Film Financial Consultants Ltd v Becker Group Ltd

[2006] NSWSC 319

CITATION:	Film Financial Consultants Ltd v Becker Group Ltd & anor [2006] NSWSC 319
HEARING DATE(S):	10 May 2005, 11 May 2005, 12 May 2005
JUDGMENT DATE :	21 April 2006
JURISDICTION:	Supreme Court
JUDGMENT OF:	Rothman J
DECISION:	1. Judgment for the Defendants;; 2. The proceedings are otherwise dismissed;; 3. The plaintiff will pay the defendants’ costs as agreed or assessed.
CATCHWORDS:	TORT - Economic Torts - interference with contractual rights - unlawful interference with economic interests - unconscionability under s.51AA of Trade Practices Act - necessity to show breach of contract - necessity to prove damage - existence of tort unlawful interference with economic interests - justification - no special disadvantage.
LEGISLATION CITED:	Trade Practices Act 1974 (Cth)
CASES CITED:	Lumley v Gye (1853) 118 ER 749 Independent Oil Industries v Shell Co of Australia Limited (1937) 37 SR (NSW) 394 Short v City Bank of Sydney (1912) 15 CLR 148 Allstate Life Insurance Co v ANZ Banking Group (1995) 58 FCR 26 Sanders v Snell (1998) 196 CLR 329 Tutte v Buck (1909) 119 NW 946 British Airways Limited v Laker Airways [1984] QB 142 Dunlop v Woollahra Municipal Council [1982] AC 158 Lonrho v Shell Petroleum Limited [1982] AC 173 Sid Ross Agency Pty Ltd v Actors and Announcers Equity Association (1970) 2 NSWR 47 Pinky’s Pizza Ribs on the Run Pty Ltd v Pinky’s Seymour Pizza & Pasta Pty Ltd (1997) ATPR 41-600 Beaudesert Shire Council v Smith (1966) 120 CLR 145 Northern Territory v Mengel (1995) 185 CLR 307 Copyright Agency Limited v Haines [1982] 1 NSWLR 182 Zhu v Treasurer of NSW (2004) 218 CLR 530 Blomley v Ryan (1956) 99 CLR 362 Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447 ACCC v CG Berbatis Holdings Pty Ltd (2003) 214 CLR 51 Woolley v Dunford (1972) 3 SASR 243
PARTIES:	FILM FINANCIAL CONSULTANTS LTD (P) BECKER GROUP LIMITED (D1) RICHARD ANTHONY LLEWELYN BECKER (D2)
FILE NUMBER(S):	SC 10118/2004
COUNSEL:	Mr Chris Harris (P) Mr Andrew S Bell (D1-D2)
SOLICITORS:	Anthony Kevin Phelps of Piper Alderman (P) Ann Louise Donohue of Minter Ellison (D1-D2)

- 2 -

IN THE SUPREME COURT
OF NEW SOUTH WALES
COMMON LAW DIVISION

JUSTICE ROTHMAN

21 April 2006

FILM FINANCIAL CONSULTANTS LTD v BECKER GROUP LIMITED & ANOR
10118/2004

JUDGMENT

1 HIS HONOUR: The plaintiff, Film Financial Consultants Limited (“Film Financial”) claims declarations, damages, including exemplary damages, and an injunction based upon an alleged unlawful interference with contract, interference with economic interests, and unconscionability in contravention of s.51AA of the Trade Practices Act.

2 The plaintiff alleges that in early February 2002 the National Film Trustee Company (“NFTC”) appointed Film Financial to audit the sub-distribution of the motion picture Waking Ned Devine by Dendy Films in Australia. Dendy Films is owned by the first defendant, Becker Group Limited (“Becker Group”). Other primary distributors licensed Becker Group to distribute motion pictures in Australia and, it is alleged, appointed Film Financial to audit that distribution. A dispute arose between Becker Group and Film Financial relating to a comment made by Film Financial about Becker Group and Becker Group and its MD Mr Becker (the second defendant) refused to allow Film Financial to enter their premises. Film Financial alleges that this conduct was unlawful, that it caused damage and that it caused a breach of the auditing contract between the principal distributors and Film Financial.

3 It is necessary to deal in more detail with the facts, including the terms of the relevant contracts, the principles of law applicable to those facts under each of the causes of action set out above. The film Waking Ned Devine is referred to in various contracts and documents by that name or by the name Waking Ned. In this judgment, the longer title will consistently be used.

Facts

4 Film Financial conducts business as an independent film distribution auditor and has performed work for major and independent motion picture production companies and movie distributors in studios throughout the world since approximately February 1988. Film Financial was founded by its current principal, John Mr Sapsford, resident of London, a chartered accountant registered with the Institute of Chartered Accountants in England and Wales.

5 Standard practice for the distribution of motion pictures is for there to be a Head Distribution Licence entered into between the producers of the particular motion picture and a worldwide distributor. Consequently the worldwide distributor enters into a number of sub-distribution agreements for a particular country or particular countries. Becker Group is a sub-distributor in Australia under such arrangements and distributes films to cinemas and video/DVD outlets for reward.

6 Because fees are generally paid by reference to the incidence of distribution (as variously defined) it is usual for the producer (in the case of a Head Distribution Licence) and the worldwide distributor (in the case of sub-distribution agreements) to reserve the right to have the figures produced, which form the basis of the calculation of any fees, audited. I will deal with the particulars of the various contracts shortly.

7 There is a trade association for the film and television industries which provides collection, advocacy and arbitration services to member organisations throughout the world. That association is called the American Film Marketers Association (“AFMA”), which also supplies some recommended or standard terms to be incorporated in distribution agreements. Not unexpectedly, a number of the distribution agreements to which I will later refer incorporate the AFMA standard terms and conditions and in so doing specify the AFMA as an arbitrator and the law of one or more particular states in the United States of America as the governing law.

8 On 20 September 1996 Pandora Cinema SA, of France (a licensor) entered into a sub-distribution licence agreement with Dendy Films Pty Ltd, a subsidiary of Becker Group, for the film Kolya. Because there are claims under the Trade Practices Act, I should recite that the plaintiff is incorporated in the United Kingdom with its registered office in London, the principal business activities of which are described as business and management, consultancy, accounting, auditing and tax consulting. Its sole director is Mr Sapsford.

9 Becker Group is a publicly listed company on the Sydney Stock Exchange. Its interests now extend into theatrical film distribution and Becker Group is a significant distributor of films across Australia and New Zealand. It owns the Dendy chain of art-house cinemas and through another of its subsidiaries, the Globe Group Pty Ltd, distributes Australian films. Film distribution revenue for the Becker Group represents approximately 25-30 percent of its total turnover.

10 The sub-distribution licence for the movie Kolya of 20 September 1996, referred to in the preceding paragraph, contained a clause under the heading “Accountings” in the following terms:

“e. Audit Rights : Continuing until three (3) years after the Term, Licensor may examine and copy on its own or through its auditors Distributor’s financial records regarding the Picture on ten (10) days’ notice. The examination will be at Licensor’s expense unless an underpayment of more than five percent (5%) is uncovered, in which case the Distributor will pay the costs of the examination on demand.”

This will be referred to as the “standard audit clause”.

11 I should make clear that payments made by the Distributor to the Licensor were calculated under the above contract on a basis which differentiated between various kinds of income and costs. In the sub-licence agreement of 20 September 1996 the disposition of gross receipts, was in relation to theatrical and non-theatrical: the recoupment of one hundred percent of the first gross receipts attributable to distribution costs. Thereafter, fifty percent of the gross receipts would go to each of the Licensor and the Distributor. Further, in relation to home or commercial video, seventy percent of the net revenue would go to the Licensor and thirty percent to the Distributor. In relation to Free TV or Pay TV, sixty percent would go to the Licensor and forty percent to the Distributor. There were other distributions, means for providing for any shortfall and other ancillary matters.

12 Ultimately any further details of the financial distribution between the parties to the contract are irrelevant. It is necessary, however, to recite that payments to the Licensor by the Distributor depended upon the costs of distribution, the amount of the income and the source of that income.

13 On 14 May 1997, Overseas Film Group Inc (“OFG”) entered into a Licence agreement with Estoaat BV in relation to the movie Waking Ned Devine. That Licence agreement was for a period of 12 years commencing on 7 August 1998 and included Australia and New Zealand. It contained a clause, which I will hereafter refer to as the “standard AFMA clause”, in the following terms:

“The AFMA Standard Terms and Conditions and Schedule of Definitions as amended, in writing, by the parties negotiating in good faith, are incorporated herein by this reference and by signature below Distributor acknowledges that they have been read and agrees to be bound by them. If any provisions of the standard Terms and Conditions and Schedule of Definitions conflict with any provisions of the Licence Agreement, the latter shall prevail.”

14 The AFMA International Standard Terms covered exclusivity limitations, territories and the agreement terms, they defined gross receipts, recoupable distribution costs, they provided for payment requirements and provided for an audit clause in the following terms:

“10.6 Audit Rights : Until three (3) years after the Agreement Term, Licensor may on fifteen (15) days’ prior Notice examine and copy, on its own or through its auditors, Distributor’s financial records regarding the Picture. The examination will be at Licensor’s expense unless it uncovers an underpayment, uncontested or later determined due, of more than ten percent (10 percent) of the amount shown due Licensor on the statements audited, in which case Distributor will pay the costs of the examination on demand.”

This clause will be referred to as “the AFMA audit clause”.

15 The distributor in the agreement of 14 May 1997, Estoaat BV sold its distribution interests to Atrium Films International (Australia) Pty Ltd by an acquisition agreement dated the same date. That acquisition agreement contained the same AFMA standard clause which imported the AFMA audit clause.

16 Also on 14 May 1997, Atrium entered into a licence agreement (the Waking Ned Devine sub-licence) with Becker Group under which Becker Group distributed Waking Ned Devine in territories including Australia and New Zealand in relation to certain rights being cinematic rights (theatrical and non-theatrical), hotel, video rights, demand view, pay-per-view and free television (with some exceptions). Payments under that licence agreement were a guaranteed minimum of an amount which is irrelevant for all purposes, and percentage payments of receipts from distribution, including the distribution pursuant to the video rights and theatrical and non-theatrical (except in the case of theatrical and non-theatrical the sum was less distribution expenses). In the case of video rights, Becker Group was required to enter into a sub-distribution deal with PolyGram Pty Ltd. The Atrium/Becker Group agreement annexed to it the AFMA standard terms and conditions which included the requirement on Becker Group to maintain complete and accurate records of the financial transactions relevant to the calculation of payments to Atrium and the standard audit clause.

17 On 27 June 1997 OFG entered into a distribution agreement with the producer of the film Waking Ned Devine.

18 Other films were being distributed and were subject to audit. During September and October 2000, Mr Sapsford, on behalf of Film Financial, undertook for Summit Entertainment an audit of the Becker Group records in relation to the movies The Blair Witch Project and Curse of the Blair Witch - Mockumentary. During the course of the conduct of that audit, Mr Sapsford sent an email to Tim Keen of Becker Group with a copy to Brad Kembel of Summit Entertainment, the effective licensor to Becker Group. It was in the following terms:

“Subject: Video/Outstanding Issues

I did glance at the two statements Paul provided and noted the twenty percent distribution fee and some manufacturing costs which were under $4 per unit. However, I don’t know the deal with PolyGram and again it could be that the issue of tape and duplication cost is fudged because of the distribution fee as it is with Magna. I could get duplication for free with the right distribution fee in place!
…
Best Regards John” (emphasis has been added)

The reference to Leon is a reference to Magna, elsewhere referred to in the email. Magna is alleged to be a related company to Becker Group; it undertakes the copying of films and other tasks which are charged to and paid by Becker Group, which charges reduce the amount upon which the royalty/profit on distribution is calculated.

19 This email was drawn to the attention of Mr Becker shortly after the Becker Group had received it and Mr Becker gave evidence to the effect that he was particularly concerned about the use of the word “fudged”.

20 On 30 October 2006 a letter, on the letterhead of Becker Entertainment entitled “Legal and Business Affairs Memorandum”, was sent from Robert Reeve of Becker Group to John Mr Sapsford. That letter said in part:

“… 1. The suggestion in your email that Becker Group Limited (“Becker”) has in some way either alone or as part of a conspiracy with our video sub-distributors “fudged” tape and duplication costs is not only unprofessional and without any substance in fact, but clearly defamatory of Becker. Accordingly, Becker reserves it’s rights against you concerning that statement and the implication that Becker has acted dishonestly and with an intention to defraud in its dealings with Summit. …
2. … We are advised by Leon … of Magna … that the issue of video duplication costs was not raised by you in your initial discussions with him (notwithstanding that you had raised the matter with us before that time), and it is apparent that your failure to avail yourself of this right under the contract in a timely manner is the principal reason for your current intransigence concerning those costs. Having said this, we note that information has been supplied to you by [Leon] on this issue and we wish to make it very clear to you and to Summit that we are totally satisfied that our video sub-distributors have fully and honestly accounted to us for their exploitation of the Film.
3. Becker has not only complied in all respects with its contractual obligation to provide full and free access to its Financial Records, including all records held by it in connection to the video sub-distribution of the Film, but has gone the ‘extra mile’ on numerous occasions in supplying requested information, explanations and facilities.
4. We note that you have attended our premises, at considerable inconvenience to us, over the period 3-16 October 2000, although you have not been in attendance on each business day during that period and for many, if not most, of those days, your attendance was for relatively short periods (four hours or less). In our view, based on numerous audits undertaken in respect of Films distributed by Becker, this is more than sufficient time to have completed your audit and any further time would constitute unwarranted and unnecessary expense.
5. In view of the above matters, we must now advise that, as far as Becker is concerned, the audit is at an end and no further access to our premises or records will be permitted.”

21 On the same date Mr Sapsford, by email, responded to the letter set out above. He expressed surprise as to its terms, and denied any implication by the use of the term “fudged” that Becker Group has acted dishonestly in any way whatsoever. Mr Sapsford asserted that his intention was certainly not to impute dishonesty and it was understood by Summit in the way he, Mr Sapsford, had intended. Mr Sapsford apologised if he had caused offence.

22 Further distribution agreements were made between Atrium and Becker Group and between other distributors and Becker Group for sub-distribution within Australia and New Zealand. Some of the films covered by those agreements were The Body and D’Artagnan.

23 On 15 March 2001 Film Financial report on the audit in relation to The Blair Witch Project and Curse of the Blair Witch – Mockumentary was delivered to Summit. That audit report makes a number of assertions. It asserts that Film Financial requested access to Magna’s records in order to perform their standard audit checks but that Becker Group did not provide them with access to the Magna records and they were, therefore, unable to perform the tests they considered necessary. There are further assertions, the details of which are unnecessary to repeat, relating to the level of payments between Becker Group and Magna based upon what were perceived to be the appropriate costs and other items for which Becker Group calculated that Summit were owed an amount of money and that there were a number of items for which information was requested but that information was not provided.

24 By letter dated 5 April 2001 Summit writes claiming US$138,319 being amounts owing to Summit on the basis of the audit conducted by Film Financial and which, according to that audit, should have been paid to Summit yet were not.

25 As earlier stated, Film Financial had, at various times, provided estimates for the cost of auditing a number of movies which were being distributed by Becker Group. Those movies included Kolya, D’Artagnan and Waking Ned Devine. Those audit estimates were for a number of producers and/or head distributors.

26 On 16 January 2002, Becker Group responded to the letter from Summit in relation to The Blair Witch Project and the audit reports related thereto.

27 The response followed some correspondence between Summit and Becker Group relating to the payment of the overages and the view of Becker Group that there were significant concerns with the audit report and the inferences made in that report. The audit report consisted of 10 pages plus annexures. The response consisted of 10 pages plus annexures. It is a detailed response. The details, like the details in the audit report, are relevant to the issues before the Court only in a peripheral sense. It is sufficient for the purposes of this judgment to recite that issue was taken with amounts that were entitled to be deducted, estimates that were made without substantiating evidence, the deductibility or non-deductibility of certain items from the amounts which would be subject to calculation for the purposes of the payment of royalties, the categorisation of certain expenses and whether amounts ought to have been included in one period’s records or another. One of the more significant items related to an allegation of overcharging in relation to sub-distribution fees described in the audit report as action points 11 and 12 and similarly described in the response. Essentially the issue between the parties was the amount charged (and perhaps its reasonableness) by Magna to Becker Group in relation to the costs associated with video revenue and video rental revenue. The amounts in question involved an under-reporting of income or an over-reporting of costs of US$151,337 resulting in an alleged underpayment of US$45,401. Film Financial performed the estimates of these figures on the basis of disallowing all costs or estimating and extrapolating from some minor information. The reason for the estimation and extrapolation, and the reason for disallowance of all costs in relation to one item, was the allegation that Becker Group did not provide Film Financial with access to the documentation necessary to audit the amounts.

28 In an email exchange on 13 and 15 October 2000 it was made clear that Becker Group had arranged with Magna to provide all of the information necessary to Mr Sapsford. The problem was that Magna could provide the information in source documentation only and was in “boxes full of invoices for each month”. It was suggested that such an examination would take at least four days and, after consultation with Summit, Mr Sapsford maintained that either Becker Group or Magna should undertake that examination and provide a list from the invoices provided.

29 Mr Sapsford was cross-examined in relation to these matters and the exchange was as follows (at page 21, line 25 et seq):

“Q: Magna offered to provide you with boxes full of the invoices for each month, didn’t they?
A: That’s correct.
Q: They offered an opportunity of reviewing each invoice and credit note?
A: They offered me an opportunity of going through them and performing that task, yes.
Q: And noting those invoices which related to The Blair Witch Project to compare the figures reported?
A: They offered that opportunity.
Q: They were offering you access to their records in order for you to satisfy your enquiries, weren’t they?
A: No. The access I was requesting by my standard information request was a listing of invoice per invoice which would total the amount that Magna were reporting to Becker; they had no such list.
Q: You wanted them to do the hard yards for you.
A: I wanted them to provide information in a normal auditable form.
Q: But they didn’t have a list?
A: That’s correct.
Q: But what they offered to provide you with were the physical invoices?
A: Correct.
Q: From which a list could be compiled.
Q: Correct.”

30 The sub-distribution agreements for The Blair Witch Project were not in evidence. It is therefore impossible for the Court to determine in what form it was necessary to provide the accounting information required. If one were to conjecture on the basis of those contracts that are before the Court, there are a number of aspects which are significant. There is a requirement in some of the agreements (see the sub-licence between Atrium and Becker Group for Waking Ned Devine) for accountings which require the distributor (in this instance Becker Group) to “maintain complete and accurate records in the currency of the Territory of all financial transactions regarding the picture in accordance with generally accepted accounting principles in the entertainment distribution business on a consistent, uniform and non-discriminatory basis throughout the agreement term… . The records will include all gross receipts derived, all recoupable distribution costs paid ”. The audit rights have already been set out. Those terms are substantially identical to the standard AFMA terms for accounting records.

31 In the dispute between Becker Group and Film Financial relating to these issues, if the terms were the same or substantially the same as the terms in other such contracts, the obligation on the Becker Group would have been to maintain their own records in an “auditable form” and to provide access to an auditor properly appointed to examine and copy the distributor’s financial records.

32 In this instance, an issue has been raised by the auditor, not about the records of Becker Group, but seeking to go behind the costs incurred by Becker Group, being payments to a sub-contractor for the provision of goods and/or services because, on the perception of the auditor, the relationship between Becker Group and its sub-contractor was not arm’s length. On the basis of those contracts that are before the Court, there was no requirement on Becker Group to provide the list of invoices at Magna and Magna was not bound by any of the contracts.

33 Of course, as earlier stated, the Court is incapable of making definitive findings in relation to the contractual relationship between Becker Group and Magna or between Becker Group and Summit because those contracts are not before the Court. The reason for the above analysis is that the dispute between Becker Group and Mr Becker, on the one hand, and Film Financial and Mr Sapsford, on the other hand, has its genesis in the suspicion of Mr Sapsford concerning the legitimacy of the costs deducted for The Blair Witch Project which suspicion was based on a certain perception of the relationship between Becker Group and Magna. It is that suspicion which gave rise to the allegation concerning “fudging” and the comments in the audit report. However, the comments in the audit report, to the effect that access to the information was not provided, are false.

34 Access to the information and source documents was provided, but the invitation declined. That which was not provided was a summary document for the purpose of Mr Sapsford and/or Film Financial auditing Magna, not Becker Group. I do not here suggest that an audit or investigation of the legitimacy of the payments between the Becker Group and Magna was not an appropriate function in an audit of the Becker Group. I do suggest that, on the basis of the material before the Court, or even on the basis of some conjecture based upon other material before the Court, there was no contractual obligation on Becker Group to provide in auditable form the financial records of Magna. Further, the audit report of 15 March 2001 in relation to The Blair Witch Project was, to the extent that it stated that “Becker did not provide us with access to the Magna records”, false and knowingly so.

35 The suspicion expressed by Mr Sapsford that “the issue of tape and duplication cost is fudged” is one to which Mr Becker took great exception. Mr Sapsford’s explanation that no implication of dishonesty arises and that the meaning ascribed to the term by Becker Group was not open to them cannot be sustained. Dictionary definitions were provided to the Court of the use of the term “fudged”. The Macquarie Dictionary defines fudge (when used as a verb) in the following way:

“To put together in a makeshift, clumsy or dishonest way; fake … – verb (intransitive) … (in games and contests) to gain advantage improperly”.

36 In the context of the email of 24 October 2000, especially the reference to the capacity to obtain duplication for free in certain circumstances, the word is being used to mean “to gain advantage improperly”. Even if the word were confined to honest behaviour, it seems to necessarily imply a failure to follow the normal rules and to blur the proper distinctions.

37 As already stated Mr Becker and Becker Group took umbrage at the comments. Thereafter Becker Group refused to allow Mr Sapsford onto the company’s premises or access to its books for any purpose.

38 The evidence of Mr Sapsford, given both in affidavit form and orally, is disingenuous in its explanation of the allegation that he was denied access to the records of Magna and his use of the word “fudged”. In circumstances where it is accepted that the list which summarised the relevant invoices did not exist in the Magna records, it cannot be said, on any understanding of ordinary language, that he was “denied access” to such a list. Moreover, his explanation of the use of the word “fudged” is not accepted. The evidence, including the manner in which it was given and the demeanour of Mr Sapsford, inevitably leads to the rejection of that evidence. Moreover, the statement in the audit report confirms, albeit indirectly, the opinion that Mr Sapsford then had.

39 Further, the written apology, disavowing any allegation of dishonesty, was not sent to the person in Summit to whom the initial email was sent.

40 Following the correspondence and audit report relating to “The Blair Witch Project”, Becker Group continued to prohibit Mr Sapsford from entering its premises or gaining access to its records generally and in particular in relation to the audit of two further films, Waking Ned Devine and Kolya.

41 This prohibition is evidenced in a number of ways and admitted by the defendants. By letter dated 8 February 2002, OFG informed Becker Group that Film Financial had been engaged to perform the audit for Waking Ned Devine and that consultants from that firm would contact them shortly. On 22 February 2002, Pandora informed “Dendy/Becker Films” that Film Financial would be performing an audit for the film Kolya.

42 By email dated 27 February 2002, Becker Group informed OFG, through one of its agents, that Becker Group had “no objection to Overseas Film Group carrying out an audit of this film, however you will have to select another auditor due to issues which remain unresolved with John Mr Sapsford (Film Financial Consultants) relating to an audit carried out by him on another Becker/Dendy film.”

43 By email dated 1 March 2002 OFG informed Becker Group that it was “insisting that we use Film Financial Consultants to perform this audit”. By further email dated 1 March 2002 Becker Group once more insisted upon the proposition that they would not “allow John Mr Sapsford onto [their] premises”. The reason for the refusal to allow John Mr Sapsford’s access to the premises and records was succinctly contained in an internal email within the Becker Group from Richard Becker to David Horton in the following terms:

“Dave
It’s got nothing to do with outstanding issues with Summit. He accused us of conspiring with the video distributor. The clear implication was fraud and he is lucky we didn’t pursue our rights (if any). I don’t want to meet or speak with him. He is unprofessional, his conduct disqualifies him from conducting any further audits with this company.”

44 By letter dated 11 March 2002 OFG insisted upon John Mr Sapsford conducting the audit and informed Becker Group that the failure to allow access by John Mr Sapsford was a clear breach of the agreement. On 13 May 2002 OFG referred the dispute between it and Becker Group to arbitration with the AFMA. That arbitration concluded with an award on 2 October 2002 which award made clear that OFG, under the agreements, was “entitled to designate John Mr Sapsford or other auditors of its choice to conduct an audit of Becker Group Limited pursuant to the terms of the Licence Agreement … with respect to the motion picture entitled Waking Ned Devine” and awarded costs of $200 for filing fee against Becker Group and otherwise required each party to pay half of the fees of the Arbitrator.

45 Following the Arbitrator’s award, OFG did not further insist upon the conduct of an audit. John Mr Sapsford sought to conduct the audit but Becker Group continued to deny him access. Further the Becker Group informed others who sought to utilise Mr Sapsford or Film Financial that Becker Group were not prepared to agree to Mr Sapsford auditing their accounts. As a consequence of that attitude, Film Financial were not engaged for at least one audit and probably others.

46 At one stage it was thought to be suggested, during the course of cross-examination of the second defendant, that the issues associated with the allegations by Film Financial of “fudging” were not of particular importance to either Mr Becker or Becker Group. Part of that cross-examination concerned a meeting between Mr Becker and representatives of Summit. It was put (transcript page 78) that if there had been a genuine concern which had prevented work being obtained from Summit, that would have been raised specifically. The explanation given by Mr Becker of the meeting (see in particular transcript page 73 and following) and the approach of Becker Group to the representatives of Summit at that meeting is accepted. Moreover the evidence of Mr Becker was such that I accept his evidence and, to the extent that there are inconsistencies between the evidence of Mr Becker and Mr Sapsford, I accept the evidence of Mr Becker.

47 From the foregoing, it is clear that the licensors, or head distributors, were entitled under the contracts with Becker Group to appoint auditors and, from time to time they did. In a number of instances the auditor appointed, or suggested for appointment, was Film Financial. Unfortunately, there are no executed contracts before the Court between any of the head distributors and/or licensors and Film Financial.

48 In that regard, Mr Sapsford was the subject of cross-examination as to the nature of any contracts that existed. The evidence of Mr Sapsford was to the effect that it was normal practice to have a written agreement, that there would always be “an estimate in writing” and there would always be a written confirmation of the acceptance of the estimate “before any work was accepted”. However, no such document is produced in these proceedings. Mr Sapsford’s evidence is that they “may be on the computer”, being a reference to his laptop. The documents were never produced. It was conceded, in evidence, that the documents had not been lost.

49 There are a number of other matters with which it is necessary to deal. The first of them is that Mr Sapsford, in cross-examination, conceded, and it seems to be the case, that any arrangement between licensors and Film Financial to carry out an audit was subject to significant change almost at the whim of the Licensor. Whether a licensor decided to conduct an audit at all is a matter entirely for the licensor. The contractual provision granted a right to conduct an audit, not a requirement to conduct an audit. Further, even when a licensor has indicated to Film Financial that the licensor would like Film Financial to undertake a particular audit, the licensor was able to change its mind at any stage up to the conduct of the audit. That is similarly the situation in relation to the identity of the auditor chosen by the licensor. (See transcript page 26)

50 The second matter which warrants comment, in relation to the evidence before the Court, is the question of whether or not Film Financial were paid auditing fees for the audit of Waking Ned Devine. Fundamentally, liability in tort arises from the occasioning of damage. I will deal with this later in the judgment. However, in relation to the auditing of Waking Ned Devine, it is impossible for the Court to determine that Film Financial was not paid its full entitlement.

51 I have already referred to the email chains being correspondence between Becker Group and Mr Sapsford relating to Becker Group’s refusal to allow Mr Sapsford access to documents. In an email of 6 March 2002, Mr Sapsford claims that “the producer has already paid … the fee for the job so now expects to receive some service!” The plaintiff’s case was, by leave, re-opened and Mr Sapsford gave sworn evidence that the above statement was incorrect and that he received no money whatsoever for a fee from the audit of Waking Ned Devine. The cross-examination of Mr Sapsford on this point was telling. Mr Sapsford agrees that the statement in his email to Mr Becker was false and a lie. During the course of the cross-examination he seeks to lay the blame for its inclusion in his affidavit at the feet of his solicitors. The changing nature of the evidence given by Mr Sapsford on this question confirms my impression in relation to his evidence generally. By and large he avoided a number of questions, often deliberately answered a different question to the one asked, deliberately sought to volunteer material about other people’s views and justifications and was unable to provide detail in areas where one would expect detail to be forthcoming.

52 The impression of Mr Sapsford was that his answers were given on a basis which he perceived would best suit his case at the time. The issue of the payment for the auditing work in Waking Ned Devine is but a prime example of that attitude. One of the difficulties associated with this area of controversy is that the contract between Film Financial and the licensor is not before the Court. Even if the Court were prepared to conjecture as to the terms of the contract, the only basis upon which that could be done is a quotation or estimate, which is described as an agreement, dated 31 January 2002, and which is unexecuted. Its terms require an initial payment prior to the commencement of each audit based upon the estimated hours and a later reconciliation. On one view, at least, the initial payment would be evidence of the finalisation of the agreement to audit. If there were no payment, on that view, that would be evidence that no final agreement to audit had been made or, at least, that the audit was not in a position to commence, regardless of the level of access.

53 The difficulty that faces the Court is that the evidence of Mr Sapsford that he was not paid is not accepted. However, the evidence that he was paid is also not accepted. The Court is unable to find, even on the balance of probability, either fact, although, as a matter of logic, one of them must be the case. Given the nature of the evidence, each of the possibilities is equally available and I cannot find, on the balance of probabilities, that any one of them has been proven. If I were forced to choose between the two equally available possibilities, I would hold that payment was made. That ‘preference’ arises from the contemporaneity of the note to that effect and the interest in proving the contrary in these proceedings.

54 On the basis of the material before the Court, there was in existence a contract for Film Financial to audit Becker Group in relation to Waking Ned Devine. That contract was to conduct an audit within the confines of the right to audit specified under the contract between Becker Group and the head distributor and allowed for the examination and copying of documents, already in existence, in the possession of Becker Group relating to the particular film.

55 While I accept that there were loose arrangements for Film Financial to be able to conduct audits in relation to the films Kolya, The Body and D’Artagnan, on the evidence before the Court, it is not possible to conclude that there were contracts between Film Financial and the licensors. The material suggests that the arrangements were tentative and subject to the constraints that the licensors could at any time have decided not to audit or to audit using different personnel. The evidence shows that Mr Sapsford accepted that proposition and that his affidavit refers to the proposition that he “was to be appointed auditor of those films.”

56 One further factual matter should be addressed. The parties to some significant degree blurred the distinction between different entities and between the principals and their corporations. This is partly because of the manner in which the distribution agreements are intertwined and the mutual appointment of attorneys that occur, it seems on the evidence, between each different subsidiary of the one parent and between the parent and each subsidiary. Nevertheless, the parties here treated action by Mr Becker as the same as action by Becker Group (generally a fair inference) and action by Dendy as action by Becker Group and so on.

57 Further, the express prohibition on Mr Sapsford entering Becker Group’s premises and gaining access to accounts has been assumed to be a ban on Film Financial in its entirety. The email exchange between Becker Group and OFG of 26 February and 1 March 2002 is typical. Becker Group writes to inform OFG that they, Becker Group, have no objection to an audit of the film, but require the selection of another auditor because of “issues which remain unresolved with John Mr Sapsford (Film Financial Consultants) relating to an [earlier] audit”. The response from OFG is that “the producer is insisting that we use Film Financial …”, after which OFG are informed by Becker Group that their Managing Director “has clearly advised that we will not allow John Mr Sapsford onto our premises.” There has been no attempt to show that Film Financial could not have conducted the audit using other personnel. John Mr Sapsford is not a plaintiff. However, the parties have assumed throughout that the prohibition on John Mr Sapsford is a prohibition which applies generally to Film Financial and I will determine the matter in accordance with that assumption.

The Plaintiff’s Claims

58 The plaintiff claims damages and injunctions under three causes of action.: unlawful interference with contractual rights; interference with economic interests; and s.51AA of the Trade Practices Act. The plaintiff claims under no other cause of action in common law, nor does it claim under any other provision of the Trade Practices Act or any other statute. I confine myself, as I must, to that which is claimed. It should be pointed out that the claim against the second defendant, Mr Becker, is pursuant to the terms of s.75B of the Trade Practices Act on the basis of his accessorial involvement. If the claim under s.51AA of the Trade Practices Act were successful, it would necessarily follow that Mr Becker would be personally liable under s.75B of the Act.

59 Before dealing with each of the causes of action, it is necessary to re-state that central to the principles associated with liability in tort for actions such as interference with contractual relations is the concept of damage. If action is taken, which comprises all of the elements of a tort, but there is no resulting damage, there can be no liability. That is not only the question of the measure of damage, and the absence of a liability for damage, but a fundamental element of the tort itself.

Intentional Interference with Contractual Relations

60 The plaintiff puts its case on the basis that it is entitled to damages against each of Becker Group and Mr Becker in relation to their “unlawful interference with its contracts with the producer/licensors of Waking Ned Devine and Kolya to audit the first defendant’s records of the distribution of those films.”

61 The plaintiff alleges that entitlement to compensation for that tort arises because the defendant knowingly and intentionally procured a breach of the contract between Film Financial and the licensor. The plaintiff alleges that there are three elements of the tort:

a A breach of contract;

b Brought about by an act of the defendant;

c Which act is unlawful e.g. which is a direct procurement of the breach with knowledge and intention of bringing about the breach.

62 Notwithstanding the description of the cause of action by the plaintiff the elements of the cause of action do not require an independently unlawful act. The tort derives from the judgment in Lumley v Gye (1853) 118 ER 749. The early cases, expanded by Lumley v Gye, were largely concerned with the tortfeasor inducing a servant to breach the contract with their master for the purpose of being employed by the tortfeasor. It was not an element of that tort that the offer of employment by the tortfeasor was itself an unlawful act. To the extent that the cases suggest the necessity for an unlawful act, they, somewhat circularly, also seem to suggest that the unlawful act can be the act of inducing or interfering with the contractual relations.

63 The other element of historical development of these industrial or economic torts that requires preliminary comment is that there is a necessity for there to be a breach of the contract. Thus, it is not an actionable tort for a person to induce an employee of another to terminate lawfully their contract of employment, for the purpose of obtaining employment elsewhere. Were it otherwise, much of the employment practices of every modern democracy would be actionable. (See Independent Oil Industries v Shell Co of Australia Limited (1937) 37 SR (NSW) 394)

64 The elements of the tort were summarised by Isaacs J in Short v City Bank of Sydney (1912) 15 CLR 148. At page 160 his Honour said:

“But to constitute that cause of action, the defendant must have induced or procured the doing of what he knew would be a breach of contract. A bona fide belief reasonably entertained that it was not a breach of contract would be fatal to the claim. If the defendant did not know of the existence of the contract, he could not induce its breach; if he reasonably believed it did not require a certain act to be performed, he is inducing a party to the contract to do something inconsistent with it could not be regarded as an inducement or procurement knowingly to break the contract; if he believed on reasonable grounds that the contract had been rescinded, or performance waived, when in fact it had not, he could not be said to knowingly procure its breach. If this were not so, no man would be safe in the ordinary transactions of life, because he might find contrary to his knowledge or belief an expectation that some contract or enterprise he entered into were inconsistent with the contractual or other obligation of the party with whom he was agreeing or dealing. No doubt every man must be understood to intend the natural consequences of his acts; but that means having regard to the circumstances with which he is, or is assumed to be, acquainted. And the terms of an agreement and its true construction, for it may be very complicated, and the acts of the parties in relation to it are circumstances without knowledge of which reasonably brought home to the mind, no man can be said to intend consequences regarding the breach of the agreement.”

65 The above passage from Short, while obiter, has been cited with approval in a number of judgments. It is noteworthy that the passage does not include the necessity for the act, which induces the breach of contract, to be, itself, unlawful.

66 Further, it seems that an analysis of the cases would suggest that intention and knowledge are used almost interchangeably and certainly synonymously. In Allstate Life Insurance Co v ANZ Banking Group (1995) 58 FCR 26, Lindgren J (with whom Lockhart and Tamberlin JJ agreed) said:

“Linguistic confusion can arise in respect of the alleged tortfeasor’s state of mind with respect to breach of the contract. Both ‘intention’ and ‘knowledge’ have been used in this context. But a person’s ‘knowledge’ that what he is inducing will constitute a breach of contract and his ‘intention’ to induce a breach of contract by what he is doing refers to one and the same thing. After all, ex hypothesi, the alleged tortfeasor’s acts are intentional, a breach of contract occurs and the acts induce the breach. Against that background, ‘knowledge’ and ‘intention’ that the breach will result from the acts, do not signify any relevant distinction.”

67 His Honour goes on to say, after referring to Lumley v Gye, supra, and other cases:

“In my opinion, the authorities establish conclusively that the gravamen of the tort is intention. Although the requirement of knowledge of the contract is sometimes discussed as if it were a separate ingredient of the tort, it is in fact an aspect of intention. The requirement that the alleged tortfeasor have ‘sufficient knowledge of the contract’ is a requirement he have sufficient knowledge to ground an intention to interfere with contractual rights.
Both his intention to interfere with contractual rights and the necessary supporting knowledge of the contract refer to the ‘actual’ or ‘subjective’ state of mind of the alleged tortfeasor. …
Although an alleged tortfeasor must have ‘a fairly good idea’ that the contract benefits another in the relevant respect, knowledge of the contract may be sufficient for the purpose of grounding the necessary intention to interfere with contractual rights although the precise term breached is not known.” (emphasis supplied) ( Allstate , supra , at 43)

68 The defendants knew of a contract in existence between Film Financial and Summit. But no action arises from any attempt to interfere (if there were any) with such a contract. The audit for Summit on The Blair Witch Project was completed. There was no breach of contract induced by any act of the defendants. The defendants also were aware of an arrangement between Film Financial and OFG in relation to Waking Ned Devine. On the basis of evidence of Mr Sapsford, it would be difficult for the Court to conclude that the defendants knew that a refusal to have Film Financial or Mr Sapsford conduct the audit would result in a breach of the contract between Film Financial and OFG. It needs to be recalled that, even Mr Sapsford takes the view, it is for OFG, at any stage, to determine whether an audit will proceed and who, if anybody, shall conduct it. Any such decision, it seems on the evidence of Mr Sapsford, related above, would not be a breach of the contract, if one existed, between OFG and Film Financial. As to the other films, there is simply no evidence of a contract or arrangement whatsoever. Even if there were a contractual relationship between Film Financial and the licensors, it had not proceeded even as far as had the Waking Ned Devine relationship, and the action of the plaintiff suffers from the same problem as exists in relation to Waking Ned Devine.

69 The plaintiff submits that the actions of the defendants led directly to the plaintiff breaching its contract. As already stated, those contracts are not before the Court. It is impossible to determine whether such contracts exist and whether or not they have been breached. On the understanding of the principal of the plaintiff, there is and can be no inference that there has been a breach of those contracts.

70 Film Financial further submits under this head, that the defendant’s actions were also unlawful because they were a direct breach of Becker Group’s contractual obligations in its distribution agreements. Film Financial point to the refusal of Becker Group to abide by the Arbitrator’s decision. The Arbitrator’s decision relevantly summarised above, makes clear that it is for the licensor to choose the auditor. It was not in breach of its contract, even after the decision of the Arbitrator, for Becker Group, or its agents, to request OFG to choose an auditor other than Mr Sapsford or Film Financial. After the Arbitrator’s decision, OFG, on the evidence, did not insist upon an audit by Film Financial.

71 Because of the existence of a relationship between Film Financial and OFG, the terms of which relationship are not before the Court, it is necessary to deal with the alternative situation, lest it be said that there was an intention to breach a contract, even though the terms were unknown. Even if that were the case, on the evidence before the Court it could not be said that damage was occasioned (see above at [53]).

72 For these reasons the claim insofar as it relies upon an interference with contractual rights is dismissed.

Interference with Economic Interests

73 Relying upon the judgment of the High Court in Sanders v Snell (1998) 196 CLR 329, the plaintiff submits that there is an avenue available for a claim under the tort of unlawful interference with economic interest. I am not, at this stage, accepting that such a tort exists. The plaintiff acknowledged that the High Court in Sanders v Snell did not accept that the tort exists in Australia. Nevertheless it dealt with the argument that, if the tort does exist, it depends upon an interference with trade or business by an unlawful act. The High Court then dealt with whether the act was unlawful and rejected the claim on that basis. The High Court described the tort as “emerging”, largely in the United Kingdom. The rationale for the element of unlawfulness is to eschew the absurd result if that were not the case. As the High Court makes clear:

“Any person engaged in trade or commerce will daily act deliberately to further that trader’s economic interest by obtaining business that would otherwise go to a trade rival. The whole focus of the business of many, if not all, traders is to compete with trade rivals and by advancing their own economic interests, inevitably harm the economic interests of their rivals. In many cases the trader’s conduct will be directed specifically at a particular rival. But, if the means of competition employed are lawful, and those means cause no breach of obligation, there is no warrant for holding the trader liable to the rival for the economic consequences of the competitive conduct. The fact that the conduct is engaged in deliberately or is directed specifically at the person who suffers economic detriment is not enough to make the conduct tortious.” ( Sanders v Snell at [31])

74 The doctrine of prima facie tort (Tutte v Buck (1909) 119 NW 946), also referred to as the “innominate tort” (British Airways Limited v Laker Airways [1984] QB 142; Dunlop v Woollahra Municipal Council [1982] AC 158; Lonrho v Shell Petroleum Limited [1982] AC 173), has never been adopted as an operating cause of action in Australia. (Sanders v Snell at [32])

75 This, of course, does not mean that the plaintiff is not entitled to argue and have accepted, for the first time, a cause of action based upon those principles. In each other case in Australia in which the emerging tort has been pleaded, it has never been successful, because one or more of the elements proposed in that tort was absent.

76 Two particular judgments were relied upon by the plaintiff in supporting the existence of the cause of action in Australia. The first of them is Sid Ross Agency Pty Ltd v Actors and Announcers Equity Association (1970) 2 NSWR 47. That was a judgment of Else-Mitchell J at an interlocutory stage determining whether pleadings should be struck out. It was given ex-tempore (as the report makes clear) and the relevant passage is at pp 51-52 of the report. His Honour, after ruling on what was called the “third count” and being addressed on the fourth count, continued, relevantly, as follows:

“The fourth count is sought to be struck out by the Summons and, in the alternative, further and better particulars are sought. That count substantially follows in its preliminary language, the terms of the third count [wrongful inducing of a breach of contract]; … there can, I think, be no doubt in the light of the authorities that have been referred to such as Rookes v Barnard … Stratford v Lindley ; … that a right of action is available to a person who suffers damage as a result of interference by another with his trade or business by unlawful means and that this may be so even though the interference does not entail the procurement of inducement of an actual breach of contract.”

77 His Honour proceeded to remark that it is not every use of unlawful means which allows or justifies an action for unlawful interference with economic or business interests and struck out the pleading on the basis that it inadequately specified a cause of action.

78 The second case upon which the plaintiff relies, in this area, is a judgment of the Court of Appeal of the Supreme Court of Victoria in Pinky’s Pizza Ribs on the Run Pty Ltd v Pinky’s Seymour Pizza & Pasta Pty Ltd (1997) ATPR 41-600. The passage dealing with this issue commences at page 44284. After comment about the manner in which the claim had been raised, Tadgell JA (with whom Phillips and Batt JJA agreed) said:

“It may be accepted that the common law recognises as an actionable wrong an interference with trade or business by unlawful means. Some of the authorities are usefully collected by Brooking J in Ansett Transport Industries (Operations) Pty Ltd v Australian Federation of Air Pilots [1991] 1 VR 637 at 666-8. There is authority for the view that a plaintiff may establish commission of the tort without proving an intention on the part of the defendant to cause economic harm to the plaintiff. …Nevertheless, the better view at present seems to be that an essential ingredient of the tort is ‘the existence in the mind of the wrongdoer of a purpose or intention of inflicting injury on the plaintiff’ … The exact nature of the element of intention seems, however, not to have been definitely settled. There is authority for the view that the defendant must be proved to have had a predominant intention, when pursuing his cause of action, to injure the plaintiff rather than advance his own interests: Barretts and Baird (Wholesale) Ltd v Institution of Professional Civil Servants [1987] 1 IRLR 3, a decision of Henry J (QBD).
In the Ansett case, supra , Brooking J assumed (as I read it) that an intention on the part of the defendant to injure the plaintiff must be proved and considered whether the plaintiff must prove also that that was the defendant’s predominant intention. …
I think it is unnecessary here to investigate, as an ingredient of the tort of interference with trade or business by unlawful means, the extent of an intention on the part of the defendants to harm the plaintiffs. Whatever room for debate may exist on that matter, it is very plain that damage is the gist of the tort: Ansett v AFAP at 645 and the cases there cited. Just as the plaintiff’s passing off claims should fail for want of proof of substantial damage, any claim for the tort of interference with their businesses by the defendants by unlawful means should fail for the same reason. Moreover an injunction, which is the only remedy that the plaintiffs now seek, could not go without proof of damage that is irreparable, and there is certainly no indication of that.”

79 The defendants submit that there is no tort recognised in Australia of the kind here claimed. There is much force in the argument pressed by the defendants that “the cause of action alleged resembles that associated with the High Court’s decision in Beaudesert Shire Council v Smith (1966) 120 CLR 145 at 156 which provided a remedy to ‘a person who suffers harm or loss as inevitable consequence of the unlawful, intentional and positive acts of another’. The existence of this tort, however, was rejected by the High Court in Northern Territory v Mengel (1995) 185 CLR 307.”

80 There are significant differences between the economic tort claimed by the plaintiff and the basis of action in Beaudesert. Assuming, for the purposes of this discussion, that there exists a tort as proposed and it reflects the principles adumbrated by the Victorian Court of Appeal in Pinky’s, supra, it depends not only upon the inevitable consequence of an intentional act but an act which has as its purpose the causing of harm or loss. (See also Copyright Agency Limited v Haines [1982] 1 NSWLR 182 at 194, per McClelland J)

81 If such a tort exists, and for present purposes I assume that to be the case, it would seem that the statement by the Court of Appeal in Victoria is that the purpose of causing injury (predominant or otherwise) must be a purpose other than the advancing of the defendant’s own interests. If a broad tort exists of the kind here mentioned, there is much more scope for a broader defence of justification than operates with an interference with contractual relations. (See Zhu v Treasurer of NSW (2004) 218 CLR 530)

82 I will assume for the current analysis that such a tort exists, that justification must be confined to assertion of a superior right and deal with the issues accordingly. Then, on the evidence before the Court, there is an unlawful act in the refusal (pre-Arbitrator’s decision) to allow Film Financial to attend and audit in relation to Waking Ned Devine. That unlawful act was the breach of contract with OFG, being the defiance in the face of an insistence by OFG and the refusal to allow Film Financial access to property and records. In relation to no other contract can it be said that there is an unlawful act because in relation to no other contract was there an insistence that Film Financial perform the audit and in relation to no other contract was there a breach of contract by Becker Group which amounted to any arguable unlawfulness.

83 In those circumstances, two further obstacles arise in the making good of a claim of unlawful interference. On the basis of the analysis previously undertaken in relation to the tort of intentional interference with contractual relations, Film Financial failed to prove, even on the balance of probabilities, that damage arose from the conduct; for that reason the claim on this less-established tort must likewise fail.

84 The second obstacle would be a question of justification, if the claim had not fallen for want of damage. Confining justification, even in this new tort, to the kind of justification adumbrated by the High Court in Zhu, supra, the defendants have a good defence. I accept that the motive of the defendants was the protection of its own business. It considered the comment by Film Financial to be particularly damaging to its reputation and to its capacity to obtain further work from Summit and beyond Summit. The right that it asserted was a right to its property, being the premises it occupied and the documents and records of the business it possessed.

“[135] … statute apart, where reliance is placed on the defence of justification to protect the right which is equal or superior to the contractual right of the plaintiff, logic suggests that the protected equal right of the defendant will normally have a similar character to the right of the plaintiff – i.e. a quasi-proprietary character – while a superior right will be proprietary. Logic is a dangerous guide in relation to terms as subtle, fluid and lacking in fixed and uniformed criteria as ‘proprietary’ and ‘quasi-proprietary’, but Jordan CJ’s analysis of superior rights in Independent Oil Industries Limited v Shell Company of Australia Limited (1937) 37 SR (NSW) 394 at 415, certainly suggests that a right which is ‘superior’ to the plaintiff’s contractual right must be proprietary. …
[138] … Jordan CJ said justification in that sense rested on the principle that ‘an act which would in itself be wrongful as infringing some legal right of another person may be justified if shown to be no more than reasonably necessary for the protection of some actually existing superior legal right in the doer of the act’. He illustrated the operation of the principle thus:
‘An occupier of land may, after notice, lawfully eject a trespasser and anyone may lawfully defend himself, by acts which would in other circumstances constitute the tort of assault.’
The legal strength of the trespasser’s position could not be improved, and the legal strength of the occupier’s position could not be reduced, by the fact that the trespasser had entered the occupier’s land pursuant to a contract with the third party.” ( Zhu , supra )

85 Once permission to enter premises is denied to Film Financial (albeit in breach of contract with OFG) insofar as Film Financial uses particular personnel, and once access to documents is denied to Film Financial in those circumstances, the person to whom objection is taken is trespassing and is in breach of the proprietary rights of Becker Group. The remedy is for OFG to sue and obtain damages and/or injunctive relief. But, for the purposes of this proposed tort, the right to protect its property (and possibly including the proprietary right in the goodwill of the business) is a superior right to the contractual right asserted and will withstand the claim in tort by Film Financial whose rights are contractual only.

86 Given that I have found that the plaintiff has not proven damage, it is probably unnecessary, and obiter, for me to finally determine the question of justification. It is also unnecessary for me to determine that the tort proposed exists. If it does, its elements not been so proven.

Section 51AA of the Trade Practices Act 1976

87 As previously stated, the only provision of the Trade Practices Act upon which reliance is placed is s.51AA of the Act. Section 51AA provides a statutory prohibition on a corporation engaging in conduct which is unconscionable within the meaning of the ‘unwritten law’. It imports into the Trade Practices Act the principles in Blomley v Ryan (1956) 99 CLR 362; Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447 and the like. It requires an unconscientiousness in the conduct of a corporation in exploiting a “special disadvantage” that exists in the other party to a transaction. It has been defined in a number of ways by the High Court.

88 In Blomley v Ryan it was said to arise:

“Whenever one party to a transaction is at a special disadvantage in dealing with the other party because illness, ignorance, inexperience, impaired faculties, financial need or other circumstances affect his ability to conserve his own interests, and the other party unconscientiously takes advantage of the opportunity thus placed in his hands.” (per Kitto J at 415)

89 In Amadio, Mason J at 461 said:

“Relief on the ground of unconscionable conduct will be granted when unconscientious advantage is taken of an innocent party whose will is overborne so that it is not independent and voluntary just as it will be granted when such advantage is taken of an innocent party who, though not deprived of an independent and voluntary will, is unable to make a worthwhile judgment as to what is in his best interests.”

90 At 474 of Amadio, his Honour Deane J described unconscionable conduct as occurring when:

“(i) A party to a transaction was under a special disability in dealing with another party with the consequence that there was an absence of any reasonable degree of equality between them; and
(ii) That disability was sufficiently evident to the stronger party to make it prima facie, unfair or ‘unconscientious’ that he procure or accept the weaker party’s assent to the impugned transaction in the circumstances in which he procured or accepted it.
Where such circumstances are shown to have existed, an onus is cast upon the stronger party to show that the transaction was fair, just and reasonable.”

91 Unconscionable conduct does not mean unfair conduct. It occurs only when there is a special disability “which seriously affects the ability of the innocent party to make a judgment as to his or her best interests’. (ACCC v CG Berbatis Holdings Pty Ltd (2003) 214 CLR 51, per Gleeson CJ at 62 [5])

92 In enacting s.51AA of the Trade Practices Act, the legislature has not extended the common law, it has, for federal legislative purposes, enacted it. In the current circumstances, Film Financial does not suffer a special disadvantage of the kind that would bring it within the provisions of s.51AA. Further, it has not been party to a transaction with the defendant Becker Group. The licensors on whose behalf Film Financial were gaining access to premises were the parties to the transaction and they, at least on one view, had a much stronger bargaining position than did Becker Group. I do not here suggest that a weaker bargaining position is, of itself, a special disadvantage of the kind contemplated in unconscionable conduct, but a stronger bargaining position is generally the antithesis of any suggestion of unconscionability towards the stronger party.

93 In those circumstances it is unnecessary for me to determine whether s.80 and 82 of the Trade Practices Act extend the right to injunctive relief and/or damages to a person not involved in the transaction.

Conclusion

94 As can be seen from the above, none of the bases upon which the plaintiff claims damage is established. I have paid little or no attention thus far to the question of injunctive relief.

95 Injunctive relief was not separately argued other than on the basis of established interference with contractual rights on an ongoing basis. (See Woolley v Dunford (1972) 3 SASR 243) There is, arguably, a basis upon which an injunction could issue restraining the defendants from interfering with audit contracts obtained by the plaintiffs in the future. Such an injunction would operate only in relation to contracts that have, in fact, been formed and of which, as with Waking Ned Devine, the defendants were aware. Given the express attitude of the defendants, it is at least possible, notwithstanding the lack of evidence in this case, that such a situation will arise. On the evidence adduced in these proceedings, particularly on damage; even if injunctive relief were available as an exercise of discretion I would not grant it.

96 The Court makes the following orders:

1. Judgment for the Defendants;

2. The proceedings are otherwise dismissed;

3. The plaintiff will pay the defendants’ costs as agreed or assessed.

**********