Pirt Biotechnologies Pty Ltd v Pirtferm Ltd - [2000] WASC 28

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CIVIL

CITATION: PIRT BIOTECHNOLOGIES PTY LTD -v- PIRTFERM LTD & ORS [2000] WASC 28

CORAM: WHEELER J

HEARD: 17-20 JANUARY 2000

DELIVERED : 15 FEBRUARY 2000

FILE NO/S: CIV 1325 of 1998

BETWEEN: PIRT BIOTECHNOLOGIES PTY LTD (ACN 077 417 862)
Plaintiff
AND
PIRTFERM LTD
First Defendant
STANLEY JOHN PIRT
Second Defendant
MARGARET WATTS PIRT
Third Defendant

Catchwords:

Contracts - General contractual principles - Parties - Intention to create legal relations - Intention objective - Relationship between intention to create legal relations and agreement upon essential terms - Credibility of witnesses

Contracts - General contractual principles - Terms - Certainty of essential terms - No concluded contract

Legislation:

Patents Act 1990 (Cth), s14

Result:

Plaintiff's claim dismissed

Representation:

Counsel:

Plaintiff:     Mr D E Eley & Mr G J Archer
First Defendant             :     Mr R L Hooker
Second Defendant         :     Mr R L Hooker
Third Defendant           :     Mr R L Hooker

Solicitors:

Plaintiff:     Eley Palmer Archer
First Defendant             :     Blake Dawson Waldron
Second Defendant         :     Blake Dawson Waldron
Third Defendant           :     Blake Dawson Waldron

Case(s) referred to in judgment(s):

Nil

Case(s) also cited:

Australian and New Zealand Banking Group Ltd v Widin (1990) 26 FCR 21
Australian Broadcasting Corporation v XIVth Commonwealth Games Ltd (1988) 18 NSWLR 540
Australian Hardwoods Pty Ltd v Commissioner for Railways [1961] 1 All ER 737
Foley v Classique Coaches Limited [1934] 2 KB 1
Foran v Wight (1989) 168 CLR 385
G Scammell & Nephew Limited v H C & J C Ouston [1941] AC 251
Geebung Investments Pty Ltd v Varga Group Investments No 8 Pty Ltd (1995) ACR 90,312
Howard v Pickford Tool Co Ltd [1951] 1 KB 417
Huppert v Stock Options of Australia Pty Ltd (1965) 112 CLR 414
JC Williamson Ltd v Lukey (1931) 45 CLR 282
Lethlean v Saunders [1999] VSC 501
Maddison v Alderson (1883) 8 App Cas 467
Masters v Cameron (1954) 91 CLR 353
May & Butcher Limited v R(E) [1934] 2 KB 17
McBride v Sandland (1918) 25 CLR 69
Mehmet v Benson (1964-65) 113 CLR 295
Millett v Regent [1975] 1 NSWLR 62
Ogier v Booth (1889) 9 VLR 160
Peter Turnbull & Co Pty Ltd v Mundus Trading Co (Australasia) Pty Ltd (1954) 90 CLR 235
Ratto v Trifid Pty Ltd [1987] WAR 237
Regent v Millett (1976) 133 CLR 679
South Australia v Commonwealth (1962) 108 CLR 130
Steadman v Steadman [1976] AC 536
Thors v Weekes (1989) 92 ALR 131
Woodside Off Shore Petroleum Pty Ltd v Atwood Oceanics Inc & Anor [1986] WAR 253

WHEELER J: The issues in this case are narrow in compass. On or about 12 ‑ 14 March 1997, the second and third defendants reached an agreement or understanding of some kind with Mr Eley and Mr Castledine. However, Eley and Castledine assert, and the second and third defendants deny, that all parties at that time intended to make a concluded agreement. Further, Eley and Castledine assert and the second and third defendants deny, that they succeeded in doing so, by reaching agreement upon all the terms necessary to constitute a contract.
The background to the dispute is as follows. The second defendant, Professor Pirt (who apparently uses the name "John" as his first name), is a retired Professor of Microbiology. He has had a distinguished career in teaching and research. He met Eley when he was a director of, and consultant to, a biotechnology company of which Eley was also a director. Through that connection, Eley became aware of research of Professor Pirt's in relation to algal technology. In 1996 Mr Castledine telephoned Professor Pirt saying that he was aware through Eley of the algal technology and interested in becoming involved in its commercialisation.
However, by that time Professor Pirt was no longer working with algal technology. Professor Pirt described to Castledine his current interest in a process called the "Total Biocombustion Process" ("TBP"). This involves the manipulation of microbial processes so as to digest organic waste, leaving no solid residue and solublising the minerals. Professor Pirt believed the TBP to be very valuable, as an attractive alternative to the two current methods of disposing of sewage sludge, they being the expensive option of incineration or the controversial one of spreading it on land. He described this process to Castledine and told him that he was looking for someone with whom to commercialise the TBP. In subsequent discussions, Eley and Castledine discussed the technology further with Professor Pirt, and noted that there might be interest in the technology by the Water Corporation of Western Australia and by certain other investors.
At this stage, the intellectual property in the TBP was held by the first defendant, a company of which Professor Pirt and his wife Dr Pirt were directors, and that company had, or had applied for, patents in Australia, the United States, Japan, Europe, South Korea and Canada. The first defendant had in February 1996, made an agreement with Glaxo Operations UK Ltd ("Glaxo") by which the first defendant granted Glaxo a non‑exclusive licence to make and to use the TBP technology, and Glaxo agreed to pay the first defendant a royalty of ₤10 per tonne of dry matter waste processed using the TBP; to provide certain other assistance to the first defendant and to employ Professor Pirt as consultant; and there were terms limiting the assignment of rights under the agreement without written consent.
To date, Glaxo has not made use of the TBP so as to give rise to liability to pay the royalty. In his evidence, Professor Pirt explained that this is because at the present time that company is permitted to discharge its waste free into the sea so that it has no present need for alternative technology. However, based upon the royalty which Glaxo was prepared to pay should it use the technology, Professor Pirt estimated that the technology might in due course be worth several million pounds in the UK and perhaps billions world‑wide. This estimate appears to have been shared by Eley, Castledine and others who were interested in investing in the technology, since the evidence of a number of witnesses was to the effect that there were discussions about how they "would all be millionaires".
Prior to his dealings with Eley and Castledine, Professor Pirt had had expressions of interest from a number of sources in developing the TBP, but, apart from Glaxo, no financial assistance.
Professor and Dr Pirt were by this time experienced in what has been described as the "scale up of industrial microbiology processes" and understood that before the TBP could be commercially exploited it would be necessary to construct a pilot plant to enable the process to be demonstrated on a scale that would attract interest from major investors. I should note also that Dr Pirt gave some evidence of her previous experience with assignment of intellectual property and described, in general terms, the detailed legal work and documentation which had been involved in the assignment of other patents in which she had previously participated.
In a letter to Eley dated 8 September 1996, Professor Pirt noted that he and Dr Pirt hoped to come to an agreement with a water utility to construct a 10 cubic metre TBP demonstration plant. He estimated the cost of construction at about ₤500,000. In the letter he suggested:
"What about setting up 'New Biotechnology Ltd. with two divisions, one for the TBP process based on our patent rights, and the other for Algal Technology to be based on our 'know how'?"
By facsimile of 26 September 1996, Eley suggested to Professor Pirt a proposal "along the following lines", which included the establishment of a company initially in Australia and subsequently in the UK or USA, and the sale of an option to acquire 25 per cent of that company for $500,000, the remaining 75 per cent of the company to be shared between Eley, Castledine and the Pirts. Precisely what the company was to do was not at that time outlined. That proposal was the subject of favourable response from Professor Pirt. Subsequently Mr Eley sent for the signature of Professor Pirt, a "letter of intent" which he had drafted. It was dated 10 October 1996 and made reference to Professor Pirt as "Pirt", the first defendant as "PL", and the plaintiff, which was not then in existence, as "PBL". The letter of intent contained, inter alia, the following articles:
"Article IV
The parties intend to incorporate a company in Western Australia to be called Pirt Biotechnologies Ltd (PBL).
Article V
The initial directors and shareholders of PBL will be Messrs J Pirt, M Pirt, P Eley and B Castledine.
Article VI
The shareholding of each person mentioned in Article V is to be negotiated between the parties.
Article VII
Eley and Castledine agree to endeavour to raise $A500,000 for a 25% equity interest in PBL on terms and conditions to be negotiated with a prospective investor.
Article VIII
It is agreed that $150,000 of the $500,000 raised will be paid to Pirt as reimbursement for bringing the process to its present status.
Article IX
It is agreed that the balance of the funds raised will be utilised by PBL in the further development of the process technology and commercialisation thereof.
Article X
It is agreed that Messrs John and Margaret Pirt should visit Perth Western Australia at a mutually convenient time to formally present the process of technology.
Article XII
Eley will endeavour to arrange for a presentation of the process technology to be made to the Water Corporation of Western Australia and/or other interested parties across Australia.
Article XIII
It is agreed that all expenses for the visit by J and M Pirt will be met by PBL.
Article XV
Following the formal presentation of the process technology Eley and Castledine intend to raise funds of say $3 million from an Australian Water Authority or Waste operator for the first demonstration plant.
Article XVII
Subject to the appropriate level of financial and administrative support for PBL, Pirt and PL will enter into a licence arrangement with PBL to commercially exploit the process technology. (Emphasis supplied)
Article XXIII
The parties at this stage do not seek a contractual obligation but require for the time being a clear indication as to their respective interests and intentions with respect to the development and commercialisation of the process technology.
This letter of intent contains such an indication."
Professor and Doctor Pirt signed the letter of intent, as did Eley and Castledine.
In February 1997 Eley purchased a shelf company which was named Pirt Biotechnologies Pty Ltd, the plaintiff. In February/March 1997, Professor and Doctor Pirt came to Perth. They met a number of potential small investors, particularly Mr Farmer. They met executives of the Water Corporation, and arranged the setting up of a laboratory scale (ie small scale) TBP demonstration plant at the Water Corporation's Woodman Point laboratories. One of Castledine's associates, Mr Douglas, arranged for the Pirts, Eley and Castledine to meet with the Premier and there was a discussion lasting 45 minutes or so with the Premier who expressed considerable interest in the technology.
At the meeting with the Premier, Eley says that he asserted that the plaintiff would own the TBP technology and grant licences throughout the world. Both Eley and Mr Douglas say that the Pirts, Eley, Castledine and Douglas held discussions after the meeting with the Premier in which Douglas explained that in order to attract any substantial financial backing for the plaintiff, it would need to own patent rights to the TBP technology, that intellectual property being the asset in which investors would be asked to invest in. At a later meeting with Water Corporation executives, one asked who owned the technology, and Professor Pirt replied that the plaintiff did. Although both Professor and Doctor Pirt denied that statements were made by them or in their presence at these meetings concerning the proposed ownership of the technology, I am of the view that such statements were made.
So far as the meeting with the Premier was concerned, any assertion that the plaintiff would own the technology (leaving aside the question of precisely what rights "owning the technology" would entail) was entirely consistent with Professor Pirt's evidence in this case that it was in the contemplation of the parties that patent rights would be assigned to the plaintiff and that this was Professor Pirt's preferred course. So far as Douglas is concerned, I found him a credible witness. Although he is a friend of Castledine, his relations with Eley are presently strained and he appears to have no motive for giving evidence which is untrue in order to assist the plaintiff. Further, advice of the type which he is said to have given is commercially sensible advice and is inherently likely to have been given at some time. So far as the meeting with the Water Corporation executives was concerned, Eley's account of this statement by Professor Pirt was supported by Ms McDaniel. She has no present association with the plaintiff, Eley, or Castledine; she appeared to be clear in her recollection of the relevant conversation; and she did not hesitate to admit that there were certain aspects of the events in 1997 which she was not, by contrast, able to recall. As to the last statement, it cannot have been factually accurate, since a patent must be assigned in writing (s 14 Patents Act) and it is common ground that there was no written assignment.
While I accept that these statements about ownership were made, their making does not, I think, assist the plaintiff. Doctor Pirt said in her evidence that it had only ever been contemplated that the plaintiff would acquire a licence to use the TBP, which would remain the property of Pirtferm, but the evidence of Professor Pirt, which I prefer on this point, was that he was at all times contemplating that assignment of the intellectual property in the TBP process might be made to the plaintiff. His evidence was essentially that he would have been happy for such assignment to take place, provided that the plaintiff had attracted an investor which would enable the plaintiff to fund such an acquisition, and that satisfactory terms could be agreed. As Professor Pirt put it in his evidence, he was of the view that commercialisation of the technology would proceed by the plaintiff getting some money in first, and then "we would negotiate an agreement over either the assignment of patents or licensing of patents". When asked about the order in which the investment and the assignment/licensing would occur he replied "Why not simultaneously". His evidence was that he always had an intention that he would come to an agreement with Eley and Castledine on the assignment or licensing of the patents. Statements that the plaintiff owned or would own "the technology" are as likely to be a reflection of this intention as they are to be a reflection of an existing contract.
In cross‑examination of Professor Pirt, a question of counsel for the plaintiff led Professor Pirt to explain that the assignment or licensing could have been, in his view, an assignment or licensing for individual countries or even individual institutions in a country, or alternatively for the whole world. He pointed out that patents are always limited to certain areas, and while he agreed that he was certainly considering assignment to the plaintiff "for the whole world" he took the view that that was simply one possibility and that further negotiation had to take place. It is unfortunate that this issue arose only during cross‑examination of the defendants, since it clearly reveals that the expression "assignment of the patents" or "assignment of the technology" is capable of a number of shades of meaning, which unfortunately were not explored during the evidence of any witnesses for the plaintiff.
Against this background it is convenient to turn to the evidence of the plaintiff concerning the meeting at which it was asserted that a contract was entered into. Because of the significance of the meeting on either 12 or 14 March 1997, it is desirable to set out in some detail the evidence which Eley and Castledine gave in respect of it.
In his witness statement, Eley said that during the last of a number of meetings at the Rydges Hotel he "outlined the corporate structure to the Pirts, confirming the name of PBPL, that John and Margaret [Pirt] would each receive 15% of the issued shares in PBPL together with $150,000." The witness statement continues:
"I said part of the $150,000 would be in reimbursement of bringing the technology up to this stage. I said further that in return for the monetary payment and the issue of their shares in PBPL, John and Margaret would cause Pirtferm Limited to assign the patent rights in the TBP technology to PBPL. I explained the share structure of PBPL … I asked them if they understood the corporate structure and both John and Margaret said words to the effect that 'Yes we do and we are happy with that arrangement'. I then again said that PBPL would be the company that owned the patents and PBPL would be in a position to raise funds for the future. I stated that the remaining 40% of the shares in PBPL would be used to raise funding for the commercialisation of the TBP technology, with 25% of that retained for investment by a major investor in order to raise $1.25-1.5 million in capital to build a 10 cubic metre demonstration plant. I said that the Pirt's payment of $150,000 would be paid once sufficient funds were available, which would probably be after the major investor had paid … The other 15 per cent of the shares in PBPL would be used to raise funds from small investors to commence the commercialisation process. I asked the Pirts if they were happy with that. They replied with words to the effect that 'Yes we are very happy'."
Eley said that Castledine then explained to the Pirts that PBPL would own the technology and that each of the four at the meeting would have 15 per cent of the shares and would be a director in order to make sure that the four of them did not lose control of the company. Eley asserts in his witness statement that Castledine said words to the effect that "PBPL would own the technology and would issue licences all over the world. Do you agree with that?" to which the Pirts replied "Yes we have said we are very happy with that". Castledine's evidence in his witness statement is almost identical. In particular, he too asserts that words were said to the Pirts to the effect that PBPL "will own the patents/technology and … will issue licences to other entities all over the world" and that they replied to the effect that "We are very happy" with that.
In oral evidence, although Eley and Castledine described the meeting as a "formal meeting", they made it clear that no minutes and no notes were taken and no attempt was made to record what was said in any written form. Mr Castledine agreed with the proposition that he regarded it as a formal meeting because formal things were done at it, most notably filling out by the Pirts of applications for shares in PBPL.
In cross‑examination, Eley elaborated somewhat on the circumstances of the meeting. As to some of the details of the meeting he was clearly mistaken. For example, he was at first certain that he had handed to Professor and Doctor Pirt certificates reflecting their shareholding in the plaintiff, when it appears plain from the dates of those certificates that they could not have been provided on 12 March and, after some reflection, he agreed that it was possible that the certificates were not provided until very much later. So far as the level of formality of the meeting was concerned, he agreed that an objective observer would have had difficulty in distinguishing between this meeting and any of the other discussions between the parties, in particular because he said that there was never any problem about anything that was discussed and that "everybody was happy with what was happening and everybody agreed with everything that was being done".

So far as the way in which the subject of assigning the technology arose, Eley said that the meeting was in effect formalising what had already been agreed at some earlier stage. Although he was unable to give specific evidence as to any earlier meeting at which express agreement had been reached in relation to this issue or as to how the earlier tentative licence proposal (Article XVII Letter of Intent) had crystallised into an agreement to assign, his evidence under cross‑examination was that earlier agreement had been reached:
"Through the course of the visit and prior to John's [Pirt] coming … but certainly during the course of the visit it's essential, its mandatory, that the company own the technology. How can you go out to somebody and raise funds when you haven't got anything …?"
In cross‑examination Eley said that he explained that the company had been formed and talked about the responsibilities of directors and talked about shareholders. He said:
"I then explained that this is the company that would own the technology which … it would be assigned from Pirtferm in due course". (Emphasis supplied)
He said that in relation to that he asked: "Are you happy with that?" and they said "Yes we are". He agreed that he did not say to the Pirts anything along the lines of "We're formalising what has already been agreed" but he said that he explained to them the structure of the company and the fact that they had agreed to transfer the patents to the company in exchange for 15 per cent each plus the $150,000. Castledine's oral evidence, although somewhat less detailed, was to very similar effect.
The defendants deny that an agreement was concluded in the way described by Eley and Castledine. The case was fought on the basis that it was one which involved substantial issues of credibility, and would require a choice to be made between accepting the evidence of Eley and Castledine one the one hand and that of the defendants on the other. However, considering all of the evidence of Eley and Castledine, I do not think that this is so. Even if I accept the evidence on behalf of the plaintiff, it seems to me that it is not sufficient to persuade me that that second and third defendants intended to make a concluded agreement on the day in question. Even if they did, it may well be that they did not succeed in doing so, having regard to the uncertainty which appears to me to surround the question of when any assignment would take place. However, rather than making a decision on the latter basis, it seems to me that a preferable analysis is one in which the uncertainty concerning that issue is to be regarded as one factor pointing to the conclusion that no intention to create legal relations at that time existed.
The production of the letter of intent by Eley and its signature by the Pirts tends to suggest that all of the parties were aware of the desirability of recording agreements even where it was not intended that such agreements would be contractually binding. In the light of that letter, I would be inclined to doubt whether Eley and Castledine intended to create legal relations on the day in question, having regard to the fact that they made no effort either then, or afterwards, (leaving aside certain self serving letters written once a dispute had arisen) to record any of the essential terms of the alleged agreement. However, their evidence is to the effect that they regarded a binding contract as having been entered into, and for the purposes of the present analysis I am prepared to accept that evidence. So far as the Pirts are concerned however, I am persuaded that there was no such intention.
My reasons for thinking that the Pirts did not intend to create legal relations, and that no objective observer could reasonably conclude that they did, rest upon what is essentially a fairly simple series of propositions. All previous correspondence and negotiations had plainly not been intended to be binding, but had been of a tentative and exploratory nature, aimed at reaching some general consensus as to the way to "go forward" (as Mr Castledine at one point put it). There is no evidence of anything said to the Pirts at the time of this meeting or immediately prior to it which would indicate that the discussion was intended to be a formal one or to have a force and effect different from those discussions (whether conducted by correspondence, by telephone or in person) which had preceded it. The setting was an informal one - a luncheon in an hotel room. There had apparently been no formal notice given, either orally or in writing, of the proposed subject matter of the discussion (although of course the purpose of the visit was to explore the "commercialisation" of the TBP so that that general topic must have been expected to have been discussed). No notes and no formal record were kept.
The subject matter of the discussion - the intellectual property in TBP - was regarded by all parties as potentially extremely valuable. Getting the technology into a form where it could be commercially exploited could be expected to be a complex process, and the discussions of how that might be achieved had been, until then, conducted in only very broad terms. Although Eley and Castledine had mentioned a number of potential investors, there was, at that stage, no identified potential major investor which appeared reasonably likely to invest the very large sum necessary to take the technology to a commercial stage.
Patents were held by Pirtferm or applied for in a number of jurisdictions, and it must have been obvious that "commercialisation" could be achieved in any number of ways, ranging from a commitment to use and develop the technology by one institution, or in one country, or a larger scale development by a major investor which was prepared to launch the technology world‑wide.
It is in my view extremely improbable that the Pirts would intend to reach any concluded agreement about the assignment of property which was potentially of enormous value in circumstances of extreme informality without the benefit of legal advice and in circumstances where no developed or detailed proposals for "commercialisation" of the TBP had been presented to them and where it was apparent that such commercialisation might take a number of forms and be carried out on anything from a very large to a relatively small scale. It is to be noted in this context that even the informal "letter of intent" suggests (Article XVII) that the agreement to licence then contemplated was conditional upon "appropriate … financial … support" for the plaintiff.
Further, the language used both by Eley and Castledine, and more especially by the Pirts, is at best ambiguous. Much of the evidence of Eley and Castledine was to the effect that they were explaining to the Pirts at that meeting what "would happen", or what "had been agreed" at some previous time. Such language is consistent either with an agreement on the one hand that each party would undertake specific obligations, or with an agreement on the other that the method outlined was the best way to proceed, or the most likely way to proceed, or the manner in which the parties desired to proceed. The words attributed to Professor Pirt that he and Doctor Pirt were "happy", or were "happy with that arrangement" are to my mind rather more consistent with approval of a plan of action rather than an intention at that time to undertake significant obligations.
Additionally, a number of terms of the alleged agreement were apparently uncertain. It was not clear what the $150,000 was payable for; the evidence of Eley was that it was in part reimbursement of expenses to date, suggesting that some unspecified portion would be consideration for the assignment of patents, although the earlier letter of intent had indicated that such a sum would be required for the purpose of reimbursement of expenses only. Eley's own evidence was that he expressly said that it was not clear when the payment of $150,000 would be made, but only that it would be "once sufficient funds were available". There was apparently no discussion of the amount of funds to be raised by the sale of the other 15 per cent of the shares in the plaintiff and no definition of precisely what steps were contemplated by the "commencement of the commercialisation process". Although Eley's saying that the plaintiff would own "the patents", may be understood as an assertion that the plaintiff would acquire all of the patents in existence or applied for at that time by Pirtferm, the apparently interchangeable expression that the plaintiff would own "the technology" is a much vaguer one and might or might not be understood as indicating an acquisition of all patents then applied for or existing.
Most importantly, there was no discussion of when the patents were to be assigned. In the plaintiff's amended answer to better and further particulars of substituted statement of claim dated 17 January 2000, the plaintiff by answer 4(b) concedes that "no date for the assignment of the patents was specified". If, as Eley and Castledine asserted, this assignment was critical to the alleged contract, the omission of any date by which performance was required appears to be significant. The answer continues by asserting:
"but it was intended for the assignment to take place before the raising of initial seed capital from Castledine investors …."
Even if one reads this answer generously, so as to represent some sort of necessary implication, there is no apparent reason for such an implication to be made. Castledine's evidence was that he approached a long‑term associate of his, Mr Farmer, in January of 1997 and that Farmer agreed to provide $25,000 worth of seed capital in return for 5 per cent of the proposed issued capital in the new company. It is therefore apparent that the raising of some seed capital could take place prior to the assignment of any patents. Such an implication would also be inconsistent with the sequence of events contemplated earlier by the parties (Article XVII of the Letter of Intent) and appears inconsistent with Eley's oral evidence that it would be "in due course".
A further difficulty in the way of any agreement on the date in question was that the parties appear to have taken the view that an assignment might be inconsistent to an extent with the agreement which Pirtferm had concluded with Glaxo and that the consent of Glaxo would be required. If there was an agreement however, it may be possible to deal with this difficulty by regarding it as conditional upon the appropriate consent being obtained.
Whatever the subjective understanding of Eley and Castledine, in my view the background against which the alleged agreement was said to have been reached, its subject matter, the circumstances in which the relevant meeting took place, and the words used by the parties, are inconsistent with an intention to reach a concluded agreement. Even if I accept the evidence given on behalf of the plaintiff, the plaintiff's claim must fail.
For the sake of completeness, I mention a number of factual issues. If it were necessary to decide between the witnesses in relation to their accounts of discussions on or about 12‑14 March 1997, I would prefer the evidence of Professor and Doctor Pirt. Portions of their evidence were not free from difficulty. I did not accept, for example, their evidence that no statements were made at meetings with the Premier, with Mr Douglas, or with executives of the Water Corporation regarding ownership of the TBP. There were inconsistencies in their conduct from time to time. For example, they asserted that the letter of intent was at no stage contractually binding, but letters which they wrote to Eley and Castledine after a breakdown in relations between them, seek payment of expenses "pursuant to" the terms of the letter of intent.
However, aspects of the evidence of Eley and Castledine were also not free from difficulty. In particular, Eley was asked about discussions which he had had with the Pirts and documents which he may or may not have provided to them, in relation to a proposed meeting at the offices of Minter Ellison in August 1997. The correspondence from Minter Ellison is not consistent with Eley's claim that he told the Pirts that there was to be a meeting at Minter's offices for the purpose of signing an agreement: at most, the meeting can have been intended at that stage to be one at which instructions might be given for the preparation of an agreement. Further, in relation to correspondence from Minter Ellison, Eley was, in my view, evasive when questioned about documents he had provided to the Pirts. He at first claimed that he had given them a complete version of the letter, later conceded that he "might have" provided them with only an edited version, and suggested that there "might have" been a reason for his editing the letter, while later again he proffered a reason for providing an edited version of the letter. His shifts in position on this issue and his claims not to remember precisely what he had done in relation to the letter were unconvincing.
Other aspects of the evidence which were said to be relevant to credibility I found unhelpful. In particular, much of the evidence revolved around what was described as a "shareholders' function". In relation to that function, Eley and Castledine gave evidence, as did a number of witnesses called by them, that it was a function at which shareholders in the plaintiff were introduced to the second and third defendants. Professor and Doctor Pirt on the other hand gave evidence that they were unaware at the time of this function that there were any shareholders in the company other than the original four. However, in my view a close analysis of the evidence suggests that it is most unlikely, after the passage of this period of time, that those present can accurately recall whether they were described at any time to Professor and Doctor Pirt as "shareholders" in the plaintiff, rather than "investors" in the technology.
The distinction is a significant one for present purposes, since it appears to me that Professor and Doctor Pirt are prepared to concede that they were aware that Eley and Castledine were seeking investors. Although it is not in my view necessary for me to reach a concluded opinion, it seems at least plausible that Professor and Doctor Pirt could have regarded the function as a social one for well wishers and supporters of the technology, rather than as a function for "shareholders" properly so understood. As I have noted, Professor Pirt has had a distinguished career and the technology which he invented may potentially be of substantial environmental and economic significance. It may well not have appeared unusual for him that a number of people would have been prepared to attend a function to discuss the TBP and to show support for it. He may well have thanked investors for investing in the technology, but of course there is no doubt that Eley and Castledine, who were present at the function, and who had paid some of the Pirts' expenses to date, were properly to be regarded as investors.
It is convenient to note also on this point that, although there is no doubt that Eley and Castledine paid, and the plaintiff apparently paid, certain of the Pirt's expenses, no question of part performance arises. Such payment was contemplated by the Letter of Intent, and some travel expenses were paid prior to either 12 or 14 March. Payment of those expenses is appropriately to be seen as the price the plaintiff was prepared to pay for the opportunity to continue to negotiate with the defendants.
Given that there were certain portions of the evidence in relation to which both Eley and Castledine on the one hand, and the Pirts on the other, gave evidence which was unsatisfactory and lacking in credibility, I am not able to form an overall view that the evidence of one or other of the witnesses is always to be considered more credible and to be preferred. In considering the discussions in March therefore, it has been necessary for me to consider both the inherent likelihood of the Pirts being prepared to reach an agreement of the type asserted by the plaintiff, and the demeanour of Eley and Castledine on the one hand and the Pirts on the other in relation to that particular meeting. I have already dealt with the likelihood of such an agreement.
So far as questions of demeanour are concerned, all of the witnesses appeared to give their evidence in relation to this issue with conviction. Eley and Castledine generally appeared to be genuinely of the view that "a deal" had been struck. However, Doctor and Professor Pirt equally appeared to be outraged by the suggestion that they would sell their significant technology so cheaply. I was however, particularly impressed by the evident strength of Professor Pirt's desire to ensure that the process which he had invented was developed and applied. This concern appeared to go beyond a mere interest in profit: rather it is a source of personal pride that he has developed a process which he regards as so significant. I therefore more readily accept that he would not have agreed to assign the intellectual property in that process to the plaintiff, unless it was clear that a major investor had been found which definitely had the resources and the interest to ensure that that process was developed and applied. I also noted that Doctor Pirt expressed in the witness box a concern for appropriate documentation, and a desire to locate or refer to documents which supported aspects of the evidence which she was giving, which bordered on the obsessive. It seems to me unlikely that she would have agreed informally and without documentation to a proposal of the significance of that suggested by Eley and Castledine.

Conclusion

For the reasons given, I would dismiss the plaintiff's claim.