FEDERAL COURT OF AUSTRALIA Omnilab Media Pty Limited v Digital Cinema Network Pty Ltd (No 3) [2011] FCA 682 Citation: Omnilab Media Pty Limited v Digital Cinema Network Pty Ltd (No 3) [2011] FCA 682 Parties: OMNILAB MEDIA PTY LIMITED (ACN 002 585 391) and OMNILAB MEDIA CINEMA SERVICES PTY LTD (ACN 145 363 855 v DIGITAL CINEMA NETWORK PTY LTD (ACN 132 404 481) and MICHAEL GEOFFREY SMITH File number: VID 535 of 2011 Judge: TRACEY J Date of judgment: 15 June 2011 Legislation: Corporations Act 2001 (Cth) ss 180, 181, 182, 183, 1317J Federal Court of Australia Act 1976 (Cth) ss 24, 25 Federal Court Rules O 29, O 52A r 10 Trade Practices Act 1974 (Cth) s 52 Cases cited: Australian Telecommunications Commission v Colpitts (1986) 67 ALR 301 cited Darvall v North Sydney Brick & Tile Co Ltd (1989) 16 NSWLR 260 cited Décor Corporation Pty Ltd v Dart Industries Inc (1991) 33 FCR 397 applied Digital Cinema Network Pty Ltd v Omnilab Media Pty Limited (No 2) [2011] FCA 509 cited Edwards v Santos Limited [2010] FCA 34 cited Date of hearing: 15 June 2011 Date of last submissions: 15 June 2011 Place: Melbourne Division: GENERAL DIVISION Category: No catchwords Number of paragraphs: 17 Counsel for the Applicants: Mr J Peters SC and Mr J Slattery Solicitor for the Applicants: Holding Redlich Counsel for the First Respondent: Mr S Senathirajah Solicitor for the First Respondent: Corrs Chambers Westgarth Counsel for the Second Respondent: Mr D Crennan Solicitor for the Second Respondent: Garland Hawthorn Brahe Lawyers IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY GENERAL DIVISION VID 535 of 2011 BETWEEN: OMNILAB MEDIA PTY LIMITED (ACN 002 585 391) First Applicant OMNILAB MEDIA CINEMA SERVICES PTY LTD (ACN 145 363 855) Second Applicant AND: DIGITAL CINEMA NETWORK PTY LTD (ACN 132 404 481) First Respondent MICHAEL GEOFFREY SMITH Second Respondent JUDGE: TRACEY J DATE OF ORDER: 15 JUNE 2011 WHERE MADE: MELBOURNE THE COURT ORDERS THAT: 1. The application for leave to appeal be heard by a Full Court of this Court subject to any contrary direction of the Full Court. 2. The application for leave to appeal be heard concurrently with or, alternatively, before the hearing of the appeal. 3. The applicants' notices of appeal be filed in substantially the same form as the notice of appeal exhibited to the affidavit of Howard Roger Rapke dated 7 June 2011 and such notices be filed and served on or before 17 June 2011. 4. The hearing of the appeal be expedited. 5. Proceeding VID 813 of 2010 be stayed until further order of the Court. 6. Costs of and incidental to the application for leave be reserved. 7. Liberty to apply to a single judge on 48 hours' notice to each other party. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. The text of entered orders can be located using Federal Law Search on the Court's website. IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY GENERAL DIVISION VID 535 of 2011 BETWEEN: OMNILAB MEDIA PTY LIMITED (ACN 002 585 391) First Applicant OMNILAB MEDIA CINEMA SERVICES PTY LTD (ACN 145 363 855) Second Applicant AND: DIGITAL CINEMA NETWORK PTY LTD (ACN 132 404 481) First Respondent MICHAEL GEOFFREY SMITH Second Respondent JUDGE: TRACEY DATE: 15 JUNE 2011 PLACE: MELBOURNE REASONS FOR JUDGMENT 1 For some time negotiations have been ongoing between major United States film studios and certain Australian entities with the view to providing subsidies to assist Australian cinema owners to upgrade their projection equipment from analogue to digital. The parties to this proceeding have been involved, in one way or another, with those negotiations. 2 Digital Cinema Network Pty Ltd ("DCN") commenced a proceeding in the Court against the Omnilab entities and Mr Michael Smith alleging that they had contravened provisions of the Corporations Act 2001 (Cth) ("the Corporations Act") and s 52 of the Trade Practices Act 1974 (Cth) in the course of negotiations with the studios. The application proceeded in accordance with the Fast Track arrangements. As a result there are no pleadings. Rather the primary judge invited DCN to identify its claims in the form of questions which she proceeded to answer. Those questions were confined to the issue of liability. Issues relating to what, if any, relief should be provided are expected to be dealt with later this year. 3 On 16 May 2011 the primary judge published a judgment in which she found that Mr Smith had contravened the duties (both statutory and fiduciary) which he owed DCN and that the Omnilab parties knowingly assisted and/or were knowingly involved in those breaches: see Digital Cinema Network Pty Ltd v Omnilab Media Pty Limited (No 2) [2011] FCA 509. She invited the parties to bring in orders to give effect to her reasons. This was done. On 31 May 2011 her Honour made declarations giving effect to her findings so far as they related to Mr Smith's breach of his fiduciary obligations and the Omnilab parties involvement in those breaches. Her Honour did not make any declarations relating to the contraventions of ss 180, 181, 182 and 183 of the Corporations Act because of the constraint imposed by s 1317J of that Act. 4 By notice of motion filed on 7 June 2011 the Omnilab parties have sought leave to appeal against her Honour's orders or, alternatively, for an order to be made that the application for leave to appeal be heard concurrently with or immediately before the hearing of the appeal. By notice of motion, filed in Court this morning, Mr Smith applied for similar orders. An expedited hearing of the appeal was also sought. 5 Leave to appeal would not have been necessary had the liability and relief issues not been separated. 6 The Omnilab parties and Mr Smith (to whom I will refer, collectively, as the applicants) submitted that a proper basis existed for me to grant leave to appeal consistently with the principles enunciated in Décor Corporation Pty Ltd v Dart Industries Inc (1991) 33 FCR 397. Their principal application was, however, that the application for leave to appeal be heard by the Full Court: see ss 24(1A) and 25(2) of the Federal Court of Australia Act 1976 (Cth). 7 The Omnilab parties relied on detailed written submissions to make good a claim that the orders of the primary judge were attended with sufficient doubt to warrant leave and that substantial injustice would be caused if the orders were allowed to stand. Detailed answering submissions were handed up by counsel for DCN in which it was contended that no proper basis had been established for challenging the conclusions to which the primary judge came. 8 It is sufficient for present purposes for me to record that, in my judgment, the draft grounds of appeal on which the applicants propose to rely if leave is granted and the arguments which have been advanced to support them raise matters of substance. It has taken a half day for the arguments to be outlined but they were not fully developed. 9 Having heard that argument I have come to the view that the present case is one of the exceptional cases in which an application for leave to appeal should be dealt with by a Full Court either in advance of or in conjunction with an appeal hearing. In coming to this view I have been guided by the principles collected by Collier J in Edwards v Santos Limited [2010] FCA 34 at [10]. 10 The main basis upon which DCN opposed the application was that it would be futile to grant leave or to refer the question of the granting of leave to a Full Court. This, it was contended, was so because, even if the proposed appeal were to be allowed, the primary judge's findings relating to contraventions of the Corporations Act would be left undisturbed. 11 It is undoubtedly correct, as a general proposition, that appeals lie from orders and not from reasons for judgments. There are, however, instances in which findings implicit in reasons for judgment but which don't find expression in orders may properly be challenged on appeal: see, for example, Australian Telecommunications Commission v Colpitts (1986) 67 ALR 301 at 308. 12 In the present matter the primary judge has made explicit findings of contravention and complicity in the contravention of ss 180-183 inclusive of the Corporations Act. The only reason that her Honour has not made declarations to give effect to those findings is that the parties lack standing under the Act to apply for such declarations. More importantly, however, the declarations relating to breach of fiduciary obligations rest on the same foundations as the findings relating to contraventions of the obligations imposed by ss 180-183 inclusive. This is because the statutory provisions codify the general law: see Darvall v North Sydney Brick & Tile Co Ltd (1989) 16 NSWLR 260. If the proposed appeal against the declarations relating to the contravention of fiduciary obligations succeeds on the grounds advanced by the applicants, this will, almost certainly, have implications for the efficacy of any findings of contravention of the Corporations Act provisions. 13 DCN objected that Mr Smith's application for leave to appeal had been made out of time. Whether the application was timely or not depended on which sub-paragraph of O 52 r 10(2A) of the Federal Court Rules applies. The relevant rule requires that a notice of motion must be filed: "(a) if the interlocutory judgment is in the nature of a decision on a question under Order 29 – within 21 days after the date on which the interlocutory judgment was pronounced; and (b) in any other case – within 7 days after the date on which the interlocutory judgment was pronounced …" 14 Although the primary judge invited DCN to pose questions and then answered them, it is not clear to me that she acted under O 29. It is more likely that she exercised one of the many broad discretionary powers available as part of the Fast Track regime. 15 I therefore consider that Mr Smith is probably out of time in making his application. If that be the case I consider that he should be granted an extension of time within which to file his application. DCN can point to no prejudice should such leave be granted. Mr Smith's arguments on appeal are substantially the same as those advanced by the Omnilab interests and there is no doubt that the Omnilab application was made in good time. 16 All parties submitted that an order for expedition of the hearing of the appeal should be made if I granted leave or referred the leave application to the Full Court. The negotiations with the American studios are on-going and the findings of the primary judge about the conduct of some of the individuals involved in the negotiations have, and are having, a negative impact on the dealings between the American and Australian parties. 17 The application for leave to appeal should be heard by a Full Court either immediately before the time fixed for the hearing of appeal or concurrently with it. An order for an expedited hearing should also be made. I certify that the preceding seventeen (17) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Tracey. Associate: Dated: 15 June 2011