District Court New South Wales Medium Neutral Citation: Mothership Music Pty Ltd v Darren Ayre (trading as VIP Entertainment & Concepts Pty Ltd) and Flo Rida (also known as Tramar Dillard) (No. 2) [2012] NSWDC 111 Hearing dates: 3 August 2012 Decision date: 03 August 2012 Jurisdiction: Civil Before: Gibson DCJ Decision: (1) Judgment for the plaintiff for $380,400.60. (2) Liberty to the plaintiff to restore in relation to interest. (3) The defendants pay the plaintiff's legal costs in the sum of $37,745.37. (4) Exhibits retained for 28 days. Catchwords: CONTRACT - assessment of damages - claim for special damages - claim for general damages for loss of commercial opportunity and injury to reputation - claim for lump sum legal costs Legislation Cited: Civil Procedure Act 2005 (NSW), ss 56 and 98(4) Cases Cited: Aerial Advertising Co v Batchelors Peas Ltd (Manchester) [1938] 2 All ER 788 Anglo-Continental Holidays v Typaldos Lines (London) [1967] 2 Lloyd's Rep 61 Beach Petroleum NL v Johnson (1995) 57 FCR 119 Dye v Commonwealth Bank of Australia [2012] NSWCA 220 Dye v Commonwealth Securities Ltd (No 2) [2012] FCA 407 Fairfax Radio Network Pty Ltd v Printlane Pty Ltd (No 2) (2011) 13 DCLR (NSW) 64 Hadid v Lenfest Communications Inc [2000] FCA 628 Hamod v State of New South Wales (No 13) [2009] NSWSC 756 Harrison v Schipp (2002) 54 NSWLR 738 Heidelberg Graphics Equipment Ltd v Andrew Knox & Associates Pty Ltd (1994) ATPR 41-326 Idoport Pty Ltd v National Australia Bank Ltd [2007] NSWSC 23 Lorenzato v Lorenzato (No 2) [2011] NSWSC 790 Mallick v BCCI [1997] 3 All ER 1 Marston & Cook Pty Ltd v Sensis Pty Ltd [2008] VSC 568 New Zealand Airline Pilots' Association v Air New Zealand Ltd [1992] 2 NZLR 656 Poseidon Ltd & Sellars v Adelaide Petroleum NL (1994) 179 CLR 332 Prosperity Advisers Pty Ltd v Secure Enterprises Pty Ltd (t/as Strathearn Insurance Brokers) [2012] NSWCA 192 Tim Barr Pty Ltd v Naurui Gold Coast Pty Ltd [2011] NSWSC 11 Texts Cited: - Category: Principal judgment Parties: Plaintiff: Mothership Music Pty Ltd First Defendant: Darren Ayre (trading as VIP Entertainment & Concepts Pty Ltd) Second Defendant: Flo Rida (also known as Tramar Dillard) Representation: Plaintiff: Mr J Sleight Defendants: No appearance Plaintiff: Neville & Hourn Legal Defendants: No appearance File Number(s): 2012/116306 Publication restriction: None Judgment 1HER HONOUR: This is an application for assessment of damages following the entry of judgment in favour of the plaintiff after failure by the defendants to comply with peremptory orders made on 15 June 2012 as follows: (1)A peremptory order that the defendants file a Defence 28 days from today. (2)In the event of no Defence being filed, judgment will be entered, and the matter listed for hearing for assessment of damages, when the matter is next before the court on Friday 3 August 2012 at 9:00am before Gibson DCJ. (3)Orders made on 18 April 2012 to continue until further order. (4)Costs reserved. 2The defendants have been made aware that the matter will proceed today for assessment of damages (Exhibits F and G). The defendants were called three times outside the court at 9:29am and 10:02am and there was no appearance. 3The circumstances giving rise to the claim may briefly be stated as follows. The plaintiff and defendants agreed that the second defendant, a rap artist known as "Flo Rida", would perform at the "Fat As Butter Festival" at Camp Shortland, Newcastle, NSW on 22 October 2011 for a period of 60 minutes, with a call time of 4:00pm. The contractual sums were paid to the defendants in July and August 2011 (paragraphs 8-10 of Exhibit C). Flo Rida was to perform at the festival at which a number of artists were engaged by the plaintiff to perform. Entry was by ticket, priced between $110 to $120 and approximately 11,000 tickets were sold. 4The second defendant was a "no show" in that he failed to appear at the event on 22 October 2011. Mr Lean made a telephone call to ascertain where the second defendant was when he failed to appear, shortly before the second defendant's performance was due to start at 4:00pm. As a result, he caused a speaker to go out and make a public announcement as follows: "Flo Rida has slept in and will not be able to make the concert. We think he will still be able to do the Mounties concert, but may have difficulty attending." 5The audience's response to this announcement may be gleaned from the footage aired on YouTube http://www.youtube.com/watch?v=ScQTnBz3DK4 which is Exhibit H. There was, to borrow from the headnote of Aerial Advertising Co v Batchelors Peas Ltd (Manchester) [1938] 2 All ER 788, a "vigorous denunciation" of the defendants. As Atkinson J noted in relation to the events in Aerial Advertising Co v Batchelors Peas Ltd (Manchester): "One can well imagine the horror and indignation felt by the thousands of people congregated there." (at 792) 6The result was disastrous. Mr Lean estimates (affidavit of 2 August 2012, paragraph 19) that approximately 2,000 of the 11,000 patrons who had attended left the venue when the cancellation of the second defendant's performance was announced. This equates to a loss of 10,000 patron hours, which also resulted in loss of food and beverages sales. 7In addition to the immediate losses on the day, both financially and otherwise, the "no show" by Flo Rida damaged the trading reputation of the plaintiff, impacting its ability to stage future events, attract patrons and compete with rivals in the music event industry. As the majority of costs incurred in staging events are fixed, the loss suffered by the plaintiff in failing to attract additional patrons equates to 90% of the ticket price (affidavit of Mr Lean, paragraph 22). 8In addition, sponsors were lost as news of the no show spread far and wide through the use of social media such as Facebook, Twitter and YouTube. The plaintiff received many angry emails. Some of these emails stated that persons attending the concert had only come to see Flo Rida and that the waste of the ticket price meant that they would never attend another festival due to this reason (see for example, the email at page 18). Another email (at page 27 to the affidavit of Mr Lean) estimated that "at least 90% of ticket sales were due to the fact that Flo Rida was playing, and he was the only reason why I purchased tickets". All of these angry patrons demanded a refund, some times in confronting language, such as "you guys didn't deliver what you advertised and I paid for!" (page 29). Emails spoke of being "angry" (page 36), feeling "ripped off" (page 38), being told "bullshit" (page 33) and "unfair and slack" conduct (page 49). 9The plaintiff relies upon the affidavits of Brent Remington Lean of 16 April and 2 August 2012. The plaintiff seeks damages as follows: Special Damages 1. Contract consideration $55,000 2. Interest (Affidavit of Lean [18]) $3,798.65 3. Additional disbursements (Affidavit of Lean [12]) $6,813.95 4. Loss of Profit (Affidavit of Lean [21]) $11,988.00 $77,600.60 General Damages for Pecuniary Loss 5. Additional Talent (Affidavit of Lean [31]) $50,000 6. Loss of Ticket Sales (Affidavit of Lean [32]) $199,800 7. Loss of food and beverage sales (Affidavit of Lean [33]) $40,000 8. Loss of Sponsors (Affidavit of Lean [36]) $13,000 $302,000 * *This subtotal was claimed at $302,000, but it has been corrected to $302,800, as it is obviously a typographical error. Legal fees 9. Incurred (Affidavit of Lean [39]) $32,025.37 10. Estimate to date (Affidavit of Lean [40]) $5,720.00 $37,745.37 TOTAL$417,345.97 10I shall deal with each these items in turn. The special damages claim 11First, the sum of $55,000 which was paid to Flo Rida and the first defendant is sought. In addition, the sum of $6,813.95 is claimed for flights, appropriate motor vehicles for the transfer from airport to hotel for Flo Rida and his entourage, and hospitality (pages 6-10 of the annexures to the affidavit of Mr Lean of 2 August 2012). 12Interest is calculated as follows: Period Interest Rate (% pa) Number of Days Total 22 October 2011 to 31 December 2011 8.75% 70 $1,037.29 (daily rate $14.82 x 70 days) 1 January 2012 to 5 August 2012 7.50% 218 $2,761.36 (daily rate $12.67 x 218 days) Total $3,798.65 13In addition, the immediate loss of profit at the venue from the number of patrons who left without purchasing drinks or other merchandise is estimated to equate to the loss of 10,000 patron hours. The patrons spent $171,268 in 100,000 patron hours, which equates to 1.713 per customer hour. Applied to the 10,000 lost customer hours, this produces a loss of revenue of $17,126. The variable cost of producing such revenue is approximately 30%. This results in a loss of profit of $11,988. 14This part of the damages totals $77,600.60. General damages for pecuniary Loss 15The plaintiff claims damages for loss to reputation arising from breach of contract. In appropriate cases, damages may in principle be awarded for loss of reputation caused by breach of contract: Mallick v BCCI [1997] 3 All ER 1, citing Aerial Advertising v Batchelors Peas Ltd and Anglo-Continental Holidays v Typaldos Lines (London) [1967] 2 Lloyd's Rep 61. This right has been recognised not only in other jurisdictions in Australia (Marston & Cook Pty Ltd v Sensis Pty Ltd [2008] VSC 568; Heidelberg Graphics Equipment Ltd v Andrew Knox & Associates Pty Ltd (1994) ATPR 41-326 at [171]) but in New Zealand (New Zealand Airline Pilots' Association v Air New Zealand Ltd [1992] 2 NZLR 656). As the High Court has explained in Poseidon Ltd & Sellars v Adelaide Petroleum NL (1994) 179 CLR 332, a claim for damages for loss of reputation is available whether the damage occurred by reason of breach of contract, tort or contravention of s 52(1) of the Trade Practices Act 1974 (Cth). 16The circumstances in which general damages for pecuniary loss may be claimed from breach of contract are set out below. Such a claim is not novel, but it is unusual. 17The loss of reputation and damage to the trading reputation of the plaintiff arise because the impact of a "no show" by the main attraction of the 2011 concert, particularly in the circumstances of the proceedings described to me, impacts adversely upon its reputation for staging events and procuring the attendance of prominent artists. The no show by the second defendant has therefore impacted upon the ability of the plaintiff to stage future events, attract patrons and compete with rivals. For example, in order to do so, the plaintiff must participate in social media, such as Facebook. The Facebook page for the "Fat As Butter Festival" received angry postings from Facebook users complaining about the no show of Flo Rida at the 2011 event. The nature of Facebook is such that the plaintiff is obliged to permit such postings to remain on the site, as it would be inadvisable for the plaintiff to remove such postings. Bad publicity such as this has had a "flow-on" effect to the 2012 Fat As Butter Festival, as has the negative publicity in newspapers and on YouTube. 18In order to promote the 2012 festival successfully, the plaintiff was obliged to lower ticket prices for early sales to $99 per ticket for the first two weeks only. The plan was that the ticket price would then be increased to $109 (for the second release) and $119 (for the third release). Even with this reduction, the comparative ticket sales, when compared to previous years, has been so much lower that the plaintiff was obliged to continue the sale of the tickets at the $99 rate, and it is not envisaged that the price will be increased. At the same time, the plaintiff has also been obliged to spend more funds on hiring talent, in order to ensure that an eminent talent could be secured to attract customers, despite the previous damage caused by the "no show" to the plaintiff's reputation. The plaintiff has secured the services of a US band called "Good Charlotte" to headline the 2012 event and a further seven international acts, whereas comparatively there were only three international acts for the 2011 event. 19Despite these efforts, ticket sales are down, and a revised estimate for ticket sales is that they are unlikely to exceed 10,000 in number. This will result in a loss for the financial year ending June 2012 of approximately $240,000, based on the budget projections set out at paragraph 32 of Mr Lean's affidavit. 20The net profit for food / beverage / merchandise / amusement is $20 per head. In addition to the loss of revenue for ticket sales, if only 10,000 tickets can be sold for the 2012 event, this will result in a loss of $40,000. 21In addition, the 2012 event has lost sponsors. Mr Lean had set out details of these in his affidavit, at paragraphs 34-38. One of those sponsors said to him that the reason for a refusal to be involved in 2012 concert was because of the reduced ticket sales "following last year" (affidavit of Mr Lean, paragraph 35). Other sponsors agreed to participate, but were not prepared to increase the sponsorship amount. 22The circumstances in which general damages may be awarded for breach of contract are discussed by Atkinson J in Aerial Advertising Co v Batchelors Peas Ltd (Manchester). The court held that so long as a loss can be proved, it is immaterial that it cannot be calculated with precision, but nevertheless an actual loss must be proved and not damage to reputation. Damages were awarded for steps taken to rectify the damage caused by the bad publicity. In Aerial Advertising Co v Batchelors Peas Ltd (Manchester), that was achieved by inserting advertisements in the newspaper. In the present case, this has been achieved by the hiring of additional talent, as well as putting down the price of tickets. 23In addition, there is a claim for general damages in respect of the pecuniary loss flowing from the conduct of the defendants, including the loss of ticket sales, loss of food and beverage sales and loss of sponsors. Atkinson J explained the basis upon which general damages could be awarded in respect of contractual pecuniary loss as follows (at 795): "There is only a claim for general damages in respect of pecuniary loss, and Mr Roskill says that I cannot give general damages for pecuniary loss in respect of breach of contract, and that I can give damages only by way of special damage for a breach of contract. For that argument Mr Roskill relies upon Groom v Crocker. I fail myself to see any difference in principle between a claim for special damage and a claim for general damage. One, of course, has to be proved as completely as does the other. The only difference is that, where one is claiming special damage, the circumstances are such that one is able to put one's finger on a particular item of loss and say, "I can prove that I lost so much there, so much there, and so much there," whereas a claim for general damage means this: "We cannot prove particular items, but we can prove beyond all possible doubt that there has been pecuniary loss." Once that has been proved, I cannot myself see any difference in principle between special damage and general damage. When one reads Groom v Crocker, one sees that, so far from saying that there is any difficulty in recovering general damages, to my mind it says precisely the opposite." 24Aerial Advertising Co v Batchelors Peas Ltd (Manchester) was considered and followed by the High Court in Poseidon Ltd & Sellars v Adelaide Petroleum NL, where the court held that loss of an opportunity to obtain a commercial advantage or benefit may amount to loss or damage, and that damages for deprivation of a commercial opportunity should be ascertained by reference to the court's assessment of the prospect of success of that opportunity, had it been pursued. 25The court stated at 355: "Notwithstanding the observations of this court in Norwest, we consider that acceptance of the principle enunciated in Malec requires that damages for deprivation of a commercial opportunity, whether the deprivation occurred by reason of breach of contract, tort or contravention of s 52(1), should be ascertained by reference to the court's assessment of the prospects of success of that opportunity had it been pursued. The principle recognised in Malec was based on a consideration of the peculiar difficulties associated with the proof and evaluation of future possibilities and past hypothetical fact situations, as contrasted with proof of historical facts. Once that is accepted, there is no secure foundation for confining the principle to cases of any particular kind. On the other hand, the general standard of proof in civil actions will ordinarily govern the issue of causation and the issue whether the applicant has sustained loss or damage. Hence the applicant must prove on the balance of probabilities that he or she has sustained some loss or damage. However, in a case such as the present, the applicant shows some loss or damage was sustained by demonstrating that the contravening conduct caused the loss of a commercial opportunity which had some value (not being a negligible value), the value being ascertained by reference to the degree of probabilities or possibilities. It is no answer to that way of viewing an applicant's case to say that the commercial opportunity was valueless on the balance of probabilities because to say that is to value the commercial opportunity by reference to a standard of proof which is inapplicable." 26Poseidon Ltd & Sellars v Adelaide Petroleum NL was considered and discussed most recently by the New South Wales Court of Appeal in Prosperity Advisers Pty Ltd v Secure Enterprises Pty Ltd (t/as Strathearn Insurance Brokers) [2012] NSWCA 192. Tobias AJA set out at [73] the propositions relevant to the claim for damages by the appellant. These may be briefly summarised as follows: (a)There must be proof, on the balance of probabilities, that some loss or damage has been sustained. This may be done by demonstrating that the conduct of the party in breach caused the loss of a commercial opportunity which had some value which was not negligible; (b)There must be evidence as to what the plaintiff would have done had it known of the breach, or of the problem; (c)The must be evidence as to the value of the chance alleged to be lost as a result of the conduct in breach; (d)The evidence must establish that there is a substantial, and not merely a speculative, prospect of loss. 27A significant part of the loss occurred because of the very late notice the defendants gave of their intentions to breach the contract. The emails from disgruntled concertgoers make this clear. The announcement of the "no show" occurred at 4:00pm, which was the time the second defendant was due to commence. Notification had received only shortly beforehand. Much of the damage to the plaintiff's reputation flows from this. 28The evidence in Mr Lean's affidavit makes it clear that the damage caused by the last minute no show by Flo Rida has had a significant impact not only upon the plaintiff's profits from the 2011 concert year, but in relation to its proposed planning of the same annual concert in 2012. I am satisfied from the evidence before me that the plaintiff can establish a claim for general damages for pecuniary loss in the sum claimed. Interest 29The plaintiff has claimed interest on the contract sum but has not made a claim for interest on general or special damages. I have granted liberty to apply in this regard. Legal fees 30The plaintiff has incurred liability for legal fees in the sum of $32,025.37 as follows: (a)Tax Invoice dated 30 April 2012 in the sum of $10,517.96. (b)Tax Invoice dated 3 July 2012 in the sum of $15,208.81. (c)Tax Invoice dated 31 July 2012 in the sum of $6,298.60. 31In addition, the costs of today are estimated to be $1,200, plus GST (for the solicitors) and, allowing for preparation and attendance, $4,000, plus GST for counsel. This is a total of $5,720 (inclusive of GST). 32The plaintiff seeks an order for payment of lump sum costs pursuant to s 98(4) Civil Procedure Act 2005 (NSW). Section 98(4) provides as follows: "(4) In particular, at any time before costs are referred for assessment, the court may make an order to the effect that the party to whom costs are to be paid is to be entitled to: (a) costs up to, or from, a specified stage of the proceedings, or (b) a specified proportion of the assessed costs, or (c) a specified gross sum instead of assessed costs, or (d) such proportion of the assessed costs as does not exceed a specified amount." 33The circumstances in which the court will depart from the procedure of assessment by costs assessors are limited. In Harrison v Schipp (2002) 54 NSWLR 738 at [21]-[22], Giles JA explained: "[21] The power conferred by r 6(2) is not confined, and may be exercised whenever the circumstances warrant its exercise. It may appropriately be exercised where the assessment of costs would be protracted and expensive, and in particular if it appears that the party obliged to pay the costs would not be able to meet a liability of the order likely to result from the assessment (Leary v Leary (1987) 1 WLR 72; Sparnon v Apand Pty Ltd (von Doussa J, 4 March 1998, unreported); Beach Petroleum NL v Johnson (1995) 57 FCR 119; Hadid v Lenfest Communications Inc [2000] FCA 628). [22] Of its nature, specification of a gross sum is not the result of a process of taxation or assessment of costs. As was said in Beach Petroleum NL v Johnson at 124, the gross sum "can only be fixed broadly having regard to the information before the Court"; in Hadid v Lenfest Communications Inc at [35] it was said that the evidence enabled fixing a gross sum "only if I apply a much broader brush than would be applied on taxation, but that ... is what the rule contemplates". The approach taken to estimate costs must be logical, fair and reasonable (Beach Petroleum NL v Johnson at 123; Hadid v Lenfest Communications Inc at [27]). The power should only be exercised when the Court considers that it can do so fairly between the parties, and that includes sufficient confidence in arriving at an appropriate sum on the materials available (Wentworth v Wentworth (CA, 21 February 1996, unreported, per Clarke JA)." 34In Fairfax Radio Network Pty Ltd v Printlane Pty Ltd (No 2) (2011) 13 DCLR (NSW) 64 at [7] it was noted that courts have considered such orders appropriate in the following circumstances: (a)Where assessment of costs would be protracted and expensive, particularly where the party obliged to pay the costs would not be able to meet the assessment: Harrison v Schipp at [21], citing decisions under previous legislation such as Hadid v Lenfest Communications Inc [2000] FCA 628 (Federal Court Rules, O 62 r 4(2)(c)); (b)Where the litigation is protracted or complex or has some other special feature which warrants a departure from the usual rule: Idoport Pty Ltd v National Australia Bank Ltd [2005] NSWSC 1273. Einstein J at [9] specifically noted that the discretion to award a gross sum is "not confined and may be exercised where the circumstances warrant its exercise"; (c)Where the proceedings have been completed or are otherwise at a stage where the making of such an order would not stultify the party against whom such an order is made (Tim Barr Pty Ltd v Naurui Gold Coast Pty Ltd [2011] NSWSC 11; Lorenzato v Lorenzato (No 2) [2011] NSWSC 790); and (d)Where the court can have "sufficient confidence" (Idoport Pty Ltd v National Australia Bank Ltd [2007] NSWSC 23 at [9]) in arriving at an appropriate sum on the materials available, including appropriate evidence of an expert nature as to the assessment of these costs: Beach Petroleum NL v Johnson (1995) 57 FCR 119. 35More recently, lump sum orders have been made in Dye v Commonwealth Securities Ltd (No 2) [2012] FCA 407 and Dye v Commonwealth Bank of Australia [2012] NSWCA 220, although without referring to the procedure identified by Barrett J in Tim Barr Pty Ltd v Naurui Gold Coast Pty Ltd [2011] NSWSC 11 at [19]-[22], or the restrictions referred to by Giles JA in Harrison v Schipp. 36In Dye v Commonwealth Securities Ltd (No 2) the amount of costs was such ($5.85 million) that taxation was likely to be "drawn-out, burdensome and expensive" (Hadid v Lenfest Communications Inc [2000] FCA 628 at [25]). This is, however, not the case in the present litigation, where the costs are without the most moderate framework. Should lump sum orders be made only in proceedings where length and complexity is a factor? In my view, the court is entitled to take into account the need for the administration of justice to be "just, quick and cheap" (s 56) and I note in this regard the statements by Harrison J in Hamod v State of New South Wales (No 13) [2009] NSWSC 756 at [18] as follows: "[18] The first defendant submitted that the making of a specified gross sum costs order in all of the circumstances would be in accordance with the overriding purpose expressed in s 56 of Act. For example, Palmer J in Hall v Poolman [2007] NSWSC 1330 at [392] said the following: [392] In applying the wide discretion conferred by CPA s 98 the Court must have regard to the principle that the purpose of the Act and the Rules is to promote the just, quick and cheap resolution of the real issues in proceedings in such a way that the cost to the parties is in proportion to the importance and complexity of the matter in dispute: CPA s 56 (1), (2), s 60 ..." 37In addition, as was the case in Fairfax Radio Network Pty Ltd v Printlane Pty Ltd (No 2), there is a clear and obvious breach of contract by the defendants, who have similarly failed to appear on any occasion when the matter was before the court. 38I am satisfied, by reason of the information provided concerning costs as set out in the affidavit of Mr Lean, that I can have "sufficient confidence" (Idoport Pty Ltd v National Australia Bank Ltd [2007] NSWSC 23 at [9]) that the estimates are appropriate and fair for the work done. Accordingly, I have made orders for payment of costs in a lump sum. Orders (1)Judgment for the plaintiff for $380,400.60. (2)Liberty to the plaintiff to restore in relation to interest. (3)The defendants pay the plaintiff's legal costs in the sum of $37,745.37. (4)Exhibits retained for 28 days. ****** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 06 August 2012