A recent New South Wales court decision provides a useful reminder on the benefit of having a clear date of contract and a good deal making and contracting process.
The cast of entertainment industry characters either directly involved or mentioned in the case include Dame Kiri Te Kanawa, John Farnham, Leading Edge Events (a concert and event promotion company), and their respective agents, managers and directors.
The case provides valuable lessons on the need to use proper deal making language and process whatever industry your deals are in. Combined with good documents the process protects legal positions for negotiations, deals and contracts.
The decision on 21 March 2007 was by Justice Patricia Bergin of the New South Wales Supreme Court in the case of Leading Edge Events Australia Pty Ltd v Kiri Te Kanawa & Ors [2007] NSWSC 228 (Leading Edge). The case was in the Equity – Commercial List, and involved a six day hearing, four barristers (one a Senior Counsel), and three law firms.
1. What was the event and who were the parties to the contract?
Leading Edge Events started the court case. It described itself as a promoter of events in the entertainment industry. The defendants were Dame Kiri, her service company Mittane Ltd (a company incorporated in Jersey, Channel Islands), and her theatrical agents and their directors.
Justice Bergin details in her 298 paragraph judgement the innumerable meetings, emails and phone communications from 18 June 2003 to 30 March 2004 during which the parties tried to negotiate their deal.
The aim was to negotiate terms for a series of concerts to be held in February 2005, titled Two Great Voices. The voices were to be the New Zealand opera singer, Dame Kiri, and the Australian pop singer, John Farnham.
There had also been numerous communications that involved the managers of Farnham and Dame Kiri in communication over creative and artistic considerations. These facts were significant to the decision reached by Justice Bergin.
She noted that ultimately, on 30 March 2004 Mittane (Dame Kiri’s service company) sent a letter by fax to Leading Edge Events concluding: “In view of the above, we have to inform you that we wish to cease negotiations and are no longer holding the availability for Dame Kiri’s services. Mittane Limited and related advisors, on behalf of our employee Dame Kiri Te Kanawa, wish to retain full artistic control of the event – evidence of which has not been forthcoming.”
Clearly, Dame Kiri had decided to not play.
“Pay to play” is an entertainment law or industry expression. It refers to performers and musicians who pay money to get to play at a venue. It also refers to payola, paying to have music played on radio. However, in the Leading Edge Events case, that concert promotion company reversed that usual situation – it sued for its pay, because Dame Kiri, did not play.
Leading Edge Events had sunk costs and could not turn things around, it sought to make Dame Kiri’s interests responsible for certain fees, expenses, losses and profits. Simply stated, it claimed Dame Kiri was legally obliged to pay as she did not play.
Proceedings were commenced on 9 November 2005. Dame Kiri was a witness in the case, but Farnham was not.
2. What money was at stake?
Among its claims, Leading Edge Events claimed there was a legally binding contract applying to Dame Kiri.
However, it accepted that there was not a specific date it could point to as the date of that contract. It based its contract claim on a series of telephone calls, emails and a draft written contract.
The simple fact of a lack of a clear contract date can raise a string of contract law problems or questions, such as whether any deal has been translated into a legally binding contract, and if so, on what terms and conditions. Good deal making and contracting process and documentation makes it less common for these problems.
Under its contract law claim and other grounds for its claims, Leading Edge Events sought recovery of:
- loss and damages of A$600,000 for an agreed management fee</span>;
- A$147,349.26 for expenses and wages</span>; and
- a quarter share of the net profits from the concerts.
3. Was there a legally binding contract?
After reviewing the submissions and evidence before her, Justice Bergin concluded that “The real reason why Mittane ceased negotiations was that Dame Kiri did not want to perform at these Concerts.” Relevant were creative and artistic considerations.
Justice Bergin was satisfied that Leading Edge Events and Mittane had not concluded a binding agreement by 16 December 2003 as claimed by Leading Edge Events. Thus the contract claim died.
4. Was there any other legal ground for the claim?
Leading Edge Events made a claim for expenditure it incurred in relation to the concerts on a quantum meruit basis arguing an application of both restitution and equitable estoppel doctrines. The equitable estoppel claim failed.
Overall the quantum meruit claim helped Leading Edge Events recover some money. Justice Bergin found that it was entitled to recover most of its expenses. She found this totalled $128,063.21 based on an application of the quantum meruit principles. Quantum meruit is a Latin expression meaning “the amount he deserves” and in essence it is a legal claim for payment of the reasonable value of services performed. Justice Bergin’s observations make it clear that it helped Leading Edge Events to have several times made known to Dame Kiri and her people that money was being spent on organisational arrangements for the concerts. Leading Edge Events would have done a lot better financially if it had signed up Dame Kiri before spending that money.
5. Summary and takeaway lessons
In summary, Leading Edge entirely failed in its claim for a “management fee” and for a share of “net profits”. It succeeded for a large portion of its claimed expenses, though it seems unlikely to be enough to cover the costs of the case, the six day hearing and the difficult to value but very real loss of management time attending to the needs of its solicitors and barrister.
The absence in this case of a finalised written agreement, one with a clear date, highlights the enormous benefits commercial enterprises can gain by following a structured deal making and contracting process. Application of such a defined process is one of the most reliable ways to increase the chance that written contracts will be drafted, supplied, negotiated, agreed upon and signed at the earliest possible time following entry into negotiations and doing a deal or reaching an “in principal” agreement.
Putting it another way, often a deal is not worth having if it is not translated into a written, signed and dated contract. Stevie Wonder repeats it often in the song, “Signed, Sealed Delivered, I’m Yours “.
Certainly, a contract can be found to exist at law even if there is no exact date. For example there can be negotiations over several meetings, phone calls and emails which taken together provide evidence that is sufficient to find the key elements for whether or not a contract exists. Most of these elements have been seen as necessary for a very long time stretching back to the late 19th century, the “classic” period in the evolution of contract law. However, it is far easier to find that there is a contract under law when one has a document clearly agreed and effective on and from a particular time and date. The date gives certainty to the parties, legal advisers and judges.
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