MLW Technology Pty Ltd v May (No 2)
[2003] VSC 199
•13 June 2003
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
COMMERCIAL LIST
No. 2085 of 2002
| MLW TECHNOLOGY PTY LTD (ACN 006 863 412) | Plaintiff |
| v | |
| ROGER THOMAS MAY and ORS | Defendants |
And Between
| ROGER THOMAS MAY and ORS | Plaintiffs by Counterclaim |
| v | |
| MLW TECHNOLOGY PTY LTD (ACN 006 863 412) And MARTIN YONG HENG YII | Defendants by Counterclaim |
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JUDGE: | Byrne J | |
WHERE HELD: | Melbourne | |
DATES OF HEARING: | 28-30 April; 1, 5, 6 and 7 May 2003 | |
DATE OF JUDGMENT: | 13 June 2003 | |
CASE MAY BE CITED AS: | MLW Technology Pty Ltd v May (No. 2) | |
MEDIUM NEUTRAL CITATION: | [2003] VSC 199 | |
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Contract – consideration – whether past consideration – whether total failure of consideration – whether repudiatory breach of contract – whether acceptance.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff and Defendants by Counterclaim | Mr M.A. Robins | Nathan Kuperholz |
| For the Defendants and the Plaintiffs by Counterclaim | Mr D.H. Denton SC and Mr M.S. Goldblatt | Douros Lawyers |
HIS HONOUR:
This litigation arises out of agreements made for the development and exploitation of a computerised mobile display terminal called the “MIM 1000 Mobile Information Manager”. I shall refer to it simply as the MIM 1000 notwithstanding that it had also been known as a UMT (Universal Mobile Terminal) and a GRM 001.
By a licence agreement dated 6 September 2001 the plaintiff, MLW Technology Pty Ltd (“MLW”), granted to the thirdnamed defendant, Info-Motion Technologies Pty Ltd (“IMT”), a perpetual worldwide licence to manufacture, market, distribute, sell and provide technical support for the MIM 1000 and for certain base software. It was a term of this licence agreement that IMT and the two other parties to the agreement, namely, the firstnamed defendant, Roger Thomas May, and the secondnamed defendant, Advanced Communications Technologies (Australia) Pty Ltd (“ACT”), would procure the issue to MLW or its nominee of 750,000 fully paid ordinary shares in a company incorporated in Florida, USA, Advanced Communications Technologies Inc (“ADVC”). A further term of the licence agreement, and one which provoked this litigation, is that whereby Mr May and ACT jointly and severally guaranteed to MLW that, on 5 September 2002, the ADVC shares would have an aggregate value of not less than $A2.3m. In fact, on that day, the shares were worth very much less than this amount. MLW, therefore, looks to Mr May for the deficiency.
In answer to this claim, Mr May contends that the licence agreement was unenforceable or void or that it had been terminated or that the court should declare it to be so. In order for him to bring these claims it was necessary that the two other parties to the licence agreement be added as defendants so that they might bring the counterclaim with him pursuant to Rule 10.02. This was done on 23 December 2002, so that IMT and ACT are both defendants, but no relief is sought against them by MLW.
The counterclaim by these three defendants was duly filed against MLW and against its director, Martin Yong Heng Yii, originally on 23 December 2002. On 21 February 2003, I ordered that the two corporate counterclaimants provide security for the costs of the defendants by counterclaim. This they have not done, so that the counterclaim as brought by them is stayed. This has caused difficulties for Mr May at trial because he seeks relief which affects their interests. To a large extent these difficulties were overcome inasmuch as counsel for Mr May appeared also for IMT and ACT as defendants before the court. One aspect of the case, however, which was affected by their absence was Mr May’s set off of the defendants’ damages claims and his counterclaim in the alternative in respect of these damages. Mr May himself suffered no loss and damage and he, therefore, did not pursue defences or claims based upon this.
The Issues
The claim of MLW was for specific performance of cl. 3.5 of the licence agreement under which Mr May agreed to repurchase the ADVC shares for $2.3m or, alternatively, for damages for breach of that provision. This is a trial of all issues between the parties other than its quantification of damages.
To these claims, Mr May in his defence pleaded that the agreement was not in fact a guarantee and that it was in any event not enforceable since it was not supported by consideration. Next, it was said that the claim must fail because MLW did not give to Mr May a notice to repurchase as is required by cl. 3.4.2 and, further, that the notice which was given did not comply with the formal requirements of that clause. Next, the obligation to repurchase the ADVC shares was dependent upon MLW tendering a registrable transfer which it did not do. Finally, it was put that any obligation Mr May might have was discharged by cl. 3.6 of the licence agreement.
In other parts of his defence, Mr May attacked the existence of the licence agreement as a whole. First, it was put that since MLW was not the owner of the subject matter of the licence, the licence agreement failed for total failure of consideration. Second, it was put that, for various reasons, MLW had repudiated the licence agreement and this repudiation had been accepted by the defendants. Finally, it was put that the court should terminate the licence agreement for misleading and deceptive conduct by MLW.
The Persons and Entities Involved
It is necessary that I introduce the two persons and the many companies who are the principal participants in the dealings which give rise to this proceeding.
Roger Thomas May. Mr May is a businessman, without particular training as a computer engineer, who has been engaged in computer related businesses since early 1999. As will appear, he was at certain times the effective controller of ACT, of Advanced Network Technologies Pty Ltd (“Advanced Network”), of Global Communications Technologies Pty Ltd (“Global Communications”), of Data Link Technologies Pty Ltd (“Data Link”) and of IMT.
Martin Yong Heng Yii. Mr Yii is a businessman who is also a computer engineer. The companies controlled by him are MLW and Monash Professional Group Pty Ltd (“MPG”). He was also a director of IMT for a certain period and, prior to 5 September 2001, held one-half of its share capital through MLW.
ACT. The ASIC record shows that this company was registered on 24 March 1999. Its early directors were Mr May, his son Jason Roger May and Graeme Shearer (until 2 May 2001). Its 1000 issued ordinary shares are held, as to 700 by Global Communications, 100 by Advance Publicity Pty Ltd, and 200 by ADVC. It may be, however, that ADVC did not acquire these shares until 18 October 2002. ACT appointed an administrator on 18 July 2002 and executed a deed of company arrangement on 24 October 2002. On 29 July 2002, Global Communications as chargee appointed a receiver and manager over its assets.
Advanced Network. The ASIC record shows that this company was registered on 20 October 2000 and that its directors then appointed were Mr May, Mr Jason May and Mr Shearer (until 23 May 2002). Its 12 issued shares are held by ACT.
Data Link. The ASIC record shows that this company was registered in 1984 and assumed its name in 1991. Its directors in 1991 were Peter Francis Crook who was a witness at the trial and Colin Lester Wells who died in or about 2001. According to Mr Crook, the company, which was in 1999 essentially a supplier of computer hardware components, then came to an arrangement with Mr Yii whereby his (Yii’s) company, MPG, joined with Data Link to develop and market mobile data terminals. For present purposes, the ASIC record shows that, on 23 January 2001, control of Data Link passed into the hands of the May interests. On that date, Mr Wells' and Mr Crook’s positions as directors were taken over by Mr May and Mr Jason May, Mr Shearer (until 23 May 2003) and Allen Christopher George Roberts (until 18 March 2002). Its 12 issued shares are shown as still standing in the names of the earlier directors. On 9 July 2002, the National Australia Bank as chargee appointed a receiver and manager over its assets.
Global Communications. The ASIC record shows that this company assumed its name in July 1999, a few months after Mr May and Mr Jason May (until 16 September 2002) became its directors. Its 52,500 shares are held by Mr May as to 52,499 and as to the remaining share by his son, Jason.
IMT. The ASIC record shows that this company was registered on 23 December 1999. Its original directors and the holders of its two issued shares were Mr Crook and Mr Wells. Mr Yii became a director on 4 October 2000. On 23 January 2001, Mr Wells and Mr Crook retired as directors and were replaced by Mr May, Mr Jason May, Mr Shearer (until 23 May 2002) and Mr Roberts (until 18 March 2002). The record also shows an issued share capital of two shares. As to the shareholding, it shows that one share only is held by Data Link. There is, however, in evidence a share buy-back agreement dated 5 September 2001 which recites that the other share was then held by MLW and that on that date IMT bought back this share. On this date, too, the ASIC record shows that Mr Yii resigned as director so that, thereafter, this is a May company.
MLW. The ASIC record shows that this company was registered in 1987 and assumed its name in 1993. At all relevant times its directors were Mr and Mrs Yii. Its 20 ordinary shares are held equally by them. Its 100 preference shares are held by Mrs Yii (50 shares) and the remainder by MLW Computer Services Pty Ltd as trustee for the Yii Family Trust.
MPG. The ASIC record shows that this company, registered in 1990, is controlled by Mr Yii as its director with his wife Siew Hong Yii (from 28 October 1998 to 18 January 2000). Its 1200 issued shares are held beneficially by MLW Computer Services Pty Ltd whose address is that of Mr and Mrs Yii.
The Claim under the Guarantee
As I have mentioned, the claim of MLW is for the deficiency between the warranted and the actual value of the ADVC shares on 5 September 2002. As pleaded, this is sought as a claim for specific performance of a term of the licence agreement under which Mr May agreed to repurchase the shares at their warranted value. The claim in the alternative was for damages. Clause 3 is in the following terms:
“Consideration and Guarantee
3.1In consideration for MLW granting the licences referred to in clauses 2.1.1 and 2.2.1 to IMT, IMT and the Guarantors shall procure that on the Commencement Date the ADVC Shares are issued to MLW or its nominee.
3.2MLW acknowledges that the shares referred to in clause 3.1 are restricted securities as defined in the Securities Act, 1933 of the United States of America and that MLW may not sell, deal in or transfer the shares referred to in clause 3.1 for a period of 12 months after the date of issue of the shares.
3.3The Guarantors jointly and severally guarantee to MLW that on the first anniversary of the Commencement Date the ADVC Shares will have an aggregate value of not less than $2,300,000.
3.4If the aggregate value of the ADVC Shares is less than $2,300,000 on the first anniversary of the Commencement Date, MLW may:
3.4.1sell all (and not less than all) of the ADVC Shares after the first anniversary of the Commencement Date in such daily volumes as do not adversely affect the market price of the shares of Advanced Communications Technologies Inc and after all of the ADVC Shares have been sold give to the Guarantors 30 days' written notice requiring the Guarantors to pay to MLW the difference between the aggregate price (in Australian dollars) received by MLW for the ADVC Shares and $2,300,000; or
3.4.2within 30 days after the first anniversary of the Commencement Date give to the Guarantors 30 days' written notice requiring either one or both of the Guarantors to purchase from MLW the ADVC Shares for an aggregate purchase price of $2,300,000; or
3.5If MLW gives to the Guarantors a notice pursuant to clauses 3.4.1 or 3.4.2, then either the Guarantors, ACT or May shall, within the time specified in the notice, pay to MLW the amount claimed by MLW against proof of the price received by MLW on the sale of the ADVC Shares or the transfer of the ADVC Shares (as the case may be).
3.6If the Guarantors do not perform their obligations pursuant to clauses 3.4 or 3.5 then IMT shall pay to MLW the amount that the Guarantors were obliged to pay to MLW pursuant to clause 3.4.1 or 3.4.2 (as the case may be), in cash, in 12 equal monthly instalments of $191,666.66 each.”
Counsel for Mr May made some point of the fact that the obligation under cl. 3.3 is not, in truth, one of guarantee. This may or may not be correct. To my mind, it is of no moment that Mr May and ACT are described as guarantors. Laymen might properly describe their obligation as a guarantee; a lawyer might understand that the legal effect of the provision is that they warranted the future value of the ADVC shares. However it be described, the obligation is clear.
The factual basis for MLW’s claim under cl. 3.3 was not in issue. On 5 September 2002 the ADVC shares were worth $28,882.50, very much less than the warranted $2.3m.
The claim for specific performance of the agreement to buy back the ADVC shares pursuant to cl. 3.5 depended upon the giving of a notice to purchase pursuant to cl. 3.4.2. The giving of this notice was challenged on two grounds. In final address counsel for MLW appeared to accept the validity of this challenge, at least as to one ground, and announced that the specific performance claim was not pressed. This left the claim for damages for breach of warranty.
Counsel for Mr May submitted that the warranty was not supported by any consideration. It was put that, in cl. 3.1, the covenant to cause the issue of the ADVC shares was expressed to be the consideration for the granting of the licences. In fact, the share certificate for these shares standing in the name of MLW is dated 16 August 2001. It was, therefore, suggested that the consideration is past consideration and, therefore, incapable of supporting the warranty. I expressed some difficulty with this submission when it was first put in the course of opening by counsel for the defendants. Having reflected upon it, I remain unpersuaded. As a matter of fact, the evidence shows that the certificate was handed over by Mr Yii on behalf of MLW after the execution of the licence agreement. As a matter of law, the agreement describes the consideration as operating in the future. It matters not that the promisor took steps to fulfil the promise before the due date. Finally, the fact that this consideration might be ineffective to support the licence agreement is entirely beside the point: the licence agreement contains abundant consideration moving from the promisee, MLW.
It was then put that the obligation of Mr May under the warranty is discharged by cl. 3.6. The argument fastened upon the words “were obliged to pay” in cl. 3.6 as indicating the intention of the parties that the guarantors were no longer obliged to make the payment. I will not dwell long upon this submission which is, to my mind, unsupportable. Clause 3.6 creates a further obligation in the event that the guarantors default under cl. 3.4.1 or cl. 3.4.2. Given the successful attack upon the cl. 3.4.2 notice, it cannot be contended that the guarantors failed to perform their obligations under that clause. In any event, cl. 3.6 does not discharge the defaulting guarantors; it merely creates a further obligation in IMT to pay the amounts which the guarantors themselves were obliged to pay.
This means that Mr May remains in breach of his warranty and is liable for damages for this breach. This is, of course, subject to any other defence which he might make out.
Ownership of the Intellectual Property
The principal defence raised by Mr May depended upon his contention that MLW did not own the copyright in the software of the subject-matter of the licence agreement. Upon this fact depended Mr May’s arguments that the licence agreement failed for total failure of consideration and that he was entitled to relief under s. 82 of the Trade Practices Act for misleading and deceptive conduct. There is no doubt that MLW asserted, in the licence agreement and elsewhere, that it was the owner of the intellectual property in the subject matter of the licence agreement. The issues were, therefore, falsity, reliance and consequential loss.
The principal parties to the licence agreement are MLW and IMT. The subject matter of the exclusive licences is two items, called in the agreement “Product” and the “Software Interface” respectively. They are defined as follows:
“’Product’ means the MIM 1000 mobile display terminal (excluding data logging capabilities) with a 320 x 240 resolution LCD screen, five buttons for user interaction, one emergency button, one rotary selection button and one button reader;
…
“’Software Interface’ means the base software that incorporates all (and not only the separate components) of the following capabilities:
(a) tracking the location of vehicles;
(b)dispatching jobs using the programme developed by MLW and known as ‘barrybros.exe’, developed by MLW as per the specifications attached as Schedule 1;
(c)sending and receiving information to and from the Product; and
(d)is designed to make the Product and/or the Firmware compatible with any other product or software.”
These were explained in evidence by Simon Peter Cleary, a computer systems engineer employed by another company within the May group. Mr Cleary was in 2000-2001 employed by ACT and was involved in the development of the MIM 1000 after the licence agreement was entered into. This was, he told me, a device which enabled a mobile unit to transmit and receive by radio data and messages to and from a base station. Such a mobile unit might be located in a van or truck making deliveries. The unit itself does not perform the transmission; this is achieved by a radio which is not part of the MIM 1000 but which is attached to it. Other attachments which would be of value might be a GPS unit which would enable the base to know precisely where the vehicle was at any time, and a device which would gather logistic information about the vehicle itself such as refrigeration temperature, tanker volume levels and when the engine was started. These, too, are not part of the MIM 1000, but the unit was capable of being programmed to gather and transmit information from these attached accessories back to base by radio. These capabilities would be provided by programming the MIM 1000 to meet the customer’s individual requirements.
Another capacity which might be of value to a user of the MIM 1000 is that of logging this data rather than transmitting it to base. This would be useful where the vehicle was out of radio range. It will be seen from the definition of “Product” in the licence agreement that these data logging capabilities were not the subject of the licence.
The MIM 1000 was a computer. As with any computer, it contained firmware which controlled its operation and, in this case, it contained also base software which would enable an engineer to design an application to sit above this base software to suit the customer’s needs. Firmware is defined in the licence agreement as “programme code that is imbedded within the Product and controls the operation of the Product”. The base software in this case was described in evidence as the software which is needed to enliven the hardware and to enable the communications mechanism to deliver information across the wireless network. As Mr Cleary put it, “the base software sits above the hardware and sits to interact with the modem that is communicating, and on top of that … you have the application” which may be deployed. More particularly, the Software Interface in the licence agreement is a specified type of base software, namely that which incorporates all of those specified capabilities which had been designed for a particular customer, Barry Bros.
The licence agreement creates a licence for each of the Product and the Software Interface. In each case, IMT is given an exclusive worldwide licence to manufacture, market, distribute, sell and provide technical support for the subject matter of the licence[1]. In other respects, however, the licences are not identical. That for the Product is perpetual[2] and no consideration is given for it by IMT. That for the Software Interface continues until terminated by notice under cl. 11 in any of the circumstances there specified[3]. Second, it is expressly provided that IMT gives no consideration for the Software Interface, “provided that as and when required by IMT, IMT purchases the Software Interface from MLW at MLW’s then current wholesale price for the Software Interface”[4]. This is a remarkable provision for it contemplates that the obligation in IMT to buy arises only when IMT, and not MLW, requires this. Third, cl. 8 imposes various restrictions on IMT, but only with respect to the Product and the firmware, and not with respect to the Software Interface. Moreover, cl. 9.1 imposes on MLW an obligation to provide IMT certain technical assistance for six months, again with respect to the Product only. Finally, cl. 9.2 imposes on MLW an obligation not to compete for three years by certain commercial activities, again with respect to the Product only.
[1]Clause 2.1.1.
[2]Clause 4.1.
[3]Clause 4.2.
[4]Clause 2.2.3. Compare cl. 3.1 which is set out at [18] above.
The submission of total failure of consideration depends upon the allegation contained in paragraph 3A of the Defence:
“At the date of the alleged Exclusive Licence Agreement, MLW did not own the Product or the Software Interface, or the right to manufacture, market, distribute, sell and provide technical support for the Product or the Software Interface.”
Notwithstanding the terms of this plea, Mr May’s case was conducted on the basis that it was the ownership in the intellectual property in the Product or the Software Interface which was in question here.
The evidence showed that the work on the UMT, the predecessor of the MIM 1000, was commenced in mid-1999. At that time, MLW had but two employees, Mr Yii and a bookkeeper. The electronic work, including the technical development, was handled by employees of the associated company, MPG. Accordingly, it was put that the intellectual property vested in MPG and not in MLW having regard to s. 35(6) of the Copyright Act 1968. In response, MLW said that the two companies were related and both were controlled by Mr Yii. In his witness statement, Mr Yii said that the work was carried out by MPG staff “on behalf of MLW”. It appears that there was no formal assignment in writing from MPG to MLW of intellectual property in the MIM 1000. I am not prepared to construe any of the agreements or other documents in evidence as amounting to an implied assignment. Accordingly, Mr May says, MLW did not own the subject matter of the licence and IMT therefore received no benefit.
Let it be assumed, then, that the intellectual property remains with MPG. Even so, I must say that the submission has about it an air of unreality. Under the licence agreement no intellectual property passes to IMT. That company is entitled to intellectual property only with respect to improvements which it may make pursuant to cl. 6. Under cl. 2.3, MLW covenants only to “make available to IMT” certain intellectual property. The operative part of the licence agreement is the grant of exclusive rights to “manufacture, market, distribute, sell and provide technical support” for the Product or the Software Interface. There is no reason to conclude that these rights were not effectively granted. Indeed, since September 2001, manufacturing, marketing distributing and selling the MIM 1000 is what IMT has sought to do without any constraint or difficulty arising out of any want of the rights conferred and without any assertion by MPG that it might not do so. It was suggested that, at some time in the future, MPG might assert its intellectual property rights against IMT or a customer or sub-licensee of IMT. I could well suppose that such an assertion would be difficult to make in the circumstances of this case. The existence of such a risk, does not, however, carry with it a total failure of consideration for an agreement under which the parties have conducted their affairs for 12 months or more.
In any event, I am not at all satisfied that MLW did not own the intellectual property in September 2001. I have mentioned the uncontradicted evidence of Mr Yii that the development work was carried out by MPG on behalf of MLW. Moreover, the licence agreement was entered into pursuant to a memorandum of understanding executed on 20 January 2001. Both MLW and MPG are parties to this document in which they acknowledge that no intellectual property is owned by MPG[5] and that “MLW owns the source code of the software used as the basis underlying for the Product”[6]. The other parties to this memorandum are Data Link and Advanced Network, both companies controlled by Mr May or in which he was interested. On the evidence as it stands, I would not be prepared to make a finding at the behest of Mr May or his companies that is inconsistent with this agreement.
[5]Recital G.
[6]Clause 4.1.1.
It follows from this, that I reject the argument that the licence agreement, including cl. 3, is ineffective for total failure of consideration. It follows, too, that the claim based on misleading and deceptive conduct, namely a representation as to the ownership of the intellectual property, must also fail.
Termination for repudiation
Mr May also put the failure of MLW to own the intellectual property as a basis for MLW’s repudiation of the licence agreement. This contention must meet the same fate as his other contentions based on this unestablished fact.
He then asserted three other breaches by MLW of its obligations under the licence agreement as amounting to repudiation which was accepted by IMT, so that the licence agreement, including the guarantee clause, has been terminated.
(1) Failure to make available the intellectual property listed in Schedule 2
Clause 2.3 of the licence agreement provides:
“In order for IMT to effectively be able to exercise its rights granted pursuant to clauses 2.1 and 2.2, MLW will, on the Commencement Date, make available to IMT all of the Intellectual Property used in and by the Product and listed in Schedule 2.
Schedule 2 lists the following items:
“1Source code of the programmes used in and in conjunction with the Product.
2Source code of the programmes used in and in conjunction with BarryBros.exe.
3 Hardware system diagrams of the Product.
4 Circuit diagrams of the Product.
5 Bios and flash code relating to the Product.
6All documentation relating to the design of the Product and the Software Interface.
7The linkable software library of the Software Interface to enable development of new product and associated applications on both the Product and the gateway device. Any associated documentation of the linkable software libraries for both the Product and the gateway device.
8Software system diagrams for the Software Interface both for the Product and the gateway device.
9Source code of the programmes used in and in conjunction with the Software Interface to held in escrow.”
The evidence showed that, on or about the commencement date, 5 September 2001, MLW delivered to IMT a CD ROM containing the files supposedly comprising the software for the MIM 1000. These were examined by Mr Cleary and by Peter Mark Taranto, a software engineer employed within the May group. Mr Taranto told me that a significant number of source code files needed to operate the MIM 1000 were missing and, further, that the libraries supplied were to be run on a specific compiler which he did not have available.
With respect to the missing source codes, Mr Taranto compiled a list of these and this list was sent to Mr Yii by letter of 26 October 2001. This provoked a meeting between Mr Yii and Mr Cleary. At this meeting, Mr Yii pointed out that many of the missing files were not in fact necessary for the operation of the MIM 1000 and Mr Cleary accepted this. At the meeting, Mr Yii produced a floppy disc containing 23 files which he contended satisfied the outstanding requirements of cl. 2.3. This was confirmed in his letter of 1 November 2001. It seems that, subject to one matter, no further complaint about this was made by Mr Cleary or by anyone from the May group. In the particulars given under paragraph 11G of the Defence, Mr May lists nine things which he says were not provided. The evidence of Mr Cleary, however, was that he was able, albeit with some difficulty and at some expense, to work with the software provided. This was done and, by May 2002 the MIM 1000 was operational.
The one matter I have referred to is the source code for the application, LCD REND. Mr Yii said that he told David Scott McQuie, an electronics engineer with Data Link, that this code was not owned by him but that he could arrange for a copy to be purchased for IMT for $2000 plus GST. Mr McQuie said that he considered this price to be not acceptable but on 8 April 2002 he placed an order for it addressed to MPG. The file was supplied but Data Link did not pay the stipulated price. I conclude from this that the missing programme was provided, albeit late, and that IMT suffered no loss.
The second deficiency perceived by Mr Cleary and Mr Taranto was the non-availability of a compiler upon which to run the libraries for the MIM 1000. Mr McQuie told me that Data Link’s own compiler, a Metroworks C compiler, would not allow the MIM 1000 source codes to function. Accordingly, on 18 September 2001 he contacted Mr Yii and was told that the MIM 1000 had been developed using a compiler called an Intertools C compiler.
Mr McQuie about this time contacted the distributor for the Intertools C compiler and was told that it was no longer available for sale. Mr Taranto’s enquiries of this distributor revealed that the current version, however, was available for about $10,000. Mr Yii maintained before me, and I accept, that this compiler would have enabled the MIM 1000 to be operated. Nevertheless, Mr McQuie decided not to purchase this compiler but, rather, to have the Data Link engineers re-engineer the MIM 1000 to enable it to operate with a different compiler, a GNU. Mr Taranto commenced his task in late September 2001 and it was completed in February 2002. No complaint was made about this at the time.
I bear in mind that the claim for breach of clause 2.3 is not one for damages, for Mr May suffered none. It was his claim that MLW thereby repudiated the licence agreement. In the circumstances of this case, such breaches of the clause as were established, do not amount to a repudiation. There were difficulties encountered by Data Link but these were overcome by May 2002. IMT was not unable to exercise its rights conferred by the licence and it has never asserted this, at least until this litigation.
(2) Breach of anti-competition clause
Clause 9.2 provides:
“MLW agrees with IMT that MLW:
9.2will not, for a period of three years from the Commencement Date, other than as expressly provided for in this Agreement, in the Territory, whether directly or indirectly, either by itself or through any third party, develop, market, distribute, sell or provide technical support for the Product or any product with the same technical specifications as the Product.”
In paragraph 20 of the Defence Mr May contends that MLW has been assisting another company to seek an order for the MIM 1000 from the Royal Malaysian police.
It should be noted that when the licence agreement was entered into Mr Yii had been seeking to sell the MIM 1000 to the Malaysian police. This was known at the time by Mr May and, indeed, the prospect of such a profitable contract may have been an inducement for him to enter into the licence agreement. It was known to him that no concluded agreement has then been achieved and nothing to this effect was represented by Mr Yii. IMT had no contact in Malaysia and so Mr Yii continued the negotiations in early 2002. He said that he did this for the benefit of IMT and I accept this to be the case. He reported to Mr Roberts of ACT his progress and his hopes that the deal would be consummated. This email was forwarded by Mr Roberts to Mr Crook of Data Link. There was no suggestion from either of these witnesses that they were unhappy with this. This is no breach of cl. 9.2.
Next, it was put in paragraph 20A of the Defence that MLW was in breach of the exclusivity of the licence granted to IMT in respect of the Software Interface. This is said to be because MLW was marketing a product known as GRM OO1. The sting of this allegation is that the GRM OO1 contains extracts from the source code used in the MIM 1000. This contention must fail for a number of reasons. First, the admittedly common source code is not distinctive of the MIM 1000. Mr Yii said, and I accept, that, in developing a program, it is not uncommon to adopt parts of an existing source code from another program. Second, the definition of Software Interface is very restrictive and does not encompass the GRM OO1. Third, Mr May and his companies made no complaint about MPG marketing the GRM OO1, a fact of which it was aware. Indeed, in January 2002 Data Link purchased one GRM OO1 from MPG. Again, this does not amount to a breach of the exclusive licence agreement.
(3) Breach of implied term as to development platform
This allegation concerns the failure of MLW to make available its development platform, and Intertools C compiler. I have already set out my findings on this matter.
As here presented, it was contended that there was an implied term of the licence agreement that the MIM 1000 would be operational on a development platform which was commercially available at the time of the licence agreement. This contention must fail. I see no warrant to imply such a term. In any event, the current version of the Intertools C compiler was available. I find no breach and, a fortiori, no repudiation.
Acceptance
The submission put on behalf of Mr May that the licence agreement was terminated for repudiation must overcome the further difficulty that there has been no acceptance. None of the acts of acceptance alleged in the defence is at all convincing. Indeed, IMT continued to develop the MIM 1000 and it was operational by May 2002. It has sought and still seeks to exploit the licence.
I conclude from this that Mr May’s contentions that the licence agreement has been terminated for MLW’s repudiation must fail.
Misleading and Deceptive Conduct
Next, Mr May puts that during the course of negotiations for the licence agreement MLW made representations that were misleading and deceptive. He seeks orders under s. 87 of the Trade Practices Act declaring the licence agreement to be void ab initio and refusing to enforce its provisions. There is nothing in this contention and I shall deal with it briefly:
(a)Representation as to ownership in the product and in the Software Interface and the right to grant the licence. I accept the representations were made but they have not been shown to have been false.
(b)The Product would be able to function on a commercial platform. The representation was not made. In any event, it was true.
(c)The subject matter of the licence included data logging capacity. This was abandoned.
(d)There were confirmed orders for sales of the MIM 1000 to the Royal Malaysian Police and the Queensland Ambulance Service. I have found that no such representation was made with respect to the Royal Malaysian Police. With respect to the Queensland Ambulance Service, I find likewise that the possibility that such an order might be placed was discussed before the licence agreement was made but no representation as alleged was made.
(e)IMT as licensee would get the benefit of those confirmed orders. The representation was not made.
(f)MLW was transferring rights to IMT which would permit it to fulfil the orders for the Product. Again, no such representation was made. Furthermore, I find that, although Mr May was aware that these orders were being sought, he placed no reliance upon them in deciding to enter into the licence agreement or to cause his companies to do so.
Conclusion
It follows from what I have written that Mr May’s defences fail. There will be judgment for the plaintiff for damages for breach of warranty. I will hear counsel further as to the precise terms of the orders which should be made to give effect to this conclusion.
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