Eden Productions Pty Ltd v Southern Star Group Limited - [2002] NSWSC 1166

No judgment structure available for this case.

CITATION: Eden Productions Pty Ltd v Southern Star Group Limited [2002] NSWSC 1166

FILE NUMBER(S): SC 50022/00

HEARING DATE(S): 11/11/02, 12/11/02, 13/11/02, 14/11/02, 15/11/02, 20/11/02, 21/11/02, 22/11/02, 25/11/02, 26/11/02, 27/11/02, 28/11/02, 29/11/02, 04/12/02

JUDGMENT DATE: 17 December 2002

PARTIES :

Eden Productions Pty Ltd - Plaintiff
Southern Star Entertainment Pty Ltd - 1st Defendant
Southern Star Group Limited - 2nd Defendant

JUDGMENT OF: Gzell J

COUNSEL : Mr D J Hammeschlag SC/ Mr A P Coleman - Plaintiff
Mr P M Wood/ Mr V F Kerr - Defendants

SOLICITORS: Holding Redlich
Freehills, Solicitors

CATCHWORDS: CONTRACTS - General Contractual Principles - Construction of Interrelated Contracts - Estoppel - Best Endeavours - Implication of Term of Trade, Custom or Usage - Implied Term of Good Faith - No Separate Issue - EQUITY - Fiduciary Obligations - No Separate Issue - RESTITUTION - Mistake - Subjective Element of Enrichment irrelevant - Trustee Distribution to Beneficiaries - Whether Change of Position Defence - EVIDENCE - Limitations of Principle in Jones v Dunkel - PROCEDURE - Discovery - Legal Professional Privilege in NSW Governed by Evidence Act 1995 - No Waiver of Client Legal Privilege by Employee or Agent unless Authorised to do so - LIMITATION OF ACTIONS - Effect of Amendment after Expiration of Limitation Act 1969 Period - INTEREST - As of Right Entitlement and Discretion under Supreme Court Act 1970, s 94

LEGISLATION CITED: Supreme Court Act 1970
Evidence Act 1995
Limitation Act 1969
Supreme Court Rules 1970

CASES CITED: Hilton Hotels (Aust) Pty Ltd v Sunrise Resource (Aust) Pty Ltd [2000] NSWSC 46
Waltons Stores (Interstate) Ltd v Maher (1987-1988) 164 CLR 387 at 404
The Commonwealth v Verwayen (1990) 170 CLR 394 at 444-446
Hospital Products Ltd v United Surgical Corporation (1984) 156 CLR 46 at 64
Williams v Minister Aboriginal Land Rights Act 1983 (1994) 35 NSWLR 497
Cubillo v Commonwealth (2000) 103 FCR 1 at 120
Schellenberg v Tunnel Holdings Pty Ltd (2000) 200 CLR 121 at 141-143
Jones v Dunkel (1959) 101 CLR 298
Con-Stan Industries of Australia Pty Ltd v Norwich Winterthur Insurance (Australia) Ltd (1985-1986) 160 CLR 226 at 236
Grundt (1937) 59 CLR at 675
Thomson ((1933) 49 CLR at 547
Australia and New Zealand Banking Group Ltd v Westpac Banking Corporation (1987-1988) 164 CLR 662 at 673
David Securities Pty Ltd v Commonwealth Bank of Australia (1991-1992) 175 CLR 353 at 379
Lipkin Gorman v Karpnale Ltd [1991] 2 AC 548 at 580
Ing v Stewart (1892) 66 LT 339
Holmark Construction Co Pty Ltd v Kekatos (1994) 12 ACLC 400 at 403
Breen v Williams (1995-1996) 186 CLR 71 at 82
Pilmer v Duke Group Ltd (in liq) (2001) 207 CLR 165 at 217-218
Commonwealth Bank of Australia v Spira [2002] NSWSC 905
Burger King Corporation v Hungry Jack's Pty Ltd [2001] NSWCA 187
Overlook v Foxtel [2002] NSWSC 17 at par 62
Esso Australia Resources Ltd v Commissioner of Taxation (1999) 201 CLR 49
The Daniels Corporation International Pty Ltd v Australian Competition and Consumer Commission [2002] HCA 49 at par 11
Potter v Minahan (1908) 7 CLR 277 at 304
Baker v Campbell (1983) 153 CLR 52
Re Bolton; Ex parte Beane (1987) 162 CLR 514
Bropho v Western Australia (1990) 171 CLR 1
Coco v The Queen (1994) 179 CLR 427 Commissioner of Australian Federal Police v Propend Finance Pty Ltd (1997) 188 CLR 501
Ampolex Ltd v Perpetual Trustee Co (Canberra) Ltd (1996) 40 NSWLR 12 at 18
NRMA Ltd v Morgan [1999] NSWSC 694 at par 10 - par 16
The Adelaide Steam Ship Pty Ltd v Spalvins (1998) 81 FCR 360 at 371
Yuill (1991) 172 CLR 319
Hood v Reeve (1828) 3 C & P 532 (172 ER 534)
Bond Media v Ltd v John Fairfax Group Pty Ltd (1988) 16 NSWLR 82
Mason and Carter, Restitution Law in Australia Butterworths, Sydney, 1995, at par 228
McCormick On Evidence, 4th ed at 131

DECISION: Matter stood over for further hearing.

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
COMMERCIAL LIST

GZELL J

TUESDAY 16 DECEMBER 2002

50022/00 EDEN PRODUCTIONS PTY LTD v SOUTHERN STAR ENTERTAINMENT PTY LTD AND ANOR

JUDGMENT

1 The plaintiff, Eden Productions Pty Ltd (“Eden”), is a company through which the services of Hal McElroy as a producer of film and television programmes are provided. The first defendant, Southern Star Entertainment Pty Ltd (“SSE”), carries on the business of developing, producing, marketing and distributing television programmes in Australia and elsewhere. The second defendant, Southern Star Group Ltd (“SSG”), is the holding company of the Southern Star Group (“Southern Star”). The parties had been associated for many years in the development and production of television programmes through what is known as a division within SSE called Hal McElroy – Southern Star (“Division”).

2 On 16 February 1995, Mr McElroy, Eden and SSE executed a service agreement (“First Service Agreement”) said to be for the period from 1 April 1993 to 31 March 1995 whereunder Eden agreed to provide to the Division the exclusive services and expertise of Mr McElroy for the development and production of such Projects as were agreed between the parties for an annual retainer. SSE agreed to provide the Division with funding for the development of Projects, was responsible for marketing and distribution and was to provide business affairs services, financial management services and administration services

3 On the same day the same parties executed a revenue sharing deed (“First Revenue Sharing Deed”) providing for the payment to Eden annually over the same period of an amount equal to 50% of the net profit of the Division.

4 On 5 May 1995 the same parties executed a new service agreement (“Second Service Agreement”) for the period 1 April 1995 to 31 March 1998 and a new revenue sharing deed covering the same period (“Second Revenue Sharing Deed”).

5 Shares in SSG were listed on the stock exchange under a prospectus of 13 August 1996. The relationship between Mr McElroy and Southern Star broke down over his participation in the float. On 5 December 1997 Eden, Mr McElroy, SSE, SSG and Neil Balnaves and Errol Sullivan, two of the principals of Southern Star, executed a deed (“Termination Deed”) that brought the Division to an end as at 31 December 1997.

6 Eden sued SSE and SSG for moneys said to be owing under the agreements and for other relief. Its pleading contained 23 claims, some of which have since been abandoned. In proceedings in the District Court, transferred to this Court and consolidated with the Eden proceedings, SSE sued Eden for repayment of moneys said to have been wrongly paid under the agreements.

Claim 1

7 After termination, SSE deducted from the profits of the Division unrecouped advances totalling $1,386,815 made to SSE by Southern Star Group Pty Ltd (“SSD”) and accounted to Eden for 50% of the remainder. There is no dispute as to the amount. Eden claimed that it was entitled to reimbursement of 50% of this amount, $693,407.50.

8 A television series (“Project”) was funded by SSE from a number of sources. First, it entered into a television licence and sometimes a licence and investment agreement (“Licence Agreement”) with a television network (“Network”) which acquired the rights to broadcast the Project in a defined territory for a specified term in consideration for the payment to SSE of a fee (“Licence Fee”) and sometimes an investment amount (“Network Investment”) both calculated at so much per episode.

9 The remaining budgeted cost per episode was sometimes funded from loans or investments by the Australian Film Finance Corporation (“FFC”) or by Film Victoria and sometimes by an advance (“Distribution Advance”) from SSD. Under an agreement between SSE and SSD (“Distribution Agreement”) and sometimes with the Network, SSD acquired the exclusive rights to market the Project subject to the Network’s rights.

10 A production company was party to the Licence Agreement and the Licence Fee, any Network Investment, any FFC or Film Victoria moneys and any Distribution Advance were utilised to produce the Project.

11 Under the Distribution Agreement, SSD was entitled to a commission on gross sales for marketing the Project, then reimbursement of its permitted sales and marketing costs and then recoupment of any Distribution Advance. Only then was it required to account for the balance to the Network and to SSE in defined proportions.

12 Clause 7.2 of the Second Service Agreement provided that all moneys paid by SSE towards development funding for a Project would be fully recoupable only from the production of that Project on a Project by Project basis.

13 Under the Second Revenue Sharing Deed, net profit of the Division was defined in cl 3.1 to mean all moneys received by the Division from development, production, distribution, marketing and other exploitation of Projects less recoupment of operating costs and any losses of previous years together with interest on those losses.

14 In the Termination Deed, SSE was referred to as Southern Star. The following provisions were contained in it:

“2.3 Eden and McElroy jointly and severely undertake to Southern Star and Southern Star undertakes to Eden and McElroy to continue to observe and perform their obligations according to the Service Agreement and the Revenue Sharing Deed that survive termination.

2.4 Without limiting Clause 2.3 and notwithstanding the termination of the Revenue Sharing Deed, on and from the date of this Deed Eden will be entitled on a continuing basis and while ever there are any Net Profits of the Division (as described in and calculated according to the Revenue Sharing Deed) to 50% of those Net Profits of the Division based on revenues received in relation to all episodes of “Amazing”, “Water Rats”, “Murder Call” and “Blue Heelers” completed as at 31 December 1997. Southern Star must continue to pay and account to Eden in respect to that profit share pursuant to the Revenue Sharing Deed. Neither the fact that the Hal McElroy/ Southern Star division will cease to produce after 31 December 1997 nor the termination of the Revenue Sharing Deed affects the entitlements described in this Clause which continue according to the terms of the Revenue Sharing Deed.”

15 In the Second Revenue Sharing Deed, SSE was again described as Southern Star. Clause 4.1 was in the following terms:

16 One of Eden’s submissions was that cl 4.1 of the Second Revenue Sharing Deed never came into operation. The agreement to which it referred was the Second Service Agreement. It was submitted that cl 4.1 was enlivened only if the Second Service Agreement came to an end but the Second Revenue Sharing Deed continued. That did not happen because the Termination Deed provided that both the Second Service Agreement and the Second Revenue Sharing Deed would terminate on 31 December 1997 and on and from that date the Division would cease to operate for the purposes of development and production of Projects.

17 I reject that submission. While the Second Service Agreement and the Second Revenue Sharing Deed came to an end on 31 December 1997, cl 2.3 and cl 2.4 of the Termination Deed continued their operation so far as on-going obligations were concerned and, in particular, continued the Second Revenue Sharing Deed in relation to the calculation of the net profits of the Division with respect to completed Projects and episodes as at 31 December 1997.

18 In this regard there was no limitation of the provisions of the Second Revenue Sharing Deed thus continued in operation and, in my view, the very provision within it that dealt with termination, came into play. If the parties intended that this clause would not operate, one would have expected an exclusion of it in cl 2.4 of the Termination Deed. In the absence of such an exclusion, net profits of the Division were to be calculated on a continuing basis so long as there were revenues from the specified Projects in accordance with the terms of the Second Revenue Sharing Deed and, in particular, in accordance with cl 4.1.

19 Eden submitted that if cl 4.1 of the Second Revenue Sharing Deed applied, it should be construed so as not to vary the regime which existed under the Second Service Agreement and the Second Revenue Sharing Deed and, in particular, the limitation in cl 7.2 of the former of recoupment of a Distribution Advance against the Project for which the Distribution Advance was made. It was said that this was a fundamental aspect of the financial arrangements between the parties and clearer words were required to vary that position. If there was a doubt with respect to the proper construction of cl 4.1, it was submitted that it should be construed against the defendants under the contra proferentem rule.

20 I reject this submission. Clause 4.1 of the Second Revenue Sharing Deed varied the basis upon which net profit of the Division was otherwise to be calculated. Eden’s submission would render otiose cl 4.1(b). In my view cl 4.1 required that after termination, the net profit of which Eden was entitled to 50% should be calculated after making allowance for the recoupment of moneys advanced or provided by any company within Southern Star.

21 The defendants submitted that the effect of cl 4.1 of the Second Revenue Sharing Deed resulted in a calculation of the net profit of the Division in accordance with cl 3.1 and then a deduction of all moneys advanced or provided by any company in Southern Star. It was submitted that the words “any relevant Project” in cl 4.1(b) were a reference to the class of Projects completed prior to termination referred to in cl 4.1(a) rather than to each such Project discretely. It was submitted that the commercial rationale for such an approach was that while the Division was operable, it was appropriate for SSD to recoup a Distribution Advance only from the Project for which it was made whereas after termination of the Division, it was appropriate that Eden’s 50% share of net profit should be calculated after recoupment of all Distribution Advances to Projects of the Division.

22 I reject that submission. It pays little regard to the reference in cl 4.1(b) of the Second Revenue Sharing Deed to net profit in respect of a Project and the recoupment of moneys advanced or provided with respect to that Project. In my view cl 4.1(b) rendered a change to the erstwhile determination of net profit. That had been calculated on a Divisional basis and not on a Project by Project basis. It was SSD that was limited to recouping its Distribution Advance with respect to any Project from the revenue received by it from the exploitation of that Project. It was only after such recoupment that SSD was obliged to pay any moneys to SSE. Any such receipt constituted revenue of the Division.

23 In my view, cl 4.1(b) of the Second Revenue Sharing Deed maintained the concept of recoupment of a Distribution Advance only from the endowed Project but instead of limiting Southern Star to recovery by SSD against revenues arising from its exploitation of a Project, it allowed SSE to have recourse to any moneys received by it with respect to the Project, including music royalties which, for reasons expressed below, ought to have been received by SSE and not by SSD.

24 If, in the event, this construction results in little change to the commercial result that would have arisen under the former regime, that is no justification for departing from the ordinary meaning to be given to cl 4.1(b) of the Second Revenue Sharing Deed. I find it unnecessary to consider the application of the contra proferentem rule.

25 The new approach required a calculation of net profit before recoupment for each Divisional Project and then empowered SSE to deduct any outstanding moneys advanced or provided by Southern Star with respect to that Project to arrive at the net profit of the Division in respect of that Project to 50% of which Eden was entitled.

26 Neither Stuart Matthew Clark, a chartered accountant called on behalf of Eden, nor Roger Michael Amos, a chartered accountant called on behalf of the defence, carried out such a task. It would involve apportioning indirect costs and overheads to Projects on some logical basis. In cross-examination, Mr Amos was asked how he would apportion overheads to prior Projects in the absence of any record enabling an apportionment to be made. He nominated relative cost of sales rather than relative revenues as an appropriate basis.

27 As neither expert was asked for an accounting solution to this problem, however, I do not propose to enter upon it. I accept the submission of Mr Wood who, with Mr Kerr, appeared for the defence that I am unable to resolve all issues in one judgment.

28 It follows from what I have said that Eden is not entitled to $693,407.50 with respect to this claim. Some of the recoupments totalling $1,386,815 made by SSE may be able to be offset against net profits of Projects of the Division prior to recoupment calculated in the manner set forth above.

Claim 2

29 Separate Licence Agreements and Distribution Agreements were entered into for an initial 13 episodes called Water Rats 1 and a subsequent 13 episodes called Water Rats 2. SSD did not recoup the entirety of its Distribution Advance with respect to Water Rats 1 from the exploitation of that series. Having recouped the entirety of its Distribution Advance with respect to Water Rats 2, SSD recouped $949,230 of its outstanding Distribution Advance for Water Rats 1 from revenue from its exploitation of Water Rats 2 before accounting for the balance to the Network and SSE. Again, the amount is not in dispute. Eden claimed that it was entitled to 50% of this amount, $474,615.

30 The defendants said that Water Rats 1 and Water Rats 2 were one Project, that Eden consented or acquiesced in this treatment and was estopped from contending otherwise.

31 Water Rats was originally conceived as a 26 episode series. The initial bible was prepared on this basis. Mr McElroy sought to interest the Networks in the production as a 26 episode series. It was promoted to overseas buyers on this basis.

32 Having concluded the way I have in relation to Claim 1, what is significant to Claim 2 is whether the 26 episode series constituted a Project for the purpose of cl 4.1(b) of the Second Revenue Sharing Deed. The term was defined in cl 1.1 to mean any project for the development, production, marketing and/or exploitation of any television or theatrical programme in Australia and/or overseas which was undertaken by the Division.

33 Mr Wood submitted that a Project was that discrete collection of episodes which were together developed, produced, marketed and exploited as a television programme. I accept that meaning. And I accept that, originally, the 26 episode series constituted one Project.

34 The original concept was varied solely for the purpose of obtaining funding from FFC. With respect to television programmes, it would only fund mini-series. The production budget was split into two, the bible was split into two and the episodes were re-worked to qualify as separate mini-series. The Licence Agreement and Distribution Agreement with respect to Water Rats 1 were separate and distinct from the Licence Agreement and Distribution Agreement with respect to Water Rats 2. Each contained a separate Distribution Advance from SSD and each provided a separate basis for recoupment.

35 The Distribution Agreement with respect to Water Rats 1 provided that out of gross receipts, SSD should first retain its commission; secondly, reimburse its permitted sales and marketing expenses; thirdly, reimburse specified development costs of the Network and SSE; fourthly, recoup half its Distribution Advance; and then account to the Network for 40% of the remaining gross receipts. Having recouped the balance of its Distribution Advance, SSD was required to account to SSE for the remaining gross receipts.

36 The Distribution Agreement for Water Rats 2 provided that, from gross receipts, SSD should retain its commission; then recoup its permitted sales and marketing expenses; then recoup its Distribution Advance and finally pay 40% of remaining gross receipts to the Network and the balance to SSE.

37 Those documents established different recoupment regimes for each mini-series. Each mini-series answered the Project definition in the Second Revenue Sharing Deed and the meaning attributed to it by Mr Wood just as much as the original 26 episode series did. The term was also defined in the Second Service Agreement to include mini-series and television series. Albeit that the genesis for splitting the 26 episode series into two parts related solely to a question of funding, once the separate Distribution Agreements were executed, the parties were bound by them.

38 Errol Morris Sullivan was the chief executive of SSE. He gave evidence that the full amount of set-up costs was loaded into the first mini-series and he would not have approved that arrangement had SSD not been able to offset those amounts against revenues from the second mini-series. To similar effect was the evidence of Peter John Anderson who was financial controller of SSE. Notwithstanding their belief, the documentation that bound SSD was to the contrary effect.

39 Maureen Patricia Barron was head of business affairs at Southern Star. Business affairs provided legal, corporate, administrative, secretarial and other services. Ms Barron is a solicitor of this court. She holds a practising certificate and did so in 1995. I was unimpressed by her evidence on this topic. She said that the Distribution Agreements reflected arrangements that had been agreed with third parties and that within Southern Star the common understanding was that Water Rats 1 and Water Rats 2 should be treated as one Project. The fact of the matter was, however, that SSE and SSD were parties to the Distribution Agreements for Water Rats 1 and Water Rats 2.

40 Ms Barron said that the terms of the Distribution Agreements were not a complete statement of the arrangements within Southern Star. They lacked the arrangement that the 26 episodes of Water Rats would be treated as one Project. That arrangement was not recorded in any document by Ms Barron. She said she thought it was unnecessary as it was understood. She said it was probably an oversight on her part not to have recorded the internal arrangement.

41 Ms Barron advised Mr Anderson in August 1997 to recoup the outstanding portion of the Distribution Advance for Water Rats 1 against gross receipts of SSD for Water Rats 2. That advice was inconsistent with the Distribution Agreements and was wrong.

42 Ms Barron did not discuss the matter with Mr McElroy. She said she regarded him as part of Southern Star. However, she was aware in August 1997 that the relationship between Mr McElroy, Mr Balnaves and Mr Sullivan had broken down.

43 It is not to the point that Mr McElroy continued to regard Water Rats 1 and Water Rats 2 as one Project. The question is as to the entitlement of SSD to recoup portion of its Distribution Advance for Water Rats 1 from gross receipts for Water Rats 2. Nor is it to the point that the Licence Agreement for Water Rats 1 required the Network, SSE and Mr McElroy to enter into a further agreement for the second 13 episodes on the same terms subject to specified variations or that it required the Network and SSE to enter into a Distribution Agreement in a scheduled form with respect to the second 13 episodes. A Distribution Agreement in those terms was executed with respect to Water Rats 2 and it is that document which governs SSD’s entitlement to recoup any Distribution Advance.

44 For the purposes of the Second Revenue Sharing Deed and, in particular, for the purposes of cl 4.1(b) I am of the view that Water Rats 1 and Water Rats 2 were two separate Projects.

45 The question remains whether Eden is estopped from asserting this conclusion on the basis that there was a common assumption to the contrary and it would be unconscionable for Eden to resile from that common assumption.

46 Mr McElroy was aware that Water Rats 1 and Water Rats 2 were regarded as a production of 26 episodes from the creative perspective. He was presented with a participation statement for the period to September 1997 that showed a recoupment for portion of the Distribution Advance with respect to Water Rats 1 against the net receipts for distribution of Water Rats 2. That document was dated 7 December 1997, after the execution of the Termination Deed. Similar recoupments were shown in the subsequently received participation statements for the period ended December 1997 and March 1998.

47 Mr Anderson said that neither Mr McElroy nor anyone else on behalf of Eden complained about this process until the commencement of these proceedings. The participation statements were received by Mr McElroy well after relations between he, Mr Balnaves and Mr Sullivan had broken down. In those circumstances, Mr McElroy’s silence could not reasonably be taken to constitute consent or acquiescence.

48 Mr Hammerschlag SC, who with Mr Coleman appeared for Eden, pointed out that the defendants acted on their own initiative in regarding Water Rats 1 and Water Rats 2 as a single Project. They neither relied upon anything said or done by Mr McElroy nor his lack of challenge to the procedure prior to the commencement of these proceedings. Mr Sullivan never turned his mind to the question whether Water Rats 1 and Water Rats 2 were one or two Projects for the purposes of the Second Revenue Sharing Deed. He was taken to each of the documents particularised as giving rise to a common assumption between the parties and said he relied on none of them in coming to his conclusion that, apart from financing purposes, Water Rats 1 and Water Rats 2 were one Project.

49 Mr Wood submitted that it was the absence of any statement to the contrary by Mr McElroy that gave rise to the estoppel. He referred to Hilton Hotels (Aust) Pty Ltd v Sunrise Resources (Aust) Pty Ltd [2000] NSWSC 46. That was a case, however, of a common assumption for which the defendant owner of a building was responsible. The plaintiff lessee told the defendant’s manager that it wished to change its signs at the top of the building to conform to its new logo. The manager said words to the effect that that would be fine so long as the plaintiff repaired the facade behind the old signs and painted the whole of the parapet level. In those circumstances the absence of any statement on behalf of the defendant to the contrary gave rise to the estoppel.

50 In the instant circumstances, however, I am of the view that Southern Star arrived at its own conclusion that Water Rats 1 and Water Rats 2 were one Project. In so doing it was not influenced by anything said or not said on behalf of Eden. There was no common assumption.

51 Furthermore, the stance taken by Southern Star was not one in which Eden had played such a part that it would be unfair or unjust if it were left free to ignore it. As Mason CJ and Wilson J said in Waltons Stores (Interstate) Ltd v Maher (1987-1988) 164 CLR 387 at 404:

Grundt

Thomson

The Commonwealth v Verwayen

52 The defence of estoppel was not made out.

53 It follows from what I said in relation to Claim 1 that Eden is not entitled to judgment for $474,568. An amount is to be determined in accordance with my judgment in relation to Claim 1 on the basis that Water Rats 1 and Water Rats 2 were separate Projects.

Claim 3

54 There are three distinct claims under this heading.

· Central Services

55 The Second Revenue Sharing Deed required operating costs of the Division to be subtracted from the income of the Division. The term was defined as follows:

““Operating Costs of the Division” means the operating costs incurred by the Division and includes (without limitation) the costs described in the Schedule (subject to Clause 3.2) which are auditable, out of pocket and reasonable costs accounted for once only and being expenses actually incurred by the division”.

56 The schedule contained a heading for central services comprising central management fees paid to SSD at 1% of the annual turnover of the Division and departmental services bought and sold which included 25% of SSE’s operating expenses for the contribution of the chief executive, financial controller and business affairs manager and the Division’s proportionate share of SSD’s operating expenses not exceeding 6% for the services of the receptionist, payroll and accounts payable clerk.

57 Eden submitted that after termination the central management fee was not payable, only portion of the departmental services bought and sold fee was payable and legal/business affairs charges should not have been deducted. The plaintiff claimed that $168,568 was wrongly deducted and it was entitled to 50% of this figure, $84,284. The defence admitted that $28,872 of legal/business affairs fees ought not to have been deducted.

58 As to the central management fees, Eden submitted they did not survive termination because the parties were no longer involved together in the operation of the Division. I have already dealt with this issue under Claim 1. The Termination Deed continued the operation of the Second Revenue Sharing Deed so far as the calculation of net profit of the Division was concerned.

59 It was submitted, further, that the 1% charged was neither incurred by the Division nor out of pocket. I reject both of these submissions.

60 It was submitted that the requirement of incurrence by the Division meant that charges incurred by an entity other than SSE in its capacity as the steward of the Division and allocated to the Division were not incurred by the Division. If that submission were correct, the inclusion of central management fees in the schedule to the Second Revenue Sharing Deed was otiose. The inclusion of a central management fee payable to SSD as a percentage of annual turnover of the Division must be interpreted as constituting a liability of the Division that was auditable, out of pocket, reasonable and actually incurred by the Division for the purposes of the definition of operating costs of the Division.

61 The Division was not a separate legal entity. It was a fiction. For accounting purposes it was treated as a profit centre within SSE. It could not itself incur expenses. They were incurred by third parties and charged to the profit centre. The definitions of the concept “out of pocket” upon which Eden relied, suggesting an individual’s payment out of personal funds for a business expense, are inappropriate in this context. The notional Division was out of pocket with respect to charges properly raised in the accounts of the Division that had been incurred by Southern Star. This included payments made on behalf of SSE to third parties and it included a proportion of the expenses incurred by SSD in maintaining its central management staff and of SSE in maintaining its chief executive, financial controller and business affairs manager. And it applied to charges properly raised in the accounts of the Division for legal/business affairs expenses.

62 In cross-examination, Mr Anderson said that after termination the 1% fee was probably a bit high. That does not mean, however, that it ceased to be a reasonable charge. The parties agreed to a formula and agreed that the formula should survive termination. As income of the Division declined post-termination, so the charge would become the less. As Mr Amos said, an effective running organisation requires head office activity and the Division benefited from that activity from time to time. The parties contemplated that the 1% charge would continue after termination and I am not satisfied that any portion of it should be excluded on the ground that it ceased to be a reasonable charge once the Division came to an end.

63 With respect to departmental services bought and sold, Eden submitted that the charges should be treated in the same way. Of a total charge for the period post-termination of $129,650, Eden conceded an appropriate charge of $45,000.

64 The Second Revenue Sharing Deed provided that SSE should review the percentages specified for central services charges but should not amend those percentages without first obtaining the consent of Eden which consent was not to be unreasonably withheld. Mr Sullivan varied the formula in a memorandum of 21 May 1997 upon which Mr McElroy reserved his rights.

65 In light of the argument that no charges beyond the concession of $45,000 should have been raised, it may not be necessary for me to arrive at a concluded view on this issue. However, I am of the view that Mr Sullivan was entitled to take the steps he did. Following a complaint of unfairness with respect to the specified formula by another Divisional head, Mr Sullivan suggested a new formula in his memorandum of 13 March 1996. Mr McElroy suggested an amendment to that formula and Mr Sullivan included his suggestion in the formula in his 21 May 1997 memorandum. If Eden refused its consent to that formulation, I regard it as unreasonable conduct.

66 With respect to the 25% of SSE’s operating expenses, the new formula charged each Division equally for half, 12.5%, and apportioned the remaining 12.5% in proportion to each Division’s revenue base. Eden argued that this change was not justified because it went beyond the mere decrease or increase in a percentage. I do not regard the power to amend the percentages as thus subscribed. What Mr Sullivan did was to amend the percentages.

67 The charge for the period January to March 1998 was in accordance with the new formula but with a reduction of 75% of the fixed charge component to reflect reduced activity post-termination. For the year ended 31 March 1999 the amount charged was calculated under the new formula except that the fixed charge was reduced to $40,000 and, finally, for the year ended 31 March 2000 the fixed charge was set at $20,000.

68 Clause 4.1(c) of the Second Revenue Sharing Deed provided that post-termination operating costs were to be referrable to Projects of the Division and SSE was to use all reasonable endeavours to minimise them, as far as practicable. Eden pleaded a breach of this term with respect to the central services charges. Eden failed to make out that plea. The only evidence on the issue was by Mr Clark who simply asserted that the only activity of the Division after termination was reporting and accounting to Eden in respect of which a reasonable cost was $20,000 per annum. On the other hand, Mr Anderson explained the nature of the activities provided by SSE and the method of charging in respect of those activities post-termination. In light of the clear reductions in the operation of the formula to take account of the reduction in activity post-termination, I am of the view that Eden is not entitled to any reduction in the charges for departmental services bought and sold.

69 Of the remaining claim to a reduction of legal/business affairs charges of $1,913, Eden offered no separate submission. Mr Anderson explained the remaining items as related to the renewal of the business name and Australian Television Repeats and Residual Agreement (“ATRRA”) audits. Mr Amos said that these were proper charges against the Division.

70 I reject Eden’s claim to a reduction in central services charges post-termination save for the admitted reduction in legal/business affairs charges of $28,872 of which Eden’s share is $14,436.

· Costs of Prior Projects

71 The term of the First Service Agreement was said to begin on 1 April 1993. Projects of the Division were those undertaken during the term. It was common ground that The Last Frontier, Return to Eden - mini-series, Return to Eden – series and Spider & Rose were not Projects of the Division. Eden claimed that operating costs to the extent of $507,564 relating to these Projects were charged to the Division. The defence admitted that $43,757 was wrongly deducted.

72 The accounting treatment adopted by SSE included income and operating costs of prior Projects within the profit share reports which went to Eden. However, the gross margin with respect to prior Projects was reversed.

73 Mr Clark estimated the operating costs with respect to prior Projects he said were wrongly charged to the Division by applying to total operating costs, the percentage that the gross margin for prior Projects bore to the gross margin for all Projects. Since the gross margin with respect to prior Projects was reversed, the methodology adopted by Mr Clark cannot be sustained. Necessarily it attributed to prior Projects operating costs of the Division properly incurred with respect to Projects initiated after 1 April 1993. Mr Clark said that costs of reporting and tracking prior Projects must be included in operating costs. Mr Anderson said that minimal costs of his administration were involved but that did not mean that additional costs were incurred by the Division because the formulae for determining central services charges were not activity based.

74 Eden has failed to establish entitlement to any amount with respect to prior Projects in excess of the admitted overcharge of $43,757 in respect of which Eden is entitled to $21,878.50.

· Inclusion of Inappropriate Charges

75 Eden claimed that $246,775.80 of operating costs were not properly chargeable to the Division because they were allocations and were neither actually incurred by the Division nor out of pocket expenses and because they were costs covered by the 1% charge for central management fees. Eden submitted that certain other items were improperly charged for other reasons.

76 I have already rejected the first contention. So far as the contention that audit fees, bank charges, legal fees, fringe benefits tax, computer costs, equipment rental and external rent were encompassed within the 1% charge is concerned, they were separate headings in the schedule to the Second Revenue Sharing Deed and thus stood outside the 1% charge.

77 Included in the claim were a number of items with respect to management and processing of residuals. Eden claimed that this process was not the responsibility of the Division. Mr Anderson explained that in order to calculate the net profit of the Division it was necessary to determine residual costs payable. Furthermore, the Licence Agreements made payment of all residuals the responsibility of the producer. I find that the residual payments were properly operating costs of the Division.

78 The expense of an overseas trip by Mr McElroy was charged to the Division. Mr Anderson said that it was the invariable practice that if Mr McElroy could justify the expense to the satisfaction of the Network as a marketing expense, he would instruct the accounting staff to so treat it and it would not have been an operating cost of the Division. That did not happen on this occasion. Under the Service Agreements, Mr McElroy through Eden provided services to SSE. His activities, including overseas travel were directed to benefiting the Division. I reject the argument that the cost of the overseas trip was not properly charged to the Division.

79 Eden argued that external rent was payable by SSD in any event. The existence of the Division did not increase that amount and accordingly it was neither actually incurred by the Division nor out of pocket. The Division was provided with premises. The rental payable by SSD to the lessor was apportioned to the Division on a square metre basis. That was a proper method of allocation based on usage. I reject the submission. The same submission was made with respect to equipment rental. Eden asserted that since SSD owned the furniture and other equipment, no specific additional cost was incurred by it in making the equipment and furniture available to the Division. For similar reasons, I reject this submission.

80 The defence conceded that legal fees of $2,139 and computer costs of $2,255 were improperly charged to the Division. Eden is entitled to reimbursement of 50%, $2,197. Apart from this amount I reject Eden’s claim for unauthorised allocations of costs.

81 Eden is entitled to an amount of $38,511.50. Otherwise I reject Claim 3.

Claim 4

82 Film Victoria advanced moneys for Blue Heelers 1 for 2.5% of gross receipts to which SSE was entitled under the Licence Agreement with the Network. Film Victoria was to make a similar advance on similar terms for Blue Heelers 2. The funding did not proceed because, by the time Film Victoria provided the funds, SSE had itself funded the deficit in the budget. SSE retained 2.5%. Eden claimed that it was not entitled to do so.

83 SSE was not obliged to provide production funding under the Service Agreements. Its obligation was to provide development funding. Mr McElroy was aware of this distinction. The defence alleged that the retention was by agreement with Mr McElroy to whom it was a matter of indifference whether SSE retained the Film Victoria cheque in which event Film Victoria was entitled to the 2.5% or SSE put up its own funds for the purpose.

84 Mr Sullivan said that Mr McElroy approached him and said that since SSE had already put up the money they should return the Film Victoria funds so that SSE could have the benefit of the 2.5% rather than Film Victoria. He preferred SSE to have it rather than giving it to Film Victoria.

85 In a statement, Mr McElroy said he was aware that there was a budget deficit for Blue Heelers 2 and he was aware that it was to be funded by Film Victoria for a 2.5% profit entitlement. Mr McElroy said in his statement that there were delays in receiving the loan funds from Film Victoria with the result that SSE funded the budget deficit and accordingly it did not require the funds from Film Victoria.

86 In cross-examination, Mr McElroy professed that he had no knowledge of delays in funding the budget deficit. He gave evasive answers about a build up of production costs and a deficit depending, as well, on how cost incurrence compared with the budget. When asked whether it was necessary from time to time for SSE to fund the Project he answered that one of the advantages of working with Southern Star was its financial capacity to fund a production. When asked the question again his answer was: “It may have been”. He denied that he knew perfectly well that SSE had funded the Blue Heelers 2 production to the extent of $185,000. This was in direct conflict with his statement. He then denied that he had had a conversation on this very topic with Mr Sullivan. He denied he said that SSE should take the 2.5%. Later he accepted that it was likely that he knew that SSE had provided funding totalling $185,000. When it was put to him that from his point of view there was to be no direct return by way of interest, royalty or otherwise for SSE’s funding, he volunteered that there was a conversation and no return on the funds was necessary because Southern Star had acquired distribution rights for nothing. The following exchange took place:

87 Furthermore, there is much to be said for the submission made by Mr Wood that the 2.5% should be regarded as an operating cost of the Division for the purposes of the First Revenue Sharing Deed.

88 I reject Claim 4.

89 Mr Anderson explained that there had been an under-calculation of this charge by $13,505. That does not appear to have been challenged by Eden. When it comes to determining ultimate relief it may be that the net profit of the Division for the requisite financial year should be reduced by $13,505 of which Eden’s share would be $6,752.50.

Claim 5

90 In its pleading Eden alleged that in excess of $700,000 as film amortisation had been wrongly charged to the Division as operating costs. Eden abandoned all but $11,090. The defence accepted that this amount was erroneously deducted. Eden’s share of that amount is $5,545.

Claim 6

91 There are two separate heads of claim.

· Excess over 5% Cap

92 Clause 11.1 of the Second Service Agreement provided that SSE was responsible for the marketing and distribution of all Projects and would actively consult with Eden in relation to such marketing and distribution and use its best endeavours to exploit Projects to the maximum commercial advantage of both Eden and SSE. Clause 11.5 provided that it was the intention that its distribution and marketing provisions would be no less advantageous to Eden and Mr McElroy than the terms upon which SSE had agreed with any third party to undertake the distribution and marketing of a Project.

93 In the Distribution Agreements for Water Rats 1, 2, 3 and 4 and Murder Call 1, it was provided that marketing expenses and sales costs were not to exceed 5% of gross receipts without the Network’s prior approval. Eden claimed that it was entitled by reason of the above provisions to have added back to the income of the Division the amount of these expenses in excess of 5% both in relation to the above Projects and in relation to Blue Heelers 3,4, and 5 on the basis that 5% established a reasonable cost for other Projects. It was SSD that recouped the marketing and distribution expenses. Eden submitted that SSE had an obligation to ensure that SSD did not exceed the 5% cap.

94 SSE’s obligation under cl 11.1 of the Second Service Agreement to use its best endeavours required it to do all that was reasonable in the circumstances (Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 46 at 64). Eden did not establish that SSE was in breach of this provision. By entering into a Distribution Agreement with SSD on terms acceptable to the Network and, in particular, on terms that enabled the Network to control the level of marketing expenses suggests that the commercial advantages of both Eden and SSE were satisfied.

95 Eden submitted that under cl 11.5 of the Second Service Agreement, the consent of Eden was required to any excess over the cap. The provision did not say so. In cl 11.2, where no third party fees were incurred in relation to marketing and distribution of a Project, it was provided that SSE was entitled to deduct fees at specified rates. Clause 11.5 provided for the adjustment of those rates if SSE agreed with any third party to undertake distribution and marketing of a Project at lower rates.

96 In any event, the provision in the Distribution Agreements enabled charges above the cap to be recouped by SSD with the prior approval of the Network. That approval was forthcoming albeit after the event. The Network agreed to the charges in return for a re-negotiation of SSD’s commission. Furthermore, it was not shown that the excess charges were to the detriment of the Division. Mr Sullivan said that increased marketing expenses were incurred for a purpose and would be expected to have a positive effect on income. Hugh John Marks was corporate counsel for Nine Network Australia Pty Ltd (“Channel 9”), the Network in question. He said he considered the expenditure to be a justifiable marketing expense.

97 Mr Marks and Ms Barron referred to the fact that marketing costs often exceed a cap in the initial stages of a Project but reduce as marketing progresses and revenues are received. While revenues are still being received for any of the Projects in question it is not possible to determine whether the 5% cap provision has been breached.

98 With respect to Eden’s claim for Blue Heelers 3, 4 and 5 there was no 5% cap in the Distribution Agreements and the marketing expenses deducted by SSD were acceptable to HSV Channel 7 Pty Ltd (“Channel 7”), the Network in question.

99 Eden has failed to establish the first head of claim.

· Sales Servicing Costs

100 The Licence Agreements for the Blue Heelers series enabled SSE to recoup all marketing costs approved in advance by Channel 7. Eden submitted that this did not allow deduction for sales servicing costs. In the Distribution Agreement for Blue Heelers, SSD was permitted to recoup marketing expenses defined in a schedule to the agreement. Eden claimed that $104,977 was wrongly claimed. Included in that total, however, were marketing costs of $57,494 that should be excluded from the claim because Eden accepted that marketing costs were properly recoupable.

101 There was no definition of marketing costs for the purpose of cl 14(d)(iii) of the Licence Agreement. Mr Clark said that sales costs are typically included within marketing costs and that sales servicing costs are merely a subset of marketing costs.

102 The evidence tendered by Eden did not support the second head of claim. I reject Claim 6. Claim 7 was abandoned.

Claim 8

103 Eden pleaded that in calculating the net profit of the Division, production costs in excess of those actually incurred, or, if actually incurred, costs which were not auditable, out of pocket and reasonably accounted for once only, were deducted. The claim was significantly reduced before trial and was further reduced in Eden’s submissions and confined to an alleged duplication with respect to business affairs charges in relation to services provided by SSD’s in-house lawyers to the production companies and included in production costs. The amount claimed was $131,731, Eden’s share of which is $65,865.50.

104 Eden submitted that departmental services bought and sold, identified as part of central services in the schedule to the Second Revenue Sharing Deed, included business affairs and that included internal lawyers and the charges made to the production companies for the provision of SSD’s in-house lawyers were necessarily duplication.

105 In my opinion no such duplication existed. The scheduled charge was for the services of SSE’s chief executive, financial controller and business affairs manager. The charges to the production companies were for legal services provided by SSD’s in-house lawyers. I reject Claim 8.

Claim 9

106 The description of departmental services bought and sold in the schedule to the Second Revenue Sharing Deed was as follows:

107 Eden contended that the charges were limited to those of the specified persons and did not include on-costs. SSE calculated the charge to include on-costs being support staff together with overheads associated with employing those staff such as rent, electricity and the like. Services were provided by SSE’s chief executive, financial controller and business affairs manager. Likewise, services were provided by SSD’s receptionist, payroll and accounts payable clerk.

108 In my opinion it is not the expense of the identified person that is the gravamen of the provision. It is the expense of the services provided by those named persons. Hence what is comprised in the contribution is an aliquot part of the operating expenses incurred in providing the services of the named persons. While the formula in the schedule to the Second Revenue Sharing Deed operated, I am of the view that the deductions were properly calculated. I have already indicated that following Mr Sullivan’s memorandum of 21 May 1997, SSE was entitled to make deductions in accordance with the formula contained therein.

109 As previously indicated, central management fees under the central services heading in the schedule to the Second Revenue Sharing Deed were set at 1% of annual turnover of the Division. Mr Anderson explained that revenue attributable to facilities provided by Channel 7 had not been included in the annual turnover of the Division in relation to Blue Heelers 4 and Blue Heelers 5. The amount involved was $7,540,777. When the final accounting between the parties is taken, it may be that an additional $75,407.77 should be taken into account as a charge to the Division, Eden’s share of which is $37,703.89.

Claim 10

110 Under administration and co-publishing agreements, SSE appointed PolyGram Music Publishing Australia Pty Ltd (“PolyGram”) as its sole and exclusive agent and administrator throughout the world in respect of SSE’s right in and to all musical works owned or controlled in whole or in part by SSE. Under those agreements, PolyGram was entitled to retain 40% of music royalties collected and the balance was payable to SSE.

111 Music royalties with respect to Water Rats 1 and Murder Call 1 were subject to a further reduction of 25% by SSD which totalled $46,352 in the former case and $13,601 in the latter case. Music royalties with respect to Blue Heelers were subjected to a further 10% recoupment by SSD totalling $13,376. Eden submitted that SSE was in breach of contract in permitting these withholdings.

112 With respect to Water Rats 1 and Murder Call 1, Channel 9 held a 40% interest in the underlying rights to the Projects and was entitled to its share of royalties paid by PolyGram. The defendants submitted that under the Distribution Agreements SSD was charged with the exploitation of the underlying rights and was entitled to its commission.

113 Polygram was given all rights of publication, control, printing, broadcasting and performance mechanical or other reproduction, synchronisation, sale, use, loan to the public and exploitation. It was given the right to make arrangements, adaptations or translations and it was given the right to exercise all other rights of whatsoever nature and to use and exploit the same in and by any means. It was not a mere agent to collect royalties. There was no other function to be performed by SSD in exploitation of the music rights.

114 In my opinion, SSE was not entitled to purport to grant exploitation rights with respect to its 60% share of the musical content of a Project. It should not have allowed SSD to withhold commission in relation to that share. If the amount of that withholding with respect to Murder Call 1 was $13,601, Eden’s Share is $6,800.50.

115 If the amount of that withholding with respect to Water Rats 1 was $46,352, Eden’s share is $23,176. The defendants submitted that Eden was not entitled to judgment in that amount because of my finding that Water Rats 1 and Water Rats 2 are two separate Projects. It was argued that unless and until the Distribution Advance for Water Rats 1 had been recouped, there were no funds to be paid by SSD to SSE. I reject that submission. The music royalties were payable to SSE and not to SSD. In allowing SSD to recoup the commissions, SSE was in breach of cl 11.1(b) of the Second Service Agreement. In my view, Eden is entitled to damages for breach of contract.

116 The position with Blue Heelers is different. Mr Anderson explained that until 1995 the processing of cheques for these music royalties was undertaken by SSE staff. The servicing of the collection of music royalties for all SSE Projects required a significant amount of administration as it required music royalty cheques to be processed and distributed and required the provision to PolyGram of music cue sheets, sales reports for Projects of the Division as to the share of revenues to which SSE was entitled. In 1995 it was decided that SSD should assume the responsibility for this work in consideration for a 10% handling fee.

117 In my opinion, SSE was not entitled to take this course. The schedule to the Second Revenue Sharing Deed contained an item for central services as part of the operating costs of the Division. SSE could not unilaterally add a cost of production for services covered by that operating cost. $13,376 was not a proper charge to the Division. Eden’s share of this amount is $6,688.

Claim 11

118 The defendants admitted that $185,000 in the year ended 31 March 1999 was omitted from income of the Division and Eden was entitled to have that amount included in the calculation of net profit of the Division for that year. Eden’s share of that inclusion is $92,500.

Claim 12

119 Clause 2.4 of the Termination Deed provided that Eden was entitled to 50% of the net profit of the Division based on revenues received in relation to all episodes of, amongst other Projects, Blue Heelers completed as at 31 December 1997. Eden claimed that episodes 39, 40, 41 and 42 of Blue Heelers 5 were completed at that date and that $88,193 should have been included in the net profit.

120 Clause 4.1 of the Second Revenue Sharing Deed provided that SSE would be obliged to pay only 50% of the net profit of the Division in respect of Projects completed prior to termination or those parts of the Project completed prior to termination. There was no definition of this concept. To me, the ordinary meaning of the words required an episode to be finalised and capable of immediate delivery to the Network. While there were tasks still to be done with respect to an episode, albeit that Mr McElroy was not involved, one could not say, in ordinary parlance, that the episode had been completed.

121 In an earlier agreement with SSE to which Mr McElroy was a party, the term “completed projects” was defined to mean Projects in respect of which principal photography was completed prior to the effective date. I do not regard that circumstance as significant in determining the meaning of the term in Second Revenue Sharing Deed. It did not accord with any of the evidence as to industry usage and smacks of a special definition.

122 Eden pointed out that cl 5.1 of the Termination Deed provided for credits to be included in episodes delivered by SSE after the Termination Deed. It was submitted that a contrast was drawn between completion on the one hand and delivery on the other. I do not read the Termination Deed as raising such a dichotomy. There is nothing inconsistent between completion in cl 2.4 requiring delivery and inclusion of credits on delivery required by cl 5.1.

123 I am fortified in my view by the preponderance of the evidence of industry usage of the concept of completion. Mr McElroy said his tasks were completed at final editing of the photographed scenes. He was not involved in sound post-production. Mr Sullivan rejected a suggestion put to him in cross-examination that an episode was completed at the end of principal photography. Edwin Dudley Roberts was a freelance writer and producer in the film and television industry. He rejected the suggestion that producers required payment at the completion of principal photography. He agreed that Mr McElroy’s involvement was completed by the time one got to track laying, mix, audio review and audio re-stripe. He said that in the television industry, completed meant when the Project had been delivered to the Network.

124 Riccardo Pellizzeri was the supervising producer of Blue Heelers. He, too, said that in his experience in the television series production industry a project or part of a project was completed when it was delivered to the Network. In cross-examination, Mr Pellizzeri also said it was another accepted industry standard for a producer to be paid on completion of principal photography.

125 Since the episodes in question were not capable of being delivered to the Network on 31 December 1997, I hold that Eden was not entitled to any adjustment to the net income of the Division under Claim 12. In those circumstances it is unnecessary for me to resolve a dispute as to the appropriate amount to be included in net income.

126 Claims 13 and 14 were abandoned.

Claim 15

127 Clause 7.2 of the Second Service Agreement provided that all moneys paid by SSE towards development funding for a Project would be fully recoupable only from the production of that Project on a Project by Project basis. SSE recouped development funding on Projects that did not go ahead. Eden claimed that it was not entitled to do so. The amount involved was $460,978 of which Eden’s share is $230,489. The amounts were not in dispute.

128 The accounting treatment adopted by SSE was to write off development expenses as they were incurred as unrecouped development. If a Project went into production, all development costs were included in the production budget and, wherever possible, at a premium.

129 The defendants submitted that cl 7.2 of the Second Service Agreement had nothing to do with the definition of operating costs deductible from the income of the Division. That was a matter for the Second Revenue Sharing Deed. The purpose of cl 7 was to define services to be provided by SSE. Clause 7.1 provided that SSE would provide the Division with funding for development of Projects agreed by the parties. It was submitted that this was no different from the obligation of SSE in cl 12 to provide premises from which the Division could operate.

130 It was submitted that cl 7.2 addressed the question of recoupment and not the question of a charge against income of the Division. In that respect its purpose was to maintain the integrity of production budgets with respect to Projects by confining recoupment of development expenditure to the Project in question.

131 The Second Revenue Sharing Deed defined operating costs of the Division by reference to the schedule and the schedule contained under a heading for other expenses, unrecouped development.

132 I accept those submissions. If it had been the intention of the parties to exclude development expenditure from operating costs of the Division, one would have expected a specific exclusion to have been included in the definition. That interpretation makes sense. The business of the Division was both development and production and it would be odd to exclude a core activity expense on the basis of a provision in another agreement when that provision speaks not of deducting development expenditure from income of the Division, but rather the recoupment of such expenditure confined to a Project by Project basis.

133 The defendants pleaded an estoppel in the alternative. It is unnecessary for me to address that issue. I reject Claim 15.

Claim 16

134 Eden elected to provide the services of Mr McElroy as executive producer for Murder Call 2. On 5 December 1997 an executive producer agreement (“Murder Call Agreement”) was executed by Eden, Mr McElroy, SSE and SSG with respect to a further 32 episodes.

135 Clause 4.1(a) of the Murder Call Agreement provided that SSE would pay to Eden in respect of Murder Call 2, 50% of all amounts received by SSE on its own behalf by way of producer fees and cost recoveries from the production budget of that series. The defence conceded that it recovered but did not account to Eden for overhead recoveries of $269,440, film vault recoveries of $16,000 and fixed asset rental recoveries of $15,259, a total of $300,699.

136 SSE incurred hiatus costs of $76,543 and wrap costs of $177,576 that were not included in the production budget. It alleged it was entitled to setoff these amounts as operating costs. If it was entitled to take that course, it failed to account to Eden for its 50% share of net cost recoveries of $46,580. It conceded it was indebted to Eden in the amount of $23,290.

137 There was a budget underage on Murder Call 2 of $81,481. Eden submitted that this constituted a cost recovery and it was entitled to a further $40,740.50. The Murder Call Agreement said nothing about a contribution by Eden to budget overruns. The defence put its argument on the basis that a cost recovery was a net concept allowing budget overruns to be offset against revenues. I reject that submission.

138 Under the Licence Agreement for Murder Call 2, the budget for production and delivery of the Project was agreed between the producer and the Network. The term “overage” was defined to mean any amount over the budgeted cost required to complete and deliver the Project. Hiatus costs and wrap costs occurred as a result of the Network not undertaking a further series. On one view they did not constitute an overage because they were outside the costs of production and delivery. If that is the case, I am of the view that SSE was not entitled to offset the costs under the Murder Call Agreement.

139 If, on the other hand, the hiatus costs and wrap costs fell within overage, SSE was, again, debarred from offsetting the amounts because cl 12.1 of the Licence Agreement for Murder Call 2 provided that the producer, at its sole expense, was required to meet any overage.

140 Eden is entitled to the benefit of 50% of the hiatus costs and wrap costs ie $127,058.50.

141 The term “underage” was defined in the Licence Agreement for Murder Call 2 to mean any part of the budgeted cost or the budgeted start up costs not spent on production of a Project. Clause 12.2 provided that SSE and the Network were entitled to any underage to be applied as gross receipts in accordance with the application schedule.

142 An underage is not a cost recovery. Eden argued that it served the same purpose and should be treated as a cost recovery. I reject that submission. Eden is not entitled to participate in the budget underage.

143 With respect to Claim 16 Eden is entitled to $150,349.50.

Claim 17

144 Under cl 11.1 of the Service Agreements, SSE was obliged to consult with Eden in relation to marketing and distribution arrangements and to use its best endeavours to exploit Projects to the maximum commercial advantage of both Eden and SSE. Eden alleged that by allowing SSD to charge commissions on pre-sales of Water Rats, SSE was in breach of this provision and in breach of fiduciary duty.

145 Eden submitted that the Distribution Agreements for Water Rats did not entitle SSD to a commission on sales effected before the date of the agreement. I reject that submission. Clause 9.1 provided that SSD was entitled to fees and commissions for marketing the Project and might deduct and retain those fees and commissions from gross receipts. Marketing the Project included promoting, distributing and exploiting the copyright and ancillary rights in all languages throughout the world. In my view, SSD was entitled to retain the prescribed commissions from gross receipts received after the execution of the Distribution Agreements.

146 Eden argued that the evidence established a notorious trade custom that commission was not charged on pre-sales where the distributor was involved.

147 In order to imply a term into a contract on the basis of trade custom or usage, the evidence must establish that the custom relied on is so well known and acquiesced in that everyone making a contract in that situation can reasonably be presumed to have imported that term into the contract (Con-Stan Industries of Australia Pty Ltd v Norwich Winterthur Insurance (Australia) Ltd (1985-1986) 160 CLR 226 at 236). The evidence did not satisfy that requirement.

148 Ian Charles Bradley is a producer of film and television programmes. He said a pre-sale was an agreement to sell rights to broadcast a future production in respect of which principal photography had not commenced. He said in his experience distributors did not charge producers a commission on such pre-sales. In a later statement he said that a commitment to purchasing a television production prior to the commencement of principal photography where the formal Licence Agreement was not signed until afterwards, constituted a pre-sale.

149 On the other hand, Mr Marks said the term pre-sale had a variety of meanings but generally referred to a sale of a Project prior to the completion of its production. The sale could be made by a producer or by a distributor. If a distributor made a pre-sale, in some instances it would be commissioned and in other instances it would be commission free. Whether a commission was charged on a pre-sale was a matter of negotiation and would depend on a number of factors.

150 With respect to Water Rats, Channel 9 was party to the Distribution Agreements that provided a commission to SSD as distributor on overseas sales effected prior to completion of production.

151 Douglas Geoffrey Newman was the general manager, finance and administration of Southern Star. Like Mr Marks, he said the term pre-sale had a number of meanings. His understanding was of a sale of rights to broadcast a Project in advance of its actual production with the proceeds being used to meet the costs of production. If such sales were made directly by the producer of the Project, they would usually be commission free. He said the sale of Water Rats to Channel 9 was a kind of pre-sale in this regard because it was negotiated by Mr Sullivan and Mr McElroy and it was used to fund the production.

152 Mr Newman drew a distinction between this type of pre-sale and one that did not fund the production because moneys were payable by instalments with little paid on execution of the contract. He said that if this type of pre-sale was initiated and concluded by the distributor, the distributor would ordinarily charge a commission on the sale.

153 Ms Barron said her understanding of the term was the sale of incomplete programmes and in her experience, distributors frequently sold rights to incomplete programmes for which they received a commission.

154 Mr Sullivan said the term had a variety of meanings. A sale to a broadcaster by a producer to fund a production was usually effected by the producer and not commissioned. On the other hand, sales by a distributor in advance of the provision of a completed Project might or might not fund the production and such pre-sales by distributors were usually commissioned.

155 Catherine Patricia Payne was a sales executive at SSD for the territories of Asia, New Zealand, North America, Latin America and Africa. Her experience was that, whether a pre-sale funded a budget or did not fund a budget, a distributor would look to receive a commission.

156 The preponderance of the evidence was against an industry custom that distributors did not charge commission on pre-sales. I find that no term to this effect should be implied in the Distribution Agreements.

157 Eden argued that Southern Star had negotiated sufficient pre-sales for Water Rats for which a commission would not have been payable to fund the production deficit and deliberately refrained from doing so to enable SSD to obtain commissions.

158 On 18 July 1995 Mr Sullivan had said that gross sales of $272,000 per episode for a 26 episode series would be needed to fully recoup the budget deficit for Water Rats and that gross pre-sales, which would be non-commissioned, were then around $150,000 an hour. By 15 August 1995, SSD had arranged pre-sales for Water Rats totalling $258,544. It does not follow, however, that those funds were available to fund the budget deficit. The evidence was to the contrary. They were pre-sales for payments by instalment after production. In a submission to the board of directors of Southern Star of 10 August 1995, total production costs were shown as $12.35 million. Channel 9 was to contribute $6.5 million, leaving a budget deficit of $5.85 million. Pre-sales at that time were only expected to generate $67,000 in the first quarter of the year ended 31 March 1996 and only $612,000 in that financial year. It was not until the quarter ended 31 March 1997 that cumulative expected pre-sales covered the budget deficit. For 18 months, therefore, the budget deficit had to be funded by other means.

159 Mr Newman’s submission to the board contained the following:

“Initial response to the promotional reel shown to potential foreign buyers at the last Cannes festival was very strong and it was initially felt that much of the budget deficit could be funded by pre-sales, however, doing this would have denied Group of significant commissions and profit shares.

So, after examining sales estimates from Southern Star Sales, it was agreed that the best position for the Group would be for Sales to provide a distribution advance of the deficit for each series. This would be recouped from net sales proceeds after costs and commissions.

In order not to deplete the Group’s financial resources, it was then decided to apply to FFC for a loan to fund the production, which would be repaid from net sales proceeds.”

160 Mr Newman explained that he was referring to Southern Star’s position vis à vis the Network and any other external investor. To the extent to which the budget was funded by pre-sales, there would be potentially less commissioned funds and more participants sharing the same lower profits. That makes sense. The provider of funds to the production budget would demand an equity interest and a distribution commission (as Primetime initially sought), a distribution commission (as Primetime subsequently sought) or a profit share (as European Communication Management sought). I do not regard Mr Newman’s board statement as evidence of a determination on the part of SSE to abandon pre-sales to the detriment of the Division.

161 In cross-examination, Mr Newman explained that funding the budget by way of pre-sales was abandoned because there were insufficient pre-sales to fund the budget deficit. That answer is totally consistent with the cash-flow estimates attached to the board paper. That evidence was also supported by the evidence of Ms Payne, Mr Sullivan, Ms Barron and Mr Newman.

162 There was no evidence that Southern Star rejected any pre-sale on other than commercial grounds. For example, negotiations with Daro were brought to an end when it was discovered that Daro had been using the reel provided to it in an attempt to obtain interest in territories different from those being discussed with Mr Sullivan and Mr McElroy.

163 Negotiations with Taurus came to nothing. But that was not because of reluctance on the part of Southern Star to negotiate a pre-sale. Mr Sullivan extended the time within which Taurus might put a proposal on a number of occasions. It was inevitable that no proposal would be forthcoming. SAT.1, Taurus’s related broadcaster, told SSD that it was only interested in taking the series after it was made.

164 France 2/3 was ultimately achieved as a pre-sale by SSD as distributor and not by Southern Star as producer. Its quantum was insufficient to contribute significantly to the budget deficit.

165 Emphasis was placed upon a memorandum from Chand Pandit, the financial controller of Southern Star, to Robyn Watts who was in charge of sales at SSD to the effect that Mr Balnaves wanted the cash flow schedule for Water Rats re-worked with no German pre-sale but a German licence fee instead. The correspondence reveals, however, that Mr Pandit had prepared a draft cash flow for Water Rats that contained no German pre-sales and revealed a deficit approximately $2 million. Robyn Watts asked him to revise his budget with and without a German pre-sale, which he did. In that context, the attribution of an intention to Mr Balnaves to cancel a German pre-sale is unfounded. The evidence simply revealed an exploration of various ways in which the budget deficit might be financed. Indeed, Mr Balnaves made further inquiry of Mr Pandit for a comparison between Southern Star guaranteeing the deficit as against a German equity partner.

166 I was invited to draw the inference that the evidence of Mr Balnaves, Ms Watts and Ms Helen Thwaites who worked at SSD would not have assisted the defence case because of the failure to call them.

167 The rule in Jones v Dunkel (1959) 101 CLR 298 only applies where a party is required to explain or contradict something. In the absence of evidence requiring an answer, the failure to call evidence has no prohibitive significance (Schellenberg v Tunnel Holdings Pty Ltd (2000) 200 CLR 121 at 141-143). Furthermore, the rule does not require a party to give cumulative evidence. The rule does not compel time to be wasted in calling unnecessary witnesses (Cubillo v Commonwealth (2000) 103 FCR 1 at 120). The defence called Mr Sullivan, Mr Newman, Ms Barron and Ms Payne. Eden did not call any evidence suggestive of a deliberate decision to cancel pre-sale negotiations in order that SSD might earn commissions. Upon a proper analysis, the documents relied upon by Eden do not support that inference and I refuse to draw such an inference from the absence of testimony from additional witnesses.

168 It was submitted that the documents indicated no attempt to consult with Mr McElroy on these issues. I reject that submission. The documents referred to in par 65 of the defendants’ written submissions with respect to this claim clearly demonstrate Mr McElroy’s involvement in the pursuit of pre-sales.

169 I find that SSE was not in breach of its obligations to consult with Eden or to use its best endeavours to exploit Projects to the maximum commercial advantage of both Eden and SSE under cl 11 of the Service Agreements.

170 In view of this finding, Eden’s claim that there was a breach of fiduciary duty must fail. If such a duty was owed by SSE, its actions were not to benefit it at the expense of Eden or to act in its own interests at the expense of the common interests of it and Eden in the Division. I reject Claim 17.

Claim 18

171 Eden claimed that by execution of a Distribution Agreement for Blue Heelers that varied an earlier Distribution Agreement, SSE granted to SSD rights to Blue Heelers 2 and all future Blue Heelers series in perpetuity. It alleged that in so doing, SSE was in breach of cl 11 of the Second Service Agreement and in breach of fiduciary duty.

172 Mr Bradley said in his experience a producer who intended to produce a production which had the potential for several series for which it had not obtained a distribution guarantee or advance, would invariably retain the distribution rights to the subsequent series until initial sales of the production had been achieved or the Network in Australia had committed to purchasing the subsequent series. He said that this enabled the producer to exploit the later series to maximum advantage. He had never encountered a situation in which a producer granted rights in perpetuity to a distributor for all the series prior to production of the first series.

173 That was not, however, the situation with respect to the grant of rights under the Distribution Agreement. At the time of its execution, Blue Heelers 1 had already been produced and sold to Channel 7 and Blue Heelers 2 had also been sold to Channel 7.

174 Mr Bradley gave as an example of a producer selling a subsequent series directly to a foreign television Network, Home and Away. Ms Barron contradicted this assertion. She said that Home and Away was distributed by SSD through a United Kingdom subsidiary and continues to be distributed as a successful series. To the same effect was the evidence of Ms Payne.

175 Mr Marks contradicted Mr Bradley. He said that, like Southern Star, Beyond was both a producer and a distributor and in respect of Good Guys Bad Guys and Stingers, distribution rights in perpetuity were granted for all subsequent series prior to the production of the first series.

176 Like Beyond, Southern Star was a tied house in the sense that productions by SSE were distributed by SSD. That was the context in which Mr Marks had experienced the grant of Distribution Rights in perpetuity. That Southern Star was a tied house was well known to Mr McElroy. In that climate, there was no lost opportunity in the sense addressed by Mr Bradley. SSE did not have the infrastructure necessary to distribute Projects so that if there had not been the initial grant of rights in perpetuity, the reality of the situation was that future distribution rights would inevitably flow to SSD.

177 Eden failed to demonstrate any prejudice suffered by Eden or, indeed, the Division. The commission rate for major markets other than the US under the Distribution Agreement was 20%. The same rate appeared in the Licence Agreements for Blue Heelers 1 and Blue Heelers 2. It was in Channel 7’s interests to maintain commission rates at as low a level as possible. Rates negotiated with SSD were at arm’s length. The rate was less than the standard rate of 25% to which SSE was entitled under cl 11.2 of the Second Service Agreement.

178 In my view, Eden has not established a realistic commercial opportunity available to the Division had the distribution rights not been granted SSD in perpetuity. There was no evidence that any other distributor was prepared to undertake the task at a lower commission rate.

179 Eden has failed to establish a breach of cl 11 of the Second Service Agreement or a breach of any fiduciary duty that might exist.

180 The plea was raised by an amendment allowed by Bergin J on 30 November 2001. The time at which the amendment is to take effect was reserved to the trial judge. The defendants alleged that the cause of action accrued more than six years prior to the date on which the claim was brought and was not maintainable pursuant to the Limitation Act 1969.

181 Because of my findings, it is unnecessary for me to decide this issue. In view of the reservation to the trial judge, however, I set out my views on the matter.

182 Eden asserted that the breach of contract arose on 26 June 1995. The amendment was made more than 6 years later. Under the Supreme Court Rules 1970, Pt 20 r 4(5) the court might order that a party have leave to make an amendment having the effect of adding or substituting a new cause of action arising out of the same or substantially the same facts and a claim for relief on that new cause of action. This might be done notwithstanding the expiration of a limitation period under r 4(1). Rule 4(5A) provided that an amendment made under the rule related back to the date of filing the statement of claim unless the court otherwise ordered.

183 Eden pointed out that there is no statutory limitation period, except by analogy, with respect to a breach of fiduciary duty (Williams v Minister Aboriginal Land Rights Act1983 (1994) 35 NSWLR 497). Eden submitted that the amended claim was primarily a claim for breach of fiduciary duty. I do not regard it in that light. In my view, the claim was basically one of breach of contract.

184 Eden also argued that the circumstances giving rise to the claim only came to the notice of Eden after the commencement of the proceedings and after discovery. The proceedings were commenced within the limitation period. In those circumstances, I am not prepared to make an order varying the course which would otherwise apply under the Supreme Court Rules 1970, Pt 20 r 4(5A). I would have rejected the limitation defence. I reject Claim 18.

Claim 19

185 FFC lent $3.9 million to SSD and it made a Distribution Advance to SSE for Water Rats 1. A legal and administrative fee of $46,750 paid by SSD to FFC, sequel fees of $199,325 paid to FFC by SSE and SSD and interest of $206,215 paid by SSD to FFC were deducted from the income of the Division as operating costs for the purposes of the Second Revenue Sharing Deed. Eden claimed that they were costs internal to SSD and SSE and ought not to have been charged to the Division.

186 The legal and administrative fee was included in the production budget for Water Rats 1. Indeed, the amount in the budget was $50,250. It was a budget approved by Mr McElroy. As a budget item its payment constituted production costs under the first item in the schedule to the Second Revenue Sharing Deed. It was, in my opinion, properly charged against the income of the Division as an operating cost of the Division.

187 The sequel fee for Water Rats 2 was paid by the production company by cheque drawn by the line producer and the production accountant. Mr Sullivan wrote to Mr McElroy saying the only way to accommodate the payment was to incur an episodic overage as the fee was payable on delivery of each episode. This was reiterated by a letter from Mr Anderson to Mr McElroy when he indicated that the sequel fee for Water Rats 2 would be an additional cost of production to be borne by the Division and the same treatment would apply to the sequel fee due for Water Rats 3. Mr Anderson requested Mr McElroy to let him know if he had any questions and received no response.

188 In my view, the sequel fees were also properly charged to the Division as an overage borne by the production company and constituted production costs under the first item in the schedule to the Second Revenue Sharing Deed.

189 Under the arrangement with FFC, an interest bearing account was opened into which FFC advances were paid and held prior to disbursement of advances to the production company. The account was opened in the name of SSD. Interest earned on the account was credited to the Division. In the same way as I regarded the 2.5% commission payable to Film Victoria as constituting an operating cost of the Division, so I regard interest payable to FFC. If these charges were not to the account of the Division, it would mean that SSD was to advance $3.9 million to the production of Water Rats 1 with no compensation for risk or for the use of the moneys. Its return on investment would be exactly the same as Eden’s from the moment it had recovered half of its Distribution Advance.

190 The defence raised estoppel as an alternative. In light of my findings it is unnecessary for me to consider this issue. Since my views on this matter differ from those previously mentioned with respect to estoppel issues, however, I comment as follows.

191 So far as the legal and administrative fee was concerned, Mr McElroy approved a budget containing the item without demur. So far as the sequel fees were concerned, Mr McElroy was asked whether he had any questions and did not avail himself of the opportunity. Both were silences contributing to an assumption on SSE’s part. When FFC financing was sought on the basis of an equity injection, it was known that the Project could not go ahead unless the funding was forthcoming. The common assumption was that the costs of raising the funds were legitimate operating expenses of the Division. The fact that Mr McElroy did not raise any objection when the basis of funding changed to a loan at interest, contributed to the continuation of the assumption on SSE’s part that the costs of raising the funds, now including interest, were legitimate operating costs of the Division.

192 Were it necessary for me to do so, I would have found that Eden was estopped from asserting that the legal and administrative fee, sequel fees and interest were not operating costs of the Division. I reject Claim 19.

Claim 20

193 Colin Friels and Catherine McClements were the lead actors for Water Rats. Water Rats 4 episodes 1 to 8 were Projects of the Division. The remaining episodes Water Rats 4 were not. Before the termination of the Division, new rates of pay were agreed for Mr Friels and Ms McClements which took effect from the first episode of Water Rats 4. Eden claimed that the increases with respect to episodes 1 to 8 were not costs of the Division.

194 The contracts establishing the new rates was signed in February 1998. The new rates had, however, been included in the production budget prepared by Mr Popplewell as at 5 August 1997. Although Mr McElroy said that he did not recall receiving any of the relevant correspondence, it reveals that he was informed of the changes.

195 On 17 June 1997, Mr Sullivan wrote to Mr McElroy stating that Southern Star and Channel 9 had accepted the budget prepared on 14 May 1997 for Water Rats 4 but that the budget might be affected by cast re-negotiations. The amount being sought by Mr Friels was set out in a memorandum from Anthony Mrsnik of 18 June 1997, a copy of which was dispatched to Mr McElroy. Mr McElroy wrote on the agenda for a status meeting of 8 July 1997 against Water Rats the words: “Status. Friels/McClements?” Mr McElroy denied that this was a reference to an increase in their rates. I found this portion of Mr McElroy’s evidence most unsatisfactory. The series of documents clearly indicated his knowledge of the negotiations with the stars. His denial that he was aware of this and his statements that he did not believe he received the documents, was unconvincing. I find that Mr McElroy was well aware that the production budget was likely to be affected by current negotiations with Mr Friels and Ms McClements.

196 On 5 August 1997, Mr Popplewell sent a memorandum to Mr McElroy enclosing the final budget with a note: “Budget is finally locked down now that Catherine McClements and Colin Friels final deal is confirmed”. I do not accept Mr McElroy’s evidence that he did not recall receiving this memorandum.

197 The evidence of Mr Sullivan, Ms Barron and Mr Marks was that the retention of lead actors for future series was beneficial to commercial prospects both of the future series and of the existing series. The increased fees achieved that purpose.

198 In my view, the increased fees paid to Mr Friels and Ms McClements formed part of the production costs and were, in consequence, operating costs of the Division under the first item in the schedule to the Second Revenue Sharing Deed. The fact that Mr McElroy was to cease to have any connection with the Division in December 1997 made no difference to the quality of the outgoings in question nor, indeed, did his knowledge or lack of knowledge of the proposed increases. In the end, it is the nature of the outgoing that justifies its inclusion in the operating costs of the Division. I reject Claim 20.

Claim 21

199 Under the Distribution Agreements, the term “gross receipts” was defined to mean all money resulting from marketing the Project. Eden claimed that this encompassed any interest earned by SSD and it was entitled to claim an account of such interest receipts. In written submissions in reply it was contended that this entitlement arose either because of a breach of cl 11 of the Second Service Agreement or because of a breach of fiduciary duty.

200 Eden was not a party to the Distribution Agreements. Their structure was that SSD should distribute gross receipts no later than 60 business days after the end of each reporting period. There was no requirement to account for interest, nor was SSD entitled to interest on the outstanding balance of its Distribution Advance.

201 Eden’s entitlement arose under the Second Revenue Sharing Deed under which income of the Division was limited to moneys received by the Division. Any interest that SSD might have earned but not distributed, falls outside that definition.

202 Furthermore, Eden did not adduce any evidence that SSD received and retained interest. SSD is not a party to these proceedings.

203 I reject Claim 21 and decline to make an order for an account.

Claim 22

204 Clause 2.2 of the Second Revenue Sharing Deed limited Eden’s rights for any default by SSE to damages for breach of contract. Clause 3.3 provided that SSE would pay as soon as possible after calculation together with interest for the period from the last day of the year in relation to which the net profit of the Division related to the date of payment at the bank interest rates payable by Southern Star from time to time. Eden submitted that interest should be calculated in terms of the Supreme Court Act 1970, s 94. Eden submitted that the Southern Star rates were lower and the defendants should not be permitted to take advantage of their own wrong.

205 Eden adduced no evidence with respect to this claim. My ultimate determination of amounts due to Eden will constitute a debt due by SSE in various years. Under cl 3.3 of the Second Revenue Sharing Deed, Eden will be entitled as a right to interest on that debt. In those circumstances the Supreme Court Act 1970, s 94(2)(b) operates to exclude a discretion in the court to determine any other interest rate.

206 Eden sought an account of interest earned by SSE. SSE identified and conceded interest sums that were not credited to the Division. In final submissions, Eden did not press this claim.

Claim 23

207 SSE calculated the net profit of the Division under the First Revenue Sharing Deed by including the amounts received from SSD in relation to Blue Heelers 1, Blue Heelers 2 and four episodes of Blue Heelers 3. SSD had deducted commissions in accordance with the levels set out in the relevant Distribution Agreements. Those commission levels were lower than those contained in cl 11 of the First Service Agreement. In May 2002, SSE re-calculated the net profit of the Division for each of the financial years up to 31 March 2001 taking into account the increased commission levels. $605,580 was calculated as representing the difference between commissions calculated in accordance with the First Service Agreement and the commissions charged by SSD under the Distribution Agreements. Eden argued that this course was not open to SSE.

208 Clause 11 of the First Service Agreement, after providing that SSE was responsible for marketing and distribution of all Projects, provided for two distinct situations.

209 First, if SSE or a related company undertook the marketing and distribution, Southern Star was entitled to specified rates of commission under cl 11.2. It provided that where no third party fees were incurred, distribution fees would be calculated in accordance with the specified rates. The distribution fees included the costs of sub-distributors. Third party fees were defined in cl 11.4 to mean those charged by distributors not being part of Southern Star or owned or controlled by members of Southern Star.

210 Secondly, if SSE was to retain a third party distributor, cl 11.3 required it to consult with Eden as to the level of fees and consider Eden’s suggestions regarding preferred distributors and only appoint distributors with Eden’s consent which was not to be unreasonably withheld.

211 The former situation applied under the First Service Agreement because SSD was part of Southern Star. Prima facie, therefore, SSE was entitled to deduct from the gross receipts of the Division, the difference between the specified commission rates and those charged by its sub-distributor, SSD.

212 Under the Second Service Agreement, cl 11.5 provided that if SSE agreed with a third party distributor to rates lower than those specified in cl 11.2, those rates would be reduced to the lower level. That provision was not present in the First Service Agreement. Eden submitted that it recorded the intent under the First Service Agreement and it should be interpreted accordingly. I reject that submission. There is nothing to indicate that the introduction of cl 11.5 in the Second Service Agreement served to record what had already been agreed. It stands in sharp contrast to the regime under the First Service Agreement and that is to be read according to its tenor.

213 Eden submitted that cl 11.2 of the First Service Agreement only operated if SSE was in receipt of gross receipts from marketing and distribution and since they were the receipts of SSD, it did not enable SSE to make the additional deduction. I reject that submission. If it were correct, Eden would not be protected from a claim by SSD to commissions in excess of those specified. The term gross receipts in cl 11.2 is not defined. There is no reason to restrict it to gross receipts from marketing and distribution. That suggestion would run counter to the inclusion of costs of sub-distributors who would be expected to be the recipients of gross receipts from marketing and distribution. In my view, the gross receipts referred to are those of the Division.

214 Eden argued that the claim breached cl 11.1(b) of the First Service Agreement. It required SSE to use its best endeavours to exploit Projects to the maximum commercial advantage of both Eden and SSE. I reject that submission. The inclusion of specified commission rates in cl 11.2 must mean that they were regarded as satisfying the maximum commercial advantage of both Eden and SSE.

215 Eden argued that additional deductions were only available with respect to receipts up to 31 March 1995 when the First Service Agreement came to an end. I reject that submission. The First Revenue Sharing Deed governed the determination of the net profit for the Division in the relevant period. In making those calculations, the First Service Agreement enabled deductions to be made for the difference in commissions from the income of the Division. That figure having been established, there is nothing in the First Service Agreement that would prevent a re-calculation of net profit based upon the income of the Division for a Project whenever received.

216 Finally, Eden submitted that the claim was the invention of Ms Barron and not made in good faith but for the purpose of thwarting Mr McElroy. Ms Barron may have been the author of the claim and she gave evidence that she did not wish Mr McElroy to be paid any figure to which he was not entitled. But that does not alter the nature of the claim based upon the proper construction of the First Service Agreement. I reject Claim 23.

SSE Claims

217 There were two claims.

· Blue Heelers Commission

218 In its proceedings, SSE was given leave to amend to include a claim that the net profit of the Division in the years ended 31 March 1994 to 31 March 2001 had been over-stated in total by $605,580 as a result of the under-calculation of Blue Heelers commissions and excess payments had been made to Eden as a result thereof under a mistake of fact or law as the consequence of which Eden had been unjustly enriched and was liable to refund the excess payments together with interest thereon.

219 Eden submitted that if it had been enriched, the enrichment was not unjust.

220 Restitution does not depend upon some subjective evaluation of whether enrichment is unjust. Receipt of a payment that has been made under a fundamental mistake is one of the categories of case in which the facts give rise to a prima facie obligation to make restitution in the sense of compensation for the benefit of unjust enrichment to the person who has sustained the countervailing detriment (Australia and New Zealand Banking Group Ltd v Westpac Banking Corporation (1987-1988) 164 CLR 662 at 673, David Securities Pty Ltd v Commonwealth Bank of Australia (1991-1992) 175 CLR 353 at 379).

221 Eden was the trustee of the McElroy family trust and in that capacity it received distributions from the Division. The trust made distributions to Mr and Mrs McElroy as beneficiaries of the trust. Mr McElroy said that if it had been suggested to him that portion of the moneys had been received in error, he would have taken legal advice before permitting Eden to make the distributions.

222 Eden relied upon the defence proposed by Brennan J in David Securities at 398-399 of the honest claim of right which he stated as:

“It is a defence to a claim for restitution of money paid or property transferred under a mistake of law that the defendant honestly believed, when he learnt of the payment or transfer, that he was entitled to receive and retain the money or property.”

223 The defence of honest claim of right did not, however, appeal to the majority in David Securities. At 385 they saw the defence as a change of position. That was so because its central element is that the defendant has acted to his or her detriment on the faith of the receipt. But the mere spending of money received under a mistake of fact or law does not constitute a change of position defence (Lipkin Gorman v Karpnale Ltd [1991] 2 AC 548 at 580).

224 In the instant circumstances, distributions were made to Mr and Mrs McElroy and returned by way of loan to Eden to fund these proceedings. The mere payment by Eden of legal expenses does not, in my opinion, constitute a change of position in defence. In Ing v Stewart (1892) 66 LT 339 a payment by mistake was made to a trustee who had distributed to the beneficiary. The trial judge gave judgment for the defence on the basis that, by analogy with the agent and principal cases, the action ought to have been brought against the beneficiary. That decision was reversed on appeal, it being held that the trustee was the appropriate defendant.

225 Eden incurred liabilities for legal expenses. It discharged them in part from funds advanced to it by Mr and Mrs McElroy. That does not, in my opinion, constitute a change of position defence.

226 Furthermore, a trustee is protected against the detriment arising upon a change of position. It has an indemnity enforceable against the assets of the trust. Eden adduced no evidence that the assets of the trust were insufficient to indemnify it if called upon to refund moneys paid by mistake.

227 Eden submitted that the claim was not made in good faith. I have already dealt with this matter with respect to the contractual construction question. So far as restitution is concerned, the right arises, prima facie upon payment by mistake. There are recognised defences to that prima facie position. An assertion of male fides is not one of them.

228 Eden referred to Mason and Carter, Restitution Law in Australia Butterworths, Sydney, 1995, at par 228 where it is said:

“It is clear that mistake on the plaintiff’s part is a recognised basis for an award of restitution based on unjust enrichment. It is also clear that, although mistake may arise from the conduct of the defendant, that is, a case of fraud or misrepresentation, the primary use of mistake in restitution arises where the mistake is spontaneous, or the fraud or misrepresentation is at the hands of a third party.”

229 Eden submitted that the mistake in the instant circumstances was not spontaneous. It was the invention of Ms Barron for the purpose of thwarting Mr McElroy after an informed decision was made as to the operation of the First Service Agreement and payment made under the First Revenue Sharing Deed.

230 This approach to the concept of spontaneity misunderstands the text in which the contrast is between mistake instigated by a defendant and spontaneous mistake, that is, a mistake made by the plaintiff. In this case the import of cl 11 of the First Service Agreement was overlooked or misunderstood. That was a spontaneous mistake.

231 What lacked spontaneity was the bringing of the claim. It was allowed by amendment. If the question when that amendment should take place was reserved to me, I would not depart from the ordinary consequence of the Supreme Court Rules 1970, Pt 20 r 4(5A) that the amendment took effect from the date of filing the Statement of Liquidated Claim in the District Court.

232 The amended claim involves the computation of the net profit of the Division which is the subject matter of numerous claims by Eden. In substance, no cause of action different from Eden’s claims was raised by the amendment and in those circumstances it is appropriate to allow the rule to take its course (Holmark Construction Co Pty Ltd v Kekatos (1994) 12 ACLC 400 at 403). The consequence is that the defence under the Limitation Act fails.

233 In my view, SSE is entitled to recover from Eden the moneys totalling $605,580 which, in error, were not charged against the net income of the Division in the years in question.

· Net Profit Advance

234 Clause 3.4(c) of the Second Revenue Sharing Deed required SSE to pay Eden as an advance against its share of the net profit of the Division for the year ended 31 March 1997 the sum of $225,000. Clause 3.8 required that if the amount paid exceeded Eden’s share of the net profit of the Division for that period, the excess would be repayable by Eden and Eden would pay interest on the excess at the bank interest rates payable by Southern Star.

235 Depending upon the effect of this judgment, SSE claimed that Eden’s share of the net income of the Division for the year ended 31 March 1997 was nil and it was entitled to a refund of $225,000 together with the interest at the stated rate.

236 Eden offered no separate defence to this claim. If Eden was entitled to less than $225,000, SSE is entitled to a refund of that excess together with interest at the Southern Star rate. The final resolution of this amount must await a further hearing of this matter at which stage I will consider appropriate orders.

Fiduciary Duty

237 It has not been necessary for me to determine whether a fiduciary relationship existed between SSE and Eden. A separate claim for breach of fiduciary duty was not articulated. Eden claimed that moneys were due and owing under, or for breach of, specific terms of the contracts or, in the alternative, for breach of fiduciary duty.

238 If it were necessary for me to decide this issue, I would have found that no fiduciary relationship existed.

239 Fiduciary duties, other than those arising from the relationship of principal and agent, arise where there is a relationship of ascendancy or influence by one party over another or dependence or trust on the part of that other (Breen v Williams (1995-1996) 186 CLR 71 at 82). As Gibbs CJ observed in Hospital Products at 68 the authorities contain guidance as to the duties of one who is in a fiduciary relationship with another, but provide no comprehensive statement of the criteria by reference to which the existence of a fiduciary relationship may be established. As Mason J said in Hospital Products at 102 the categories of fiduciary relationships are infinitely varied and the duties of the fiduciary vary with the circumstances which generate the relationship.

240 In the instant circumstances, Eden’s contract with SSE was one for the provision of consultancy services. The Service Agreements excluded partnership, joint venture or principal and agent in cl 32.1 as did the Revenue Sharing Deeds in cl 13.1.

241 The relationship between SSE and Eden did not create ascendancy of one party over the other, nor dependence or trust by one party in the other. It was a commercial relationship entered into by Eden with the advantage of legal advice. The fact that Mr McElroy relied upon Mr Sullivan and Mr Anderson to ascertain with accuracy the net profit of the Division is beside the point. SSE was subject to precise duties in calculating and remitting Eden’s share of the net profit of the Division. Inspection and auditing rights were vested in Eden to ensure that performance. There was no vulnerability in Eden nor was there any power entrusted to SSE, the exercise of which might affect Eden’s position. There is an absence in the in the instant relationship of those elements which one would expect in a fiduciary relationship (see Pilmer v Duke Group Ltd (in liq) (2001) 207 CLR 165 at 217-218, Breen at 108, Hospital Products at 68).

Implied Terms

242 Eden did not plead an implied term of good faith in any of the contracts independently of its claims for breach of fiduciary duty. For the reasons discussed in Commonwealth Bank of Australia v Spira [2002] NSWSC 905, I may be bound by Burger King Corporation v Hungry Jack’s Pty Ltd [2001] NSWCA 187 to hold that such a term was implied in each of the commercial contracts between the parties in these proceedings. Barrett J took that view in Overlook v Foxtel [2002] NSWSC 17 at par 62.

243 In Spira I discussed the nature of the implication of the term. I did not discuss its content. Suffice it to say for present purposes that I regard its content as no more extensive than the statement in positive form of a proscriptive and negative duty imposed on a fiduciary. Viewed in that light, no additional duty in the performance of obligations or the exercise of rights under the contracts before me arose than a fiduciary relationship would require.

244 Nor were the claims by Eden founded upon duties of that kind. As I have said, Eden’s claims were for moneys due and owing under, or for breach of, overt terms of the contracts.

Waiver of Privilege

245 In the course of the proceedings, Mr Hammerschlag sought access to documents produced to the court under a notice to produce addressed to the defendants for which legal professional privilege was claimed. I gave short reasons for dismissing that application, indicating that I would give fuller reasons in due course.

246 The notice to produce sought any legal, accounting or other advice received by SSE, SSD, SSG or any officer as to the entitlement or otherwise of SSD or SSE to recoup from or make allowance from profits of the Division, any unrecouped Distribution Advance. Legal professional privilege was claimed with respect to eight documents.

247 The notice to produce also sought all documents (including any board papers, minutes or agendas) touching upon, concerning or relating to or recording any consideration, determination or decision by SSE, SSD, SSG or any officer to amend the profit share report for the year ended 31 March 2001 and to adjust the commissions charged to the Division in relation to Blue Heelers 1, 2 or 3, as recorded in a letter from Southern Star to Eden of 2 May 2002. The notice further sought any legal, accounting or other advice received by SSE, SSD, SSG or any officer as to the entitlement or otherwise of SSE, SSD or SSG to adjust the commissions charged to the Division in respect to Blue Heelers 1, 2 or 3 and which were recorded in the amended profit share report for the year ended 31 March 2001. In answer to that notice, six documents were identified for which legal professional privilege was claimed.

248 In cross-examination, Mr Anderson was asked whether he discussed the profit share report for the year ended 31 March 2001 with lawyers. Over objection, I allowed him to answer the question and he identified the lawyer as Ms Barron. He said he was asked by Ms Barron to perform some calculations, which he did. He was asked what she said to him. No further objection was taken and the following answer was given:

249 In Esso Australia Resources Ltd v Commissioner of Taxation (1999) 201 CLR 49, the High Court held that it was the common law legal professional privilege and not the client legal privilege under the Evidence Act 1995 (Cth) that governed the question of discovery and inspection of confidential written communications between a lawyer and client.

250 The New South Wales Supreme Court Rules 1970, Pt 36 r 13, however, incorporated provisions of the Evidence Act 1995 (NSW). Relevantly for present purposes, it provided that the court should not compel production of a document unless and until the court directed that the production should not be prevented over the objection of a person if evidence of the document could not be adduced in the proceedings over the objection of the person by virtue of the operation of Pt 3.10 Division 1 of the Evidence Act 1995.

251 Unlike the Supreme Court Rules 1970, Pt 36 r 16(3), r 13 was silent with respect to inspection. It did not require production of documents for which a claim of client legal privilege was made until a court ordered that production. In this case, however, the documents were produced to the court sealed up. I treated Mr Hammerschlag’s application as for leave to inspect under r 16(3). Alternatively, I notionally returned the sealed up documents to Mr Wood and dealt with the application in terms of r 13(2)(a).

252 The Evidence Act 1995, s 118(a) provided that evidence was not to be adduced if, on objection by a client, the court found that adducing the evidence would result in the disclosure of a confidential communication made between the client and a lawyer for the dominant purpose of the lawyer providing legal advice to the client. Section 122(1) provided that Pt 3.10 Division 1 did not prevent the adducing of evidence given with the consent of the client. It was upon this provision that Mr Hammerschlag relied. He submitted that the evidence was given without objection on the part of the client and in the absence of an objection, the client must be taken to have given his consent to the disclosure and thereby to have waived client legal privilege under the Act. Mr Hammerschlag supported this submission by reference to an American text, McCormick On Evidence, 4th ed at 131:

“Of course, if the holder of the privilege fails to claim his privilege by objecting to disclosure by himself or another witness when he has an opportunity to do so, he waives his privilege as to the communications so disclosed.”

253 The Evidence Act 1995, s 122(2) provided that Pt 3.10 Division 1 did not prevent the adducing of evidence if a client had knowingly and voluntarily disclosed to another person the substance of the evidence and the disclosure was not made in certain circumstances irrelevant for present purposes. Section 117(1) defined the term “client” to include an employee or agent of the client. Section 122(3) provided that s 122(2) did not apply to a disclosure by a person who was, at the time, an employee or agent of a client unless the employee or agent was authorised to make the disclosure.

254 Jealous guarding of waiver of client legal privilege by third party disclosure is a clear feature of the legislation and in that context I gain little assistance from the American text.

255 I did not regard the failure to object to Mr Anderson’s testimony as constituting a waiver by the client. In my view, the provisions contrast waiver by the client itself and waiver by an employee or agent of the client. If an employee or agent is said to have waived privilege that cannot, in my view, constitute a waiver in terms of s 122(1) of the Evidence Act 1995 and must be determined under s 122(2) and then only if the authority of the employee or agent is established as required by s 122(3).

256 In The Daniels Corporation International Pty Ltd v Australian Competition and Consumer Commission [2002] HCA 49 at par 11 it was said:

Potter v Minahan

Baker v Campbell

Re

Bolton

Ex parte Beane

Bropho v Western Australia

Coco v The Queen

Commissioner of Australian Federal Police v Propend Finance Pty Ltd

Yuill

257 In my view, the significance of the immunity is recognised in the explicit limitation in the Evidence Act 1995 of waiver of client legal privilege by third party disclosure. The stricture in the legislature is sufficiently robust to withstand the submission that privilege may be lost by a failure to object to an answer given in evidence by a third party.

258 Mr Anderson was an employee of one of the defendants. He was the financial controller of SSE. He gave evidence on behalf of the defendants. He had authority to take various steps including indicating on behalf of the defendants that reports previously issued were in error and were replaced. There was no evidence that he was authorised by the defendants to waive their client legal privilege. The evidence was insufficient for me to draw the inference that he had that authority. In those circumstances, I refused to grant leave to inspect the documents for which legal professional privilege was claimed relating to the adjustment of commissions charged with respect to Blue Heelers.

259 With respect to the unrecouped Distribution Advance issue, the following exchange took place:

260 Not only does that passage not give rise to a right of inspection because the authority of Mr Anderson to waive privilege was not established, but also it failed to identify the substance of the advice sufficient to invoke s 122(2) of the Evidence Act 1995 (Ampolex Ltd v Perpetual Trustee Co (Canberra) Ltd (1996) 40 NSWLR 12 at 18, NRMA Ltd v Morgan [1999] NSWSC 694 at par 10 – par 16, The Adelaide Steam Ship Pty Ltd v Spalvins (1998) 81 FCR 360 at 371).

261 I was referred to Hood v Reeve (1828) 3 C & P 532 (172 ER 534) in which it was held that a clerk in a merchant’s accounting house might be called as a witness to explain the meaning of a particular entry in the books of the office made by a fellow clerk, since deceased. In view of the legislative restriction in s 122(3) of the Evidence Act 1995, that decision was of no assistance to me.

262 In Bond Media v Ltd v John Fairfax Group Pty Ltd (1988) 16 NSWLR 82, Giles J held that a witness called to give evidence of material fact did not, because of his status as managing director of a company, necessarily qualify as a witness who might be asked to make an admission on its behalf. Notwithstanding that a different context was involved in that case, I drew comfort from it in support of my conclusion that Mr Anderson lacked the necessary authority to waive the client legal privilege of the defendants.

Orders

263 The claims I have allowed, will affect the calculation of net profit of the Division in different financial years. I will hear the parties on appropriate orders and appropriate calculations of interest. I will also hear the parties on costs.

Last Modified: 12/18/2002

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Citations

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

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Giacci v Giacci Holdings Pty Ltd [2009] WADC 166

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Giacci v Giacci Holdings Pty Ltd [2009] WADC 166

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26

Statutory Material Cited

4

Hilton Hotels (Australia) Pty Ltd v Sunrise Resources (Australia) Pty Ltd [2000] NSWSC 46

Hospital Products Ltd v United States Surgical Corporation [1984] HCA 64

Luxton v Vines [1952] HCA 19

CITATION:	Eden Productions Pty Ltd v Southern Star Group Limited [2002] NSWSC 1166
FILE NUMBER(S):	SC 50022/00
HEARING DATE(S):	11/11/02, 12/11/02, 13/11/02, 14/11/02, 15/11/02, 20/11/02, 21/11/02, 22/11/02, 25/11/02, 26/11/02, 27/11/02, 28/11/02, 29/11/02, 04/12/02
JUDGMENT DATE:	17 December 2002
PARTIES :	Eden Productions Pty Ltd - Plaintiff Southern Star Entertainment Pty Ltd - 1st Defendant Southern Star Group Limited - 2nd Defendant
JUDGMENT OF:	Gzell J

COUNSEL :	Mr D J Hammeschlag SC/ Mr A P Coleman - Plaintiff Mr P M Wood/ Mr V F Kerr - Defendants
SOLICITORS:	Holding Redlich Freehills, Solicitors
CATCHWORDS:	CONTRACTS - General Contractual Principles - Construction of Interrelated Contracts - Estoppel - Best Endeavours - Implication of Term of Trade, Custom or Usage - Implied Term of Good Faith - No Separate Issue - EQUITY - Fiduciary Obligations - No Separate Issue - RESTITUTION - Mistake - Subjective Element of Enrichment irrelevant - Trustee Distribution to Beneficiaries - Whether Change of Position Defence - EVIDENCE - Limitations of Principle in Jones v Dunkel - PROCEDURE - Discovery - Legal Professional Privilege in NSW Governed by Evidence Act 1995 - No Waiver of Client Legal Privilege by Employee or Agent unless Authorised to do so - LIMITATION OF ACTIONS - Effect of Amendment after Expiration of Limitation Act 1969 Period - INTEREST - As of Right Entitlement and Discretion under Supreme Court Act 1970, s 94
LEGISLATION CITED:	Supreme Court Act 1970 Evidence Act 1995 Limitation Act 1969 Supreme Court Rules 1970
CASES CITED:	Hilton Hotels (Aust) Pty Ltd v Sunrise Resource (Aust) Pty Ltd [2000] NSWSC 46 Waltons Stores (Interstate) Ltd v Maher (1987-1988) 164 CLR 387 at 404 The Commonwealth v Verwayen (1990) 170 CLR 394 at 444-446 Hospital Products Ltd v United Surgical Corporation (1984) 156 CLR 46 at 64 Williams v Minister Aboriginal Land Rights Act 1983 (1994) 35 NSWLR 497 Cubillo v Commonwealth (2000) 103 FCR 1 at 120 Schellenberg v Tunnel Holdings Pty Ltd (2000) 200 CLR 121 at 141-143 Jones v Dunkel (1959) 101 CLR 298 Con-Stan Industries of Australia Pty Ltd v Norwich Winterthur Insurance (Australia) Ltd (1985-1986) 160 CLR 226 at 236 Grundt (1937) 59 CLR at 675 Thomson ((1933) 49 CLR at 547 Australia and New Zealand Banking Group Ltd v Westpac Banking Corporation (1987-1988) 164 CLR 662 at 673 David Securities Pty Ltd v Commonwealth Bank of Australia (1991-1992) 175 CLR 353 at 379 Lipkin Gorman v Karpnale Ltd [1991] 2 AC 548 at 580 Ing v Stewart (1892) 66 LT 339 Holmark Construction Co Pty Ltd v Kekatos (1994) 12 ACLC 400 at 403 Breen v Williams (1995-1996) 186 CLR 71 at 82 Pilmer v Duke Group Ltd (in liq) (2001) 207 CLR 165 at 217-218 Commonwealth Bank of Australia v Spira [2002] NSWSC 905 Burger King Corporation v Hungry Jack's Pty Ltd [2001] NSWCA 187 Overlook v Foxtel [2002] NSWSC 17 at par 62 Esso Australia Resources Ltd v Commissioner of Taxation (1999) 201 CLR 49 The Daniels Corporation International Pty Ltd v Australian Competition and Consumer Commission [2002] HCA 49 at par 11 Potter v Minahan (1908) 7 CLR 277 at 304 Baker v Campbell (1983) 153 CLR 52 Re Bolton; Ex parte Beane (1987) 162 CLR 514 Bropho v Western Australia (1990) 171 CLR 1 Coco v The Queen (1994) 179 CLR 427 Commissioner of Australian Federal Police v Propend Finance Pty Ltd (1997) 188 CLR 501 Ampolex Ltd v Perpetual Trustee Co (Canberra) Ltd (1996) 40 NSWLR 12 at 18 NRMA Ltd v Morgan [1999] NSWSC 694 at par 10 - par 16 The Adelaide Steam Ship Pty Ltd v Spalvins (1998) 81 FCR 360 at 371 Yuill (1991) 172 CLR 319 Hood v Reeve (1828) 3 C & P 532 (172 ER 534) Bond Media v Ltd v John Fairfax Group Pty Ltd (1988) 16 NSWLR 82 Mason and Carter, Restitution Law in Australia Butterworths, Sydney, 1995, at par 228 McCormick On Evidence, 4th ed at 131
DECISION:	Matter stood over for further hearing.