Soldatic v Inverness

[2008] NSWSC 734

CITATION:	Soldatic v Inverness [2008] NSWSC 734
HEARING DATE(S):	25/06/08
JUDGMENT DATE :	21 July 2008
JURISDICTION:	Equity Division
JUDGMENT OF:	Macready AsJ at 1
CATCHWORDS:	Corporations Law. Application to set aside demand under s 459G of the Corporations Act. Allegation of genuine dispute. Held: No genuine dispute. No matter of principle.
PARTIES:	Marco Soldatic Enterprices (Australasia) Pty Limited v Inverness Medical Switzerland GmbH
FILE NUMBER(S):	SC 2068/2008
COUNSEL:	Ms S Mirzabegian for plaintiff Ms JA Soars for defendant
SOLICITORS:	Meehans Solicitor Corporation for plaintiff Addisons for defendant

- 1 -

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

Associate Justice Macready

Monday 21 July 2008

2068/08 Marco Soldatic Enterprises (Australia) Pty Limited v Inverness Medical Switzerland GmbH

JUDGMENT

1 His Honour: This is an application under sections 459G and 459H of the Corporations Act 2001 (Cth) to set aside a statutory demand served by the Defendant (“Inverness”) on 7 March 2008. The application was brought within time and an initial affidavit in support was also filed and served within time.

2 The statutory demand claimed that the Plaintiff (“MSE”) was indebted to Inverness in the amount of $500,000 under a Deed of Settlement entered into by the parties on or about 5 September 2007 (“Deed of Settlement”).

3 MSE challenges the statutory demand on the basis that there is a genuine dispute as to the existence of the debt and MSE has an offsetting claim.

Background to the demand

4 The background is helpfully set out in submissions which I will adopt with some modification.

5 On 18 May 2007 proceedings were commenced in the Federal Court by Inverness against MSE and Mr Soldatic alleging patent infringement by MSE in respect of certain medical testing products for pregnancy, ovulation and menopause imported into Australia and sold by MSE trading as Marco D’Polo. A settlement meeting took place on 18 July 2007 attended by representatives of the parties and their solicitors.

6 A live question in these proceedings is whether there was a discussion at the settlement meeting in relation to Inverness providing what have been described as “letters of comfort”. These are letters to be sent by Inverness to MSE’s customers giving advice that Inverness would not sue the customer for selling the product.

7 Following that meeting, extensive “without prejudice” or “subject to contract” correspondence and drafts passed between the solicitors for the parties negotiating the terms of a Deed of Settlement and Supply Agreement between the solicitors for the parties and for Innovacon, Inc (“Innovacon”) a US company related to Inverness. On 5 September 2007 the solicitors for Inverness received the Deed of Settlement and Supply Agreement signed by MSE and Mr Soldatic.

8 Although further attention will have to be paid to it, one of the provisions in clause 2 of the Deed of Settlement provided that MSE and Mr Soldatic agreed to forthwith cease to sell the infringing products. The Supply Agreement provided that Innovacon and related companies would supply MSE directly with the diagnostic tests.

9 Subsequently the patent attorney for Inverness, Dr Houlihan of Houlihan² Patent & Trade Mark Attorneys proposed by letter dated 19 September 2007 an arrangement for “future cooperation” on terms, including that Inverness would agree not to take enforcement action and would allow MSE to continue to sell its existing stocks of the infringing products with a percentage being paid to Inverness, that sales would cease by 4 January 2008 and providing that Inverness would send a letter in a proposed form attached to that letter, to the “marketplace” in order to take into account the time lag until Innovacon could supply MSE with products. Mr Soldatic of MSE countersigned this letter where marked to indicate MSE’s acceptance of the terms and returned the letter to Houlihan² on 28 September 2007.

10 Houlihan² sent letters in the agreed form to MSE’s customers on 3 October 2007 and an additional letter to Coles dated 18 October 2007 . This later letter refers to the Supply Agreement between Innovacon and MSE and states “(a) there may be a time lag in the supply of the Inverness products, Marco D’Polo is permitted by Inverness to sell the following products which are not Inverness products during the transition period…”.

11 There was further correspondence between the solicitors for the parties, Houlihan and Meehans about the sending of a further letter to some of MSE’s customers, including Woolworths. A further letter was sent to Coles (and apparently API), but an impasse was reached between the solicitors and no further letter was sent to Woolworths.

12 On 1 December 2007 the first of 8 quarterly instalments was due pursuant to clause 3.2(c) of the Deed of Settlement. MSE failed to pay. A letter of demand was sent on 8 January 2008 from Houlihan to the solicitors for MSE and no reply was received. On 7 February 2008 a demand was made under clause 3.3 of the Deed of Settlement for the whole amount then outstanding of $500,000 (pursuant to an acceleration clause), and MSE refused to pay.

13 On 7 March 2008 a statutory demand and affidavit in support were served by Inverness on MSE. While there had been a previous assertion in a letter dated 4 February 2008 that it was a term of the agreement that Inverness would provide these further letters, that assertion only came after MSE was already in default in paying the instalment due and after a letter of demand dated 8 January 2008 from Houlihan² to Meehans which had not been responded to. No assertion that any representation had been made or that there was an implied term of the agreement had been made in correspondence prior to the commencement of these proceedings.

The claims by MSE

14 MSE submitted that there were two areas of genuine dispute with respect to the existence of the debt arising under the Deed of Settlement:

(a) first, there is a dispute as to what was agreed at the settlement meeting and in particular, whether a representation was made as to the provision by Inverness to MSE’s customers of letters of comfort to facilitate the sale of MSE’s products by those customers (“letters of comfort”);
(b) secondly, there is a dispute as to the legal effect of the representation – in particular:
(i) whether, by failing to provide letters of comfort which would facilitate the sale of MSE’s products, IMS engaged in misleading or deceptive conduct in contravention of section 52 of the Trade Practices Act 1974 (Cth), causing loss to MSE and therefore making the Deed of Settlement liable to be set aside under section 87 of the Act; or
(ii) whether the representation took effect as an implied term of the agreement, which term was breached by Inerness thus preventing Inverness from seeking specific performance of the Deed of Settlement.

15 The implied term suggested was in these terms:

“That Inverness agreed to forward letters of comfort to MSE’s customers so as to facilitate the continued sale of MSE’s products and in particular its existing stocks of products which might or might not have infringed Inverness’ patents by those customers of MSE without the threat of litigation by Inverness

16 There was no evidence of the amount of any damage suffered by MSE which would support an offsetting claim. Normally a plaintiff must provide a basis for finding, even by way of estimate, the “amount” of the alleged offsetting claim, that being an indispensable component of the case that must be made out under s459H(1)(b); see W&P Reedy Pty Ltd v Macadams Baking Systems (Pty) Ltd [2007] NSWCA 146 per the Court of Appeal at [6]; cited with approval in Wellnora Pty Ltd v Fiorentino [2008] NSWSC 483 per Barrett J at [56]. This is the reason for the submission that the misrepresentation could lead to setting aside the Deed of Settlement.

17 I turn to the evidence of any representation that letters of comfort be provided. In evidence an initial affidavit was rejected on this aspect and in a later affidavit which supplemented the earlier affidavit the following was said:

7. The Deed of Settlement was negotiated at a meeting, which I attended together with MSE's solicitor Paul Meehan, in or about August 2007 ("the settlement meeting") Representatives of IMS were also at the settlement meeting

8. MSE agreed to enter into the Deed of Settlement and the supply agreement on the understanding that IMS would provide letters of comfort to all of MSE's customers (including Coles and Woolworths) so that those customers would put MSE's products back on their shelves ("letters of comfort"). At or around the time the Federal Court proceedings were commenced, many of MSE's customers removed MSE's products from their shelves. Although I cannot recall precisely what was said at the settlement meeting, I recall that the provision of letters of comfort was discussed and representatives of IMS agreed to supply letters of comfort. If IMS did not agree to provide letters of comfort to facilitate the sale of MSE's products, MSE would not have entered into the Deed of Settlement or the supply agreement. This is because MSE had agreed to indemnify its customers for any damages resulting from the sale of its products and MSE wanted to protect its position in this regard.

18 After making some initial rulings on the admissibility of paragraph 8, I heard further argument on its admissibility and reserved that question. Reference was made in submissions to the decision of White J in Tokich Holdings Pty Ltd v Sheraton Constructions (NSW) Pty ltd (in Liq) [2004] NSWSC 527 where his honour said:

“20 However the proceedings are characterised, the issue is not whether Tokich Holdings owes the debt to which the statutory demand relates. The issue is whether there is a genuine dispute about that.
21 I admitted the evidence to which objection was taken. Evidence which may be inadmissible as hearsay or opinion to establish a fact relevant to indebtedness would not on that account be inadmissible to establish a fact relevant to whether there was a genuine dispute about indebtedness. In Geoffrey W Hill & Associates v King (1992) 27 NSWLR 228 at 230, McLelland J (as his Honour then was), when dealing with the admissibility of hearsay evidence on an application for an interlocutory injunction said:
“that evidence which would be objectionable as hearsay on the issue as to whether an alleged fact is true may, nevertheless, be admitted on the issue (1) whether there is a case for investigation as to whether that alleged fact is true, (2) whether there is a real prospect of that alleged fact being found to be true at a final hearing, or (3) whether there is a serious question to be tried at a final hearing as to whether that alleged fact is true.”
22 Although the mere assertion that a debt is denied will be insufficient, evidence in the form of conclusions as to primary facts which would be inadmissible as proof of the relevant facts either pursuant to the opinion rule in s 76 of the Evidence Act , or under s 135 of the Evidence Act , may be admissible as evidence that there is a dispute as to the existence or amount of the debt, and as to whether that dispute is genuine.
23 In John Holland Construction and Engineering Pty Limited v Kilpatrick Green Pty Limited (1994) 14 ACSR 250 Young J (as his Honour then was) said (at 253):
“There may be cases, and indeed it may be the majority of cases, where the court will look not only to an assertion of a dispute, but some sort of material short of proof which backs up the claim that is made that the amount is disputed. It is clear that what is required in all cases is something between mere assertion and the proof that would be necessary in a court of law. Something more than mere assertion is required because if that were not so then anyone could merely say it did not owe a debt.
On the other hand, if proof of a claim was required then one would be doing the very thing that one is not to do, and that is to try this sort of dispute in the Companies Court. What more than assertion is required is something that may differ from case to case. In Jesseron Holdings Pty Ltd v Middle East Trading Consultants Pty Ltd (No 2) (1994) 13 ACSR 787; 12 ACLC 490 I indicated that so long as the claim is not fictitious or merely colourable and is genuinely believed to exist one can ordinarily take that as sufficient. That is something more than mere assertion. Even if the proposition in Jesseron (No2) goes too far, as Mr Hutley submits, it would seem to me that in a sizeable construction case, where the contemporaneous correspondence between the parties shows that there is a disputing of the figures, then one can say, without looking at the figures, or without looking at the evidence that backs up the figures, that there is a genuine dispute between the company and the respondent about the amount of debt. A similar thing can be said about any offsetting claim.”

24 In Reale Bros Pty Ltd v Reale [2003] NSWSC 666 Young CJ in Eq rejected the proposition that there must be evidence on each and every element that the company would need to prove at a trial on the merits of the issue of indebtedness. His Honour referred with approval to SMEC International Pty Ltd v CEMS Engineering Inc (2001) 38 ACSR 595 at 600. There Austin J applied the test of whether there was a plausible contention requiring investigation, and admitted evidence which his Honour characterised as being in various respects vague but which indicated, with some supporting documentation, that there may have been confusing and inconsistent contracts between the parties which provided grounds of real doubt as to the enforceability of the contract on which the statutory demand was based.
25 Whether the evidence in the form of a generalised summary is sufficient to establish a genuine dispute is of course a different question from whether the evidence is admissible for that purpose.”

19 Of particular importance is the form of the third sentence in paragraph 8. In form it is a conclusion as to a representation. Having regard to the comments of his Honour I propose to admit paragraph 8. Whether the evidence in this form is sufficient to establish a genuine dispute is the matter which now needs to be addressed.

20 I had the benefit of having a number of submissions in respect of the principles to be applied. I think the most useful summation of what is a genuine dispute is that given by McLelland CJ in Equity in Eyota Pty Limited v Hanave Pty Limited (1994) 12 ACLC 669. At page 671 his Honour made the following comments respect of the expression "Genuine dispute":

“It is, however, necessary to consider the meaning of the expression 'genuine dispute' where it occurs in s 459H. In my opinion that expression connotes a plausible contention requiring investigation, and raises much the same sort of considerations as the 'serious question to be tried' criterion which arises on an application for an interlocutory injunction or for the extension or removal of a caveat. This does not mean that the Court must accept uncritically as giving rise to a genuine dispute, every statement in an affidavit 'however equivocal, lacking in precision, inconsistent with undisputed contemporary documents or other statements by the same deponent, or inherently improbable in itself, it may be” not having 'sufficient prima facie plausibility to merit further investigation as to (its) truth' (cf Eng Mee Yong v Letchumanan (1980) AC 331 at 341), or 'a patently feeble legal argument, or an assertion of facts unsupported by evidence' (cf South Australia v Wall (1980) 24 SASR 189 at 194).
But it does mean that, except in such an extreme case, a Court required to determine whether there is a genuine dispute should not embark upon an inquiry as to the credit of a witness or a deponent whose evidence is relied on as giving rise to the dispute. There is a clear difference between, on the one hand, determining whether there is a genuine dispute and, on the other hand, determining the merits of, or resolving, such a dispute. In Mibor Investments (at ACLC 1066; ACSR 366-7) Hayne J said, after referring to the state of the law prior to the enactment of Division 3 of Part 5.4 of the Corporations Law , and to the terms of Division 3:
'These matters, taken in combination, suggest that at least in most cases, it is not expected that the Court will embark upon any extended inquiry in order to determine whether there is a genuine dispute between the parties and certainly will not attempt to weigh the merits of that dispute. All that the legislation requires is that the Court conclude that there is a dispute and that it is a genuine dispute.'
In Re Morris Catering (Australia) Pty Limited (1993) 11 ACLC 919 at 922; (1993) 11 ACSR 601 at 605 Thomas J said:

There is little doubt that Division 3 . . . prescribes a formula that requires the Court to assess the position between the parties, and preserve demands where it can be seen that there is no genuine dispute and no sufficient genuine offsetting claim. That is not to say that the Court will examine the merits or settle the dispute. The specified limits of the Court's examination are the ascertainment of whether there is a "genuine dispute" and whether there is a "genuine claim".

It is often possible to discern the spurious, and to identify mere bluster or assertion. But beyond a perception of genuineness (or the lack of it) the Court has no function. It is not helpful to perceive that one party is more likely than the other to succeed, or that the eventual state of the account between the parties is more likely to be one result than another.

The essential task is relatively simply - to identify the genuine level of a claim (not the likely result of it) and to identify the genuine level of an offsetting claim (not the likely result of it).'

I respectfully agree with those statements."

21 There are a number of points to be noted. The first is that one witness for the defendant who was present at this meeting has sworn that there was no such representation. Although there plainly was a meeting of a number of people, including the plaintiff's present solicitor who has given no evidence of the representation, and nor has the plaintiff indicated anyone else who was present at the meeting and who might be likely to give evidence of the representation.

22 It is also apparent from the terms of the words that are used in paragraph 8 that this witness will not be able to give evidence of what was said to constitute the representation in the future. He has said that he cannot remember the words. This is particularly important as the precise words will comprehend what were the terms of the representation. The importance of the precise words is evident from the fact that the parties later entered into a separate agreement to attend to the matter in an agreed form. It is to be appreciated that the only basis of complaint is that a letter in similar terms to the later Coles letter was not sent to Woolworths, who had already been notified in terms of the letter under the later agreement.

23 It is to be observed that there were negotiations about the form of the settlement agreement and there is no suggestion that this matter arose during those negotiations for inclusion in the settlement document.

24 It was submitted that the whole settlement between the parties was premised on MSE ceasing to sell the infringing products. Clause 2 of the Deed of Settlement provided that MSE and Mr Soldatic agreed forthwith to cease selling the infringing products. The Supply Agreement provided that Innovacon and related companies would supply MSE directly with the diagnostic tests. It was submitted that the terms of the Deed of Settlement and Supply Agreement preclude or are expressly inconsistent with the allegation that there was an agreement reached at the settlement meeting to send the alleged letters of comfort or to allow MSE to sell its remaining infringing stock. The clause was in these terms:

2. Ceasing Sale and Purchase of Products

2.1. MSE and Mr Soldatic agree that they will forthwith cease, either by themselves, their servants or agents, from selling or offering for sale in Australia or keeping in Australia for the purposes of supplying or offering for sale any products or goods using, comprising or relying on the Patents (including the Products), or authorising, directing, counselling or procuring the doing of any of those acts, for so long as any of the Patents remains in force in Australia, unless expressly permitted to do so by IMS.( emphasis added)

2.2 MSE and Mr Soldatic agree that they will forthwith cease, either by themselves, their servants or agents, from importing into Australia or purchasing any products or goods using, comprising or relying on the Patents (including the Products), or authorising, directing, counselling or procuring the doing of any of those acts, for so long as any of the Patents remains in force in Australia, unless expressly permitted to do so by IMS.

2.3 MSE and Mr Soldatic agree that, unless expressly permitted by IMS not to do so, within 14 days of the date of this Deed they will destroy any of the Products, or any other products which may infringe any of the Patents currently in their possession, custody or control, with the exception of some samples required for use in the litigation proceedings against Biomerica, and confirm in writing to IMS that they have done so. All samples retained for use in the proceedings against Biomerica are to be destroyed within one month of the finalisation of the those proceedings, and MSE and Mr Soldatic will confirm in writing to IMS that they have done so.”

25 On the operation of clause 2.3 the defendant made submissions to the effect that the clause contemplated further agreement which might permit the sale of the offending product. Despite this, the whole tenor of clause 2 is inconsistent with the existence of the representation.

26 I note that there is no “whole agreement” clause in the settlement agreement although in the Supply Agreement there was such clause. The absence of a “whole agreement” clause in the present document under consideration is that it allows some movement.

27 Importantly the assertion that there were representations made or an agreement was reached in August (alternatively July) 2007 is also inconsistent with the parties’ subsequent conduct in entering into a letter of agreement made on or about 28 September 2007 (made up of the offer dated 19 September 2007 from Houlihan to MSE, which was countersigned by Mr Soldatic on behalf of MSE on 28 September 2007 and returned to Houlihan) in which the parties agreed as to the precise terms of any letters to be sent to customers of MSE. Inverness submitted that this agreement is the only agreement between the parties in relation to the sending of letters by Inverness to customers of MSE and as to the arrangements in relation to the sale by MSE of infringing products during the transition period. The evidence is that Inverness complied with the terms of the letter of agreement and sent letters to customers of MSE, including Woolworths, in the agreed form.

28 In my view, having regard to the matters mentioned and in particular the inability to ascertain what the precise representation was and the parties’ conduct in later coming to agreement about what would be done in respect of letters of comfort, the claim that there is a genuine dispute is not a plausible contention requiring investigation. I am assisted in coming to this conclusion by the fact that no complaint was made about the matter until after demand was made for the outstanding amounts under the agreement and no proceedings have been commenced to set aside the agreement.

29 In respect of the implied term it was suggested that as the only suggestion of an implied term in the initial affidavit was “that IMS would not threaten MSE’s customers with court action if they placed MSE’s products on its shelves”, the present term cannot be raised because of the Graywinter principle. The authorities on this area have moved from time to time over the years and a recent short reference to it is contained in the decision of Barrett J in Saferack Pty Ltd v Marketing Heads Australia Pty Ltd [2007] NSWSC 1143 at paragraphs 22 to 25 in these terms:

22 It was submitted on behalf of the defendant these alleged deficiencies could not be raised by way of challenge under s.459J(1)(b) because they were not identified in either of the affidavits supporting the s.459G application, that is, Mr Hagan’s affidavit of 7 August 2007 and Mr Busby’s affidavit of 31 July 2007. The defendant thus calls in aid the principle emerging from Graywinter Properties Pty Ltd v Gas and Fuel Corporation Superannuation Fund (1996) 70 FCR 452 according to which an applicant under s.459G is limited to grounds appearing from the supporting affidavit or affidavits filed and served within the period of 21 days mentioned in that section.
23 Valuable discussion of this principle and its precise content may be found in the recent judgment of White J in Hansmar Investments Pty Ltd v Perpetual Trustee Co Ltd (2007) 61 ACSR 321. In that case, his Honour regarded as too strict the approach taken by me in Process Machinery Australia Pty Ltd v ACN 057 262 590 Pty Ltd [2002] NSWSC 45 and Elm Financial Services Pty Ltd v Macdougal [2004] NSWSC 560. White J was of the view that my observation to the effect that the ground of challenge must be raised expressly in, or appear by necessary inference from, the supporting affidavit suggested too demanding a requirement. He referred, in that connection, to observations of Austin J in POS Media Online Ltd v B Family Pty Ltd (2003) 21 ACLC 533 to the effect that the approach I had taken in Process Machinery arguably took the observations of Sunberg J in Graywinter further than they were taken by the Court of Appeal of the Supreme Court of Western Australia in Energy Equity Corporation v Sinedie Pty Ltd (2001) 166 FLR 179 and might be inconsistent with Callite Pty Ltd v Adams [2001] NSWSC 52.
24 White J then dealt with the case of a ground obvious on the face of an identified document but not expressly enunciated in the supporting affidavit. In the POS Media case, Austin J had inclined to the view that, if the relevant document (such as an agreement) was annexed to the supporting affidavit, a ground obvious on the face of the document would be available even though not mentioned or suggested in the text of the affidavit (I had indicated in Process Machinery that the text would have to say something about the relevant matter). Austin J did not need to decide the point but it became the subject of the following observations of White J in the Hansmar case by reference to the decision of Santow J in Callite Pty Ltd v Adams :

“[31] Such a mode of reasoning would be consistent with Callite . There, a solicitor served a statutory demand demanding payment of an amount of unpaid legal costs. One of the grounds of challenge to the demand was that the solicitor had failed to make the disclosure required by s 175 of the Legal Profession Act 1987 (NSW). Santow J (as his Honour then was) held that this ground of challenge was not available because no facts were deposed to from which one could infer that there was no fee disclosure and no costs agreement. However, the affidavit did depose to the receipt of accounts and those accounts were annexed. Santow J held (at [10]) that a perusal of the accounts showed that they lacked the prescribed statutory content as required by s 192 of the Legal Profession Act and reg 22A of the Legal Profession Regulations 1994 (NSW). Section 192 of the Act precluded any action being taken for recovery of costs until 30 days had passed after the provision of a bill of costs which complied with the Act. Santow J held (at [12]) that the legal consequences which flowed from the form in which the accounts were rendered were not required to be pleaded in the affidavit. His Honour set aside the statutory demand on the basis that public policy precluded a statutory demand being used to bypass the safeguards of the Legal Profession Act.

[32] I doubt that it could be said that in Callite it was a necessary inference from the affidavit that this ground of challenge was raised. However, it was an available inference, so that it could fairly be said that the ground was raised in the supporting affidavit.”
25 With the benefit of the analysis by Austin J in POS Media and White J in Hansmar Investments , I am persuaded that my earlier approach is indeed too strict. In the Graywinter case itself, the minimum requirement with respect to a supporting affidavit was said by Sunberg J to be that it must “contain a statement of the material facts on which the applicant intends to rely to show a genuine dispute” [emphasis added]. That was, of course, a s.459H(1)(a) case. But the same reasoning applies where the challenge is under s.459J. In endorsing the approach taken by Sunberg J, the Full Court of the Supreme Court of Western Australia, in Meadowfield Pty Ltd v Gold Coast Holdings Pty Ltd [2001] WASCA 360, said that the supporting affidavit is “required to reveal a genuine dispute” [emphasis added]. These statements, coupled with the approaches taken by Austin J and White J and the decision of Santow J in Callite , persuade me that a ground is “raised”, as referred to in Energy Equity , if the ground is evident from the supporting affidavit, even if only because it can be discerned from some annexed document the content of which “reveals” it.

30 The relevant document is in evidence so that to that extent the matter is raised. The basis of an implied term is referred to by Mason J in Codelfa Construction Pty Ltd v State Rail Authority of New South Wales [1982] HCA 24; (1982) 149 CLR 337 at 347 where the court approved the statement in BP Refinery ( Westernport) Pty Ltd v Hastings Shire Council (1977) 16 ALR 363 at p376:

"Their Lordships do not think it necessary to review exhaustively the authorities on the implication of a term in a contract which the parties have not thought fit to express. In their view, for a term to be implied, the following conditions (which may overlap) must be satisfied.
(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 term of the contract".

31 It was submitted that none of the conditions are satisfied here. In particular, in my view, the asserted implied term is inconsistent with the express terms of the Deed of Settlement, in particular clause 2.1 which prohibits MSE and Mr Soldatic from selling or offering for sale in the infringing products “unless expressly permitted to do so by IMS”. It is certainly not necessary to give business efficacy to the agreement and is not obvious. The terms of any permission by Inverness for MSE and Mr Soldatic to sell down their remaining stock of infringing products arose later and are contained in the letter of agreement entered into in September 2007.

32 There were submissions that the later conduct could support the inclusion of such an implied term in the original agreement. In this state the Court of Appeal has held that post contractual conduct cannot be used to construe a contract. See Magill v National Australia Bank Limited [2001] NSWCA 221 at par to to par 53 and Independent Timber Importers v Mercantile Mutual Insurance [2002] NSWCA 304 at 17. For this reason I do not think it is correct to look at post contractual conduct in order to imply a term into a contract.

33 In my view there is no case for such an implied term.

34 I dismiss the proceedings with costs.

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