Ellerine Brothers (Pty) Ltd v Klinger

JurisdictionEngland & Wales
JudgeLORD JUSTICE TEMPLEMAN,LORD JUSTICE WATKINS,LORD JUSTICE FOX
Judgment Date23 March 1982
Judgment citation (vLex)[1982] EWCA Civ J0323-4
Docket Number82/0140
CourtCourt of Appeal (Civil Division)
Date23 March 1982
Ellerine Brothers (Proprietary) Limited

and

Soco Properties (Proprietary) Limited
Plaintiffs (Appellants)
and
Michael Klinger
Defendant (Respondent)

[1982] EWCA Civ J0323-4

Before:

Lord Justice Templeman,

Lord Justice Watkins

and

Lord Justice Fox

82/0140

1981 E. No. 692

IN THE SUPREME COURT OF JUDICATURE

COURT OF APPEAL (Civil Division)

(On appeal from His Honour Judge Newey QC

sitting as a deputy judge of the Queen's

Bench Division and dealing with Official

Referees' Business)

Royal Courts of Justice

Mr. MARTIN HARTY (instructed by Messrs. Wright & Webb, Syrett & Sons) appeared on behalf of the Appellants (Plaintiffs).

Mr. TREVOR PHILIPSON (instructed by Messrs. Bartletts, de Reya) appeared on behalf of the Respondent (Defendant).

1

( )

LORD JUSTICE TEMPLEMAN
2

This is an appeal against an order of His Honour Judge Newey, QC, sitting as a deputy judge of the Queen's Bench Division and dealing with Official Referees' Business, dated 27th August 1981, whereby he stayed all proceedings in the present action pursuant to section 1 of the Arbitration Act 1975.

3

By an agreement dated 13th October 1978 it was recited, inter alia, that the plaintiffs, who were parties to the agreement, had provided finance for making a film entitled "Gold". The plaintiffs' registered addresses were given as Johannesburg and Germiston in the Republic of South Africa. That is of some importance having regard to the provisions of the Arbitration Act 1975.

4

The agreement recited that the film had been distributed and had recovered its certified costs of production and was in profit. Certain disputes had arisen between all parties to the agreement, a squabble over how much was due to each and one or two other squabbles. In the event the defendant, Mr. Klinger, was appointed, and accepted appointment as, principal distributor of the film. By the agreement each plaintiff became entitled to 20 per cent of the net receipts of the film.

5

The expression "the net receipts" was defined as meaning "the gross monies in the hands of Mr. Klinger of the film from all sources and hereafter arising from the exploitation of the film after deduction of all fees deductible from such gross monies in accordance with any contractual obligation (provided that no such deduction of fees shall be made to…. Mr. Klinger or any company with which Mr. Klinger is associated) and after deduction also of all expenses of distribution and exploitation of the film actually incurred by Mr. Klinger or by any sub-distributor of the film".

6

Mr. Klinger undertook in the exercise of his appointment to distribute the film "and to account to the parties entitled thereto for the net receipts of the film" in accordance with certain instructions which had been given and which are not material.

7

There was also a provision that Mr.Klinger "shall keep all usual and proper books of account showing the net receipts accruing from the distribution and exploitation of the film throughout the world….. which books of account and all contracts relating to the distribution of the film shall be opened to the inspection of those authorised by [the plaintiffs] jointly and severally at reasonable times and they may take extracts therefrom or copies thereof".

8

There was a provision that "Within thirty days of receiving reports or statements of account rendered by distributors under distribution or sub distribution agreements Mr.Klinger shall render a copy of each such report to each of [the plaintiffs] or as they may direct and shall at the time of delivering each such report deal with all monies received by Mr. Klinger and accounted for such report in the manner provided herein".

9

The agreement was dated 13th October 1978 but, so far as the present evidence goes, nothing was done by Mr. Klinger in fulfilment of his obligations to account until May 1981.

10

Clause 12 of the agreement said it was to be read and construed in all respects in accordance with the laws of England. Clause 13 was an arbitration clause in this form: "All disputes or differences whatsoever which shall at any time hereafter arise between the parties hereto or any of them touching or concerning this deed or its construction or effect or as to the rights duties or liabilities of the parties hereto or any of them under or by virtue of this deed shall be referred to a single arbitrator to be agreed upon by the parties hereto or in default of agreement to be nominated by the President for the time being of the Institute of Chartered Accountants in accordance with and subject to the provisions of the Arbitration Act 1950 or any statutory modification or re-enactment thereof".

11

So far as the evidence goes, all was silent for nearly a year and then the plaintiffs woke up and they wrote to Mr. Klinger on 4th September 1980 saying "We have not received any statement of accounts or payments in respect of 'Gold'. Could we have a report from you please". The silence continued and they wrote a reminder on 11th December 1980. There was then an oral request by one of the representatives of the plaintiffs who happened to see Mr. Klinger. Another reminder was sent on the 8th January 1981 drawing attention to the clause of the agreement which cast on him the duties of keeping accounts and making reports and asking for an urgent reply. The plaintiffs received back on the 19th January 1981 a perfectly polite but useless letter from Mr. Klinger's secretary saying that unfortunately Mr. Klinger was in the United States and would not be returning to London until the end of the month and that the plaintiffs might rest assured that their letters would be brought to his attention as soon as possible. Nothing of course happened. A reminder was sent on 11th February 1981 and a further apology was received from the secretary on 2nd March 1981.

12

Finally, the plaintiffs lost patience and on 24th March 1981 they wrote to Mr. Klinger's solicitors giving an ultimatum saying "Unless we receive a full and proper account together with payment of all sums due, within the course of the next seven days, proceedings will be instituted without further notice or delay". The reply to that, of course, was that the defendant's solicitors would take instructions. On the 3rd April the plaintiffs issued a writ, served by post on 7th April. That writ, after reciting the agreement, alleged that Mr. Klinger had duly distributed and exploited the film, though the plaintiffs could not give particulars until after discovery. The plaintiffs complained that "In breach of the said agreement and of the terms thereof although requested to do so by letter dated 24th March 1981 the defendant has wrongfully failed and is failing:

13

(i) To render any or any true or full or accurate accounts showing the net receipts accruing from the distribution and the exploitation of the film.

14

(ii) To pay to the plaintiffs and each of them a sum equal to 20% of the net receipts or any sums. And the plaintiffs and each of them claim: 1. An account of the net receipts accruing on the distribution and the exploitation of the film. 2. An order for the payment by the defendant to the plaintiffs and to each of them of all monies found due to them on the taking of such accounts".

15

This produced some results, though unsatisfactory, because on 6th May the defendant sent to the plaintiffs' solicitors what he called Report No. 22 for the period 1st April 1979 to 31st January 1981. The account showed that he had received £12,921.14 and that, after deduction of distribution expenses and costs, he was £8,440.22 out of pocket and nothing was due to the plaintiffs. But the details given of the expenses which absorbed all of the £12,921 of income, and more, included not only £6,895.22 of expenses paid to other persons, which appear to have been estimated, but also a charge for general overhead costs at the rate of £7,500 per annum. The plaintiffs are far from accepting the figures shown in the account. They wish the expenses which have been incurred to be vouched and they wish to dispute the entitlement of Mr. Klinger, on the true construction of the agreement, to claim general overhead costs and possibly some of the other items which he claims to deduct.

16

The day after the rendering of that account, that is to say, on 7th May 1971, the plaintiffs took out a summons for an account under Order 43, rule 1. That asked "that an account may be taken as claimed in the writ of summons and that payment be made by the defendant to the plaintiffs on the amount found to be due on the taking of such account", and they asked for costs. They were sent some additional documentation, some of the vouchers, but not enough to satisfy them or make them accept that Mr. Klinger had discharged all his obligations under the agreement.

17

Mr. Klinger in a letter of 1st June 1981 said: "As you have questioned the precis of expenses incurred, we will prepare supporting evidence in respect of the expenses in question which are quite clearly allowed under the terms of our contract". Nothing has been received to date.

18

In support of their application for an account, the plaintiffs put in an affidavit which was sworn by their solicitor on 17th June, complaining that the account which had been produced purported to make deductions which were not authorised under the agreement and were not supported by vouchers.

19

On l8th June 1981 the summons for an account was transferred to an Official Referee.

20

On 2nd July 1981 the defendant, Mr. Klinger, took out a summons asking for the proceedings to be stayed pending arbitration. He relied on section 4 of the Arbitration Act 1975. When the matter came before His Honour Judge Newey on...

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