GALAXY COMMUNICATIONS PTY LTD v PARAMOUNT FILMS OF AUSTRALIA INC [1998] NSWCA 89

GALAXY COMMUNICATIONS PTY LTD v PARAMOUNT FILMS OF AUSTRALIA INC

SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL

PRIESTLEY, MEAGHER and STEIN JJA 27 March 1998, 24 February 1998

True construction of clause of agreement — meaning of 'become insolvent'? — entitlement to declaratory relief — hypothetical issue — future rights — proceedings an abuse of process/vexatious/ revealing no reasonable cause of action — stay of proceedings under Pt13 r5 SCR

The opponents are in partnership with the claimants to supply movie subscription services and general entertainment subscription services for pay TV pursuant to two distribution agreements. The term of the agreements is for 25 years.

C113(c) of the agreements provide for termination of the agreements by giving notice of election to terminate if a party becomes insolvent. The opponents allege that the claimants became insolvent in or about November 1997 to January 1998 and sought declarations before Giles J that they are entitled to terminate the agreements on the ground that the claimants became insolvent by so notifying them. The claimants contend that on the proper construction of the agreements they must be insolvent at the time the notice electing to terminate is given. The claimants sought an order that the question of the proper construction of cl13(c) be decided separately from and before any trial in the proceedings and, alternatively, an order that the proceeding be dismissed or permanently stayed.

The two principle issues before Giles J were the proper construction of cl13(c) of the distribution agreements and the entitlement of the opponents to the declaratory relief they were seeking.

Giles J held that the clause was satisfied if the claimants had moved from a state of solvency to a state of insolvency at any time prior to the giving of notice of election to terminate and refused the claimants' application for a stay or summary dismissal.