Scientific Product Developments Pty Ltd v Monash University
[2008] VSC 190
•20 May 2008
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
PRACTICE COURT
No. 6189 of 2008
| SCIENTIFIC PRODUCT DEVELOPMENTS PTY LTD | Plaintiff |
| v | |
| MONASH UNIVERSITY | Defendant |
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JUDGE: | HOLLINGWORTH J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 19-20 May 2008 | |
DATE OF JUDGMENT: | 20 May 2008 | |
CASE MAY BE CITED AS: | Scientific Product Developments Pty Ltd v Monash University | |
MEDIUM NEUTRAL CITATION: | [2008] VSC 190 | |
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Injunction application – Plaintiff seeking exclusive use of defendant’s wind tunnel – Plaintiff seeking to enforce alleged contractual hire rates – Balance of convenience – Injunction refused.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr D Christie | Gadens Lawyers |
| For the Defendant | Mr N Mukhtar QC with Mr P Noonan | Clayton Utz |
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HER HONOUR:
The injunction application
The defendant, Monash University, owns and operates a 1MW wind tunnel.
Dr Jeffrey Saunders is a former research fellow at the university. For many years, Dr Saunders has, through the plaintiff company, conducted a commercial business of aerodynamic testing of motor vehicles, using the Monash wind tunnel. The university itself undertook some commercial motor vehicle testing for several years in the mid-1990s, however, it has not done so from then until a few months ago.
The wind tunnel is not only used for motor vehicle testing by the plaintiff. The university uses it for a variety of academic research and teaching purposes, as well as hiring it out for commercial use in the aerodynamic testing of buildings, airplanes and boats.
In late November 2007, the university gave notice that it would be substantially increasing its hire rates for the wind tunnel, to more than double the rates to which the plaintiff says that it is contractually entitled.
In late January 2008, the university informed Dr Saunders that it proposed to offer its own aerodynamic motor vehicle test services. On 28 February 2008, it conducted such testing for Ford Australia. The plaintiff complains of this conduct and says that it has a contractual right to use the wind tunnel for such testing to the exclusion of all other persons, including the university.
This proceeding, which was issued on 14 May 2008, essentially concerns a dispute as to the terms and conditions on which the plaintiff may have access to the wind tunnel between now and the end of 2009. There is no dispute that whatever contractual arrangements are in place at present, they will cease in December 2009, when a 36-month notice period expires.
By summons dated 14 May 2008 the plaintiff seeks orders that:
Until the hearing and determination of this proceeding or until further order or until 8 December 2009, whichever is the earlier, the defendant be restrained from:
(a)Refusing or neglecting to give effect to the agreement between the plaintiff and the defendant made on or about 7 June 1999;
(b)Refusing or neglecting to make the Monash wind tunnel available to the plaintiff upon the plaintiff giving 30 days' notice of its request to hire the wind tunnel to carry out aerodynamic testing on motor vehicles;
(c)Charging or seeking to charge rates for the hire by the plaintiff of the wind tunnel in excess of those specified in the agreement;
(d)Seeking payment from the plaintiff for the hire of the wind tunnel within 30 days after the plaintiff's use of the wind tunnel to carry out aerodynamic testing;
(e)Hiring out the wind tunnel or associated facilities to carry out aerodynamic testing on motor vehicles for the motor vehicle industry other than to the plaintiff.
Serious question to be tried
Was there a binding agreement?
The plaintiff's case is based on an alleged agreement between the plaintiff and the university dated June 1999. The agreement is said to be partly written, partly oral and partly to be implied.
Insofar as it is written, it is said to be contained in a letter dated 7 June 1999 from Dr Saunders to Professor Rhys Jones, the then Head of the Department of Mechanical Engineering, and in Professor Jones' reply of the same date. Dr Saunders' letter was noted as having been "endorsed" by Professor William Melbourne, the former Head of Department; Professor Jones' reply was also copied to Professor Melbourne. Neither Professor Jones nor Professor Melbourne gave evidence about the two letters, or any discussions about them.
The university argues that Professor Jones had no legal authority to enter into any such binding agreement on behalf of the university. It argues that the plaintiff's case must therefore fail on that ground alone. Irrespective of whether Professor Jones had actual authority, I accept that there is a serious question to be tried as to whether Professor Jones had ostensible or apparent authority to enter into such an agreement; further, or alternatively, as to whether the university ratified the agreement by its subsequent conduct.
I turn to consider the alleged terms relied upon by the plaintiff.
Exclusivity
Dr Saunders' letter of 7 June says:
I (acting in the name of my nominated vehicle aerodynamics consultancy company) have exclusive rights to hire out the 1MW wind tunnel and associated facilities to carry out commercial testing for the motor vehicle industry.
The plaintiff says the clause entitles it to be the only person to use the wind tunnel for commercial testing for the motor vehicle industry. That is to say, it focuses on the words “exclusive rights … to carry out commercial testing.”
The university says that even if the letters constitute an agreement, at the highest, the clause would prevent the university from hiring the facility out to a competitor of the plaintiff, but would not prevent the university from using the facility itself. It focuses on the words “exclusive rights to hire”.
Dr Saunders’ letter was, apparently, not drafted or settled by any lawyer.
The clause is to be construed against the background facts known to the parties at the time. Those include the fact that the university was not doing any such commercial testing in June 1999, and had not done so for several years.
Whilst I do not believe that the plaintiff's case in this regard is a particularly strong one, for the purposes of this application I proceed on the basis that it is, at least, arguable that the clause could be construed in the way contended for by the plaintiff.
Rates of payment
The plaintiff says that the following part of Dr Saunders’ letter contains a contractual term that it would make the following payments to the university for the life of the agreement:
(a)Use of the 1MW wind tunnel and associated facilities at the rate of $3500 for each eight hours of commercial operation;
(b)Use of the dynamometer without the 1MW fans operating at the rate of $1200 for each eight hours of commercial operation;
(c)For the use of the 1MW wind tunnel by me for associated research or calibration purposes when commercial testing is not being undertaken. The rate is $50 per hour; and
(d)Technical officer support at the rate of $35 per hour.
It is clear that the letter does not reflect all of the payment terms between the parties, in that it is common ground that the university is also entitled to charge certain additional sums, which will be considered later in these reasons.
For the purposes of the injunction application, I proceed on the basis that there is a serious question to be tried as to the plaintiff's contractual entitlement to be charged no more than those rates during the term of the agreement.
Time for invoices
The university now requires the plaintiff to comply with its standard practice of paying invoices within 30 days of their delivery.
The plaintiff asserts that it was a term of the agreement that the university would not require it to pay for use of the wind tunnel until the plaintiff had itself been paid by its own client.
Such a term is not contained in writing. Nor has any conversation been deposed to which would support such a term.
The fact that the university did not, until recently, seek payment in advance of payment by the client, does not establish the existence of the term. That is especially so during the period when Dr Saunders was himself working at the department and, therefore, had some control over when the university invoiced his company. Nor would such a term be implied into the contract: it is not necessary for business efficacy and is not so obvious that it goes without saying.
For these reasons, I am not persuaded that there is any serious question to be tried about this alleged term.
Booking arrangements
The plaintiff has booked the wind tunnel for later this week, from 21 to 23 May. The university is not refusing to honour the booking, however, it is insisting that the plaintiff pay a number of outstanding invoices before it will allow the plaintiff to utilise the booking.
The plaintiff pleads that the wind tunnel "would be made available" to it upon reasonable notice (presumably irrespective of whether it has outstanding invoices, although the matter is not actually addressed in the pleading).
Once again, such a term is not contained in writing and no evidence has been led of any conversation said to give rise to an oral term. The fact that the university has always or generally been able to accommodate the plaintiff's booking requests does not establish a contractual entitlement to use the facility “on demand”. Nor would such a term be implied: the university is an educational facility and has to co-ordinate and manage its own usage requirements, as well as those of external users.
In reply, counsel for the plaintiff did not press this alleged term, and I will say nothing more about it.
Balance of convenience
I turn to consider the possible consequences which may flow if an injunction is granted or refused.
I have explained why I am not satisfied that there is even an arguable case that the plaintiff is not obliged to pay the university until it has itself been paid. Whatever the appropriate rate is, the plaintiff must pay in accordance with the university's usual payment terms. There is nothing to stop the university from requiring the plaintiff to pay any outstanding invoices before it makes the wind tunnel available for future hiring.
There is no evidence and no suggestion that the university will not continue to hire the wind tunnel to the plaintiff. This is not a case of refusal of supply.
Exclusive use
The plaintiff’s summons seeks to restrain the university from hiring out the wind tunnel for motor vehicle testing, other than to the plaintiff. However, there is no evidence that the university intends to hire the tunnel to any other person, for them to conduct motor vehicle testing. This part of the application must therefore fail.
Even though the plaintiff’s summons does not, on its face, seek to prevent the university from using the tunnel to conduct its own commercial motor vehicle testing, it is clear from the affidavits and submissions that this is what the plaintiff really wants to achieve. The plaintiff says that if the university is not restrained from competing with it for commercial motor vehicle testing, it will suffer the following types of loss:
1.Loss of income from the clients serviced by [the university].
2.Future losses associated with that client choosing to use [the university] in the future rather than [the plaintiff].
3.The loss of use of the capital it has invested in the wind tunnel.
I will shortly discuss the evidence, such as there is, about the potential loss of clients if the plaintiff has to put its prices up due to increased charges by the university. But there is really no evidence as to how likely it is that the plaintiff would suffer any or any substantial loss of clients to the university, apart from any price rise.
It is clear that Dr Saunders has a well-established reputation in the aerodynamics industry, having worked at RMIT for almost 20 years, before he moved to Monash in 1997. Through the plaintiff, he has been performing motor vehicle testing for more than 30 years. Dr Saunders deposes to the fact that he has long-standing clients of several decades, including Ford and GM Holden. There is obviously a theoretical risk of losing customers whenever a competitor begins to operate in what has been a monopolistic market, but the evidence is not such as to allow the court to draw any conclusions as to how likely it is that the plaintiff would actually lose substantial business to the university between now and the end of next year (at which point any exclusive rights which it may have will end).
If the plaintiff succeeded at trial in establishing that it was entitled to the exclusive use of the tunnel until December 2009, there would not appear to be any particular difficulty in principle in calculating its lost profit to the time of trial. The university would be obliged to give discovery of documents relating to any commercial motor vehicle testing which it conducts until the trial. At the very least, that would show which clients it did testing for, what tests it conducted, and the duration of any testing. There seems to be no reason why the plaintiff could not readily calculate and prove its loss if it were given such information.
If the plaintiff succeeded, the university would also be prevented from using the tunnel from the time of judgment until December 2009, so the plaintiff would suffer no ongoing loss during that period.
The third type of alleged loss, being the alleged loss of use of capital, is more problematic. Although the plaintiff asserts that it has invested $370,000 in capital improvements to the wind tunnel, the university denies it has done so and the plaintiff’s supporting evidence is unsatisfactory. The plaintiff has produced no documentary evidence showing that it has paid what could properly be called capital costs, nor has it given any examples of such capital works. Nor is there any explanation as to how Dr Saunders arrived at a total estimated figure of $370,000.
The plaintiff says that within the university’s accounting system, invoice charges are broken down into three distinct amounts: hire rates, employee costs and what Dr Saunders describes as “the cost of any improvements to the wind tunnel.” That is not an accurate description of what is in the internal university documents relied upon by the plaintiff: apart from hire and staff charges, the only other relevant category is described as “Materials/Equipment”. It seems from all the evidence that this is simply a reference to any particular configuration or equipment that is needed to conduct particular testing. Elsewhere, Dr Saunders’ describes this as being for “the operation and development of the wind tunnel”. To talk of this as some sort of capital “improvement” to the wind tunnel seems inaccurate.
Furthermore, Dr Saunders fails to explain whether the cost of modifications and equipment for specific testing has been, and will continue to be, passed on to the plaintiff’s clients.
I would give the plaintiff’s claim for “loss of use of capital” very little weight in considering where the balance of convenience lies.
On the other side of the scale, if the “exclusive use” injunction is granted, the university will be prevented from using for its commercial benefit a very substantial asset which it owns and has spent millions of dollars in establishing and developing.
Proposed higher rates
The plaintiff also complains that unless the university is enjoined from charging the proposed higher daily rates, it will be difficult, if not impossible, for it to continue providing its services at a profitable level. The plaintiff goes so far as to assert that there is a "probable consequence" that it will be forced to cease trading. In this regard, Dr Saunders' affidavits are full of generalised assertions which are, once again, largely unsupported by any hard evidence and riddled with inconsistencies. The aide memoire which was produced by the plaintiff’s solicitor, with a view to showing that the plaintiff’s profit margin could not cope with the proposed increased hire rates, only served to highlight the inadequacies in the plaintiff’s evidence.[1]
[1]These matters were canvassed at some length during submissions, and the details are not reproduced here.
I am not satisfied on the evidence that there is a real risk that the plaintiff might be forced to cease trading if the increased charges were imposed between now and trial. I am satisfied that damages would be an adequate remedy if the plaintiff succeeds at trial on this alleged term.
In considering the balance of convenience, I note that there is no doubt that the university could meet any damages award which may be made against it. The same cannot be said of the plaintiff. Based on the plaintiff's own financial statements, there are serious doubts as to the plaintiff's ability to pay substantial compensation if the injunction were to be granted, and it were found at trial that it should not have been.
For these reasons, in considering the balance of convenience, I am satisfied that damages would be an adequate and, indeed, the most appropriate, remedy. I say that, particularly having regard to the fact that I do not regard the plaintiff's case, although arguable, as particularly strong. In all the circumstances, I have concluded that to refuse the injunction would give rise to the least risk of injustice.
Discretionary matters
Delay
The university argues that an injunction should be refused because the plaintiff has delayed in seeking such relief.
The plaintiff has known since November 2007 that the university intended to charge higher than what it alleges to be the contractual rates. The plaintiff decided to take a pragmatic approach and has paid higher rates under protest until now. I am not critical of the fact that it has tried to resolve this aspect of the dispute by negotiation before commencing the proceeding.
However, the plaintiff has known since late January that the university proposes to start using the wind tunnel for its own commercial testing. It has known since mid-March that the university did in fact perform such testing for Ford on 28 February. The plaintiff was also told in April that it would have to pay all outstanding amounts before its booking for 21 to 23 May. Notwithstanding all that notice, the plaintiff took no steps to prevent that happening until it issued this proceeding in the middle of last week.
Notwithstanding the delay, I am not persuaded that it is such as would disentitle the plaintiff to relief were the balance of convenience more finely balanced than it is. However, for the reasons I have explained, the balance of convenience favours the university, not the plaintiff.
But questions of timing have had some relevance to my decision in this case. Both in submissions and in these reasons, I have been critical of the state of the plaintiff's evidence – in particular, insofar as it makes sweeping, bald assertions without descending to detail or backing them up with supporting documents. Had the plaintiff only just learnt of the university's proposed conduct and been obliged to come urgently to Court to protect its interests, I may have made more allowance for the poor state of its evidence. But it has had more than enough time to put before the Court evidence sufficient to make out its case, particularly the threatened harm which it says will flow to it if an injunction is not granted. It has not done so.
Finally, I will consider the question of supervision. The university says that the injunction should be denied because it would, effectively, require the Court to become engaged in the ongoing supervision of the contract. That argument would have had more weight had the plaintiff still asserted a contractual right to hire the wind tunnel whenever it wanted. I would not give any weight to that argument, given the way in which the case is now proceeding. An injunction limited to restraining the university from using or hiring out the wind tunnel would be a relatively straightforward one requiring little supervision; likewise, an injunction restraining the university from charging more than contractual rates. Accordingly, I have no regard to the possible supervision problems in coming to the conclusion that the injunction should be denied.
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