Mr Cosentino entered into the management agreement with RCM, Mr Carr told him:
“(a) if at any time during the term of the Agreement Cosentino was not satisfied with the level of service provided to him by RCM then Cosentino could dissolve the Agreement with immediate effect; and
(b) if this occurred each party could walk away from the Agreement without any future obligations to the other.”
161 The statement covering these matters was said to have been made at a meeting attended only by Mr Carr and Mr Cosentino. It is denied by Mr Carr. Mr Cosentino’s account of these matters, as given in his evidence-in-chief, appears at paragraph 21.
162 In final submissions, Mr Shaw placed reliance upon the doctrine of equitable estoppel as precluding RCM from relying upon the terms of the written contract to deny Mr Cosentino’s ability to withdraw from the management agreement at will. Mr Shaw referred to two formulations of the doctrine in the difficult case of Commonwealth v Verwayem (1990) 170 CLR 394, 428-9 per Brennan J and 409 per Mason CJ.
163 One could see how, if what was alleged to have been represented to Mr Cosentino as pleaded in the counterclaim was in fact said by Mr Carr, this might form the basis of an equitable estoppel. On Mr Cosentino’s evidence, however, nothing is deposed to which would appear to offer Mr Cosentino an obligation-free exit from the contract. As to the allegation of deceptive and misleading conduct and the defence based on estoppel, they fail simply upon the facts. What Mr Carr is alleged to have said as described in Mr Cosentino’s evidence is not inconsistent with RCM’s right to rely upon the letter of the management agreement.
Repudiation
164 Clause 9 of the contract sets out what, according to defendant’s counsel, Mr Shaw, were RCM’s fundamental responsibilities. The heading to the clause is “Manager’s Responsibilities” and it provides as follows:
“9. THROUGHOUT the term the Manager shall:
9.1Act in the best interest of the Artist. Their professional integrity is to be paramount and the Manager agrees not to do anything, which impacts on that integrity without prior consultation of the artist.
9.2Use his best endeavours to procure engagements in the entertainment industry for the Artist and promptly attend to any and all offers of employment or engagements of the Artist which are submitted to come to the knowledge of the manager.
9.3Use his best endeavours to promote, publicise, develop and advance the professional career of the Artist and the best interests of the Artist and in relation thereto shall confer with and advise the Artist as required in relation to the entertainment industry including the following:
(a)suggestions in relation to performances by the artist;
(b)All matters pertaining to publicity, public relations and advertising;
(c)General practices in the entertainment industry regarding such matters in respect of which the Manager has knowledge;
(d)Act as general Business Manager of the Artist in the course of such management and attend to matters in a businesslike manner PROVIDED HOWEVER that the Manager shall not be required to provide any specialist professional advice and counsel in relation to taxation matters, investment matters, legal and/or accounting advice other than of a general nature.”
165 In final submissions, Mr Shaw submitted that this clause 9 was an essential clause, any breach of which would give the non-defaulting party a right to terminate the contract. He referred to Associated Newspapers Ltd v Bancks (1951) 83 CLR 322, 366 per Dixon, Williams, Webb, Fullagar and Kitto JJ; National Australia Bank Ltd v Rice [2015] VSC 10 at [192] per Elliott J. He quoted the test of essentiality adopted by their Honours in Bancks as derived from the formulation of Jordon CJ in Tramways Advertising Pty Ltd v Luna Park (NSW) Ltd (1938) 38 SR (NSW) 632, 641-2.
166 Mr Shaw submitted that the relationship between the performer and his personal manager required a high degree of mutual confidence. He noted that the manager had duties of personal and fiduciary nature and, pursuant to clause 4 of the management agreement, Mr Cosentino appointed RCM as his agent and attorney for the purposes of executing documents. He cited authorities in support of these propositions which Mr Williams QC and Mr Manly for RCM were prepared to agree with.
167 According to the formulation of essentiality, said Mr Shaw, Mr Cosentino would not have entered into the contract unless he was assured of strict or substantial performance of RCM’s obligation in clause 9.1 to act in his best interests and in clause 9.2 to use its best endeavours to procure engagements in the entertainment industry and in clause 9.3 to use its best endeavours to promote, publicise, develop and advance the professional career of Mr Cosentino.
168 Next, Mr Shaw submitted that where a party to a contract evinces an intention no longer to be bound by the contract or an intention to fulfil the contract only in a manner substantially inconsistent with his obligations and in no other way, that party repudiates the contract. He cited Progressive Mailing House Pty Ltd v Tabali (1985) 157 CLR 17, 33, 40. The other party to the contract in these circumstances is entitled to accept the repudiation and terminate the contract.
169 Repudiation, he submitted, did not depend upon the subjective intention of the putative repudiator, but rather, on the effect of that person’s conduct as seen by a reasonable person. He referred to DTR Nominees Pty Ltd v Mona Homes Pty Ltd (1978) 138 CLR 423, 431.
170 According to these criteria, submitted Mr Shaw:
“…the conduct of RCM from 11 April 2014 to 28 April 2014 comprised a fundamental breach of clause 9 of the management agreement. These were provisions that went to the very heart of the management agreement and the relationship of RCM and Cosentino. Further, the conduct of RCM plainly evinced an intention only to fulfil the contract in a manner inconsistent with [its] obligations and accordingly comprised a repudiation of the management agreement. The breach or repudiation was accepted by the letter from Gibsons of 3 June 2014 and accordingly the contract came to an end as a result of RCM’s breach.”
171 He reviewed the exchange of emails, described above, commencing on 7 April and climaxing on 11 April. He noted that the meetings which were deferred were meetings which Mr Cosentino was very keen to attend (T656, L2-5) in circumstances where Mr Carr agreed that television was very important to Mr Cosentino’s career (T249, L2-8) and that it would have been in Mr Cosentino’s best interests to have the production companies make television shows starring Mr Cosentino. (T273, L7-9) He noted that Mr Marchesani concurred. (T505, L1-7)
172 Tracing the history of the emails, Mr Shaw submitted that Mr Carr’s explanation was that the production companies would have wanted the certainty of knowing that Mr Carr was on-board and would continue to manage Mr Cosentino’s career. This explanation should, he said, be rejected because it was not to be found reflected in any of the emails.
173 Mr Williams QC and Mr Manly did not disagree with Mr Shaw’s summary of the law on repudiation and fundamental breach. They submitted, however, that emphasis should be placed, not upon whether clause 9 was a condition of the contract, any breach of which would entitle the innocent party to terminate, but upon the seriousness of any particular breach. This, it was said, was in accordance with more modern analysis of contractual breach.
174 They conceded that the meetings with the production houses were very important for Mr Cosentino. In a broad sense, they were ready to concede that they were of fundamental importance and that they went to the root of the management contract. They said, however, that what occurred was that those meetings were deferred for a short time. Whilst the obligations under clause 9 might be fundamental, time was not of the essence, and a short deferral of the date of the meetings constituted neither a repudiation nor a fundamental breach.
175 Mr Williams QC and Mr Manly referred to the observation by Mason J (as he then was) in Tabali’s case, that counsel for the appellant there had submitted “correctly, that repudiation of a contract is a serious matter and is not lightly inferred…”. ((1985) 157 CLR 17, 32))
176 They made reference to the fact that Mr Carr was, on 11 April, probably busy with a number of other matters, though little evidentiary basis was laid for this submission.
177 The exchange of emails on 11 April and following should, they said, be viewed in the context of the relationship between the parties. They submitted that at the meeting of 4 April matters had concluded, according to the evidence of Mr Carr and Mr Marchesani with the Cosentinos stating that they had further grievances beyond the issue relative to the performance at Wollongong, upon which they declined to elaborate. Therefore, Mr Williams QC and Mr Manly said, the Cosentinos were in a frame of mind where they were likely to exaggerate the significance of the events of 11 April.
178 The tone of the email of 7 April from Mr Marchesani, referring to a positive discussion between Mr Cosentino and Mr Carr, implied that the meeting of 4 April, which was followed by that telephone conversation, ended on a sour note.
179 They said I should find that the issue of extension of the management agreement was discussed at the meeting on 4 April, despite denials made by the Cosentinos that this occurred. In fact, they submitted that I should accept the evidence of Mr Marchesani and Mr Carr to the effect that the issue of extension was raised. Ultimately, however, they conceded that whilst Mr Marchesani had given this evidence, Mr Carr had not.
180 In Koompahtoo Local Aboriginal Land Council v Sanpine Pty Ltd (2007) 233 CLR 115, the High Court considered discharge of contracts for repudiation and fundamental breach or breach going to the root of the contract. Their Honours recognised that, apart from repudiation, a contract may be discharged by an innocent party if there is a breach of a term of such essentiality that, in accordance with the formulation in Bancks’ case, the promisee would not have entered into the contract without it.
181 Secondly, they said there were some terms which were innominate and might be the basis for discharge upon breach, depending upon the seriousness of the breach, itself. Where a very serious breach of such an innominate term occurred, the breach was said to go to the root of the contract.
182 In a general sense, I accept the submission put by Mr Shaw that clause 9 should be regarded as an essential term of the contract, any breach of which would give an automatic right to the artist to terminate. On the other hand, on one view, one might regard Mr Carr’s actions and omissions at the Wollongong performance as constituting some type of minor breach of clause 9 and, instinctively, one feels that this event could not be regarded as going to the root of the contract or as justifying discharge of the contract by the artist.
183 Whatever view one may take on that subject, I agree with Mr Shaw’s submission that what occurred on 11 April did constitute a breach of such importance that it could be regarded as going to the root of the contract. Further, I accept that the same matters can be regarded as a repudiation by RCM of its obligations.
184 Certainly, the mere deferral of even the most important meeting, in itself, could not constitute a breach going to the root of the contract or a repudiation; but to characterise what happened as a mere deferral having the same character, for instance, as a deferral of a meeting by the manager simply because of conflicting obligations, substantially underplays the importance of what occurred. The deferral was, according to RCM’s emails, to enable Mr Cosentino to consider the request that had been put to him to deal with the issue of renewal of his management agreement with RCM.
185 The first email on 11 April from Mr Marchesani included the statement, “We need the management agreement to extend for a further three years form (sic) when it ends in October…”. Mr Cosentino replied that he was agreeable to discuss this matter and (at DCB 241) Mr Marchesani responded, “We must discuss and resolve point one”. Point 1 was not, as Mr Carr and Mr Marchesani sought to characterise it in their evidence, whether or not the management agreement would be extended. What needed to be resolved was the extension of the management agreement.
186 It was not that Mr Cosentino was being pressed to give a clear answer, yes or no. He was being pressed for the answer “yes” and the meetings which were important to his career were deferred until he offered that satisfactory response.
187 I find the evidence of Mr Carr and Mr Marchesani, to the effect that all that they were seeking was certainty, unconvincing. Upon their account, whilst it would have been entirely unsatisfactory to meet the production companies stating, “RCM continues as manager for the next six months. Extension of those arrangements is under discussion but has not been confirmed”, it would have been acceptable to say “RCM continues as manager for the next six months and will terminate at that stage”. This is simply implausible and I reject it.
188 Again, the suggestion made by both Mr Carr and Mr Marchesani, that they were under an ethical obligation not merely to answer questions about RCM’s future with Mr Cosentino but to volunteer what the situation was even if not directly asked, was difficult to credit. RCM had no entitlement to demand the extension of its agreement with Mr Cosentino, and the emails indicated that it wished to hold Mr Cosentino’s career hostage to attain that result.
189 Mr Shaw’s submissions, that there is nothing in the email exchange to suggest that all that RCM was seeking was certainty, is correct. If there was any doubt about that, Mr Cosentino sent an email to Mr Carr on the afternoon of 11 April stating, amongst other things, that he hoped:
“…that your commitment to the cause isn’t contingent on us immediately signing an extension, without having any opportunity to discuss or negotiate that agreement. The way that it read in the email Adrian sent, sounded a bit like an ultimatum. I hope that’s not the way you look at it.”
190 This email made the Cosentinos’ concerns absolutely plain. If RCM’s position was, as Mr Carr and Mr Marchesani said it was, this email should have produced an immediate response of clarification denying any attempt to use the meetings as blackmail. In fact, all that happened was that Mr Carr advised Mr Cosentino that the meetings had already been confirmed and could not be rescheduled.
191 The entire exchange shows RCM putting its interest in securing an extension of its management entitlements ahead of the interest of Mr Cosentino in having his career managed and advanced in accordance with the provisions of clause 9. This conduct was repudiatory.
192 Mr Cosentino’s pleading also asserts that an email of 28 April to Shine UK (Ms Georgia Brown) was also repudiatory. It simply asserted that RCM continued to be the main point of contact for Mr Cosentino. It asserted the continuation of the management contract. Mr Williams QC and Mr Manly submitted that this email could not, in itself, be repudiatory. I accept that submission.
193 Also in his pleaded case, Mr Cosentino asserts that his email of 29 April 2014, quoted above, constituted an acceptance of repudiation. Mr Williams QC and Mr Manly submitted that it could not have that operation, merely speaking about breakdown of marriages and so forth and the need to be honest. The punch line is “I believe it would be best for both of us if we go our separate ways. I hope you understand and respect my position.” There was no assertion of repudiation, merely a suggestion of incompatibility that Mr Cosentino and Mr Carr were “in very different head spaces”.
194 The acceptance of repudiation must be found, therefore, in the letter from Gibsons, on behalf of Mr Cosentino, on 3 June 2014. There is no question as to its capacity to constitute, as a matter of form, an acceptance of repudiation. Indeed, RCM’s case is that it constitutes, in itself, a repudiation by Mr Cosentino.
195 Mr Williams QC and Mr Manly submit that the Cosentinos had taken action between April and June which constituted an affirmation of the contract and therefore cut off their ability to accept the repudiatory conduct of 11 April.
196 The innocent part to a contract confronted by the other party’s repudiation is at liberty, either to accept the repudiation and discharge the contract prospectively, or affirm the contract. In Sargent v ASL Developments Ltd (1974) 131 CLR 634, 641, Stephen J said:
“The doctrine of election as between two inconsistent legal rights is well established but certain of its features are not without their obscurities. The doctrine only applies if the rights are inconsistent the one with the other and it is this concurrent existence of inconsistent sets of rights which explains the doctrine; because they are inconsistent neither one may be enjoyed without the extinction of the other and that extinction confers upon the elector the benefit of enjoying the other, a benefit denied to him so long as both remained in existence.”
197 So, in the case of repudiation, the innocent party terminating the contract enjoys the benefits of termination but is deprived of the opportunity to insist upon the performance of future obligations which are thereby terminated. On the other hand, if the innocent party elects to affirm the contract, that party becomes entitled to continue to insist upon future performance but is deprived of the opportunity to rely upon the repudiation to terminate the contract.
198 A further repudiation would give the innocent party a further opportunity for election. Mason J (as he then was) said:
“A person is said to have a right of election when events occur which enable him to exercise alternative and inconsistent rights, i.e. when he has the right to determine an estate or terminate a contract for breach of covenant or contract and the alternative right to insist on a continuation of the estate or performance of the contract. It matters not whether the right to terminate the contract is conferred by the contract or arises at common law for fundamental breach – in each instance the alternative right to insist on performance creates a right of election.” (1974) 131 CLR 634, 655
199 At 7.35am on 15 April, Mr Adam Cosentino sent an email to Mr Marchesani at RCM (PCB 1024-1027). The email consisted of a detailed response as to the show which Mr Cosentino proposed to put on for the Singapore Grand Prix. The covering email to Mr Marchesani read as follows:
“Hi Adrian,
Below the email I am going to send to Sarah, we are thinking of going in at $US100,000 (performance fee) & $US30,000 (for transport, fight (sic), freight etc). Total - $US130,000, do you agree?
If your (sic) OK with the fee ill (sic) send it Sarah and cc you in.
Let me know.
Regards
Adam”
200 At 10.59am, Mr Marchesani responded to Mr Adam Cosentino raising a number of queries which were responded to in a return of the email with the answers in bold letters. The responses to the questions were emailed by Mr Cosentino at 3.34pm. Mr Marchesani responded in an email despatched at 18.26 (viz 6.26pm) stating, “Yes OK…why not suggest less than 78K for fees and more for production…means you pay a couple of K less in tax…”.
201 Mr Adam Cosentino responded at 8.16pm, concluding, “So we could say $90,000 in performance fee and $40,000 in production expenses etc etc”. The final transmission in the chain was at 8.39pm from Mr Marchesani stating, “at the end of the day its (sic) only trying to save a couple of K…so let’s not bother and just go with all up 130K and let them split it 60/40.”
202 This exchange constitutes the Cosentinos or, perhaps more accurately, Mr Adam Cosentino on behalf of his brother, availing of Mr Cosentino’s entitlement to advice from RCM in accordance with clause 9.3 of the management agreement – which advice was forthcoming. The entitlement to that advice for Mr Cosentino existed only if the management agreement continued to be in force.
203 Mr Shaw cross-examined a number of witnesses and made submissions as to what he said was a common transitional phase or a `run-off period’, where the responsibility of one manager has terminated, yet there are steps taken to “finish off” management matters by the old manager. Examples were that if RCM had previously represented Mr Cosentino but did not then represent him, it would facilitate a promoter enquiring after Mr Cosentino’s services and making contact either with Mr Cosentino himself or the new manager. Mr Williams QC and Mr Manly did not concede the correctness of this practice or analysis.
204 Whatever might be said for the practice explored by Mr Shaw in cross-examination to seek guidance as to a commitment, even one which was previously explored by a manager during the term of his management, goes beyond any interim or `run-off’ process. It constitutes an election to affirm the contract.
205 Mr Williams QC and Mr Manly also took me to another email exchange on 15 April 2014 (PCB 1028), where Mr Carr sent an email to Mr Adam Cosentino stating “can you confirm Bathurst?” Mr Adam Cosentino responded:
“Hi Ralph,
It’s confirmed.
Let me know what I have to do from here.
Regards
Adam”
206 Mr Williams QC and Mr Manly submitted that this was another example of Mr Adam Cosentino seeking advice from RCM on behalf of his brother. I am inclined to think that this is correct, though if it stood alone it might be regarded as a little slender to constitute an election to affirm the contract.
207 Mr Shaw relied upon the decision of the High Court of Australia in Tropical Traders Ltd v Goonan (1964) 111 CLR 41. There, the Court determined that it was competent for a party, presented with a right to elect, to seek an extension of time in which to elect. Both options remained open to the “elector” so long as, in the interim period, it did nothing which could be regarded as an election and it was not inequitable for it to keep its right to elect open.
208 For reasons already explained, in my view, this is not what Mr Cosentino did. Rather, on 15 April, he elected to affirm the contract. In any event, even if that were not so, as Mr Williams QC and Mr Manly submitted, the substantial lapse of time between 11 April and 3 June might have rendered the doctrine of Tropical Traders Ltd v Goonan problematic to apply in this case. As it is, that is a matter upon which I do not have to offer an opinion.
Post-contractual misleading and deceptive conduct
209 The pleaded matters relating to the Seven Network, Nicabate, Live Nation and Sony were not ultimately pressed and so I need say no more about them.
Calculation of commission
210 Clause 7 of the management agreement entitled RCM to a commission of 20 per cent of Mr Cosentino’s “gross earnings (exclusive of agency fees) received throughout the world in the entertainment industry during the term of [the management] agreement”. (Clause 7.1) The parties are in dispute as to the meaning of the expression “gross earnings”. Clause 7.3 defines the phrase as follows:
“7.3The expression ‘gross earnings’ shall mean the total of all money or other consideration (including but not limited to advances, salaries, earnings, wages, fees, royalties, bonuses, gifts, goods or benefits of any kind, shares, shares and ventures, properties or profits) directly or indirectly accrued to the account of or received by the Artist or any person on their behalf from the entertainment industry including any companies owned or controlled by the Artist. All money or other consideration paid to the Artist’s creditors pursuant to legal process or by virtue of assignment by or at the direction of the Artist shall be deemed to be part of the Artist’s gross earnings. gross Earnings (sic) shall not include any sums paid as Goods and Service Tax, recording and video budgets, any Artist royalties that are credited to recoup any advances but which are not actually received by the Artist, support band fees and live production expenses.”
211 The issue in dispute between the parties is whether the exclusionary provision as to “live production expenses” entitles Mr Cosentino to deduct from the total of his gross earnings the amount of live production expenses before commission is calculated upon those earnings. Mr Shaw, on behalf of Mr Cosentino, said that the opening words of the second sentence of clause 7.3, namely, “All money or other consideration paid …” do not govern or restrict the meaning of live production expenses. He said, “That would make no sense in the context of the second item [referred to in the sentence], recording and video budgets.” This, submitted Mr Shaw, in accordance with principles approved by the High Court for interpretation of commercial contracts, was the common sense businesslike interpretation. He continued:
“It would be remarkable for an artist to pay a 20 per cent commission on gross earnings for a live show without any account being taken of the live production expenses of that show, which would likely be considerable.”
212 The construction favoured by RCM, he said, would have the capricious result that:
“Where live production expenses [were] paid in a lump sum by a customer, RCM does not charge commission on that amount, but where the customer pays for a show including live production expenses, and Mr Cosentino bears those live production expenses, RCM receives a commission on the full gross amount.”
213 Further, he submitted that the clause, in the case of ambiguity, should be construed contra proferentem.
214 Mr Williams QC and Mr Manly submitted that the phrase extends so as to exclude from being the subject of commission payment only those live production expenses which were paid to the artist, as distinct from those which the artist might outlay himself as the cost of his performance. They noted that Mr Cosentino, by way of counterclaim, was seeking to “claw back” a large portion of the commission which, in accordance with the procedures laid down in the contract, had been paid by Mr Cosentino to RCM.
215 Mr Williams QC cross-examined Mr Adam Cosentino at some length as to a large number of invoices which were relied on by Mr Cosentino for this portion of his counterclaim. The cross-examination demonstrated, according to Mr Williams QC and Mr Manly, that the allocations to particular performances were arbitrary and, in the case of a large number of invoices, it could not be shown with clarity which live performances they pertained to. Other amounts claimed as expenses, such as the salary of Mr Cosentino’s magician’s assistant, Ms Stavrou, who was on salaried retainer, were paid and payable whether a performance was being staged or not. They submitted that a business-like interpretation of the contract would create a regime in which it was possible, with relative ease and at the time when commission became payable, to make confident and conclusive calculations of it. The recalculation made by way of counterclaim could occur only after the event when a whole range of expenses were finally invoiced and in circumstances where the allocation of those invoices was unclear and contentious. As to the suggested incongruity of referring to, for instance, a “recording budget” being paid to an artist, they submitted that the reference to the recording budget should be taken in the context of meaning the amount budgeted as the cost of making the recording.
216 In my view, the interpretation advocated by Mr Williams QC and Mr Manly should be preferred. Obviously, a 20 per cent commission on gross, as distinct from net, earnings seems, to a person with little experience of the entertainment industry, quite high. It becomes, on the face of it, more exorbitant when, to use popular language, it is seen to be levied upon the “top line”; that is, before expenses. That appears to be the plain meaning of the provision which levies commissions on gross earnings. Mr Williams QC and Mr Manly submitted that the figure seems high in comparison, for instance, with the commission charged by a barrister’s clerk. They drew attention to the fact that RCM had at any one time about a half dozen entertainment clients, as the evidence showed a few public figures and footballers who were represented, in comparison to the quite large lists which paid commission to each barrister’s clerk. The services which a manager was expected to render to an artist under his management were correspondingly far more extensive. Whatever might be the merit of these considerations as establishing the fairness or otherwise of the commission regime, I am concerned to interpret the contract. No argument has been put seeking to attack the contract or its formation based on any equitable or statutory ground, for instance, of unfairness or unconscionability.
217 To provide for the deduction of so large and wide a group of expenses as live production expenses would make a mockery of the concept that commissions are to be levied on “gross earnings”. I accept the submission made on behalf of RCM that there is no incongruity in seeing the whole of the last sentence of clause 7.3 as restricted to money or consideration paid to the artist. I accept that references to, for instance, a “recording budget” should be seen as a reference to the payment of the amount budgeted for the cost of making a recording. There is no warrant for deducting from the gross earnings, upon which commission is calculated, costs outlaid by Mr Cosentino as live production expenses. His counterclaim in this regard therefore fails.
218 Even if I were wrong in this, Mr Williams QC and Mr Manly have challenged the jurisprudential basis upon which the counterclaim is made. It is not in the form of a money count for monies paid under mistake or upon a consideration that has failed. Rather, as Mr Shaw put it, it is a simple claim in contract. As I understand it, the contention was that, as a matter of contract, if excessive commission beyond what the contract provided for were paid, there was an obligation under the contract to repay that commission. There was no plea that a term should be implied in the contract, either as a matter of fact or a matter of law. I enquired of Mr Shaw why this counterclaim was not pleaded as a money count. He said that since the parties’ relationship was governed by contract, that necessarily excluded any restitutionary claims such as money counts.
219 Mr Shaw did not refer me to any case in which a claim or counterclaim for repayment of money already paid was mounted in this fashion. I accept that where the relationship of parties was governed by a contract, that would necessarily exclude a claim, for instance, in quantum meruit or property occupied – see Ovidio Carrideo Nominees Pty Ltd v The Dog Depot Pty Ltd (2006) V Conv R 54-713. Nevertheless, the existence of a contract, whether discharged by breach or by performance, has not been seen as a bar to a party bringing a claim to recover on a money count. In David Securities Pty Ltd v Commonwealth Bank of Australia (1992) 175 CLR 353, the High Court held a customer of the bank entitled to recover money which it had paid under a mistake of law ostensibly under a contract which it had with the bank.
220 In Roxborough v Rothmans of Pall Mall Australia Limited (2001) 208 CLR 516, their Honours held that a wholesale buyer of cigarettes was entitled to recover the amount of a purported state tax added to the price of the cigarettes sold to it when the tax was held to be unconstitutional on the basis that a distinct and severable part of the consideration for the contract had failed. Again, where the seller or vendor under a contract for sale terminates the contract for breach by the purchaser or buyer, the purchaser or buyer may recover as monies paid upon a consideration that has failed instalments of purchase price paid by it – McDonald v Dennys Lascelles (1933) 48 CLR 457, 479 (per Dixon J as he then was). I accept the submission made by Mr Williams QC and Mr Manly that the counterclaim was not properly framed as a cause of action.
221 The counterclaim relative to live production expenses fails.
Commission on sales of merchandise
222 A similar issue arises with respect to commission on sales of merchandise. Mr Cosentino said that an arrangement whereby Cosentino was charged commission on gross receipts for merchandise would have been entirely uneconomic as far as they were concerned. Mr Adam Cosentino said that this matter was raised with Mr Carr and Mr Carr agreed to vary the terms of the contract – T845, L20. Mr Carr denies this – T325, L25 - T326, L30. As I understand it, however, the effect of Mr Adam Cosentino’s evidence was that the only substantial merchandise revenue upon which commission was paid was, as a matter of fact, treated in the manner which Mr Cosentino says is the correct one in his counterclaim. The issue on the facts therefore appears to be moot and it is unnecessary for me to make any findings with respect to it.
Post-management term commission
223 Clause 7.1 of the management agreement provides for the payment of what might be described as “trailing” commission in the four years following the termination of the management agreement. It provides for payment at a sliding scale of commission at 20 per cent for year one, 15 per cent for year two, 12.5 per cent for year three and 10 per cent for year four:
“…of the Artist’s gross earnings derived from any and all engagements or subject to the specific provisions relating to recording and publishing below, agreements relating to any of the Artist’s activities in the entertainment industry which were entered into during the term...”
224 On behalf of RCM, Mr Williams QC and Mr Manly contended that the trailing commission applies to earnings derived from all engagements whensoever arranged, but only to earnings derived from agreements entered into during the term of RCM’s managership. Mr Shaw submitted that the natural and ordinary meaning was that both engagements and agreements were to be regarded as governed by the restrictive phrase, “which were entered into during the term”. The obviousness of this construction, he submitted, was clearer still, once one excluded the words referring to publishing and recordings which were not appropriate to an illusionist anyway, so that the relevant passage provided for payment of commission on earnings from “all engagements or … agreements relating to any of the Artist’s activities in the entertainment industry which were entered into during the term”.
225 I accept the submission made by Mr Shaw on behalf of Mr Cosentino. The meaning of agreement is relatively clear. Precisely what an `engagement’ is might be the subject of some debate. I would have thought that for an entertainer, an engagement was a booking and, typically, a booking would always occur in pursuance of an agreement, unless one is to entertain the possibility of an entertainer breaking into performance unasked and unexpectedly – and then deriving earnings from that performance, an unlikely situation. A more likely interpretation of the relationship between engagements and agreements is that the two are linked in meaning and are used to convey a composite concept rather than relating to distinct and separate matters. This is a frequent traditional drafting technique. For instance, a general law conveyance has the vendor “hereby assign, convey and set over” the relevant property. It is not obvious what the clear distinction is between the three verbs employed. The trailing commission is payable only upon agreements and engagements made before the termination of the management agreement.
226 The second issue as to trailing commission arises out of the fact that persons now seeking to engage the services of Mr Cosentino for his performances as an illusionist must approach and make an agreement with Gumball Enterprises Pty Ltd, which makes Mr Cosentino’s services available for a fee which would generally equate with the fee which a promoter might, before June 2014, have paid to Mr Cosentino himself. The company adopted its present name on 12 June 2014. Its directors are Mr John Cosentino and Mr Adam Cosentino. Mr John Cosentino holds the shares. The company is trustee of the Gumball Productions Unit Trust, the unit holders of which trust are Rogicom Pty Ltd, as trustee of the Rogicom Discretionary Trust and Jayco Pty Ltd as trustee for the J and J Cosentino Family Trust. All of these matters are derived from company searches and the evidence of Mr Adam Cosentino and by reference to the trust deeds themselves. Whilst Gumball has, according to Mr Adam Cosentino, been contemplating engaging other artists, at present its only client is Mr Paul Cosentino, who is neither a director nor a shareholder. Clause 7.1 of the management agreement includes as its final sentence:
“In each case, post termination commissions will be payable upon receipt of the gross earnings by or on behalf of the Artist. It shall apply to any income diverted to a Trust Company or other entity directly or indirectly on behalf of the Artist.”
227 Mr Shaw submitted that these earnings should not be subject to the trailing commission. He said, “Simply put, the earnings of Gumball are not earnings of Cosentino and therefore cannot fall into this category.” That is, they are not `earnings…of the Artist’. Nor, he submitted, are they earnings `…diverted to a Trustee Company or any other entity directly or indirectly on behalf of the Artist’. He said:
“The earnings of Gumball are earnings from arrangements that it has made as production company to put on Cosentino’s shows. It charges for those shows and pays Cosentino a fee. Cosentino is not a shareholder or a director of Gumball nor a unitholder in the trust of which it is trustee, nor does he have any interest in those unitholders. In those circumstances, the income earned by Gumball is not income diverted to a trustee company or any other entity directly or indirectly on behalf of Cosentino.”
Nor, submits Mr Shaw, are these allowances brought to commission charge by the words in clause 7.3 as part of the definition of gross earnings on the basis of being derived by any company owned or controlled by the artist. The money is received by Gumball for its own account and not on behalf of Mr Cosentino.
228 Mr Williams QC and Mr Manly submitted that the monies derived by Gumball were `income diverted to a Trust Company or other entity directly or indirectly on behalf of the Artist’.
229 These competing contentions raise a difficult point of construction. The issue is similar to ones which have arisen many times over the decades in the tax jurisdiction. Without going to the provisions in the tax legislation, a taxpayer’s assessable income includes not only income which the taxpayer received but income diverted by the taxpayer to another person or entity. Further, there have been general anti-avoidance provisions in Australian income tax law over the years: the old s260 of the Income Tax Assessment Act 1936 and its successor, Part IVA.
230 It may be, given the interpretation which I have applied to RCM’s trailing commission entitlements, that this point of construction will turn out to be moot. I think that is the likely outcome. Against the possibility that I am incorrect, I reach the following conclusions.
231 Where a new contract is made by Gumball Enterprises for the supply of Mr Cosentino’s services, it would appear, from Mr Adam Cosentino’s evidence, that Gumball would contract as principal, not as agent for Mr Cosentino. Since the fees are in accordance with the original contract payable to Gumball, they cannot be said to have been “diverted” from Mr Cosentino or anyone else. The provisions of clause 7.1 therefore do not apply. The amounts payable to Gumball were not directly or indirectly received by the artist. In any event, Gumball is not, upon the evidence, controlled by Mr Paul Cosentino.
232 The parties disagreed as to how post-management term commission should be assessed. The plaintiff’s case was that, had Mr Cosentino continued under its management, he would have derived a higher income than, in the event as proven, the case under self-management. Whatever merit that argument might have for the balance of the primary term which, I have found, was cut short by repudiatory conduct by Mr Cosentino, I cannot see that it has any validity for the period after 31 October 2014. From there, Mr Cosentino was entitled to manage himself as he saw fit or to appoint another manager or, for that matter, to retire from show business. There is no warrant for awarding commission on any basis other than the earnings which he actually derived.
233 Mr Marchesani made a projection which increased Mr Cosentino’s earnings by 10 per cent each year upon the footing that his career was still in a growth phase. It may be that other findings and determinations that I have made render this debate between the parties moot. I shall record, however, that 10 per cent is a rate far beyond the underlying inflation rate in Australia at the moment. Mr Adam Cosentino said that his brother’s potential for growth in career in Australia might be limited.
234 If, upon various permutations and combinations, it is necessary to calculate damages by reference to RCM being deprived of trailing commissions, in my view, there is no warrant to include a 10 per cent uplift per year.
Disposition
235 The parties were agreed that I should determine the matters of principle and leave it to counsel to work out the figures to give effect to my determination.
236 I have heard no argument on the question of costs.
237 I will direct that the parties bring in short minutes to give effect to these reasons. Costs will be reserved.
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