"Mad Max: Fury Road" Appeal Allowed By NSW Court of Appeal

“The primary judge held that cl 21 was effective to incorporate terms which could be described as “WB and WB standard for ‘A’ List directors and producers” into the Letter Agreement. However, he considered that WB Productions had not established that the arbitration clause which it relied upon was its “standard” or the “standard” of its parent, Warner Bros Studio Enterprises Inc. He also held that the dispute which was the subject of the proceedings was not covered by the arbitration clause in the COEs. Accordingly, he refused the stays sought by WB Productions and WB Entertainment.”

“WB Productions and WB Entertainment have sought leave to appeal from this decision. They contend that the terms incorporated into the Letter Agreement by cl 21 included an arbitration clause, or alternatively, that the dispute was covered by the arbitration clause in the COEs.

By a draft notice of contention, KMMF and KMMS contend that cl 21 did not operate of its own force to incorporate any terms into the Letter Agreement, but rather, that it only imposed an obligation to negotiate in good faith with a view to the inclusion of further terms.”

“It was not seriously in contest that leave should be granted. The appeal is undoubtedly arguable and, if the applicants’ contentions are correct, WB Productions should not be required to litigate in a forum other than the one chosen by the parties through the Letter Agreement. In these circumstances, it is appropriate to grant leave.”

“In the present case, the words of cl 21 of the Letter Agreement favour the conclusion that terms which were “WB standard for ‘A’ list directors and producers” were immediately incorporated, while leaving room for subsequent negotiations about their precise effect in the Letter Agreement. Clause 21 states that the “balance of terms” will be “WB standard for ‘A’ list directors and producers”. The fact that the clause subsequently indicates that there is room for negotiation within limited confines does not detract from that clear expression of the parties’ intention.

Further, the construction suggested by the text of cl 21 is supported by considering the clause in the context of the Letter Agreement as a whole. [...] Each of these definitions refers to “WB’s standard participation definitions” or “WB’s standard definitions”. Similarly, the definitions of “Producing Credit” and “Directing Credit” in cl 7 refer to “WB’s customary exclusions”. All of these provisions point to the incorporation of terms which were “standard” without the need for further negotiation. Without the immediate incorporation of such terms, critical provisions of the Letter Agreement would be rendered meaningless.”

“In the present case, the evidence of Mr Levin was that WB Productions was under the control of WB Pictures, both of which were subsidiaries of WB Entertainment. He stated that his responsibilities included “ultimate oversight over all matters relating to agreements associated with projects considered for production”. He did not limit the description of his role to the United States entities in the Warner Bros group or exclude WB Productions from his area of oversight. Indeed, he stated that he was an “authorised signatory” for WB Productions.

Further, as Ms Smokler pointed out in her evidence, negotiations in respect of the Film took place between “WB Pictures business affairs executives” and, ultimately, Mr Levin’s legal department, on the one hand, and the United States representatives of KMMF and KMMS on the other. There was no suggestion in her evidence that, because WB Productions was an Australian company, there was a different set of terms which were “WB standard for ‘A’ list directors and producers” under cl 21, different “standard definitions” under cl 3, different “customary exclusions” under cl 7 or different “customary termination rights for ‘A’ list directors and producers” under cl 12. [...]

In these circumstances, it seems to me that, in referring to terms which were “WB standard for ‘A’ list directors and producers”, the parties were referring to terms which were “standard” for the companies in the Warner Bros group, including WB Pictures and WB Productions.”

“In the present case, the arbitration clause incorporated into the Letter Agreement from the 2009 Form Agreements requires that an arbitrator “shall follow California law and the Federal Rules of Evidence in adjudicating the Dispute”. Therefore, the “procedure in relation to arbitration” in the Letter Agreement is “governed by the law of a Convention country” for the purpose of s 7(1)(a) of the International Arbitration Act 1974 (Cth), namely, Californian law as the law of the United States. The present dispute involves a matter that “is capable of settlement by arbitration” under the arbitration clause incorporated into the Letter Agreement. It follows that the proceedings between KMMF and KMMS and WB Productions must be stayed under s 7(2) of the International Arbitration Act 1974 (Cth).

In these circumstances, in my opinion, the present proceedings should be stayed in their entirety, but KMMF and KMMS should have the right to seek to have the stay lifted so far as it concerns the claim against WB Entertainment on the giving of 7 days’ notice. However, the parties should have the opportunity to consider this judgment and, if they wish to do so, make submissions on the precise form of orders.”