Pointerra Limited v Here Europe B.V
[2024] WASC 212
•10 JUNE 2024
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS
CITATION: POINTERRA LIMITED -v- HERE EUROPE B.V. [2024] WASC 212
CORAM: SOLOMON J
HEARD: 6 JUNE 2024
DELIVERED : 6 JUNE 2024
PUBLISHED : 10 JUNE 2024
FILE NO/S: COR 160 of 2023
BETWEEN: POINTERRA LIMITED
Plaintiff
AND
HERE EUROPE B.V.
Defendant
Catchwords:
Corporations law - Application to set aside statutory demand - Where contract governed by foreign law - Genuine dispute - Offsetting claim - Whether issue of construction should be resolved under s 459G Corporations Act - Turns on own facts
Legislation:
Corporations Act 2001 (Cth) s 459G, s 459H, s 459J
Result:
Application granted
Category: B
Representation:
Counsel:
| Plaintiff | : | Mr S Penrose |
| Defendant | : | Mr WCJ Zappia |
Solicitors:
| Plaintiff | : | Tottle Partners |
| Defendant | : | Dentons Australia |
Cases referred to in decision:
Advanced National Services v Daintree Contractors [2019] NSWCA 270
CA & Associates v Fendi Group [2020] WASCA 31
Complete Hire and Sales Pty Ltd v Terra Firma Constructions [2018] WASCA 111
Creata (Aust) Pty Ltd v Gary Adrian Faull [2017] NSWCA 230
Du Buisson Perrine v Chan 49 WAR 432
Farrant v Leburn [1970] WAR 179
McDonald v Dennys Lascelles (1933) 48 CLR 457; [1933] HCA 25
Secretary, Department of Social Services v Vader (by his litigation guardian) [2024] FCAFC 37
SMEC Australia Pty Ltd v Valentine Falls Estate Pty Ltd [2011] WASCA 138
SOLOMON J:
(This judgment was delivered largely extemporaneously on 6 June 2024 but was unable to be completed. It has been edited from the transcript and was supplemented in order to complete the reasons)
The application
This is the application of the plaintiff (Pointerra) under s 459G of the Corporations Act 2001 (Corporations Act) to set aside a statutory demand served on Pointerra by the defendant (HERE) and dated 22 September 2023. The factual background is relevantly uncontroversial and is set out in an affidavit on behalf of Pointerra by its managing director, Ian Olson, and an affidavit on behalf of the defendant by HERE's account manager, Mark Wallace. The relevant background may be summarised as follows.
Background
Pointerra is a technology company listed on the Australian Stock Exchange. It specialises in software which analyses three-dimensional data comprising three-dimension co-ordinates corresponding to spatial locations. Pointerra procures data from other enterprises that acquire the data by, for example, physical travel on roads. According to the evidence of Mr Olson, it is important for Pointerra's business purposes that the three-dimensional source data be very accurate in all three dimensions, and from one batch of data to another. Mr Olson gave as an example of the service provided by Pointerra, data that can allow local councils to monitor fixed assets such as sign posts, roads or pavements allowing a local council, for example, to identify a missing park bench or street sign.
HERE is a company based in the Netherlands (and, it appears, also in Chicago in the United States). HERE's business includes the supply under licence of various data and software. Amongst the data and software produced and provided by HERE under licence is the sort of data and software utilised by Pointerra.
Contractual documents
In September 2019, Pointerra and HERE entered into an agreement called the HERE Partner Program Agreement (PPA). The PPA appears to be, in effect, a form of master agreement that contemplates further downstream agreements setting out terms and conditions and the licensing of particular products or services. Some of these downstream agreements contemplated by the PPA are referred to as Licence Supplements. The fees charged by HERE for particular licenced materials are set out in the various downstream agreements including but not limited to the Licence Supplements.
Clause 2 of the PPA sets out the structure of the suite of agreements contemplated by the PPA and defines the 'Agreement' to include the PPA in addition to any one or more of the Licence Supplements and any further letters or policies or guides as defined in the PPA. It is therefore evident that the PPA itself contemplates that the relationship between the parties will be governed by a suite of documents and that the suite itself shall be dynamic and evolving.
Clause 2.3 of the PPA provides for the precedence of the various documents contemplated to be included in the suite of agreements. Clause 2.3 provides that, to the extent of any conflict within the various arrangements or agreements constituting the suite of agreements, they prevail in the order set out at clause 2.1. The first document in that list of the suite of agreements is the PPA itself. Therefore, clause 2.3 of the PPA provides that under the terms of the PPA, it is the PPA that prevails in the event of any conflict.
Clause 5 of the PPA is headed Fees, Reports, Invoicing. Clause 5.1.1 provides that the fees for the use of Licence Materials (which is itself a defined term) are set out in the relevant Licence Supplement. That is, clause 5.1.1 contemplates that the quantum of the fee and presumably other associated aspects of the fee are to be provided for in the downstream Licence Supplements.
A critical clause in this dispute is clause 5.2 of the PPA which provides:
[Pointerra] shall pay HERE a non-refundable (except in the case of termination for cause by [Pointerra]) minimum annual licence fee ("MALF") in the amount and in such instalments as set out in the Partner Commercial Conditions Confirmation (if any). The MALF shall be applied annually to fees due under all Licence Supplements between HERE and [Pointerra]. Fees or MALFs do not apply to any other fee periods and may not be credited towards or offset other amounts due to HERE under the Agreement.
One aspect of that clause may be immediately observed. The clause provides for a minimum annual licence fee (MALF) but the clause itself does not prescribe the amount. Rather, the amount is to be set out in a different instrument referred to as the Partner Commercial Conditions Confirmation (with the words added 'if any'). It follows that clause 5.2 does not of itself impose an obligation to pay any particular amount. To the extent that an amount is able ultimately to be determined, however, that amount is said to be non-refundable with the qualification that it is refundable in circumstances of termination for cause.
A further feature of the PPA is that clause 12.9 provides that the governing law of the Agreement is the law of the Netherlands. Both parties agreed therefore that the law of the Netherlands was the law that governed the construction and operation of the PPA and, indeed, the suite of Agreements by reason of the definition of Agreement in clause 2.1 of the PPA as noted above.
It is then necessary to consider the further agreement styled 'Partner Program Commercial Conditions Confirmation' (PCCC) which is the Agreement referred to expressly in clause 5.2 of the PPA, as noted above. That is a two-page agreement signed by Mr Olson of Pointerra on 16 March 2021. I observe therefore that the instrument that provides the particulars of the fee referred to in clause 5.2 of the PPA was not entered into until approximately one and a half years after entry by the parties into the PPA. Although signed on 16 March 2021, the PCCC is dated 15 March 2021 and is said to be for a term of 36 months from that date. Item 4 of the PCCC provides that it is governed by and incorporates the PPA.
The critical clause in the PCCC is clause 7 which provides:
The total MALF for Partner under the [PPA] shall be USD 250,000, of which USD 249,000 should apply to HERE Content and USD 1,000 to other HERE Product and Services.
During each annual period the partner shall pay the MALF as follows:
(a) During the first annual period (i) USD $125,000 will be invoiced on 15 April 2021, and (ii) the balance of USD 125,000 will be invoiced upon acceptance of the Deliverables under SOW 1 and SOWA 2; and
(b) During the second and third annual periods USD 250,000 is payable upfront quarterly in four (4) equal instalments.
Each payment is due 30 days from the invoice date. For the avoidance of doubt, the first payment of USD 125,0000 under subsection 7(a)(i) will be payable on 15 May 2021.
In this [PCCC]:
"SOW 1" means the Statement of Work No. 1 which commenced 15 March 2021; and
"SOW 2" means Statement of Work No. 2 which commenced 15 March 2021.
I note the following features of clause 7. The clause provides for the quantum of the MALF, that is, US$250,000. That figure is then divided. The opening paragraph of clause 7 provides that USD$249,000 is for 'Content' and US$1000 is for 'Product and Services'. That breakdown reflects the breakdown in the Statements of Work which is a further set of documents or agreements entered into by the parties to which I will come. Thus, clause 7 of the PCCC makes plain that the MALF referred to at clause 5.2 of the PPA is US$250,000.
Clause 7 of the PCCC then provides for a further differential in respect of the two halves of the USD$250,000. That is, the MALF of USD$250,000 is divided into two payments of USD$125,000 each. Under clause 7(a)(i) the first tranche of USD$125,000 is to be invoiced on 15 April 2021 which is a month after the date of the PCCC. Under clause 7(a)(ii) the second tranche of USD$125,000 is to be invoiced upon acceptance of the 'Deliverables' under the Statement of Work No. 1 and the Statement of Work No. 2.
That is the stipulation for the first year of the MALF. Clause 7(b) provides that for the subsequent annual periods, the MALF of USD$250,000 is payable upfront quarterly in four equal instalments.
Each of the payments under clause 7 is due 30 days from the invoice date. Clause 7 provides that the first payment, that is, the payment provided for by clause 7(a)(i), is payable by 15 May 2021. That is how the PCCC works in any event because the invoice is to be issued under clause 7 on 15 April 2021 and is payable within 30 days.
It follows quite obviously that the first tranche of the MALF is payable two months after the effective date of the PCCC.
HERE's position is that clause 5.2 of the PPA rendered the MALF payable independently of the performance of any work under the Statements of Work or under the Licence Supplement. It did not need to be 'earned' and was payable in advance of, and independently of, the provision of any benefit conferred by HERE under the various instruments. Clause 7 of the PCCC in effect then treated differentially two halves of the MALF. Clause 7 of the PCCC modified clause 5.2 of the PPA such that the absolute and independent obligation to pay the MALF applied only to the first tranche of the MALF, that is, the US$125,000 due on 15 May 2021. That is to be contrasted with the second tranche of US$125,000 which was to be paid for only upon acceptance of Deliverables under the Statements of Work and therefore were referable to the performance by HERE of its obligations under those instruments. The defendant's position was therefore that the first tranche of US$125,000 is indisputably payable irrespective of the performance, or the quality of the performance, by HERE under any of the Statements of Work, Licence Supplement or other agreements. HERE accepts that on the construction it propounds, the second tranche of the first MALF was related to performance of HERE's contractual obligations and had to be 'earned'.
I observe at this point that clause 7 does not in its terms purport to change the character of the second tranche of the US$125,000 or, for that matter, the MALF for subsequent years, in the sense that the clause does not suggest or purport to effect a change in the character of any element of the MALF. Put simply, clause 7 of the PCCC does not say that the MALF is reduced to US$125,000 to be invoiced on 15 April 2021 and that the balance of the quantum does not have the character of the MALF provided for by clause 5.2.
Rather, clause 7 of the PCCC on its face suggests that the whole of the quantum of US$250,000 constitutes the MALF but that the clause provides for the periods in which the various tranches of the MALF shall be paid. On a plain reading, all the sums in clause 7 of the PCCC and the associated conditions relate to the MALF stipulated by clause 5.2 of the PPA.
As I have observed, the PCCC refers expressly to two other documents - Statement of Work No.1 and Statement of Work No. 2. The Statements of Work commenced on 15 March 2021. They plainly were intended to operate simultaneously with the PCCC. The Scope of Work No. 1 and the Scope of Work No. 2 are in similar terms but provide for different items to be licensed.
The Statements of Work describe the project scope of work and deliverables schedule and other associated items of a particular Pointerra and HERE project. I should at this point observe that the project that was the subject of the Statement of Works and associated agreements concerned what the parties referred to as 'LIDAR' which is an acronym for light detection and ranging. Mr Olson explained that this is a distance measurement technique which uses beams of light to measure distances.
The Statements of Work are subject to yet a further agreement referred to as the consulting services agreement between the parties which was said to be effective from 23 December 2020. The Statements of Work are said to be subject to the terms of that agreement, with the terms of the Statements of Work prevailing in the event of conflict. Clause 9 of the Statement of Work No. 1 and clause 10 of Statement of Work No. 2 provide for the fees payable by Pointerra. Statement of Work No. 1 provides that the fee is US$249,000 plus actual expenses and that the sums generated under that scope of work are to be applied against the MALF agreed in clause 7 of PCCC.
Clause 11 of the Statement of Work No. 1 provides for further terms and conditions. Clause 11.2 provides that in the event that HERE and Pointerra do not execute a separate Licence Supplement within 30 days or the Licence Supplement entered into is terminated during the three year term for any reason, then Pointerra must pay an amount determined by HERE acting reasonably for the services properly performed under the scope of work. The Statements of Work were signed by Pointerra and HERE on 16 March 2021 and 23 March 2021 respectively.
The Statement of Work No. 2 reflects the same terms and conditions with different particulars of the work. The fees provided in clause 10 of the Statement of Work No. 2 is for a fee of US$1000 plus expenses. It is evident that the aggregate fee of US$249,000 under the Statement of Work No. 1 and US$1,000 under the Statement of Work No. 2 equates to the MALF of US$250,000 under clause 7 of the PCCC.
On the same date as the Statements of Work and the PCCC were executed, the parties also entered into a LIDAR Licence Supplement (Supplement). The Supplement recites the background making express reference to the Statements of Work. The Supplement is plainly a downstream document expressly contemplated by the PPA to which I have referred. Item 4 provides that the Supplement is governed by and incorporates the PPA but goes on to provide that in the case of, and to the extent of a conflict between the Supplement and the PPA, the Supplement prevails. It will be immediately observed that that clause appears to conflict with the order of precedence provided by the PPA itself. The effective date of the Supplement is recorded as 15 March 2021.
Item 12 of the Supplement provides for fees. The fees reflect the fees in the Statements of Work which, as observed, reflect the quantum of the MALF; except that the fee under the Supplement is the same US$250,000, but with the addition of 25 per cent of revenue generated by Pointerra, at least for the first year. The second year has a slight variation to the fee that is in addition to the US$250,000. Item 16 of the Supplement refers to the MALF and states that the sums generated under the Supplement are to be applied against the MALF as set out in clause 7 of the PCCC.
Item 17 of the Supplement provides that payment is due 30 days from the invoice and that all currency figures are to be understood as US dollars.
The outline above describes broadly the relevant suite of documents. It may be observed that some of the obligations of the parties do not emerge with ease and clarity.
The dispute
Returning to the evidence of Mr Olson, in his affidavit he states that leading up to the entry into the Supplement and other agreements, Mr Olson and others from Pointerra emphasised to HERE the importance to Pointerra of the accuracy of the data to be provided under the Supplement.
Mr Olson's evidence was that there were numerous problems with the data. It was unfit for purpose and was not able to be used by Pointerra to deliver the product it was seeking to develop and commercialise in its proposed products. For the purposes of this application, HERE accepted that there was a genuine dispute about whether Pointerra received the benefit of the content provided by HERE under the Supplement and associated agreements.
In the period 1 July 2021 to mid-2023 HERE issued various invoices to Pointerra for sums that totalled US$625,000. The first of those invoices appears to be the invoice provided for by clause 7(a)(i) of the PCCC. However, it was not issued as contemplated by that provision on 1 April 2021 but rather on 1 July 2021. Consistently with the PCCC, it was issued for the amount of US$125,000 and was described as 'Annual Fees Year 1'. Neither that amount nor any subsequent invoices have been paid by Pointerra.
Pointerra has refused to pay because it says it did not get a product that was fit for purpose. It says further that by reason of HERE's failure to provide a product that was fit for purpose, it has incurred wasted business development expenditure, it has lost the opportunity to sell the product it intended to develop, and it has suffered reputational damage. Pointerra made no effort to quantify any of those alleged losses in its evidence.
Pointerra also claims that by reason of the circumstances outlined in Mr Olson's affidavit, it is entitled to have the relevant instruments set aside under the Australian Consumer Law.
Statutory notice of demand
HERE's notice of demand issued under s 459E of the Corporations Act was limited just to that first invoice of 1 July 2021 for US$125,000 pursuant to clause 7(a)(i) of the PCCC (Invoice). HERE accepts that there is a genuine dispute in respect of the balance of the invoices. However, HERE contends that on a proper construction of the instruments, there can be no genuine dispute regarding the Invoice. I turn now to the relevant principles.
Applicable principles
Under s 459H the court must determine whether there is a genuine dispute about the existence or amount of the debt to which the demand relates, or whether Pointerra has an offsetting claim. In substance, if the court is satisfied that there is a genuine dispute in relation to the Invoice or that the amount of Pointerra's offsetting claim exceeds the alleged debt the subject of the Invoice, then the notice of demand ought to be set aside. The matter for determination is therefore whether there is a genuine dispute regarding the Invoice or whether the amount of Pointerra's offsetting claim exceeds the Invoice.
The relevant principles are fairly well settled and have been set out in many cases. They need not be repeated. However, there are two particular issues of relevance that arose in this matter on the written submissions, only one of which remained after oral submissions.
The first and remaining issue is the extent to which on an application under s 459G, the court should embark on a consideration of a dispute arising from a point of contractual construction. The second, which did not remain in dispute between the parties, is the level of particularity required to permit a court to take account of an offsetting claim for the purposes of s 459G.
The first of those two issues was considered by the Court of Appeal in CA & Associates v Fendi Group [2020] WASCA 31 (CA & Associates). In that matter Buss P and Vaughan J said [38] - [41]:
Cases in which the court will determine a disputed question of contractual construction on an application to set aside a statutory demand will be the exception rather than the norm. Two things are established by the authorities. First, in dealing with an application to set aside a statutory demand the court is not compelled to determine questions of construction of instruments. Second, such proceedings are not ordinarily the occasion for the court to construe a contract, especially where there are competing views about its meaning. The corporations list ought not to be used as a convenient means of determining a dispute about whether a putative debt is due and payable, even if the only disputed issue is one of contractual construction.
Where the question of contractual construction has any element of rational controversy the court should exercise restraint.
Competing but plausible submissions on a question of contractual construction should lead to a finding that there is a dispute on the question and therefore a dispute as to the existence of the debt the subject of the statutory demand. Consistent with the existing authorities - excluding as a 'genuine dispute' only that grounded on feeble legal argument or which is spurious, illusory or misconceived - there is a genuine dispute where a question of contractual construction is subject to rational argument.
Thus it is necessary to consider whether the question of contractual construction being relied on for the genuine dispute is so obviously incorrect that it is properly characterised as being incapable of rational argument, i.e it is no more than a patently feeble legal argument - one that is spurious, illusory or misconceived - which lacks plausibility.
In some respects, the threshold question of whether there is a genuine dispute might be akin to whether there is a serious question to be tried or an arguable case in resisting an application for summary judgment. In the context of an application for summary judgment, it is well established that the question of whether a claim is so untenable that it cannot possibly succeed may require extensive argument. Nevertheless, the Court of Appeal in SMEC Australia Pty Ltd v Valentine Falls Estate Pty Ltd [2011] WASCA 138 said [20]:
...whilst the court may determine any difficult question of law on such an application, it will usually be appropriate to leave the determination of such questions for trial.
While the comparison to applications for summary judgment may be useful in some respects, it is, in my view, important to appreciate the difference in the regulatory regime in which the two applications are made. An application for summary judgment is a mechanism for the substantive resolution of a dispute through the determination of the respective rights of the parties on the substantive issues that divide them. In contrast, s 459G is an application to set aside a mechanism designed to test the solvency of a company and its ability to pay its debts. Failure to comply with a statutory demand which has not been set aside gives rise to a presumption that the company is insolvent for purposes which include an application that the company be wound up in insolvency. The regime is thus not directed to the resolution of the underlying substantive rights of the parties. Rather, the evident object of s 459H is to confine the effect of a statutory demand to amounts which are indisputably due and payable.[1]
[1] See Complete Hire and Sales Pty Ltd v Terra Firma Constructions [2018] WASCA 111 ('Complete Hire').
It may indeed be appropriate in limited circumstances to determine a dispute of contractual construction in an application for summary judgment. However, in my view, given the difference in the regulatory object of the two regimes, it is less likely that such an exercise should appropriately be undertaken in an application under s 459G. That point was eloquently explained by Mitchell JA in CA & Associates [89] ‑ [93]:
The issue of a statutory demand is not a means by which the ordinary curial procedures for debt recovery are to be avoided. The purpose of the statutory demand procedure is not to allow claimants to use the spectre of a winding up application to apply additional pressure on a corporation to satisfy their claims. Rather, the purpose of the statutory demand procedure is to facilitate a winding up application where there is no apparent reason, other than insolvency, for the corporation's refusal to pay a demanded amount. That is why, in dealing with an application to set aside a statutory demand, the court must keep in mind that the task which it is performing is the determination of the amount of a genuine dispute or claim, which must exist in fact, rather than resolving the dispute or offsetting claim, or attempting to predict its outcome.
In my view, the threshold to be met by an applicant seeking to establish the existence of a genuine dispute under s 459H is lower than that facing a defendant opposing a plaintiff's summary judgment application. The question on a summary judgment application is whether there is such a high degree of certainty about the ultimate outcome of the action if it went to trial that summary judgment ought properly be granted. If so, it will be in the interests of justice to resolve the controversy by entering judgment at an early stage of the proceedings. In a summary judgment application, the court resolves the dispute by entering judgment where the court is able to make a certain and concluded determination that the plaintiff would succeed. Even a strong claim may be genuinely disputed, and the proper course for a claimant in those circumstances is to commence proceedings and seek summary judgment.
On the other hand, the question in the current context is whether the existence of the dispute provides a reason, other than insolvency, as to why the demanded amount has not been paid. The question for the court considering an application to set aside a statutory demand is whether the corporation's basis for disputing the debt is so lacking in merit as to indicate that the professed dispute is not genuine, so that it is not a reason for non-payment of the debt.
The question on an application to set aside a statutory demand remains the same even if the dispute turns on the proper construction of a document which both parties accept is to be construed only by reference to its terms. That is illustrated by the decision of the New South Wales Court of Appeal in Creata (Aust) Pty Ltd v Faull,[2] in which the court recognised that such proceedings were not ordinarily the occasion for the court to construe a contract where there are competing views about its meaning. The court put the question in terms of whether the applicant presented a 'patently feeble argument', or whether the question of construction was 'as plain as a pikestaff'.
That is, even where the question is one of pure construction, it remains the case that the answer must be so apparent that the court can conclude the ostensible dispute put forward by the applicant is not genuine, so that it is not a reason for non-payment of the claimed debt.
Construction of the agreements
[2] Creata (Aust) Pty Ltd v Gary Adrian Faull [2017] NSWCA 230; BC201707172.
The issue that divides the parties is ultimately one of the proper construction of clause 5.2 of the PPA and clause 7 of PCCC. The question for the court is whether the construction urged by Pointerra is a patently feeble argument such that Pointerra's basis for disputing the debt is so lacking in merit as to indicate that the professed dispute is not genuine. HERE contends there is no genuine dispute because on the proper construction of the suite of agreements between the parties, the Invoice is indisputably owing. Whether that is so depends upon the proper construction of the instruments.
The principles of contractual construction are not relevantly controversial. They were conveniently set out in a similar context by the Court of Appeal in the CA & Associates decision at [51].
In its written submissions supplemented by oral submissions, HERE contended that clause 5.2 makes it plain that the Invoice is payable irrespective of the level to which the licenced materials are used and irrespective of the performance or the quality of the performance under the Supplement and associated agreements. As noted above, HERE submitted that the effect of clause 5.2 of the PPA and clause 7 of the PCCC was that the MALF under clause 5.2 was effectively modified so that the unconditional and immediate nature of the obligation to pay only applied to the first tranche of US$125,000 under clause 7(a)(i) of the PCCC. HERE submitted that a proper understanding of the suite of documents and particularly those two clauses was such that the parties had agreed that the first tranche of the first year of the MALF did not need to be earned. It was due and payable in advance of the provision of any benefit and could be credited against any benefits, if any, subsequently conferred on Pointerra by the various agreements. HERE also pointed to the fact that clause 5.2 expressly provided that the fee was non-refundable other than in the event of termination. There is no suggestion or evidence here that the PPA has been terminated.
In broad terms, Pointerra submitted that a genuine dispute arose by reason of its contention that on a proper construction of the agreements, notwithstanding the terms of clause 5.2 of the PPA, the payment of the MALF was for the benefit of the content provided by HERE under the Supplement and associated documents. In circumstances where the content provided was defective, there is a genuine dispute about the obligation to pay the MALF.
Both parties referred to the decision of the New South Wales Court of Appeal in Advanced National Services v Daintree Contractors [2019] NSWCA 270. In that decision, Gleeson JA, with whom the other members of the court agreed, referred to various authorities regarding the failure to pay a contract debt and the difference between a claim in debt and a claim for damages. Gleeson JA explained that [47]:
The important difference between a claim in debt and a claim for damages for breach of contract is that a claim in debt is a claim to enforce a primary obligation. Hence "[t]he question is whether the sum has been 'earned', not whether the contract has been breached": J W Carter and M J Tilbury, Remedial Choice and Contract Drafting (1998) 13 JCL 5 at 21.
Here, there is no issue of a claim for damages. The claim is for a debt said to be owing under the PPA and the PCCC. An important question here is whether it is a debt that on a proper construction of the instruments was required to be 'earned'. Gleeson JA referred also to the seminal decision of Dixon J in the High Court case of McDonald v Dennys Lascelles (1933) 48 CLR 457; [1933] HCA 25. It is not necessary to descend into the details of that decision and the principles it discusses. It is sufficient to observe that an important issue here is to consider: what is the fee the subject of the Invoice for? Or in other words, what was the consideration for the payment demanded?
A useful comparison may be made with the law of deposits - a common instance in which a non-refundable fee is payable at or towards the commencement of a contract. Generally speaking, a deposit is payable independently of any obligation of performance and may thus be recovered even if the contract is terminated. The basis for that was explained by Wickham J in Farrant v Leburn [1970] WAR 179 at 183 - 184 (Farrant). His Honour explained that a deposit is not conditional upon completion or performance of a contract. That is because a deposit is a payment, the consideration for which is entry into the contract and the promise made thereby by the other party. Therefore, the consideration is fully provided upon entry into the contract and the obligation to pay thereby crystallises irrespective of subsequent performance or, indeed, termination of the contract for cause or otherwise.
That explanation is also reflected in Professor Carter's Contract Law in Australia, 8th edition where the learned author sets out the various approaches to the law of deposits at [37-37] and explains that the prevailing and correct view is that a deposit is recoverable as a liquidated sum irrespective of performance because the right to payment accrued unconditionally prior to termination.
The principles and the law associated with obligations relating to deposits was considered at some length by the Court of Appeal in Du Buisson Perrine v Chan 49 WAR 432 (Du Buisson Perrine), a decision of McLure P and Newnes and Murphy JJA. McLure P explained the notion of a deposit and observed that most cases on deposits concern deposits payable on or around the time of entry into the contract but that that was not necessarily the case.
Both McLure P and Murphy JA (although Murphy JA was not in agreement with the President on the result) adopted the explanation of Wickham J in Farrant. Murphy JA cited authority that the normal incident of a deposit is that it is liable to forfeiture upon default. That is because it is a primary obligation that arises independently of performance. Whether an obligation to pay bears that character is a matter of the proper construction of the instrument. One factor in that consideration is the proportion that the deposit bears to the total price. The higher the proportion that the deposit bears to whole of the price or the fee, the less likely it is that the parties intended the obligation to pay the debt to arise independently of performance.
The question is ultimately whether, on the proper construction of the suite of agreements, and in particular the PPA and the PCCC, the obligation to pay the Invoice arises as HERE contends, independently of any performance of, or benefit conferred by, HERE. For the purposes of this application it is not necessary to make a final determination of that question. The court need only be satisfied that the contention to the contrary is not so feeble as to render the dispute one which could not be genuine.
Disposition
In my view, although HERE's preferred construction has merit, it is not patently unarguable that the allegedly deficient performance by HERE may entitle Pointerra to refuse payment of the Invoice. That is because I consider it is not untenable to contend that the Invoice is not a primary obligation that prevails independently of HERE's performance of its contractual obligations.
The MALF was not payable upon entry into, or at the commencement of the PPA or the PCCC, or the Supplement. That suggests the consideration for the payment was not the entry into one or more of those instruments. Further, clause 7 of the PCCC expressly ties at least the second tranche of the first MALF to performance in the form of 'Deliverables'. That nexus is both temporal (in the sense that it is not payable until the time of the Deliverables) and substantive (in the sense that the payment is expressly referenced to performance of contractual obligations by HERE).
I do not accept as obviously and necessarily correct HERE's submission that the first tranche under clause 7(a)(i) of the PCCC modified clause 5.2 of the PPA such that the first tranche had a different character or quality than the balance of the fee. It is quite arguable that on the plain terms of clause 5.2 of the PPA and clause 7 of the PCCC the various tranches of the MALF bore the same character. If that is so, then the invoice is less likely to bear the character attributed to it by HERE.
Although clause 5.2 of the PPA does provide that the MALF is non-refundable, that does not present an insurmountable obstacle to Pointerra's preferred construction. The MALF here has not been paid; so no issue of a 'refund' arises. The non-refundable quality of the payment is also excluded where there has been termination for cause. Although that has not happened here, it suggests there is an arguable link between the MALF and performance of the contractual terms.
Pointerra's position is also supported by the fact that the MALF is a very high proportion of the full fee payable under the Supplement and indeed in certain circumstances may have been almost the entirety of the fee payable under the Supplement. On the analysis of Murphy JA in Du Buisson Perrine [120] - [125], that factor mitigates against the MALF bearing the character of a payment akin to a deposit.
The construction urged by Pointerra might also be supported by clause 11 of the Statements of Work which provide that in the event that the Supplement is not entered into, then Pointerra must pay an amount determined by HERE acting reasonably for the services properly performed under the scope of work. That provision suggests that the consideration for the payment of any fees is the performance by HERE of its contractual obligations and makes no reference to a non-refundable element of the payment.
Foreign law
At the commencement of his oral submissions, counsel for HERE referred to the provision of the PPA that the governing law is that of the Netherlands. Counsel submitted that as Pointerra had brought no evidence of the law of the Netherlands, the court could not know the applicable law and therefore could not be satisfied that there was a genuine dispute. As I foreshadowed in the course of oral argument, I do not accept that submission. If I am satisfied, as I am, that there is a genuine dispute under Australian law, in my view it would be unsatisfactory for the notice of demand to remain effective on the basis of a possibility that the law of the Netherlands might be different in circumstances where neither party sought to demonstrate that to be the case. In those circumstances I would be inclined in any event to set aside the notice of demand under s 459J of the Corporations Act on the basis that there is some other reason the demand should be set aside.
In any event, as the Full Court of the Federal Court recently re-affirmed in Secretary, Department of Social Services v Vader (by his litigation guardian) [2024] FCAFC 37 [46], it is well-established that, absent proof of foreign law, it is presumed that foreign law corresponds with, and is the same as, the law of the forum.
Genuine dispute
In the circumstances, I consider that it is not appropriate to resolve the constructional debate on this application. It follows that there is a genuine dispute in relation to the Invoice and the application to set aside the notice of demand should therefore be granted.
In addition to the constructional debate, as noted above, Pointerra claims that on the basis of HERE's allegedly false assurances and defective performance it is entitled to set aside the relevant instruments under the Australian Consumer Law. In my view, that provides a further reason for granting the application.
Offsetting claim
As noted above, Pointerra relied in its written submissions on an offsetting claim. The terms of s 459H make plain that in order to take account of such a claim, the court must be in a position to make an assessment of its quantum so that it can take account of 'the amount of that claim'. In Complete Hire [15] - [17], the Court of Appeal explained the particularity required. In short, precise quantification is unnecessary but there must be evidence of a plausible and coherent basis for quantifying the claim. Counsel for Pointerra rightly conceded that the evidence adduced by Pointerra did not reach even that threshold and so no reliance was ultimately placed on the offsetting claim.
Conclusion
For these reasons, the application to set aside the notice of demand will be granted.
I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
LZ
Associate to the Honourable Justice Solomon
10 JUNE 2024
0
6
1