Strange Investments (WA) Pty Ltd v Coretrack Ltd

[2014] WASC 281

JURISDICTION     :   SUPREME COURT OF WESTERN AUSTRALIA

IN CIVIL

CITATION:   STRANGE INVESTMENTS (WA) PTY LTD -v- CORETRACK LTD [2014] WASC 281

CORAM:   PRITCHARD J

HEARD:   18-21 NOVEMBER, 19 DECEMBER 2013, FURTHER WRITTEN SUBMISSIONS 30 APRIL, 1 MAY & 8 MAY 2014

DELIVERED          :   5 AUGUST 2014

FILE NO/S:   CIV 1190 of 2012

BETWEEN:   STRANGE INVESTMENTS (WA) PTY LTD

Plaintiff

AND

CORETRACK LTD
First Defendant

GLOBE DRILL PTY LTD
Second Defendant

Catchwords:

Contracts - Principles of construction - Meaning of 'deliver'

Bailment - Elements of bailment - Whether bailment needs a defined term

Ownership of chattels - Rights of ownership - Requirements for transfer of ownership - Possession - Intention to transfer ownership

Estoppel - Estoppel by convention - Common assumption - Whether facts support existence of common assumption - Turns on own facts

Legislation:

Copyright Act 1968 (Cth)
Rules of the Supreme Court 1971 (WA)
Sale of Goods Act 1895 (WA)

Result:

Separate trial questions answered

Category:    B

Representation:

Counsel:

Plaintiff:     Mr S K Shepherd

First Defendant             :     Mr K L Andronos

Second Defendant         :     Mr K L Andronos

Solicitors:

Plaintiff:     Gaden Lawyers (WA)

First Defendant             :     Rockwell Olivier

Second Defendant         :     Rockwell Olivier

Cases referred to in judgment:

AG Australia Holdings Ltd v Burton [2002] NSWSC 254; (2002) 58 IPR 327

Alpha Wealth Financial Services Pty Ltd v Frankland River Olive Company Ltd [2008] WASCA 119

Antaios Compania Naviera SA v Salen Rederierna AB [1985] AC 191

Associated Alloys Pty Ltd v ACN 001 452 106 Pty Ltd [2000] HCA 25; (2000) 202 CLR 588

Australian Broadcasting Commmission v Australasian Performing Rights Association Ltd [1973] HCA 36; (1973) 129 CLR 99

Australian Rail Track Corporation Pty v QBE Insurance (Europe) Ltd [2012] NSWSC 952

Bofinger v Kingsway Group Ltd [2009] HCA 44; (2009) 239 CLR 269

Borden (UK) Ltd v Scottish Timber Products Ltd [1981] Ch 25

Bowtell v Goldsbrough, Mort & Co Ltd [1905] HCA 60; (1905) 3 CLR 444

Brambles Security Services Ltd v Bi-Lo Pty Ltd (1992) Aust Torts Reports 81-161

Branir Pty Limited v Owston Nominees (No 2) Pty Ltd [2001] FCA 1833; (2001) 117 FCR 424

Breen v Williams [1996] HCA 57; (1996) 186 CLR 71

Burnett v Randwick City Council [2006] NSWCA 196

Burns Philp and Co v Dingle and Co (1923) 23 SR (NSW) 240

Button v Cooper [1947] SASR 286

Codelfa Construction Pty Ltd v State Rail Authority of New South Wales [1982] HCA 24; (1982) 149 CLR 337

Con‑Stan Industries of Australia Pty Ltd v Norwich Winterthur Insurance (Australia) Ltd [1986] HCA 14; (1986) 160 CLR 226

CSR Ltd v Carson Pty Ltd [2002] QSC 21

Dart Industries Inc v Décor Corp Pty Ltd [1993] HCA 54; (1993) 179 CLR 101

East West Corporation v DKBS AF 1912 A/S [2003] QB 1509

EDWF Holdings 1 Pty Ltd v EDWF Holdings 2 Pty Ltd [2010] WASCA 78; (2010) 41 WAR 23

Ewing International LP v Ausbulk Ltd (No 2) [2009] SASC 381

Fearnley v Australian Fisheries Management Authority [2006] FCAFC 3

Flack v National Crime Authority (1997) 80 FCR 137

Franklin v Giddins [1978] Qd R 72

Franklins Pty Ltd v Metcash Trading Ltd [2009] NSWCA 407; (2009) 76 NSWLR 603

Gamer's Motor Centre (Newcastle) Pty Ltd v Natwest Wholesale Australia Pty Ltd [1987] HCA 30; (1987) 163 CLR 236

Gatward v Alley (1940) 40 SR (NSW) 174

Geodesic Constructions Pty Ltd v Gaston (1976) 16 SASR 453

Gollan v Nugent [1988] HCA 59; (1988) 166 CLR 18

Grundt v Great Boulder Pty Gold Mines Ltd (1937) 59 CLR 641

Hancock Prospecting Pty Ltd v Wright Prospecting Pty Ltd [2012] WASCA 216; (2012) 45 WAR 29

Hobbs v Petersham Transport Co Pty Ltd [1971] HCA 26; (1971) 124 CLR 220

Horsley v Phillips Fine Art Auctioneers Pty Ltd [1995] NSWSC 78

Howe v Teefy (1927) 27 SR (NSW)

Jones v Dunkel [1959] HCA 8; (1959) 101 CLR 298

Ken v The Vessel 'Maria Luia' (No 2) [2003] FCAFC 93; (2003) 130 FCR 12

Leigh & Sillavan Ltd v Aliakmon Shipping Co Ltd; The Aliakmon [1986] 2 All ER 145

Lewis Construction (Engineering) Pty Ltd v Southern Electric Authority of Queensland (1976) 50 ALJR 769

MacDonald v Shinko Australia Pty Ltd [1999] 2 Qd R 152

Maggbury Pty Ltd v Hafele Australia Pty Ltd [2001] HCA 70; (2001) 210 CLR 181

McCourt v Cranston [2012] WASCA 60

Morris v CW Martin and Sons Ltd [1966] 1 QB 716

Motor Mart Ltd v Webb [1958] NZLR 773

Official Assignee of Madras v Mercantile Bank of India Ltd [1935] AC 53

Pacific Carriers Ltd v BNP Paribas [2004] HCA 35; (2004) 218 CLR 451

Pacific Film Laboratories Pty Ltd v Commissioner of Taxation [1970] HCA 36; (1970) 121 CLR 154

Pioneer Kabushiki Kaisha v Registrar of Trade Marks [1977] HCA 56; (1977) 137 CLR 670

Primary Health Care Ltd v Commissioner of Taxation [2010] FCA 419, (2010) 186 FCR 301

Queensland Independent Wholesalers Ltd v Coutts Townsville Pty Ltd [1989] 2 Qd R 40

Re Cole [1964] Ch 175

Re Dickens; Dickens v Hawksley (1935) 1 Ch 267

Re Ridgeway (1885) 15 QBD 447

Russell v Wilson [1923] HCA 60; (1923) 33 CLR 538

Ryledar Pty Limited v Euphoric Pty Ltd (2007) 69 NSWLR 603

Secure Parking (WA) Pty Ltd v Wilson [2008] WASCA 268; (2008) 38 WAR 350

Seven Network (Operations) Ltd v TCN Channel Nine Pty Ltd [2005] FCAFC 144; (2005) 146 FCR 183

Sharp v Maritime Super Pty Ltd [2012] NSWSC 1350

Simonson Properties Pty Ltd v Hardy [2014] NSWSC 229

Southern Cross Assurance Co Ltd v Australian Provincial Assurance Association Ltd [1935] HCA 56; (1935) 53 CLR 618

Specialised Transport Pty Ltd v Dominiak (1989) 16 NSWLR 657

Stellar Chartering and Brokerage Inc v Efibanca-Ente Finanziario Interbancario SpA (The Span Terza No 2) [1984] 1 WLR 27

Sturt Football Club Inc v Commissioner of State Taxation [2010] SASC 279

Tabe v The Queen [2005] HCA 59 (2005) 225 CLR 418

The Anderson Group Pty Ltd v Tynan Motors Pty Ltd [2006] NSWCA 22; (2006) 65 NSWLR 400

The Arawa [1977] 2 Lloyd's Rep 416

The Pioneer Container [1994] 2 AC 324

The Tubantia [1924] P 78

Thompson v Palmer [1933] HCA 61; (1933) 49 CLR 507

Warne v GDK Financial Solutions Pty Ltd [2006] NSWSC 259

Western Export Services Inc v Jireh International Pty Ltd [2011] HCA 45; (2011) 86 ALJR 1

Wilkie v Gordian Runoff Ltd [2005] HCA 17; (2005) 221 CLR 522

Zhu v Treasurer of New South Wales [2004] HCA 56; (2004) 218 CLR 530

Contents

1.     Factual background

Factual overview
Overview of the Share Sale Agreement
Overview of the IPL Agreement

Terminology

2.     The questions for determination in the separate trial
3.     The parties' cases on the construction of the IPL Agreement, and the estoppel claim

The plaintiff's pleaded case
Some clarification of the plaintiff's case
The case advanced by the defendants

4.     The meaning and legal effect of the IPL Agreement:  applicable principles

Construction of contracts
Principles in relation to the ownership of chattels

5.     Why the plaintiff's case for ownership of the Drill Rig and Drill Rod Handler fails

(a)          Did Globe Drill lose any of its rights of ownership on the effective date of the IPL Agreement?

Possession of the Drill Rig and Drill Rod Handler
Did the terms of the IPL Agreement disclose an intention that rights of ownership of the Drill Rig and Drill Rod Handler would pass to the plaintiff on the effective date of the IPL Agreement?

(i)          The absence of express terms transferring ownership, or consistent with a transfer of rights of ownership of the Drill Rig and the Drill Rod Handler

(ii)         The terms of the IPL Agreement are premised on Coretrack's exercise of the rights of ownership in the Drill Rig and Drill Rod Handler

(iii)        Whether cl 6.1 of the IPL Agreement manifests an intention that the costs of production are to the benefit of the plaintiff

(iv)         Whether the right to delivery on termination under cl 15.1(d) gave the plaintiff any rights of ownership in the Drill Rig and the Drill Rod Handler prior to termination

(v)     The substance of the IPL Agreement

(vi)         Evidence of the surrounding circumstances, which assists to resolve the ambiguity in the IPL Agreement.

Conclusion in relation to transfer of ownership or rights of ownership in the Products on the effective date of the IPL Agreement, or prior to termination

(b)          Did ownership of the Products pass to the plaintiff upon the delivery of the Products to it following termination?

The ordinary meaning of the word 'deliver'
Whether the other terms of the IPL Agreement manifest an intention that delivery under cl 15.1(d) should result in a transfer of ownership of the Products

(i)      The broader context within which the obligation to 'deliver' is found
(ii)     The construction and operation of cl 15.3 and cl 15.4

(iii)        The construction of cl 15.1(d) advanced by the plaintiff does not accord with business common sense

(iv)    Other arguments advanced by the plaintiff

Conclusion in relation to the operation of the IPL Agreement

6.     Why the estoppel claim fails

The pleaded Common Assumption
Why the evidence did not establish the existence of the Common Assumption

(i)      The transaction documents
(ii)      Evidence as to pre-contractual negotiations
(iii)    Evidence as to the conduct of the parties after the transaction
(iv)    The SFC filed by the plaintiff in this action

7.     Conclusion and orders

1. PRITCHARD J:  These proceedings concerned the separate trial of certain issues raised in this action.  At the core of these issues was the question whether the plaintiff owns some machinery, known as a Drill Rig and a Drill Rod Handler, following the termination of an intellectual property licence agreement entered into by the plaintiff and the defendants (the IPL Agreement[1]).  The essence of the plaintiff's claim is that from the effective date of the IPL Agreement, it enjoyed some rights of ownership in the Drill Rig and the Drill Rod Handler, in particular a deferred right to possession of those items.  The plaintiff says that upon termination of the IPL Agreement, the defendants were obliged to deliver the Drill Rig and Drill Handler to it, at which point the defendants' rights in those items would come to an end, and the plaintiff would enjoy, as against all of the world, full rights of ownership of the Drill Rig and Drill Rod Handler.

   [1] Exhibit B.

2. The defendants say that under the IPL Agreement they were the owners of the Drill Rig and Drill Rod Handler at all times, and that upon delivery of those items to the plaintiff on termination of the Agreement, the plaintiff would hold those items as a bailee.  Alternatively, the defendants plead an estoppel by convention.  They say that the plaintiff is estopped from contending that it enjoyed rights of ownership in the Drill Rig and Drill Rod Handler from the commencement of the IPL Agreement, because the parties operated under a common assumption to the contrary (the Common Assumption), and departure from the Common Assumption would cause the defendants detriment and would be unconscionable (the estoppel claim).

3. For the reasons which follow, I have concluded that on the proper construction of the IPL Agreement, the plaintiff did not obtain rights of ownership in the Drill Rig and the Drill Rod Handler under the IPL Agreement.  Upon the delivery of those items to it, the plaintiff will not own the Drill Rig and the Drill Rod Handler ‑ that is, it will not enjoy, as against all of the world, all of the rights of ownership in those items.  In my view, the plaintiff will hold the Drill Rig and the Drill Rod Handler as a bailee. 

4. In these reasons, I deal with the following matters:

   1.Factual background;

   2.The questions for determination in the separate trial;

   3.The parties' cases on the construction of the IPL Agreement, and the estoppel claim;

   4.The meaning and legal effect of the IPL Agreement:  applicable principles;

   5.Why the plaintiff's case of ownership of the Drill Rig and Drill Rod Handler fails;

   6.Why the estoppel claim fails; and

   7.Conclusion and orders.

1. Factual background

1. In this section of my reasons I provide an overview of the facts relevant to resolution of the issues on the separate trial, and an overview of the key provisions of the Share Sale Agreement and the IPL Agreement relevant to the separate trial.

Factual overview

1. The facts necessary to resolve the issues arising in the separate trial (save for the estoppel claim) are not in dispute.

2. The plaintiff has developed intellectual property in a Drill Rig designed to drill deep into the earth's crust, for use in the geothermal energy industry.  The Drill Rig design encompasses a drill rod handling system (the Drill Rod Handler) which facilitates the extension of the drill into the ground. 

3. Prior to January 2010, Globe Drill was engaged in the manufacture of the Drill Rig. 

4. At that time, the plaintiff, in its own right and in its capacity as trustee for the Strange Family Trust, and Ms Lisa Strange (the Vendors) owned all of the shares in Globe Drill.  Ms Strange's husband, Mr Warren Strange, was the sole director and shareholder of the plaintiff. 

5. On 15 January 2010, the Vendors entered into an agreement pursuant to which the Vendors sold to Coretrack all of the shares in Globe Drill (the Share Sale Agreement[2]).  Completion of that agreement occurred on 25 February 2010. 

   [2] Exhibit A.

6. On 15 January 2010, the plaintiff and the defendants also executed the IPL Agreement.  Pursuant to the IPL Agreement, the plaintiff granted a licence to Coretrack to possess and use the plaintiff's intellectual property (the Strange IP) in drill rigs and drill rod systems and related machinery (referred to respectively as Products, Improvements and Accessories, in the IPL Agreement) in order to manufacture drill rigs and drill rod handlers, and to use them to provide drilling services to third parties.  The IPL Agreement contemplated that Coretrack would sub‑licence all of its rights under the IPL Agreement to Globe Drill, so that the Products, Improvements and Accessories could continue to be manufactured by Globe Drill.  That sub‑licence agreement was entered into by the plaintiff and the defendants in September 2011 (the IP Sub‑Licence Agreement).[3]

   [3] Amended Statement of Claim [15], Amended Defence [15], Exhibit C.

7. For the duration of the IPL Agreement, and thereafter, the plaintiff was, and remains, the owner of the Strange IP subsisting in any Product, component of a Product, Improvement or Accessory.[4]

   [4] Amended Statement of Claim [18(a)], Amended Defence [18(a)].

8. At the date of execution of the Share Sale Agreement, Globe Drill was in possession of the Drill Rig (which had been referred to at various times as the GT 3000, the GT 2000 and the GT7).  At that stage, the Drill Rig was partially constructed.[5]  Globe Drill had also instructed an engineering firm, Karni Engineering, to manufacture the Drill Rod Handler.[6] 

   [5] Amended Statement of Claim [7(a)], Amended Defence [7(a)].

   [6] Amended Statement of Claim [7(b)], Amended Defence [7(d) and (e)].

9. Over the course of the IPL Agreement, the defendants manufactured Products, or components of Products, under the IPL Agreement, namely the Drill Rig and the Drill Rod Handler.[7]  It was not in dispute that the Drill Rig and the Drill Rod Handler were 'Products' for the purposes of the IPL Agreement.

   [7] Amended Statement of Claim [20], Amended Defence [20].

10. By January 2012, neither the Drill Rig nor the Drill Rod Handler had been commissioned, within the meaning of that term in the IPL Agreement (that is, subjected to final tests and ready for use).[8] 

    [8] Amended Statement of Claim [47], Amended Defence [47(b)].

11. By January 2012, the relationship between the plaintiff and the defendants had broken down.  Subsequently, the IPL Agreement was terminated. Although the defendants do not dispute that by virtue of the termination of the IPL Agreement they were obliged to deliver the Drill Rig and the Drill Rod Handler to the plaintiffs, they did not do so.  Both the Drill Rig and the Drill Rod Handler remain in the defendants' possession. 

12. The parties then commenced proceedings against each other for damages arising out of alleged breaches of the IPL Agreement.[9] 

    [9] In addition to this action, Coretrack and Globe Drill have also commenced an action against the plaintiff in CIV 2001 of 2012.

13. In the present action, the plaintiff seeks an order[10] that Coretrack or Globe Drill deliver up the Drill Rig and the Drill Rod Handler (and other items said to constitute Products, components of Products, Improvements and Accessories under the IPL Agreement[11]).The plaintiff also seeks a declaration that it is entitled to possess the Drill Rig, the Drill Rod Handler, and any items constituting Products, Improvements and Accessories under the IPL Agreement, and that any rights that Coretrack or Globe Drill may have had to possess and use them have terminated.[12] 

    [10] Amended Statement of Claim, Prayer for Relief B.

    [11] Amended Statement of Claim [46].

    [12] Amended Statement of Claim, Prayer for Relief C.

14. The defendants deny that on the proper construction of the IPL Agreement, the plaintiff is entitled to the relief it seeks.  They also contend that the plaintiff is estopped from claiming a declaration that the rights enjoyed by the defendants in the Products, Components, Improvements and Accessories have terminated.  Initially, that estoppel claim was grounded on a claim to an estoppel by convention[13], and an estoppel resulting from representations made by the plaintiff's director, Mr Strange.[14]  However, in the course of the trial, counsel for the defendants abandoned reliance on the claim to estoppel by representation.[15]

    [13] Amended Defence [70].

    [14] Amended Defence [71].

    [15] Defendants' Closing Submissions, 3 December 2013 [4].

15. Since 9 February 2012, and as amended on 12 March 2013, an interlocutory injunction has been in place, restraining the parties from selling, offering for sale, modifying or dealing with the Drill Rig and Drill Rod Handler, until final resolution of these proceedings and proceedings CIV 2001 of 2012, or such further or other order of the Court.

16. It is convenient at this point to set out a brief overview of the terms of the Share Sale Agreement and the IPL Agreement.

Overview of the Share Sale Agreement

1. Under the Share Sale Agreement, the Vendors agreed to sell their shares in Globe Drill, free of any encumbrances, to Coretrack for the consideration set out in cl 4 of the Share Sale Agreement.[16]  The consideration paid was an allocation to the Vendors of shares in Coretrack, in two tranches.[17] 

   [16] Clause 3.1 of the Share Sale Agreement (Exhibit A).

   [17] Clause 4 of the Share Sale Agreement (Exhibit A).

2. Title to the Vendors' shares in Globe Drill passed on Settlement of the Share Sale Agreement,[18] which took place on 25 February 2010. 

   [18] Clause 3.4 of the Share Sale Agreement (Exhibit A).

3. The Share Sale Agreement was subject to a number of Conditions Precedent. For present purposes, the most significant of those was the execution of the IPL Agreement,[19] and a requirement that Coretrack be satisfied that Globe Drill had Net Tangible Assets (NTA) of $1.2 million at the Settlement Date.[20]  Settlement of the Share Sale Agreement was also conditional upon notice being given by the parties to each other of various matters, including notice by Coretrack to the Vendors that Coretrack had (or would have, within 10 days of settlement) a minimum of $4 million in uncommitted, unencumbered cash reserves in its bank accounts.[21]

   [19] Clause 2.1(b) of the Share Sale Agreement (Exhibit A).

   [20] Clause 2.1(c)(iv) of the Share Sale Agreement (Exhibit A).

   [21] Clause 6.1(b) of the Share Sale Agreement (Exhibit A).

4. The terms of the Share Sale Agreement included the provision by the parties of a number of warranties.[22]  The Vendors' warranties included that the Vendors were entitled to sell, assign and transfer the full legal and beneficial ownership of their shares to Coretrack on the terms set out in the Share Sale Agreement.[23] In addition, the Vendors warranted that the Accounts (namely the balance sheet and profit and loss account set out in schedule 7 to the Share Sale Agreement) disclosed a true and fair view of the assets and liabilities of Globe Drill,[24] and that there had been no change in the nature, amount, valuation or basis of valuation of the assets or liabilities of Globe Drill since the Accounts Date.[25] 

   [22] Clause 7 of the Share Sale Agreement (Exhibit A).

   [23] Clause 1.1(d) of sch 3 to the Share Sale Agreement (Exhibit A).

   [24] Clause 5.1(a) of sch 3 to the Share Sale Agreement (Exhibit A).

   [25] Clause 5.2(a) of sch 3 to the Share Sale Agreement (Exhibit A).

1. The Vendors also gave various warranties in relation to the assets of Globe Drill.[26]  These included that all assets of Globe Drill were listed in schedule 9 to the Share Sale Agreement, and were fully paid for, and were either the absolute property of Globe Drill, or were used by Globe Drill under a contract, save as identified in schedule 9 or otherwise provided for in the accounts.[27]  The Vendors' warranties also included various warranties in relation to Globe Drill's 'stock', including that all stock was of good and merchantable quality, fit for purpose, manufactured to proper standards and saleable in the usual course of the business of Globe Drill.[28]  The Business of Globe Drill was defined to mean that of the design and manufacture of exploration and production drill rigs with a particular focus on bespoke geothermal rigs with an ability to drill to a depth of 3,500 metres or more.[29] 

   [26] Clause 10 of sch 3 to the Share Sale Agreement (Exhibit A).

   [27] Clause 10.1 of sch 3 to the Share Sale Agreement (Exhibit A).

   [28] Clause 10.2 of sch 3 to the Share Sale Agreement (Exhibit A).

   [29] Clause 1.1 of the Share Sale Agreement (Exhibit A).

2. The warranties provided by the Vendors did not extend to warranties in relation to intellectual property.[30]  That was entirely consistent with the fact that Globe Drill did not own the intellectual property in the Products, and that use of that intellectual property was to be dealt with in the IPL Agreement.

   [30] See cl 14 of sch 3 to the Share Sale Agreement (Exhibit A).

3. In the course of the parties' submissions, some attention was given to the way in which assets were dealt with in the Schedules to the Share Sale Agreement.  The term 'assets' was not defined in the Share Sale Agreement.  The assets listed in schedule 9 to the Share Sale Agreement did not include or make any reference to drill rigs.  The assets listed comprised items of office furniture and workshop equipment.  In contrast, Globe Drill's balance sheet and profit and loss accounts for the year to December 2009, which were included in schedule 7 to the Share Sale Agreement, listed two drill rigs as 'Assets' under the heading 'Work in progress'.  The two drill rigs were referred to as 'WIP GT7' and 'WIP GT8'.  The total value of these assets was said to be over $1 million.[31] 

   [31] See sch 7 to the Share Sale Agreement (Exhibit A).

4. On execution of the Share Sale Agreement, the vendors provided Coretrack with a Vendor Disclosure Letter[32] which disclosed facts, matters and circumstances affecting the Vendor Warranties (the Disclosure Letter).[33]  In relation to the warranties concerning preparation of Globe Drill's accounts, the Disclosure Letter indicated that the accounts included in schedule 7 to the Share Sale Agreement did not reflect the impact of certain transactions, including additional expenditure on two drill rigs (which appear to be the drill rigs referred to as GT7 and GT8 in the accounts).  Furthermore, in relation to the liabilities of Globe Drill, the Disclosure Letter noted that liabilities not included in the accounts set out in schedule 7 included an 'invoice for the construction of GT‑3000 rig tower from Karne [sic] Engineering for $400,000' which had not yet been paid.  The Disclosure Letter provided that 'Globe Drill Pty Ltd does not have custody of or title of the asset, and while the asset is available for purchase, that is yet to be confirmed.  The asset remains undelivered.'[34] 

   [32] See cl 1.1 of the Share Sale Agreement (Exhibit A).

   [33] Exhibit D. 

   [34] Exhibit D, page 3.

5. The Disclosure Letter also noted that the warranties concerning Stock referred to 'manufacturing' and not 'saleable' Stock.[35]  That reflected the fact that Globe Drill's business was concerned with manufacturing drill rigs for use in providing drilling services rather than for the purpose of the sale of those drill rigs. 

Overview of the IPL Agreement

[35] Exhibit D, page 5.

1. At the heart of the IPL Agreement was the provision by the plaintiff to Coretrack of an exclusive worldwide licence to use the 'Strange IP'[36] for the purpose of providing the 'Services', and manufacturing the 'Products' and 'Improvements' during the term of the IPL Agreement.[37]  The initial term of the IPL Agreement was for 10 years, with an option to renew for a further five years.[38] 

   [36] The Strange IP was defined to mean all Intellectual Property Rights subsisting in the Products, Improvements and Accessories, including but not limited to patents, design and trademarks, copyright, and confidential information:  see Clause 1.1 of the IPL Agreement (Exhibit B), and see also Item 2 of sch 1 to the IPL Agreement (Exhibit B).  Under the IPL Agreement, the plaintiff warranted that it owned all right, title and interest in the Strange IP, and had the right to grant the licence for the use of the Strange IP:  cl 4.2 of the IPL Agreement (Exhibit B).

   [37] Clause 2.1 of the IPL Agreement (Exhibit B).

   [38] See cl 1.1 and cl 13 of the IPL Agreement (Exhibit B).

2. The Services were defined to mean 'the provision of drilling services using the Products, Improvements and Accessories, and the provision of other geo thermal related services and products'.[39]

   [39] Clause 1.1 of the IPL Agreement (Exhibit B).

3. The Products were defined to include certain drill rigs, a drill rod system, and products or components manufactured pursuant to the IPL Agreement.[40]  The Improvements were defined to mean 'all improvements to or variations of the Products and Accessories',[41] while the 'Accessories' referred to 'any accessory, auxiliary equipment or products designed and intended specifically for use in conjunction with the Products and Improvements thereto'.[42] 

   [40] Item 1 of sch 1 to the IPL Agreement (Exhibit B).

   [41] Clause 1.1 of the IPL Agreement (Exhibit B).  The 'Improvements' were not limited to design and technical changes, but included any new rig and drilling equipment designs which were developed by Coretrack and any sub‑licensee pursuant to the terms of the IPL Agreement.

   [42] Clause 1.1 of the IPL Agreement (Exhibit B).

4. While the IPL Agreement permitted Coretrack to use drill rigs constructed using the Strange IP in order to provide drilling services, the IPL Agreement also imposed a manufacturing obligation on Coretrack.  Coretrack was required to manufacture and commission at least two geothermal drill rigs in each year of the term of the IPL Agreement.[43]  Consequently, over the 10‑year term of the IPL Agreement, Coretrack was required to manufacture and commission at least 20 drill rigs.  (As I have already noted, the reference to commissioning was a reference to the stage at which a drill rig had passed testing and was ready to be delivered.[44])

   [43] Item 6 of sch 1 to the IPL Agreement (Exhibit B).

   [44] Item 6 of sch 1 to the IPL Agreement (Exhibit B).

5. The IPL Agreement was clearly directed to maximising the use of the Strange IP.  For example Coretrack was obliged to use its best endeavours to promote the Services during the term of the IPL Agreement.[45]  In the event that Coretrack did not wish to pursue commercial opportunities to provide the Services or Products in any particular country, the plaintiff was entitled to apply to Coretrack's board to have that country removed from the scope of the worldwide licence granted to Coretrack under the IPL Agreement.[46]

   [45] Clause 6.2(a) of the IPL Agreement (Exhibit B).

   [46] Clause 6.3 of the IPL Agreement (Exhibit B).

6. Many of the terms of the IPL Agreement were directed to protecting the Strange IP, including during its use in the provision of the Services.  By way of example, Coretrack agreed that it would not contest the plaintiff's rights in the Products and in the Strange IP.[47]  Coretrack and Globe Drill acknowledged that the plaintiff was the owner of all rights in the Strange IP and they agreed that they would take all action necessary to safeguard the Strange IP and not permit access to it by third parties, other than pursuant to the IPL Agreement or with the plaintiff's consent.[48]  They also agreed that they would not use the Strange IP, or the Products, Improvements or Accessories, for any purpose other than that authorised under the IPL Agreement or approved by the plaintiff, or otherwise do anything to diminish or interfere with any of the plaintiff's Intellectual Property Rights.[49]  In its manufacture and use of the Products, Coretrack agreed that it would comply with the plaintiff's reasonable 'quality control requirements',[50] follow its reasonable directions in respect of the manufacture, use and repair of the Products,[51] and use only such replacement parts, filters and recommended oils as approved by the plaintiff.[52]  Coretrack was also prohibited from sub-licensing any of its rights (other than to any Coretrack subsidiary, including Globe Drill[53]) without the plaintiff's prior consent.[54]  Globe Drill agreed that in the event of a sub‑licence to it, it would be bound by the terms of the IPL Agreement.[55] 

   [47] Clause 6.2(c) of the IPL Agreement (Exhibit B).

   [48] Clause 11.1 of the IPL Agreement, see also cl 9.1 and cl 9.5 of the IPL Agreement (Exhibit B).

   [49] Clause 11.8 of the IPL Agreement (Exhibit B).

   [50] Clause 6.2(e) of the IPL Agreement (Exhibit B).

   [51] Clause 6.2(f) of the IPL Agreement (Exhibit B).

   [52] Clause 6.2(h) of the IPL Agreement (Exhibit B).

   [53] Clause 3.2 of the IPL Agreement (Exhibit B).

   [54] Clause 3.1 of the IPL Agreement (Exhibit B).

   [55] Clause 3.3 of the IPL Agreement (Exhibit B).

7. The consideration paid by Coretrack for the grant of the Licence was set out in cl 6.1 of the IPL Agreement.  That clause provided:

   In consideration of the grant of the Licence, the Licensee agrees to pay:

   (a)The Licence Fee to Strange on the dates and in the manner set out in item 3 of schedule 1;

   (b)The Royalties to Strange on the dates and in the manner set out in item 3 of schedule 1;

   (c)All of the Licensee's costs associated with the production, marketing and sales (including associated freight and insurance costs) of the manufacture and use of any Products, Improvements and Accessories under the Licence;

   (d)All taxes, duties and dues including import and customs duties imposed by any government in respect of the Products, Improvements and Accessories manufactured by the Licensee under the Licence; and

   (e)The costs of obtaining requisite Approvals … and all of the Licensee's other costs associated with the Products, Improvements and Accessories.

8. In the initial 10‑year term of the IPL Agreement, the licence fee was $1 plus GST, and the royalties were 10% of the gross profits (plus GST) generated by Coretrack and any sub‑licensees.[56]  In the event the licence was renewed for a further five‑year term, the licence fee would be $200,000 plus GST, while the royalties remained unchanged at 10% of gross profits plus GST.[57] 

   [56] Item 3(a) of sch 1 to the IPL Agreement (Exhibit B).

   [57] Item 3(b) of sch 1 to the IPL Agreement (Exhibit B).

9. The IPL Agreement contained an 'entire agreement' clause, which provided that the IPL Agreement 'embodies the entire agreement of the parties, and there are no further or other agreements or understandings, written or oral, in effect between the parties, relating to the subject matter of this Agreement'.[58]

   [58] Clause 19.8 of the IPL Agreement (Exhibit B).

10. Finally, of particular relevance for present purposes are the provisions of the IPL Agreement concerned with termination.  Each party was permitted to terminate the IPL Agreement in certain circumstances, including (for example) in the event of a material breach by the other party which was incapable of remedy.[59]  Clause 15 of the IPL Agreement set out the obligations of the parties on termination of that agreement.  Given the significance of cl 15 to the present proceedings, it is appropriate to set out cl 15 in its entirety:

    [59] Clause 14 of the IPL Agreement (Exhibit B).

    15.1Subject to clauses 15.2 and 15.3, upon expiry or early termination of this Agreement for any reason, the Licensee will, and will ensure all of its authorised sub licensees will, immediately:

    (a)cease any further provision of the Services or the sale of the Products within the Territory and cease all manufacture of the Products and Accessories;

    (b)cease using the STRANGE IP and remove references to the Products from their advertising materials and websites;

    (c)pay all outstanding Royalties and or other amounts owing to STRANGE under the terms of this Agreement at the time of termination, including Royalties on income yet to be derived, but owing to the Licensee;

    (d)subject to clauses 15.3 and 15.4, deliver all Products and components, whether commissioned or not, to STRANGE at the Licensee's cost;

    (e)co‑operate and do all acts and things reasonable required  by STRANGE to properly conclude matters arising pursuant to this Agreement;

    (f)co-operate and do all things necessary to immediately transfer, at no cost to STRANGE, all Approvals for any Products, which are in possession of or in the Licensee's name or the name of any authorised sub licensee into STRANGE's name and all Intellectual Property Rights assigned to STRANGE hereunder; and

    (g)deliver up to STRANGE all materials belonging to STRANGE and provided to the Licensee under this Agreement including but not limited to all Copyright Works and all Confidential Information embodied in any format, including all hard copies and electronic copies and delete all electronic copies in the possession or control of the Licensee and all authorised sub-licensees.

    15.2Upon expiry or termination of this Agreement for any reason, STRANGE may nominate whether it requires that all authorised sub licence agreements entered into between the Licensee and authorised sub licensees be novated or assigned to STRANGE or be terminated … .

    15.3Subject to Clause 15.4, immediately upon expiry or termination of this Agreement for any reason, the Licensee will have 90 days to find a buyer for any commissioned Products.  If the Licensee receives an offer for any commissioned Products during this period, the Licensee must immediately provide STRANGE with full details of the offer and allow STRANGE a period of 30 days to match the offer made by a third party buyer.

    15.4In the event that STRANGE does not exercise its right of first refusal pursuant to Clause 15.3, the Licensee may sell the commissioned Products to a third party provided that the third party agrees to enter into a licence agreement with STRANGE in respect of its use of the STRANGE IP relating to the Products in question on terms no less favourable than the terms of this Agreement.

    15.5Following expiry or earlier termination of this Agreement, the Licensee and GLOBE DRILL agree to the restraint set out in item 7 of the schedule and will ensure that all sub-licensees are bound by the same restraint in their sub‑licence agreements.

    15.6Termination of this Agreement will not affect the accrued rights or remedies of any party and the obligations under Clauses 6.1, 7, 8, 9, 11, 12, 15, 17, 18, 19.3, 21 and Items 3, 5 and 7 of schedule 1 will survive termination of this Agreement.

Terminology

1. As the overview of the Share Sale Agreement and the IPL Agreement reveals, those agreements draw a clear dichotomy between ownership of the intellectual property subsisting in the Drill Rig and the Drill Rod Handler and ownership of the physical goods themselves.  In the discussion below, when I refer to the Drill Rig and the Drill Rod Handler I mean to refer only to the physical goods (the corporeal assets), and not to the intellectual property rights pertaining to those goods (the incorporeal assets), namely the Strange IP. 

2. The IPL Agreement treats Coretrack as having possession of the Products, and obliges it to deliver the Products to the plaintiff upon termination.  (Consistent obligations were extended to Globe Drill under the IP Sub‑Licence Agreement.)  However, as is apparent from the factual overview set out above, Globe Drill was the owner of the Drill Rig and the Drill Rod Handler prior to the execution of the Share Sale Agreement.  The acquisition by Coretrack of Globe Drill's shares did not inevitably mean that Coretrack could be regarded as the owner of Globe Drill's assets.[60]  The two companies remained separate legal entities. 

   [60] See Shagang Shipping Co Ltd v Ship 'Bulk Peace' [2014] FCAFC 48 [34] (Allsop P, Rares & McKerracher JJ agreeing); Bray v F Hoffman-La Roche Ltd (2002) 118 FCR 1, 21 [72] (Merkel J); see also Cauvin v Philip Morris Ltd [2005] NSWSC 640 [22] (Bell J).

3. The Amended Defence pleads that when Coretrack acquired Globe Drill it acquired the right to possess and use, and thus ownership of, the Drill Rig and the Drill Rod Handler.[61]  The plaintiff joins issue with these claims.[62]  However, it appears that this dispute concerns the claim to ownership of the Drill Rig and the Drill Rod Handler, and not to the corporate relationship between Coretrack and Globe Drill. 

   [61] Amended Defence [13(d), 70(a)(ii)].

   [62] Amended Reply [1, 8(h)].

4. In order to resolve the present dispute, it is not necessary to make any finding as to whether Coretrack 'owns' goods which are owned by Globe Drill.  I have proceeded on the assumption that the relationship between Coretrack and Globe Drill is such that Coretrack can also be regarded as the owner of the goods owned by Globe Drill, from the settlement date of the Share Sale Agreement.  However, for ease of reference, in these reasons for decision I will refer to the defendants as the owners of the Drill Rig and the Drill Rod Handler following the Share Sale Agreement, save where it is necessary to refer to those parties separately in order to reflect the provisions of the IPL Agreement.

1. The questions for determination in the separate trial

1. On 24 July 2013, the Court made orders by consent in the present action that there be a separate trial of certain issues raised in the pleadings, pursuant to O 32 r 4 of the Rules of the Supreme Court 1971 (WA) (the separate trial). The separate trial deals with the issues raised by specified paragraphs of the pleadings, in so far as those paragraphs relate to the Drill Rig and the Drill Rod Handler.

2. In short, the separate trial is confined to dealing with those paragraphs of the pleadings that set out the plaintiff's claim for an order that the defendants deliver up the Products (and any components of Products), Improvements and Accessories, and its claim for a declaration that any rights that the defendants may have had to possess and use the Products, Improvements and Accessories have terminated, and that the plaintiff is entitled to possession of them.

3. As I have observed, the defendants do not dispute that they are required, pursuant to the IPL Agreement, to deliver the Drill Rig and the Drill Rod Handler to the plaintiff.  What is in dispute is whether the rights that the defendants had in the Drill Rig and the Drill Rod Handler have terminated (or will terminate upon the delivery to the plaintiff).  In essence, the question is whether the plaintiff will have possession of the Drill Rig and the Drill Rod Handler as the absolute owner once those items are delivered to it. 

4. The issues for determination in these proceedings do not concern the balance of the plaintiff's claim, namely a claim for damages based (amongst other things) on claims that Coretrack and Globe Drill breached the IPL Agreement, and the IP Sub‑Licence Agreement.

5. It is appropriate to mention that the separate trial is confined to dealing with the Drill Rig and the Drill Rod Handler because there is a dispute between the parties about what items of equipment are Products (or components of Products), Improvements and Accessories which are subject to the obligation to deliver to the plaintiff upon termination.  That aspect of the parties' dispute will require resolution at a later date. 

1. The parties agreed that resolution of the specified paragraphs of the pleadings in the separate trial would resolve the following questions:

   1.As at immediately prior to settlement on the Share Sale Agreement:

   1.1what proprietary rights did the second defendant have in the partially constructed Drill Rig?

   1.2What proprietary rights did the plaintiff have in the partially constructed Drill Rig?

   2.As at immediately prior to the termination of the IP Licence Agreement:

   2.1what proprietary rights did the second defendant have in the Drill Rig?

   2.2what proprietary rights did the plaintiff have in the Drill Rig?

   2.3what proprietary rights did the second defendant have in the Drill Rod Handler?

   2.4what proprietary rights did the plaintiff have in the Drill Rod Handler?

   3.If the second defendant had proprietary rights in the Drill Rig and/or Drill Rod Handler as at immediately prior to termination of the IP Licence Agreement, then on termination of the IP Licence Agreement:

   3.1what proprietary rights did the second defendant have in the Drill Rig

   3.2what proprietary rights did the plaintiff have in the Drill Rig

   3.3what proprietary rights did the second defendant have in the Drill Rod Handler

   3.4what proprietary rights did the plaintiff have in the Drill Rod Handler

   by reason of the operation of Clause 15.1(d) of the IP Licence Agreement?

1. The parties' cases on the construction of the IPL Agreement, and the estoppel claim

1. It is necessary to set out the plaintiff's case as pleaded, and as put at the trial, as there was some ambiguity in the case advanced by the plaintiff.

The plaintiff's pleaded case

1. The plaintiff contends that the Share Sale Agreement, the IPL Agreement, and the IP Sub‑Licence Agreement:

   •acknowledged that the plaintiff was the owner of the Strange IP;

   •created an exclusive licence for the defendants to use the Strange IP to provide the Services and manufacture the Products;

   •allowed the defendants to have possession of Products during the operation of the IPL Agreement; and

   •provided that upon termination of the IPL Agreement, the rights of the defendants to possession of Products terminated, and thereafter the plaintiff was entitled to exercise its right to possession and ownership of any and all uncommissioned Products, in addition to its rights in respect of the Strange IP subsisting in those items.[63]

   [63] Amended Statement of Claim [17].

2. The plaintiff says that as a consequence of the IPL Agreement, the defendants were, during the operation of the IPL Agreement, entitled to possession of the Products, entitled to use the Products to provide the Services, entitled to manufacture the Products, and upon termination or expiry of the IPL Agreement, were required to deliver up all non-commissioned Products.[64]  However, the plaintiff says that to the extent that the defendants had possession of Products, whether or not they were manufactured by the defendants, such possession was as a licensee only and subject to delivery up to the plaintiff upon termination pursuant to cl 15.1 of the IPL Agreement.[65]

   [64] Amended Statement of Claim [13].

   [65] Amended Statement of Claim [18(c)].

3. The plaintiff says that at the date of termination of the IPL Agreement, the defendants had possession of the Drill Rig and the Drill Rod Handler.[66]  Neither of those Products was commissioned.[67]  Pursuant to cl 15.1(d) of the IPL Agreement and cl 6(a) and cl 6(c) of the IP Sub‑Licence Agreement, the defendants were obliged to deliver to the plaintiff the Drill Rig and Drill Rod Handler.[68]  The plaintiffs says that as a result of termination of those agreements, such rights to possession and use of the Drill Rig and Drill Rod Handler as the defendants enjoyed as licensee and sub‑licensee terminated, and the plaintiff became the owner of those Products and was entitled to possession of them.[69]

Some clarification of the plaintiff's case

[66] Amended Statement of Claim [46].

[67] Amended Statement of Claim [47].

[68] Amended Statement of Claim [49].

[69] Amended Statement of Claim [52].

1. There was some clarification of the basis for plaintiff's case in the course of submissions by its counsel during the hearing, although some ambiguity remained.

2. Counsel for the plaintiff conceded that prior to the Share Sale Agreement, Globe Drill owned the Drill Rig and the Drill Rod Handler (which were described as 'work in progress' in Globe Drill's Accounts), but not the intellectual property in the Drill Rig and the Drill Rod Handler.[70] 

   [70] ts 598 ‑ 599 (19 December 2013).

3. It was also accepted that Globe Drill's interest (that is, as owner) in the Drill Rig and the Drill Rod Handler continued on the execution of the Share Sale Agreement.[71]  Counsel for the plaintiff also confirmed that the plaintiff did not contend that ownership (or title) of the Drill Rig and the Drill Rod Handler passed from Globe Drill to the plaintiff at the effective date of the IPL Agreement (which was on the date of settlement of the Share Sale Agreement on 25 February 2010).[72] 

   [71] Plaintiff's Closing Submissions, 16 December 2013 [77].

   [72] ts 606 (19 December 2013).

4. The case advanced was that from the effective date of the IPL Agreement there was a division of the rights of ownership in the Drill Rig and the Drill Rod Handler, so that neither Globe Drill nor the plaintiff enjoyed all of the rights of ownership in them.  Counsel for the plaintiff did not abandon the claim that the defendants possessed the Drill Rig and Drill Rod Handler as licensee or sub‑licensee under the IPL Agreement and IPL Sub‑Licence Agreement.  However, he submitted that on the effective date of the IPL Agreement, the plaintiff obtained a 'deferred right to possession' of the Drill Rig and the Drill Rod Handler, by virtue of the terms of the IPL Agreement.[73]  That was said to be because at that point, Globe Drill's right to exclusive possession became subject to the plaintiff's right to possession upon termination of the IPL Agreement.[74]  Counsel for the plaintiff also submitted that upon the effective date for the IPL Agreement, Coretrack and Globe Drill immediately gave up their indefinite right to keep the Drill Rig and the Drill Rod Handler, and the right to transfer that property to a third party.[75]  He submitted that what Coretrack and Globe Drill held was a right to possession of the Products during the term of the IPL Agreement, while the plaintiff held what counsel described as a 'deferred' or 'reversionary' right to possession of the Products.[76] 

   [73] ts 602 (19 December 2013).

   [74] ts 603 (19 December 2013).

   [75] ts 603 (19 December 2013).

   [76] Plaintiff's Closing Submissions, 16 December 2013 [14].

5. There was no ambiguity about one aspect of the plaintiff's case:  it claimed that upon termination of the IPL Agreement, and delivery of the Drill Rig and the Drill Rod Handler, ownership of the Drill Rig and the Drill Rod Handler would pass to the plaintiff.[77]  Counsel for the plaintiff submitted that the transfer of physical possession, together with the intention of the parties to convey ownership, meant that ownership of the Drill Rig and Drill Rod Handler would pass at that point.[78]

   [77] ts 606 (19 December 2013).

   [78] ts 606 (19 December 2013); Plaintiff's Closing Submissions, 16 December 2013 [21].

6. The plaintiff's case was that that intention could be discerned from cl 15 and cl 6 of the IPL Agreement.  In so far as cl 6 is concerned, counsel for the plaintiff submitted that it described the consideration paid by the plaintiff for the passing of title in the Products upon their delivery to the plaintiff, and that that consideration encompassed all costs of production of the Products.[79]

   [79] ts 608 (19 December 2013).

7. The plaintiff's case thus had two planks ‑ the first concerned with its acquisition of rights of ownership in the Drill Rig and the Drill Rod Handler from the effective date of the IPL Agreement, and the second concerned with the rights it enjoyed once the Drill Rig and the Drill Rod Handler were delivered pursuant to cl 15.1(d). 

The case advanced by the defendants

1. The defendants' case is that the Share Sale Agreement transferred ownership of Globe Drill to Coretrack.  It did not alter Globe Drill's ownership of the assets it owned prior to the Share Sale Agreement (which included the partially constructed Drill Rig). 

2. The defendants do not dispute that the plaintiff has always retained ownership of the Strange IP used to manufacture the Products.  They say that the IPL Agreement (and the IP Sub‑Licence Agreement) were (as their names suggest) agreements which licensed the defendants to use the Strange IP in the manufacture and use of drill rigs.  They say that nothing in the IPL Agreement or the IP Sub-Licence Agreement transferred ownership of the Drill Rig and Drill Rod Handler (which were manufactured by Globe Drill) to the plaintiff.  The defendants' contention is that the term 'deliver' in cl 15.1(d) of the IPL Agreement simply means a transfer in possession, without any intention to convey ownership of the Drill Rig and the Drill Rod Handler.[80]  The defendants say that this transfer of possession was intended to protect the Strange IP in the event of the termination of the IPL Agreement. 

   [80] ts 571 (19 December 2013).

3. The defendants say that at the date of execution of the Share Sale Agreement, Globe Drill was in possession of the partially constructed Drill Rig and had instructed Karni Engineering to construct the Drill Rod Handler, for which Globe Drill subsequently paid.[81]  They say that on settlement of the Share Sale Agreement, the Drill Rig and the Drill Rod Handler were assets of Globe Drill, and remained so thereafter.[82]

   [81] Amended Defence [7(a), (d) and (g)].

   [82] Amended Defence [8(b)].

4. They defendants say that they were entitled to possess and use the Products, but that the rights to possess and use the Drill Rig and Drill Rod Handler vested in Globe Drill on their creation or acquisition by Globe Drill, and not in consequence of the IPL Agreement.[83]  (They say that Coretrack had rights to possess and use the Drill Rig and Drill Rod Handler by reason of Coretrack's acquisition of Globe Drill.[84])  The defendants' case is that in respect of any Products created or acquired after the completion of the Share Sale Agreement, the right to possess those Products vested in the defendants independently of the IPL Agreement, and that at all times they have had unencumbered title to the Products.[85]  The defendants accept that upon termination of the IPL Agreement and the IP Sub‑Licence Agreement, their rights to possess and use the Products terminated,[86] but they deny that this resulted from, or was accompanied by, any change in ownership.

   [83] Amended Defence [13(a), (c)].

   [84] Amended Defence [13(d)].

   [85] Amended Defence [13(e) and (f), 17(b), 18(b)].

   [86] Amended Defence [52(b)].

5. Counsel for the defendants submitted that upon delivery of the Products, the plaintiff would hold them subject to a bailment at will.[87]  He submitted that the underlying rationale for that arrangement was to protect the Strange IP.[88]

   [87] ts 560 (19 December 2013).

   [88] ts 561 (19 December 2013).

6. In answer to that part of the plaintiff's case which claims that absolute ownership, or rights of ownership, in the Drill Rig and Drill Rod Handler moved from Globe Drill to the plaintiff upon the effective date of the IPL Agreement, the defendants plead an estoppel by convention.  They contend that the parties each held, and conducted their relationship on the basis of, the Common Assumption.  The Common Assumption was that at the time of the Share Sale Agreement, Globe Drill had title to and ownership of the Drill Rig, that Coretrack would in effect acquire the Drill Rig by acquiring Globe Drill itself, that in acquiring or manufacturing Products, Improvements and Accessories, the defendants would have unencumbered title as against the plaintiff in such items, and would retain that title and ownership, subject to the Strange IP, during the term of the IPL Agreement and the IP Sub-Licence Agreement.[89] 

   [89] Amended Defence [70(a)].

7. The defendants say that each of the parties, to the knowledge of the other, accepted this Common Assumption as being true for the purpose of the Share Sale Agreement, the IPL Agreement and their dealings during the currency of the IPL Agreement, and that acceptance of the Common Assumption was intended by them to govern title to the Drill Rig and Drill Rod Handler.[90]  The defendants say that they were entitled to act in reliance on the Common Assumption, and that in acting on the basis of it, and with the plaintiff's knowledge, they placed themselves in a position where they would suffer detriment if the plaintiff were permitted to resile from the Common Assumption.[91] The defendants say that in all of these circumstances, it would be unjust and unconscionable for the plaintiff to be permitted to deny the truth of the Common Assumption,[92] and it should therefore be estopped from claiming a declaration that the rights of the defendants to possess and use the Drill Rig and the Drill Rod Handler have terminated and that the plaintiff as the owner of those items is entitled to have possession of them.[93]

   [90] Amended Defence [70(b) and (c)].

   [91] Amended Defence [70(e)].

   [92] Amended Defence [70(f)].

   [93] Amended Defence [70(g)].

8. The plaintiff denies the existence of the Common Assumption pleaded by the defendants, and says that the understanding said to be the subject of the Common Assumption was not held in common, and was not capable of founding an estoppel by convention.[94]

   [94] Amended Reply [8(h)].

1. The meaning and legal effect of the IPL Agreement:  applicable principles

1. The meaning of a contract ‑ that is, ascertaining the substance of what has been agreed by the parties ‑ is determined as a matter of construction.  Its legal effect, however, is determined as a matter of law.[95]  It is convenient to note the principles governing construction of contracts, before calling to mind relevant principles in relation to the transfer of ownership of chattels.

Construction of contracts

[95] Fearnley v Australian Fisheries Management Authority [2006] FCAFC 3 [27] (Finn & Sundberg JJ); Sturt Football Club Inc v Commissioner of State Taxation [2010] SASC 279 [46] (White J); Lewison K, The Interpretation of Contracts (4th ed, 2007) 363.

1. The Court's role in construing a written contract is to give effect to the common intention of the parties.  That common intention is to be ascertained objectively.[96]  In interpreting a contract, the words used should be interpreted according to their ordinary and natural meaning, save where a contrary intention is found within the contract itself.[97]  When a commercial contract is involved, the meaning of the terms of that contract is to be determined by what a reasonable person in the position of the parties would have understood those terms to mean.[98] 

   [96] Hancock Prospecting Pty Ltd v Wright Prospecting Pty Ltd [2012] WASCA 216; (2012) 45 WAR 29, 50 [75] (McLure P, Newnes JA & Le Miere J agreeing).

   [97] Southern Cross Assurance Co Ltd v Australian Provincial Assurance Association Ltd [1935] HCA 56; (1935) 53 CLR 618, 636 (Rich, Dixon, Evatt & McTiernan JJ); Sharp v Maritime Super Pty Ltd [2012] NSWSC 1350 [115] (Ward J); Australian Rail Track Corporation Pty v QBE Insurance (Europe) Ltd [2012] NSWSC 952 [48] (Stevenson J).

   [98] Pacific Carriers Ltd v BNP Paribas [2004] HCA 35; (2004) 218 CLR 451, 462 [22] (Gleeson CJ, Gummow, Hayne, Callinan & Heydon JJ).

2. The meaning of a term must be considered within the context of the whole contract, and the words of every clause must, if possible, be construed so as to render them all harmonious with each other.[99]  Furthermore, if one transaction was effected through multiple documents then it may be necessary to construe one document conformably with another constituting the same transaction.[100]

   [99] Australian Broadcasting Commmission v Australasian Performing Rights Association Ltd [1973] HCA 36; (1973) 129 CLR 99, 109 (Gibbs J); Wilkie v Gordian Runoff Ltd [2005] HCA 17; (2005) 221 CLR 522 [16] (Gleeson CJ, McHugh, Gummow & Kirby JJ).

   [100] Zhu v Treasurer of New South Wales [2004] HCA 56; (2004) 218 CLR 530, 558 - 559 [80] ‑ [82] (the Court); Secure Parking (WA) Pty Ltd v Wilson [2008] WASCA 268; (2008) 38 WAR 350, 374 [87] (Buss JA, Martin CJ agreeing); EDWF Holdings 1 Pty Ltd v EDWF Holdings 2 Pty Ltd [2010] WASCA 78; (2010) 41 WAR 23, 52 ‑ 53 [104] (Buss JA, Owen JA & Newnes JA agreeing).

3. If the language of the contract is open to two constructions, the preferred meaning will be that which avoids consequences that appear capricious, inconvenient or unjust.[101]  Furthermore, a construction that accords with business common sense will be preferred to one which flouts business common sense,[102] although if the meaning of the words used is unambiguous, the Court must give effect to the parties' intention as expressed in those words.[103]

Principles in relation to the ownership of chattels

[101] Australian Broadcasting Commission v Australasian Performing Rights Association Ltd [1973] HCA 36; (1973) 129 CLR 99, 107 (Gibbs J); Lewis Construction (Engineering) Pty Ltd v Southern Electric Authority of Queensland (1976) 50 ALJR 769, 775 (Gibbs J, Mason J agreeing).

[102] Antaios Compania Naviera SA v Salen Rederierna AB [1985] AC 191, 201 (Lord Diplock); Maggbury Pty Ltd v Hafele Australia Pty Ltd [2001] HCA 70; (2001) 210 CLR 181, 198 [43] (Gleeson CJ, Gummow & Hayne JJ).

[103] Australian Broadcasting Commmission v Australasian Performing Rights Association Ltd [1973] HCA 36; (1973) 129 CLR 99, 105 (Barwick CJ), 109 (Gibbs J), 114 ‑ 115 (Stephen J).

1. The parties' cases raised issues concerning the ownership of a chattel, the relationship between ownership and possession, and how ownership in a chattel may be transferred from one person to another.  The concept of 'ownership' in the law of property raises some difficult questions.  It is, in essence, a conclusion recognised by the law that a person is entitled to exercise all of the rights capable of being exercised with respect to property of the kind in question, and the right to exercise those rights as against all other persons.[104]

   [104] Gatward v Alley (1940) 40 SR (NSW) 174, 178 (Jordan CJ); Ken v The Vessel 'Maria Luia' (No 2) [2003] FCAFC 93; (2003) 130 FCR 12, 33 (Tamberlin & Hely JJ); Simonson Properties Pty Ltd v Hardy [2014] NSWSC 229 [63] ‑ [64] (Sackar J).

2. Honoré described ownership as comprising a bundle of rights and incidents.[105]  Those rights vary according to the nature of the property in question,[106] but generally speaking include the right to possess or to have exclusive physical control of a thing, the right to use it, the right to the income from it, the right to manage and deal with it, the right to control its use by others and to permit others to make use of it, the right to the capital in it, the right to security of possession (that is, to prevent others from making use of it), the right of transmission (to sell or give it away), and the absence of any time limitation on the enjoyment of these rights.[107] 

   [105] Honoré AM, 'Ownership' in Guest AG (ed), Oxford Essays in Jurisprudence (1961) 108.

   [106] For example, as between tangible chattels, and intangible chattels (such as choses in action). 

   [107] Honoré AM, 'Ownership' in Guest AG (ed), Oxford Essays in Jurisprudence (1961) 108.

3. Possession of a chattel is evidence of ownership of that chattel[108] ‑ so much so that possession of a chattel is regarded as generating a rebuttable presumption of ownership.[109] Consequently, it is generally accepted that possession is the most important of the incidents of ownership of a chattel. The law of possession 'is ancient and fairly complicated',[110] and the meaning of possession varies in different areas of the law.[111]  In the case of tangible chattels, possession (which is sometimes called actual or de facto possession) usually requires physical possession of the good, plus the intention to possess that good (that is, to exclude others from the exercise of control over it).[112]  However, a person who does not actually have physical possession of a good may nevertheless be held to be in possession of the good if he or she has control over that good, together with the requisite intention.  This is sometimes referred to as legal possession[113] or constructive possession.[114]  Alternatively, a party may not have actual possession but may have a right to immediately acquire physical possession, which is referred to as a right to possession.[115] 

   [108] See generally Heydon JD, Cross on Evidence (9th ed, 2012) [41125].

   [109] Russell v Wilson [1923] HCA 60; (1923) 33 CLR 538, 546 (Isaacs and Rich JJ).

   [110] The Anderson Group Pty Ltd v Tynan Motors Pty Ltd [2006] NSWCA 22; (2006) 65 NSWLR 400, 406 [36] (Young CJ in Eq, Santow JA agreeing).

   [111] Tabe v The Queen [2005] HCA 59 (2005) 225 CLR 418, 423 ‑ 424 [7] (Gleeson CJ).

   [112] The Tubantia [1924] P 78; Button v Cooper [1947] SASR 286, 292 (Mayo J).

   [113] Horsley v Phillips Fine Art Auctioneers Pty Ltd [1995] NSWSC 78 [70] (Santow J), referring to Words and Phrases Legally Defined (3rd ed, 1989) 398.

   [114] See, for example, Official Assignee of Madras v Mercantile Bank of India Ltd [1935] AC 53, 58 ‑ 59.

   [115] The Anderson Group Pty Ltd v Tynan Motors Pty Ltd [2006] NSWCA 22; (2006) 65 NSWLR 400, 407 [38] (Young CJ in Eq, Santow JA agreeing).

1. On the other hand, actual possession does not always constitute legal possession, such as where a person merely has physical possession of a good, on behalf of another, with no right to exercise legal control over the good,[116] such as in the case of an employee's use of an employer's goods. 

   [116] Burnett v Randwick City Council [2006] NSWCA 196 [89] ‑ [97] (Tobias JA, Giles JA agreeing); The Anderson Group Pty Ltd v Tynan Motors Pty Ltd [2006] NSWCA 22; (2006) 65 NSWLR 400, 407 [42] (Young CJ in Eq, Santow JA agreeing) quoting Holdsworth WS, A History of English Law (5th ed,1942) 448; Horsley v Phillips Fine Art Auctioneers Pty Ltd [1995] NSWSC 78 [73] ‑ [75] (Santow J).

2. There is also a distinction between possession of a good and a mere contractual right to the good.  A person who has only contractual rights to possess a good at some stage in the future is not in possession of that good.[117]

   [117] Leigh & Sillavan Ltd v Aliakmon Shipping Co Ltd; The Aliakmon [1986] 2 All ER 145, 149 (Lord Brandon).

3. Possession is not merely evidence of absolute title (that is, of ownership) of a chattel.  Possession also carries with it a relative legal title to the chattel, which is sometimes called a 'possessory title'.[118] 

   [118] Russell v Wilson [1923] HCA 60; (1923) 33 CLR 538, 546 (Isaacs & Rich JJ); Burnett v Randwick City Council [2006] NSWCA 196, [106] ‑ [113] (Tobias JA, Giles JA & Hodgson JA agreeing); The Anderson Group Pty Ltd v Tynan Motors Pty Ltd [2006] NSWCA 22; (2006) 65 NSWLR 400, 407 (Young CJ in Eq, Santow JA agreeing), quoting Holdsworth WS, A History of English Law (5th ed, 1942) 449; Specialised Transport Pty Ltd v Dominiak (1989) 16 NSWLR 657, 663 (Young CJ in Eq).

4. While ownership and possession will often coincide, that is not always the case.  (The owner may place the chattel in the custody of a third party, for example.)  Accordingly, possession of a chattel is said to be as good as absolute title as against every person but the absolute owner.[119]  Possessory title is thus a relative concept because it is possible to have greater or lesser rights to possession (that is a stronger or weaker possessory title) of a chattel.[120]  By way of example, in the case of a bailment at will, the bailee has physical possession, but the bailor has constructive possession (the ability to control the use of the good), and thus a stronger possessory title to the chattel.  If, however, the bailment is for a fixed term, or until satisfaction of a condition, the bailor will have no physical possession, no immediate right to possession and only a qualified constructive possession, and thus a lessor possessory title than the bailee.[121]

   [119] Russell v Wilson [1923] HCA 60; (1923) 33 CLR 538, 546 ‑ 547 (Isaacs & Rich JJ), 550 ‑ 551 (Higgins J), 552 (Gavan Duffy J), 553 ‑ 554 (Starke J); Gollan v Nugent [1988] HCA 59; (1988) 166 CLR 18, 30 (Brennan J), 47 (Deane, Dawson, Toohey & Gaudron JJ).

   [120] Flack v National Crime Authority (1997) 80 FCR 137, 141 (Hill J).

   [121] Flack v National Crime Authority (1997) 80 FCR 137, 141 (Hill J), referring to Howe v Teefy (1927) 27 SR (NSW) 301.

1. Why the plaintiff's case for ownership of the Drill Rig and Drill Rod Handler fails

1. Although there is an overlap in each plank of the plaintiff's case, it is convenient to deal with them separately.  I will commence by considering that part of the plaintiff's case which contended that from the effective date of the IPL Agreement, the defendants lost some of their rights of ownership of the Drill Rig and Drill Rod Handler, and the plaintiff acquired some rights of ownership in those Products.  I will then deal separately with the question of the termination of the IPL Agreement.

(a)     Did Globe Drill lose any of its rights of ownership on the effective date of the IPL Agreement?

1. In my view, on the effective date of the IPL Agreement no rights of ownership of the Drill Rig and Drill Rod Handler passed from Globe Drill to the plaintiff.  I have reached that conclusion having regard to the fact that Globe Drill retained possession of the Drill Rig and Drill Rod Handler prior to termination of the IPL Agreement, and having regard to the terms of the IPL Agreement.

Possession of the Drill Rig and Drill Rod Handler

1. The starting point in the analysis is the plaintiff's concession that prior to the execution of the Share Sale Agreement and the IPL Agreement, Globe Drill owned the partially constructed Drill Rig and that that interest (as owner) continued on the execution of the Share Sale Agreement. 

2. As I have already observed, the plaintiff had always owned the Strange IP, and it is not suggested that the defendants acquired any proprietary interest in the Strange IP under either the Share Sale Agreement or the IPL Agreement.  I digress to observe that it is not uncommon to see ownership of the physical property in a chattel, and ownership of intellectual property rights subsisting in the same chattel, being held by different persons.[122]

   [122] See, for example, Pacific Film Laboratories Pty Ltd v Commissioner of Taxation [1970] HCA 36; (1970) 121 CLR 154, 163 (Barwick CJ, McTiernan J agreeing), 167 ‑ 168 (Windeyer J); Seven Network (Operations) Ltd v TCN Channel Nine Pty Ltd [2005] FCAFC 144; (2005) 146 FCR 183, 202 [95] (Finkelstein J); Primary Health Care Ltd v Commissioner of Taxation [2010] FCA 419, (2010) 186 FCR 301, 336 ‑ 337 [142] ‑ [143] (Stone J); see also Re Dickens; Dickens v Hawksley (1935) 1 Ch 267.

3. There was no dispute that Globe Drill manufactured the Drill Rig and the Drill Rod Handler during the course of the IPL Agreement.  Ownership of a chattel can come about by mixing one chattel with another to make something new.[123]  Accordingly, the manufacture of the Drill Rig or the Drill Rod Handler by the addition of new parts or components (as compared with the construction of the Drill Rig and Drill Rod Handler at the commencement of the IPL Agreement) supports the presumption that Globe Drill was the owner of the Drill Rig and Drill Rod Handler (as modified from time to time) at all times prior to the termination of the IPL Agreement. 

   [123] See Associated Alloys Pty Ltd v ACN 001 452 106 Pty Ltd [2000] HCA 25; (2000) 202 CLR 588, 598 [13] (Gaudron, McHugh, Gummow & Hayne JJ).

4. In addition, there was no dispute that physical possession of the Drill Rig and Drill Rod Handler remained with Globe Drill prior to the termination of the IPL Agreement.  That also supports the presumption that Globe Drill continued to enjoy the rights of an owner of the Drill Rig and Drill Rod Handler during the term of the IPL Agreement. 

5. These features of the surrounding context give rise to the presumption that Globe Drill owned the Drill Rig and the Drill Rod Handler at the effective date of the IPL Agreement, and continued to own those Products at all times prior to termination of the IPL Agreement.

Did the terms of the IPL Agreement disclose an intention that rights of ownership of the Drill Rig and Drill Rod Handler would pass to the plaintiff on the effective date of the IPL Agreement? 

1. The next question is whether the terms of the IPL Agreement brought about a transfer of ownership, or rights of ownership, in the Drill Rig and the Drill Rod Handler, prior to termination of the IPL Agreement.  The transfer of ownership of goods can be effected in a number of ways, for example, by sale, by gift or by will.  In a contract of sale, title to goods passes at the time intended by the parties.[124]  In order to transfer ownership of goods in the absence of a contract of sale, the general rule is that title passes on delivery (that is, on the transfer of possession), when that delivery is made and received with the intention to pass title.[125]  In order to manifest an intention to pass title, the acts or circumstances said to effect the change in possession must be unequivocal.[126]

   [124] Sale of Goods Act 1895 (WA) s 17.

   [125] Burns Philp & Co v Dingle & Co (1923) 23 SR (NSW) 240, 247 (Ferguson J).

   [126] Re Cole [1964] Ch 175, 192 (Pearson LJ); Re Ridgeway (1885) 15 QBD 447, 449 (Cave J).

2. In my view, the terms of the IPL Agreement do not support the conclusion that the parties intended that some or all of the rights of ownership in the Products would pass from Globe Drill (and in turn Coretrack) to the plaintiff on the effective date of the IPL Agreement or at any time prior to termination of the IPL Agreement.  I have reached that conclusion having regard to the following considerations:

   (i)The absence of express terms transferring ownership, or consistent with a transfer of rights of ownership, of the Drill Rig and Drill Rod Handler to the plaintiff;

   (ii)The terms of the IPL Agreement are premised on Coretrack's exercise of rights of ownership in the Drill Rig and Drill Rod Handler;

   (iii)Whether cl 6.1 of the IPL Agreement manifests an intention that the costs of production of the Products are to the benefit of the plaintiff;

   (iv)Whether the right to delivery on termination under cl 15.1(d) gave the plaintiff any rights of ownership in the Drill Rig and the Drill Rod Handler prior to termination;

   (v)The substance of the IPL Agreement; and

   (vi)Evidence of the surrounding circumstances, which assists to resolve the ambiguity in the IPL Agreement.

1. The absence of express terms transferring ownership, or consistent with a transfer of rights of ownership of the Drill Rig and the Drill Rod Handler

1. There is no term in the IPL Agreement which expressly refers to a transfer of ownership of the Products from Coretrack or Globe Drill to the plaintiff. In contrast, where rights of ownership in property are concerned, they are referred to in express words. There are, for example, express references to the plaintiff's ownership of the Strange IP,[127] and to the means by which Coretrack could purchase a share in the Strange IP.[128]  There is also express reference to Coretrack assigning to the plaintiff any intellectual property (in the form of copyright) created by Coretrack or Globe Drill during the course of manufacturing the Products.[129]  Viewed in this context, there is a strong argument that had the parties intended that the terms of the IPL Agreement would result in the transfer of ownership of the Products, it would be reasonable to expect that they would have said so.

   [127] Clause 11.1 of the IPL Agreement (Exhibit B).

   [128] Clause 18.1 of the IPL Agreement (Exhibit B).

   [129] Clause 11.6 of the IPL Agreement (Exhibit B).

2. Furthermore, if the IPL Agreement had been intended to convey ownership, or rights of ownership, in the Products at the effective date of the IPL Agreement, one would expect to see warranties from Coretrack that it owned those Products which were in existence at that time.  The only warranties as to ownership in the IPL Agreement are those provided by the plaintiff that it owns 'all right, title and interest in the Strange IP' and the right to grant the licence to use the Strange IP.[130]

   [130] Clause 4.2 of the IPL Agreement (Exhibit B).

3. In so far as the plaintiff contended that Coretrack obtained its right to possess and use the Drill Rig and Drill Rod Handler as a licensee pursuant to the IPL Agreement, that argument is not supported by any express terms of the IPL Agreement.  The licence conferred on Coretrack by the IPL Agreement is a licence to use the Strange IP for the purpose of providing the Services and manufacturing the Products.[131]  There is no reference to a licence being provided to Coretrack for the purpose of its possession and use of the Products, as opposed to its use of the Strange IP.  That is entirely consistent with the parties having in their contemplation that Coretrack would own the Products during the term of the IPL Agreement.

1. The terms of the IPL Agreement are premised on Coretrack's exercise of the rights of ownership in the Drill Rig and Drill Rod Handler

   [131] Clause 2 of the IPL Agreement (Exhibit B).

1. Many of the clauses in the IPL Agreement deal with Coretrack's use of the Products,[132] and those clauses clearly proceed on the basis that Coretrack would be entitled to control how the Products would be used, and hence would be in a position to ensure its contractual obligations to the plaintiff under the IPL Agreement could be met.

   [132] See for example IPL Agreement cl 6.2(e), (f), (g), (h), cl 9.5, and cl 11.1(a) (Exhibit B).

2. Counsel for the plaintiff submitted that the fact that the plaintiff exercised control over the manufacture of Products pursuant to the IPL Agreement indicated that it exercised a right of control over those Products consistent with ownership of them.  I do not agree.  The plaintiff's contractual entitlement to exercise control in respect of the manufacture of the Products was a reflection of the plaintiff's ownership of the Strange IP which was used to manufacture the Products, and not indicative of a right of ownership of the Products themselves.  The preservation of an intellectual property right may require the owner of the right to retain control over the activities of a licensee in the use of that right.[133]

   [133] See, for example, Pioneer Kabushiki Kaisha v Registrar of Trade Marks [1977] HCA 56; (1977) 137 CLR 670, 682 ‑ 683 (Aickin J).

3. In addition, the IPL Agreement contemplated that Coretrack might make inventions relating to the Products, or develop new Products.[134]  Inventing or creating something new prima facie leads to ownership of it.[135]  There was no suggestion that ownership of those inventions or new Products would pass to the plaintiff.  Coretrack's only obligation was to keep the inventions or new Products confidential so that the plaintiff could take steps to protect any intellectual property rights subsisting in them.[136] 

1. Whether cl 6.1 of the IPL Agreement manifests an intention that the costs of production are to the benefit of the plaintiff

   [134] Clause 12.3 of the IPL Agreement (Exhibit B).

   [135] Breen v Williams [1996] HCA 57; (1996) 186 CLR 71, 80 (Brennan CJ), 88 ‑ 89 (Dawson & Toohey JJ), 101 (Gaudron & McHugh JJ) 126 (Gummow J); Associated Alloys Pty Ltd v ACN 001 452 106 Pty Ltd [2000] HCA 25; (2000) 202 CLR 588, 598 [13] (Gaudron, McHugh, Gummow & Hayne JJ); CSR Ltd v Carson Pty Ltd [2002] QSC 21 [19] ‑ [22] (Holmes J); see also Borden (UK) Ltd v Scottish Timber Products Ltd [1981] Ch 25.

   [136] Clause 12.3 of the IPL Agreement (Exhibit B).

1. Counsel for the plaintiff submitted that 'as a consequence' of cl 6.1 of the IPL Agreement, ownership or a right of ownership in the Products (namely a deferred right to possession) was transferred to the plaintiff on the effective date of the IPL Agreement, so that from that point, Globe Drill (and in turn Coretrack) held the Drill Rig and the Drill Rod Handler only as a licensee.[137]  However, the plaintiff expressly did not contend that cl 6.1(c) of the IPL Agreement 'vested title' in the Products in the plaintiff.[138]  Instead, counsel for the plaintiff submitted that by treating the costs associated with the production of the Products as consideration for the licence, the parties manifested an intention that following termination (and delivery of the Products to the plaintiff) Coretrack and Globe Drill could not seek to recoup those costs from the plaintiff.[139]  It was submitted that that was consistent with the transfer of ownership of the Products delivered to the plaintiff pursuant to cl 15.1(d) of the IPL Agreement.

   [137] Plaintiff's Closing Submissions, 16 December 2013 [87].

   [138] Plaintiff's Closing Submissions, 16 December 2013 [69].

   [139] Plaintiff's Closing Submissions, 16 December 2013 [68], [70].

2. Although the meaning of the terms of cl 6.1(c) is not entirely clear, I have concluded that the clause cannot be understood as manifesting an intention that there would be a transfer of ownership, or of some of the rights of ownership, from Coretrack or Globe Drill to the plaintiff on the effective day of the IPL Agreement, or at any stage during the IPL Agreement, or on the termination of the IPL Agreement, for five reasons. 

3. First, under cl 6.1(c) the costs of production of the Products are consideration for the grant of the 'Licence'. The 'Licence' is the exclusive licence to use the Strange IP for the purpose of providing the Services and manufacturing the Products and Improvements,[140] and not a licence for the use of the Products themselves (as would otherwise be required if Coretrack and Globe Drill did not in fact own those Products).

   [140] Clause 2.1 of the IPL Agreement (Exhibit B).

4. Secondly, cl 6.1 cannot assist the plaintiff in its argument that on the effective date of the IPL Agreement, one of the rights of ownership ‑ a deferred right to possession of the Products ‑ passed to the plaintiff.  Clause 6.1 clearly has a prospective operation:  the costs associated with production said to constitute consideration for the grant of the licence are those associated with the manufacture of the Products 'under the Licence'.  On the effective date of the IPL Agreement, no costs had been expended by Coretrack under the Licence.  Clause 6.1(c) does not assist in explaining how ‑ at the effective date of the IPL Agreement ‑ the plaintiff could be said to have acquired any of the rights of ownership, of the partially constructed Drill Rig or of the Drill Rod Handler. 

5. Thirdly, if construed as suggested by the plaintiff, cl 6.1(c) does not sit comfortably with cl 15.3 and cl 15.4 of the IPL Agreement.  Under cl 6.1(c), the costs said to constitute consideration for the Licence go well beyond the costs of production of the Products, and include costs associated with marketing and sales.  As I explain below, however, cl 15.3 and cl 15.4 clearly contemplate that Coretrack (and Globe Drill) would retain the proceeds of the sale of any commissioned Products on termination of the IPL Agreement (and would thus enjoy the benefit of the costs associated with the marketing and sales of those Products). 

6. Fourthly, it makes flouts business common sense to view Coretrack's costs of manufacture of the Products as consideration passing from the plaintiff as the promisee, for the plaintiff's acquisition of ownership, or rights of ownership, in those Products from Coretrack and Globe Drill.  In this respect, I note that cl 6.1 also treats the payment of all taxes, duties, and the cost of obtaining approvals associated with the use of the Products as consideration for the grant of the Licence.  Although consideration need only move from the promisee, and need not move to the promisor, it is nevertheless far from clear why such taxes and charges ‑ which do not appear to be linked to the costs of production of the Products ‑ would be regarded as assisting the plaintiff to establish rights of ownership in the Products. 

7. Fifthly, the better construction of cl 6.1 of the IPL Agreement is that it manifests an intention of the parties that Coretrack, as the owner of the Products, would be responsible for the payment of any production costs, taxes or charges associated with the manufacture, use and sale of the Products.  Further, by expressly prescribing responsibility for the payment of these costs and charges, cl 6.1 operates to avoid any dispute as to the plaintiff's liability to contribute to them (to the extent that those costs and charges also permitted the use of the Strange IP), and to preclude any claim by Coretrack for the recovery of such costs, taxes or charges from the plaintiff (as the owner of the Strange IP) in the event of the termination of the IPL Agreement.  

1. Whether the right to delivery on termination under cl 15.1(d) gave the plaintiff any rights of ownership in the Drill Rig and the Drill Rod Handler prior to termination

1. Counsel for the plaintiff submitted that on the effective date of the IPL Agreement, Coretrack and Globe Drill lost the right to the exclusive possession of the Drill Rig and the Drill Rod Handler because at that point the plaintiff acquired a deferred right to possession upon termination of the Agreement, by virtue of cl 15.1(d) of the IPL Agreement.  I set out my conclusions on the proper construction of cl 15.1(d) of the IPL Agreement later in these reasons.  For present purposes, it suffices to say that on the effective date of the IPL Agreement, the plaintiff did not obtain physical possession of the Products.  In my view, there is no basis for concluding that the plaintiff obtained constructive possession, nor any right to immediate physical possession of the Products, from the effective date of the IPL Agreement, by virtue of the existence of cl 15.1(d).  The plaintiff was not entitled, pursuant to the IPL Agreement, to obtain possession of any Products unless and until the IPL Agreement was terminated, and even then only in the event that Coretrack was unable to sell such commissioned Products as it had to third parties (as contemplated by cl 15.3 and cl 15.4).  In my view, at the effective date of the IPL Agreement, the plaintiff's right was merely a contractual right to the possession of Products in the future.  For the reasons set out at [78] a contractual right to possession in the future does not constitute a proprietary right in the Products.

1. In my view, the evidence relied upon by the defendants did not point plainly and unequivocally to the existence of the Common Assumption on which they relied.

2. In view of that conclusion, it is unnecessary to deal with a number of other issues in relation to the estoppel by convention claim, including whether an estoppel can be founded on an assumption by the parties as to their legal rights,[179] whether an estoppel by convention may arise from pre‑contractual negotiations,[180] whether an entire agreement clause precludes a claim of estoppel by convention,[181] and the implications of the failure of each of the parties to call particular witnesses to give evidence.[182]  It is also unnecessary to say anything more about the plaintiff's numerous objections to the evidence relied upon by the defendants (other than what appears below in so far as it concerns the relevance of the evidence in establishing the claimed Common Assumption).

The pleaded Common Assumption

[179] See Technomin Australia Pty Ltd v Xstrata Nickel Australasia Operations Pty Ltd [No 3] [2012] WASC 481 [188] ‑ [189] (Allanson J) referring to Alpha Wealth Financial Services v Frankland River Olive Company Ltd [2008] WASCA 119 [164] (Buss JA); Con‑Stan Industries of Australia Pty Ltd v Norwich Winterthur Insurance (Australia) Ltd [1986] HCA 14; (1986) 160 CLR 226, 244; Bofinger v Kingsway Group Ltd [2009] HCA 44; (2009) 239 CLR 269, 296 [74] (the Court).

[180] See Thompson v Palmer [1933] HCA 61; (1933) 49 CLR 507, 574 (Dixon J), Grundt v Great Boulder Pty Gold Mines Ltd (1937) 59 CLR 641, 674, 676 (Dixon J, McTiernan J agreeing); cf Ryledar Pty Limited v Euphoric Pty Ltd (2007) 69 NSWLR 603, 646 [200] ‑ [202] (Tobias JA, Mason P & Campbell JA agreeing); Franklins Pty Ltd v Metcash Trading Ltd [2009] NSWCA 407; (2009) 76 NSWLR 603, 621 [34] (Allsop JA), 738, 739 [577] (Campbell JA).

[181] See Branir Pty Ltd v Owston Nominees (No 2) [2001] FCA 1833; (2001) 117 FCR 424, 543 ‑ 544 [444] ‑ [447]; Ryledar Pty Ltd v Euphoric Pty Ltd[2007] NSWCA 65; (2007) 69 NSWLR 60, 646 ‑ 648 [204] ‑ [214] (Tobias JA, Mason P & Campbell JA agreeing).

[182] Cf Jones v Dunkel [1959] HCA 8; (1959) 101 CLR 298.

1. The Common Assumption plea set out in the Amended Defence[183] is that:

   (i)at the time of the acquisition by [Coretrack] from the Vendors (as defined in the Share Sale Agreement) of the shares in [Globe Drill], [Globe Drill] had title to and ownership of the Drill Rig … free and clear of any interest of [the plaintiff] other than with respect to the Strange IP;

   (ii)by reason of (i) above, [Coretrack], in acquiring the whole of the shares of [Globe Drill] and in providing the consideration therefor, would in effect acquire the Drill Rig … ;

   (iii)[Coretrack and Globe Drill] in acquiring, manufacturing or causing a third party to manufacture any Products, Improvements and Accessories would have unencumbered title as against [the plaintiff] in such Products, Improvements and Accessories, subject to the Strange IP;

   (iv)[Coretrack and Globe Drill] had, and would continue to have title and ownership of all Products, components of Products, Improvements and Accessories which were created or acquired by the Defendants during the term of the IP Licence Agreement and IP Sub-Licence Agreement, other than with respect to the Strange IP.

   [183] Amended Defence [70(a)].

2. It can be immediately seen that the Common Assumption said to have arisen was, in truth, two quite discrete assumptions.  The first concerned Globe Drill's ownership of the Drill Rig at the time of the Share Sale Agreement, and Coretrack's acquisition of ownership of the Drill Rig by virtue of its acquisition of Globe Drill's shares.  For the reasons set out at [42] ‑ [44], it is unnecessary to say more about these aspects of the claimed Common Assumption. 

3. The evidentiary issue pertains to the second plank of the claimed Common Assumption, which is that in acquiring, manufacturing, or causing a third party to manufacture, any Products, the defendants would have unencumbered ownership of those Products as against the plaintiff, and would continue to own them during the term of the IPL Agreement and the IP Sub‑Licence Agreement. 

4. The defendants say that the Common Assumption manifested in a number of ways, which are particularised in the Amended Defence.  Most of these particulars concern the first plank of the Common Assumption.  The particulars concerning the second plank of the Common Assumption are expressed in very general terms.  They are that 'at all material times, the parties proceeded on the agreed basis that all Products … were acquired, developed and paid for by the Defendants such that they would have title free and clear of any interest of the plaintiff other than with respect to the Strange IP'.[184]

Why the evidence did not establish the existence of the Common Assumption

[184] Amended Defence [70(a)(G)].

1. The evidence relied upon by the defendants was referred to in a witness statement made by Mr Trevor Beazley, a Non‑Executive Director of Coretrack, dated 2 September 2013, and was contained in documents otherwise tendered in evidence.  The evidence relied upon by the defendants, whether considered individually, or collectively, did not establish the existence of the Common Assumption for which the defendants contend.  In order to explain that conclusion, it is convenient to divide the evidence into four categories:

   (i)the transaction documents;

   (ii)evidence as to pre-contractual negotiations;

   (iii)evidence as to the conduct of the parties after the transaction;

   (iv)the Statement of Facts and Contentions (SFC) filed by the plaintiff in this action.

1. The transaction documents

1. The defendants pointed to the terms of the Disclosure Letter, in which the drill rigs were identified as assets of Globe Drill for the purpose of calculating the NTA, and to the terms of the Share Sale Agreement including warranties in schedule 3, the accounts of Globe Drill in schedule 7, the required NTA, and the provision of shares in Coretrack of substantial value as consideration for Globe Drill's shares.  Counsel for the defendants submitted that these documents demonstrated that all parties shared the Common Assumption that Globe Drill would continue to own the Products throughout the term of the IPL Agreement.[185]  I do not agree.  Neither the Share Sale nor the Disclosure Letter disclose anything about the defendants' beliefs as to whether they would enjoy rights of ownership (to the exclusion of the plaintiff) in respect of any Products following the effective date of the IPL Agreement, or manufactured during the course of the IPL Agreement. 

1. Evidence as to pre-contractual negotiations

   [185] Defendants' Closing Submissions, 3 December 2013 [115].

1. The defendants also pointed to pre‑contractual communications between the parties or their advisers, which they said demonstrated that prior to execution of the transaction documents, the parties all assumed that Globe Drill would continue to own the Products then in existence and any Products subsequently created and paid for by it.[186]  I am not persuaded that the evidence on which the defendants rely establishes the existence of the Common Assumption, for three reasons.

   [186] Defendants' Closing Submissions, 3 December 2013 [117].

2. First, some of the evidence on which the defendants relied was too vague and ambiguous to establish the existence of the Common Assumption with sufficient certainty as to be enforceable.  By way of example, the defendants relied on an email from Mr Angus Walker, of Patersons Securities, dated 25 September 2009, to Mr Strange, Mr van t'Riet (a director of Coretrack) and Mr Beazley, in relation to an agreement which at that stage was proposed to involve a company called Terra Therm Pty Ltd.  (This was said to be relevant because the same terms were said to be reflected in the agreements ultimately entered into between the parties to the present dispute.)  The proposed framework for that transaction was to involve an 'agreement with Strange Investments to buy all IP … and pay an ongoing royalty' and 'includes the license to build, own, operate, market, sell etc rigs and business activities'.[187]  The reference to a licence not only to build, market and sell drill rigs, but to own them too, is quite ambiguous in the present context.

   [187] Trial bundle 126 (Exhibit E; Document E7).

3. Similarly, Mr Beazley referred to a business plan provided to Coretrack by Mr Strange on 18 December 2009 (the Business Plan),[188] which appears to have been accompanied by some documents containing forecasts of income and expenditure.  Counsel for the defendants submitted that the Business Plan 'was in terms consistent only with Globe Drill maintaining ownership of the drill rig'.[189]  I am unable to agree.  Nothing in the Business Plan expressly dealt with the rights which would be enjoyed by the defendants, or the plaintiff, under the IPL Agreement.  There were references in the documents to the value of 'assets' and to 'depreciation'.[190]  However, there was no evidence in relation to what these terms meant, or how they were understood by the parties, in relation to the anticipated operation of the IPL Agreement.

   [188] Witness Statement of Mr Beazley, 2 September 2013 [55] - [57] (Exhibit F); Trial bundle 160 (Exhibit E; Document E23).

   [189] Defendants' Closing Submissions, 3 December 2013 [64(l)].

   [190] Trial bundle 202 ‑ 205, 208 (Exhibit E; Document E23).

4. Secondly, some of the evidence of pre-contractual negotiations on which the defendants relied was explicable by reference to the anticipated terms of the Share Sale Agreement, and thus did not assist to establish the existence of a Common Assumption as to the rights of ownership of Products during the term of the IPL Agreement.  By way of example, Mr Beazley's statement contained references to a number of communications between Mr Strange and officers of the defendants.[191]  Most of the communications pertained to the ownership of the Drill Rig prior to the Share Sale Agreement (namely that Globe Drill owned the partially constructed Drill Rig) but said nothing about the parties' understanding of what the position would be after the effective date of the IPL Agreement.  By way of example, Mr Beazley referred to an email from Mr Strange, dated 4 January 2010, in which Mr Strange advised that Coretrack would 'get all of Globe Drill's creditors paid and "1 x GT 3000"'.[192]  Mr Beazley's evidence was that the Drill Rig 'was an asset of Globe Drill, and that Coretrack was acquiring it as part of the proposed transaction'.[193]  However, the terms of the email to which Mr Beazley referred, and his belief, were clearly directed to the position which would arise under the Share Sale Agreement, and not to the position during the term of the IPL Agreement.

   [191] See also Defendants' Closing Submissions, 3 December 2013 [64(g)].

   [192] Witness Statement of Mr Beazley, 2 September 2013 (Exhibit F) [71].

   [193] Witness Statement of Mr Beazley, 2 September 2013 (Exhibit F) [72].

5. Mr Beazley also referred to the defendants' insistence on a minimum NTA of $1.2 million.  He explained that this had been agreed because Coretrack wanted to show that 'it was buying something tangible'.[194]  However, even if that was Coretrack's intention, it pertains to the Share Sale Agreement, and does not go beyond what is now not in dispute ‑ that Globe Drill owned the partially completed Drill Rig at the time of the Share Sale Agreement. 

   [194] Witness Statement of Mr Beazley, 2 September 2013 (Exhibit F) [50].

6. The defendants also relied upon a 'Term Sheet' dated 18 December 2009 which set out some key matters the parties sought to have included in the terms of the agreement they were negotiating.[195]  Counsel for the defendants submitted that the Term Sheet 'was consistent only with Globe [Drill] retaining title to the equipment'.[196]  I am unable to agree.  While the Term Sheet clearly indicated that one of the objects of the Share Sale Agreement was to inject funds into Globe Drill to retire debt and to fund completion of the Drill Rig, nothing in the document referred to the parties' understanding of the position which would arise in relation to rights of ownership in the Drill Rig or other Products after the effective date of the IPL Agreement. 

   [195] Trial bundle 163 ‑ 165 (Exhibit E; Document E22). 

   [196] Defendants' Closing Submissions, 3 December 2013 [64(l)].

7. Thirdly, some of the evidence on which the defendants relied pertained to Mr Beazley's subjective understanding of the transaction.  Mr Beazley's evidence was that he understood the transaction proposed on Globe Drill's behalf in December 2009 was a proposal for 'Coretrack to buy Globe Drill, with Globe Drill to build, own and operate a fleet of drill rigs capable of geothermal and mineral drilling'.[197]  Mr Beazley also referred to the Business Plan which he said 'confirmed in my mind that at that point in time the main asset of Globe Drill was the partially constructed drill rig and other auxiliary and factory equipment'.[198]  This evidence did not establish that Mr Beazley's understanding was shared by the directors of Coretrack, or that that understanding pertained to ownership of the Products following the execution of the IPL Agreement. 

1. Evidence as to the conduct of the parties after the transaction

   [197] Witness Statement of Mr Beazley, 2 September 2013 (Exhibit F) [44].

   [198] Witness Statement of Mr Beazley, 2 September 2013 (Exhibit F) [57].

1. Counsel for the defendants submitted that 'there is abundant evidence that the same Common Assumption applied during the term of the IP Licence Agreement'.[199]  Again, I am unable to agree, because the evidence was referrable to Coretrack's obligations under the Share Sale Agreement, or otherwise did not establish the existence of the Common Assumption with sufficient clarity.

   [199] Defendants' Closing Submissions, 3 December 2013 [119].

2. By way of example, the defendants relied on an announcement made by Coretrack to the Australian Stock Exchange on the date of settlement of the Share Sale Agreement.[200]  That announcement was directed solely to the acquisition of Globe Drill (and with it, its manufacturing business) under the Share Sale Agreement.

   [200] Trial bundle 853 - 855 (Exhibit E; Document E48). 

3. The defendants also pointed to evidence of capital raising by Coretrack,[201] which counsel submitted was for the purpose of funding 'the payments contemplated by that transaction [ie the Share Sale Transaction] on the basis of those representations [that is, representations that Globe Drill owned the Drill Rig at the date of the Share Sale Agreement]'.[202]  The defendants also relied upon payments made by Coretrack to third parties to discharge Globe Drill's debts.[203]  None of this evidence pertained to the effect of the IPL Agreement, nor did it disclose any belief by Coretrack's directors either as to the effect of that Agreement or as to ownership of the Products following the effective date of that Agreement. 

   [201] Trial bundle 862 ‑ 862 (Exhibit E; Document E50).

   [202] Defendants' Closing Submissions, 3 December 2013 [119(c)].

   [203] Trial bundle 864 - 937 (Exhibit E; Documents E51, E52).

4. The defendants also relied on a resolution made by Coretrack's board on 18 February 2010,[204] to allocate shares to the Vendors based on Coretrack's acquisition of Globe Drill, with an NTA of $1.2 million on settlement of the Share Sale Agreement. However, that decision was not directed to the position under the IPL Agreement. Furthermore, the explanatory notes for that Board meeting noted that under the IPL Agreement, and in consideration for the grant of the licence, Coretrack had agreed to pay (amongst other things) all relevant production, marketing and sales costs.[205]  Clearly Coretrack's Board was aware of cl 6.1 of the IPL Agreement.  Whether they held a view about how that clause, or the IPL Agreement, would operate in relation to the ownership of any Products manufactured during the term of that Agreement, is not apparent on the face of the document.

   [204] Trial bundle 825 ‑ 851 (Exhibit E; Documents E46, E47).

   [205] Trial bundle 833 (Exhibit E; Document E47).

5. Other evidence which pertained to the Drill Rig during the period after the IPL Agreement was entered into was too ambiguous to establish the existence of the Common Assumption for which the defendants contended.  The defendants pointed to evidence which showed that after the Share Sale Agreement was entered into, Globe Drill included the work in progress on the Drill Rig as an asset in its accounts,[206] Coretrack referred to the Drill Rig in its 2010 Annual Report as one of its key products,[207] and that it referred to the construction of the Drill Rig and other equipment as 'assets under construction'.[208]  Counsel for the defendants submitted that 'it does not require any accounting expertise to accept that the recording of items of equipment in company accounts demonstrates a belief on the part of the directors … that assets recorded as such in company accounts belong to the company'.[209]  However, that submission belies the difficulty in ascertaining precisely what belief is disclosed by recording something as an 'asset' in this way.  Significantly, other entries in the Annual Report suggested that the inclusion of an item in Coretrack's list of assets was not necessarily referrable to a belief that all rights of ownership in that item were enjoyed solely by Coretrack.  By way of example, the Annual Report also included a statement of the company's financial position, which referred to its assets as including 'property, plant and equipment'.[210]  The notes to that entry, however, referred to plant and equipment, including 'plant and equipment under construction, under finance lease' and 'other plant and equipment under finance lease'.[211]  It thus appears that the 'assets' referred to included items which were held by Coretrack under finance leases, presumably in the capacity of a licensee.  There was no evidence in relation to the preparation of the accounts to clarify this issue.  An Interim Financial Report of 31 December 2010 was no more specific.[212]  In his evidence, Mr Beazley referred to these financial reports,[213] but his evidence did not disclose a clear belief held by Coretrack's directors in relation to the ownership of the Drill Rig following the effective date of the IPL Agreement.

   [206] Defendants' Closing Submissions, 3 December 2013 [119(e)]; Trial bundle 967 (Exhibit E; Document E57).

   [207] Trial bundle 979 ‑ 980, 982 (Exhibit E; Document E62).

   [208] Trial bundle 1022 (Exhibit E; Document E62).

   [209] Defendants' Closing Submissions, 3 December 2013 [119(e)]. 

   [210] Trial bundle 1000 (Exhibit E; Document E62). 

   [211] Trial bundle 1032 (Exhibit E; Document E62). 

   [212] Trial bundle 1217 ‑ 1240 (Exhibit E; Document E69).

   [213] Witness Statement of Mr Beazley, 2 September 2013 (Exhibit F) [127] ‑ [130]. 

6. Mr Beazley also gave evidence that during 2010, Coretrack paid for construction costs of the Products, including to Karni Engineering.[214]  His evidence was that upon payment to Karni Engineering 'Globe Drill took delivery of, and obtained title to the drill rig tower'.[215]  While the creation or purchase of a chattel is evidence of its ownership, the area of dispute in this case concerns whether the terms of the IPL Agreement disclosed a different intention as to ownership of Products manufactured by Globe Drill (or by third parties, for Globe Drill).  Mr Beazley's evidence in relation to the payment of construction costs associated with the Products did not disclose whether the parties held any common belief as to whether the IPL Agreement had any bearing on ownership of those Products. 

   [214] Witness Statement of Mr Beazley, 2 September 2013 (Exhibit F) [124] ‑ [126].

   [215] Witness Statement of Mr Beazley, 2 September 2013 (Exhibit F) [126].

1. Counsel for the defendants submitted that 'Coretrack continued to make representations to the equities market … which representations assumed that Globe Drill continued to own the Equipment'.[216]  The evidence relied upon referred to 'Globe Drill's GT3000 rig'[217] or to raising capital to finance construction of the Drill Rig.[218]  However, for the reasons I have already outlined, in my view such references do not disclose a sufficiently clear belief that the defendants continued to enjoy all rights of ownership of the Products, notwithstanding the IPL Agreement.  Some of the evidence relied upon referred to raising capital for use as 'general working capital for the Company post drilling of its first test well using the [Drill Rig]'[219] or to the Drill Rig as being 'owned and developed by Globe Drill'[220] (emphasis added) but this evidence said nothing about the basis upon which the defendants were said to 'own' the Drill Rig, or about the effect of the IPL Agreement, which was the source of the defendants' authority to manufacture, develop and use the Drill Rig to provide the Services. The same difficulty arises in relation to statements made in the course of investor presentations about the Drill Rig and its capabilities,[221] and to public statements attributed to Mr Strange, in which he referred to 'Globe Drill's GT 3000 drill rig',[222] or to Coretrack's development of the Drill Rig.[223]

   [216] Defendants' Closing Submissions, 3 December 2013 [119(g)].

   [217] Trial bundle 941 (Exhibit E; Document E54).

   [218] Trial bundle 968 ‑ 969, 972 (Exhibit E; Documents E58, E60).

   [219] Trial bundle 1054 (Exhibit E; Document E64).

   [220] Trial bundle 1179 (Exhibit E; Document E67).

   [221] Trial bundle 963 (Exhibit E; Document E56).

   [222] Trial bundle 807 (Exhibit E; Document E41).

   [223] Trial bundle 971 (Exhibit E; Document E59).

2. I should emphasise that nothing in these reasons is intended to suggest that Coretrack misled the market when it made the public announcements to which I have referred.  On the contrary, the evidence to which I have referred was consistent with the proper construction of the IPL Agreement.  The point for present purposes is simply that I am not persuaded that the evidence relied upon by the defendants at the trial was sufficient to establish, with clarity, the existence of the Common Assumption that the defendants enjoyed all rights of ownership of the Products, after the effective date of the IPL Agreement.

1. The SFC filed by the plaintiff in this action

1. Finally, the defendants relied on the SFC which was filed on the plaintiff's behalf in this action.[224]  Counsel for the defendants submitted that the plaintiff did 'not contend that it had title to the [Products] during the Term of the IP Licence Agreement.  It accepts that title must lie with one or other of the Defendants (eg at 5.16).'[225]  I leave to one side for a moment whether a document filed on a party's behalf in an action can constitute evidence of that party's understanding sufficient to support the existence of a common assumption.  Assuming for present purposes that it can, in my view the SFC does not establish the existence of the Common Assumption in this case.  At the time the SFC was filed, the parties proposed that the Court should deal with a preliminary question confined to the operation of cl 15.1(d) of the IPL Agreement.  The facts and contentions set out in the SFC therefore concerned the operation of cl 15.1(d). 

   [224] Plaintiff's Statement of Facts and Contentions for Hearing of Preliminary Questions, 19 March 2012.

   [225] Defendants' Closing Submissions, 3 December 2013 [120].

2. The defendants pointed, in particular, to para 15.16 of the SFC.  That paragraph stated that the plaintiff's case was that 'if the Products and components are asserted to be owned' by the defendants, then Globe Drill was immediately required to deliver the Products and components to the plaintiff pursuant to cl 15.1(d).  Clearly, that contention does not constitute a concession that the defendants owned the Products prior to the point of delivery.  Similarly, the plaintiff's contention in the SFC that upon delivery, the proprietary interest in, and right and title to, the Products would pass to the plaintiff,[226] cannot be construed as evidence of a belief that absolute ownership of the Products was enjoyed by Globe Drill prior to that point, in view of the confined focus of the preliminary question then envisaged. 

   [226] Plaintiff's Statement of Facts and Contentions for Hearing of Preliminary Questions, 19 March 2012, for example at [5.23], see also at [5.33].

1. Conclusion and orders

1. For the reasons set out above, while the defendants are obliged to deliver the Drill Rig and Drill Rod Handler to the plaintiff, in view of the termination of the IPL Agreement, I would decline to make a declaration that the defendants' rights of ownership in the Drill Rig and Drill Rod Handler have terminated, or that the plaintiff is entitled to possession of those Products as the owner of them.

2. Turning to the questions to which the separate trial was directed, the answers to those questions are as follows:

   1.As at immediately prior to settlement on the Share Sale Agreement:

   1.1what proprietary rights did the second defendant have in the partially constructed Drill Rig?

   1.2What proprietary rights did the plaintiff have in the partially constructed Drill Rig?

3. There was no dispute between the parties that immediately prior to settlement of the Share Sale Agreement, Globe Drill was the absolute owner of the partially constructed Drill Rig.  The plaintiff, together with the other Vendors, owned of all of the shares in Globe Drill prior to the Share Sale Agreement.

   2.As at immediately prior to the termination of the IP Licence Agreement:

   2.1what proprietary rights did the second defendant have in the Drill Rig?

   2.2What proprietary rights did the plaintiff have in the Drill Rig?

   2.3What proprietary rights did the second defendant have in the Drill Rod Handler?

   2.4What proprietary rights did the plaintiff have in the Drill Rod Handler?

4. Immediately prior to the termination of the IPL Agreement, Globe Drill was the absolute owner of the Drill Rig and the Drill Rod Handler.  The plaintiff had no proprietary rights in the Drill Rig or the Drill Rod Handler.

   3.If the second defendant had proprietary rights in the Drill Rig and/or Drill Rod Handler as at immediately prior to termination of the IP Licence Agreement, then on termination of the IP Licence Agreement:

   3.1what proprietary rights did the second defendant have in the Drill Rig

   3.2what proprietary rights did the plaintiff have in the Drill Rig

   3.3what proprietary rights did the second defendant have in the Drill Rod Handler

   3.4what proprietary rights did the plaintiff have in the Drill Rod Handler

   by reason of the operation of Clause 15.1(d) of the IP Licence Agreement?

5. Following delivery of the Drill Rig and Drill Rod Handler pursuant to cl 15.1(d) of the IPL Agreement, Globe Drill will retain its rights of ownership, including the right to control over the Drill Rig and Drill Rod Handler, but it will no longer have possession of those Products.  The Drill Rig and Drill Rod Handler will then be held by the plaintiff as a bailee. 

6. I will hear from the parties in relation to the orders which should be made to give effect to these reasons.