Rocla Pty Ltd v Plastream Pipe Technologies Pty Ltd - [2011] SASC 80

SUPREME COURT OF SOUTH AUSTRALIA
(Civil)
ROCLA PTY LTD v PLASTREAM PIPE TECHNOLOGIES PTY LTD & ANOR
[2011] SASC 80
Judgment of The Honourable Justice Anderson
12 May 2011
CONTRACTS - GENERAL CONTRACTUAL PRINCIPLES - OFFER AND ACCEPTANCE - OFFER - OPTION FOR VALUABLE CONSIDERATION OR UNDER SEAL - EXERCISE OF OPTION - TIME FOR EXERCISE
DEEDS - ALTERATION OF DEED AFTER EXECUTION
On 22 August 2008, parties entered into a business sale agreement (BSA) with a third-party (Caliber Pty Ltd) for the purchase by the plaintiff of the Caliber business - Caliber carried on business using intellectual property sub-licensed to it by the first defendant which in turn licensed it from the second defendant as owner.
On the same date, parties entered into various ancillary agreements for the benefit of the plaintiff in carrying on the Caliber business – form of agreements attached as schedules to the BSA - first defendant entered into a new sub-licence deed with the plaintiff for the intellectual property as contemplated by the BSA (Sub-licence) – Sub-licence contained option to purchase specific equipment – plaintiff and first defendant later purported to vary the Sub-licence to extend the time for exercise of the option – option purportedly exercised within extended period.
Whether option exercised within time - whether time for exercise of option validly extended - whether consent of second defendant, as a non-party to sub-licence, required to extend option – whether Sub-licence part of a series of agreements (including the business sale agreement) and therefore a single transaction – whether option validly exercised in accordance with terms of Sub-licence.
Held: Period for exercise of option validly extended – parties to Sub-licence did not require consent of non-party to extend option – Sub-licence not part of other agreements comprising single transaction - option validly exercised within extended period.
PRIVITY OF CONTRACT
Whether privity principles prevent argument from second defendant, a non-party to Sub-licence.
Held: Privity does not prevent argument because second defendant joined in action and issues raised by plaintiff as to valid exercise of option.

ESTOPPEL - ESTOPPEL BY CONVENTION
Whether conventional estoppel arises on the facts – whether mutual adoption by the parties to the BSA of an assumed state of fact that no party would vary terms of ancillary agreements without consent of all parties.
Held: Requirements of conventional estoppel not made out.

TRADE AND COMMERCE - TRADE PRACTICES ACT 1974 (CTH) AND RELATED LEGISLATION - CONSUMER PROTECTION - UNCONSCIONABLE CONDUCT
Whether conduct of plaintiff and first defendant in extending period for exercise of option was unconscionable.
Held: Conduct not unconscionable.

PROCEDURE - MISCELLANEOUS PROCEDURAL MATTERS - DECLARATIONS
EQUITY - GENERAL PRINCIPLES - MISTAKE - EQUITABLE RELIEF IN CASE OF MISTAKE - RECTIFICATION
Declarations – whether declarations should be made regarding construction of document.
Held: Declarations sought required hypothetical or academic answers – not appropriate for declarations – privity of contract means declarations by non-party not appropriate.

EQUITY - GENERAL PRINCIPLES - MISTAKE - EQUITABLE REMEDIES - RECTIFICATION
Rectification – whether document should be rectified.
Held: Rectification inappropriate because party seeking rectification not a party to the contract.

DAMAGES - GENERAL PRINCIPLES - DAMAGES AFTER ACTION BROUGHT
Damages.
Held: No entitlement to damages even if option to purchase not validly exercised.
Trade Practices Act 1974 (Cth) s 51AA, referred to.
Ainsworth v Criminal Justice Commission (1992) 175 CLR 567; Allianz Australia Insurance Ltd v National Jet Systems Pty Ltd [2004] SASC 438; Forstaff Adelaide Pty Ltd v Hills Industries Ltd [2006] SASC 88; Frederick John von Stanke as executor of the estate of Frederick William von Stanke (deceased) v O'Meara & Ors [2007] SASC 410; McGarrigle v Public Service Board [1979] 1 NSWLR 292; Mentha v G.E. Capital (1997) 154 ALR 565, applied.
Coulls v Bagot's Executor and Trustee Co Ltd (1967) 119 CLR 460; United Scientific Holdings Ltd v Burnley Borough Council [1978] AC 904; Elias v Forsyth (2004) QSC 338; Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337; Con-Stan Industries of Australia Pty Ltd v Norwich Winterthur Insurance (Australia) Ltd (1985) 160 CLR 226; ACCC v C.G. Berbatis Holdings Pty Ltd (2003) 214 CLR 51, discussed.
Trident General Insurance Co Ltd v McNiece Bros Proprietary Ltd (1988) 165 CLR 107; Dunlop Pneumatic Tyre Company Ltd v Selfridge & Co Ltd [1915] AC 847; Laybutt v Amoco Australia Pty Ltd (1974) 132 CLR 57; Traywinds Pty Ltd v Cooper (1989) 1 Qd R 222; Young v Lamb (2001) NSWCA 225; Blomley v Ryan (1956) 99 CLR 362; Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447, considered.

ROCLA PTY LTD v PLASTREAM PIPE TECHNOLOGIES PTY LTD & ANOR
[2011] SASC 80
Civil
ANDERSON J.
1.     Introduction
2.     The issues
3.     Privity of contract
4.     Option to purchase
4.1     Option not exercised within time
(a)     Date option expired
(b)     Date agreement made
(c)     Conclusion

4.2     Consent of all parties required (The “single transaction” argument)
(a)     The alleged express terms
(b)     The alleged implied terms
(c)     Conventional estoppel
(d)     Conclusion on single transaction

4.3     Terms upon which option exercised
(a)     Form of Notice
(b)     Complete Plastream line

4.4 Trade Practices Act
5.     The scope of the sub-licence
5.1     The missing comma
5.2     Rectification
6.     Damages
7      Conclusion and orders
1.     Introduction

The plaintiff company (Rocla) is a manufacturer of pipes for various purposes. It previously manufactured concrete pipes but became interested in pipes made of PVC and those made from steel reinforced profile (SRP). The second defendant (SRLA) owns the technology used for the manufacture of SRP strips, made of HDPE plastic but with steel reinforced ridges (the SRP technology). The SRP technology has two primary commercial uses: the SRP strips can be either wound to manufacture new pipes, or they can be wound into an existing pipe to line that existing pipe so as to repair it. The second use of the SRP technology to repair existing pipes is referred to as “pipe rehabilitation”.
On or about 16 May 2008 SRLA granted to the first defendant (Plastream) an exclusive, perpetual, worldwide licence to commercialise the SRP technology other than for the purpose of pipe rehabilitation (Master Licence). The Master Licence enables Plastream to use SRLA’s SRP technology including the intellectual property owned by SRLA. Plastream is also permitted by the Master Licence to sub-licence the SRP technology.
The Master Licence also imposes a number of restrictions on Plastream. Pursuant to clause 3.4 and clause 3.5, Plastream agreed that it would not engage in the business of “pipe rehabilitation” using the SRP technology and that it would ensure any sub-licence it entered into imposed the same obligation. Among other things, pipe rehabilitation is defined in the Master Licence as including activities that fall within the scope of the rights granted by SRLA to Interflow Pty Ltd (Interflow). On 15 September 2003 SRLA and Interflow had entered into an agreement whereby SRLA granted Interflow the right to commercialise the SRP technology for the purpose of conducting the business of pipe rehabilitation (Interflow Agreement).
On 22 August 2008, Rocla entered into a business sale agreement with SRLA, Plastream and another company, Caliber Australia Pty Ltd (Caliber), for the purchase by Rocla of the Caliber business (BSA). The Caliber business had been a division of the overall SRLA business operation. Prior to the business sale, Caliber carried on business in Australia and New Zealand using the SRP technology owned by SRLA to manufacture plastic pipes and detention tanks.
On this same date, the parties entered into various agreements for the benefit of Rocla in carrying on the Caliber business. These agreements are:
(a)a real property licence granted by SRLA to Rocla for the occupation of a portion of SRLA’s premises at Gepps Cross (Real Property Licence);
(b)a supply agreement between SRLA and Rocla for the supply by SRLA of SRP strip (Supply Agreement); and
(c)a sub-licence granted by Plastream to Rocla to use SRP technology in Australia and New Zealand other than for the purpose of Pipe Rehabilitation (Rocla Sub-licence).
It is a term of the BSA that SRLA is to enter into a conditional agreement with Rocla which provided SRLA would licence to Rocla the SRP technology, on terms materially the same as the Rocla Sub-licence, in the event that the Master Licence was terminated (Mirror Licence).
Plastream granted a sub-licence of the SRP technology to Rocla by way of the Rocla Sub-licence on 22 August 2010. It is a term of that agreement that Rocla has an option to purchase from Plastream what is defined as a “Complete Plastream Line”, being a Plastream pipe production line containing all the components necessary to produce Plastream pipe including SRP (the option). The option was to be exercised by Rocla informing Plastream that it wished to purchase the Complete Plastream Line. The Rocla Sub-licence provides that Rocla could exercise the option “at any time within the first 20 months of the Term”. “Term” is defined in the agreement as the period commencing from 22 August 2008.
Rocla and Plastream argue that on 22 April 2010 they agreed to vary the terms of the Rocla Sub-licence. They say that they agreed to extend the exercise period for the option until 21 May 2010 with consideration in the form of an increased deposit paid by Rocla. Rocla did not exercise the option until after 22 April 2010.
Rocla alleges that it validly exercised the option. That is denied by SRLA. Plastream agrees with Rocla that the option was validly exercised.
In its statement of claim Rocla seeks declarations that the option was validly exercised. It also seeks an injunction requiring SRLA to supply SRP strip pursuant to the supply agreement but SRLA has agreed to continue to supply Rocla until this litigation is resolved so that the injunction is not necessary.
As I have indicated SRLA denies that the option was validly exercised. It argues that it was not consulted in relation to any variation of the exercise period and that the various agreements entered into between each of Caliber, SRLA, Rocla and Plastream involved a single transaction. Therefore it is argued all parties involved in the BSA were required to consent and did not consent to an extension of time in which the option could be exercised. On their own behalf Rocla and Plastream claim to have extended the time by mutual agreement. They claim that they are entitled to do that because they are the only parties to the Rocla Sub-licence.
SRLA has also issued a counterclaim in which it claims to have suffered loss and damage as a result of its continuing obligation to supply Rocla when it argues that it had alternative markets which it could have supplied at a greater profit. SRLA also seeks rectification of the BSA by the insertion of a comma between the words “replacement” and “lining” in clause 3.5(a) of both the Rocla Sub-licence and the Mirror Licence.
SRLA alleges that the Rocla Sub-licence, the Supply Agreement, the Mirror Licence, and the Real Property Licence were entered into as part of, and to give effect to, a single transaction comprising the BSA. SRLA pleads that it was either an express term or an implied term of the BSA that each of these agreements, the form of which were attached as schedules to the BSA, formed part of the BSA. SRLA claimed therefore that the agreements could only be varied in writing by consent of each of the parties to the BSA.
SRLA seeks a declaration that Rocla was required to obtain consent from SRLA if there was any variation of the terms of the Rocla Sub-licence. It seeks declarations that the option was not validly exercised. It claims an estoppel against Rocla. It seeks a declaration that Rocla does not have any licence currently to use and apply the SRP technology and seeks a declaration that SRLA no longer has any obligation to continue to supply the SRP strip.
SRLA further seeks a declaration that on a proper construction of the Rocla Sub-licence, Rocla is not enabled to use the technology for the “replacement” of any culverts, pipelines, conduits, underground ducts, tunnels, bores or like structures and it seeks rectification of the BSA by the insertion of a comma in the relevant place.
2. The issues
The key issues raised by the parties during argument are as follows:
1.Whether Rocla validly exercised the option to buy a Complete Plastream Line as provided for in the Rocla Sub-licence. That raises the question of the standing of SRLA to seek relief in this Court. The question is whether the doctrine of privity of contract allows SRLA to seek such relief. SRLA claims that privity is not an issue because it is a party to the action in which Rocla seeks declarations and furthermore that there is one single transaction which encompasses all the separate agreements.
2.The construction of the Rocla Sub-licence involves determining the objective intention of the parties to the contract relating to the aspect of “pipe rehabilitation”. The question is what the parties intended by the restriction placed on Rocla from engaging in “pipe rehabilitation” using SRP technology. There is a question as to whether any issue of construction arises in any existing dispute between the parties or whether such an issue is merely hypothetical.
3.SRLA seeks rectification of the BSA essentially because of a missing comma in the Rocla Sub-licence which, although included in some earlier drafts, did not appear in the final document signed by Rocla and Plastream. There is both an executed copy of the agreement with the missing comma and an unexecuted copy attached as a schedule to the BSA. As with 2 above, there is a question as to whether the rectification is sought as an academic or hypothetical exercise unrelated to any existing factual dispute between the parties.
4.The question of whether SRLA has suffered any loss and damage as a result of having to supply Rocla rather than supplying product to alternate markets at a better price. That only becomes relevant if Rocla is found not to have validly exercised the option.
3. Privity of contract
Mr Hoffmann QC for Rocla and Mr S. Doyle for Plastream argue that SRLA has no standing to argue some matters because of the principles of privity of contract. It is submitted by both counsel that Rocla and Plastream were at liberty to vary the time for the exercise of the option and the terms and conditions upon which the option could be exercised as between themselves. They suggest that SRLA, which was not a party to the Rocla Sub-licence, has no right to be heard on the issue of the exercise of the option.
Both counsel also argue that SRLA cannot seek rectification of a document to which it is not a party. Both rely on the principles set out in Trident General Insurance Co Limited v McNiece Bros Proprietary Limited (1988) 165 CLR 107 at page 122. In that decision the High Court restated the law on privity of contract even though the decision itself was an exception to the general rule.
Mr Hoffmann summarised his argument on privity by reference to the decisions leading up to Trident. He referred to Dunlop Pneumatic Tyre Company Limited v Selfridge & Co Ltd [1915] AC 847 and Coulls v Bagot’s Executor and Trustee Company Limited (1967) 119 CLR 460.
In Coulls, Barwick CJ said at page 478:
It must be accepted that, according to our law, a person not a party to a contract may not himself sue upon it so as directly to enforce its obligations …
The general principle emerging from the cases is that a third party should neither benefit nor be burdened by the performance of a contract between two parties. The doctrine of privity allows only the contracting parties to benefit or be burdened in law by the making of the contract.
Mr Hoffmann sought to apply the statement of principle to this matter and in particular to the construction of the sub-licence between Rocla and Plastream. He relied on the general statements made by the authors of Cheshire & Fifoot Law of Contract – 9^th Australian edition at paragraph 7.2. The authors state:
7.2Who are the parties? The privity rule is about the parties to a contract. The practical test of the question – who are the parties to a contract? – depends on looking at the particular contract and ascertaining, as a matter of interpretation, who are the parties actually named as parties to the contract; or it may be a matter of ascertaining the objective intention from all the circumstances. A party to a contract may be determined by estoppel.
[Footnotes omitted]
In reply Mr O’Sullivan QC for SRLA argues that this is not a case of breaching the rules of privity of contract. He submitted that the issue of the exercise of the option is one joined between the parties. SRLA was joined in the action by Rocla. Rocla pleaded the exercise of the option and sought declarations that the option was validly exercised. In turn SRLA has pleaded in response and denied the valid exercise of the option.
It is my view that the exercise of the option is clearly a relevant issue between Rocla and SRLA. Rocla has made it so. As Mr O’Sullivan pointed out, SRLA is not seeking to enforce any rights regarding the exercise of the option, it is merely seeking a declaration that the option was not validly exercised in opposition to the claim made by Rocla. It has been made a party to the dispute and is responding.
If the option was not validly exercised SRLA would be under no continuing obligation to supply materials to Rocla and may be entitled to damages because of the supply beyond the time for the exercise of the option. It is therefore a relevant issue.
In my view the question of privity as such is immaterial to this particular argument as there are clearly issues relevant to this argument that are joined between the parties on the pleadings. The relevant question is whether SRLA has standing to argue the question of the exercise of the option between two other parties. In my view it clearly has that standing because it has been involved in the issues by Rocla.
However, in relation to the ability of SRLA to seek declarations as to the proper construction of the sub-licence and to seek orders for rectification of the sub-licence, the principles of privity of contract are clearly relevant.
I deal with that aspect later in these reasons and conclude that in relation to SRLA’s claim for declarations and rectification, quite apart from the fact that the declarations sought by SRLA are related to hypothetical or academic matters, SRLA is prevented by the principles of privity of contract from obtaining this relief.
I later conclude that it was open to both Rocla and Plastream to enter into their own discussions for both an extension of time in which to exercise the option and also as to the terms of the exercise of the option and any variation of it. I deal with these aspects shortly.
As a result I further conclude that SRLA was obliged to continue supply to Rocla and Rocla is entitled to the declarations it seeks. It follows that SRLA is not entitled to any damages.
4. Option to purchase
I will now deal with SRLA’s arguments as to why it says the option was not validly exercised. Rocla claims that it and Plastream agreed to vary the terms of the Rocla Sub-licence deed by extending the time in which the option was to be exercised from 22 April 2010 to 21 May 2010.

It is alleged by Rocla that the option was then exercised on 21 May 2010 by a letter transmitted by email from Rocla to Plastream. I deal with this in more detail at [101] onwards.
Plastream in its defence agrees with the allegations of Rocla regarding the exercise of the option. SRLA denies that the option was validly exercised.
There are three reasons why SRLA claims the option was not validly exercised. I will deal with these reasons in turn, including Rocla’s response to them.
4.1 Option not exercised within time
The first reason is that the time for the exercise of the option had already expired before there was any agreement to extend the time for the exercise of the option. This argument involves a two-part consideration of a) when the option expired, and b) when any agreement was made to extend the option period.
(a) Date option expired
Submissions were made as to the effect of clause 11.1 of the Rocla Sub-licence and the calculation of strict time limits for the exercise of the option. SRLA argued that pursuant to clause 11.1 of the Rocla Sub-licence the option had not been exercised within the time stipulated.
Clause 11.1 states:
11.1Rocla may, at any time within the first 20 months of the Term, by giving notice to RLP [Plastream] in accordance with clause 16 inform RLP that Rocla wishes to purchase a Complete Plastream Line.
It can be seen that clause 11.1 refers to any time within the first 20 months of the “Term” which is defined in clause 2.20 as:
… subject to clause 11, the period commencing from the Commencement Date …
The commencement date is 22 August 2008.
SRLA argues that on a proper construction of clause 11.1, the time for the exercise of the option expired at midnight on 21 April 2010. In the alternative they argue that at the latest it would be midnight on 22 April 2010. In either case the argument is that the option was not exercised within the period specified in the contract and therefore the option lapsed.
In response to SRLA’s argument, Rocla submits that the last time to exercise the option was not until midnight on 22 April 2010. Mr Hoffmann submitted that in interpreting terms of the Rocla Sub-licence, the Court should look to the Supply Agreement as a relevant objective surrounding circumstance known to the parties at the time of contracting.
The Supply Agreement and the Rocla Sub-licence were entered into on the same day. “Term” is defined in the Supply Agreement at clause 2.25 as “... the period commencing on and including the Commencement Date”. This is in contrast to the definition of “Term” in clause 2.20 of the Rocla Sub-licence as “… the period commencing from the Commencement Date”. Mr Hoffmann submits that the contrasting use of the language to define “Term” in the two agreements demonstrates the parties intended the exercise period for the Rocla Sub-licence should not include the 22 August 2008 commencement date. In other words, the relevant period in which to exercise the option is 20 months from 23 August 2008. The last day to exercise the option was therefore 22 April 2010. This is consistent with SRLA’s alternative argument.
(b) Date agreement made
SRLA argues that the agreement to extend the time for exercising the option was reached after the option had expired, with the result that any agreement to extend the time was ineffective.
It is SRLA’s position that the agreement to extend the option was not reached by Rocla and Plastream until 23 April 2010 when an email was sent from Mr Buttery to Mr Baker.
Mr O’Sullivan referred to the email from Mr Baker to Mr Buttery on 22 April 2010 at 5.24 pm as evidence the parties were still negotiating the agreement to extend the option at this time. This is the email Mr Hoffmann submits records an earlier telephone conversation between the parties in which the agreement to extend the time for exercising the option was concluded. The email states:
In our phone conversation this afternoon I advised you that we are still keen to take up the Option to give you Notice that Rocla wishes to purchase a Complete Plastream Line as per clause 11.1 of the SRP Technology Licence Deed between Rib Loc Pty Ltd (now changed to Plastream Pty Ltd) and Rocla Pty Ltd (Rocla).
As we discussed and agreed we will provide a deposit of A$200,000:
· on the basis that this is refundable subject to Fletcher Building Board approval expected on 18^th May 2010 for the purchase of the Line
· you have agreed to extend the deadline date for exercising the Option of 22^nd April 2010 recognising this approval timeframe – I suggest to the Friday following the Board meeting, i.e. 21^st May.
This deposit of A$200,000 is refundable to Rocla should we not receive Board Approval for this investment.
We both agree that this manner of communication is acceptable.
Please reply by email your confirmation of agreement following which we will arrange for the transfer of the deposit tomorrow 23^rd April 2010. Please also advise bank account details for the deposit.
Mr O’Sullivan points to the language used by Mr Baker, namely that Rocla is “still keen to take up the Option” as well as the final paragraph, as indicative of the fact the parties were still negotiating the agreement to extend the option late on 22 April 2010. He also submits that a strong inference can be drawn from surrounding emails from Mr Buttery to the members of the Plastream Board, that Mr Buttery did not have authority to confirm the agreement at the time of Mr Baker’s email.
Mr O’Sullivan contends that confirmation of the agreement to extend the option was not communicated by Plastream to Rocla until Mr Buttery’s email of 23 April 2010, and accordingly the agreement was not concluded until this date, being after the time for exercising the option had passed. Accordingly, the option expired before any agreement to extend it was reached. The email from Mr Buttery states:
Thank you for your email.
Plastream confirms the agreement reached by telephone on Thursday 22 April.
As noted we both agreed that email was an acceptable method for communication.
The deposit of A$200,000 will be refunded should the Board not approve the investment in the Plastream line.
The deadline to receive the final purchase order and the balance of the deposit has been extended to the Friday following the board meeting namely 21 May 2010, provided that any order will be subject to Plastream’s acceptance, based on acceptable terms relating to price, delivery, product specification and terms of sale.
Mr O’Sullivan submits that the law is clear that where a specific period is prescribed for the exercise of an option, the option will lapse if it not exercised within that period. Mr O’Sullivan referred to a number of cases as authority for the strictness of the rule, including the case of United Scientific Holdings Ltd v Burnley Borough Council [1978] AC 904. In that case, Diplock LJ stated that practical business considerations require astrict compliance with the terms of an option to acquire property. His Lordship stated at page 929:
Again I will refrain from repeating the more elaborate juristic analysis of the distinction between the two types of contract that I attempted in the United Dominions Trust case ([1968] 1 All ER 104 at 109, [1968] 1 WLR at 83, 84). A more practical business explanation why a stipulation as to the time by which an option to acquire an interest in property should be exercised by the grantee must be punctually observed is that the grantor, so long as the option remains open, thereby submits to being disabled from disposing of his proprietary interest to anyone other than the grantee, and this without any guarantee that it will be disposed of to the grantee. In accepting such a fetter on his powers of disposition of his property, the grantor needs to know with certainty the moment when it has come to an end.
Mr O’Sullivan contends that in this matter, SRLA has a commercial interest in the exercise of the option as a result of its obligations under the Supply Agreement. SRLA has an obligation to continue to supply SRP strip to Rocla until the “Termination Date”, a term defined in the Supply Agreement at clause 2.26 as:
2.26“the Termination Date” means the later of the date:
2.26.1on which:
2.26.1.1the Purchaser ceases to carry on all, or a substantial part of the Business;
2.26.1.2the parties mutually agree that this Agreement is to terminate;
2.26.1.3a party terminates this Agreement pursuant to clause 10; or
2.26.1.4that is the day before the second anniversary of the Commencement Date:
whichever first occurs; or
2.26.2if the Purchaser has exercised the option granted to it under the SRP Technology Licence Agreement, the Purchaser completes the acquisition of a Complete Plastream Line in accordance with that option;
[Emphasis added]
Mr O’Sullivan submits that unless the option was exercised by the time specified in clause 11 of the Rocla Sub-licence, the option lapsed.
Rocla alleges that clause 11 of the Rocla Sub-licence was varied orally during a telephone conversation on 22 April 2010 between Mr Stephen Baker of Rocla and Mr Peter Buttery of Plastream.
Mr Hoffmann submits that on 22 April 2010 Mr Baker sent to Mr Buttery an email confirming such agreement had been reached between the parties. That email was said to record the agreement reached between the parties to extend the period in which Rocla could give notice of a desire to acquire a Complete Plastream Line to 21 May 2010, with consideration passing from Rocla to Plastream in the form of an increased deposit of $200,000. I have set out the email earlier at [44].
In Mr Baker’s email, Mr Baker advised Mr Buttery that, as per their earlier telephone conversation, Rocla was, “still keen to take up the Option to give you Notice that Rocla wishes to purchase the Complete Plastream Line as per clause 11.1 of the SRP Technology Licence Deed [the Rocla Sub-licence]…”. Mr Baker agreed Rocla would provide a $200,000 refundable deposit to SRLA (subject to Board approval) and in return SRLA would extend the deadline date for exercising the option from 22 April 2010 to 21 May 2010. The agreement was confirmed by Mr Buttery by return email on 23 April 2010.
Mr Baker, in cross examination, confirmed that he believed that he and Mr Buttery had reached an agreement on 22 April 2010 to vary the period in which Rocla could exercise the Option. In terms of whether Mr Buttery had authority to agree to vary the agreement, Mr Hoffmann argued that there was no case pleaded by the second defendant that Mr Buttery lacked authority, and as such it was not in contention. It was further argued that Mr Buttery was a director and chair of Plastream, and therefore he had at least an ostensible authority in respect of his dealing with Mr Baker on 22 April. Mr Buttery was not called to give evidence.
In the alternative, Mr Hoffmann submits whether or not the option was agreed to be varied on 22 April or some other day is immaterial; the parties were entitled to vary the contract and they validly did. Mr Hoffmann contends that it is not without precedent that parties vary options, even when they have expired. He submits that the parties agreed to vary the Rocla Sub-licence and consideration, in the form of the increased deposit, was given for the variation. No particular form of variation was required.
Mr Hoffmann cited the decision of Chesterman J in Elias v Forsyth (2004) QSC 338 as authority for the rights of contracting parties to vary the mode of performance of a contract by parol agreement. Chesterman J states at [47]:
… Whether by the operation of the doctrine of variation, waiver or estoppel the rights of the parties to the deed changed so that the operation period was extended … upon the applicant given notice of extension to the respondents… and by payment of the option fee.
His Honour went on to say at [48]:
…There is no impediment to an agreement appearing in a deed being varied by parol agreement.
(c) Conclusion
It is my view that the arguments advanced by Mr O’Sullivan fail. In plain terms I agree with Mr Hoffmann’s summation that the parties to the Rocla Sub-licence had the ability to vary by agreement the time for the exercise of the option in any way they chose, whether or not the time for exercising the option had already expired. In terms of the actual timing of the exercise of the option, I consider that the time for the exercise of the option did not expire until 22 April 2010.
The email relied on both parties, that from Mr Baker to Mr Buttery of 22 April 2010, is equivocal.
It is equivocal because it asks for email confirmation of an agreement which may suggest that some form of agreement had already been reached earlier that day. However, for the reasons set out I consider that the time for concluding the agreement and the notifying of it does not matter.
In my view, this case is distinguishable from those referred to by Mr O’Sullivan, including the United Scientific Holdings decision. These decisions relate to disputes by the parties to the contract as to whether an option was effectively exercised. This is not such a case. The parties to the contract are not in dispute. I agree with Mr O’Sullivan that SRLA has an interest in the exercise of the option in that it impacts SRLA’s obligation to supply Rocla with SPR strip. However, it remains the case that SRLA is not a party to the Rocla Sub-licence, and that creates an insurmountable problem, in my opinion.
4.2 Consent of all parties required (The “single transaction” argument)
The second argument relating to the exercise of the option is that neither Rocla nor Plastream were able to vary the time for the exercise of the option without the consent of all parties to the BSA. Those parties included SRLA and Caliber. It is argued that this is an express term of the BSA. SRLA relied specifically on clause 37 for this agreement as well as other clauses in the BSA. Clause 37 states:
37.This Agreement can only be varied by the parties in writing.
The parties to the BSA, as I have said, are Caliber, SRLA, Plastream and Rocla and the variation to the Rocla Sub-licence was agreed between only Plastream and Rocla. SRLA’s argument relies on the fact that an unexecuted copy of the Rocla Sub-licence was annexed to the BSA, and therefore suggesting it was part of the BSA.
In the alternative, SRLA argues that it was an implied term of the agreement that Rocla and Plastream could not vary the terms of the Rocla Sub-licence without the consent of all parties to the BSA. SRLA points to the link between the rights under clause 11 of the Rocla Sub-licence and SRLA’s obligations pursuant to the supply agreement to continue supply. This argument relies on what has been called the “single transaction” proposition.
The “single transaction” argument is a key plank in the argument advanced by SRLA. Mr O’Sullivan submits that each of the four separate agreements were necessary to effect the sale of the Caliber business and therefore ancillary to the BSA. These agreements included the Master Licence, the Supply Agreement and the Rocla Sub-licence and the real property licence. Mr O’Sullivan submits that there was a need for symmetry governing the respective rights granted to exploit the SRP technology. This includes any rights granted under the Interflow Agreement some years earlier.
(a) The alleged express terms
Mr O’Sullivan refers to several terms within the BSA as express terms of the contract supporting his argument that the parties intended to proceed with the acquisition of the Caliber business and all other necessary agreements as a single transaction. In particular, Mr O’Sullivan points to the schedules and a number of defined terms of the BSA as evidence that the parties intended the various agreements constitute a single transaction.
Mr O’Sullivan points to the recital in the BSA to the effect that SRLA owns the assets and technology used in the Caliber business. The BSA also provides that SRLA is agreeing to procure Plastream to enter into an agreement with Rocla.
The agreement also provides in clause 2.2 that “‘Agreement’ means this agreement, including any schedule or annexure to it”. Schedule 8 to the BSA is an unexecuted copy of the Rocla Sub-licence.
Completion is defined in clause 2.12 as “‘Completion’ means completion of the sale and purchase of the Business, the Caliber Assets and the RLA Assets under clauses 14-16”.
Apart from the attachment of the Rocla Sub-licence as Schedule 8, the BSA also provides for a copy of the Real Property Licence to be attached as Schedule 5, the Supply Agreement as Schedule 7 and also a copy of the Mirror Licence in the form of the 15th Schedule.
Transaction documents are defined as follows:
“Transaction documents” means this Agreement, the SRP Supply Agreement, the SRP Technology Licence Deed, the Stock Consignment Agreement, the Work-In-Progress Consignment Agreement and the licence Agreement.
Clause 28 provides under the heading “entire agreement” that the BSA and “the other transaction documents contain everything the parties have agreed in relation to the subject matter they deal with”. This is said to be supportive of the “single transaction” submission.
Mr O’Sullivan refers to Clause 10 which states:
10.RLA HEREBY FURTHER AGREES with the Purchaser:
Enter into the Licence Agreement
10.1 to grant the Licence to the purchaser in accordance with the Licence Agreement;
Enter into the SRP Supply Agreement
10.2 to supply SRP to the Purchaser in accordance with the SRP Supply Agreement; and
Procure Grant of the SRP Technology Licence Deed
10.3 to procure the grant by RLP to the Purchaser of the SRP Technology licence in accordance with the SRP Technology Licence Deed (which is to include a licence to use the Plastream Trade Mark).
Mr O’Sullivan points to the relationship between SRLA and Plastream as created by the BSA. He further points to the common board of both companies at the time of the transaction and the fact that SRLA has agreed with Rocla to procure Plastream to enter into an agreement in the form of Schedule 8.
On completion, the BSA provides that Rocla must deliver to SRLA duly executed counterparts of the licence agreement, the SRP Supply Agreement, the SRP Technology Licence and the SRLA/Rocla agreement (this is the Mirror Licence).
Mr O’Sullivan emphasises that SRLA at completion is obliged to procure an agreement in the form of Schedule 8 duly executed by Plastream and then provide it to Rocla.
The overall submission is that objectively the BSA is evidence of “a single transaction involving a number of ancillary steps in pre-agreed form”. Therefore it is said that post-execution clause 37 requires that any variation can only be achieved by all parties consenting in writing. The question is, does that mean all parties to the BSA must consent to any variation in any of the individual agreements between only two of the four parties to the BSA?
Mr Doyle for Plastream distinguishes the two different versions of the sub-licence, namely, the executed copy and the unexecuted copy attached to the BSA as Schedule 8. Mr Doyle submits that whereas the executed copy has force as a contractual document, the unexecuted copy does not. He characterises the unexecuted copy in Schedule 8 as “no more than a means of identification of other obligations, the conduct of other obligations which sit in the BSA”. Mr Doyle submits that the argument based on a single transaction has no legal effect. He submits that clearly there were interrelations between the companies and clearly some obligations were conditional on others but that it is irrelevant.
Mr Doyle submits that the reason for splitting the transaction into separate contracts is to recognise that some parties have rights in relation to some parts of the overall agreement but not to others. He gives as an example the right granted by licence for Rocla to occupy part of SRLA’s premises.
In summary Mr Doyle contends that the unexecuted copy of the sub-licence as Schedule 8 merely defines the content of other obligations but does not of itself create any obligations.

Mr Hoffmann submits that this is not a single transaction for a number of reasons. He points to the long negotiations which took place where each party, separately advised, chose to document their respective arrangements by a series of agreements.
He then argues that Rocla and Plastream are at liberty to reach any agreement they choose in relation to the exercise of the option as they are the only parties to the sub-licence. He adds that furthermore they are not prevented by any express term in the sub-licence restricting them in any way.
Mr Hoffmann suggests that the fact that SRLA was not a party to the sub-licence was a deliberate choice made by those directing SRLA and including legal advisers. He submits that this is part of the objective background leading up to the conclusion of the agreement and is persuasive against the argument put by SRLA that the whole series of documents should be regarded as a single transaction.
Mr Hoffmann argues that the single transaction argument is contrary to sound commercial commonsense, namely, that any minor variation to any of the individual agreements between any two parties would always be subject to the consent of all of the four parties to the BSA.
The language of the BSA in Mr Hoffmann’s submission is also against the single transaction proposition. He refers to clause 28 referred to by counsel for SRLA. He submits that clause 28 recognises the differences between the agreement, that is the BSA, and the other transaction documents.
Clause 28 of the BSA is as follows:
28.This Agreement and the other Transaction Documents contain everything the parties have agreed in relation to the subject matter they deal with. No party can rely on an earlier written document or anything said or done by another party, or by a director, officer, agent or employee of that party, before this document or the other Transaction Documents were executed, save as permitted by law.
Likewise he says clause 37 cannot be relied on by SRLA as indicative of a single transaction. Mr Hoffmann submits that its purpose is to ensure that the agreement can only be varied in writing. It relates only to the BSA and it was not intended to refer to the other agreements.
(b) The alleged implied terms
SRLA pleads that the implied term, as to the need for consent by all parties to the BSA for any variation to the sub-licence, is on the basis that it is (a) reasonable and equitable, (b) necessary to give the BSA business efficacy, (c) so obvious that it goes without saying, (d) capable of clear expression, (e) consistent with the express terms of the BSA, and (f) necessary to protect the interest of those parties who, although parties to the BSA, would not be parties to the agreements annexed in the schedules to the BSA once those agreements were executed in accordance with the requirements of the BSA.
Mr O’Sullivan advances similar arguments to those advanced when he dealt with the alleged express terms in relation to why he suggests there is an implied term that the consent of all parties is required for any amendment or variation to the Rocla Sub-licence. He also relies on Mr Lukban’s evidence to the effect that he understood the documents in relation to the sale of the Calender business were all inter-related.
Mr Hoffmann argues that as against the argument that there is an implied term, the Court should not take note of Mr Lukban’s evidence on this topic. He says that it is irrelevant because the Court must look to the objective situation and not Mr Lukban’s subjective intention or understanding.
Mr Hoffmann submits that there is no implied term requiring SRLA’s consent to a variation of the Rocla Sub-licence as SRLA cannot bring the facts of this matter within the principles stated in Codelfa Construction Proprietary Limited v State Rail Authority of New South Wales (1982) 149 CLR 337.
In Codelfa Mason J said at page 347:
The conditions necessary to ground the implication of a term were summarised by the majority in BP Refinery (Westernport) Pty Ltd v Hastings Shire Council (1977) 52 ALJR 20 at page 26.
His Honour then sets out and adopts those grounds as follows:
(1)it must be reasonable and equitable;
(2)it must be necessary to give business efficacy to the contract so that no term will be implied if the contract is effective without it;
(3)it must be so obvious that it “goes without saying”;
(4)it must be capable of clear expression;
(5)it must not contradict any express terms of the contract.
Brennan J in Codelfa also endorsed the statement in BP Refinery at page 405.
Mr Hoffmann submits that it is only in respect of (4) above that SRLA can say that they come within the tests emerging from the BP Refinery case and endorsed by the High Court in Codelfa.
Mr Hoffmann submits that aside from the fourth point, namely, that the implied term can be clearly expressed, the other requirements for implying a term in Codelfa are not met in this instance.
(c) Conventional estoppel
In the further alternative in support of the single transaction argument, SRLA pleads a conventional estoppel. The estoppel in this case is said to arise from the mutual adoption by the parties to the BSA of an assumed state of fact that the parties would adhere to the terms of the various ancillary agreements and that no party to the BSA would vary the terms of the ancillary agreements without the consent of all parties. The estoppel, if it exists, operates to prevent Rocla from denying that state of fact. Mr O’Sullivan cited Con-Stan Industries of Australia Pty Ltd v Norwich Winterthur Insurance (Australia) Ltd (1985) 160 CLR 226 at 244:
Estoppel by convention is a form of estoppel founded not on a representation of fact made by a representor and acted on by a representee to his detriment, but on the conduct of relations between the parties on the basis of an agreed or assumed state of facts, which both will be estopped from denying.
Mr O’Sullivan argues that the assumed state is evidenced by the answers given by Mr Lukban in cross-examination. Mr Lukban said that he understood that there were a number of documents that were inter-related in relation to the sale and purchase of the Caliber business. He said that he knew that the supply agreement and its duration depended on whether the option was exercised. Mr Hoffmann submits that Mr Lukban’s subjective views are irrelevant in determining the objective intention of the parties to the contract. I agree that Mr Lukban’s views are not relevant. I cannot see any valid argument for the operation of an estoppel on the basis suggested by Mr O’Sullivan. The conduct of the parties, each separately advised, is contrary to the assumed state of fact that Mr O’Sullivan contends for. I therefore reject the argument.
(d) Conclusion on single transaction
I find that there is no express term agreed between the parties requiring the consent of all parties to the BSA for any variation in the terms of the Rocla Sub-licence. I disagree that the BSA is a single transaction involving all of the other steps recorded in the other agreements. I do not agree that the annexure of an unexecuted copy of the Rocla Sub-licence as a schedule to the BSA is indicative of any objective intention of the parties to proceed with a single transaction.
The parties have clearly chosen to have separate agreements covering their respective rights and interests vis à vis each other. I agree with Mr Doyle’s characterisation that the unexecuted copy by way of a schedule is merely a means of identifying other obligations between the parties and that it does not have any contractual force.
I find that there are no express terms of the BSA requiring the consent of all parties to any variation of the Rocla Sub-licence. In particular I find that the sole purpose of clause 37 was to ensure that any variation to the agreement is in writing. In my view that is all it did.
In relation to the implied terms suggested by Mr O’Sullivan, I simply refer to the requirement for implying terms as laid down in BP Refinery and endorsed by the High Court in Codelfa and agree with the submission that, except for the fact that the suggested implied term is capable of clear expression, the other requirements are not made out. In particular the implication of the term is not necessary to give the BSA business efficacy, the term is not so obvious that it goes without saying and is not consistent with the express terms of the contract.
4.3 Terms upon which option exercised
The next argument advanced by SRLA is that if the time for exercising the option to purchase was validly extended, then the option was not properly exercised in accordance with the provisions of clause 11 of the Roca Sub-licence. It is argued SRLA’s obligation for continuing supply terminated when the sub-licence terminated on 21 August 2010. This argument depends on the actual terms in which the option is said to have been exercised. The option contained in clause 11.1 relates to the purchase of a Complete Plastream Line. Mr O’Sullivan argued on the authority of Laybutt v Amoco Australia Pty Ltd (1974) 132 CLR 57 per Gibbs J at 75 that the option in this case should be characterised as a conditional contract. If that is the case, SRLA argued that performance of all conditions is required before the option can be exercised. It is argued that strict compliance with the actual form expressed in the option is required.
SRLA points to the terms of the option in clause 11.2, namely that the purchase is to be for a Complete Plastream Line (as defined) and that the purchase is to be on the terms set out in clause 11.
It is the Rocla’s case that it gave valid notice to Plastream that it had exercised the option within the extended period, and paid a further deposit. The notice was in the form of a letter attached to an email from Mr Lukban to Mr Buttery on 21 May 2010. The letter is as follows:
The purpose of this letter is to confirm that Rocla has today, paid a 30% deposit into Plastream’s account … to be applied towards the acquisition of a Complete Plastream Line as contemplated under the SRP Technology Licence Deed dated 22 August 2008 between Rocla and Plastream and as varied between the parties by emails during the course of April and May 2010. Please note the 30% deposit (being $1,260,000) paid today includes the $200,000 previously paid into Plastream’s account on 23 April 2010 and that the deposit is based on the assumption that the cost of the Complete Plastream Line is $4,200,000. I note that we are awaiting finalisation of the quote from you as to the cost of the Complete Plastream Line.
Also, the deposit has been paid to Plastream only on the following basis:
·The deposit is to be held on trust for Rocla and may only be released to Plastream on the direction from Rocla; and
·The deposit be fully refundable if, for any reason, the order does not proceed.
…
It is SRLA’s case that Rocla did not comply with the requirements of clause 11 of the Rocla Sub-licence when it purported to exercise the option on 21 May and thus the option was not validly exercised. The basis for this non-compliance was argued to be two-fold. First, Mr O’Sullivan challenges the form of the notice itself on the basis that the 21 May Letter contained statements inconsistent with clause 11. In particular he submitted that Rocla did not pay a deposit in accordance with the requirements of clause 11.2. Secondly, he argues that what Rocla purchased from Plastream was not a full or Complete Plastream Line as defined in the Rocla Sub-licence and therefore the option was not validly exercised. I will deal with each in turn.
(a) Form of Notice
The second defendant contends that the 21 May letter contains terms contrary to clause 11.2. Clause 11.2 states that if Rocla gives valid notice under clause 11.1, then Plastream must sell and Rocla must purchase a Complete Plastream Line on the terms set out in clause 11 and in the General Terms in Schedule 4. Paragraph 4.2 of the General Terms provides that Rocla as the buyer is required to make a down payment of 30% of the sales price within 7 days of receiving a signed acceptance of offer from Plastream in respect of the order for a Complete Plastream Line.
It is the plaintiff’s case that the 21 May letter validly gave notice to Plastream that Rocla had exercised the option, whether or not it complied precisely with the notice regime prescribed in clause 11.
Mr O’Sullivan submits that notice to purchase a Complete Plastream Line must be in accordance with clause 11.1 of the Rocla Sub-licence, and that the letter of 21 May does not purport to give notice pursuant to that clause. In fact it does not mention the clause.
Clause 11.2 provides that SRLA must sell and Rocla must purchase from SRLA a Complete Plastream Line if notice is given pursuant to clause 11.1.
Mr O’Sullivan describes the option in clause 11.1 as a call option or, as he put it, “an option where one party grants to another party the right to acquire an asset at a specified or determined price within a specified or determined period”.
Mr O’Sullivan submits that because the letter of 21 May does not comply with clause 11 there are two consequences which follow. The first is that the sub-licence was terminated on 21 August 2010 and the second is that SRLA’s obligation to continue to supply strip came to an end on that same date.
Mr Hoffmann submits that in the case of any discrepancies between the 21 May letter and the notice requirements under clause 11, there are a number of authorities to support the proposition that a purported exercise of an option should be fairly and not pedantically construed.
Mr Hoffmann cites the decision of the Queensland Court of Appeal in Traywinds Pty Ltd v Cooper (1989) 1 Qd R 222 as authority for the proposition that no particular form of words are necessary for the purpose of exercising an option, provided the statement by the option holder is unqualified. Kelly SPJ held that a purported exercise of an option should be fairly and not pedantically construed so that words stating a desire or intention to exercise an option may be sufficient.
Mr Hoffmann also refers the court to the unanimous decision of the New South Wales Court of appeal in Young v Lamb (2001) NSWCA 225 as authority for the proposition that in exercising an option, a party is not required to conform precisely to the terms of the option. What is required is notice of an intention to exercise an option. Mr Hoffmann submits that the syntactical semantic approach to the exercise of the option which he says was put forward by the second defendant is not the way in which the court should construe the agreement reached on 21 May 2010.
In the alternative, Mr Hoffmann submits that if Rocla was required to conform precisely to the terms of clause 11, then it did so.
Mr Hoffmann submits that when Rocla gave notice of its intention to exercise the option on 21 May, within the extended period, there was no requirement to pay a deposit. Mr Hoffmann submits that despite this, a deposit paid by Rocla on terms that it was to be held in trust by Plastream pending the resolution of the order for the complete Plastream line. Mr Hoffmann contends that the terms attached to the deposit were entirely consistent with the regime in paragraphs 2.1 and 2.2 of the General Terms. Mr Hoffmann submits that whilst the deposit, being refundable, may well have been inconsistent with the requirements in clause 11, it was not required to be paid on 21 May. The deposit was only payable under paragraph 4 if the order proceeded and the Supply Agreement was entered into.
Mr Hoffmann submits that if one has regard to the whole of the Rocla Sub-licence, including the General Terms and Schedule 6, then it becomes apparent that the objective purpose of clause 11 was that there was a period of time within which to consider whether or not a Complete Plastream Line would be purchased. According to Mr Hoffmann, the effect of the exercise of the option was really to engage a process identified in paragraph 2 of the General Terms; it did not result, of itself, in the delivery of an asset in which there was some equitable interest. Paragraph 2 of the General Terms established a process for dealing with the production, delivery and commissioning of the Complete Plastream Line and the formation of a contract to do that. Mr Hoffmann submits that the process identified in paragraph 2 resulted in a contract for the provision of a complete Plastream line assuming the parties could come to terms. On Mr Hoffmann’s submissions, this occurred on 29 July 2010.
In my view the interpretation contended for by Mr O’Sullivan in relation to the form of the notice required by clause 11 is somewhat pedantic and technical. I adopt a liberal approach to construction in this instance and find that there is sufficient evidence to show an intention on the part of Rocla to exercise the option. Whilst clearly Rocla did not conform with the precise words of clause 11, it nevertheless clearly manifested its intention to exercise the option. Consistent with what I have held earlier, I consider that both Rocla and Plastream knew what they were doing and were in agreement as to the exercise of the option.
(b) Complete Plastream line
The second defendant submits that there was no valid exercise of the option by Rocla as a “Complete Plastream Line” was not acquired. According to Mr O’Sullivan, on a proper construction of the terms of the Rocla Sub-licence, the exercise of option involves the purchase of a “Complete Plastream Line” (as defined), comprising all of the components identified in Schedule 5. Mr O’Sullivan referred to a quotation for a Complete Plastream Line from Plastream to Rocla dated 29 July 2010 (Plastream Quote). He submits the Plastream Quote expressly records items removed from Schedule 5 of the Rocla Sub-licence in order to save on costs. In particular, there are winding cages and a welder identified in Schedule 5 which Rocla did not purchase. Mr O’Sullivan contends that there is no evidence Rocla is going to purchase more winding cages or the other equipment excluded in the Plastream Quote.
Furthermore, Mr O’Sullivan submits that Rocla did not comply with the payment terms applying to the option. Clause 11.3 states that the price of the Complete Plastream Line is payable in accordance with the General Terms. As I understand Mr O’Sullivan’s argument, he contends that there is no evidence that a down payment was paid by Rocla in accordance with the General Terms and that there is no evidence of any written agreement to vary the terms of the General Conditions as is required by clause 25.1 of the General Terms.
Whilst “Complete Plastream Line” is a defined term, Mr Hoffmann argues it was not a concrete concept as at 22 August 2008. Mr Hoffmann argues that on any reasonably objective construction, the Rocla Sub-licence contemplated that there would be changes and modifications to the definition. It would not be good commercial commonsense to not allow modifications.
In relation to the Complete Plastream Line I agree that it would not be good commercial commonsense for the parties to have intended to be bound precisely by the definition in the contract. Whilst all winding cages were contemplated as making up a Complete Plastream Line I can see no reason why, if there was a need for only half of those cages, the purchase would not be regarded as that of a Complete Plastream Line. The purchaser may have only needed half the cages available for the purpose of its business, but nevertheless has purchased a Complete Plastream Line.
4.4 Trade Practices Act
As a further alternative, SRLA argues that if Rocla was not bound to seek SRLA’s consent to any of the variations to the terms of the Rocla Sub-licence then SRLA was placed in a position of disadvantage and that by amending the terms of the sub-licence Rocla has acted unconscionably contrary to the provisions of s 51AA of the Trade Practices Act 1974 (Cth), set out as follows:
1.A corporation must not, in trade or commerce, engage in conduct that is unconscionable within the meaning of the unwritten law, from time to time, of the States and Territories.
2.This section does not apply to conduct that is prohibited by section 51AB or 51 AC.

I note that on 1 January 2011 the Trade Practices Act was renamed the Competition and Consumer Act 2010 (Cth). However, the second defendant accepted that the Trade Practices Act is the applicable Act in relation to the unconscionable conduct alleged by operation of the transitional provisions in the Trade Practices Amendment (Australian Consumer Law) Act (No 2) 2010 (Cth).
The unconscionable conduct argument is effectively an alternative to the “single transaction” argument advanced by Mr O’Sullivan. The allegation is that SRLA was in the position of having no ability to have input to the discussions between Plastream and Rocla in varying the sub-licence.
The issues which SRLA claim were decided without its input relate to the time of continuing supply and the price at which the product was supplied. It is therefore said that in those circumstances Rocla has engaged in unconscionable conduct contrary to s 51AA of the Trade Practices Act. Mr O’Sullivan referred to ACCC v C.G. Berbatis Holdings Pty Ltd (2003) 214 CLR 51 and in particular Gleeson CJ as [5] and [14]. This reference relates to what has been referred to as the unwritten or judge-made law on unconscionable conduct, namely:
A disabling circumstance seriously affecting the ability of the innocent party to make a judgment in [that party’s] own best interests.
By Rocla and Plastream amending clause 11 of the sub-licence, it is argued that SRLA was placed in such a position and unable therefore to make a judgment in its own best interest. It is said that SRLA was at the mercy of Rocla and Plastream after it had extended the Supply Agreement.
An explanatory memorandum for s 51AA says that it “embodies the equitable concept of unconscionable conduct as recognised by the High Court in Blomley v Ryan (1956) 99 CLR 362 and Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447”. In Berbatis it seems that the result may well have been the same without the enactment of s 51AA.
It is my view that there is nothing in this matter which takes it any further than the unwritten or judge-made law on unconscionability.
On the construction of the BSA and my finding that the BSA, together with the other contracts, does not constitute a single transaction, there is no room for a finding that Rocla has acted unconscionably. Likewise there is no room for a finding that SRLA has been affected in its ability to make judgments in its own best interest. I reject the argument.
In summary therefore Rocla and Plastream validly extended the option and Rocla exercised it by the extended deadline. The consent of SRLA was not required. The BSA was not part of a series of agreements constituting a single transaction. There is no estoppel which operates and there was no unconscionable conduct as SRLA was not placed in a position of disadvantage.
5. The scope of the sub-licence
5.1 The missing comma
The scope of the Rocla Sub-licence and the topic of a missing comma occupied a considerable amount of time in the trial. Evidence was given by several witnesses including the solicitors engaged in the preparation of the relevant documents on behalf of SRLA. The issues on this topic arise from the plea by SRLA in its defence. SRLA pleads in its defence that Rocla knew from the Master Licence that Plastream had agreed that it would not engage in the business of pipe rehabilitation.
It is not part of Rocla’s claim against either defendant that the Rocla Sub-licence and its scope needs to be reviewed. It forms no part of the statement of claim issued by Rocla. It is not raised in Plastream’s defence. When it is raised in the defence of SRLA it is in the context of Rocla allegedly being excluded from using the SRP technology in the “replacement” of culverts, pipelines, conduits and the like and in carrying out pipe rehabilitation.
SRLA is therefore seeking a construction and rectification of the Rocla Sub-licence because it alleges that a comma was omitted in the final agreement between Rocla and Plastream. The history of the exchanges between the parties is pleaded. Rocla argues a different interpretation than that submitted by SRLA.
It is clear that there were discussions between Rocla and SRLA regarding the word “replacement” and its meaning in the context of pipe rehabilitation in the overall context of the Albert Priestly project in or about November and December 2008. However, there is nothing pleaded regarding the use by Rocla of SRP technology in any allegation of breach of contract. In short, there is no factual situation pleaded which raises any issue for determination by the Court.
It seems that in December 2008 the Sales Development Manager of Rocla asked Plastream to provide a quote for a mobile pipe-winding machine. Mr Lukban says that Rocla intended to place the machine about 20 kilometres from the site where pipes were to be laid. This was to reduce transportation costs.
A formal quote was sent on 29 December 2008. The email from Mr Gysin-Webster to Mr Dunkley of Rocla indicates that Mr John Taylor was concerned that the
… anticipated application of the pipes that are to be produced using the offered winding line, is a rehabilitation application and therefore not within the scope of Rocla? Please check the application is not in conflict with our agreement or alternatively give us a clear description of the intended application.
On 7 January 2009 Mr Allen of Rocla sent an email to Mr Gysin-Webster describing the project as:
… the scope of the project is to construct a new pipeline in an open channel easement. The existing channel is roughly trapezoidal in cross section, in poor condition and needs to be decommissioned. The process will be to excavate a trench, install a new pipeline and back fill. Nothing at all to do with the work Interflow does.
Although Rocla tendered for the project and was unsuccessful, as I say later, I suspect these exchanges were the genesis of a potential dispute which I find has not yet arisen and indeed may never arise.
In Rocla’s reply it admits the existence of the relevant clauses of the Rocla Sub-licence but denies SRLA’s interpretation. It denies that the comma was removed solely by reason of a word processing error.
In the cross-action by SRLA against Plastream it is pleaded that “the terms of the Rocla Sub-licence may, unless rectified, purport to permit Rocla to use the SRP technology for ‘replacement’”.
Earlier in the course of these proceedings the parties filed statements of the issues in the trial. Rocla nominated the proper construction of the Rocla Sub-licence as an issue. Plastream generally agreed with the issues identified by Rocla. SRLA in its statement of issues raised the scope of the sub-licence in the context of the declaration it seeks as to the use of SRP technology for “replacement” and for pipe rehabilitation.
As will become apparent I do not regard it as sufficient for the parties to nominate a subject matter as an issue to be decided simply because the parties wish to have the benefit of an “opinion” on a possible future issue or event.
I intend to set out some relevant parts of the documents in question, even though I will later decline to make the orders sought.
The term “pipe rehabilitation” is defined in the Master Licence in clause 2.11 as:
“Pipe rehabilitation” means in situ manufacture of all kinds of shape of tubular objects, for the renovation, repair, lining, relining, renewal or rehabilitation of culverts, ducts, pipelines, conduits, tunnels, bores and like structures, including the provision of any service and the manufacture of any equipment in connection with those activities: and also includes for the territories of Australia and New Zealand, activities that fall within the scope of the rights granted by RLA to Interflow Pty Ltd for those territories prior to the commencement date.
It can be seen from this definition that “pipe rehabilitation” as defined in the Master Licence does not include the word “replacement”.
The Distributor Franchise Agreement (known as the Interflow Agreement) was made on 15 September 2003 between SRLA and Interflow and contains its own definitions.
Recital A provides:
Rib Loc has developed technology for application in the repair, replacement, lining and relining, renovation and rehabilitation of conduits and has the power to grant rights in respect of such technology.
[Emphasis added]
The franchise granted by clause 3.1.1 grants to Interflow a “franchise” to supply all and any products or services resulting from the technology in the application throughout the territory for the duration of the term.
“Application”, in turn, is defined in clause 2.2 as:
“Application” means the employment of the technology in the repair, renovation, replacement, lining, relining, rehabilitation and renewal of culverts, pipelines, conduits, underground ducts, tunnels, bores and like structures, but subject to variation as outlined in Appendix 1 herein.
Therefore it is apparent that from September 2003 Interflow, by virtue of the Interflow Agreement, used the SRP technology in the business of repair, replacement and the like. In other words, what is generally understood as pipe rehabilitation.
From the arguments advanced it seems that the concern is whether Rocla is restricted to the provision of pipes for greenfield sites. It appears that there is no issue between the parties that at the time Rocla entered into the Rocla Sub-licence Rocla understood that Interflow was involved in pipe rehabilitation and that Rocla was not to be involved in that aspect of the business. It is suggested by SRLA that Rocla knew that pipe rehabilitation included repair and replacement.
What Rocla is permitted to do is set out in clause 3.1 of the Rocla Sub-licence which states:
3.1Subject always to the restrictions imposed on Rocla by clause 3.5 and to clause 11, RLP hereby grants to Rocla with effect from the Commencement Date for the Term:
(a) an exclusive royalty-bearing licence, for the Territory, to use and apply the SRP Technology to manufacture Plastream Pipe for sale by Rocla to customers within the Territory; and
(b) an exclusive licence for the Territory to use the Plastream Trade Mark for all purposes related to the sale of Plastream Pipe to customers within the Territory.
What Rocla is not permitted to do is set out in clause 3.5 of that agreement which states:
3.5In exercising its rights under clause 3.1(a), Rocla must not:
(a)     supply any products or services resulting from the SRP Technology for, or otherwise employ the SRP Technology in, the repair, renovation, replacement lining, relining, rehabilitation or renewal of culverts, pipelines, conduits, underground ducts, tunnels, bores or like structures;
(b)     engage in any way in a business of Pipe Rehabilitation; or
(c)     sell Plastream Pipe to any person who is either engaged in the business of Pipe Rehabilitation, or who intends to resell or supply the Plastream Pipe to any person who is so engaged, or for any other purpose related to Pipe Rehabilitation,
Without the prior written consent of RLP [Plastream] on each occasion.
SRLA claims in its defence and counterclaim that the Rocla Sub-licence was intended to mean one thing but that by a mutual mistake, namely the omission of a comma between the words “replacement” and “lining”, the whole meaning of the agreement has been changed. In the alternative it is claimed that there was a unilateral mistake.
The comma is missing between the words “replacement” and “lining” in the executed copy of the Rocla Sub-licence. SRLA submitted that “replacement lining” followed by “relining” does not make any commercial sense.
The BSA, with SRLA as a party, has annexed to it an eighth schedule which is an unexecuted copy of the Rocla Sub-licence again with the comma missing. SRLA seeks to amend the BSA by the insertion of a comma between the words “replacement” and “lining” appearing in clause 3.5(a). In other words it seeks the rectification of an annexure to the BSA as a means of rectifying the actual Rocla Sub-licence.
The same claim which is made against Rocla in the defence filed by SRLA is also made by it in its cross-action against Plastream. Plastream denies SRLA’s right to rectification.
Rocla denies in its reply that any comma was omitted from the document solely by reason of a word processing error. It contends that the agreement does reflect the intention of the parties.
SRLA points to the evidence of the solicitors and officers of SRLA to argue that the omission of the comma was a mistake. Rocla relies largely on the evidence of Mr Lukban and Mr Baker. Plastream did not call any evidence.
It is submitted by both Rocla and Plastream that I should determine this matter by looking to the intention of the parties from a consideration of the objective background facts.
The evidence of Mr Baker of Rocla is important in this regard. He states that, in his understanding, rehabilitation of pipelines is limited to in situ work only. In his affidavit he referred to the Albert Priestly project. He says that he asked Mr Lukban to keep him informed about the project. He said that he knew that the project involved the replacement of pipe in an irrigation channel in New South Wales and that Rocla had asked Plastream for a quote for a winding machine in order to make pipe to put into the irrigation channel. The project is irrelevant to the extent that there is no issue as to that project.
Mr Baker said in cross-examination that he believed that Rocla was entitled to undertake any Albert Priestly type project under its sub-licence. He says that when he was first introduced to the Caliber business he understood that they were buying a pipe business and that they had the rights to manufacture and supply pipes. It was his understanding that Rocla did not have the rights to undertake any pipe relining. He said that the Albert Priestly project was not dissimilar to many projects that Rocla was involved in when replacing existing pipes using concrete pipes.
There was a lot of discussion in and around September 2009 between the respective officers, including Mr Baker, regarding what was suggested to him to be a solution to clarify the matter, namely the insertion of a comma between the word “replacement” and the word “lining” in clause 3.5(a) of the Rocla Sub-licence.
Mr Baker said in cross-examination that the insertion of a comma would be a problem for Rocla because it would prohibit Rocla from supplying pipe for any job which directly or indirectly replaced an existing pipe. He understood that the insertion of a comma between the word “replacement” and the word “lining” would mean that Rocla had no right to be involved in a project in which new pipe was placed in irrigation channels for projects like the Albert Priestly project. This was one of the reasons why he did not agree to a comma being inserted at that time.
Mr Rees of Rankine Tucker was engaged by SRLA to act in connection with the BSA and the other agreements, including the Rocla Sub-licence, for the purpose of achieving the sale of the Caliber business to Rocla. Mr Simmons of Minter Ellison was also engaged by SRLA. Initially he was asked to amend the Rocla Sub-licence for consistency with the rest-of-the-world or Master Licence.
Mr Simmons from Minter Ellison was not involved at the time when the words “replacement lining” became part of clause 3.5(a) of the Rocla Sub-licence.
In his evidence in chief Mr Rees described the sequence of events in relation to the various drafts of the Rocla Sub-licence which he prepared. In particular he referred to the removal of the word “replacement” by the solicitors for Rocla and Ms Porcelli’s instructions to him that it had to be reinstated. He said that when he put the word “replacement” back into the document the comma did not go back in. He explained how that was in error because of mistakes in the track changes made to the draft and was a word processing mistake. He did not notice the omission of the comma.
Ms Porcelli stated in her evidence that she instructed Minter Ellison to review the sub-licence to ensure that its terms were consistent with the terms of the rest-of-the-world licence. She details the steps in the preparation of the drafts and the basis of her instructions to Mr Rees.
Ms Porcelli refers to a conversation she had with Mr Lukban on 23 July 2008. She said that he said that he was concerned with the situation where Rocla removed an existing pipe and replaced it. He told her that Rocla was in the business of replacing pipe and referred to the concrete pipes manufactured by Rocla. She told him that she would refer it to the technical people and the solicitors.
Ms Porcelli said that there were changes in the clause in the drafts exchanged following that conversation. She said that she did not notice that the comma was missing when she saw the final draft but did notice that the word “replacement” had gone back in pursuant to her instructions. She noted that when “replacement” was re-included in the document it was in red font and underlined and the entire clause was highlighted yellow.
Mr John Taylor, who is the general manager, manufacturing of SRLA, gave evidence by way of affidavit regarding his recollections of the discussion which took place about the term “replacement”. These discussions all took place in mid-2008, and then in November or early December 2008 he became aware that Rocla was proposing to tender for the Albert Priestly project. He then had a discussion with Mr Gysin-Webster, who was the manager of Plastream. It appears that Mr Gysin-Webster had the view that Rocla could tender for the project.
Mr Barry Taylor, who is the president of SRLA, deposes in his affidavit to conversations between he and Mr Baker in late September 2009. He confirms essentially what Mr Baker said in relation to the discussion regarding the insertion of a comma after the word “replacement”. He confirms that Mr Baker said that that was going to be a problem for Rocla.
Mr Lukban was cross-examined about the conversation he had with Ms Porcelli regarding the word “replacement” in the draft sub-licence. He said he had not deposed to that conversation in his affidavit as he had forgotten about it. He then proceeded to relate the details of the conversation. He said that he told Ms Porcelli that he was concerned about the exclusion of the word “replacement”. He said that he was later told by his lawyers that the word “replacement” had been put back in. It appears that Mr Lukban accepted that the word had been put back into the document.
It was put to him that when he saw the expression “replacement lining” in the document, that is, without the comma separating those two words, he knew that it was in fact wrong. He denied that to be so. He did say that there had been no discussion between he and Mr Buttery of Plastream about the expression “replacement lining”. He said he saw that the comma was missing but he did not say anything about this to Rocla’s solicitors or anyone else from Rocla. He said he was happy for the term “replacement lining” to be part of the sub-licence. He then gave an explanation of what he understood by “replacement lining”. It was put to him that he did not notice the comma was missing but he denied that.
Not long after the time when he said he saw the comma was missing, Mr Lukban wrote an email reproducing clause 3.5(a) and included the comma between the words “replacement” and “lining”. When pressed on this he said it was a typographical error. He specifically denied that he wanted to take advantage of the missing comma in order to increase the scope of Rocla’s rights under the agreement.
Mr Lukban said that he was the person responsible for providing instructions to the solicitors for Rocla for these proceedings. He said he was aware that the case against Rocla was that the comma was missing as a result of a mistake during word processing. He agreed that he has not said anywhere in his affidavits that the absence of the comma was not a mistake but nevertheless he still denies that it was a mistake.

I have considerable difficulty in determining the objective intention of the parties from my review of the evidence. In any event I do not find it necessary to do that because of my view that it is not appropriate to attempt to construe the agreement for theoretical or future possibilities.
When talks regarding the purchase of Caliber began in 2007 there were two known uses for the SRP technology, namely, the manufacture and sale of plastic pipes and secondly the repair of existing pipes by winding the SRP strip inside.
Before 18 May 2008 SRLA, Plastream and Caliber had common ownership and employed people common to all three companies. Ms Porcelli was in this category, as was Mr Buttery. At about that time SRLA was purchased by a Japanese group called the Sekisui Group of Companies. Sekisui did not wish to purchase the Plastream business nor did it wish to continue with the Caliber business.
In early June 2008 Rocla agreed to buy only that part of the Caliber business that related to the new pipe making. In discussions leading up to the agreement in the middle of 2008 it was understood that Rocla was only purchasing from Caliber the right to sell the Plastream pipe to retailers. It was understood that Caliber’s business did not include the sale to persons in the business of pipe rehabilitation. Accordingly solicitors were engaged to draw up the necessary documents in June 2008. Drafts were exchanged of the various contracts necessary to achieve the sale of the Caliber business to Rocla.
There was a lot of discussion between Mr Lukban and Ms Porcelli in particular about the drafts of the documents prepared by the solicitors and surrounding what was meant by “replacement” in clause 3.5(a). “Replacement” was taken out of one draft and then re-included but when re-included clause 3.5(a) included for the first time the words “replacement lining” without a comma between them.
There were further discussions relating to whether SRLA should be added as a party to the Rocla Sub-licence. SRLA was included but then taken out when SRLA did not agree to it being added as a party. Settlement of the sale of the Caliber business took place on 22 August 2008 when the various agreements were entered into and in particular Caliber, SRLA, Plastream and Rocla entered into the BSA. Rocla and Plastream entered into the Rocla Sub-licence and Rocla and SRLA entered into the Mirror Licence. SRLA and Rocla separately entered into the Supply Agreement.
Despite the objective findings above I am left with no clear view of what the parties intended regarding Rocla’s ability to engage in projects such as the Albert Priestly project. This is because there is very little evidence about it.
I have already stated that on the pleadings there is currently no actual issue between the parties requiring an interpretation of the document on the topic of replacement.
There is no evidence before me as to what is meant by the terms “replacement” or “replacement lining”. I do not know whether these are terms which are well known within the industry and have an industry meaning. There is no factual basis for deciding whether any particular actions which might be taken by Rocla in the future would involve replacement and/or replacement lining.
SRLA chose to call no evidence on the topic of what was meant by pipe rehabilitation. No director was called to say what was understood by them in relation to the topic. It had the onus of course in its attempt to convince the court to rectify the document. Likewise I have no evidence from SRLA as to its understanding of how Interflow’s business operates.
One suspects that the parties were gearing up for some form of litigation from the time SRLA became aware that Rocla had tendered for the Albert Priestley Project. SRLA became aware of this tender and argued that Rocla had no right to tender for the work. This aspect was the subject of considerable discussion between the parties, particularly between Mr Lukban and Mr Baker on behalf of Rocla and Ms Porcelli and both Mr John Taylor and Mr Barry Taylor on behalf of SRLA.
At this time the issue regarding the addition of a comma was discussed. SRLA has suggested that Rocla, through Mr Lukban, has attempted to gain a commercial advantage through the absence of the comma which SRLA claims was a mutual mistake.
During final submissions it became apparent that SRLA is really seeking declarations and an order for rectification to protect it in the future against the possibility of Interflow taking action against SRLA should Rocla proceed to tender for projects similar to the Albert Priestly project. Mr O’Sullivan conceded that the question of what Rocla can actually tender for and whether it comes within the definition of replacement is not in issue in this matter. Mr Hoffmann, however, did not agree. The reason for this is clear from the understanding Mr Baker had regarding the importance of the word “replacement”. If replacement is an exclusion within clause 3.5(a) of the sub-licence then, as Mr Baker said, Rocla is likely prohibited from tendering for projects such as the Albert Priestly project. If, however, the expression is “replacement lining” then that is something that Rocla always understood it could not do. Rocla wishes to argue that it is entitled to place new pipe in irrigation channels because it is not prevented from doing that by the exclusions in clause 3.5(a).
Therefore, although conceded by Mr O’Sullivan that the question of what is encompassed within the definition of “replacement” in this matter is not in issue, Mr Hoffmann wishes to have a ruling which enables his client to gain the comfort of being able to tender for projects such as the Albert Priestly project. It is simply a question of construction of the document in a vacuum. In my view it would need an actual set of facts and evidence as to the exact project involved, and possibly evidence as to the knowledge and understanding of specific terms used in the business before any meaningful conclusion could be drawn. I cannot therefore in this matter give Mr Hoffmann’s client the comfort it seeks to allow it to tender for like projects in the future. This likewise means that I can give no comfort to Mr O’Sullivan’s client. The Court should not be required to make a judgment solely for the purpose of giving comfort to either or both of the parties urging their respective interpretations.
Mr Hoffmann concedes that Rocla did not buy the right to use SRP technology for the purpose of pipe rehabilitation. He submits that the case is not about the missing comma. He submits that the only question is what is the scope of Rocla’s rights under the sub-licence. He puts it this way in his written submission:
Is Rocla restricted in manufacturing and selling Plastream pipe
(a)so that it can only sell Plastream pipe to persons undertaking green field developments but not, for example, place pipe in an open irrigation channel (SRLA’s case); or
(b)so that Rocla can sell to people who might dig up and replace (in whole or in part) an existing pipe (Rocla’s case).
In relation to this litigation Rocla made the first move by issuing proceedings and SRLA retaliated with its request for declarations and rectification of the agreement. It also counterclaimed for damages amounting to approximately $500,000.
In my view the litigation has not been well planned. SRLA concedes in its oral submissions and in the written reply that there are limitations upon the basis of any judgment which can be made in this matter. That is because any declaration relates to hypothetical dealings which may take place at some indeterminate time in the future. It may never happen. Rocla clearly seeks to have an advantageous interpretation to assist it in tendering for further works like the Albert Priestly project. SRLA seeks to have an interpretation to prevent Rocla from tendering for such projects.
The High Court and the Full Court have consistently said that the court will not give declarations for theoretical possibilities. A majority of the High Court in Ainsworth v Criminal Justice Commission (1992) 175 CLR 567 (Mason CJ, Dawson, Toohey and Gaudron JJ) observed at [581]:
It is now accepted that superior courts have inherent power to grant declaratory relief. It is a discretionary power which “[i]t is neither possible nor desirable to fetter … by laying down rules as to the manner of its exercise.” However, it is confined by the considerations which mark out the boundaries of judicial power. Hence, declaratory relief must be directed to the determination of legal controversies and not to answering abstract or hypothetical questions. The person seeking relief must have “a real interest” and relief will not be granted if the question “is purely hypothetical”, if relief is “claimed in relation to circumstances that [have] not occurred and might never happen” or if “the Court’s declaration will produce no foreseeable consequences for the parties”.
[Citations omitted]
Some more recent decisions of the Full Court include Allianz Australia Insurance Ltd v National Jet Systems Pty Ltd [2004] SASC 438, Forstaff Adelaide Pty Ltd v Hills Industries Ltd [2006] SASC 88 and Frederick John von Stanke as executor of the estate of Frederick William von Stanke (deceased) v O’Meara & Ors [2007] SASC 410.
5.2 Rectification
SRLA cannot expect to rectify a document to which it is not a party. It therefore attempts to answer that by its argument that all of the various contractual relationships entered into by the parties amount to a single transaction. I have earlier in these reasons rejected the argument that the parties intended that the series of contracts were to be regarded as a single transaction.
Pipe rehabilitation is defined in the documents. It seems that there is not much dispute that Rocla was never intended to be involved in pipe rehabilitation. The issue of what is and what is not pipe rehabilitation does not arise in this matter. There is no dispute between the parties as to any current plans for Rocla to be involved in any project which could be regarded as pipe rehabilitation.
“Replacement” and what is meant by it is likewise a non-issue in this matter, for the reasons I have given. There is no factual basis to decide whether any aspect of Rocla’s current or future operations involves “replacement” and/or “replacement lining”. Despite this, SRLA seeks rectification by the insertion of a comma between the words “replacement” and “lining” in the sub-licence attached as Schedule 8 to the BSA.
How that could be when there is no issue as to what is meant by the words is somewhat difficult to fathom. It does make the exercise requested of the Court entirely hypothetical. The Court should not indulge the parties in condoning such an exercise.
For what it is worth, it seems clear to me that in the process of the preparation and settling of the documents a word processing or typographical error was made and the comma was omitted as a result. That error was not picked up by the solicitors. It may be that that becomes relevant in any future litigation but it is not relevant on the issues joined between these parties. It is sought to be made relevant by the seeking of a declaration which is entirely hypothetical. The construction of the words “replacement” and “replacement lining” must await a factual situation when, on the specific facts of that case, the court will have the ability to construe the words.
It is noteworthy that only Mr Lukban claims to have noticed the missing comma. This is somewhat surprising as he did not even seek to examine the sub-licence when conducting due diligence procedures on behalf of Rocla. All other participants, including the solicitors and Ms Porcelli, who I found to be an astute accountant, missed the change. I do not believe that Mr Lukban did notice the missing comma as he says. I believe he has sought to take advantage of the missing comma for what he perceives to be Rocla’s commercial advantage. Whether that was his intention all along I cannot say. I do not attribute any similar motive to Mr Baker. I thought he had a genuine belief of what Rocla was entitled to do and that it did not include pipe rehabilitation. He thought Rocla could replace pipe in a project such as the Albert Priestly project.
The second defendant therefore seeks rectification of a document in respect of which there is no live dispute. Rectification is sought in the abstract. Any potential future issue remains hypothetical or theoretical and relates only to a potential “comfort” for SRLA or Rocla. It may be intended as “a weapon or argument for use in negotiations”. See McGarrigle v Public Service Board [1979] 1 NSWR 292 at 295 per Moffitt P and Mentha v G.E. Capital (1997) 154 ALR 565 at 575 per Finkelstein J.
It is not the work of this Court to be involved in hypothetical declarations or to grant rectification in such circumstances.
I formed the view that Rocla has been influenced by Mr Lukban’s view of the matter. I am not convinced that he has always held that view. He has been somewhat opportunistic in seeking to advance an interpretation for Rocla’s commercial advantage. I did not find Mr Lukban to be an impressive witness. I thought his evidence smacked of reconstruction for the purpose of fitting in with the case plan for Rocla. I thought that he was ensuring that he gave the best answer for what he thought was Rocla’s cause.
I have dealt with some of Mr Lukban’s evidence earlier. He said in cross-examination that he could not recall in his conversation with Ms Porcelli whether he used the words “a no dig option” but in his affidavit he denied using those words. He said he saw the comma was missing yet he failed to tell the solicitors, even though he was responsible for instructing them. I do not accept that his inclusion of the comma in his email of 10 September 2009 was a typographical error, as he says. Mr Lukban has not deposed prior to trial to the absence of the comma as not being a mistake, but maintains in his evidence that it was not a mistake.
Mr Lukban told Mr John Taylor on 6 May 2008 that Rocla had exercised the option. That was untrue. Mr Lukban knew that it was untrue. He claimed it was a case of not giving full disclosure rather than being an untruth. He likewise responded by letter of 3 June 2008 (drafted by solicitors) that the option had been exercised in accordance with the terms of the sub-licence. This again was not true. His involvement in these two instances of deliberate untruths does him no credit.
Whilst I respect Mr Baker’s view as to what he thought the exclusions were, I do not see Mr Lukban’s explanations as anything other than opportunistic.
6. Damages
In the event that I am mistaken in relation to my consideration of the exercise of the option, and if it were the case that the option was not validly exercised for any of the reasons put forward by SRLA, then I indicate that I would not make an award of damages in any event.
The case on damages presented by SRLA lacks in specificity and on the balance of probabilities I do not find any case adequately made out.
I have said earlier that Rocla has given an undertaking through its solicitors to pay damages to SRLA if the option was not validly exercised. Such damages would relate to the supply by SRLA of SRP strip to Rocla after 21 August 2010.
The calculation of loss submitted by SRLA amounts to the loss of profit which SRLA claims it would have gained had it been able to sell the product to an associated company in the United States (the US company) instead of to Rocla.
The claim is made on the basis that in supplying Rocla from 22 August 2010 to 31 December 2010 SRLA was operating its plant at full capacity. That raises the question of whether it was operating at full capacity as it claims.
The onus of proof generally in relation to damages is on SRLA. My view is that the onus has not been discharged.
As I have indicated, SRLA attempted to establish that it was operating at full capacity. Evidence before me shows that the two extrusion lines in the SRLA plant can be operated for 24 hours a day, seven days a week. That was not the case during the period August to December 2010.
Rocla claims that there is no evidence to support the claim of maximum capacity. I was not told what the capacity of the lines was in terms of how much SRP strip could be produced.
To operate at full capacity SRLA would require extra labour, and clearly extra specialised operators would have been required if the plant was to be operated 24 hours per day. However, the evidence shows that during that period the extrusion lines were sometimes only utilised for three days a week whereas in other periods it was either four or five days per week.
One other problem for SRLA, and its claimed loss of sales to the US company, is that when actual orders were received from the US company they were in fact fulfilled. There were three such examples in the relevant period.
The evidence in relation to the US company sales is lacking. I am also faced with a lack of evidence in relation to what strip was actually produced and what demands there were for the strip during the relevant period. I was merely given factory extrusion plans as distinct from production details. This is merely evidence of SRLA’s intention to produce during the relevant period.
I am not convinced that the claimed loss from the potential sales to the US company is made out. As I have said, it appears that orders actually received were filled. I am concerned also at the lack of any arm’s length trading between the two companies. It seems from the evidence that budget considerations for both SRLA and the US company were paramount in attempting to justify the figures by book entries. This was apparently to achieve some balancing process as between the two companies.
Mr Barry Taylor agreed in cross-examination that the production worth over $700,000 of profile was produced on instructions from Germany and that it was manufactured “for inventory”. He agreed it suited both SRLA and the US company to do so. He agreed that it was an ideal outcome for both companies. The US company did not have the capacity to sell the product when it was produced. It was not purchased by the US company at the time but at some later date. In the meantime it was stored at the premises of Priority Engineering in Adelaide where it still remains. It does not have the hallmark of an arm’s length transaction.
In addition there is no evidence which satisfies me as to either what price would be paid if and when the US company did place orders and there is very limited evidence as to costs of production. As the claim is for loss of profit, it is difficult to make any meaningful calculation without adequate details of prices and costs. That is a serious defect in any claim for damages based on loss of profit.
Mr Hoffmann was particularly critical of Mr Barry Taylor and his evidence to support the claim for damages. He suggested that Mr Taylor attempted to mislead the court. He submitted that the damages case for approximately half a million dollars was manufactured and Mr Taylor knew that to be so.
The main criticism related to Mr Taylor deposing to matters which he said were of his own knowledge. It turned out that some were not, including the sale of SRP strip to the US company.
The fact is that Mr Taylor’s evidence was unsatisfactory in many respects. It simply did not go far enough to support a claim for damages. I do not find that he deliberately attempted to deceive the court but he certainly attempted to make the most of limited information not within his own knowledge. He was forced to concede that to that extent his affidavit was not correct.
A similar criticism, albeit without any suggested motive, is levelled at Mr John Taylor. Again his evidence did not support the claim. Direct evidence should have been called from the particular employees responsible for the relevant parts of the manufacturing process but none was called by SRLA. Mr John Taylor could not give that evidence from his own knowledge.

The assessment of damages is therefore left in an unsatisfactory and very tentative situation. It is not the type of evidence which a court would normally hear in a claim for damage and loss, whether that be in tort or contract. The evidence required was quite specific and detailed but it has not been called.
For these reasons, as I say, had the option not been validly exercised, which may have entitled SRLA to damages, I would have been unable to find any damages proved for the reasons I have given.
7 Conclusion and orders
On the basis of my findings, Rocla is entitled to the first two declarations it seeks.
1.A declaration that clause 11.1 of the SRP Technology Licence Deed was varied such that the words “at any time within the first 20 months of the Term” were replaced by words to the effect of “on or before 21 May 2010”.
2.A declaration that the plaintiff gave notice to the first defendant in accordance with clause 16 of the SRP Technology Licence Deed on or before 21 May 2010 and consequently exercised the option in clause 11 of the SRP Technology Licence Deed.
So there will be declarations in those terms. As to the third and fourth declarations sought, I will hear the parties as I do not have sufficient details of the agreement reached between the parties for the continuation of supply of the SRP strip pending the completion of this litigation.
The first defendant is also the beneficiary of the declarations above as it supported the remedies sought by the plaintiff.
SRLA is not entitled to the orders it seeks and is not entitled to damages.
I will hear the parties on costs.