Drip World Pty Ltd v Dardy Touring Corp

The plaintiff, Drip World Pty Ltd, commenced these proceedings on 18 May 2020 against the first defendant, Dardy Touring Corp (“Dardy”), a company incorporated in New York, and the second defendant, William Morris Endeavour Entertainment, LLC (“WME”), a company incorporated in Delaware.

The proceedings arise out of a proposed hip hop festival to be known as “Ra!se Tha Roof” (“the Festival”) in Australia during 2019 and, in particular, with the proposed involvement in the Festival of the hip hop artist French Montana (“the Artist”).

Dardy is a touring company that acts on behalf of the Artist. WME is a talent agency which represents musicians and other artists, including the Artist.

Drip World has not yet served Dardy. It served WME by delivery to its agent in the United States.

In its List Statement, Drip World alleges that:

On 13 July 2020 WME filed a notice of motion seeking an order pursuant to Uniform Civil Procedure Rules 2005 (NSW) r 11.6(1) that the proceedings be either dismissed or stayed permanently. UCPR r 11.6 provides:

Difficulties with the case pleaded as set out at [5] are that:

Drip World has recognised those difficulties and now, by Amended Notice of Motion filed in court on 3 December 2020, seeks an order granting it leave to file an Amended Summons and Amended Commercial List Statement to:

According to the proposed Amended List Statement there were terms of the “Stakeholder Agreement” that WME:

On behalf of WME, Mr Sulan submitted that either the Court had no power to make the amendments sought or, alternatively, that the Court should not exercise its power to permit the amendments sought because Drip World was, in effect, abandoning its claim against WME and against Dardy.

In those circumstances, Mr Sulan submitted that the appropriate course would be to dismiss the current proceedings, and leave it to Yellow Presents to commence fresh proceedings.

Section 64 of the Civil Procedure Act 2005 (NSW) provides:

The section is to be construed broadly. [2]

One of its stated objects is to avoid the “multiplicity of proceedings”.

One consequence of my refusing to grant Drip World the leave it seeks is that there would be likely be a multiplicity of proceedings as, in all likelihood, Yellow Presents would commence proceedings against WME and Dardy seeking the relief now sought to be propounded by the amendment.

In my opinion, s 64 is apt to allow the amendment sought and, but for the matters that follow, I would have been inclined to allow that amendment.

Were the amendment to be allowed, it would be necessary for Yellow Presents to serve the Amended Summons and List Statement on WME and Dardy in the United States, thus giving rise to the issues that WME seeks to agitate in its 13 July 2020 motion concerning the proceedings as presently constituted.

In those circumstances, counsel agreed that I should consider, now, whether service of such Amended Summons and Amended List Statement would be set aside upon the same bases as WME now seeks to agitate in relation to the Summons and List Statement as presently constituted.

If such service would be set aside:

The critical question is whether, for the purposes of UCPR r 11.6(2)(a), such service would be liable to be set aside upon the basis that it is not authorised by the Rules. That in turn depends on whether the proposed amended proceedings would fall within any of the categories specified in Schedule 6 to the UCPR.

In his written submissions, Mr Elliott, for Drip World, submitted that the claims proposed to be made by Yellow Presents against WME were the enforcement of the Stakeholder Agreement which is a contract that:

In oral submissions, Mr Elliott did not press the first of these bases and accepted that the alleged Stakeholder Agreement was not to be performed wholly or in part in Australia but, rather, in the United States.

However, Mr Elliott submitted that it was at least arguable that the Stakeholder Agreement was one that would be governed by Australian law, thus enlivening cl (b)(iv) of Schedule 6.

Consideration of that submission requires examination of the circumstances leading up to the making of the alleged Stakeholder Agreement.

The proposed contract for the Artist’s appearance at the Festival was to be between Dardy and Yellow Presents.

The Artist’s fee for appearing at the Festival was $US800,000.

Negotiations for the payment of the Deposit, being half of the Artist’s fee, took place between Ms Spedaliere for Yellow Presents and Mr Clarkson from WME

At all relevant times Ms Spedaliere was in Sydney and Mr Clarkson was in California.

The first draft of that contract was circulated on 21 December 2018. Although it was expressed to be between Dardy Touring and Yellow Presents, it was engrossed on WME letterhead.

Between 17 December and 19 December 2018 Ms Spedaliere and Mr Clarkson exchanged the emails and had the conversations referred to at [8(c)] above. Those emails were directed to the term to be included in the contract between Yellow Presents and Dardy concerning the Deposit.

Ms Spedaliere wrote:

Mr Clarkson replied:

Ms Spedaliere replied:

Mr Clarkson replied:

Ms Spedaliere replied:

Mr Clarkson replied:

It is this exchange of emails, and the conversations referred to by Mr Clarkson in the email at [34] (“as I have been clear on our calls”) that allegedly constitutes the Stakeholder Agreement.

Mr Clarkson’s assistant sent a copy of the draft contract to Ms Spedaliere under cover of an email of 22 December 2018 which read:

That draft provided that the “Payment Terms” included the payment of a $400,000 deposit.

The document also provided that the contract would be governed by the law of the State of California.

As the email stated, the deposit was due on the “issuance” of the proposed contract between Yellow Presents and Dardy Touring, and not upon its execution.

There were further negotiations as to the detail of the contract between Dardy and Yellow Presents including that the Deposit would be $US400,000 “minus any amount required to be withheld pursuant to … applicable taxation law”. This explains why the Deposit ultimately paid was $US240,000, rather than $US400,000. Mr Elliott informed me that the difference was to be retained in Australia for withholding tax.

On 9 January 2019, Yellow Presents’ solicitor, Mr Matt McCormick, wrote to Mr Clarkson’s assistant:

On 18 January 2019 Yellow Presents’ bank, National Australia Bank Ltd, confirmed that “280,000 USD has been processed today 18/01/2019 to William Morris Endeavour Entertainment LLC”.

The amount was credited to WME’s “Client Trust Account” in Beverly Hills California on 24 January 2019.

Negotiations thereafter continued in relation to the proposed Dardy/Yellow Presents contract.

At one point, another company, Yellow Live Pty Ltd, was proposed as the counter party to Dardy.

Ultimately Drip World was proposed as counter party.

All drafts of the proposed contract were on WME letterhead.

Negotiations ceased at the end of May 2019 without any contract being entered.

On 28 May 2019 Mr McCormick wrote to Mr Clarkson:

Mr McCormick then set out details of his trust account.

At a time not precisely identified in the evidence, but evidently around December 2019, WME released part of the Deposit to Dardy Touring and appropriated the balance, apparently for commission.

On 16 December 2019 Ms Spedaliere sent an email to Ms Michelle Katz at WME stating:

On 22 December 2019 Ms Katz replied, denying the existence of any escrow arrangement or agreement and stating:

Ms Spedaliere replied:

Ms Katz replied on 23 December 2019, stating that the Artist was entitled to his fees and stated:

There the matter rested.

Mr Elliott pointed to the fact that the Stakeholder Agreement was created in the context of the proposed participation by the Artist in the Festival which was to take place in Australia and submitted that there was at least a prima facie or arguable case [3] that the proper law of the Stakeholder Agreement was Australia.

Mr Elliott pointed to authority that the requirement to establish a “prima facie case” has been described as “not particularly onerous” [4] and that the inquiry “neither requires nor permits an assessment of the strength (in the sense of likelihood of success)” of the contention. [5]

However, I am not satisfied, even to this relatively undemanding standard, that the proper law of the Stakeholder Contract was Australia.

The Stakeholder Agreement was entered in anticipation of, and as an integral aspect of, the proposed contract between Dardy and Yellow Presents, as illustrated by the fact that each of the draft Dardy/Yellow Presents contracts was engrossed on “WME” letterhead.

As the course of negotiations to which I have referred above show, agreement as to the terms upon which the Deposit would be paid and held for the purposes of the proposed Dardy/Yellow Presents contract was a matter specified by Mr Clarkson for WME as being necessary on the “issuance” of the proposed Dardy/Yellow Presents contract.

The Dardy/Yellow Presents contract was to be governed by the law of California.

The deposit the subject of the Stakeholder Agreement was to be paid in California. WME was to perform its obligations under the Stakeholder Agreement in California.

Further, the Stakeholder Agreement was made in California.

Where contracts are created by the exchange of electronic communications, the contract is made at the place where the message of acceptance is received by the offeror. [6]

The message of acceptance received by the offeror here was Ms Spedaliere’s message set out at [35] above accepting Mr Clarkson’s proposal at [34]. Mr Clarkson received Ms Spedaliere’s message in California.

I do not regard Mr Clarkson’s response “thanks” as having any contractual implications. He was merely acknowledging Ms Spedaliere’s acceptance of his proposal.

For those reasons, my opinion is that the proper law of the Settlement Agreement was the law of California.

It follows that, were I to grant Drip World leave to amend the Summons and List Statements so as to substitute Yellow Presents as plaintiff, Yellow Presents would not be entitled to serve the originating process on WME without leave.

If service were nonetheless effected, the proceedings would be liable to be dismissed under UCPR r 11.6 on the basis that none of the circumstances referred to in Schedule 6 are enlivened and that, accordingly, service is not authorised by the Rules.

Further, in these circumstances, I would not be prepared to grant Yellow Presents leave under UCPR r 11.5 to serve the proposed Amended Summons and Amended List Statement on WME.

UCPR r 11.5(5) states that the Court may grant such leave if satisfied that:

Although the alleged Stakeholder Agreement has a connection with Australia, in that it was allegedly entered against the backdrop of the proposed participation by the Artist in the Festival in Australia, I am not satisfied that it has a “real and substantial” connection.

In any event, in my opinion, WME has been unduly vexed by the manner in which these proceedings have been conducted to date.

WME was faced with a claim by Drip World that Drip World now accepts is not maintainable and must be abandoned.

It appears that it was only when WME’s solicitors drew attention to the fact that Drip World was not incorporated until 11 April 2019 that the amendment now proposed was agitated.

As Mr Sulan put it in oral submissions:

Thus, even had I been satisfied that the requirements of UCPR r 11.5(5) were otherwise engaged, I would not, as a matter of discretion, grant Yellow Presents leave to serve WME outside the jurisdiction.

For those reasons, my conclusion is that I ought not to grant Drip World leave to amend the Summons and List Statement as it seeks.

As Drip World does not intend to prosecute the claim as presently formulated, the proceedings should be dismissed.

I make the following orders:

I will hear the parties as to costs.