Intercast & Forge Pty Ltd v Prodata Solutions Pty Ltd - [2022] SADC 151

District Court of South Australia
(Civil)
INTERCAST & FORGE PTY LTD v PRODATA SOLUTIONS PTY LTD
[2022] SADC 151
Judgment of his Honour Judge Burnett
16 December 2022
CONTRACTS - GENERAL CONTRACTUAL PRINCIPLES - CONSTRUCTION AND INTERPRETATION OF CONTRACTS - IMPLIED TERMS
CONTRACTS - GENERAL CONTRACTUAL PRINCIPLES - DISCHARGE, BREACH AND DEFENCES TO ACTION FOR BREACH
ESTOPPEL - ESTOPPEL BY CONDUCT
The applicant and the respondent entered into a written agreement in 2007 (the Agreement) pursuant to which the respondent agreed to provide software services to the applicant. The term of the Agreement was for a period of 12 months from the Commencement Date. It was also a term that the Agreement would be automatically renewed for a further period of 12 months on each anniversary of the Commencement Date unless terminated by either party in writing at least 7 days prior to the Commencement Date. The Commencement Date was 1 April of each respective year. The Agreement was renewed, without incident, until 2022.
The applicant claimed that the respondent had not given notice of the termination of the Agreement. The applicant submitted that the Agreement remained on foot and that the respondent was required to continue to provide the services under the Agreement at the prices specified in the Agreement. Alternatively, the applicant submitted that it was an implied term of the Agreement that the Agreement could only be terminated on reasonable notice. The applicant therefore submitted that any notice of termination of the Agreement (which it denied had been given) was invalid because it did not provide for a reasonable period of notice.
The respondent claimed that by various letters sent in February and March 2022 and a pop up message that appeared on the screens of users of the computer from 1 March 2022 that it had given notice to the applicant of the termination of the Agreement as from 31 March 2022. In the alternative, the respondent claimed that the applicant was estopped from denying that the Agreement was terminated or that the notice of termination was not adequate. The respondent submitted that as the Agreement had been terminated, the continued use of the software by the applicant was an infringement of the copyright in the software that was owned by the respondent.
Held
(1) The letters and pop up messages relied upon the respondent did not provide clear and unequivocal notice of the termination of the Agreement. Notice given pursuant to an agreement must express clearly and unequivocally the fact that it is intended to convey: Prudential Assurance Co Ltd v Health Minders Pty Ltd (1987) 9 NSWLR 673; Ballas v Theophilos (No 2) (1957) 98 CLR 193 applied. The notice must be construed objectively and in context. The recipient is to be credited with knowledge of the terms of the relevant agreement: Mannai Investment Co Ltd v Eagle Star Life Assurance Co Ltd [1997] AC 749; Lactos Fresh Pty Ltd v Finishing Services Pty Ltd [2006] FCA 219 applied.
(2) There was no estoppel precluding the applicant from denying the Agreement had been terminated. Conventional estoppel required a common assumption as to facts or law that was intended to govern the legal relationship between the parties: Outback Energy Hunter Pty Ltd v New Standard PEL 570 Pty Ltd [2018] SASC 8; Brackenridge v Bendigo and Adelaide Bank Limited [2021] SASCA 129 applied. There was no such common assumption. There was no representation by the applicant that could give rise to an assumption on the part of the respondent for the purpose of a promissory estoppel.
(3) The applicant’s submission that the Agreement could only be terminated on reasonable notice is rejected. The Agreement, upon renewal, was for a fixed period of 12 months: 195 Crown Street Pty Ltd v Hoare [1969] 1 NSWLR 193; Sina Holdings Ltd v Westpapc Banking Corporation [1966] 1 NZLR 1 applied. Accordingly, there was no basis to imply a term that termination could only be on reasonable notice. Such a term would be contrary to the express term that the contract is not renewed if terminated by either party in writing at least 7 days prior to a Commencement Date anniversary.
(4) Consequent upon the finding that the Agreement remained on foot, the respondent’s claim for breach of copyright did not require determination.
(5) A declaration should be made that the Agreement remained on foot and that the respondent was required to provide the software services to the applicant at the prices set out in the Agreement.
Copyright Act 1968 (Cth) s 13, s 21(5), s 31. s 32(2), s 35(2), s 35(6) and s 36(1), referred to.
Byrne v Australian Airlines Ltd (1995) 185 CLR 410; Heydon on Contract, JD Heydon 2019; McCelland v Northern Ireland General Health Services Board [1957] 1 WLR 594; Crawford Fitting Co v Sydney Valve Fittings Pty Ltd (1988) 14 NSWLR 438; BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266; Gallagher & ors v Pioneer Concrete (NSW) Pty Ltd (1993) 113 ALR 159; Prudential Assurance Co Ltd v Health Minders Pty Ltd (1987) 9 NSWLR 673; Ballas v Theophilos (No 2) (1957) 98 CLR 193; Australasian Performing Right Association Ltd v Metro on George Pty Ltd (2004) 210 ALR 244; Jong v Advanced Dental Services Pty Ltd [2019] NSWCA 318; MLW Technology v May [2005] VSCA 29; Etlis v New Age Pty Ltd Constructions (NSW) Pty Ltd [2005] NSWCA 165; McIntyre v Marshall [2004] NSWSC 412; Gibbins Thomson Pty Ltd v Council of City of Liverpool [2004] NSWSC 1172; Mannai Investment Co Ltd v Eagle Star Life Assurance Co Ltd [1997] AC 749; Lactos Fresh Pty Ltd v Finishing Services Pty Ltd [2006] FCA 219; Outback Energy Hunter Pty Ltd v New Standard Energy PEL 570 Pty Ltd [2018] SASC 8; Brackenridge v Bendigo and Adelaide Bank Limited [2021] SASCA 129; Republic of India v India Steamship Co Ltd (No 2) [1998] AC 878; Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387; University of London Press Ltd v University Tutorial Express Ltd [1916] 2 Ch 601; QAD Inc v Shepparton Partners Collective Operations Pty Ltd [2001] FCA 615; Coco v AN Clark (Engineers) Ltd (1969) RPC 41; Etna v Arif [1999] VSCA 99; [1999] 2 VR 353; Hart v McDonald (1910) 10 CLR 417; 195 Crown Street Pty Ltd v Hoare [1969] 1 NSWR 193; Sina Holdings Ltd v Westpac Banking Corporation [1996] 1 NZLR 1; Portland Marketing (International) Pty Ltd v Wulff (No 2) [2018] FCCCA 2506; Legione v Hateley (1983) 152 CLR 406; Heaps v Addison Wesley Longman [1999] NSWSC 1093, considered.

INTERCAST & FORGE PTY LTD v PRODATA SOLUTIONS PTY LTD
[2022] SADC 151
Civil
Introduction

The primary issue in these proceedings is whether the respondent, Prodata Solutions Pty Ltd (Prodata), validly terminated a written agreement that it had entered into with the applicant, Intercast & Forge Pty Ltd (Intercast), entitled “Custom Software Support Agreement” (the Agreement).
Prodata has provided technology services to Intercast since 2003 comprising two software applications named “Production System” or “Prodys” and “Despatch”.
The parties entered into the Agreement on 1 March 2007 to formalise their arrangement for the provision of that software. The Agreement provided that the “The Agreement will be automatically renewed for a further period of 12 months on each anniversary of the Commencement Date unless terminated by either party in writing at least 7 days prior to the Commencement Date Anniversary”.
The Agreement was renewed, without incident, from 2007 to 2022.
The parties agreed that the renewal date of the Agreement was varied to 1 April of each year, such that 1 April became the Commencement Date Anniversary for the purposes of the Agreement.
Prodata contends that it validly terminated the Agreement not less than seven days before the Agreement was automatically renewed on 1 April 2022. It says therefore that it is not required to continue to provide the software services. Intercast claims that Prodata did not validly terminate the Agreement and therefore the Agreement remains on foot and Prodata is required to continue to provide the services under the Agreement at the prices specified in the Agreement.
There are three subsidiary issues which also need to be determined. These subsidiary issues are:
·If Prodata has established that it gave notice of the termination of the Agreement, was that notice nevertheless invalid, as Intercast contends, because Prodata did not provide a reasonable period of notice of the proposed termination of the Agreement;
·If Prodata has not established that it validly terminated the Agreement, is Intercast nevertheless estopped from denying that the Agreement was terminated at the end of the 2021-2022 term (ie at 31 March 2022);
·If Prodata has validly terminated the Agreement, has Intercast breached the copyright of Prodata in the software and modifications, by its continued use of the Software. Alternatively or additionally, has Intercast breached the confidential information of Prodata by using the software after the termination of the Agreement. Both of these claims were made in the revised cross claim of Prodata. Prior to trial, the Court ordered that the question of liability on the cross claim be determined at this trial but that a separate trial be heard, if required, in relation to the quantum of the cross claim. Intercast does not seriously dispute that if the Agreement was validly terminated by Prodata, it is liable on the cross claim for breach of copyright, although when any breach occurred and the loss and damage arising from the breach remains in dispute and, if necessary, is to be determined in the later trial.
Course of the trial
Intercast called three witnesses at trial. Each of those witnesses gave their evidence in chief by way of affidavit or written witness statement. The topics dealt with by these witnesses concerned the nature of the business of Intercast, its business relationship with Prodata and the use of the software, and meetings and other communications with Prodata relating to the use of the software. None of this evidence was particularly contentious.
There is a dispute about the evidence insofar as it concerns meetings and other oral communications between the parties in about the 18 month period prior to 31 March 2022. Those communications are relevant and important in that they provide background to the context in which the relevant letters were sent by Prodata that are said to constitute notice of the termination of the Agreement. They are also relevant to the estoppel claim made by Prodata and whether there was a common assumption that the Agreement would expire on 31 March 2022.
Mr Brett Lawrence, the general manager of Intercast, gave evidence. He gave evidence that Intercast was a subsidiary of a company headquartered in France. He said that Intercast operated an iron foundry which supplied products to clients in the rail and water infrastructure industry, automotive industry and mining and industrial industries. The products were supplied by Intercast to specifications designed by the customers of Intercast. Mr Lawrence gave evidence that from about 1999, in the course of its business, Intercast used two software applications provided by Prodata. They were:
a. The Prodsys system which managed data to support the audit trail required by customers to prove process capability in the manufacture of products and also to assist problem solving within Intercast;
b. ICF Despatch which was developed to interface data from customer orders and the Prodsys data tables so as to provide customers with delivery dockets with all relevant data for the costing of the products and were then used by Intercast to create customer invoices.
Mr Lawrence described the Prodata software as being integral to the business of Intercast including being a vital part of its quality accreditation. He gave evidence of the adverse impact on the business of Intercast if it could not use the software.
Mr Lawrence also gave evidence about the communications leading up to 31 March 2022, being the date that the Agreement would expire if it has not been automatically renewed. I will deal with those communications during the course of my factual findings.
Mr Mark Mignone, the financial controller of Intercast, also gave evidence about the communications leading up to 31 March 2022. I will also deal with that evidence during the course of my factual findings.
Mr Victor Ivec, the IT manager of Intercast, also gave evidence about the same communications. He also gave evidence that the Prodsys and Despatch systems are an integral part of Intercast’s business and that it would take the best part of 12 months for a replacement system to be developed. He also gave evidence about the nature of the Prodsys and Despatch systems.
Prodata called one witness, its managing director, Mr David Mifsud whose evidence in chief was also given by way of affidavit. Mr Mifsud gave evidence about the development of the software for the Prodsys and Despatch systems by two employees of Prodata and the writing of the code for those systems. He also gave evidence about the history of this Agreement and its performance. Mr Mifsud gave evidence about the genesis of this dispute which occurred when Prodata came to the conclusion that in December 2017 a third party, South Australian Fire and Emergency Services (Safecom), had breached confidential information relating to the software by giving a third party access to the software. As a result of the breach, Prodata considered that it could not guarantee the security of its products. Mr Mifsud also gave evidence about the communications leading up to 31 March 2022. I will also deal with that evidence during the course of my factual findings.
Pleaded case of Prodata
As the Agreement is automatically renewed if notice of termination is not given, the appropriate starting point is to examine the pleaded case of Prodata as to why it alleges that the Agreement was terminated or Intercast is estopped from denying the termination of the Agreement.
As to the notice of termination, Prodata pleaded that the Agreement was terminated by way of:
a.      A letter from Mr Mifsud of Prodata to Mr Ivec of Intercast dated 4 January 2022 (but sent on 4 February 2022);
b.      A letter from Mr Mifsud of Prodata to Mr Ivec of Intercast dated 24 February 2022;
c.      The offering by Prodata to Intercast of a 1 month extension to the Agreement by letter and invoice dated 24 March 2022;
d.      The pop up screens that appeared to all users of the software on and from 1 March 2022 displaying an expiration date of 31 March 2022.
Prodata does not plead that the Agreement was terminated in any of the oral discussions that I refer to and which took place between the representatives of the parties. Such a plea would be contrary to the written terms of the Agreement which require that any notice or other communication made under the Agreement could be given by hand delivery, mail, email or facsimile. Oral advice is not sufficient.
That does not mean the oral discussions have no relevance. They may be used to provide the context in which the letters alleged to terminate the Agreement were sent and therefore assist in the construction of those letters. Alternatively, they may be used as part of the estoppel claim and in particular as to what assumptions and representations were made by the parties.
The estoppel case of Prodata relied upon communications between Prodata and Intercast in the period between December 2017 to 21 March 2022. Prodata pleaded that Intercast knew that the Agreement would be discontinued upon the expiry of the 2022 term and that any use of the Software would need to be subject to a new agreement (which would specify an increased price and include a waiver of liabilities arising from the third party breach).
Background facts
The Court makes the findings of fact set out below.
Intercast operated a foundry business which supplied products to clients in the rail and water infrastructure industry, automotive industry and mining and industrial industries. The products were supplied by Intercast to specifications designed by its clients.
Prodata operated a software business.
Intercast and Prodata had entered into agreements prior to 2007 pursuant to which Prodata supplied software services to Intercast.
On 1 March 2007, Intercast and Prodata entered into the Agreement pursuant to which Prodata agreed to provide Software Support Services for the Software Application. The Agreement contained the following terms that are relevant to the determination of this dispute (these terms are extracted from the Agreement):
Commencement and Term
·    This Agreement is for a period of 12 months from the Commencement Date shown in Schedule A.
·    The Agreement will be automatically renewed for a further period of 12 months on each anniversary of the Commencement Date unless terminated by either party in writing at least 7 days prior to a Commencement Date anniversary.
…
Fees and Payment
·    Notwithstanding any other provisions of this Agreement, we may increase the Annual Fee at anytime if the Software Valuation increases due to customisations to the Software Application requested by you from time to time. A pro-rata Annual Fee increment will be charged it [sic] such an increase comes into effect between anniversaries of the Agreement Date.
·    Notwithstanding any other provisions of this Agreement, we may increase the Software Valuation at each anniversary of the Agreement Date by an amount not greater than the increase in the Consumer Price Index since the last CPI adjustment of the Software Valuation.
·    We must provide 14 days notice in writing of any Annual Fee increase
…
Intellectual Property Rights
·    We retain all copyright and other intellectual property rights in works or materials we apply or produce in delivering the Services and all intellectual property rights with respect to such works or materials (and any copies, reproductions, adaptations, additions to, enhancements, alterations, modifications or translations made of such works or materials) vests in us from the moment of its creation.
·    We warrant that our provision of the Services will not infringe the intellectual property rights of any third party and we agree to indemnify you against any liability you may reasonably sustain if our provision of the Services infringes the intellectual property rights of any third party.
·    You must treat as confidential all information (other than information in the public domain) which we provide to you including (without limitation) information relating to our software and systems, our pricing and our business operations. You agree not to disclose such information to any other party without our prior written permission. You may only use such information and may only disclose this information to your employees to the extent necessary to give effect to this Agreement.
·    We must treat as confidential all information (other than information in the public domain) which you provide to us including (without limitation) information relating to your business operations. We agree not to disclose such information to any other party without your prior written permission. We may only use such information and may only disclose this information to the extent necessary to enable us to perform our obligations in accordance with this Agreement.
Warranties & Liability
·    Apart from the express warranties contained in this Agreement and subject to any warranties implied by law which cannot be excluded by agreement, all warranties with respect to the Services are hereby expressly excluded. We accept no liability for the provision of the Services, whether arising by reference to the provisions of this Agreement, implied terms, tort or otherwise howsoever. If circumstances arise where you are entitled to claim damages from us notwithstanding the other provisions of this Agreement, our liability to you for the aggregate of all such claims (regardless of the basis on which you are entitled to claim from us including, without limitation, negligence) is limited to the lessor of:
·The Service Fees received by us during the period following the date of the first event giving rise to your claim up to a maximum period of 6 months.
·If any warranty or condition is implied by the Trade Practices Act or other relevant legislation which may not be excluded then our liability for any breach of such an implied warranty is limited solely to the resupply of the relevant Service or payment to you of the cost of having the service provided again (at our option).
·    In no event will we be liable for any consequential damages (including without limitation loss of or damage to data, loss of profits, loss of savings and loss of revenue) even if we have been advised of the possibility of such damages.
Termination
·    By you – You may terminate this Agreement at any time by giving notice in writing.
·    By us – We may terminate this Agreement immediately by notice in writing to you in any of the following circumstances:
·You fail to fulfil your obligations under Clause □
·You use the Software Application in breach of the applicable Software Licence Agreement.
·You fail for at least 30 days to remedy a breach of this Agreement after receiving a written notice from us identifying the breach and requiring it to be remedied.
·You fail for at least 30 days to pay an amount that is due under this Agreement.
·You are affected by an event that reasonably indicates that there is a significant risk you will become unable to pay debts as they fall due. This includes but is not limited to:
·      a meeting or creditors being called or held;
·      the appointment, whether voluntary or otherwise, of an administrator, receiver or liquidator;
·      a declaration by you or other indication that you are about to cease carrying on business.
Other Provisions
·    Entire Agreement – this Agreement constitutes the entire Software Support Services Agreement between the parties and supersedes any prior Support Services Agreements, understandings and negotiations applicable to the Software Application.
·    Notices – Notices or other formal communications under this Agreement may be given by hand delivery, by mail or by email or facsimile transmission and will be deemed to be received:
·In the case of hand deliver, upon delivery;
·in the case of mail, three (3) business days after the date of posting the article; or
·in the case of email or facsimile, upon completion of transmission (except where transmission is completed after 5.00 pm on a business day, in which case receipt is deemed to occur at 9.00 am on the next business day).

The Commencement Date under the Agreement was stated to be 1 March 2007. Both parties agreed that the date upon which the Agreement was renewed had been changed from 1 March to 1 April. The parties are unable to identify when this change took place. For many years, invoices have been issued for the period from 1 April to 31 March. This agreed amendment meant that any notice terminating the Agreement was required to be sent in writing at least seven days before 1 April, that is on or before 24 March.
The Agreement was renewed each year without dispute until this year.
The parties had enjoyed a close commercial relationship.
In about December 2017, Mr Mifsud became aware that Safecom had gained access to confidential information relating to the software. This led to Prodata commencing legal proceedings in the Federal Court in December 2017 against Safecom which it believed was responsible for causing the loss of the confidential information.
Prodata was concerned that as a result of the breach of its confidential information, it could no longer guarantee the security of its system. Prodata was therefore concerned that it may suffer liability to a client in the event that the client suffered loss or damage arising from the security breach. That concern was not shared by Intercast. Intercast took the view that it could only suffer loss if a third party gained access to Intercast’s system. Prodata accepted that Intercast could only suffer loss in that way.
Mr Mifsud, on behalf of Prodata, kept Mr Ivec of Intercast informed at least in a general way about the progress of the Federal Court proceedings in telephone calls communications from December 2017 (or possibly from February 2018) to September 2020 (when the proceedings instituted by Prodata against Safecom were dismissed).
On 15 April 2020, Mr Mifsud sent a draft email to Mr Ivec in which he set out what he described as a limited offer to the majority of Prodata’s long term valued clients. The draft offer provided for the transfer of the intellectual property in the software from Prodata to Intercast for an upfront payment, the amount of which was not specified. The draft email also stated that the proposal mitigated the potential risk to Intercast from Prodata being sold and the potential for the new owner to change rates and or terms that may be unacceptable to Intercast.
On 21 April 2020, Mr Mifsud sent a further email to Mr Ivec in which he set out a proposal for Intercast to pay support and licence fees on a time and materials basis, based on a transfer of the intellectual property to Intercast for a sum to be agreed.
Mr Ivec responded to the proposals by indicating that Intercast could not justify buying the software as they had already paid for it to be developed.
By email dated 30 April 2020, Prodata sent an invoice pursuant to the Agreement in the sum of $36,300 for the supply of the software support services for the period from 1 April 2020 to 31 March 2021. That invoice was paid.
In September 2020, the Federal Court proceedings were dismissed because of the failure of Prodata to comply with procedural deadlines. There was no hearing on the merits. Prodata, by that time, did not have legal representation and was conducting the proceedings itself.
By letter dated 5 November 2020, Prodata advised Intercast that the Federal Court action had been dismissed and that Prodata could not stand behind the integrity of the software with the same confidence it previously had and were unable to warrant that the software was free from threat. The letter went on to state that Prodata was prepared to institute further proceedings in relation to the breach, but that it may require the support of their customers so that it could ensure the ongoing safety and security of the systems that it had provided.
Two observations should be made about the letter. First, it was written prior to the renewal of the Agreement on 1 April 2021. The matters raised in the letter did not, from Prodata’s perspective, prevent the renewal of the Agreement or cause Prodata to take action terminating the Agreement. Secondly, the letter clearly foreshadowed that Intercast, as well as other Prodata’s customers, may be asked to contribute to fund the proposed litigation. It does not say that funds will be used to pay an existing costs order of the earlier Federal Court proceedings that had been dismissed pursuant to which Prodata had a liability of about $1 million.
On 10 March 2021, Prodata issued an invoice for the renewal of the Agreement for the period from 1 April 2021 to 31 March 2022 in the sum of $37,400. Intercast paid that invoice.
Mr Mifsud gave evidence that by April 2021 he had come to the conclusion that there would not be a quick resolution to the breach and that it would be too great a risk for Prodata to continue to licence the software under its current terms. He said that the came to that conclusion for two reasons: first, because of the risk that Prodata would be liable in the event that the breach led to loss or damage to its customers and secondly, because there had been no material increases in pricing. He considered that an increase in pricing was justified because of the evolution of the software and its value and the risks associated with the operation. Mr Mifsud said that it was at this point he commenced active conversations with his clients to discuss options to agree to a new licence to the software at the conclusion of the current term.
I do not accept that it was the desire to seek new agreements that motivated Prodata to discuss options with its customers including Intercast. Prodata commenced discussions to seek contributions from its customers to fund the proposed litigation. The Confidentiality Deed and the letter dated 27 May 2021 (both of which are discussed below) confirm that conclusion.
Prodata and Intercast entered into a Confidentiality Deed dated 13 May 2021. That Deed records that Prodata was prepared to make available confidential information available to Intercast on the terms set out in that Deed. The sole purpose for the supply of the information was expressed to be to enable Intercast to assess and discuss with Prodata whether to provide litigation funding in respect of a potential claim to be instituted by Prodata against a third party. I do not accept that Mr Mifsud at that point commenced conversations with Intercast to discuss options to agree a new licence to the software at the conclusion of the current agreement. The documentation at this time suggests that Prodata was concerned with raising funds for its proposed court action and that it could not guarantee the security of its software because of the breach.
On about 21 May 2021, there was a meeting on Microsoft Teams between Mr Mifsud and Mr Lawrence, Ivec and Mignone of Intercast. I accept the evidence of Messrs Lawrence, Ivec and Mignone that the purpose of the meeting was to discuss the provision of funding by Intercast for the proposed action and the means by which it might be achieved. Mr Mifsud stated that Prodata said that it was in a serious financial situation and needed financial assistance in relation to the proposed litigation. The risk to Intercast arising from the unauthorised access to its system was also discussed. I do not accept that there was a specific or express discussion relating to the termination of the Agreement. I also do not accept that it was clear from the discussions at this meeting that Prodata intended that the Agreement would not be renewed. I have set out later in these Reasons why I prefer the evidence of Messrs Lawrence, Ivec and Mignone over Mr Mifsud on these topics. Further, the letter sent by Prodata on 27 May 2021 (referred to in the following paragraph) makes no reference to the termination of the Agreement. If that topic was raised at the meeting, it would be expected that it would have been referred to in the letter. The letter is consistent with the evidence of the Intercast representatives that the purpose of the meeting was to discuss the provision of funding to Prodata.
Prodata sent a letter to Intercast on 27 May 2021 in which it set out the intellectual property rights options following their meeting regarding funding options. The letter set out various options including that Intercast would purchase the intellectual property relating to the software for the sum of $600,000 and would deduct fees for consulting services from its investment. The letter went on to provide different options depending on whether Prodata won or lost the proposed proceedings and whether Intercast paid for the whole or only a deposit for the intellectual property. There was no reference to termination of the Agreement in the letter. Mr Mifsud acknowledges that he did not receive a positive response to this letter.
At the meeting on 21 May 2021, Intercast either put forward or suggested that it would entertain a proposal where it would pay the sum of $200,000 for the intellectual property rights of the software. Therefore on 4 June 2021, Prodata sent a letter to Intercast in which it offered it to transfer the intellectual property in the software to Intercast for the sum of $200,000 with the existing agreement to terminate as at 30 June 2021 and a new agreement to commence on 1 July 2021 with a $4000 monthly support fee and consulting fees fixed at 30 June 2021 with an annual increase of 3%.
On 9 June 2021, Prodata sent a letter to Intercast in which it stated that it could not accept that offer, that it had raised sufficient funds for the pre-trial phase of the new proceedings and may consider additional funding options before September 2021 and that it would continue to seek a resolution of the breach of Prodata’s software system.
It is apparent that at this stage, no agreement was reached relating to the transfer of the intellectual property rights to the software to Intercast and at that stage no further funding was being sought from Intercast. Intercast had made it clear that it disagreed with the assessment of Mr Mifsud that Intercast was at risk because of the security breach.
Prodata sent a letter to Intercast on 4 February 2022 (although the letter was incorrectly dated 4 January 2022). As this was one of the notices relied upon by Prodata as constituting notice of its intention to terminate the Agreement, I will set out in full the terms of the letter:
Mr Victor Ivec
Intercast & Forge
1 Schumacher Road
WINGFIELD SA 5013
Dear Vic
Re: ProdSys and Despatch licence agreement
Further to our recent discussion, I wish to provide you with an update in relation to legal action Prodata lodged against third parties for breach of Intellectual Property (IP).
As you may be aware, Prodata took action to secure its IP when it was first made aware of a breach by third parties. That case was dismissed for procedural reasons, however, Prodata firmly believes that it has evidence that can be used to assist resolve the breach to BaseClass Technology (BaseClass), software Prodata developed and has used since 1992 to create and support systems for all our clients.
The components of BaseClass that were subject to the breach includes modules use to authenticate login accounts via the security and audit sub systems. This places Prodata in a situation where, whilst we have no evidence or belief that anyone is presently seeking to exploit the breach against our clients, we cannot guarantee that they won’t in the future. Accordingly, as matters stand we will no longer be able to offer any guarantee of the integrity of systems developed for InterCast & Forge (IC&F) post expiry of the ProdSys and Despatch agreement 31 March 2022.
Prodata obtained legal advice confirming our new claim has a high chance of success, however, this requires Prodata to raise substantial funding for new proceedings.
Prodata lodged a claim with its Professional Indemnity Insurers, to mitigate the risk of consequential damage to our clients because of breach by third parties. However, as no claim has actually been brought or threatened against Prodata to date, coverage has not yet been offered.
I welcome a meeting to provide further information and to discuss terms for a new agreement post 31 March 2022, that will assist minimise disruption to IC&F in the event;
Breach of IP is unresolved by 31 March 2022.
Prodata losses the case.
Yours sincerely
David Mifsud
Managing Director
Intercast sought and received legal advice following receipt of this letter.
On 5 February 2022, Mr Mifsud sent an email to Mr Ivec in which stated that he was going through the Intercast account to prepare a contract extension post 31 March 2022 and that he noted that Prodata had failed to submit invoices for the licences in 2012 and 2018. I do not consider this email suggests that Prodata had determined to terminate the Agreement, rather it implies that the Agreement will continue.
Mr Mifsud, Mr Lawrence, Mr Ivec and Mr Mignone held a meeting by way of Microsoft Teams on 24 February 2022. At that meeting Mr Mifsud stated that Prodata urgently required funds to progress its proposed litigation against the third party. Mr Mifsud also said that Intercast could sue Prodata for which Prodata had insurance and that Intercast could, through that claim, recover its costs. I accept that the Intercast participants said that Intercast might purchase the intellectual property for $200,000 and that they could justify that payment to head office as a payment for ownership of the software and not a speculative investment in a legal dispute that had no clear link to Intercast. I accept that Intercast’s representatives did not raise with Mr Mifsud that notice to prevent the automatic renewal of the Agreement needed to, but had not yet, been given. I would not have expected that topic to have been raised.
I do not accept at this meeting or in any other meeting including the telephone conference held on 22 March 2022 and telephone calls between Mr Mifsud and Mr Ivec after 4 February 2022 that Mr Mifsud made it clear that Prodata was terminating the Agreement or giving notice of its intention to do so. I have formed this view for a number of reasons. First, it is contrary to the evidence of M Lawrence, Mr Ivec and Mr Mignone and I prefer their evidence for the reasons that I set out below. Secondly, the evidence of Mr Mifsud is not consistent with the substance of the communications that were taking place throughout this period and the concerns of Prodata. Prodata’s primary concern was to raise money for the proposed litigation. The potential sale of the intellectual property rights was a means by which those funds could be raised. The reason for entering into of the Confidentiality Deed was to enable information to be provided for this purpose. A secondary concern of Prodata was that it could no longer guarantee the integrity of its software applications. As Mr Mifsud admitted in cross examination, there was less risk to Intercast as its confidential information would only be compromised if access was obtained to its server. Thirdly, any express statement that Prodata was terminating the Agreement is not reflected in any written communication sent by Prodata. Mr Mifsud gave evidence that he made express oral statements in relation to the termination of the Agreement but did not make such express statements in writing. It would be expected Prodata would have made express statements in writing, if they had been made orally. Mr Mifsud said that he considered the licence fees were too low and that was one of the two reasons why a new Agreement was required. Nowhere is that referred to in the written communications. Fourthly, had Intercast received express notification that Prodata had or intended to terminate the Agreement, it would be expected that it would immediately take steps to urgently negotiate some interim or alternate arrangement with Prodata. From Intercast’s perspective, the software systems provided by Prodata were critical to its business. The evidence from Mr Lawrence, which I accept, refers to the substantial impact on the business of Intercast, if supply of the software services was interrupted. Mr Ivec said that it would take the better part of 12 months for Intercast to develop a replacement system. It is implausible that in these circumstances, Intercast would take no steps to secure an extension from Prodata or seek out an alternate supplier. Fifthly, Prodata was very selective about what it told Intercast about the need to raise further funds for the proposed proceedings. In cross-examination, Mr Mifsud admitted that the funds raised were going to pay the costs liability of the first proceedings, which were dismissed. Even if funds raised from Intercast were not going to be used for that purpose, full and frank disclosure would have included reference to that purpose (and that the funds of other customers were going to be used to pay the costs liability) and that the costs liability was in the sum of $1m. Intercast was not so advised.
In its written submissions, Prodata contended that Mr Ivec had accepted that during the course of these discussions that because of the security risk that Prodata could not continue with the Agreement. I do not accept that is a fair reading of the evidence of Mr Ivec. The passage relied upon by Prodata for that contention was the following passage:
QI think in those discussions, because of that risk he indicated that he could not continue with the agreement that required him to warrant a security of the software.
AYeah, and I said we’re legally letting go of that liability, we had no concerns.
That answer responds to the security issue in relation to the warranting of the software, rather than the continuation of the agreement.
Mr Ivec makes that clear when a little later in cross-examination he said:
QQ: And he communicated that any new agreement needed to include an indemnity for Prodata because he wasn’t prepared to warrant the security
AA: He didn’t talk about a new agreement There was no discussions that a new agreement needed to be arranged.
QQ; But there was discussion that he needed not to be required to warrant the security wasn’t there?
AA: He made that statement.
Following the meeting, Prodata sent a letter to Intercast on 24 February 2022. The letter provides confirmation that the main topic of the meeting was the proposed litigation and Prodata’s need for funding and the consideration which Prodata would give for that funding. Again, as Prodata relies on this letter as constituting notice of termination of the Agreement, I will set out in full the terms of the letter.
24 February 2022
Mr Victor Ivec
Intercast & Forge
1 Schumacher Road
WINGFIELD SA 5013
Dear Vic,
Re: ProdSys and Despatch software.
I wish to thank you, Mark and Bret the opportunity to discuss licensing for the ProdSys and Despatch systems earlier today.
In summary, Prodata is committed to resolve breach of Intellectual Property (IP) to ensure Prodata is able to continue warranty the integrity of the software we support on behalf of all of our clients.
Prodata seeks to protect IC&F investment in ProdSys and Despatch and to ensure continuity of highly customised software that meets IC&F’s exacting requirements.
Accordingly, Prodata is ready to lodge a new claim to protect our client’s interest, and have obtained advice from Senior Counsel (Mr Michal Hall, SC) who considers our case extremely strong. Mr Hall has offered to speak with IC&F’s legal team to provide you assurance and gain your support.
Prodata will not pursue litigation without IC&F’s support, however, when we win the case, Prodata will transfer the IP to IC&F, enabling IC&F continue to use the software, including the ability to instruct Andre to incorporate customisations into alternate software.
IC&F will not be required to pay future licence fees in the event Prodata wins the case.
Prodata’s offer
1. Prodata will lodge a claim on confirmation from IC&F to offer legal and financial assistance as follows:
a.IC&F agrees to adjoin Prodata in proceedings or to provide legal assistance as required.
b.In the event Prodata obtains a favourable outcome at trial, Prodata agrees to:
Prodata will transfer the IP rights for BaseClass Technology, limited to maintaining ProdSys and Despatch systems to IC&F for payment of $250,000 payable on or prior 21 March 2022.
IC&F will agree to contribute towards Security For Costs (SFC) limited to $150,000 in the event SFC’s are sought by the respondents.
c.In the event Prodata is unsuccessful at trial.
Prodata will retain the IP in ProdSys and Despatch systems with future support fees calculated per the terms of the 2007 agreement, e.g. 10% of the software valuation payable commencing twelve months following completion of trial or twelve months from the date of this offer.
IC&F will be offered an agreement to retain Andre Furstenrecht services for a minimum three-year period.
Once again, thank you for the time to meet with you today, and would appreciate a response to this offer at your earliest convenience.
Yours sincerely
David Mifsud
Managing Director

On 1 March 2022, a pop up screen appeared when every user of the software logged onto the system. The pop up screen appeared immediately on logging on.
The message appeared in a box that read:
Error
License is due to expire on 31/03/2022.
Please Contact Prodata Solutions to re-activate your License.
OK
That message had not appeared previously on users screens.
Mr Ivec said that he noticed a similar message appearing on the test despatch system on 12 January 2022. That message was identical to the above message except it said that the “License has expired”. He forwarded the message to Andre Furtenrecht at Prodata and received an email in response on 12 January 2022 stating “If you do it again it’s all good to use.” That suggested that the message was an anomaly, rather than a notice affecting the rights of Intercast.
A telephone conference call took place on 22 March 2022 between Mr Mifsud, Mr Ivec and Mr Mignone. The substance of the discussion in that telephone call was that (1) Prodata required money urgently to pursue the further court proceedings; (2) Mr Mifsud was pushing for a decision as to whether Intercast would purchase the intellectual property as set out in the letter of 24 February 2022 and (3) a response by Mr Mignone that Intercast needed more time to provide head office with information about any purchase.
For the reasons which I have expressed, I find that nothing was said during the course of the telephone call by the Intercast representatives about the agreement continuing after 31 March 2022, nor was anything said by the Prodata representative about the termination of the agreement. The submission made by Prodata that Mr Mifsud specifically stated that the existing agreement was not continuing is rejected. It is extraordinary that Mr Mifsud is said to be so clear and precise in his oral communications, but that clarity is not reflected in the written communications.
On 24 March 2022, Mr Mifsud sent an email to Mr Ivec with the subject matter expressed as “License extension.” Again, as that letter is relied upon by Prodata as providing notice to Intercast of the termination of the agreement, I will set out that email in full:
Hello Vic
Thank you for the opportunity to speak with you and Mark on Tuesday.
I understand from the meeting IC& F require additional time to present options to the new CEO and accordingly I offer the attached invoice to extend the license agreement a further month. The license will be extended on receipt of payment.
I welcome the opportunity to meet with you /Mark and or Brett to address a longer term solution.
The email attached an invoice which contained the following description:
Production and ICF Databases- CHECK meet with you/Mark or Brett to address a longer term solution.
1 month License and Support Agreement 1/4/22 to 30/4/2022” $50,000 [plus gst]
The invoice required a payment of $50,000 for one month for the use of the software compared to the previous 12 month fee of $33,000, a huge increase.
Following the receipt of the email and invoice, lawyers for Intercast became involved and asserted the Agreement had been renewed. Intercast took out an application for an injunction to prevent Prodata from taking action that would prevent Intercast from receiving the software services. An agreement was reached that the services would be supplied pending determination by the Court.
Legal principles
Prodata has asserted that it validly gave notice of the termination of the Agreement by the three letters and pop up messages that I referred to in paragraph 17 above.
(i)Implied term-termination on reasonable notice
A contract for no set term may be terminated on giving reasonable notice if an implied term permits this.[1] Such a term is excludable as a matter of construction.[2] There is no general right to terminate a contract on reasonable notice.[3] However, ordinarily the nature of a commercial agreement which is for an indefinite period will lead to the conclusion that the parties must have intended to it to be terminable on notice (rather than terminable at will).[4]
[1] Byrne v Australian Airlines Ltd (1995) 185 CLR 410 at 429; Heydon on Contract, JD Heydon, 2019 at [24.110] citing McCelland v Northern Ireland General Health Services Board [1957] 1 WLR 594. See also Crawford Fitting Co v Sydney Valve Fittings Pty Ltd (1988) 14 NSWLR 438 at 443.
[2] Ibid.
[3] Ibid.
[4] Crawford Fitting Co v Sydney Valve Fittings Pty Ltd (1988) 14 NSWLR 438 at 444.
In accordance with the established criteria for the implication of a term set out by the High Court in BP Refinery (Westernport) Pty Ltd v Shire of Hastings[5] an implied term that the contract be terminated on reasonable notice must be:
[5] (1977) 180 CLR 266,283.
(1)    reasonable and equitable;
(2)    necessary to give business efficacy to the contract;
(3)    so obvious that it goes without saying;
(4)    capable of clear expression;
(5)    not contradictory to any express term of the contract.
The existence of the implied term is a matter of construction of the agreement. The question of construction will include reference not only to textual considerations but also the subject matter of the agreement, the circumstances in which it was made and the provisions to which the parties have or have not agreed.[6]
[6] Crawford Fitting Co v Sydney Valve Fittings Ltd (1988) 14 NSWLR 438 at 443.
What is reasonable must depend on the facts and circumstances of each case.[7]
[7] Gallagher & ors v Pioneer Concrete (NSW) Pty Ltd (1993) 113 ALR 159 at 190.
(ii) Clear and unequivocal notice
General law principles require that a notice given pursuant to an agreement such as a notice of termination must express clearly and unequivocally the fact that it is intended to convey. In this case, that fact was Prodata was terminating the agreement.[8]
[8]. Prudential Assurance Co Ltd v Health Minders Pty Ltd (1987) 9 NSWLR 673 at 677, 681 and 683; Ballas v Theophilos (No 2) (1957) 98 CLR 193 at 196.
That requirement has been long applied in a number of different situations involving the exercise of contractual rights including (1) notice of termination [9] (2) notice of the exercise of options;[10] (3) notice seeking enforcement of a term of a contract;[11] (4) notice of extension of time in relation to building work;[12] (5) a notice to complete;[13] (6) a notice to meet contractual obligations under a contract;[14] and (7) a notice from a tenant requesting the appointment of a second valuer in relation to a rent review.[15]
[9] Australasian Performing Right Association Ltd v Metro on George Pty Ltd [2004] FCA 1123; (2004) 210 ALR 244.
[10] Jong v Advanced Dental Services Pty Ltd [2019] NSWCA 318 at [7]; Ballas v Theophilos (No 2) (1957) 98 CLR 193 at 196.
[11] MLW Technology Pty Ltd v May [2005] VSCA 29.
[12] Etlis v New Age Pty Ltd Constructions (NSW) Pty Ltd [2005] NSWCA 165.
[13] McIntyre v Marshall [2004] NSWSC 412.
[14] Gibbins Thomson Pty Ltd v Council of City of Liverpool [2004] NSWSC 1172.
[15] Heaps v Addison Wesley Longman [1999] NSWSC 1093.
In determining whether it is clear and unequivocal, the notice must be construed objectively and in context.[16] The recipient is to be credited with knowledge of the terms of the relevant agreement.[17] In Mannai Investment Co Ltd v Eagle Star Life Assurance Co, (which was a case involving termination by notice), Lord Steyn held:[18]
[16] Mannai Investment Co Ltd v Eagle Star Life Assurance Co Ltd [1997] UKHL 19; [1997] AC 749 at 767.
[17] Ibid.
[18] Ibid at 768.
The question is not how the landlord understood the notices. The construction of the notices must be approached objectively. The issue is how a reasonable recipient would have understood the notices. And in considering this question the notices must be construed taking into account the relevant objective contextual scene.
That test has been applied in Australia.[19] In Lactos Fresh Pty Ltd v Finishing Services Pty Ltd, Weinberg J held:[20]
[19] Lactos Fresh Pty Ltd v Finishing Services Pty Ltd [2006] FCA 219 at [129]-[130].
[20] Ibid at [129].
The test to be applied to determine the validity of the notice is whether a reasonable recipient, who is credited with knowledge of the terms of the lease, and taking into account the surrounding circumstances, would have doubt as to the meaning of the notice or have regarded it as equivocal. If so, the notice will be found to be invalid.
Weinberg J went on to hold:[21]
[21] Ibid at [131].
The authorities recognise that the application of this test can be a question of impression. It can also turn on the facts of the individual case and the terms of the specific clause under which the notice is issued.
The terminology does not need to precisely conform to the language in the relevant agreement - the appropriate question is what someone who received the notice would fairly have understood to be the meaning of it in all of the circumstances of its receipt.[22]
[22] Prudential Assurance Co Ltd v Health Minders Pty Ltd (1987) 9 NSWLR 673 at 677, 681 and 683.
(iii)Estoppel
The respondent has referred to the decision of Blue J in Outback Energy Hunter Pty Ltd v New Standard Energy PEL 570 Pty Ltd,[23] where his Honour sets out the elements of estoppel by convention in the following terms:
[23] [2018] SASC 8 at [269]-[270].
The elements of estoppel by convention are:
1.   The parties proceed on the basis of an assumption of fact and/or law capable of forming the foundation of the remaining elements.
2.   Each party, from the perspective of the other, accepts the assumption as true for the purpose of the transaction in question.
3.   Such acceptance is intended to govern the legal position between the parties.
4.   The proponent takes or omits to take action and is entitled to so act in reliance upon the assumption.
5.   The other party knows that the proponent is so acting.
6.   The proponent would suffer detriment if the other party were permitted to depart from the assumption.
7.   It would be unconscionable for the other party to depart from the assumption.
The first three elements are capable of being satisfied in two different sets of circumstances:
(a)     the parties make a mutual assumption: i.e. each party makes the assumption and knows that the other party is making the same assumption and both parties intend it to govern their legal relations;
(b)     the proponent alone makes the assumption and believes that the other party is making the same assumption and intends it to govern the legal position between the parties when the other party does not actually make the assumption but knows that the proponent is making it in that belief with that intention and plays a causative role in relation thereto (usually by positive conduct but in exceptional circumstances by acquiescence therein).^[
(citations omitted).
The Court of Appeal in Brackenridge v Bendigo and Adelaide Bank Limited, [24] repeated the same essential elements of estoppel by convention, although expressing those elements in slightly different terms.[25] The Court in Brackenridge went on to observe that in many cases, the same factual basis will give rise to both estoppel by convention and promissory estoppel given the common and overlapping features of both forms of estoppel.[26]
The assumption of fact or law required to establish an estoppel by convention can either be shared by them or made by one party and acquiesced by the other.[27] Like promissory estoppel, conventional estoppel requires clarity. It operates to prevent a party from denying the truth of the shared assumption.
In Waltons Stores (Interstate) Ltd v Maher[28]Brennan J set out the principles of equitable or promissory estoppel and said:
In my opinion, to establish an equitable estoppel, it is necessary for a plaintiff to prove that (1) the plaintiff assumed that a particular legal relationship then existed between the plaintiff and the defendant or expected that a particular legal relationship would exist between them and, in the latter case, that the defendant would not be free to withdraw from the expected legal relationship; (2) the defendant has induced the plaintiff to adopt that assumption or expectation; (3) the plaintiff acts or abstains from acting in reliance on the assumption or expectation; (4) the defendant knew or intended him to do so; (5) the plaintiff’s action or inaction will occasion detriment if the assumption or expectation is not fulfilled; and (6) the defendant has failed to act to avoid that detriment whether by fulfilling the assumption or expectation or otherwise.
[24] [2021] SASCA 129.
[25] Ibid at [142].
[26] Ibid at [144].
[27] Republic of India v India Steamship Co Ltd(No 2) [1998] AC 878 at 891, 913).
[28] (1988) 164 CLR 387 at 428.
In Brackenridge, the Court of Appeal held that the elements of promissory estoppel comprised the following elements:[29]
[29] [2021] SASCA 129 at [143].
1.   one party makes a representation or engages in conduct which is capable of giving rise to an assumption in the other party;
2.   the other party, based on the first party’s representation or conduct forms an assumption about the manner in which rights will be exercised or enforced;
3.   the other party acts or abstains from acting in reliance upon the assumption resulting from the first party’s representation or conduct;
4.   the other party would suffer detriment if the first party were permitted to depart from the assumption.
(iv)Copyright and breach of confidential information
It was not in dispute that if the Agreement had been terminated or was not in force, then Intercast had breached the copyright of Prodata by using the software. The exact timing of the breach is a matter to be determined at a later hearing, along with the quantum of any damages.
I will therefore set out only briefly the relevant provisions of the Copyright Act 1968 (Cth) and any relevant authorities.
Pursuant to s 32(2) of the Copyright Act, where an original literary, dramatic, musical or artistic work has been published, copyright subsists in the work. Relevantly, the work in the present case is a literary work. The definition of literary work in s 10 of the Act includes a computer program or a compilation of computer programs. Originality, in the context of the Copyright Act, requires originality of expression, not originality of ideas.[30]
[30] University of London Press Ltd v University Tutorial Express Ltd [1916] 2 Ch 601 at 608-9.
Under s 35(2) of the Copyright Act, the author of literary (or other) work is the owner of any copyright subsisting in the work, except, inter alia, where the work is created pursuant to the terms of the author’s employment with his or her employer, in which case pursuant to s 35(6), copyright subsisting in the work will be owned by the employer.
Pursuant to s 36(1) of the Copyright Act, a person infringes copyright in a literary work, if not being the owner or without the licence of the owner, they do or authorise the doing in Australia of any act comprised in the copyright.
Section 13 of the Act provides that a reference in the Act to “an act comprised in the copyright” shall be read as a reference to any act that, under the Act, the owner of the copyright has the exclusive right to do. Under s 31 of the Act, in respect of a literary work, the owner has the exclusive right to reproduce the work in a material form. In turn, s 21(5) provides when a computer program is taken to have been reproduced namely when (a) an object code version of the program is derived from the program in source code by any process, including compilation; or (b) a source code version of the program is derived from the program in object code by any process, including decompilation.
Under that definition, reproduction occurs during the ordinary course of a user running a computer program.[31]
[31] QAD Inc v Shepparton Partners Collective Operations Pty Ltd [2001] FCA 615 at [79].
As to breach of confidence, I am content to adopt the elements of such a claim set out by Megarry J in Coco v AN Clark (Engineers) Ltd[32] where he held that for a claim for breach of confidence to succeed, the applicant must establish (1) the information had the necessary quality of confidence about it; (2) the information must have been imparted in circumstances importing an obligation of confidence; and (3) there must have been an unauthorised use of the information to the detriment of the party communicating it.
[32] (1969) RPC 41 at 47.
Determination
(i)Implied term of reasonable notice
The first issue that arises for determination is the proper construction of the Agreement and in particular the clause relating to the commencement and term of the Agreement and whether a term can be implied, as Intercast contends, that the Agreement can only be determined on reasonable notice and that seven days notice was not reasonable.
The entire agreement clause contained in the Agreement does not of itself preclude the implication of a term. An implied term is part of and included in the contract.[33] The entire agreement clause in the Agreement does not exclude implied terms: the clause simply states that the Agreement is the entire agreement between the parties.
[33] Etna v Arif [1999] VSCA 99; [1999] 2 VR 353 at [46]; Hart v McDonald [1910] HCA 13; (1910) 10 CLR 417.
The contention of Intercast rests on the mistaken premise that the automatic renewal provision contained in the Agreement is to be construed as creating an agreement akin to a contract of no fixed duration.
That contention is contrary to established authority, that an option, when exercised, creates a new agreement made upon the existing terms of the original agreement and not an extension of an existing agreement.[34]
[34] 195 Crown Street Pty Ltd v Hoare [ 1969] 1 NSWR 193 at 199; Sina Holdings Ltd v Westpac Banking Corporation [1996] 1 NZLR 1.
There is no basis to construe the Agreement otherwise. The Agreement is for a fixed period of 12 months. It can be renewed for a further period of 12 months if the renewal is exercised (ie if neither has given notice of termination in the required period). If renewed, a further fixed agreement of 12 months duration comes into existence.
Further, no term can be implied into the Agreement that termination of the Agreement could only be made on reasonable notice. Such a term is contrary to the express term that the Agreement be for a fixed period of 12 months. The implied term of termination on reasonable notice would cut across the fixed term, depending on when, during the course of the year, it was exercised. That is, the notice period might extend beyond the fixed term.
Further, the implied term that termination could only be effected on reasonable notice is contrary to the express term that the contract is not renewed if terminated by either party in writing at least 7 days prior to a Commencement Date anniversary. That term would not be able to be exercised if the Agreement could only be terminated on reasonable notice.
In these circumstances, it could not be said that the implied term was necessary to give business efficacy to the Agreement. The parties have agreed on a fixed term, subject to renewal. The Agreements allows each of them to withdraw (ie terminate) the Agreement at the expiration of the fixed term. Nothing more is needed in relation to their right to terminate the Agreement.
Cases cited by Intercast such as Gallagher v Pioneer Concrete (NSW) Pty Ltd[35] and Portland Marketing (International) Pty Ltd v Wulff (No 2)[36] were cases in which the contract was either not determinable at will or of no fixed duration. In such cases, it was necessary to imply a term that the contract could be terminated on reasonable notice. There is no such necessity in the present case.
[35] (1993) 113 ALR 159 at 190.
[36] [2018] FCCCA 2506 at [240].
(ii)No termination of the Agreement
Prodata has submitted that it provided notice of termination of the Agreement by reason of a number of different communications. Those communications must be construed objectively, in the context in which they were provided and considering how a reasonable recipient of the communications would have understood them. The reasonable recipient is to be credited with knowledge of the terms of the Agreement, when assessing how it would have understood the communications.

Prodata has first contended that it terminated the Agreement by the letter it sent to Intercast dated 4 January 2022 (but actually sent on 4 February 2022).
I do not consider that this letter provided clear and unequivocal notice of the termination of the Agreement by Prodata.
The letter is written in the context of discussions between Intercast and Prodata about the potential legal action by Prodata against Safecom and need for contributions to be made to the costs of that litigation by Prodata’s customers including Intercast. Prodata had also expressed its concerns about guaranteeing the integrity of the system developed for Intercast.
The letter commenced with a stated purpose of providing an update in relation to legal action by Prodata against third parties for breach of intellectual property. Until the last paragraph, the letter merely recites facts for the implicit purpose of persuading Intercast to contribute to the funding for the litigation.
The last paragraph of the letter is an invitation to Intercast to hold discussions to provide further information and discuss terms for a new agreement post 31 March 2022 (the expiry date of the Agreement). The letter makes no express reference to terminating the Agreement and in my opinion does not do so implicitly. It certainly does not do so clearly and unequivocally. The invitation to hold discussions to discuss terms of a new agreement must be read in the context of the request that Prodata had made for further funding. The letter also contemplates that the discussions take into account that the breach of the intellectual property might be resolved by 31 March 2022.
The letter also records that Prodata could no longer guarantee the integrity of the system post expiry of the Agreement. As observed earlier in these Reasons, Intercast did not share that view. It was also observed that the Agreement contained various exclusions and limitations of liability on the part of Prodata. The letter does not specify what, if any, amendments to the Agreement may be required.
The consequences of termination are severe for both sides. Intercast, on receiving this letter, could not be clear that Prodata was terminating the Agreement and would be at risk of default itself if it did not comply with the terms of the Agreement post 31 March 2022.
The last paragraph of the letter refers to:
welcome a meeting to provide further information and to discuss terms for a new agreement post 31 March 2022 that will assist minimise disruption to IC&F [Intercast] in the event:
(a) Breach of IP is unresolved by 31 March 2022.
(b) Prodata losses (sic) the case.
It is unclear whether the phrase “in the event” is referring to the discussion of terms of a new agreement or the minimisation of the disruption to Intercast. I accept the submission of Prodata that the phrase is referrable to the need to minimise disruption to Intercast in the stated circumstances, but the phrase is by no means clear.
I do not consider that any significance can be placed on the fact that Intercast obtained legal advice after receiving this letter. The fact of obtaining legal advice does not suggest that Intercast formed a particular view about the matter. The content of the legal advice is unknown and not something about which the Court should speculate.
The second communication relied upon by Prodata in support of its contention that it terminated the Agreement is the letter it sent to Intercast dated 24 February 2022.
Again, I do not consider that letter provides clear and unequivocal notice of the termination of the Agreement. Its purpose was to provide an offer to fund the proposed litigation.
The letter then goes on to make an offer in the event that Intercast agrees to provide funding. The offer is in two parts: the first if Prodata obtains a favourable outcome in the proposed proceedings and the second if Prodata is unsuccessful in the proposed proceedings. Again, the letter does not expressly refer to the termination of the Agreement.
Prodata submits that the letter was premised on it seeking a new agreement. If that is so, that premise is not clear. The premise or offer only related to the situation where Intercast agreed to offer legal or financial assistance to the proposed action. Not surprisingly, in these circumstances, the terms upon which this assistance was to be provided would need to be agreed between the parties. The letter represented the first offer of such terms. The letter did not make any reference to the relationship between the parties in the event that the Intercast did not agree to make the payment.
The letter concluded by asking Intercast for a response to the offer. Again, that is not consistent with a termination of the Agreement. As the offer referred to a payment to be made on or prior to 21 March 2022, logically an agreement would need to be reached prior to that date. If Intercast did not agree to provide further funding, the Agreement could either be automatically renewed or terminated at that time.
The offer contained in the letter dated 24 February 2022 referred to events in the future: that is what would happen if at a certain time in the future, Prodata was either successful or unsuccessful in the litigation. I accept the submission from counsel for Intercast that the letter does not make clear the contractual relationship in the interim period, prior to these events, is that the Agreement is terminated.
I do not consider the letter makes it clear to Intercast that the Agreement was terminated from 31 March 2022 and that it would thereafter not be bound by the terms of the Agreement.
Prodata contended the letter should not be considered in isolation but in the context of the earlier communications where that the Agreement was to be revisited and the parties were negotiating the terms of a new agreement. I accept that the Agreement must be considered in its context, but do not find that the past communications evidence the negotiating the terms of a new agreement.
There are a number of difficulties with Prodata’s submission. First, it will only be in rare cases that a requirement of clear and unequivocal notice could somehow be provided by an amalgam of a number of communications. Secondly, the subject matter of the 24 February 2022 letter was the provision of money by Intercast to fund the proposed litigation. Thirdly, the 24 February 2022 letter cannot be characterised as part of a series of communications that conveyed the Agreement was not to be renewed and that the terms of a new agreement were to be negotiated.
The third communication relied upon by Prodata is an email it sent to Intercast on 24 March 2022. That letter followed a telephone conference call between Mr Mifsud and Mr Ivec and Mr Mignone on 22 March 2022. The purpose of that call was to discuss whether Intercast would purchase the intellectual property in the software and the urgent need of Prodata to fund its proposed proceedings. Relevantly, Mr Ivec or Mr Mignone advised Mr Mifsud that Intercast needed more time to provide their head office with a proper valuation of the software.
I find that there was no discussion during that telephone discussion about the termination of the Agreement. I make that finding for 3 reasons: (1) I generally prefer to the evidence of Mr Ivec and Mignone over the evidence of Mr Mifsud for the reasons which I have previously expressed; (2) the statement of Mr Mifsud that “Prodata was incurring costs from delays in negotiating with Intercast as to the new agreement” is ambiguous as to whether Mr Mifsud is referring to the negotiation to purchase the software or to the Agreement. It seems to me that it is the former as the Agreement had not expired as at 22 March 2022 and therefore there could have been no costs incurred by Prodata in relation to the delay arising from any renegotiation of the Agreement at that date. I accept that Mr Ivec or Mignone would not have understood there to be a reference to the termination or expiry of the Agreement. Thirdly, the context of the discussion was the need of Prodata for further money to fund the proposed litigation. It was not the expiry of the Agreement.
In my view, the email dated 24 March 2022 is equivocal and does not clearly and unequivocally terminate the Agreement. There is nothing expressly said about the termination of the Agreement. It makes an offer to Intercast to extend the licence for a further month at the rate of $50,000 (plus gst) and welcomes the opportunity for a meeting with representatives of Intercast to address a long term solution. The author of the letter might assume a particular state of affairs exists, namely that the Agreement will be terminated, but the letter does not clearly and unequivocally convey the termination of the Agreement, even implicitly. The context in which the letter was written was that Prodata was in urgent need of funding which might be satisfied by Intercast agreeing to purchase the intellectual property rights in the software.
Intercast, on receipt of the email, could have done one of two things: it could have accepted the offer in which case there would have been a new arrangement for a month or it could have rejected the offer and insisted that Prodata comply with the terms of the Agreement. It did the latter.
It follows that the invoice dated 24 March 2022 does not take matters any further. The invoice simply reflects the offer that has been made in the email dated 24 March 2022. In fact, it is not truly an invoice as no money was owed at the time that it was sent. The invoice does not refer to the Agreement at all, let alone its termination.
Prodata submitted that the offer contained in the letter necessarily carried with it the proposition that the existing Agreement had ended or will end. The difficulty with accepting that submission is that if the offer “necessarily carried with it” the termination of the Agreement, it did so implicitly and not expressly and not clearly and unequivocally. Further, the offer is not a statement that a particular state of affairs exists: the offer may be rejected in which case, any state of affairs that may be consistent only with the offer can no longer be assumed.
Prodata submitted that the 24 March 2022 letter and invoice must be considered in the context of the earlier communications, including the other communications upon which it relied as providing notice of the termination of the Agreement. That may be accepted. However, these communications, none of which I found to have provided clear and unequivocal notice of the termination of the Agreement, could supplement the notice in the 24 March letter and invoice and somehow transform the notice given in those communications into clear and unequivocal notice. The earlier communications were all addressing different issues.
Prodata also relied upon the pop up messages that appeared on software users’ screens from 1 March 2022. That pop up screen stated that “your licence is due to expire on 31 March 2022.” The message on the screen that went on to say “Please contact Prodata Solutions to re-activate your Licence.”
The pop up screen is not a notice given under the Agreement. Under the Agreement, notice must be given by hand, post, email or facsimile. The notice given upon the pop up screen is none of those.
It is simply advice provided to all users of the software. It is certainly did not advise that the Agreement was terminated. The pop up screen does no more than to tell users that the license will terminate on 31 March 2022 but does not say anything about renewal. A notice to all users of the software system cannot be construed as formal notice of termination to Intercast under the Agreement.
In fact, the Agreement will terminate unless renewed. It will be automatically renewed unless clearly and unequivocally terminated prior to 24 March 2022. The second part of the message then went on to request the user to “contact Prodata Solutions to re-activate your Licence”. That implies that Intercast could re-activate the Licence. Such an implication is contrary to a contention that Prodata was giving notice of termination of the Agreement by the pop-up screen.
(iii)Estoppel
Both claims for estoppel by convention and promissory estoppel require that the applicant for the estoppel, in this case Prodata, form a certain assumption. Estoppel by convention requires both parties to hold the assumption.
The relevant assumptions alleged to have been held by Prodata are (in broad terms) that (1) the Agreement would come to an end on 31 March 2022 and that was the intention of Prodata; (2) the parties were engaging in good faith negotiations in which Intercast would either purchase the software or enter into a new licence agreement; and (3) Prodata had given adequate notice of its intention to terminate and Intercast did not require any better notice to be given.
Some of the matters relied upon by Prodata to form these alleged assumptions occurred prior to 1 April 2021. It was on that date that the Agreement was renewed to the year expiring on 31 March 2022. These matters could not give rise to the assumptions pleaded as the Agreement was renewed after those matters.
Communications that related to the security breach, the Federal Court proceedings or the offers and negotiations that related to the potential sale of the intellectual property rights do not of themselves convey that the parties had accepted that the Agreement had been terminated. At most, those matters provide a context in which the later communications might be understood. I have already addressed the communications from 4 February 2022 and found that none of these communications provided clear and unequivocal notice of termination of the Agreement.
There was no common assumption held by the parties that would form the basis of an estoppel by convention.
Intercast did not ever hold the assumption that the Agreement would come to an end on 31 March 2022 or that Prodata had given adequate notice of its intention to terminate the Agreement. I accept the evidence of each of the representatives of Intercast that at no time had they formed the understanding that Prodata had the belief that the Agreement was ending on 31 March 2022 or that Prodata believed it had given adequate notice of its intention to terminate the Agreement.
I reject the evidence of Mr Mifsud that he said words to the effect that the Agreement would not persist beyond 31 March 2022. I have already stated my reasons for rejecting his evidence on that topic. The substance of the communications between Prodata and Intercast was the need for Prodata to raise funds for the proposed litigation. The sale of the intellectual property rights was discussed as one means by which the money might be raised. A secondary issue was the concern of Prodata relating to the breach by the third party of its intellectual property rights. These were the matters that were discussed at each of the relevant meetings held on 21 May 2021, 24 February 2022 and 22 March 2022, not the termination of the Agreement.
I therefore reject the contention of Prodata that there was a shared assumption that the Agreement was coming to an end in any event or that the existing agreement would not continue without variation or a further agreement as to the outstanding matters being discussed.
Prodata submitted that it was quite consistent with the raising of money being a focus of the meeting that the Agreement coming to an end was also discussed and accepted by the parties. I accept that Mr Mifsud raised the security risk caused by the breach by Safecom and that it needed further protection in relation to that risk. However, that topic was not raised in the context of not renewing the Agreement or a reason as to why the Agreement would not continue beyond 31 March 2022. Prodata did not ever state in writing what it required for that protection or whether the terms of the Agreement were inadequate for that purpose. The Agreement already contained a provision that Prodata accepted no liability for the provision of Services, whether arising by reference to the provisions of the Agreement, implied terms, tort or otherwise howsoever. The provision went on to state that if liability could not be excluded, then the liability was limited to the claim of certain amounts and did not include any liability for consequential loss. Intercast had repeatedly said that the security risk was not an issue from its perspective. Intercast had no reason to believe that Prodata’ s concerns about the security risk could not be accommodated within the terms of the existing Agreement.
Further, for the purposes of estoppel by convention, the assumption must be on or fact or law. It is difficult to characterise any assumption that the Agreement would come to an end of 31 March 2022 as an assumption of fact or law. Intercast did not wish the Agreement to come to an end. The relevant assumption could only be a prediction or opinion; that Prodata would exercise its rights to terminate the Agreement. That is not an assumption of fact or law sufficient to establish a defence based on estoppel by convention.
As to the alleged assumption that the parties were negotiating in good faith for Intercast to either purchase the software or enter into a new licence agreement, I do not find that Intercast ever held the assumption that its options were limited to purchasing the software or entering into a new agreement. At all times, I have found Intercast believed that the Agreement might be renewed. Intercast was merely responding to requests by Prodata to fund the proposed litigation. It was not engaging in negotiations of the type alleged.
Even if Intercast held that assumption that there were engaged in negotiations, limited only to purchasing the software or entering a new agreement, an estoppel by convention could only operate to preclude Intercast from denying the truth of that alleged shared assumption. It would not be estopped from saying that the Agreement was renewed.
As to the alleged assumption that the notice given by Prodata was adequate and that Intercast would not require or insist on any better notice being given, I have already found that the notices were not adequate in that they did not clearly and unequivocally convey that Prodata was exercising its right to terminate the Agreement. Intercast did not subjectively form the view that the notices were adequate or that they conveyed the intention of Prodata to terminate the Agreement. In these circumstances, there was no shared assumption between the parties as to the adequacy of the notice.
Therefore, there were no common assumptions as to any of the matters referred to above or in paragraph 18 of the defence to found an estoppel by convention.
As to promissory estoppel, I do not consider that there was any representation made by Intercast that could give rise to the alleged assumptions. I reject, for the reasons which I have already stated, the pleaded allegation (which was repeated in the written submissions of Prodata) that at the meetings held on 24 February 2022 and 22 March, the representatives of Intercast stated that they were aware and understood that the Agreement would not persist beyond 31 March 2022 and that a new agreement would need to be negotiated.
It follows that any failure to respond could not amount to a representation by omission by Intercast.
Prodata did not form any assumption based on any representation made by Intercast.
In its written submissions, Prodata also submitted as part of the promissory estoppel (which could form part of an estoppel by acquiescence or encouragement)[37] that Intercast knew that Prodata held the assumption that the Agreement would expire on 31 March 2022 without variation or further agreement as to outstanding matters). I have expressed my finding that Intercast at no time held the view that the Agreement was going to expire on 31 March 2022 or knew that Prodata had that view.
[37] Legione v Hateley (1983) 152 CLR 406.

It follows that Intercast has not encouraged, by its participation in meetings or otherwise, any assumption or the continuation of any assumption by Prodata.
(iv)Breach of copyright or confidential information
As a result of my findings about there being no clear and unequivocal notice terminating the Agreement, and there being no operative estoppel, it is not necessary that I consider Prodata’s claim that Intercast had breached its confidential information or intellectual property by continuing to use the software systems.
Intercast had conceded, in the event that I found that the Agreement had in fact been terminated or if Intercast was found to be estopped from contending the Agreement was still extant, that it would follow that there was some breach of copyright. Damages for that breach would have been required to be determined at the subsequent hearing.
The Agreement is quite clear that all intellectual property rights remain with Prodata.
Conclusion
Intercast is entitled to a declaration that the Agreement has been renewed for the 12 month period commencing on 1 April 2022 and expiring on 31 March 2023. Prodata will be restrained from taking any step that will prevent the software ceasing to operate prior to 31 March 2023. Intercast is also entitled to a declaration that Prodata is not entitled to payment on its invoice dated 24 March 2022.
I will hear the parties on the precise form of the orders and costs.