Boreline Pty Ltd v Romteck Australia Pty Ltd [No 2]
[2023] WADC 33
•23 JUNE 2023
JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
IN CIVIL
LOCATION: PERTH
CITATION: BORELINE PTY LTD -v- ROMTECK AUSTRALIA PTY LTD [No 2] [2023] WADC 33
CORAM: RUSSELL DCJ
HEARD: 8-10 & 11 MARCH & 14 APRIL 2022
DELIVERED : 24 MARCH 2023
FILE NO/S: CIV 4462 of 2021
BETWEEN: BORELINE PTY LTD
Plaintiff
AND
ROMTECK AUSTRALIA PTY LTD
Defendant
Catchwords:
Tort - Detinue - Remedies - Order for delivery up of property - Whether security interest under Personal Property Securities Act 2009 (Cth) - PPS lease - Bailment - Estoppel
Legislation:
Personal Property Securities Act 2009 (Cth), s 12, s 12(2)(j), s 12(3)(c), s 13, s 13(1), s 13(2)(b), s 13(3), s 267
Result:
Plaintiff's claim allowed in part
Representation:
Counsel:
| Plaintiff | : | Mr D W Thompson |
| Defendant | : | Mr J P Cook |
Solicitors:
| Plaintiff | : | Results Legal |
| Defendant | : | Mendelawitz Morton |
Case(s) referred to in decision(s):
Aristoc Industries Pty Ltd v RA Wenham (Builders) Pty Ltd [1965] NSWR 581
Australian Broadcasting Commission v Australasian Performing Right Association Ltd (1973) 129 CLR 99
Australian Goldfields NL (in liq) v North Australian Diamonds NL [2009] WASCA 98; (2009) 40 WAR 191
Belgravia Nominees Pty Ltd v Lowe Pty Ltd [No 6] [2019] WASC 5
Black Box Control Pty Ltd v TerraVision Pty Ltd [2016] WASCA 219
Black Diamond Group Pty Ltd v Manor of Maluka Pty Ltd [2015] 1 Qd R 180
Boreline Pty Ltd v Romteck Australia Pty Ltd [2021] WADC 135
Bredenkamp v Gas Sensing Technology Corporation, in the matter of Welldog Pty Ltd (in liq) (Receivers and Managers Appointed) [2017] FCA 1065
Chianti Pty Ltd v Leume Pty Ltd [2007] WASCA 270; (2007) 35 WAR 488
City Motors (1933) Pty Ltd v Southern Aerial Super Service Pty Ltd (1961) 106 CLR 477
Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 347
Commercial Developments Pty Ltd (t/as Don Rogers Motors Pty Ltd) v Mercantile Mutual Insurance (Workers' Compensation) Ltd (1991) 5 WAR 208
DM Drainage & Construction Pty Ltd as Trustee for DM Unit Trust t/as DM Civil v Karara Mining Ltd [No 6] [2021] WASC 410
Doulton Potteries Ltd v Bronotte [1971] NSWLR 591
Duke of Somerset v Cookson (1735) 3P Wms 390; 24 ER 1114
Electricity Generation Corporation t/as Verve Energy v Woodside Energy Ltd [2014] HCA 7; (2014) 251 CLR 640
Forge Group Power Pty Ltd (in liq) (receivers and managers appointed) v General Electric International Inc [2016] NSWSC 52
General and Finance Facilitities Ltd v Cooks Cars (Romford) Ltd [1963] 1 WLR 644
Girgis v Poliwka [No 6] [2019] WASC 230
Gold Valley Iron Pty ltd (in liq) v OPS Screening & Crushing Equipment Pty Ltd [2022] WASCA 134
Gollan v Nugent (1988) 166 CLR 18
Gomba Holdings UK Ltd v Minories Finance Ltd [1988] 1 WLR 1231
Googe v Spoljaric [2017] WADC 99
Hamersley Iron Pty Ltd v Forge Group Power Pty Ltd (in liq) (Receivers & Managers Appointed) [2017] WASC 152; (2017) 52 WAR 90
Hobbs v Petersham Transport Co Pty Ltd; Petersham Transport co Pty Ltd v ASEA Electric (Australia) Pty Ltd (1971) 124 CLR 220
JKC Australia LNG Pty Ltd v CH2M Hill Companies Ltd [No 2] [2020] WASCA 112
Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd Wright Prospecting Pty Ltd v Mount Bruce Mining Pty Ltd [2015] HCA 37; (2015) 256 CLR 104
Pargiter v Alexander (1995) Aust Torts Reports 81-349
Re Arcabi Pty Ltd (Receivers & Managers Appointed) (in liq); ex parte Theopold & Herbert in their capacities as Receivers & Managers of Arcabi Pty Ltd (receivers & Managers Appointed) (in liq) [2014] WASC 310
Simic v New South Wales Land and Housing Corporation [2016] HCA 47; (2016) 260 CLR 85
The Bell Group Ltd (in liq) v Westpac Banking Corporation [No 9] [2008] WASC 239; (2008) 39 WAR 1
The Commonwealth of Australia v Verwayen (1990) 170 CLR 394
Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; (2004) 219 CLR 165
Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387
Ximenes v Franco (1751) 1 Dick 149; 21 ER 226
Zhu v The Treasurer of the State of New South Wales [2004] HCA 56; (2004) 218 CLR 530
Contents
A. Overview
B. The evidence
1........... Documentary evidence
2........... The witnesses
Nicky Alfred Kleyn
Stephen Ronald Merralls
Christopher Phillip Kleyn
Sean Eric Joseph
Randall Stratton Joseph
C. Relevant factual background
D. Boreline's claim
1........... Boreline's primary case
2........... Boreline's secondary case
E. Romteck Australia's defences to Boreline's claim
F. Legal principles applicable to Boreline's claim in detinue
G. Boreline's claim for an order for delivery up of the Equipment
H. The issues to be determined
No issue that the demands were made
Matters in issue
I. Was Boreline entitled to the Equipment under the Technology Development Agreement?
1........... The relevant terms of the Technology Development Agreement
2........... The Paragraph 5 items
Evidence of Nicky Alfred Kleyn
Evidence of Stephen Ronald Merralls
3........... Findings in relation to the Paragraph 5 items
4........... The Paragraph 6 items
Boreline's submissions
Romteck Australia's submissions
Boreline's submissions in response
5........... The proper construction of the Technology Development Agreement
6........... Findings of fact as to performance of Technology Development Agreement to time receivers appointed to Old Romteck
7........... Findings of fact as to arrangements between Boreline and Romteck Australia in relation to manufacture and calibration of Borecams and Corecams
The evidence
The Appendix
8........... Findings in relation to the Paragraph 6 items
J. Is any entitlement of Boreline to the Equipment negated because Romteck Australia acquired the Equipment under the Business Sale Agreement?
1........... The relevant provisions of the PPSA and issues for determination
2........... Was there a security interest, as alleged under s 12(3)(c) of the PPSA?
Did the bailment of any of the Equipment to Old Romteck constitute a PPS lease?
Was Boreline regularly engaged in the business of bailing goods?
Section 13 of the PPSA applies to bailments for value only
3........... Was there a security interest, as alleged under s 12(2)(j) of the PPSA?
4........... Did the Equipment form part of the assets of Old Romteck acquired by Romteck Australia under the Business Sale Agreement?
K. Boreline's alternative case
1........... Was Boreline entitled to the Equipment under the Further Agreement?
2........... Is Romteck Australia estopped from denying Boreline's ownership of the Equipment?
L. Can Romtek Australia rely on the limitation defence in relation to any claim for breach of contract?
M. Conclusion and orders
RUSSELL DCJ:
A. Overview
The plaintiff, Boreline Pty Ltd (Boreline), supplies survey and orientation probes and camera equipment for use in downhole drilling in the mining industry. Its two main products are known as the Borecam and Corecam.
From about early January 2015 until about October 2021, the defendant, Romteck Australia Pty Ltd (Romteck Australia), provided services to Boreline, including in relation to the manufacture, service, repair and calibration of Borecams and Corecams.
Prior to that, from about October 2012 until 3 November 2014, Boreline engaged with another company, Romteck Pty Ltd, in connection with a project to develop orientation probes and camera equipment. I refer to that company in these reasons as Old Romteck.
Administrators were appointed to Old Romteck on 3 November 2014. Old Romteck was wound up in liquidation on 4 November 2014 and receivers and managers were appointed to Old Romteck on 6 November 2014. Romteck Australia acquired the assets and business of Old Romteck from the receivers of Old Romteck on or about 22 December 2014.
Boreline claims ownership of certain equipment, schematic diagrams, software and design notes as set out in Schedule A to the amended statement of claim (collectively the Equipment), which are alleged to be in the possession of Romteck Australia.
Boreline claims in detinue against Romteck Australia and seeks an order for delivery up of the Equipment, which it claims is its personal property and which, despite demands having been made of it in October and November 2021, Romteck Australia has refused to return to Boreline.
Boreline also claims damages, though the parties have agreed that determination of any claim for damages should be deferred until after judgment on Boreline's claim for delivery up.
Romteck Australia's position is, in essence, that Boreline is not entitled to possession of any of the Equipment, or to the relief claimed.
I set out the issues to be determined in further detail later in these reasons. The overarching issues to be determined are whether, at the time Boreline made its demands of Romteck Australia for the return of the Equipment, Boreline had an immediate right to possession of the Equipment, and whether Boreline is entitled to the relief claimed. Relevantly, at this stage, that is whether Boreline is entitled to an order for delivery up of the Equipment, or any part of it.
For the reasons that follow, I find that Boreline is entitled to possession and an order for delivery up of the items of Equipment set out in [259] at the conclusion of these reasons.
B. The evidence
Documentary evidence
A joint book of documents, comprising 10 volumes, and a supplementary book of documents, comprising one volume, were filed for use at the trial. Not all of the documents included in those books of documents were referred to by the parties during the trial. As such, by agreement, the books of documents were to be updated to remove the documents that were not referred to by either counsel in their written and oral opening and closing submissions, or during the examination of the witnesses who gave evidence at trial. Though that was the intention, material remains which was not referred to, or its relevance explained. Such material is of little, if any, assistance and evidentiary weight.
The reduced, updated book of documents was tendered as one exhibit - exhibit 3. The updated supplementary book of documents was tendered as exhibit 4. The parties have each adopted different referencing in their written closing submissions. In these reasons, where I refer to a document in one of the books of documents, I will refer to it by reference to the relevant exhibit number and the page number or numbers. For example: exhibit 3/25 to refer to the document at page 25 of exhibit 3, and exhibit 4/3429 - 3432 to refer to the document or documents at pages 3429 - 3432 of exhibit 4.
There were two further exhibits, being a copy of Schedule A to the amended Statement of Claim[1] and a document headed 'Appendix to Technology Development Agreement signed and dated 24 October 2012' containing the original signatures and date.[2]
The witnesses
[1] Exhibit 1.
[2] Exhibit 2. The date handwritten at the foot of the document is stated as '23rd day of DEC 2014'.
Three witnesses were called on behalf of Boreline. They were Nicky Alfred Kleyn, Stephen Ronald Merralls and Christopher Phillip Kleyn.
Two witnesses were called on behalf of Romteck Australia. They were Sean Eric Joseph and Randall Stratton Joseph.
Nicky Alfred Kleyn
At the time of giving his evidence, Nicky Alfred Kleyn, also referred to during the trial as Nick Kleyn and Mr Kleyn senior, was the managing director of Boreline. He was not appointed as a director of Boreline until 14 July 2021, but (other than for a short period) has been involved in the management of Boreline since its incorporation in 2012.
I refer to Nicky Kleyn's evidence, and my assessment of him as a witness and his evidence, as it arises for consideration in these reasons.
Stephen Ronald Merralls
Stephen Ronald Merralls, also referred to as Steve Merralls, is an engineer. At the time of giving his evidence, he was a shareholder of Romteck Australia. Mr Merralls was a director of Romteck Australia from 19 February 2015 until 24 January 2019.[3] He was employed by Romteck Australia as general manager of production from about 10 December 2014[4] until 18 February 2019.[5]
[3] Exhibit 4/3435, 3436, 3438.
[4] Exhibit 3/94 - 97; ts 452.
[5] Exhibit 3/3036; ts 604.
Mr Merralls was previously a consultant to Old Romteck from 2003 to 2008 and employed by Old Romteck as project coordinator from 2008 until November 2014. He was then employed on a casual basis by the receivers of Old Romteck from about 26 November 2014.[6] He was one of Nicky Kleyn's main points of contact at Old Romteck and, later, at Romteck Australia.
[6] ts 431 - ts 432, ts 450 - ts 451.
I refer to Stephen Merralls' evidence, and my assessment of him as a witness and his evidence, as it arises for consideration in these reasons.
Christopher Phillip Kleyn
Christopher Phillip Kleyn is the younger of two sons of Nicky Kleyn. He has been a director of Boreline since its incorporation on 10 September 2012. His evidence, which I accept, was very limited. It was to the effect that, other than for a short period of time, his father, Nicky Kleyn senior has managed the Boreline business since its incorporation.[7]
Sean Eric Joseph
[7] ts 613 - ts 615.
Sean Eric Joseph is an accountant. He is also admitted as a solicitor of the Supreme Court of New South Wales and has held an in‑house practicing certificate for 40 years.[8] I found him to be a credible and straight forward witness. His evidence was limited.
[8] ts 623.
He was a director of Romteck Australia from its incorporation on 12 November 2014 until 26 January 2019. He was the sole director of Romteck Australia at the time of its incorporation and the person responsible for purchasing the assets of Old Romteck from its receivers in December 2014.[9] He did not have day‑to‑day dealings with Boreline and has not met or spoken to Mr Nicky Kleyn or his son, Nick Kleyn.[10]
[9] Exhibit 4/3435; ts 618, ts 623.
[10] ts 622.
Sean Joseph also gave evidence to the effect that Steve Merralls and Phil Harman were appointed by him as joint general managers of Romteck Australia, reporting directly to the chairman of the board of directors, Mr Robert Oberstar. Mr Merralls became a director of Romteck Australia in February 2015.[11]
[11] ts 624.
Sean Joseph first visited Old Romteck's premises at 37 Collingwood Street, Osborne Park (which were subsequently leased by Romteck Australia) on 19 December 2014. He met with Mr Merralls there, who showed him the equipment at the Osborne Park premises used to manufacture and calibrate the Boreline products (which he referred to as mining probes).[12]
Randall Stratton Joseph
[12] ts 620 - ts 621.
Randall Stratton Joseph is Sean Joseph's son. At the time of giving his evidence, he was and had been a director of Romteck Australia since 31 January 2019.[13] I found him to be a credible witness, though his evidence was very limited.
[13] Exhibit 4/3435; ts 623.
Randall Joseph started working at Romteck Australia as a general manger alongside Mr Merralls in 2018. He became involved in dealing directly with administrative matters relating to the manufacture and calibration of mining products for Boreline in 2021.[14]
C. Relevant factual background
[14] ts 628.
Before addressing the issues to be determined in this action, I will outline, in general terms, the factual background and the competing positions of the parties giving rise to the issues in dispute. Unless otherwise indicated, the following matters are common ground, were not disputed or are unequivocal, and I find them to be facts.
Boreline was incorporated on 10 September 2012.[15] At that time, the directors were Mr Nicky Alfred Kleyn's sons, Christopher Phillip Kleyn and Nicolas Alfred Kleyn.[16] Though not a director of Boreline until 14 July 2021, Mr Nicky Alfred Kleyn managed and controlled Boreline's business at the time of its incorporation and subsequently.
[15] Exhibit 4/3430.
[16] Exhibit 4/3431.
Prior to Boreline's incorporation, Nicky Kleyn was involved in other businesses operated through Camteq International Pty Ltd (Camteq) and Coretell Pty Ltd (Coretell), which provided downhole survey equipment for use in the mining industry. That equipment included a camera probe, which was known as the Proshot, and a core orientation device, which was known as the Orishot.
Boreline was established by Nicky Kleyn and his sons, Nicolas Kleyn and Christopher Kleyn, to improve the design of and further develop those probe and orientation tools. This was with a view to manufacturing and supplying the re-designed tools for use in the mining industry by drilling companies and geologists to provide data to analyse the location, depth, orientation and size of ore bodies.
Before Boreline was incorporated, Nicky Kleyn had discussions with Old Romteck regarding the further development of the probe and orientation tools. His primary contact was Stephen Merralls, an engineer and industrial designer, who at that time was employed by Old Romteck as project co-ordinator.
Old Romteck provided a quotation for the design and development work. It is not in issue that the quotation, which is dated 3 July 2012 and addressed to Camteq[17] (Quotation), related to work which subsequently formed the basis of an agreement between Boreline and Old Romteck.
[17] Exhibit 3/2 - 6.
On about 24 October 2012, Boreline (as customer) and Old Romteck (as developer) entered into a written agreement for the development and supply of an improved downhole orientation system using Boreline's orientation and camera probe equipment. That agreement is titled, and I will refer to it in these reasons as, the Technology Development Agreement.[18]
[18] Exhibit 3/7 - 20.
Some of the terms of the Technology Development Agreement are in issue and are considered in further detail later in these reasons. It is common ground that the Technology Development Agreement provided, in general terms, for Old Romteck to carry out the design and development work in stages, which involved Old Romteck undertaking research and development, designing, manufacturing and testing prototypes of the hardware, firmware and software and then, manufacturing pre-production units for testing before moving into production.
Boreline supplied Old Romteck with the existing orientation and camera probe equipment, and certain other equipment owned by Boreline for the purpose of Old Romteck developing the improved downhole orientation system.
Old Romteck retained possession of that equipment and worked on the design and development of the improved downhole orientation system until it entered external administration on 3 November 2014.
An external administrator was appointed to Old Romteck on 3 November 2014.[19] On 4 November 2014, by order of the Federal Court, Old Romteck was wound up in insolvency, and Neil Raymond Cribb of RSM Bird Cameron Partners was appointed as liquidator.[20] On 6 November 2014, Simon Guy Theobold and Jeffrey Laurence Herbert were appointed as receivers and managers of Old Romteck.[21]
[19] Exhibit 4/3444.
[20] Exhibit 3/55; Exhibit 4/3444.
[21] Exhibit 3/56 - 57; Exhibit 4/3444.
Romteck Australia was incorporated on 12 November 2014 to acquire the business and assets of Old Romteck from the receivers and managers of Old Romteck. That acquisition was concluded and is documented in a business sale agreement dated 22 December 2014 (Business Sale Agreement).[22]
[22] Exhibit 3/117 - 146 (executed by Romteck Australia) and exhibit 3/147 - 176 (executed by the receivers).
From early January 2015 until about October 2021, Romteck Australia provided services to Boreline in respect of the Borecam and Corecam. The contractual relationship between them and the nature of the services provided by Romteck Australia to Boreline are in dispute between the parties.
The critical dispute and the central issue in this trial concerns the ownership of the Equipment. In essence, and as outlined in further detail later in these reasons, Boreline alleges that it owns the Equipment and is entitled to have it returned to it by Romteck Australia. Romteck Australia disputes Boreline's claimed entitlement to the Equipment and denies it is under any obligation to return any of the Equipment to Boreline.
D. Boreline's claim
Boreline claims against Romteck Australia in detinue and seeks an order for delivery up of the Equipment, having made demands for its return in October and November 2021, which demands Boreline alleges have been wrongfully refused by Romteck Australia. Boreline submits that damages would not be an adequate remedy because of the specialised nature of the Equipment, and asks the court to order delivery up by way of ancillary equitable relief.
Boreline's primary case
The foundation for Boreline's primary case is pleaded at pars 3 ‑ 9 of the amended statement of claim. Boreline claims that it is entitled to the return of the Equipment, which it breaks down into two categories.
The first is that Boreline provided the items listed in par 5 of the amended statement of claim to Old Romteck for the purpose of Old Romteck undertaking the work under the Technology Development Agreement.[23] It is Boreline's case in respect of those items that, in doing so, Boreline did not pass property in those items to Old Romteck. Rather, Old Romteck held those items as bailee,[24] and Boreline is entitled to their return. Boreline has described those items as 'the Paragraph 5 items'. I will also refer to those items collectively using that description in these reasons. They are the items identified and described in Schedule A to the amended statement of claim (exhibit 1) as follows:
Paragraph 5 items
1.item B.1 - dual gearbox unit complete with stepper motors;
2.the mechanical parts of item B.3, described as stepper motor control unit;
3.item B.7 - adaptor for mounting the Corecam units;
4.item B.10 - specific manufactured tools for the clamping and holding of the Corecam units, removal of end plugs and drill guide for end plugs;
5.the electrical switching control box of item C.2, described as Helmholtz coils control unit; and
6.item C.11 - specific manufactured tools for the clamping and holding of the Borecam units with spanners for the dismantling of the Borecam tube.
[23] Amended statement of claim, pars 5, 7(a); Boreline's opening submissions, pars 34 - 35; Boreline's closing submissions, pars 8 - 10.
[24] Amended statement of claim, par 7(a); reply, par 4.1.
The second category of the Equipment that Boreline claims it is entitled to possession of is the balance of the items of the Equipment, which Boreline claims it took property in as they were acquired or created by Old Romteck under the terms of the Technology Development Agreement, on its proper construction.[25] Boreline has described those items of the Equipment as 'the Paragraph 6 items'. I adopt that description when referring collectively to those items in these reasons. They are the items identified and described in exhibit 1 as follows:
[25] Amended statement of claim, pars 6, 7(b); Boreline's opening submissions, pars 34 - 43; Boreline's closing submissions, pars 8, 11 - 23.
Paragraph 6 items
For the manufacture of the Corecam and Borecam devices:
1.item A.1 - schematic diagrams, source code and operating code;
2.item A.2 - Gerber files for the PCBs;[26]
[26] 'PCB' refers to printed circuit board. Gerber files are files containing information for the manufacture of PCBs; ts 447.
3.item A.3 - development design notes and all documentation relating to the devices;
4.item A.4 - assembly procedures for fitting of the PCBs to the Boreline supplied enclosures;
For the calibration of the Corecam and Borecam accelerometers:
5.item B.2 - cables for the stepper motor drives;
6.item B.3 - stepper motor control unit;
7.item B.4 - Gerber files for the PCBs incorporated in the stepper motor control unit;
8.item B.5 - development design notes and all documentation relating to the stepper motor control unit;
9.item B.6 - power supplies;
10.item B.8 - application software for calibration, analysis and reports of the calibration;
11.item B.9 - setup and calibration procedures for the accelerometer calibration system;
For the calibration of the Borecam magnetometers:
12.item C.1 - Helmholtz coils magnetometer calibration unit;
13.item C.2 - Helmholtz coils control unit;
14.item C.3 - schematic diagram of the Helmholtz coil control unit;
15.item C.4 - Gerber files for the PCBs incorporated in the Helmholtz coil control unit;
16.item C.5 - development design notes and all documentation relating to the Helmholtz control unit;
17.item C.6 - setup and calibration procedures for the calibration system;
18.item C.7 - Borecam holding and support unit within the Helmholtz coils;
19.item C.8 - 5 x Borecam calibration indexing collars;
20.item C.9 - cables for connection of the Helmholtz coils;
21.item C.10 - power supply and spare power supply;
22.item C.12 - application software for the calibration, analysis and reports of the calibration; and
23.item C.13 - golden sample of the Borecam.
In essence, it is Boreline's primary case that it was entitled to possession of the Equipment at the time it made the demands for its return, and that none of the matters alleged by Romteck Australia in its defence operate to negate that entitlement.
Boreline's secondary case
If Boreline is unsuccessful in its argument that it took property in the Paragraph 6 items under the Technology Development Agreement, or it is found it was so entitled but that such entitlement was negated by subsequent events as asserted by Romteck Australia, Boreline relies on its secondary case.[27] That alternative case is pleaded at pars 10 - 19 of the amended statement of claim.
[27] Boreline's opening submissions; ts 225; Boreline's closing submissions, par 48ff.
At par 10 of the amended statement of claim, Boreline pleads:
On about 15 December 2014, [Romteck Australia] sent a letter to [Boreline] signed by its general manager Mr Stephen Merralls and containing the following words:
'Should you have any contracts in the name of Romteck Pty Ltd that you require re-signing in the name of Romteck Australia Pty Ltd then please forward to the undersigned for action.'
Boreline pleads that the letter dated 15 December 2014 constituted an offer made by Romteck Australia to Old Romteck's customers to trade with them on the terms on which Old Romteck had previously traded with them.[28] At trial, it was accepted by Boreline that the letter was not itself an offer capable of acceptance. Rather, Boreline asserts that it forms part of a further, separate agreement entered into between Boreline and Romteck Australia[29] between 15 and 23 December 2014, which it defines in its pleading as the 'Further Agreement'.
[28] Amended statement of claim, par 11.
[29] ts 719.
I adopt Boreline's pleaded definition of the alleged separate agreement and refer to that in these reasons as the Further Agreement. Boreline alleges that, by the Further Agreement, it was agreed that Romteck Australia would:
1.complete the development work that Old Romteck had not yet completed at the time it went into external administration; and
2.manufacture, repair and recalibrate Corecam and Borecam units for Boreline.[30]
[30] Amended statement of claim, par 14; Boreline's closing submissions, par 49.
Boreline was at pains to make clear (despite what was stated in its letter of demand dated 26 October 2021)[31] that it does not assert that the Technology Development Agreement was assigned or novated to Romteck Australia. Rather, it says that the extent of any connection between the Further Agreement and the Technology Development Agreement is limited to the incorporation, by reference, of certain terms of the Technology Development Agreement into the Further Agreement.[32]
[31] Exhibit 3/3211 - 3215.
[32] Boreline's closing submissions, par 49.
Boreline pleads that the material terms of the Further Agreement were (relevantly) to the following effect:[33]
1.Romteck Australia would develop core orientation and camera probe products for Boreline, provide support for the software used to control those products, engineering support and upgrades and improvements to those products and software from time to time, as required.
2.Boreline would pay Romteck Australia for those services at the rates set out in par 14(b) of the amended statement of claim, as varied from time to time.
3.The Equipment was and would remain Boreline's property.
[33] Amended statement of claim, par 14.
It is alleged that the Further Agreement was partly oral and partly in writing. To the extent that it was oral, Boreline says it was formed in conversations between Mr Nicky Kleyn on behalf of Boreline and Mr Stephen Merralls on behalf of Romteck Australia. Boreline relies on a conversation between Mr Nicky Kleyn[34] and Mr Merralls, in which it is alleged that words to the following effect were spoken:[35]
Mr Kleyn:Based on the Letter, I presume the Technology Development Agreement entered into between Boreline and Romteck Pty Ltd on 24 October 2012 is now being taken over by Romteck Australia Pty Ltd?
Mr Merralls: Yes that is correct.
Mr Kleyn:Does the agreement need to be amended or re-signed between Boreline and Romteck Australia? I want to ensure it is clear Boreline still owns all equipment and IP under the agreement.
Mr Merralls: No, the agreement does not need to be re-signed as there is no dispute as to Boreline's ownership of the equipment and intellectual property the subject of the agreement. We are happy to continue as is.
Mr Kleyn:Great thank you. We will continue the agreement with Romteck Australia.
[34] Though referred to as 'Nick', in par 12 of the amended statement of claim, it is clearly a reference to Mr Nicky Kleyn.
[35] Amended statement of claim, par 12.
To the extent that it was written, Boreline's pleaded case is that it was recorded in a document prepared by Romteck Australia titled 'Appendix to Technology Development Agreement signed and dated 24 October 2012', signed by Mr Kleyn and Mr Merralls and dated 23 December 2014. I adopt Boreline's pleaded definition of that document[36] and refer to it in these reasons as 'the Appendix'.
[36] Amended statement of claim, particulars to par 14.
I do not reproduce the Appendix in full here. It is exhibit 2,[37] and includes the following:
[37] A copy of the Appendix is also at exhibit 3/177 - 178.
Appendix to Technology Development Agreement signed and dated 24th October 2012.
Manufacture of Boreline Pty Ltd Products by Romteck Pty Ltd.
After a protracted development period, it is agreed between Romteck Pty Ltd (ACN N 94 009 202 117) (Managing Director, Roland A. Brazier) and Boreline Pty Ltd (ACN 160 290 442) (Managing Director Nick Kleyn) that a manufacturing phase for the required Boreline products is to begin.
As laid down in Section 5 of the Agreement, Boreline now owns all the Intellectual Property including the embedded firmware, PCB designs and PCB production tools for the Corecam device (also known as the Oritool) and the Borecam device (also known as the Camera). Boreline will also own the Intellectual Property of the calibration software and hardware for both devices. In addition, on the suspension of the hand-held component in Stage One of Section 3 of the Agreement, Boreline will also own the Intellectual Property for the interim Apple iPod Application Software for the control and data retrieval from both the Corecam and Borecam units, until such time that the hand-held component is completed at which time the Intellectual property rights will revert to Boreline.
Romteck will continue to manufacture the Corecam, Borecam and support the Apple iPod unit for the agreed price until Romteck or Boreline terminate this agreement. The agreed price will include engineering support as required, and upgrades and improvements from time to time as required.
…
As requested by Boreline and as a result of the Product development phase being completed and accepted by Boreline and all accounts paid, the below listed items now become the Property of Boreline:
…
The Appendix then lists the items that are now reproduced in exhibit 1 (the Equipment).
It is not submitted by Boreline that the Appendix of itself has contractual force. Rather, it is submitted that it is part of the evidence of the alleged partly written and partly oral Further Agreement.[38]
[38] Boreline's closing submissions, par 56; ts 719 - ts 722; ts 727.
In oral submissions, though they post-date the date of the alleged Further Agreement, Boreline also relied on an exchange of emails between Stephen Merralls and Nicky Kleyn between 24 and 28 December 2014.[39]
[39] Exhibit 3/2346 - 2347, 3/2349 - 2350; ts 728.
Further, Boreline claims (in the alternative), that by the statements made by Stephen Merralls to Nicky Kleyn and that by signing the Appendix and providing it to Mr Kleyn, Mr Merralls, on behalf of Romteck Australia, represented to Boreline that Boreline was the owner of the Equipment, which gives rise to an estoppel.[40] Boreline asserts, in essence, that:
1.In reliance on the representation:
(a)Boreline did not recover the Equipment from Romteck Australia in December 2014 because, through his dealings with Stephen Merralls, Nicky Kleyn understood that the Equipment was and would continue to be Boreline's property;[41] and
(b)Boreline did business with Romteck Australia on that basis, leaving the Equipment in Romteck Australia's possession, and allowing Romteck Australia to continue to use the Equipment to supply products and services to Boreline.
2.Romteck Australia is estopped from denying Boreline's ownership of the Equipment in the circumstances and should not be permitted to continue to detain the Equipment because Boreline will suffer detriment.
3.The detriment Boreline asserts it will suffer is the loss of use of the Equipment, and being unable to calibrate and service its existing stock of Borecams and Corecams without going to considerable effort and expense to adapt other equipment for that purpose.
E. Romteck Australia's defences to Boreline's claim
[40] Amended statement of claim, par 16 and 19; Boreline's closing submissions, pars 53 - 54, 57 - 59; ts 729 - ts 734.
[41] Exhibit 3/2346 - 2347.
Romteck Australia denies it is liable to return any of the Equipment to Boreline and that Boreline is entitled to any of the relief it claims. It defends Boreline's claims on a number of bases, as pleaded in the defence and set out in its submissions. In summary, Romteck Australia's position is as follows:
1.The Technology Development Agreement was an agreement between Old Romteck and Boreline. Romteck Australia is not a party to that agreement and is not bound by its terms.[42]
[42] Defence, par 3(a).
2.The Technology Development Agreement had been performed by Old Romteck, before Romteck Australia was registered on 12 November 2014,[43] and was expressly excluded from the assets of Old Romteck acquired by Romteck Australia under the Business Sale Agreement.[44]
[43] Defence, pars 3(c), 12(d), 12(e).
[44] Defence, par 10(c).
3.As to the Paragraph 5 items, its primary position is that Boreline has failed to discharge its onus of proof as to their existence or any continuing possessory right to them.[45]
[45] Romteck Australia's closing submissions, par 125.
4.As to the Paragraph 6 items, Romteck Australia contends that:
(a)On its proper construction, any assignment of 'the right, title and interest in the Product' under cl 5 of the Technology Development Agreement was conditional upon payment in full being made by Boreline. It is Romteck Australia's case that Boreline did not make payment in full and, as such, did not acquire any right, title or interest in the Product (any of the Paragraph 6 items). It also relies upon the retention of title clause in the standard terms and conditions attached to the Quotation, which it contends was incorporated into the Technology Development Agreement.[46]
[46] Defence, par 4; Romteck Australia's closing submissions, pars 8 - 13, 161 - 162; ts 671 - ts 672.
(b)Boreline and Old Romteck abandoned the Technology Development Agreement, or elected not to pursue their respective rights under it against one another.[47]
[47] Romteck Australia's closing submissions, par 26; ts 657.
(c)As to the Further Agreement alleged to have been entered into between Boreline and Romteck Australia (through Mr Merralls) and the alleged estoppel, Romteck Australia:
(i)denies that there was any Further Agreement or estoppel, as alleged;[48]
[48] Romteck Australia's closing submissions, pars 39 - 41, 52 - 67, 163; ts 679 - ts 681, ts 683 - ts 684.
(ii)denies there was any conversation between Mr Kleyn and Mr Merralls, as alleged by Boreline;[49]
[49] Romteck Australia's closing submissions, par 46, pars 48 - 51, ts 683 - ts 684.
(iii)says that Mr Merralls did not have authority to enter into or bind Romteck Australia to any such agreement, to execute the Appendix or make any representation on behalf of Romteck Australia at that time;[50] and
[50] Defence par 14(e), par 14(f); Romteck Australia's closing submissions, pars 75 - 117; ts 685 - ts 687.
(iv)says any agreement or agreements between Boreline and Romteck Australia were ad hoc, by quotations, purchase orders and invoices for production and calibration services only.[51]
[51] Defence par 14; Romteck Australia's closing submissions, pars 31, 48; ts 677; ts 687.
5.Even if it is found that Boreline was entitled to possession of any of the Paragraph 5 items or the Paragraph 6 items under the Technology Development Agreement (which it denies), it is Romteck Australia's case that:
(a)Boreline's bailment of those items to Old Romteck for value amounted to a PPS lease within the meaning of s 13 of the Personal Property Securities Act 2009 (Cth) (PPSA);[52]
[52] Defence par 9. (The defence refers to leasing or bailing. Romteck Australia relies only on bailment; see ts 741 - ts 742); Romteck Australia's closing submissions, pars 128, 165.
(b)that PPS lease was a security interest as prescribed by s 12(3)(c) of the PPSA, which Boreline failed to perfect by registration in the personal property securities register and, by operation of s 267 of the PPSA, vested in Old Romteck immediately prior to the appointment of administrators on 3 November 2014;
(c)as such, those items formed part of the assets of Old Romteck acquired by Romteck Australia on or about 22 December 2014 from the receivers of Old Romteck under the Business Sale Agreement;
(d)Romteck Australia acquired title to them and took possession of them on that date;
(e)there was no registration on the personal property security register to restrict the receivers' right to sell, and Romteck Australia's right to acquire the assets in the possession of Old Romteck free from any security interest; and
(f)Boreline ceased to have any right, title or interest in them. Nothing has changed to disturb Romteck Australia's higher right to possession of any of the Equipment, which has remained continuously undisturbed since the date of the settlement of the Business Sale Agreement on or about 22 December 2014.[53]
6.Romteck Australia also pleads that Boreline's interest in the Paragraph 6 items amounted to a security interest, within the meaning of s 12(2)(j) of the PPSA, granted by Old Romteck to Boreline.[54] No submissions were made in relation to this issue on behalf of Romteck Australia during the trial. However, counsel for Romteck Australia said in closing that he was instructed not to concede it.[55]
7.Romteck Australia also raises a limitation defence.[56] It no longer presses its limitation defence to Boreline's cause of action in detinue.[57] However, to the extent Boreline relies on any claim in contract, Romteck Australia says such claim is statute barred as any claim for breach of contract accrued no later than 1 January 2015.[58] Though, as I consider further later in these reasons, no breach of contract is alleged or relied upon by Boreline. Boreline claims in detinue and for an order for delivery up of the property it asserts it had an immediate right to possession of at the time of its demands.
8.Romteck Australia also pleads that RGT Holdings Pty Ltd (RGT), by virtue of a registered security interest under the PPSA, had a superior right of possession to Boreline to the Paragraph 5 items and the Paragraph 6 items.[59] However, that defence was not pressed or relied on by Romteck Australia as part of its case at trial.[60]
F. Legal principles applicable to Boreline's claim in detinue
[53] Romteck Australia's closing submissions, par 169.
[54] Defence par 7(b)(v).
[55] Romteck Australia's closing submissions, ts 744.
[56] Defence, pars 7(a)(ix) - (xi), 7(b)(x) - (xii).
[57] ts 690 - ts 691.
[58] ts 651 - ts 659.
[59] Defence, pars 9(d) - (j).
[60] ts 649.
The elements of and relief for a claim in detinue and the relevant principles and authorities were collected by Gething DCJ in Googe v Spoljaric,[61] which I respectfully refer to and adopt.
[61] Googe v Spoljaric [2017] WADC 99 [296], [300], [303] - [307].
In summary, to succeed in a claim in detinue, a plaintiff must establish that it has an immediate right to possession of personal property, it has made a demand of the defendant for the return of that property and the defendant has wrongfully refused to return the property to the plaintiff.[62]
[62] Pargiter v Alexander (1995) Aust Torts Reports 81-349, 62,503 (Zeeman J); Black Diamond Group Pty Ltd v Manor of Maluka Pty Ltd [2015] 1 Qd R 180 [28], [41] - [42] (Jackson J); Gollan v Nugent (1988) 166 CLR 18, 25 (Brennan J).
It is common ground that, for Boreline to succeed in its claim against Romteck Australia in detinue in relation to the Equipment, Boreline must establish that:
1.Boreline made a demand to Romteck Australia for the return of the Equipment.
2.At the time Boreline made that demand, Boreline had an immediate right to possession of the Equipment.
3.Romtek Australia refused Boreline's demand to return the Equipment.
4.Romteck Australia's refusal to return the Equipment to Boreline and its continued detention of it was wrongful.
G.Boreline's claim for an order for delivery up of the Equipment
As already stated, the principal relief that Boreline seeks is an order for delivery up of the Equipment. At common law, a plaintiff suing successfully in detinue was entitled to an order for return of the property detained or payment of its value, along with damages in compensation of the loss caused by its wrongful detention. The election between returning the property or paying its value was for the defendant, the party having been found to have wrongfully detained the property, to make. That is no longer the position in all Australian states, but remains the position in Western Australia.[63]
[63] Googe v Spoljaric [303] - [306] (Gething DCJ); see also General and Finance Facilitities Ltd v Cooks Cars (Romford) Ltd[1963] 1 WLR 644, 650 - 651 (Diplock J); City Motors (1933) Pty Ltd v Southern Aerial Super ServicePty Ltd (1961) 106 CLR 477, 491 (Windeyer J).
If Boreline succeeds in its claim, it seeks an order for delivery up. Boreline submits, in effect, that:[64]
1.Boreline has a right or claim to the Equipment.
2.This is an appropriate case in which equity may be called upon in the court's auxiliary jurisdiction to make the principal relief available at common law more effective by deferring any right of Romteck Australia to elect to pay damages, and making an order for delivery up.
3.Ancillary equitable relief is justified on the facts of this case, because the Equipment forms part of a bespoke system for the manufacture and calibration of the Borecam and Corecam, which cannot be replaced 'off the shelf'. It is submitted that damages at law would be an inadequate remedy because the property has special value.
[64] See ts 737; Boreline's closing submissions, pars 77 - 78, referring to Ximenes v Franco (1751) 1 Dick 149; 21 ER 226; Gomba Holdings UK Ltd v Minories Finance Ltd [1988] 1 WLR 1231; Duke of Somerset v Cookson (1735) 3P Wms 390; 24 ER 1114; Aristoc Industries Pty Ltd v RA Wenham (Builders) Pty Ltd [1965] NSWR 581; Doulton Potteries Ltd v Bronotte [1971] NSWLR 591.
Romteck Australia takes no issue with the court's power to order delivery up if Boreline's claim in detinue is made out. Though, it says the court has power to order delivery up without the need to resort to equity.[65]
[65] Romteck Australia's closing submissions; ts 680.
This court has power to make an order for delivery up. I refer to my decision in Boreline Pty Ltd v Romteck Australia Pty Ltd[66] as to the court's power to grant equitable relief. The court has jurisdiction to grant equitable relief if it is ancillary or auxiliary or incidental to a claim otherwise within the jurisdiction of the court.[67]
H. The issues to be determined
No issue that the demands were made
[66] Boreline Pty Ltd v Romteck Australia Pty Ltd [2021] WADC 135 [18] - [21] and the authorities referred to.
[67] See Commercial Developments Pty Ltd (t/as Don Rogers Motors Pty Ltd) v Mercantile Mutual Insurance (Workers' Compensation) Ltd (1991) 5 WAR 208, 217 - 219; Chianti Pty Ltd v Leume Pty Ltd [2007] WASCA 270; (2007) 35 WAR 488, 505.
It is not in issue,[68] and I find that, Boreline made demands of Romteck Australia for the return of the Equipment, which were refused by Romteck Australia, as evidenced by:
1.the letter sent to Romteck Australia by Boreline's solicitors dated 26 October 2021 demanding the return of the Equipment to Boreline by 5.00 pm on 2 November 2021;[69]
2.Romteck Australia's response to that letter dated 2 November 2021;[70]
3.the further letter sent to Romteck Australia by Boreline's solicitors dated 4 November 2021, demanding the return of the Equipment to Boreline by 5.00 pm on 5 November 2021;[71] and
4.Romteck Australia's response to that letter dated 5 November 2021.[72]
Matters in issue
[68] ts 689.
[69] Exhibit 3/3210 - 3215.
[70] Exhibit 3/3221 - 3224.
[71] Exhibit 3/3252 - 3255.
[72] Exhibit 3/3315 - 3318.
At the conclusion of the trial, counsel for each of the parties agreed that, in broad terms, the issues to be determined in this action are:
1.Was Boreline entitled, under the Technology Development Agreement to:
(a)the Paragraph 5 items; and
(b)the Paragraph 6 items,
(together the Equipment)?
These issues turn in large part on the proper construction of cl 5 (and other provisions) of the Technology Development Agreement, whether Boreline provided the Paragraph 5 items to Old Romteck, and whether the Paragraph 6 items were acquired or created by Old Romteck for Boreline.
2.If Boreline was so entitled, do any of the matters alleged by Romteck Australia in its defence operate to negate that entitlement?
This involves determination of a number of sub-issues, which are considered in detail later in these reasons. For present purposes, the key issues to be determined, in broad terms, are whether any entitlement of Boreline to the Equipment, or any part of it, is negated because:
(a)Boreline did not pay in full for the Product (as defined in the Technology Development Agreement); or
(b)if Boreline was entitled to the Equipment, Romteck Australia acquired the right, title and interest in it from the receivers of Old Romteck under the Business Sale Agreement?
3.In relation to Boreline's alternative case, if it is unsuccessful in its primary argument that it took property in the Paragraph 6 items under the Technology Development Agreement, or it is found it was so entitled but that such entitlement was negated by subsequent events as asserted by Romteck Australia:
(a)Was Boreline entitled to the Equipment under the Further Agreement?
(b)Is Romteck Australia estopped from denying Boreline's ownership of the Equipment?
4.Can Romteck Australia rely on the limitation defence asserted in relation to any claim for breach of contract?
5.Is Boreline entitled to the relief claimed, at this stage, an order for delivery up of the Equipment?
The parties accept that the issue of whether Romteck Australia has wrongfully refused to return the Equipment to Boreline is part and parcel of the ultimate question as to whether Boreline was entitled to the Equipment at the time of making the demands for its return.
Was Boreline entitled to the Equipment under the Technology Development Agreement?
The relevant terms of the Technology Development Agreement
It is common ground that Boreline and Old Romteck were parties to the Technology Development Agreement, which is dated 24 October 2012, and in which references to 'the Developer' are to Old Romteck and references to 'the Customer' are to Boreline. A number of the issues in dispute turn on the proper construction of certain terms of that agreement.
Though not an operative part of the Technology Development Agreement, the Background provides context. It states:
A.The Customer has identified a need to improve certain products that it currently supplies to the mining industry and in particular its downhole orientation and camera equipment.
B.The Customer has requested the Developer to develop and supply an improved system incorporating the functions of both the orientation equipment and camera probe equipment ('the Product').
C.The Developer has agreed to develop the Product exclusively for this purpose and for the Customer to retain all intellectual property rights in respect of the Product and its component parts.
Relevantly to the issues in dispute, the Technology Development Agreement includes the following express terms:
1.Development and Supply
(a)The Developer agrees to develop the Product exclusively for the Customer.
(b)The parties agree that the Product will be developed in accordance with clause 3 of this Agreement.
2.Consideration
(a)In consideration for the Developer agreeing to develop the Product to the Customer pursuant to this Agreement the Customer agrees to make payments to the Developer in accordance with clause 4.
3.Development Milestones and Responsibilities
The Developer is responsible for the supply of all electronic components, printed circuit boards, batteries and sundry items up to and including the Stage Five prototypes as part of the scope of supply.
The Customer is responsible for the manufacture and supply of support hardware, brass/plastic enclosures, as requested by the Developer during the course of the development. The Customer is also responsible for the supply of the initial calibration rig.
The Developer agrees to develop the Product in stages and within the following timeframes:
Stage One
Preparation of a Design Specification for the Produce ('the Design Specification') including Downhole tool design including schematic circuit board layout, embedded software requirements and radio communications.
Completion date: On or before 28 September 2012.
Stage Two
Prototype design and test - Downhole Equipment Hardware.
Completion date: On or before 31 January 2013.
Stage Three
Prototype design and test - Downhole Equipment firmware.
Completion date: On or before 31 January 2013.
Stage Four
Prototype design and test - software based hand held controller based on Mobile device.
Prototype design and test - calibration software based on Mobile Device.
Completion date: On or before 31 January 2013.
Stage Five
Manufacture, assemble, calibrate and test four pre-production units (plus two additional battery trial units).
Prototype design and test - calibration software based on Mobile Device.
Completion date: On or before 29 February 2013.
4.Payment
(a)The Customer agrees to pay the Developer by the following instalments and on receipt of a tax invoice;
i.Delivery to the Customer of the Stage One work -$27,700.00 (inclusive of GST) Due and Payable
ii.Delivery to the Customer of the Stage Two and Three work, progress to be assessed for intermediate payments -
$20,000.00 (inclusive of GST) 31 October 2012
$20,000.00 (inclusive of GST) 30 November 2012
$20,000.00 (inclusive of GST) 31 December 2012
$59,700.00 (inclusive of GST 31 January 2012
iii.Delivery to the Customer of Stage Four work - $75,000.00 (inclusive of GST) 31 January 2013
iv.Delivery to the Customer of Stage Five work - $23,800.00 (inclusive of GST) 29 February 2013
(b)The Customer will pay the Developer's invoices within 30 days of the date of the invoice.
5.Intellectual Property Rights and other Property
The Developer hereby assigns to the Customer its entire right, title and interest in the Product, Design Specification, Ancillary Documentation, notes, source codes, software drawings, designs, procedures, discoveries and inventions created pursuant to the Agreement, including, but not limited to, patents, copyrights, trade secrets and any other Intellectual Property right, whether in Australia or abroad. The Developer agrees to cooperate with the Customer in the procurement and maintenance of the Customer's rights in the Product, Design Specification and to sign all papers which the Customer may deem necessary and desirable for vesting the Customer with such rights throughout the world, including litigation of applicable patents, copyrights and other proceedings.
…
14.General
…
(h)There are no other representations, promises, warranties, covenants or undertakings between the parties and this Agreement supersedes all previous agreements in respect of its subject matter and embodies the entire Agreement between the parties.
The defined terms in cl 5 are defined in cl 15(a) as follows:
15.Definitions and Interpretation
(a) Definitions
The following words have these meanings in this Agreement unless the contrary intention appears:
Agreementmeans this Agreement and any written variation to this Agreement.
Ancillary means any document embodied in any
Documentation material form which relates to the Product in any way and includes, without limitation, any hardware design, printed circuit board design, source code (including commentary contained in that source code), object code, algorithms, flowcharts, entity relationship diagrams, network topology diagrams, data flow diagrams, software interface specifications, design documentation, academic papers, white papers, tender documents (and responses), general hardware and software specifications and documents relating to the testing of the Product.
Productmeans the downhole equipment hardware, the downhole software, the handheld controller and includes all of the equipment and services set out in the Developer's quotation delivered to the Customer dated 3 July 2012 (excluding 'production' items).
…
Intellectual means any and all intellectual and
Propertyindustrial property rights throughout the world and includes, without limitation:
(a)Copyright (including future copyright and rights in the nature of or analogous to copyright);
(b)Moral rights;
(c)Performers' protection;
(d)Inventions (including patents);
(e)Trade marks, service marks;
(f)Designs; and
(g)Printed circuit board layouts,
Whether or not now existing and whether or not registered or registrable and includes any right to apply for the registration of such rights and includes all renewals and extensions.
It is common ground that the 'Developer's quotation' referred to in the definition of 'Product' in cl 15(a) is the Quotation.[73]
[73] As defined in [33] above, being the quotation from Old Romteck addressed to Camteq dated 3 July 2012; Exhibit 3/2 - 6.
'Design Specification' is defined in cl 3, under the heading 'Stage One', which is in the following terms:
Stage One
Preparation of a Design Specification for the Product ('the Design Specification') including Downhole tool design including schematic circuit boards layouts, embedded software requirements and radio communications.
The Paragraph 5 items
Boreline pleads at par 5 of the amended statement of claim that, in or about 2012, it handed the Paragraph 5 items, all of which Boreline had manufactured, to Old Romteck in order to allow Old Romteck to perform its obligations under the Technology Development Agreement. This is not admitted by Romteck Australia.[74]
[74] Defence, par 5.
Boreline has the onus of proving this on the balance of probabilities. It relies on the evidence of Mr Nicky Kleyn and Mr Stephen Merralls, as identified in its written closing submissions.[75]
Evidence of Nicky Alfred Kleyn
[75] Boreline's closing submission, par 9; ts 266, ts 267 - ts 268 (Mr Kleyn); ts 443 - ts 446 (Mr Merralls).
Before turning to Mr Nicky Kleyn's evidence relied upon by Boreline in relation to the Paragraph 5 items, I will say something about my assessment of Mr Nicky Kleyn as a witness.
I found it difficult to accept all of Mr Kleyn's evidence. I did not find Mr Kleyn to be dishonest, but did not find him to be a wholly accurate or reliable witness. He had a poor recollection of events. He was unable to recall meetings and discussions, either at all or in any detail. His evidence was confusing at times. He did not answer questions directly and was either vague in his answers or overly detailed about matters that were not responsive to questions asked of him. There were also a number of inconsistencies in his evidence, with him giving varying versions of his own recollection or account, and also inconsistencies between his account and that of other witnesses or with what is recorded in contemporaneous documents.
Given the passage of time between the events Mr Kleyn (and other witnesses) gave evidence about and when that evidence was given, it is not surprising his recollection was not particularly good. Generally contemporaneous, or near contemporaneous, documents provide more valuable and revealing information than what may be flawed attempts at recollection of facts by witnesses, in particular, those with an interest in the outcome of the litigation.[76]
[76] See DM Drainage & Construction Pty Ltd as Trustee for DM Unit Trust t/as DM Civil v Karara Mining Ltd [No 6][2021] WASC 410, [56] - [57] (Vaughan J); Girgis v Poliwka [No 6] [2019] WASC 230 [123] (Vaughan J); Belgravia Nominees Pty Ltd v Lowe Pty Ltd [No 6] [2019] WASC 5 [26(f), (g)] (Tottle J).
In assessing evidence which relies upon the recollection of events which occurred sometime ago, I have placed significant weight upon contemporaneous documents, where available, and upon inferences that can be properly drawn from that evidence. Where it is possible to establish objective facts from their evidence, I have assessed the oral testimony of the witnesses in light of the inherent probabilities of particular versions of events, in the context of established facts.
However, on this particular issue of whether the Paragraph 5 items were provided to Old Romteck by Boreline, there is no contemporaneous documentation that evidences precisely what items were provided to Old Romtek and when.
In his evidence, Mr Nicky Kleyn was shown a copy of Schedule A to the amended statement of claim.[77] He said it was a list of equipment that he put together with Steve Merralls. He said it is a list of 'all the things required to calibrate and operate the probes and the orientation tools'. He said that some of the items in the list were bought, some were developed and some were made.
[77] Which, at that time was marked for identification as MFI-A and was later tendered to become exhibit 1.
Mr Kleyn did not give clear evidence as to precisely which items Boreline provided to Old Romteck when. In relation to items in exhibit 1 that were made or 'done' by Boreline, and items made or developed by Romteck, Mr Nicky Kleyn's evidence was as follows:[78]
[78] ts 266 - ts 269.
THOMPSON, MR:Have you seen that before, Mr Kleyn? - - -Yes.
Right. What is it? - - - It's a list of equipment that I put together with Steve Merralls.
Okay. So what - what is - what is the equipment that's listed in it? - - - These are all the things required to calibrate and operate the probes and the orientation tools.
All right. And do those items of equipment exist or did they? - - - Yes.
Do you know where they are? - - -Romteck had them.
Right. Where did they come from originally? - - - Some were bought. Some were developed. Some we made.
Can you say which - which is which? - - - The gearbox et cetera was made cos we made a couple of different versions of that. The Gerber files would have been - were made by Romteck. The notes and development stuff was done by Romteck. The adaptor for mounting the Corecam units was done by us. The software calibration analysis reports done by Romteck. Procedures would have been done by Romteck. Specific manufactured tools for clamping and holding the Corecams was all done by us. Helmholtz coil was purchased from China.
…
THOMPSON, MR: …
Mr Kleyn, could you just repeat what you were saying but also say when? You say for instance that you made or you did something or other. Can you say roughly [when] that was done? - - - I have to put a correction in there. My engineer, when I say we did or I did - - -.
Yes? - - - I'm referring to Boreline as a company that did it.
…
All right. So if you - if you were to go through without reading out all of the items in the list. But just mention the ones that Boreline provided? - - - . Most of these would have been done or a version of them was done before we got the first orientation tool or camera.
When you - you got the first orientation tool or camera from where? - - - . From Romteck.
Okay, so - - - ? - - - . They had to use this stuff to calibrate - - -.
All right? - - - and fix. But we had a problem with the calibration so the - the Helmholtz coil was probably improved or was improved several times.
Okay. But just before you go there, so the - the things that Boreline made and provided to Romteck you're saying that they would - they were all provided before but you got the first camera, that's the Borecam back from Romteck. What - what sort of date would that have been? - - - . They started giving us stuff in 2014 but we had to send it back because it wasn't done properly, like the calibration was miles out so we couldn't use it.
All right, but - but the - but you started getting things from them in 2014? - - - 2014, early - late 2014, I think we got the first [proto] types of the Ori tools …
…
Just to make sure we're not speaking at cross purposes, I'll just say what I'm talking about is the very first item you got back from Romteck, the first camera or the first orientation tool you got back from Romteck? - - - . Working or not working?
Not - not working, just the very first? - - - . Okay, that would be in 2014, very late 2014.
Okay, and how - how late in 2014? - - - December, November, maybe.
All right? - - -. But very late in the year.
All right, and you're saying that the items that Boreline provided to Romteck would all have been provided before that, is that what you're saying? - - -. A version of the item, yes.
…
Mr Kleyn then went on to give evidence about other items provided to Old Romteck by Boreline. This included Old Romteck ordering the Helmholtz coil, in respect of which Mr Kleyn said 'I think we paid for it'. He also referred to Boreline providing or paying for other items, including the dual gearbox, step motors, cables and step motor drives. He said that Boreline would build the mechanism that holds it altogether, and they (Old Romteck) would do the electronics to make it operate.[79]
[79] ts 270.
In essence, Mr Kleyn's evidence, which I accept, was to the effect that Boreline provided or made the mechanical parts, the hardware, and Old Romteck developed or made the electronic components, the printed circuit boards, firmware, software and related files, documents and design notes. This is consistent with what was contemplated by the terms of the Technology Development Agreement, and the equipment and services set out in the Quotation, which I consider further later in these reasons.
Boreline also provided to Old Romteck what is described as the 'golden sample of the Borecam'.[80] Mr Kleyn explained that they called it golden because it was a perfect camera.[81]
Evidence of Stephen Ronald Merralls
[80] Item C.13 in exhibit 1.
[81] ts 273.
I found Mr Merralls' evidence in relation to technical matters concerning the design and operation of the Borecam and Corecam reliable. He gave very detailed descriptions and explanations, which indicated that he had a good knowledge, understanding and recollection of those matters. However, I did not find Mr Merralls to be a wholly reliable witness. He had a poor recollection of some events, which he put down to his age and the time that has passed since the events he was being asked about, yet he remembered other matters in detail.
There were a number of matters put to him in cross‑examination relating to disputes between Boreline and Old Romteck relating to outstanding accounts, and other matters concerning his communications with the receivers, that he said he did not recall or remember or that he said he was not involved in. However, when he was taken to contemporaneous documents concerning those matters, they disclosed he was involved and a contrary factual position to that advanced by him.
There were also inconsistencies in the accounts he gave in his own evidence and between his evidence and that of Mr Kleyn, particularly in relation to when and the circumstances in which the Appendix was prepared. I refer to this in further detail later in these reasons.
Given the passage of time between the events the subject of the dispute in this action and when Mr Merralls gave evidence about them, it is not surprising that his recollection about certain matters was not particularly good. As such, though I accept some of his evidence and have taken that evidence into account, I have placed significantly more weight upon contemporaneous documents, where available, and upon inferences that can be properly drawn from that evidence.
However, as I have said, on this issue relating to the Paragraph 5 items there is no contemporaneous documentation that evidences what items were provided to Old Romteck and when. Mr Kleyn and Mr Merralls were the only witnesses who gave evidence about those matters.
It is not necessary to, and I do not repeat all of Mr Merralls' evidence. I accept Mr Merralls' evidence in response to questions asked of him as to which of the items listed in exhibit 1 were provided by Boreline to Old Romteck. In relation to the Paragraph 5 items, I accept his evidence to the effect that each of the following items were provided to Old Romteck by Boreline.
1.item B.1 - dual gearbox unit complete with stepper motors;[82]
2.item B.7 - adaptor for mounting the Corecam units;[83]
3.item B.10 - specific manufactured tools for the clamping and holding of the Corecam units, removal of end plugs and drill guide for end plugs;[84] and
4.item C.11 - specific manufactured tools for the clamping and holding of the Borecam units with spanners for the dismantling of the Borecam tube.[85]
[82] ts 444.
[83] ts 444.
[84] ts 445.
[85] ts 445.
This is also largely consistent with Mr Kleyn's evidence as to items Boreline made or provided to Old Romteck. Though Mr Kleyn referred to additional items.
In relation to the balance of the Paragraph 5 items, Mr Merralls' evidence was that item B.3, described in exhibit 1 as 'Stepper motor control unit' was developed by 'Romteck', which I take to be Old Romteck. He did not say anything about the mechanical parts of the control unit, which Boreline claims it provided to Old Romteck. Nor did he give any evidence to the effect that the electrical switching control box of item C.2, described as 'Helmholz coils control unit' was provided to Old Romteck by Boreline, as claimed. However, I infer, based on Mr Nicky Kleyn's evidence, that those items were made by Boreline's engineer and provided to Old Romteck by Boreline.
Findings in relation to the Paragraph 5 items
Though not expressed in the clearest of terms, I am satisfied on the balance of probabilities on Mr Kleyn's evidence and Mr Merralls' evidence that Boreline provided each of the Paragraph 5 items to Old Romtek for the purpose of it undertaking work under the Technology Development Agreement. I am also satisfied that Boreline provided to Old Romteck item C.13, described as the golden sample of the Borecam. I infer that has been included in the Paragraph 6 items in error, as this was not something acquired or created by Old Romteck.
Though it is unclear on the evidence of both Mr Nicky Kleyn and Mr Merralls as to precisely when those items were provided to Old Romteck by Boreline, I find that it was before the appointment of receivers to Old Romteck. I infer that those items were provided at around the time or shortly after the parties entered into the Technology Development Agreement on 24 October 2012. This is because those items were required to allow Old Romteck to undertake the development work which, based on the contemporaneous documents, I find was undertaken between about 24 October 2012 and 29 February 2013,[86] and in any event by the time the receivers were appointed.
[86] See exhibit 3/21, 23, 24, 25, 26, 33, 34.
There is nothing in the terms of the Technology Development Agreement to suggest that property in those items was to pass to Old Romteck. I accept Boreline's submission to the effect that those items were bailed to Old Romteck by Boreline for the purpose of Old Romteck undertaking work under the Technology Development Agreement, and subsequent production of Borecam and Corecam units.
I am also satisfied, for reasons I outline later, that Boreline was entitled to possession of the Paragraph 5 items at the time it made its demands of Romteck Australia for their return, and that those items were in Romteck Australia's possession, having been used by it to manufacture Borecams and Corecams for Boreline.
The Paragraph 6 items
Boreline's submissions
Boreline submits, in effect, that under cl 5 of the Technology Development Agreement it became entitled to the rights, title and interest in the Paragraph 6 items, which it contends were acquired or created by Old Romteck as part of the project to redesign and develop the downhole survey system.
It refers in particular to the first sentence of cl 5, which provides:
The Developer hereby assigns to the Customer its entire right, title and interest in the Product, Design Specification, Ancillary Documentation, notes, source codes, software drawings, designs, procedures, discoveries and inventions created pursuant to the Agreement, including, but not limited to, patents, copyrights, trade secrets and any other Intellectual Property right, whether in Australia or abroad.
Boreline also relies on the following definitions:
1.'Product', as set out above, which is defined to include the downhole equipment hardware, the downhole software, and includes all of the equipment and services set out and described in the Quotation. The Quotation sets out items to be supplied by the customer, including 'Supply of Helmholtz coil magnetic calibration apparatus - reimbursement of cost to procure';
2.'the Product' in par B of the Background, in respect of which it says that though this further definition of 'the Product' is considerably more general than that in cl 15, it is consistent with that definition and does not introduce any ambiguity or uncertainty as to its meaning;[87] and
3.'Design Specification' and 'Ancillary Documentation', also set out above.
[87] Boreline's closing submissions, par 21.
It was submitted on behalf of Boreline that, between them, those defined terms cover all of the Equipment, and:
1.in respect of items that were acquired or created by Old Romteck, clause 5 vested property in those items in Boreline when they were acquired or created; and
2.confirmed that property in items supplied or to be supplied by Boreline to Old Romteck (the Paragraph 5 items) was to remain with Boreline.[88]
Romteck Australia's submissions
[88] Boreline's closing submissions, par 33; ts 714 - ts 715.
Romteck Australia contends that, on its proper construction, any assignment of 'the right, title and interest in the Product' under cl 5 of the Technology Development Agreement was conditional upon payment in full being made by Boreline.[89]
[89] Romteck Australia's opening submissions, pars 72 - 74; ts 237; Romteck Australia's closing submissions, pars 13 - 14.
It also relies upon the retention of title clause in the standard terms and conditions attached to the Quotation, which it asserts was incorporated into the Technology Development Agreement, and provides:[90]
[90] Exhibit 3/6; Defence par 4; Romteck Australia's closing submissions, pars 8 - 13; ts 161 - ts 162, ts 237.
Property in Goods
It is a fundamental condition of any order accepted by Romteck Pty Ltd that property in the Goods does not pass until full payment of the Goods has been received and passed for payment by ROMTECK's bank until such time as the bank has accepted the payment, property and the Goods remains with ROMTECK irrespective of the location of the Goods.
Romteck Australia says that Boreline did not make payment in full and, as such, did not acquire any right, title or interest in the Product (any of the Paragraph 6 items). It submits that Boreline took the position that the Product had not been developed to its satisfaction and it was not required to and did not pay the full amount owing. The evidence it relies on in support is set out in its written closing submissions.[91]
Boreline's submissions in response
[91] See Romteck Australia's closing submissions, pars 14 - 25.
In summary, Boreline disputes:
1.Romteck Australia's contention to the effect that any assignment of the 'right, title and interest in the Product' under cl 5 of the Technology Development Agreement was conditional upon payment in full by Boreline for the Product.[92]
2.That the retention of title provision in, or any part of, the Quotation was incorporated into the Technology Development Agreement, and submitted that such incorporation would be inconsistent with the express terms of the entire agreement provision in cl 14(h) of the Technology Development Agreement.[93] It submits, in effect, that there is insufficient evidence before the court to support a finding that Boreline did not pay the amounts it was bound to pay to Old Romteck[94] in respect of the project the subject of the Technology Development Agreement.
The proper construction of the Technology Development Agreement
[92] Boreline's closing submissions, pars 24 - 25.
[93] Boreline's closing submissions, pars 26 - 27 and the evidence referred to.
[94] Boreline's closing submissions, par 28.
It is well settled that a commercial contract is to be construed objectively based on the understanding of a reasonable person in the position of the parties to it by reference to the contract as a whole, to its text, context and its purpose or objects.[95] Unless the contrary intention is indicated, the court is entitled to apply a businesslike interpretation and prefer a construction that makes commercial sense and will avoid consequences which appear to be capricious, unreasonable, inconvenient or unjust.[96]
[95] Electricity Generation Corporation t/as Verve Energy v Woodside Energy Ltd [2014] HCA 7; (2014) 251 CLR 640 [35]; Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd Wright Prospecting Pty Ltd v Mount Bruce Mining Pty Ltd [2015] HCA 37; (2015) 256 CLR 104 [46] - [53]; JKC Australia LNG Pty Ltd v CH2M Hill Companies Ltd [No 2] [2020] WASCA 112 [67] - [72] and the authorities referred to.
[96] See Australian Broadcasting Commission v Australasian Performing Right Association Ltd (1973) 129 CLR 99, 109; Zhu v The Treasurer of the State of New South Wales [2004] HCA 56; (2004) 218 CLR 530, [82]; Electricity Generation Corporation t/as Verve Energy v Woodside Energy Ltd [35].
It is not permissible to consider extrinsic evidence to subtract from, add to, vary or contradict the language of a written contract.[97] However, resort to extrinsic circumstances and things external to the contract may be necessary to identify its purpose and in determining the proper construction where there is a constructional choice.[98]
[97] Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 347, 348, 352; see also Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; (2004) 219 CLR 165 [35] - [36].
[98] Black Box Control Pty Ltd v TerraVision Pty Ltd [2016] WASCA 219 [42(4)]; Simic v New South Wales Land and Housing Corporation [2016] HCA 47; (2016) 260 CLR 85 [18].
In Black Box Control Pty Ltd v TerraVision Pty Ltd,[99] the Court of Appeal set out the principles that must be applied in respect of extrinsic evidence:
(1)If an expression in a contract is unambiguous and susceptible of only one meaning, evidence of surrounding circumstances cannot be adduced to contradict its plain meaning.
(2)To the extent that a contract, document or statutory provision is referred to, expressly or impliedly, in an instrument, that contract, document or statutory provision can be considered in construing the instrument, without any need for ambiguity or uncertainty of meaning.
(3)There are important limits on the extent to which evidence of surrounding circumstances (when admissible) can influence the proper construction of an instrument. Reliance on surrounding circumstances must be tempered by loyalty to the text of the instrument. Reference to background facts is not a licence to ignore or rewrite the text. The search is for the meaning of what the parties said in the instrument, not what the parties meant to say.
(4)There are also limits on the kind of evidence which is admissible as background to the construction of a contract, and the purposes for which it is admissible. Insofar as such evidence establishes objective background facts known to the parties or the genesis, purpose or objective of the relevant transaction, it is admissible. Insofar as it consists of statements and actions of the parties reflecting their actual intentions and expectations it is inadmissible. Such statements reveal the terms of the contract which the parties intended or hoped to make, and which are superseded by, or merged into, the contract.
[99] Black Box Control Pty Ltd v TerraVision Pty Ltd [42].
Applying those principles, I accept Boreline's submission that the Quotation, which is expressly referred to in the definition of Product in the Technology Development Agreement, may be considered in construing the Technology Development Agreement, or certain of its terms. However, the terms of the Quotation, including the retention of title clause, are not incorporated as terms of the Technology Development Agreement.
Though not an operative part of the Technology Development Agreement, the Background provides context to the agreement between Boreline and Old Romteck. It is also consistent with the evidence of Mr Nicky Kleyn and Mr Stephen Merralls, which I accept, to the effect that Boreline engaged the services of Old Romteck to design and develop an improved downhole survey system using Boreline's existing orientation and camera probe equipment.[100]
[100] ts 258 - ts 261, ts 432 - ts 441.
The Technology Development Agreement sets out the terms upon which it was agreed that Old Romteck was to design and develop the improved downhole survey system, referred to in the agreement as the 'Product', for Boreline. The Product, as defined, included all aspects of the system, including the downhole equipment hardware, software and all related design notes and documentation as described in the Quotation. It did not include the 'production' items referred to in the Quotation, which were to be produced as part of a subsequent manufacturing phase, once all the development and testing of the prototypes had been completed.
The development was to be completed by Old Romteck in stages as set out in cl 3. Clause 3 also provides that Old Romteck is responsible for the supply of all electronic components, printed circuit boards, batteries and sundry items up to and including the Stage Five prototypes as part of the scope of supply. As such, those items were to be acquired or created by Old Romteck and supplied to Boreline as part of the development project.
Clause 3 of the Technology Development Agreement also provides that Boreline is responsible for the manufacture and supply of support hardware, brass/plastic enclosures during the course of development and the supply of the initial calibration rig. The Quotation also set out equipment to be supplied by the customer, which included, amongst the other things stated, 'brass enclosures for all downhole equipment' and 'Helmholtz coil magnetic calibration apparatus'.
Clause 5 provides:
5.Intellectual Property Rights and other Property
The Developer hereby assigns to the Customer its entire right, title and interest in the Product, Design Specification, Ancillary Documentation, notes, source codes, software drawings, designs, procedures, discoveries and inventions created pursuant to the Agreement, including, but not limited to, patents, copyrights, trade secrets and any other Intellectual Property right, whether in Australia or abroad.
…
Though the word 'assigns' is used in cl 5, it is clear, having regard to the agreement as a whole and the purpose of the agreement, that the intention of the parties was that ownership of the things stated in cl 5 was to pass to Boreline, as the customer for whom the improved downhole survey system was to be developed by Old Romteck. That included all aspects of the system, including the downhole equipment hardware (which became known and referred to as the Borecam and Corecam and associated parts, once developed).
Having regard to items expressly included in the defined terms, Design Specification and Ancillary Documentation and the other items expressly referred to in cl 5, this included printed circuit board designs and layouts, schematic diagrams, source code, operating code, firmware and software for each device, and all related design notes and documentation. Having regard to the definition of 'Product' and the equipment and services set out and described in the Quotation, it included the design and development of the calibration and testing environment, procedures and associated documentation, amongst the other matters described.
The transfer of the right, title and interest to Boreline provided for in cl 5 is not expressly stated to be on condition of payment and there is no express term incorporating the retention of title clause in the Quotation. Nor is there any other provision to the effect that property in 'goods' does not pass until full payment, or any reference to 'goods' in the Technology Development Agreement.
M.Conclusion and orders
For the reasons I have outlined, I find that Boreline is, and was at the time of the demands, entitled to possession of the following items of the Equipment:
1.the Paragraph 5 items, namely:
(a)item B.1 - dual gearbox unit complete with stepper motors;
(b)the mechanical parts of item B.3, described as stepper motor control unit;
(c)item B.7 - adaptor for mounting the Corecam units;
(d)item B.10 - specific manufactured tools for the clamping and holding of the Corecam units, removal of end plugs and drill guide for end plugs;
(e)the electrical switching control box of item C.2, described as Helmholtz coils control unit; and
(f)item C.11 - specific manufactured tools for the clamping and holding of the Borecam units with spanners for the dismantling of the Borecam tube; and
2.the following Paragraph 6 items:
For the manufacture of the Corecam and Borecam devices:
(a)item A.1 - schematic diagrams, source code and operating code;
(b)item A.2 - Gerber files for the PCBs;
(c)item A.3 - development design notes and all documentation relating to the devices;
(d)item A.4 - assembly procedures for fitting of the PCBs to the Boreline supplied enclosures;
For the calibration of the Corecam and Borecam accelerometers:
(e)item B.2 - cables for the stepper motor drives;
(f)item B.3 - stepper motor control unit;
(g)item B.4 - Gerber files for the PCBs incorporated in the stepper motor control unit;
(h)item B.5 - development design notes and all documentation relating to the stepper motor control unit;
(i)item B.6 - power supplies;
For the calibration of the Borecam magnetometers:
(j)item C.1 - Helmholtz coils magnetometer calibration unit;
(k)item C.2 - Helmholz coils control unit;
(l)item C.3 - schematic diagram of the Helmholtz coil control unit;
(m)item C.4 - Gerber files for the PCBs incorporated in the Helmholtz coil control unit;
(n)item C.5 - development design notes and all documentation relating to the Helmholtz control unit;
(o)item C.7 - Borecam holding and support unit within the Helmholtz coils;
(p)item C.8 - 5 x Borecam calibration indexing collars;
(q)item C.9 - cables for connection to the Helmholtz coils;
(r)item C.10 - power supply and spare power supply; and
(s)item C.13 - golden sample of the Borecam
Boreline has established and succeeds in its claim in detinue against Romteck Australia and in relation to each of those items of the Equipment, and is entitled to an order for delivery up of those items.
On the evidence before me, I am not satisfied on the balance of probabilities that Boreline is, and was at the time of the demands, entitled to possession of the other items of the Equipment. Boreline's claim in detinue in relation to those items of the Equipment fails.
I will hear from counsel as to the final form of orders and in relation to costs.
I certify that the preceding paragraph(s) comprise the reasons for decision of the District Court of Western Australia.
LDB
Associate to Judge Russell
24 MARCH 2023
JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
IN CIVIL
LOCATION: PERTH
CITATION: BORELINE PTY LTD -v- ROMTECK AUSTRALIA PTY LTD [No 2] [2023] WADC 33 (S)
CORAM: RUSSELL DCJ
HEARD: 19 JUNE 2023
DELIVERED : Ex tempore
PUBLISHED : 23 JUNE 2023
FILE NO/S: CIV 4462 of 2021
BETWEEN: BORELINE PTY LTD
Plaintiff
AND
ROMTECK AUSTRALIA PTY LTD
Defendant
Catchwords:
Costs - Application for indemnity costs - Calderbank offer - Whether rejection of Calderbank offer was unreasonable - Rejection of Calderbank offer not reasonable - Turns on own fact
Legislation:
District Court of Western Australia Act 1969 (WA), s 64(3)
Rules of the Supreme Court 1971 (WA), O 66 r 1(1), O 66 r 1(3)
Supreme Court Act 1935 (WA), s 37
Result:
Defendant pay plaintiff's costs of action to be taxed if not agreed
Plaintiff's application for indemnity costs dismissed
Representation:
Counsel:
| Plaintiff | : | Mr D W Thompson |
| Defendant | : | Mr J P Cook |
Solicitors:
| Plaintiff | : | Results Legal |
| Defendant | : | Mendelawitz Morton |
Case(s) referred to in decision(s):
Boreline Pty Ltd v Romteck Australia Pty Ltd [No 2] [2023] WADC 33
Calderbank v Calderbank [1975] 3 All ER 333
Eccles v Koolan Iron Ore Pty Ltd [No 3] [2013] WASC 418 (S)
Ford Motor Company of Australia Ltd v Lo Presti [2009] WASCA 115; (2009) 41 WAR 1
Strzelecki Holdings Pty Ltd v Jorgensen [2019] WASCA 96; (2019) 54 WAR 388
RUSSELL DCJ:
[The judgment in this matter was delivered ex tempore on 19 June 2023. These reasons are edited from the transcript with minor amendments to grammar and with the insertion of case references.]
Introduction
On 24 March 2023, I delivered my reserved decision following the trial of this action, which was heard on 8 - 11 March and 14 April 2022.
The background to this matter, the evidence adduced and arguments advanced at trial, and my reasons for decision are outlined in Boreline Pty Ltd v Romteck Australia Pty Ltd [No 2] [2023] WADC 33. These reasons in relation to the costs of the action, should be read in conjunction with those reasons.
I allowed the plaintiff's claim in detinue in part and, on 31 March 2023, made final orders, which included an order for delivery up by the defendant to the plaintiff of the property described in items A.1 to A.4, B.1 to B.7, B.10, C.1 to C.5, C.7 to C.11 and C.13 of Schedule A to the amended statement of claim filed on 23 February 2022.
Boreline's claim in detinue was unsuccessful in relation to the balance of the items listed in Schedule A to the amended statement of claim, being the property described in items B.8, B.9, C.6 and C.12.
The parties have been unable to agree orders as to costs. Each party has filed competing minutes of proposed orders and written submissions. I heard oral submissions on behalf of each of the plaintiff and defendant today, 19 June 2023, as to the orders each contend ought to be made as to the costs of the action.
Orders sought in relation to costs of the action
The plaintiff seeks an order that the defendant pay the plaintiff's costs of the action to be taxed if not agreed, with the costs incurred from and including 23 December 2021 to be paid on an indemnity basis.
In support of its application for indemnity costs, the plaintiff relies on an affidavit affirmed by Charlotte Emily Evans on 31 March 2023, which attaches:
(a)a letter dated 22 December 2021 marked 'Without prejudice save as to costs' sent by email from the plaintiff's solicitors to the defendant's solicitors on that date (Attachment CEE-1); and
(b)a letter dated 19 January 2022, marked 'Without Prejudice (save as to costs)' sent by email from the defendant's solicitors to the plaintiff's solicitors on that date (Attachment CEE-2).
I do not repeat the content of those letters in these reasons.
In essence, by its solicitor's letter dated 22 December 2021, the plaintiff made an offer of compromise, stated to be made in accordance with the principles in Calderbank v Calderbank,[205] which offer was open for acceptance until 10 January 2022. The plaintiff offered to settle its claim on the basis set out in that letter, namely that:
1.The defendant deliver up the Equipment as defined in the proceeding as the items in Schedule A of the writ of summons within seven days of acceptance of the offer.
2.Each party bear their own costs.
3.The plaintiff will forego any claim for losses against the defendant.
[205] Calderbank v Calderbank [1975] 3 All ER 333.
By its solicitor's letter dated 19 January 2022, the defendant noted that the plaintiff's offer had lapsed and stated, if it were open, it would be rejected and set out the reasons why, in the defendant's view, the plaintiff would not succeed in its claim. The defendant asserted ownership of and title to the Equipment and made a counteroffer to the effect that the defendant would convey title to the Equipment to the plaintiff for $500,000 plus GST, and the action be dismissed with no order as to costs.
The defendant opposes the plaintiff's application for costs and, for the reasons submitted on behalf of the defendant, says there should be no order as to costs.
Further, the defendant submits that, if the court is minded to order costs in favour of the plaintiff, for the reasons outlined in the defendant's submissions, it would not be appropriate for the court to exercise its discretion to award costs on an indemnity basis, and the plaintiff should not recover all of its costs.
The defendant submits that the plaintiff's alternative case, that there was a further agreement or estoppel, was not made out, consumed significant resources of the parties and the court, and significantly distracted from the ultimate issue. As such the defendant submits, in effect, that there should be an apportionment under O 66 r (1)(3) of the Rules of the Supreme Court 1971 (WA) (RSC).
Though I do not repeat the parties' submissions or refer to them in any detail in these brief reasons for my decision in relation to costs, I have considered them, and the relevant authorities, in detail.
Relevant principles relating to costs
The relevant principles relating to costs are well established and are not in dispute. I refer to and respectfully adopt the summary of those principles, including in relation to apportionment of costs where a party does not succeed on all issues litigated, as set out in the judgment of the Court of Appeal in Strzelecki Holdings Pty Ltd v Jorgensen.[206]
[206] Strzelecki Holdings Pty Ltd v Jorgensen [2019] WASCA 96; (2019) 54 WAR 388 [48] - [52] (Murphy, Mitchell & Pritchard JJA) (Strzelecki v Jorgensen).
It is uncontroversial that a District Court judge has the same power in relation to the payment of costs as a judge of the Supreme Court.[207]
[207] District Court of Western Australia Act 1969 (WA) (DCA) s 64(3); Supreme Court Act 1935 (WA), s 37.
Without limiting the court's wide discretion as to costs, the starting point in relation to an award of costs is that costs will usually follow the event so that generally the court will order that the successful party to any action or matter recover their costs, as provided by O 66 r 1(1) of the RSC.
Under O 66 r 1(3) of the RSC, where a party, though generally successful in an action has, by the introduction of some issue or issues on which it has failed, increased the costs, the court may order such party to pay the costs of such issue or issues.
As stated in the decision of the Court of Appeal in Strzelecki v Jorgensen:[208]
… The Court may depart from the general rule that costs follow the event and modify a costs order to take into account matters such as any unreasonable conduct of a generally successful party, or to the failure of that party on one or more specific issues. The exercise of the discretion in that way is recognised by a number of rules in the RSC, together with the practice of the Court, and authority. So, for example, if the Court is of the opinion that the conduct of a successful party - either before or after the commencement of the litigation - has resulted in costs being unnecessarily or unreasonably incurred, the Court may deprive that party of costs, either wholly or in part, and it may further order that party to pay the costs of an unsuccessful party, either wholly or in part. …
(footnotes omitted)
[208] Strzelecki v Jorgensen [50].
However, as held by the Court of Appeal in Strzelecki v Jorgensen:[209]
… It is well-recognised that an order that a successful party recover only a portion of its costs, where it has not been wholly successful, should not be made as a matter of course, for at least two reasons. First, it is often the case that a successful party will not succeed on every issue raised. Secondly, to attempt, in every case, an analysis of which party was successful on which issue would add uncertainty and complexity to the outcome of litigation, and add to the time and cost of costs arguments. Consequently, the power to apportion costs in this way should only be exercised where there are discrete and severable issues on which the generally successful party failed, and which added to the cost of the proceedings in a significant and readily discernible way. …
(footnotes omitted)
[209] Strzelecki v Jorgensen [51].
I am not satisfied on the evidence before me that there has been any unreasonable conduct on the part of the plaintiff, either before or after the commencement of the litigation or in the course of trial, that has resulted in costs being unnecessarily and unreasonably incurred, or any other basis upon which it ought to be deprived of its costs of the action.
Although the plaintiff was not wholly successful in its claim in detinue in relation to all of the items of the Equipment set out in Schedule A, the way in which the trial was conducted was such that it is not possible to separate out or apportion time spent in relation to the part of the plaintiff's claim it has not succeeded on. There was no particular time or costs that, in my view, could be said to have been incurred specifically in relation to the four items of the Equipment that I have found Boreline is not entitled to possession of, and to an order for delivery up in relation to.
A similar issue arises in relation to the defendant's submission to the effect that costs have been unnecessarily incurred because of the plaintiff's alternative claims, which have failed. The same could be said of the defences raised by the defendant in relation to the Personal Property Securities Act 2009 (Cth), the PPS lease issue and that the Equipment formed part of the assets acquired by Romteck from the receivers of Old Romteck. Those matters also took up a significant amount of time and, no doubt, costs.
It is not readily discernible or possible to apportion the amount of time and costs applicable specifically to the plaintiff's alternative case concerning the alleged further agreement and estoppel, nor the defences raised by the defendant to which I have referred.
I am not persuaded this is a case in which there ought to be any apportionment. Nor am I persuaded that there should be no order as to costs in relation to the plaintiff's claim, on which it has largely succeeded.
Though it has been submitted that the value of the Equipment the subject of the claim largely lies in the items of Equipment the plaintiff did not succeed on, there is no evidence before me from which I could draw such inference or reach such a conclusion.
The plaintiff is clearly the successful party in the action, having largely succeeded in its claim in detinue and in obtaining the relief sought - an order for delivery up of all but four of the items the subject of its claim.
In all the circumstances, I see no good reason to depart from the usual rule relating to costs that costs should follow the event, and the unsuccessful party pay the successful party's costs of the action, to be taxed if not agreed.
That leaves the issue of the basis upon which such costs should be taxed and paid.
Is the plaintiff entitled to costs on an indemnity basis from 23 December 2021?
An indemnity costs order, if made, would make the paying party (in this case the defendant) liable from a certain date (23 December 2021) to pay the costs that the other party has incurred, except insofar as those costs are of an unreasonable amount or have been unreasonably incurred.
It is well established that an order for indemnity costs may be justified by the rejection of an offer of compromise made in accordance with the principles articulated in Calderbank v Calderbank.
The relevant principles which govern the exercise of the court's discretion to make an award for indemnity costs in the context of a Calderbank offer are well settled. They were set out by Buss JA (as his Honour the President then was) in Ford Motor Company of Australia Ltd v Lo Presti.[210] Those principles have been cited and applied in numerous subsequent decisions, including in the supplementary decision of Le Miere J in Eccles v Koolan Iron Ore Pty Ltd [No 3],[211] referred to by the parties before me.
[210] Ford Motor Company of Australia Ltd v Lo Presti [2009] WASCA 115; (2009) 41 WAR 1 [16] - [32] (Buss & Wheeler JJA agreeing).
[211] Eccles v Koolan Iron Ore Pty Ltd [No 3] [2013] WASC 418 (S).
I adopt and apply those principles in determining the question of indemnity costs. I do not repeat them in these reasons, they are well known, and are not in dispute.
The Court of Appeal reiterated in Strzelecki v Jorgensen that Calderbank offers must be assessed without the benefit of hindsight, and having regard to the strength of the parties' cases as they then stood - at the time of the offer.[212] Further, the court observed that:[213]
It is well-established that a party's erroneous prediction about the prospects of litigation, on the basis of which they reject a Calderbank offer, may not be regarded as unreasonable if that party was not, at the time, and for good reason, in possession of sufficient information to make a proper assessment of its prospects …
[212] Strzelecki v Jorgensen [87].
[213] Strzelecki v Jorgensen [88].
The plaintiff's Calderbank offer was made on 22 December 2021 and remained open for acceptance until 10 January 2022. The defendant responded to the offer on 19 January 2022, after the offer had lapsed, and made a counteroffer, which I infer was not accepted.
The defendant's solicitors stated in their letter the reasons why the offer would have been rejected had it still been open for acceptance. Though some of the reasons why it was contended the plaintiff's claim would fail were not ultimately made out, I am not satisfied that in the circumstances of this case, there are clear grounds that the defendant's rejection of the plaintiff's offer was unreasonable at the time.
Given the nature of the claim, the offer made, the time at which it was made (including the time the defendant was allowed to consider it with the intervening holiday period), the circumstances in which the defendant came to be in possession of the Equipment, the information available to the defendant at the time of the offer, and the ultimate result in the action as compared to the compromise offered, I am not satisfied it is appropriate, in the circumstances of this case, to make an order that the defendant pay the plaintiff's costs of the action from 23 December 2021 on an indemnity basis.
Though the plaintiff, having been largely successful in its claim, is entitled to its costs of the action, to be taxed on the usual basis, if not agreed. That is, on a party/party basis.
Orders
Subject to hearing from the parties as to the form of the final orders, I will therefore make orders to the following effect in relation to the costs of the action:
1.The defendant to pay the plaintiff's costs of the action to be taxed if not agreed.
2.The plaintiff's application for indemnity costs is dismissed.
I will also hear from the parties as to whether any order needs to be made in relation to any reserved costs and as to the costs of, and incidental to, the hearing as to the costs of the action.
I certify that the preceding paragraph(s) comprise the reasons for decision of the District Court of Western Australia.
LDB
Associate to Judge Russell
22 JUNE 2023
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