Terravision Pty Ltd v Black Box Control Pty Ltd
[2014] WASC 261
•23 JULY 2014
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS
CITATION: TERRAVISION PTY LTD -v- BLACK BOX CONTROL PTY LTD [2014] WASC 261
CORAM: LE MIERE J
HEARD: 4 JULY 2014
DELIVERED : 23 JULY 2014
FILE NO/S: CIV 2103 of 2012
BETWEEN: TERRAVISION PTY LTD
Plaintiff
AND
BLACK BOX CONTROL PTY LTD
Defendant
Catchwords:
Application for trial of separate issues or questions - O 32 r 4 of the Supreme Court Rules 1971 (WA) - Factors to consider in ordering separate questions - Separate question will ensure efficient use of time, minimise costs and may lead to disposal of proceedings - Question for determination not adequately formulated
Legislation:
Federal Court Rules 1979 (Cth), O 29 r 2(a)
Supreme Court Rules 1971 (WA), O 1 r 4, O 1 r 4B, O 20 r 8(1), O 20 r 9(1)(b), O 32 r 4
Result:
Application granted in part
Category: B
Representation:
Counsel:
Plaintiff: Ms K J Levy
Defendant: Mr P Mendelow
Solicitors:
Plaintiff: Danaghers Commercial and Corporate Lawyers
Defendant: Bowen Buchbinder Vilensky
Case(s) referred to in judgment(s):
Agriculture & Rural Finance Pty Ltd v Gardiner (2008) 238 CLR 570
Australian National Industries Ltd v Spedley Securities Ltd (1992) 26 NSWLR 441
AWB Ltd v Cole (No 2) [2006] FCA 913; 233 ALR 453
City of Swan v Lehman Brothers Australia Ltd [2009] FCA 784; (2009) 73 ACSR 86
Codelfa Construction Pty Ltd v State Rail Authority (NSW) (1982) 149 CLR 337
Hancock Prospecting Pty Ltd v Wright Prospecting Pty Ltd [2012] WASCA 216; (2012) 294 ALR 550
Landsdale Pty Ltd v Moore [2009] WASCA 176
Tepko Pty Ltd v Water Board [2001] HCA 19; (2001) 206 CLR 1
LE MIERE J: The plaintiff, TerraVision Pty Ltd (TerraVision), is a software manufacture and supply company. It supplies software systems to provide data for the location of vessels, vehicles and assets as well as other data relating to the operation of those vessels, vehicles and assets. It holds intellectual property rights including the copyright and software source code in certain software (TerraVision Software) and materials and physical items that are utilised by TerraVision Software (TerraVision Hardware).
The defendant, BlackBox Control Pty Ltd (BlackBox), is a hardware and software supply company. In supplying services to its customers it uses TerraVision software, hardware and services pursuant to a licence agreement with TerraVision made on 13 June 2006 (Licence Agreement).
The Licence Agreement provides that, subject to certain qualifications, BlackBox has the exclusive right to provide products or services that include or use TerraVision Products for vehicle and mobile asset tracking. TerraVision Products is defined to mean any one of a range of hardware or software products or services that are listed in the Price List. Clause 9.5 provides that 'BlackBox may provide tracking services that do not include TerraVision Products providing, TerraVision is paid the Price in accordance with subcl 10.4'. Clause 10 sets out obligations of BlackBox in relation to sales. The obligations include advising or notifying TerraVision of sales or transactions. Clause 12 sets out obligations of BlackBox. Clause 12.3 provides that BlackBox will 'within 15 days of the end of each calendar month … notify TerraVision of the Sales Transactions of the prior month so that the appropriate Price may be calculated in accordance with the Price List'. Clause 12.4 provides that BlackBox will 'pay TerraVision the Price within 30 days of receiving an invoice from TerraVision'. The Price List is an appendix to the Licence Agreement.
Differences have arisen between TerraVision and BlackBox. In essence, TerraVision says that BlackBox has not informed or notified it of all of the transactions which it is obliged to give notice of and has not paid TerraVision in respect of the transactions of which it has not given notice.
TerraVision has applied for an order pursuant to O 32 r 4 of the Supreme Court Rules 1971 (WA) that certain questions be tried separately and before the trial of the action. TerraVision proposes seven questions which comprise four issues and some sub issues. BlackBox opposes the trial of separate issues or questions.
Trial of separate questions ‑ legal principles
Order 32 r 4 of the Supreme Court Rules provides that the court may order that any question or issue whether of law or fact or partly of law and partly of fact, and whether raised by the pleadings or by agreement of the parties or otherwise be tried separately from any other question or issue.
In AWB Ltd v Cole (No 2) [2006] FCA 913; 233 ALR 453 Young J reviewed the authorities concerning O 29 r 2(a) of the Federal Court Rules 1979 (Cth) which provides that the court may make orders for the decision of any question separately from any other question, whether before, at, or after any other trial. In City of Swan v Lehman Brothers Australia Ltd [2009] FCA 784; (2009) 73 ACSR 86, Rares J at [27] in turn summarised the principles extracted from the relevant authorities by Young J as follows:
(1)As a general rule the starting point is that all issues of fact and law should be determined at the one time.
(2) A party seeking the determination of separate questions must satisfy the Court that it is 'just and convenient' for the order to be made. The order must be made on concrete facts, either established or agreed, for the purpose of quelling a controversy between the parties so as to produce a conclusive or final judicial decision on the issue, which is of a real, not hypothetical, importance to the determination of the controversy.
(3)There are special problems where the separate issue involves a mixed question of fact and law, although it may still be able to be decided as a separate issue. However, care must be taken in precisely formulating the question and specifying the facts upon which it is to be decided.
(4) The court must have all relevant matters before it as a precondition of it being asked to exercise its discretion if the separate question involves the grant or refusal of declaratory relief.
(5) It may still be appropriate to determine a separate question even if it will not resolve all the issues, provided that there is a strong prospect that the parties will agree upon the result when the core of the dispute has been decided or if the decision will obviate unnecessary and expensive hearings of other questions.
(6)Generally speaking an issue will not be appropriate for separate determination if it is simply one of two or more alternative ways in which an applicant or plaintiff frames its case and its determination would leave other significant issues unresolved.
(7)It is relevant to consider whether:
•the separate questions will contribute to the saving of time and cost by substantially narrowing the issues for trial or even lead to the disposal of the proceedings;
•they will contribute to the settlement of the proceedings;
•they will give rise to significant contested factual issues both at the time of the hearing of the preliminary question and at the time of the trial;
•there will be any significant overlap between the evidence adduced on the hearing of the separate question and a trial;
•the questions will prolong, rather than shorten, the proceedings.
The court should approach the separate trial of issues with caution. In Tepko Pty Ltd v Water Board [2001] HCA 19; (2001) 206 CLR 1 Kirby and Callinan JJ said:
The attractions of trials of issues rather than of cases in their totality, are often more chimerical than real. Common experience demonstrates that savings in time and expense are often illusory, particularly when the parties have, as here, had the necessity of making full preparation in the factual matters relevant to one issue are relevant to others, and they all overlap.
The second and related comment is this. A party whose whole case is knocked out on a trial of a preliminary or single issue, may suspect, however unjustifiably, that an abbreviated course was adopted and a decision reached in the court's, rather than the parties', interests.
Thirdly, there is an additional potential for further appeals to which the course of the trial on separate issues may give rise. Indeed, that could occur here were this appeal to be allowed and a retrial had in which the remaining issues of causation and damages were decided. Single-issue trials should, in our opinion, only be embarked upon when their utility, economy, and fairness to the parties are beyond question [168].
In Landsdale Pty Ltd v Moore [2009] WASCA 176 the Court of Appeal allowed an appeal against an order for the separate trials of the issues of liability and quantum of damages in an action for negligence. Newnes JA, with whom Buss JA agreed, said that the court should approach each case with the object of eliminating any unnecessary delay or cost and ensuring the efficient and timely resolution of the case, consistent with doing justice to both sides and observed that that is reflected in O 1 r 4A and r 4B of the Rules of the Supreme Court. Newnes JA said:
But while that will often require a more flexible approach than might have been taken in the past, at the same time it is important that the lessons of the past are not forgotten, and that the court and the parties do not succumb to the immediate attraction of apparently more efficient but less conventional procedures without careful regard to past experience with such procedures [19].
After referring to Tepko Pty Ltd v Water Board as authority for the proposition that an application for the separation of issues is to be approached with some caution, Newnes JA said at [22] that 'the separate trial of issues will generally only be appropriate in cases where there is a clear line of demarcation between those issues, and the determination of one in isolation from the other is likely to result in a substantial saving in time, inconvenience and expense'.
Issues identified by plaintiff
TerraVision says that its proposed questions arise from what is, broadly, the heart of the dispute between the parties, being what are the disclosure obligations of BlackBox under the Licence Agreement, properly construed? TerraVision describes the issues as:
1.transactions of the defendant;
2.cap on payments; and
3.communications to Clifford.
I will first consider the 'transactions of the defendant' issue.
Transactions of the defendant
TerraVision says that the question is to identify which of the products and services provided by BlackBox are intended to be included under the terms of the Licence Agreement, or, put another way, does the Licence Agreement cover all of the transactions or only a subset of the transactions entered into by BlackBox?
The issue arises in this way. Clause 10 sets out the obligations of BlackBox to inform TerraVision of transactions it has made. There is no dispute between the parties concerning cl 10.1 to cl 10.3. The dispute concerns cl 10.4. However, it is necessary to refer to cl 10.1 to cl 10.3 before describing the issue in relation to cl 10.4. Clause 10.1 provides that for a sale to a Contracting Party that includes a TerraVision hardware product BlackBox will issue a purchase order to TerraVision for the product including the Price from the Price List. Contracting Party is defined to mean 'a person or company who wishes to rent, purchase or otherwise acquire or use a TerraVision Product or a service that uses a TerraVision Product'. Clause 10.2 provides that for a Sale Transaction to a Contracting Party that includes providing TerraVision software to the Contracting Party, BlackBox will notify TerraVision of the Sale Transaction, provide the software to the Contracting Party and invoice the Contracting Party. TerraVision will then invoice BlackBox for the price. Sale Transaction is defined to mean 'a transaction by BlackBox in which a product or service that includes or uses a TerraVision Product is provided to a Contracting Party'. Clause 10.3 provides that for a Sale Transaction to a Contracting Party that includes providing a TerraVision Service to the Contracting Party, BlackBox will advise TerraVision of the Sale Transaction and invoice the Contracting Party for the provision of the service. TerraVision will then invoice BlackBox for the price.
The dispute between the parties concerns cl 10.4. I will set it out in full:
10.4 Provision of tracking services that do not include TerraVision Products
For sale or service to a Contracting Party that does not include providing a TerraVision hardware product, software or service to the Contracting Party
(a)Black Box will advise TerraVision of the transaction;
(b)Black Box will invoice the Contracting Party for the provision of the service; and
(c)TerraVision will invoice Black Box for the Price.
It is also necessary to set out the Price List:
Product
Price
Black Box services incorporating TerraVision Software
15% of gross revenue
Black Box services not incorporating a TerraVision Product
15% of gross profit
TerraVision Hardware
Cost plus 15%
TerraVision Services
Cost plus 15%
This issue or dispute between the parties is a dispute as to the proper construction of cl 10.4 of the Licence Agreement, in the context of the Licence Agreement as a whole.
In essence, TerraVision says that on the proper construction of the Licence Agreement the sales or services covered by cl 10.4, that is a sale or service to a Contracting Party that does not include providing a TerraVision hardware product, software or service to the Contracting Party, covers all sales or services made or provided by TerraVision to a Contracting Party that are not covered by cl 10.1 to cl 10.3. Clause 10.4(a) requires BlackBox to advise TerraVision of all transactions between BlackBox and a Contracting Party that it has not notified or advised TerraVision of pursuant to cl 10.1 to 10.3 and cl 10.4(c) provides for TerraVision to invoice BlackBox in relation to such transactions. Therefore, TerraVision says, BlackBox is required to inform, notify or advise TerraVision of each and every transaction between BlackBox and a Contracting Party. It is common ground that BlackBox has not done so.
BlackBox says that on its proper construction cl 10.4(1) only operates where a person or company wishes to rent, purchase or otherwise acquire or use a TerraVision product or a service that uses a TerraVision product, and where the ultimate sale does not include providing a TerraVision product, software or service to the person or company. BlackBox further says that cl 10.4(1) is confined to the provision of tracking services. Further or alternatively, BlackBox says cl 10.4(1) only operates when BlackBox effects a transaction involving a tracking service in substitution for a TerraVision product, in circumstances in which a TerraVision product could have been used. The words 'tracking service' are not defined in the Licence Agreement. BlackBox has not pleaded, or otherwise propounded, the meaning of 'tracking services'.
The question of what sales and services provided by BlackBox to a Contracting Party that BlackBox must give TerraVision notice of, and pay for, is a crucial part of the dispute between the parties. It is common ground that that dispute could be tried and determined at a hearing of perhaps two or three days, depending upon any oral evidence which is to be led. If the issue were determined in favour of BlackBox, the parties would be likely to settle the proceedings as a whole. That is because the amount of TerraVision's claim would be greatly reduced. If the issue is determined in favour of TerraVision, then that is likely to facilitate a more efficient resolution of the rest of the proceedings for the following reasons. BlackBox says that it has notified TerraVision of all the transactions it is contractually required to give notice of. If the 'transactions of the defendant' issue is determined in favour of TerraVision it would then follow that BlackBox has not given TerraVision notice of all the transactions it is contractually required to give notice of. Counsel for BlackBox said, in effect, that BlackBox is then likely to co‑operate with TerraVision and agree for the BlackBox transactions which have not been notified to TerraVision to be divided into categories for the purpose of determining which class of products specified in the Price List they fall into. That would reduce the burden of work to be undertaken by the parties in preparing for the balance of the issues for trial and the time to be occupied at trial. If the 'transactions of the defendant' issue is not resolved before trial then it will be necessary for every transaction undertaken by BlackBox since the date of the Licence Agreement to be examined to determine which product class in the Price List they fall into. That would take up many days of hearing and involve substantial resources of the parties in preparing for trial.
I find that the utility, economy and fairness to the parties of a separate determination of the 'transactions of the defendant' issue is clearly established subject to two related matters raised by BlackBox and the question for separate determination being clearly and precisely framed. Indeed, BlackBox at first agreed that the separate trial of the 'transactions of the defendant' issue would contribute to the saving of time and cost but then withdrew its agreement to the trial of the issue as a separate question and opposed it for the reasons I will now address.
Counsel for BlackBox submitted that BlackBox will adduce evidence of the factual matrix relevant to the construction of the Licence Agreement, which evidence will add to the time required for the hearing of the construction issue. Furthermore, counsel for BlackBox submitted that there are likely to be contested factual issues both at the time of the hearing of the separate question and at the time of the trial of the remaining issues.
There are many judicial statements to the effect that the separate determination of an issue will usually not be an appropriate procedure where there is a commonality of witnesses and issues of credit as between the separate issue and other issues in the case which will or may necessitate a ruling on the credit of one or more of the common witnesses, thus possibly precluding that same judicial officer from again dealing with the matters going to the credit of the common witness in accordance with the decision of the New South Wales Court of Appeal in Australian National Industries Ltd v Spedley Securities Ltd (1992) 26 NSWLR 441.
Counsel for BlackBox submitted that the evidence to determine the construction issue will include evidence of pre‑contractual negotiations and of subsequent conduct. I am not persuaded that the admission of such material is likely to cause any substantial prolongation of the hearing of the 'transactions of the defendant' issue or is likely to raise significant issues of credit for the following four reasons.
First, BlackBox has not pleaded any facts or circumstances relevant to the construction of cl 10.4. A party who contends that the factual matrix is relevant to the construction of the contract must plead each fact of the factual matrix that they wish to rely on in support of their construction of the contract. That is a consequence of O 20 r 8(1) which requires that a defence must contain a statement of the material facts on which the defendant relies for his defence, but not the evidence by which those facts are to be proved. Further, O 20 r 9(1)(b) requires a defendant to plead specifically any matter which, if not specifically pleaded, might take the opposite party by surprise.
Secondly, on the hearing of this application, BlackBox led no evidence concerning the evidence which it may adduce at the separate hearing of the 'transactions of the defendant' issue.
Thirdly, the submissions of counsel for BlackBox did not condescend to the particulars of the evidence which BlackBox may adduce on the separate hearing of the issue concerning the construction of cl 10.4. Counsel's submissions went no further than submitting that BlackBox may lead evidence of pre‑contractual negotiations and the subsequent conduct of TerraVision, by its sole director Mr Clifford, in making no complaint that BlackBox had failed to notify TerraVision of any transactions which it was contractually required to give notice of. Counsel submitted that it may be inferred from this subsequent conduct that BlackBox's construction of the Licence Agreement, and in particular cl 10.4, was accepted by TerraVision to be correct.
Fourthly, admissible evidence of the pre‑contractual negotiations and of subsequent conduct is likely to be limited. The court is entitled to look at evidence of the objective factual background known to the parties at the date of the contract to assist in its interpretation. The objective factual background includes the genesis and aim of the transaction. However, the admissibility of background evidence cannot be used to introduce evidence of the subjective intentions of the parties. Further, the relevant background consists of facts that were actually known to both parties to the contract. Thus, insofar as pre‑contractual discussions are concerned, the volume of evidence of background is not likely to be extensive and there is no evidence that it will be controversial.
The court may not generally look at the subsequent conduct of the parties to interpret a written agreement. Counsel for BlackBox referred to the 10th Australian edition of Cheshire & Fifoot's Law of Contract in support of his contention that such evidence is admissible. The learned authors say at [10.16]:
In England the view has been adopted that the meaning of a contract must be determined as at the time when the contract was made, and that evidence of the subsequent conduct of the parties is inadmissible in the interpretation of a contract document … However, Australian courts have not been unanimous on this point. Although several modern High Court judgments support the view that such evidence is inadmissible, the dogmatic application of this view is open to criticism, and at odds with other (including High Court) authorities. At the same time, many courts have continued to profess adherence to it.
Despite the reservations of the learned authors, a single judge of this court is bound to apply the principle that evidence of the subsequent conduct of the parties is inadmissible in the interpretation of a written contract. In Agriculture & Rural Finance Pty Ltd v Gardiner (2008) 238 CLR 570 at [35] Gummow, Hayne and Kiefel JJ approved the rule that 'it is not legitimate to use as an aid in construction of [a] contract anything which the party said or did after it was made'. In Hancock Prospecting Pty Ltd v Wright Prospecting Pty Ltd [2012] WASCA 216; (2012) 294 ALR 550 McLure P, with whom Newnes JA and Le Miere J agreed, having referred to the 'true rule' stated by Mason J in Codelfa Construction Pty Ltd v State Rail Authority (NSW) (1982) 149 CLR 337, at [10] applied the rule that subsequent conduct cannot be taken into account in construing a contract.
I find that the determination of the 'transactions of the defendant' issue as a separate question will contribute to the saving of time and cost by substantially narrowing the issues for trial and may lead to the disposal of the proceedings. However, I am not satisfied that the plaintiff has adequately formulated the question for determination. Question 2 proposed by the plaintiff does not, in terms, specify the obligation or obligations of BlackBox which the plaintiff says arise from the proper construction of the Licence Agreement and the clause or clauses from which that obligation or those obligations arise, or the proper construction of the clause or clauses of the Licence Agreement which are to be interpreted or construed or even state the clauses of the Licence Agreement which are to be interpreted or construed. The parties should confer on the drafting of a question or questions to determine those matters and I will determine the question or questions to be separately tried after that conferral and further submissions.
Cap on payments
In its defence BlackBox pleads at [3(b)] that by mutual agreement in or around May 2007 the Licence Agreement was varied insofar as the royalty payment by BlackBox to TerraVision under the Licence Agreement was capped in the sum of $20,000 per month. The particulars of the plea are the rather Delphic reference 'Minutes of the Defendant's Board of Directors' meeting dated 8 May 2007'. In its reply TerraVision denies that the Licence Agreement was varied as alleged and further pleads that any variation to the Licence Agreement must be in writing and supported by consideration. BlackBox has given notice of a proposed rejoinder in which it pleads that if the variation of the Licence Agreement pleaded in its defence is unenforceable because it is not in writing and not supported by consideration, then BlackBox assumed that TerraVision would not seek to recover from it royalty payments under the Licence Agreement in excess of $20,000 per month and TerraVision is estopped from departing from that assumption or from the assumption that TerraVision would not seek to assert that the contract variation was unenforceable by reason of being not in writing or being unsupported by consideration.
In my view the 'cap on payments' issue is not suitable for determination as a separate question. The matters pleaded by BlackBox in its proposed rejoinder give rise to mixed questions of fact and law and are likely to give rise to significant contested factual issues and issues of the credit of witnesses whose credit is likely to be in issue at the trial of the remaining issues.
Communications to Clifford
The third issue identified by TerraVision concerns the notification requirements BlackBox must comply with upon a proper construction of the Licence Agreement. The plaintiff's proposed question 6 is:
As to the manner of notification, whether, upon a proper construction and pursuant to the terms of the Licence Agreement, the obligation of BlackBox to provide information to TerraVision is satisfied by communication (of the Required Information) to Mr Peter Clifford, at and for the purpose of his attendances at Board Meetings of BlackBox or otherwise in his capacity as director of BlackBox.
The matter concerning notification to Mr Clifford at board meetings of BlackBox or in his capacity as a director of BlackBox arises from BlackBox's defence. In [2(d)] of its defence BlackBox says that Mr Clifford was provided with unfettered access to BlackBox's financial records in his capacity as a director of BlackBox and was provided each month with a general ledger report of BlackBox and a purchase order to enable TerraVision to issue its invoice for royalties payable under the Licence Agreement. At [5] of its defence BlackBox denies, amongst other things, pleas by TerraVision concerning the information which BlackBox is contractually required to provide to TerraVision. BlackBox further repeats the matters pleaded in subpar 2(d) of its defence to which I have referred and further pleads that TerraVision, through Mr Clifford, had direct access to the Sales Transactions (as defined). Those pleadings appear to give rise to an issue whether the provision of information by BlackBox to Mr Clifford in his capacity as a director of BlackBox satisfies an obligation of BlackBox to provide information to TerraVision. However, in the course of the hearing of this application counsel for BlackBox said, in effect, that BlackBox's case is that information provided to Mr Clifford was provided to him in his capacity as a director of TerraVision even though it was provided to him at a board meeting of BlackBox, and furthermore information was provided to Mr Clifford on other occasions on which he had contact with officers or employees of BlackBox. Counsel for BlackBox acknowledged that its pleadings will need to be amended to reflect that position.
The 'communications to Mr Clifford' issue is not suitable for hearing as a separate question. It will not resolve the issue of whether or not the provision of information to Mr Clifford satisfied BlackBox's obligation to provide information to TerraVision. Furthermore, the issue is a mixed question of fact and law and is likely to involve contested factual issues and issues of credit of witnesses whose credit will also be in issue at the trial of the remaining issues.
Conclusion
The construction issue which TerraVision has described as the 'transactions of the defendant' issue is suitable for determination as a separate question and should be so determined. I am not satisfied that TerraVision's formulation of the proposed question is adequate. The parties should confer in relation to the proper formulation of that question or questions. I will then determine the question or questions to be separately tried. I will not order that the issues described by the plaintiff as the 'cap on payments' and 'communications to Clifford' issues be tried separately.
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