I am a jobbing engineer and record producer and entered a verbal agreement to manage and develop an unsigned band. We have been working together as a three piece since the middle of last February. This band has had my Pro Tools rig and recording equipment on loan since then. During that time they have received my advice, and I have produced their tracks, written melodies, and advised them of career matters. This was all done on the usual understanding that eventually they would pay me for my development services as both manager AND engineer (and hire costs so that I could set the management company up properly).

Last May we jointly bought a new hard drive between 3 of us costing

Forget it all; move on; learn from your experience and concentrate on new music.
That's my advice.

To quote myself, and shamelesly promote my next single(a creation from this board I may add)
...."There was allways going to come that day when it was time to walk away..."

Seriously though just get on with the next project. For the few that I have made money out of, which is nothing like JK`s success`s, I have allways lost on a few and made enemies who should have actually been grateful to me for helping them. When I start working with people now, I really vet their personalities and try to suss out what this bunch will be like should they not be happy.
I took on a very argumentative and extremely entertaining act a few years back, against everybody`s advice and made a lot of money. The agreement ended when the "act" finally turned on me. Try and spot what problems you think will happen later, and don`t be afraid to be cynical, and most importantly, Make Music.!

Take a leaf out of JKs books and do multiple projects some fronted by singers who you can get two a penny.
Make music like SAW, MOTOWN etc where its all about the producers and not the singers. Then do an audition and get all the popstars, pop idols, xfactors rejects oops i mean hopefuls and record with them. Oh yeah have contracts use session singers for the Bvs and if any of them misbehave cut them out of the recording and bring in the next wannabe.

As long as you write the material or you have outside people write the material then you wont have a problem you cant fix and oh go to church and thank God each sunday for revealing their devillish nature now when the money stakes are peanuts and not after a hit or two when you would spend thousands or millions and age 30 years in 3 months.

Laugh it off mate, these dramas make the hits taste sweeter.

Another thing worth mentioning, is the "artistes", allways think that because you are in charge etc, you are hiding money from them, as I`m sure you know in your case, it`s virtually impossible to do this as an entrepreneur, and if you sent them an invoice for your time, you would probably be told where to stick it, which creates a catch 22, of scraping your cut off the top and hiding it from the act.
It`s a thankless task that you do for bands sometimes sadly, and they do like to have a scapegoat, and the buck stops at us guys, but I think you are good company here.

.....I was about to go to court over a pretty similar situation, and we got our wish to have the hearing in a very inconvenient place for the other party.(and for us for that matter)
The friendly postie has just arrived with a cheque to avoid this happening.Game set and match, in this case.