Roy v Ecosol Pty Ltd - [2007] SASC 239

SUPREME COURT OF SOUTH AUSTRALIA
(Civil)
ROY v ECOSOL PTY LTD
[2007] SASC 239
Judgment of The Honourable Chief Justice Doyle
4 July 2007
CONTRACTS - GENERAL CONTRACTUAL PRINCIPLES - OFFER AND ACCEPTANCE - MATTERS NOT GIVING RISE TO BINDING CONTRACT
Civil trial - claim for declaration of oral agreement entitling plaintiff to royalty payments - defendant denies alleged agreement - whether on balance of probabilities Court is satisfied alleged agreement was made - whether conduct of defendant gave rise to reasonable belief on part of plaintiff that defendant agreed to pay royalties.
Held: Defendant's denial of making of alleged agreement affirmed - claim dismissed.

ROY v ECOSOL PTY LTD
[2007] SASC 239
Civil

DOYLE CJ: The plaintiff Mr Roy claims a declaration that he is party to an oral agreement with Ecosol Pty Ltd (“Ecosol”) entitling him to be paid an amount equal to four per cent of gross receipts from sales by Ecosol of stormwater filters designed and developed by Mr Roy and sold by Ecosol. I will refer to the agreement as “the royalty agreement”. Mr Roy alleges that he made the royalty agreement with Mr Charlton, a director of Ecosol, between April 1996 and October 1996. This was before he began to design and develop the filters in question, or at an early stage of that work.
Mr Roy alleges that in December 1998, in the course of a conversation with Mr Charlton, the agreement was confirmed or renewed. On this basis Mr Roy resumed working for Ecosol (having stopped working for Ecosol in August 1998) and worked on the development of further filtration products, in particular products intended for sale in the United Kingdom.
Ecosol and Mr Charlton deny making any such agreement. Ecosol admits that Mr Roy designed and developed stormwater filters and other filtration products for it, and that Ecosol sold them. Ecosol says that it paid Mr Roy in various ways for this work and that his return, like that of others involved in Ecosol, was through shares in Ecosol held by his wife, and shares in Ecosol International Pty Ltd (“Ecosol International”) held by him.
The parties agreed that I should first decide whether the royalty agreement was made. If it was, there would then be a hearing (if necessary) to determine the amount of Mr Roy’s entitlement under the royalty agreement.
The issue for me is whether I am satisfied on the balance of probabilities that the royalty agreement was made as alleged by Mr Roy.
Deciding this issue involves considering the direct evidence of Mr Roy and Mr Charlton about the relevant conversations. They were the only persons present. It also involves me considering evidence about dealings between Mr Roy on the one hand, and Mr Charlton and Ecosol on the other hand, and evidence of other events that bear on the likelihood of the royalty agreement having been made. The relevant events occurred between October 1995 and the second half of 2002.
It is necessary to weigh up all of this evidence before reaching a conclusion. This is not a case in which I am prepared to make a finding, on the basis of demeanour, that I accept one witness and do not accept the other witness. I have found it necessary to consider the other evidence before reaching a conclusion.
As will appear, I am not satisfied that the royalty agreement was made. Taking into account the evidence of Mr Roy and the evidence of Mr Charlton about the crucial conversations, and the evidence of other dealings involving them, I prefer the evidence of Mr Charlton on the central issues. I consider that the other evidence supports his evidence, because in a number of respects the other evidence is of events that point to a conclusion that an agreement as alleged by Roy had not been made. In any event, Mr Charlton’s evidence is the more plausible evidence. I will explain in due course why that is so.
I will begin by summarising the relevant dealings between the parties. In this summary I will deal mainly with matters which are uncontested. I will then deal with the matters that cause me to conclude that Mr Charlton’s evidence should be accepted. To the extent that those matters are events, I will deal with them in roughly chronological order. I will indicate my findings as I go.
Overview
The following is a chronological summary of the relevant dealings between the parties from October 1995 to the second half of 2000.
Events before Ecosol was incorporated
From 1993 to 1995, before becoming involved with Ecosol, Mr Roy ran his own plumbing business. The business did not run smoothly and on 25 October 1995 Mr Roy was declared a bankrupt. It was because of Mr Roy’s status as a bankrupt that his wife was later allotted shares in Ecosol.
For six months, starting in June 1995 Mr Roy worked from a shed at his home in Hawthorndene on a project to turn his ideas for a stormwater filter into a marketable product. Mr Versteegh, a friend of Mr Roy helped with aspects of the project.
On 28 October 1995 Mr Roy’s then fiancé, now wife, and Mr Roy’s friend Mr Versteegh registered the company RSF Patent Pty Ltd (RSF). Ms Roy and Mr Versteegh were the directors of RSF. On 30 October 1995 RSF filed a provisional application for a patent in respect of a stormwater filter invented by Mr Roy. The stormwater filter that was the subject of this patent was later marketed by Ecosol under the names RSF 100 and RSF 2000.
Events leading to the registration of Ecosol
In November 1995, Mr Roy approached a company trading under the name Adelaide Aluminium for a quote for aluminium baskets needed to make the stormwater filters. At this time Mr Roy and Mr Versteegh had developed working models of the RSF 100 and RSF 2000, but further testing was required before the products would be ready for manufacture and sale.
Mr Bishop, an employee of Adelaide Aluminium, was impressed with Mr Roy’s product and told Mr Roy that he, his mother and Mr Charlton, Mr Bishop’s business associate, were interested in entering into a joint venture with Mr Roy and the principals of RSF. Mr Bishop suggested the creation of a new company as the joint venture vehicle to market the RSF products.
There followed in December 1995 and January 1996 a number of discussions or negotiations involving Mr Roy, Mr Versteegh, Mr Charlton and Mr Bishop. I deal with the significance of these negotiations, and the discussion documents prepared to assist in the negotiations, below.
The parties reached an agreement on the joint venture, and on 9 February 1996 Ecosol was registered. Ms Roy and Mr Versteegh along with Mr Charlton, Mr Bishop and his mother were appointed directors of Ecosol.
On 9 April 1996 RSF Patent assigned the rights to the RSF 100 and the RSF 2000 to Ecosol. The licence agreement provided that RSF Patent would receive royalties for the RSF 100 and RSF 2000. These royalty entitlements have been met by Ecosol.
Development of the RSF 4000
After Ecosol was established, Mr Roy continued to improve the RSF 100 and the RSF 2000 and began to develop new filtration products. The RSF 4000 is one of the products developed after Ecosol was established. Ecosol has since gone on to receive a substantial amount for sales of the RSF 4000. It is Mr Roy’s claim to royalties on the sale proceeds of the RSF 4000 that is the subject of this dispute.
The RSF 4000 was developed as part of a process of creating and testing a series of stormwater filters.
Mr Roy’s recollection is that he started development of what would become the RSF 4000 a month or two before Ecosol lodged a patent application in respect of the product on 29 November 1996. Mr Roy gave evidence that in about October 1996, in addition to working on the development of the RSF 4000, he was improving the RSF 100 and RSF 2000. He carried out the work from a workshop at his home in Hawthorndene. Mr Roy was not able to recall the date on which the royalty agreement was made. He gave evidence that he and Mr Charlton engaged in a number of conversations about the royalty agreement after the RSF 100 and RSF 2000 royalty agreement was signed on 9 April 1996 and concluding before October 1996. He characterised these conversations as a series of negotiations leading to the royalty agreement or continuing confirmation of the royalty agreement. Mr Charlton recalled first discussing the idea for the product that would become the RSF 4000 with Mr Roy and Mr Versteegh in about May 1996. No written royalty agreement or any written record of the oral agreement was produced.
Six business plans relating to the business of Ecosol were tendered. They were prepared between 13 May 1996 and 2 January 1997. I deal with the significance of these plans in my findings. It is sufficient to say here that the business plans refer to the process of creating and testing a series of stormwater filters that resulted in the RSF 4000. The last business plan in the series, dated 2 January 1997 refers to Ecosol’s application for a government grant for assistance to develop the RSF 4000 (the AusIndustry grant).
Ecosol applied for the AusIndustry grant on 6 January 1997. On 30 April 1997 Mr Roy signed a deed of acknowledgment and assignment of intellectual property rights over the RSF 4000 in favour of Ecosol. The parties agree that the deed was prepared to ensure that Ecosol fulfilled all of the eligibility requirements for the AusIndustry grant.
Events after the development of the RSF 4000
Ecosol tendered an invoice dated 1 July 1997 recording a payment to Mr Roy in the amount of $20,000. Mr Roy and Mr Charlton gave conflicting evidence about the invoice, but it was established that Mr Roy was paid monies totalling $20,000 between January and May 1997. I deal with the significance of the invoice and the payment of $20,000 to Mr Roy between January and May 1997 in my findings.
Mr Gapper, another witness, began employment with Ecosol late in 1996 and was appointed a director of Ecosol on 18 May 1998. Mr Charlton and Mr Roy agree that Ecosol invited Mr Gapper to work for Ecosol in late 1996. Mr Roy and Mr Gapper gave conflicting accounts of events that occurred when, in about October 1996, Mr Charlton brought Mr Gapper to Mr Roy’s workshop at Hawthorndene to have a look at the filtration products under development. As mentioned, Mr Gapper was subsequently employed with Ecosol. He remained with the company for about four and half years.
By 1998 Ecosol had grown and the number of staff had increased. In March 1998 Mr Macklin was hired as sales representative. He was based in Queensland and is currently the managing director of Ecosol. Mr Macklin was called as a witness at the trial. He gave evidence about his dealings with Mr Roy and in particular spoke about occasions on which Mr Roy travelled to Queensland on Ecosol business.
Mr Roy was in Queensland on Ecosol business from 1 to 9 July 1997, during which time he stayed with Mr Macklin. Mr Roy travelled to Queensland again on 19 July 2000. Mr Roy gave evidence of a conversation which that took place in Queensland on one of these occasions when royalties were discussed. He was not able to be specific about the timing of the conversation and at one stage asserted that both Mr Charlton and Mr Macklin were present. Mr Macklin contested this evidence and my findings on the issue are set out below.
The parties agree that in late 1998 or early 1999 Ecosol became aware of opportunities to sell filtration products overseas. Mr Roy did not work for Ecosol from August to December 1998. Mr Roy and Mr Charlton disagree about what occurred between them prior to Mr Roy stopping work in about July 1998. Mr Roy returned to work for Ecosol in December 1998. He says that Mr Charlton asked him to come back to work to improve the filtration products and adapt them for overseas markets. Mr Roy claims that in December 1998 he had a conversation with Mr Charlton during which Mr Charlton again promised that he would be entitled to royalties if he agreed to return to work. Mr Charlton denies this assertion and gave evidence that it was Mr Roy who approached Ecosol, asking to return to work because he was short of money.
Mr Roy and his wife travelled to Europe for a holiday in August 1999. In planning for the trip Mr Roy spoke to Mr Charlton about money. Mr Roy, like most of the key individuals in Ecosol, had not been paid all of the wages that were due to him. This was because Ecosol had experienced cash flow difficulties.
The significance of the discussions that took place between Mr Roy and Mr Charlton in August and December 1998 and in June and August 1999 is dealt with in my findings.
In October 1999, the principals of Ecosol decided to create a new company to conduct business in overseas markets. Ecosol International Pty Ltd (Ecosol International) was registered on 10 October 1999. Mr Charlton, Ms Roy and Mr Gapper were appointed directors. The allocation of shares in Ecosol International was viewed as a means to compensate the key individuals involved in Ecosol for their investment of time and capital that had gone unrewarded because of cash flow difficulties. Mr Roy was allocated 60,000 shares in Ecosol International.
Mr Roy travelled to the United Kingdom on two occasions, to promote the filtration products. He gave evidence of conversations on the topic of royalties that he alleged took place between himself and Mr Charlton on these trips. The second trip to the United Kingdom took place in November 2000. Mr and Ms Roy gave evidence of a conversation between Mr Roy and Mr Charlton while driving to a meeting. Mr Charlton recalled travelling in the car with Mr and Ms Roy but denied that any discussion on the issue of royalties took place.
From 1996 to 2000 Ms Roy was employed with Westpac bank. She resigned from her job at Westpac in January 2000 to return to study at TAFE. She continued her studies in 2001. In Mr Roy’s evidence he said that the reduction in household income, resulting from his wife’s return to study, motivated him to ask Mr Charlton to start making royalty payments. As I discuss in my findings, Mr Roy’s statement of claim pleads that he received payments on account of royalties between January 2000 and November 2001. Mr Charlton agrees that Mr Roy asked for more money in January 2000. In February 2000 Ecosol began making regular payments to Mr Roy of $2000 a month. From July 2001 the payments were increased to $4000 a month. The last $4000 payment was made in October 2002. Mr Charlton denies that these payments were made on account of royalties. He says the payments were made in respect of share sales and salary. I deal with this issue in my findings.
Ecosol tendered four share transfer documents. The share transfers documents show that Ecosol International shares, owned by Mr Roy, were sold to Ecosol for cash. Three of the share transfer documents dated 30 June 2000, 1 November 2000 and 4 January 2001 respectively, were signed by Mr Roy. The fourth share transfer document is dated 1 July 2002 and was not signed.
Mr Roy alleges that when he was asked to sign the fourth share transfer, he realised for the first time the effect of the documents. He claimed that up until this point he had signed the documents without question, on the instruction of Mr Charlton, unaware that he was selling his Ecosol International shares. He explained his inattention to the details of the documents by suggesting that he relied on Mr Charlton to pay him the money he was owed and did not stop to consider the way Mr Charlton arranged the company’s financial affairs. Mr Charlton denies this, stating that Mr Roy knew he was selling his shares and simply wanted the money.
Mr Roy said that he stopped attending at the Ecosol offices, on what he called a semi-regular basis, in June 2001. He continued to ask for money from Ecosol and Ecosol continued to make monthly payments to Mr Roy until July 2002. Mr Roy says that it was not until November 2001 that he understood that Ecosol was denying his royalty claim.
Ecosol tendered an email written by Mr Macklin and received by Mr Roy on 23 July 2002. The email refers to a telephone discussion between Mr Roy and Mr Macklin on 22 July 2002. The significance of the telephone conversation and follow up email is dealt with in my findings.
The dispute over royalties escalated and the parties engaged legal representatives. In late 2002 Mr Roy, Mr Charlton and Mr Macklin met at the Ecosol offices in Carrington Street in an attempt to settle the outstanding issues without their lawyers. The parties dispute the context of this meeting. Mr Charlton and Mr Macklin gave evidence that the meeting was held on a without prejudice basis. Mr Roy disagrees and in evidence said that the meeting was an occasion on which Mr Charlton and Mr Macklin acknowledged his royalty claim. Mr Roy initiated proceedings against Ecosol on 15 July 2005.
Findings on contentious issues
I am satisfied that the witnesses were intending and trying to tell the truth. On some matters, not surprisingly, the memory and so the reliability of a particular witness was not particularly good. On such matters I have given careful consideration to the reliability of the evidence, meaning its inherent plausibility and its consistency with other evidence.
Reliability
On a number of matters Mr Roy and Mr Charlton contradicted each other. There are also a limited number of conflicts between the evidence of Mr Roy and that of other witnesses.
I do not attribute the conflicts to dishonesty. Sometimes they are attributable to failure of memory. In Mr Roy’s case on some occasions I attribute them to a lack of understanding of relevant events, or to mistake or confusion on his part. I am satisfied also, having observed him at some length in the witness box, and having considered all of the evidence, that he has a tendency to recall events in a manner consistent with his own wishes and beliefs. This is not a disguised way of saying that I find him to be dishonest. As I have already said, I accept that he is honest. But I have come to the conclusion that in a number of respects his evidence is not reliable, and I am satisfied that he has a tendency to recall events as he thinks they would or should have been, rather than as they were. The significance of these observations will appear as I deal with the evidence.
I begin with some findings about Mr Roy and Mr Charlton.
Mr Roy was 22 years old in 1995, and is now almost 34 years old. He completed Year 9 of his schooling. He began his own business as a plumber at the age of 20. I am satisfied that at the relevant time he was inexperienced in business matters, and lacked any real understanding of the business and commercial issues that were addressed by Mr Charlton when considering the arrangements pursuant to which Ecosol would sell products designed and developed by Mr Roy. I am also satisfied that Mr Roy did not pay much attention to business or commercial details. He is, nevertheless, an intelligent man. He has an enquiring and inventive mind. But his focus was on the design and development of the relevant products. He was not much concerned about the business arrangements. He expected a return for his efforts, and was not working for the love of it. But he did not concern himself with the business structures or arrangements through which that award might be achieved. He was content to leave that largely to others, and in particular to Mr Charlton.
In evidence Mr Roy tended to embark on lengthy answers to questions, sometimes before the question was complete, and sometimes without having understood the question. I consider that this is an indication of an aspect of his personality. He is not a good listener, and as I have already said, has a tendency to ignore matters of detail. This is not intended as an adverse reflection on him. One sees plenty of witnesses like him. But in deciding where the balance of probabilities lies, it is relevant to have regard to the qualities of the key witnesses before me.

As will appear, I am satisfied that on a number of matters his evidence is mistaken. That is usually because at the relevant time he was not particularly concerned with, or simply did not understand, what was being done. This shows that his memory is not always reliable. It also demonstrates that he did not attend to detail, and has the capacity to attribute a significance to a casual observation that it might not warrant.
I bear these findings in mind when considering the evidence.
Mr Charlton is a qualified accountant who has practised since 1982. He was not asked his age, but I estimate he must be about 50 years of age. He has worked as a business consultant. It appears that he is prepared to engage in business activity outside the field of accounting when suitable opportunities arise. His knowledge of business and commercial matters was far greater than that of Mr Roy.
The evidence demonstrates that Mr Charlton was the one who did most thinking about the business arrangements that should be made for the sale of products developed by Mr Roy, and about how the participants in that venture might be rewarded.
The evidence and exhibits demonstrate that he is a careful man, who pays attention to details. The evidence indicates that he is reasonably thorough in his record keeping.
I also find that by and large his evidence accorded with objective facts. There were no occasions that I can think of when, unlike Mr Roy, his oral evidence was in conflict with the objective facts. That does not mean that his evidence must be accepted. He has the skill and experience to make his evidence accord with the objective facts. But unless I am to conclude that he is dissembling, the matters to which I have referred suggest that his evidence is generally reliable.
I now turn to the matters that I have considered in reaching my conclusion that Mr Charlton’s evidence is to be preferred to that of Mr Roy on the vital matters.
No written agreement
Mr Lazarevich, counsel for Mr Roy, submits that the absence of a written royalty agreement is not surprising. He makes the point that other significant matters were not reduced to writing. For example, there was no shareholder agreement governing arrangements under which the parties would make their respective contributions to the venture that was conducted through Ecosol. There were other things that one might have expected to be reduced to writing. The absence of a written agreement on royalties was therefore no reason to doubt the evidence of Mr Roy.
There is some force in that point, but I would have expected some written record of the royalty agreement if one was made. I would have expected to find at least a memorandum or note from Mr Charlton to others involved in Ecosol, or some other reference in company documents to the royalty agreement. Having regard to Mr Charlton’s general approach to record keeping it would be surprising if an agreement as significant as this would be made with no written record or written confirmation of it at all, even in a relatively informal manner. In short, I consider that the absence of any written record of or reference to the royalty agreement is a factor supporting Mr Charlton’s evidence. It is not decisive. No one matter is.
I add that I am not prepared to find that, from the outset, Mr Charlton set out to deceive Mr Roy by agreeing to pay him royalties to secure his support for Ecosol, intending to avoid pausing any written record of the agreement with a view to later denying that it had been made. Such deviousness on the part of Mr Charlton is not consistent with my assessment of him as a witness.
Unequivocal evidence
Mr Lazarevich made the point that Mr Roy was unequivocal in his evidence about the making of the royalty agreement. I agree he was. But there were other matters in which he was adamant and on which he was mistaken.
Negotiations December 1995 and January 1996
It is not really contested, and I find, that in December 1995 and January 1996 there were a number of discussions involving Mr Roy, Mr Charlton, Mr Versteegh and Mr Bishop. The discussions covered a number of matters. The matters included the business arrangements to be made between the parties for the design and development of products, and for their marketing. Not surprisingly, considerable attention was paid to the arrangements under which funding would be provided by Mr Charlton, Mr Bishop and Mrs Evans. They were to be the source of funds for the design and development work that still needed to be carried out on the RSF 100 and the RSF 2000. Mr Roy and Mr Versteegh were to attend to design and development, and later to marketing. A number of possible arrangements, and a number of points of detail, are canvassed in “discussion documents” prepared mainly by Mr Charlton for use in these discussions. The details of the discussions do not matter. The documents were tendered as part of exhibit D30 (Tab 1 to tab 7 inclusive).
The discussion documents indicate, and I find, that there was discussion about the payment of royalties on sales of the RSF 100 and of the RSF 2000. The development of these two products was well advanced at the time, although some work remained to be done.
More significantly, the discussion documents indicate that Mr Charlton was proposing that there should be no royalties paid on other products “without a unanimous vote of all shareholders”. I accept Mr Charlton’s evidence that this topic was discussed on several occasions. That evidence is supported by the fact that the documents refer in terms to this point. I find that Mr Roy agreed to the proposal made by Mr Charlton. I find that a copy of the discussion notes was given to Mr Roy on each occasion or most occasions. I find that he read them. Notes in his handwriting, and in particular on the document D30 tab 6, indicate that he agreed that no royalties would be paid on products to be developed in the future.
Behind that proposal by Mr Charlton was, I find, an expectation on both sides that the costs of developing other products would be met by the joint venture vehicle, whatever it might be. This was in contrast to the cost of development of the RSF 100 and the RSF 2000, which cost had been largely met by Mr Roy and Mr Versteegh. The different approach to the existing products, and to possible future products, is understandable in the circumstances.
The significance of these findings is that they make it less likely that Mr Charlton would agree with Mr Roy to pay royalties to him on products to be developed, and in particular the product that became the RSF 4000. On Mr Roy’s evidence this agreement was reached sometime during 1996. It is not out of the question that the agreement was reached, because circumstances could and did change.
But the fact of the arrangement reached in January or February 2006, and the rationale for it, suggests that Mr Charlton would not have gone back on it.
Mr Lazarevich correctly submits that in December 1995 and January 1996 the only two products that the parties had in mind were the RSF 100 and the RSF 2000. It is true also that the RSF 4000 was a different kind of product. But the distinction being drawn by Mr Charlton, which I find Mr Roy accepted, was between products already developed by Mr Roy largely at his own cost, and products that might be developed in the future wholly or largely at the cost of the joint venture vehicle, whatever it might be.
It is also correct, as Mr Lazarevich submits, that the agreement reached in January or February 2006 does not prevent the parties from making a different agreement later. But in the circumstances it makes it less likely that a different agree would be reached.
Mr Trim QC, counsel for Ecosol, does not suggest that the agreement overrode a later agreement, if one was made as alleged by Mr Roy. Mr Trim relies on the earlier agreement as a matter making it less likely that Mr Roy’s evidence is correct. I agree with him.
The discussion notes have a further significance.
When shown the discussion notes in cross-examination, and the statements in the notes to the effect that royalties would not be paid on future products without a unanimous agreement of shareholders, Mr Roy denied that any such discussion took place. He persisted in that denial, despite a number of references to the topic in the documents, and despite notes in his own writing on the documents suggesting that he had addressed his mind to the very matter. He maintained that denial, despite being pressed on the point.
His evidence on the topic demonstrates how his memory on a significant matter is not always reliable. I am satisfied that his evidence is wrong. I realise that when the negotiations were taking place he might have found it difficult to absorb all the details. But the fact is, on my finding, that his memory is faulty. And his steadfast denial that the matter was discussed and agreed, in the face of the documentary evidence, is indicative of a tendency to see things as he wants to see them. This topic provides an illustration of why I have to be cautious about the reliability of his memory on central issues. Of itself that is not decisive, but it is a relevant factor.
Mr Roy’s evidence about the oral agreement
Mr Roy gave evidence that some time after the signing of the royalty agreement relating to the RSF 100 and the RSF 2000 (this is exhibit P6, dated 9 April 1996) he and Mr Charlton had a discussion at Mr Roy’s home. They were in regular contact. The discussion related to developing a different kind of product, an in-line filter. The RSF 100 and RSF 2000 were point of entry filters, that is, they collected rubbish at the point where the stormwater entered the drainage system.
At the time of this discussion Mr Roy said that he was working more or less full time on the RSF 100 and the RSF 2000. He had given up his plumbing business. His expenses were being met by Ecosol, but he had no source of income. He was not yet employed by Ecosol. He said in evidence that he told Mr Charlton that if he was going to increase his workload and commitment, he wanted an adequate return. He was not willing to accept the royalty arrangement in relation to the existing products, because that was for a royalty based on a percentage of the net sales price. Mr Roy said that depending on the cost of sales, which was not under his control, the royalty might be little or nothing. He said that he told Mr Charlton that for that reason, if he was to work on further products, which Mr Charlton wanted him to do, he wanted a royalty of 4 per cent of the amount of the invoice to the customer. He said that Mr Charlton agreed to this. He said that they agreed that payment of royalties need not be made until Ecosol was profitable. He said that Mr Charlton said they would save money by not having the agreement reduced to writing, thus not incurring legal fees. Mr Roy agreed to that.
Mr Charlton denies that any such conversation took place.
There are some matters that support Mr Roy’s evidence about the conversation.
There must have been a decision made at some time that year that resulted in Mr Roy turning his mind and efforts towards new products, including the product that became the RSF 4000. In January 2007 Ecosol applied for a government grant for assistance to develop the RSF 4000. It is apparent that the project was already underway. I find that Mr Roy began working on this project during 1996.
Only Mr Roy had the ability to develop the proposed new products. He was not being paid a wage for his work. If he was to move on to new products, it would be sensible for him to establish a basis for his remuneration.
So it would not be surprising, in that context, if some such discussion as he claimed did take place.
But there are matters pointing the other way. Ecosol was meeting the costs of developing the RSF 4000. Funds were being provided to Ecosol by Mr Charlton, Mr Bishop and Mrs Evans. They were at risk in the same way as was Mr Roy. They were contributing capital, he was contributing his time. Yet, on Mr Roy’s case, Mr Charlton agreed to a basis for royalty payments more generous than the basis for royalty payments on the RSF 100 and RSF 2000. Royalty payments in respect of those products were based on the net selling price. Mr Roy’s wife had shares in Ecosol, and so if the venture prospered, she would share in the profits (if Ecosol was the seller of the further products). I have already referred to the discussion in January 1996. It would be surprising if Mr Charlton would change his approach so soon. There is also the fact that if a royalty agreement was made with Mr Roy, the question arose of remuneration for Mr Versteegh, who was working with him. From Mr Roy’s evidence, that seems to have been left hanging.
On balance, I consider that these matters suggest that Mr Charlton would not have agreed to pay royalties as claimed by Mr Roy. As I have already recorded, I do prefer the evidence of Mr Charlton, but I rely on the evidence as to those other matters, more than I do on demeanour.
There is a further point. The Statement of Claim pleads that the agreement was made in about January 1996. At trial Mr Lazarevich was granted leave to amend the Statement of Claim to allege that the agreement was made on a date in 1996 which Mr Roy could not recall, but after April (when the parties signed the royalty agreement for the existing products tendered as exhibit P6) and before the end of October. If the conversation did occur, it is most unlikely that it would have been as early as January. The need to amend the Statement of Claim illustrates the poor recall that Mr Roy had of some significant matters.
The business plans – May 1996 to January 1997
Six business plans relating to the business of Ecosol were tendered. The first is dated 13 May 1996, the last is dated 2 January 1997.
It is apparent from reading them that each document is a work in progress. They contain incomplete portions of text. The content on a given topic changes from one document to the next. Some of the changes reflect changes of approach to the document, that is, the sort of things that it covers. Some of the changes reflect events that occurred along the way. The business plans give the history of the development of the rapid stormwater filtration (RSF) concept, outline the proposed business structure and funding arrangements, and give information about the person’s involved. They canvass the market that Ecosol aimed to supply. In part they are a historical record, in part a formulation of business proposals and structures, and in part purely promotional.
I find that the different versions of the business plan were circulated among the participants in the project, without finding that each person saw each version. Mr Charlton was the main author of the later versions. Others made contributions.
Mr Roy said that at one stage he saw a business plan that referred to a 4 per cent royalty, presumably meaning 4 per cent of gross sales. He no longer had a copy of the plan. He had last seen it in a filing cabinet at the Ecosol premises.
Mr Charlton denied that such a business plan existed. No such plan was produced. Having regard to my reservations about the reliability of Mr Roy’s evidence, and my acceptance that Mr Charlton was generally truthful, I do not accept Mr Roy’s evidence on this point.
Mr Lazarevich cross-examined Mr Charlton on a business plan dated 23 December 1996. The text in s 1.1 states:
The technology originally consisted of two at-source filtration units, RSF 100 and RSF 2000. Ecosol has an exclusive licence agreement with the inventor to develop these products and is currently negotiating a similar agreement for an in-line/end-of-line unit, the RSF 4000.
In s 1.1 of a business plan dated 2 January 1997 there is an almost identical statement, but now the text is to the effect that Ecosol:
… has recently negotiated a similar agreement for an in-line/end-of-line unit, the RSF 4000.
Mr Lazarevich put it to Mr Charlton that the statements suggest that a royalty agreement was being and then had been negotiated with Mr Roy in relation to the RSF 4000, and that that must have been the royalty agreement of which Mr Roy gave evidence. There is force in this submission.
When this text was put to Mr Charlton, he said that it was inaccurate. He said that the business plans were a work in progress, they were drafts. He pointed to several portions of the text in the documents that were in fact incorrect. With reference to the plan of 2 January 1997 he referred to a passage of text in s 1.3 that refers to the RSF 4000, and says:
However, unlike the RSF 100 and RSF 2000, Scott and Jodie Roy are the owners of this invention and accordingly shareholdings and royalties need to change. We are currently considering the best way to reflect these changes.
He makes the point that this part of the text is inconsistent with the part of the text that suggests that a licence agreement has been negotiated. Mr Charlton said that other persons might have contributed that part of the text.
On this topic Mr Charlton’s evidence was not completely convincing. I accept that the business plans reflect evolving proposals and planning, but the timing and text of these two passages is curious, because they do suggest that an agreement has been reached between December and January. But, without descending into detail, there are other passages of text that are inconsistent in a general way with Mr Roy’s claim. And the agreement that Mr Roy claims he made is in fact significantly different from the licence agreement that was reached of the RSF 100 and RSF 2000.
In reaching my decision I treat this as a matter tending to support Mr Roy’s evidence, but at the end of the day it was not sufficient to outweigh other factors.
Conversation with Mr Gapper in late 1996
Mr Roy gave evidence that in 1996 he was working at his home at Hawthorndene on the development of the RSF 4000. He had a workshop there. On one occasion that year Mr Charlton brought Mr Gapper to Mr Roy’s home. Mr Charlton had invited Mr Gapper to take up employment with Ecosol.
Mr Roy explained the project to Mr Gapper and, I assume, showed him a prototype. In the course of the conversation Mr Roy explained to Mr Gapper how the project was funded and how the participants would be rewarded. Mr Roy gave evidence that he said, in Mr Charlton’s presence, that he (Mr Roy) was getting a 4 per cent royalty but that Mr Gapper would be on a wage. Mr Charlton did not say anything to the contrary.
Mr Roy was uncertain about the timing of the conversation. I accept Mr Gapper’s evidence that he visited Mr Roy’s home only once, in September or October 1996. This was when he was considering employment with Ecosol, which employment he subsequently took up. Mr Gapper agreed that Mr Charlton was present for some of the time. This must be the occasion to which Mr Roy refers.
Mr Gapper firmly denied that there was a conversation in which Mr Roy said that he was to receive a 4 per cent royalty. He agreed that during his employment with Ecosol, which lasted for about four and a half years, he heard discussions in the Ecosol offices between Mr Charlton and Mr Roy. He heard Mr Charlton explaining to Mr Roy that he was not getting royalties because Ecosol had met the development costs of the RSF 4000, and Mr Roy was, in effect, doing the development work for Ecosol. He said that those conversations began in about the middle of 1998, and there were a number of them.
I accept that Mr Gapper is truthful and reliable. Accordingly, his evidence provides no support for Mr Roy’s claim. It causes me not to accept Mr Roy’s evidence on this point. It provides some support for Ecosol’s case, because his evidence of conversations between Mr Charlton and Mr Roy is that Mr Charlton was explaining why there was no entitlement to royalties, as distinct from refusing to meet an existing entitlement.

Mr Roy said that his entitlement to royalties was not disputed by Mr Charlton until late 2001. It follows that I do not accept that evidence. I accept evidence from Mr Charlton and Mr Gapper that the claim to a royalty was a subject of contention from at least mid 1998. In this respect the evidence of Mr Roy is not reliable.
Payment of $20,000 to Mr Roy between January and May 1997
Mr Trim tendered as exhibit D30 tab 15, a printed invoice from Mr Roy to Ecosol for an amount of $20,000, dated 1 July 1997. The invoice stated:
For consultancy services provided to Ecosol Pty Ltd in 1996/97 in full settlement for the development of the RSF 3000 and RSF 4000 and assignment of patent rights on 30 April 1997.
Handwritten on the invoice are references to five payments said by Mr Charlton to have been made to Mr Ecosol between January and May 1997, amounting to $20,000.
Mr Roy denied preparing the invoice. He said Mr Charlton must have forged it. Initially he seemed to deny receiving the money. Later he said that if the money was received it was payment for the sale of shares. (I will come to that topic later)
Mr Charlton said that to obtain a government grant to assist Ecosol in developing the RSF 4000, already referred to, Ecosol had to have clear proof that it was entitled to the intellectual property in the RSF 4000. He prepared a deed by which Mr Roy assigned all his rights in the RSF 4000 to Ecosol. The deed is dated 30 April 1997, and was tendered as exhibit D30 tab 14.
Mr Charlton said that when he raised the matter of the deed with Mr Roy, Mr Roy made the point that he was working on the RSF 4000, was not employed by Ecosol, and wanted a payment for his efforts. Mr Charlton said that he agreed in the end to a payment of $20,000, and in effect said that this was a fair recognition of Mr Roy’s contribution to the project. He paid it partly by way of advances from himself to Ecosol, and partly from an Ecosol account. It was not a payment on account of royalty. He said that Mr Roy had not claimed a royalty at that stage.
The invoice and payment are not relied on by Ecosol as a settlement of any claim for royalties, but as a fact inconsistent with Mr Roy’s evidence. Mr Trim argues that Mr Charlton would not have paid this money if Mr Roy was also to get the claimed royalty.
I find that the payments were made. I accept Mr Charlton’s evidence as to the fact and manner of payment, without going into the rather complicated details of how the payments were made.
I accept Mr Charlton’s evidence that the payment was made in recognition of Mr Roy’s efforts, and at his request. Mr Roy’s initial denial of the fact of payment, and his denial that he asked for a payment, is another illustration of his memory being unreliable.
I accept Mr Charlton’s explanation for the Deed. Of itself the preparation and signing of the Deed supports neither side. But I accept that discussion about the Deed was linked by Mr Roy to the question of a payment.
I agree that this evidence tends to support Ecosol’s case, because it is unlikely that Mr Charlton would have agreed to make the payment if Mr Roy was to receive the royalty. One would expect him, at the least, to record that the payment should be deducted from any royalties that later fell due.
The question of who prepared the invoice is disputed. I find that the terms were substantially formulated by Mr Charlton. I doubt whether Mr Roy would have used language of this kind. To the extent that it was prepared by Mr Roy, I find that it was in terms suggested by Mr Charlton. To that extent I accept Mr Roy’s evidence that he was not the author of the document. But in the end, that is neither here nor there. I do not accept that the document was fabricated by Mr Charlton to explain the payment.
Employment by Ecosol of Mr Roy in July 1997
Mr Charlton gave evidence that from 1 July 1997 Ecosol employed Mr Roy and paid him a wage. A letter of 1 July 1997 appointing Mr Roy was tendered as exhibit P7.
I accept this evidence. I accept generally the evidence given by Mr Charlton about the employment, and about the payments made by Ecosol to Mr Roy by way of wages until the employment ceased in 2001. I also accept generally Mr Charlton’s evidence about other payments made to Mr Roy. It is a complicated story, because at times the wages were not paid because Ecosol was short of funds. It is further complicated by the fact that Mr Charlton found tax effective ways of making other payments to Mr Roy to assist him. For example, Ecosol agreed to purchase equipment belonging to Mr Roy. All of the payments are documented in records kept by Mr Charlton which I find to be accurate.
It is not suggested by Ecosol that the payments of salary were in lieu of or on account of royalty payments. Rather, Mr Trim argues that it is unlikely that Ecosol would have paid Mr Roy a wage if it was also to pay him a royalty. I accept that submission. The evidence on this topic provides some slight support to Ecosol’s case.
Mr Roy denied being employed by Ecosol from 1 July 1997, although he acknowledged that later he was employed by Ecosol. Mr Roy acknowledged the receipt of the payments which Mr Charlton said were wages, but said that he had left it to Mr Charlton to organise how Mr Roy was to be remunerated, and what the payments would be called. For example, they might be expenses. He suggested that his only concern was that he receive enough money each week. When cross-examined his evidence on the topic of payments was unsatisfactory, and his explanation for a failure to lodge tax returns for a number of years was unsatisfactory.
I accept that the position between Mr Roy and Ecosol was not a simple one. Ecosol did meet various expenses incurred by Mr Roy, and found ways of assisting him financially. But on this topic Mr Roy’s evidence was generally rather unsatisfactory, as Mr Lazarevich acknowledged. His evidence was confusing and contradictory.
I find that this is an instance of Mr Roy not attending to the details of things at the time when they happened, and then later maintaining a blinkered view that events occurred he thinks they would have or should have. This topic provides another illustration of the unreliability of Mr Roy’s evidence.
Mr Roy stops work in July 1998
It is common ground that in July or early August 1998 Mr Roy stopped working for Ecosol, and did not return until about December 1998. Mr Roy said in examination-in-chief that he intended to return to work. In cross-examination he said that he needed a break, and that his wife had sold some shares, suggesting that he did not need a wage at the time.
Mr Charlton said that Mr Roy left after a conversation between them in late July 1998. Mr Roy said he was short of money, and wanted a payment of royalties. Mr Charlton conceded in cross-examination that Mr Roy’s approach probably reflected a belief in an entitlement. Mr Charlton said the conversation did not end amicably, when he declined to make the payment, and that was why Mr Roy stopped work.
I accept that Mr Roy stopped work because of a dispute over royalties, and that this was probably the first time that Mr Roy asserted such a claim. However, this incident supports neither party’s case.
Mr Roy resumes work in December 1998
It is common ground that in about December 1998 Mr Roy returned to work with Ecosol.
Mr Roy gave evidence that in December 1998 Mr Charlton asked him to return to work with Ecosol, to work on the development of some filters for sewage drains, the filters being aimed at the United Kingdom market. Mr Roy said that he agreed, provided it was “on the same royalty agreement”, meaning the agreement for a royalty based on gross sales. Mr Roy said that Mr Charlton agreed to this. In the Statement of Claim this agreement is pleaded as the second royalty agreement. It is the second basis for Mr Roy’s claim.
Mr Charlton gave evidence that Mr Roy telephoned him in late November 1998 saying he was short of money and wanted to come back to Ecosol. Nothing was said about royalties. Mr Charlton agreed that Mr Roy could resume his employment on the same terms as before. He was to be paid a wage. Mr Charlton agreed that he said to Mr Roy that he might be able to help Ecosol with a project in the United Kingdom. Mr Roy came back to Ecosol and worked on developing products for the United Kingdom market, the development costs being met by Ecosol.
Mr Roy’s evidence about this incident stands or falls with his evidence about the conversation at his home at Hawthorndene. His evidence about this second agreement turns on the existence of the earlier agreement.
In the end I have preferred Mr Charlton’s evidence about this incident, because his evidence is supported by evidence of other events. Taken in isolation, there is nothing about this incident that supports either case.
Negotiations between Mr Roy and Mr Charlton between June and August 1999
Mr Charlton gave evidence that he was due to travel overseas on about 28 June 1999. Mr Roy approached him on about Friday 25 June. Mr Roy wanted to be paid some money. He raised the issue of unpaid wages. Mr Charlton accepts that Ecosol had not paid all of the wages due to Mr Roy, because of its limited funds. Mr Charlton said that in the discussion Mr Roy also claimed royalty payments on the RSF 4000.
Mr Charlton said that he was loath to reject the claim out of hand, because in 1998 that had led to Mr Roy leaving Ecosol. He said that he tried to explain to Mr Roy that a royalty had been paid on sales of the RSF 100 and of the RSF 2000 because Mr Roy had developed these products substantially at his own cost. He explained that the cost to developing the RSF 4000 had been met by Ecosol, and that was why he was not entitled to royalties. Mr Roy became “agitated”.
They agreed to meet again the next day. Overnight Mr Charlton prepared a draft of a royalty agreement. It was intended to demonstrate that if there was to be a royalty agreement relating to the RSF 4000, it would have to be on net sales, allowing for all of Ecosol’s costs. Mr Roy would have to give various warranties. He said he was trying to demonstrate why, in any event, an agreement of the kind that Mr Roy claimed or wanted was not possible. He said that Mr Roy was not interested in the detail, but insisted on getting some money. Mr Charlton no longer had the draft royalty agreement. A later draft of it was tendered as exhibit D30 tab 16. Mr Charlton said that he was not proposing a royalty agreement along the lines of the draft, but was using a draft to demonstrate why there could not be an agreement of the kind that Mr Roy wanted.
No agreement was reached. Mr Roy and his wife went overseas, as did Mr Charlton. Mr Charlton agreed that Ecosol would meet some of the costs of their trip, and in due course Ecosol made a substantial reimbursement to Mr and Mrs Roy in respect of their costs.
The discussion resumed some time in August 1999.
A detailed letter from Mr Charlton to Mr Roy of 28 August 1999 was tendered as exhibit D30 tab 17. With it was a revised draft of the royalty agreement. The letter recites some of the history. It puts forward a proposal that involved Mr Charlton, Mr Roy and Mr Gapper foregoing amounts owing to them and instead being allotted shares in a company to be incorporated to sell products on the United Kingdom market. That company became Ecosol International. The letter explains, fairly as it seems to me, the advantages and disadvantages of the proposal, and outlines the risks. It includes a warning that Mr Roy should obtain his own tax advice. It refers to the draft royalty agreement.
In due course Ecosol International was incorporated. Shares were allotted to Mr Roy, Mr Charlton and Mr Gapper as proposed. Other events occurred that suggest that Mr Roy went along with the proposal outlined in the letter. Shares allotted to Mr Roy were sold over a period of time, providing him with cash flow, as contemplated in the letter. I find that this occurred, although curiously, Mr Roy denied any knowledge of this, and gave evidence that he realised what was happening only after a substantial number of shares had been sold.
Mr Roy denies that there was a discussion in June 1999 about a draft royalty agreement. He denies receiving the letter in August 1999, saying that he first saw either document only much later when solicitors were involved in the dispute.
I accept the substance of Mr Charlton’s evidence. I do not accept that he fabricated the letter or the draft agreement, as Mr Roy seems to suggest. I accept that there were detailed discussions between the two men in June and August of 1999.
The events that followed are broadly consistent with what was outlined in the letter, and so are broadly consistent with Mr Roy going along with what is proposed in the letter. To that extent those events are inconsistent with there being an agreement for the payment of a royalty as claimed by Mr Roy. The tenor of the letter, and of the discussions, is that a royalty will not be paid, but if there was to be any royalty it would not be a royalty on gross sales, and that Mr Roy will be remunerated in other ways.
I agree with Mr Lazarevich that the references in the letter to royalties are somewhat curious. For example, the letter refers to Mr Roy foregoing royalties as yet to be determined. I agree with Mr Lazarevich that drafting a royalty agreement to demonstrate why a royalty agreement is not possible or practical seems a curious way to do things.
However, the fact remains that subsequent events are consistent with Mr Roy having agreed to the proposal outlined in the letter. Mr Roy’s evidence about subsequent events is, in a number of respects, unsatisfactory. It is again clear that he did not understand the arrangements that were proposed and that were implemented. This, I find, is because he did not care to attend to the details. In evidence, I find, he denied things that clearly did occur. In particular, I find that he was aware that his shares in Ecosol were being sold, over a period of time, to enable him to raise cash.
I accept that in these discussions Mr Roy made a claim for a royalty. He may have believed that he had an agreement. But the evidence is inconsistent with Mr Charlton having acquiesced in the fact of an agreement.
These events are not pleaded by Ecosol as a settlement of any claim to royalties. They are relied upon by Mr Trim as amounting to conduct inconsistent with there being a royalty agreement, because the relevant conduct is consistent with an arrangement for remuneration of Mr Roy in other ways.
It is for that reason that I find that these discussions tend to support the evidence given by Mr Charlton.
I have already referred to the contribution that Ecosol made to the overseas trip by Mr and Mrs Roy. This, and the other evidence relating to discussions at about this time, is consistent with Mr Roy wanting money, claiming to be entitled to royalties, but accepting payment on the basis proposed by Mr Charlton in the end.
Payments on account of royalties – January 2000 to November 2002
In his Statement of Claim Mr Roy pleads that “in part performance” of the royalty agreement Ecosol paid him $2,000 per month between January and November 2000, and $1,000 per week between November 2000 and November 2002, amounting in all to $74,000.
No evidence was put forward to support this plea.
Mr Charlton gave quite detailed evidence about the payments by Ecosol to Mr Roy, supported by records that he produced. I accept that evidence.
The evidence demonstrates that Ecosol (in the person of Mr Charlton) made payments to Mr Roy on various bases. He was paid a wage while working for Ecosol. Ecosol purchased tools and equipment from him and they were then used in Mr Roy’s work for Ecosol. Ecosol paid Mr Roy the $20,000 referred to above. Mr Charlton helped arrange for Mr Roy to sell shares in Ecosol International over a period of time for a sum in excess of $100,000. Ecosol contributed to the cost of the overseas trip by Mr and Mrs Roy.
Mr Roy was evidently unclear about the basis of the various payments made to him. This is a reflection of his failure to interest himself in matters of detail.
There is nothing in this evidence to support Mr Roy’s case. The evidence as to the payment of wages, the purchase of tools and equipment, and the contribution to the trip, is consistent with Mr Charlton’s evidence that he accepted that Mr Roy should be rewarded for his efforts, and that reward should be over and above the allotment of shares in Ecosol and Ecosol International. It is generally consistent with Mr Charlton’s evidence that that reward was in the form of various payments, and not by way of a royalty.
Conversations relied upon by Mr Roy
Mr Roy gave evidence of a conversation with Mr Charlton in the course of a journey by motor car in England, in the course of which there was an argument, during which Mr Charlton apparently acknowledged (indirectly) Mr Roy’s entitlement to a royalty. Mrs Roy was with them at the time, and her evidence supports that of Mr Roy. Mr Charlton denied that there was any such conversation.
It may be that something was said about royalties. By this time, on Mr Charlton’s evidence, royalties had become an intermittent source of dispute between Mr Roy and Mr Charlton. But I do not accept that Mr Charlton made any relevant acknowledgment. I accept his evidence to that extent.
Mr Roy also claimed that on another occasion in the United Kingdom, in the presence of Mr Mulvaney, an Ecosol employee, there was a reference to Mr Roy getting royalties. Mr Mulvaney was called by Ecosol. He said that he could recall something being said about royalties when they were in the United Kingdom, and can also recall some discussions at Ecosol’s office in Adelaide. But he could not remember any significant details.
I do not consider that the evidence on this topic is of any assistance. I am not sufficiently confident in Mr Roy’s reliability to find that the conversation occurred as described by him. Mr Charlton denied that there was any such conversation.
Mr Roy gave evidence of a conversation in Brisbane with Mr Macklin, an employee of Ecosol, in which Mr Macklin said that he or Ecosol would “honour” any agreement between Mr Roy and Mr Charlton. This evidence is equivocal. It says nothing about the existence of an agreement for the payment of royalties.
In cross-examination Mr Roy said that this conversation was the conversation referred to in para 44.2 of the Statement of Claim. There it is pleaded as involving also Mr Charlton. In effect Mr Roy said, by reference to the pleading, that it was a conversation in which Mr Charlton affirmed Mr Roy’s entitlement to a royalty of four per cent on gross sales.
I have no hesitation in accepting the evidence from Mr Macklin and Mr Charlton that Mr Charlton was not present on those occasions when Mr Roy met with Mr Macklin in Brisbane. From various records the occasion for the meeting was identified as being either July 1999 or July 2000. In cross-examination, in any event, Mr Macklin firmly denied that there was an occasion when Mr Charlton acknowledged that Mr Roy was entitled to royalties on sales for the RSF4000. I accept Mr Macklin’s evidence. He struck me as a truthful witness.
I also accept the evidence of Mr Macklin that on 22 July 2000 Mr Roy telephoned him. There was a discussion about payments being made to Mr Roy. Mr Roy was wanting to be paid, and it may be that monies were owed to him at the time. In the course of the conversation he claimed an entitlement to royalties. I accept the evidence of Mr Macklin, drawing on an email that he sent to Mr Roy on 23 July 2000, that Mr Macklin told Mr Roy that he understood there was no written agreement entitling Mr Roy to a royalty payment.
Mr Roy gave evidence of a meeting in Adelaide (I find the meeting was in late 2002) with Mr Charlton and Mr Macklin. The meeting was linked to a meeting involving solicitors, and was apparently part of an attempt to settle the dispute between Mr Roy and Ecosol.

Mr Trim objected to this evidence, on the basis that the conversation had been agreed at the time to be on a without prejudice basis. I accept the evidence of Mr Charlton and Mr Macklin to that effect. In any event, I accept the evidence of Mr Macklin and Mr Charlton that the purpose of the meeting was to try to reach an overall settlement with Mr Roy, with a view to Ecosol and Mr Roy going their separate ways. I accept their evidence that they made no admission at the time that Mr Roy was entitled to royalties on sales of the RSF 4000.
Conclusion
Weighing up all of the evidence, I am not satisfied on the balance of probabilities that Mr Charlton made the agreement for the payment of royalties that Mr Roy alleges he made.
I am satisfied that Mr Roy was trying to tell the truth. But, as I have explained, I find that on a number of topics Mr Roy’s evidence is unreliable. I find that he has a capacity to see or to remember things as he wants them to be. I am not satisfied that his evidence about business arrangements in particular is reliable.
While these findings do not necessarily lead to a rejection of his evidence about the vital conversations, they cause me to be cautious about his evidence.
It is that caution, coupled with my findings on other matters, that leads me to the conclusion above.
The evidence of the negotiations in late 1995 and early 1996, and the absence of any written record of the agreement, suggest that the agreement was not made. The probabilities are otherwise. The text of the two business plans provides some support for Mr Roy, but the support is not enough to outweigh other factors. Mr Gapper, Mr Mulvaney and Mr Macklin gave evidence that negated Mr Roy’s claims of admissions or acknowledgements by Mr Charlton in Mr Roy’s favour. The evidence of Mr Gapper and Mr Macklin to the effect that Mr Charlton was denying an entitlement to royalties provides some support for Mr Charlton’s evidence. The payment of $20,000 to Mr Roy tends to support Ecosol’s case. It is unlikely, I find, that this sum would have been paid had Mr Roy been entitled to royalties. The evidence of the negotiations in June and August 1999 tends to support Ecosol’s case, because the tenor of those negotiations is inconsistent with Mr Roy being entitled to a payment of royalties. The negotiations proceeded, and decisions were implemented, on a different basis.
I accept that at various times Mr Roy asserted an entitlement to royalties on sales of the RSF 4000. I accept that there might have been some references to royalties, even in 1996, as a possible means of payment. These references might have matured in Mr Roy’s mind into a belief that an agreement was made.
But I find, on the balance of probabilities, that the claimed agreement was not made. I also find on the balance of probabilities that Mr Charlton did not act in such a manner in the course of any such conversation as to give rise to a reasonable belief on the part of Mr Roy that Mr Charlton had agreed to a payment of royalties.
In short, I am not persuaded by Mr Roy’s evidence. I find, on the balance of probabilities, that Mr Charlton’s denial of the making of the alleged agreement is correct.
It follows that the claim must be dismissed.