Australian company Omnilab Media will appeal a Federal Court decision that they "knowingly" assisted a former Digital Cinema Network director to breach the Corporations Act 2001 (Cth).

The court heard claims last month that Omnilab Media, which tried to purchase DCN around a year ago, received confidential information from DCN’s Michael Smith about the Virtual Print Fee negotiation process, the requirements, responsibilities and functions of a digital integrator under VPF agreements.

Smith had been negotiating the financial subsidies with US Studios – assisting local cinemas to upgrade to digital projection – on DCN’s behalf since 2008, but Omnilab was appointed to manage and administer the VPF by the Independent Cinemas Association of Australia (ICAA) last year.

As a result, DCN’s current directors Martin and James Gardiner started legal proceedings in September last year.

Justice Gordon found that Omnilab entered the digital transition market from a “standing start” before improperly acquiring DCN’s proprietary information from Smith.

DCN has, as a result, claimed breach of sections 180-184 of the Corporations Act 2001 (Cth) by Smith and Omnilab. Smith resigned from DCN late last year and the trial began in February.

Omnilab maintained at trial that it was unaware Smith was breaching his duties. However this was soon dismissed.

Justice Gordon said the breaches of fiduciary duty by Smith were “dishonest and fraudulent” and Omnilab was well aware of the actions.

Although not stating which findings Omnilab considered to be “wrong”, the company’s managing director Christopher Mapp said in a statement that an appeal would be lodged.

Justice Gordon didn’t grant an injunction to prevent both Omnilab and ICAA to continue negotiating with the US Studios, which Mapp said was “favourable” for his company.

Gordon noted that: “The evidence disclosed that DCN was unable to perform the functions of a digital integrator to the satisfaction of the Studios – it could not provide the minimum number of screens and did not have sufficient financial resources to provide the guarantees sought by the Studios”.

Smith could be subject to criminal charges (with a maximum of five years' imprisonment).

The full, complex case can be read here.

Leave a comment

Your email address will not be published. Required fields are marked *