Terravision Pty Ltd v Black Box Control Pty Ltd [No 2]
[2015] WASC 66
•25 FEBRUARY 2015
TERRAVISION PTY LTD -v- BLACK BOX CONTROL PTY LTD [No 2] [2015] WASC 66
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2015] WASC 66 | |
| Case No: | CIV:2103/2012 | 19 SEPTEMBER 2014 | |
| Coram: | LE MIERE J | 25/02/15 | |
| 20 | Judgment Part: | 1 of 1 | |
| Result: | Paragraphs struck out from defendant's amended substituted defence | ||
| B | |||
| PDF Version |
| Parties: | TERRAVISION PTY LTD BLACK BOX CONTROL PTY LTD |
Catchwords: | Pleadings Extent of required particulars Permissible aids to agreement interpretation Corporate directors' imputed knowledge Turns on own facts |
Legislation: | Nil |
Case References: | Barclay Mowlem Construction Ltd v Dampier Port Authority (2006) 33 WAR 82 BP Australia Ltd v Nyran Pty Ltd [2004] FCAFC 163 BP Australia Pty Ltd v Nyran Pty Ltd (2003) 198 ALR 442 Chartbrook Ltd v Persimmons Homes Ltd [2009] 1 AC 1101 Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337 Energy Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640 Hart-Roach v Public Trustee (Unreported, WASC, Library No 980044, 11 February 1998) Kidd v Artus t/as Downings Legal [2013] WASC 264 Mainteck Services Pty Ltd v Stein Heurtey SA [2014] NSWCA 184 Prenn v Simmonds [1971] 1 WLR 1381 Retirement Services Australia (RSA) Pty Ltd v 3143 Victoria Street Doncaster Pty Ltd [2012] VSCA 134 Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd (1979) 144 CLR 596 Terravision Pty Ltd v Black Box Control Pty Ltd [2014] WASC 261 Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
- IN CHAMBERS
- Plaintiff
AND
BLACK BOX CONTROL PTY LTD
Defendant
Catchwords:
Pleadings - Extent of required particulars - Permissible aids to agreement interpretation - Corporate directors' imputed knowledge - Turns on own facts
Legislation:
Nil
Result:
Paragraphs struck out from defendant's amended substituted defence
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):
Barclay Mowlem Construction Ltd v Dampier Port Authority (2006) 33 WAR 82
BP Australia Ltd v Nyran Pty Ltd [2004] FCAFC 163
BP Australia Pty Ltd v Nyran Pty Ltd (2003) 198 ALR 442
Chartbrook Ltd v Persimmons Homes Ltd [2009] 1 AC 1101
Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337
Energy Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640
Hart-Roach v Public Trustee (Unreported, WASC, Library No 980044, 11 February 1998)
Kidd v Artus t/as Downings Legal [2013] WASC 264
Mainteck Services Pty Ltd v Stein Heurtey SA [2014] NSWCA 184
Prenn v Simmonds [1971] 1 WLR 1381
Retirement Services Australia (RSA) Pty Ltd v 3143 Victoria Street Doncaster Pty Ltd [2012] VSCA 134
Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd (1979) 144 CLR 596
Terravision Pty Ltd v Black Box Control Pty Ltd [2014] WASC 261
Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165
1 LE MIERE J: The plaintiff has applied to strike out a number of paragraphs of the defendant's amended substituted defence dated 4 September 2014.
The dispute
2 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).
3 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).
4 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 of the Licence Agreement 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, which I will describe in greater detail later in these reasons, 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 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.
5 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.
The action
6 TerraVision's re-amended statement of claim is dated and was filed on 12 March 2014. On 17 April 2014 BlackBox filed a substituted defence to the re-amended statement of claim. TerraVision filed a reply on 5 May 2014.
7 TerraVision 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. BlackBox opposed the trial of separate issues or questions. On 23 July 2014 I delivered reasons for decision in which I concluded that the construction issue which TerraVision described as the 'transactions of the defendant' issue is suitable for determination as a separate question and should be so determined: Terravision Pty Ltd v Black Box Control Pty Ltd [2014] WASC 261. I directed the parties to confer in relation to the formulation of the question or questions to be separately tried and adjourned the matter to 26 August 2014. I have not determined the question or questions that should be separately tried or made any order for the trial of a separate question or questions because BlackBox filed an amended defence after I had determined that there should be a trial of separate questions based on the pleadings as they then existed.
8 On 26 August 2014 BlackBox filed an amended substituted defence to re-amended statement of claim. TerraVision applied for certain paragraphs in BlackBox's amended defence to be struck out. On 4 September 2014 BlackBox filed a further defence entitled 'Re-amended Substituted Defence to Re-amended Statement of Claim'. I will refer to that document as BlackBox's amended defence. TerraVision then filed an amended minute pleading defects in BlackBox's amended defence. I heard TerraVision's application to strike out the specified paragraphs of BlackBox's amended defence on 19 September 2014. TerraVision did not, at that time, press all of its objections to the amended defence. TerraVision pressed only objections to paragraphs 2(d), 3AA, 3AB, 3A(a)(iii) - (v), 3A(b), 3A(c), 3A(d), 3A(e), 3A(f)(i) - (iv), 3A(g)(i) - (ii), 3A(h) and 3A(j). Those are the paragraphs of the amended defence which relate to the issue which I have determined should be the subject of a separate trial - the 'transactions of the defendant' issue. Before considering the amended defence I will outline the 'transactions of the defendant' issue.
Transactions of the defendant issue
9 The issue concerns which of the products and services provided by BlackBox are 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?
10 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.
11 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:
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12 This issue or dispute between the parties concerns 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.
13 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.
The amended defence
14 The most substantial amendments to the defence now being considered are those in pars 3AA, 3AB and 3A. Those amendments plead facts and circumstances known to the parties prior to entry into the Licence Agreement which BlackBox says shed light on the proper interpretation of cl 10.4 of the Licence Agreement. BlackBox says that it and TerraVision commenced their commercial business relationship in 2002 and at that time entered into an agreement which is pleaded in [3A(b)] and described as the 2002 Agreement. The 2002 Agreement is similar to the Licence Agreement but did not contain a clause in the terms of cl 10.4 of the Licence Agreement, or any similar clause. In 2005 TerraVision and BlackBox entered into a further similar agreement - the 2005 Agreement. Clause 10.4 in the 2005 Agreement is in substantially the same terms as cl 10.4 of the Licence Agreement. Paragraphs 3AA, 3AB and 3A of the amended defence plead matters which BlackBox says are the circumstances in which cl 10.4 of the 2005 Agreement came to be inserted in the 2005 Agreement and which were circumstances known to the parties.
15 TerraVision applies to strike out the new pleading. TerraVision says that the purpose or object of the 2002 Agreement and the 2005 Agreement, and the terms of those agreements, are irrelevant to the proper construction of the Licence Agreement. Insofar as the amended defence pleads what the parties proposed to achieve by the 2002 Agreement and the 2005 Agreement and the concerns of one party communicated to the other, TerraVision says those are matters of subjective intention and inadmissible in determining the proper construction of the Licence Agreement.
Legal principles - strike out
16 The plaintiff applies to strike out the specified paragraphs of the amended defence on the ground that the amendments may prejudice, embarrass or delay the fair trial of the action. The plaintiff says that the matters pleaded by the amendments are irrelevant and evidence to prove them is inadmissible. Material is not struck out merely because it is irrelevant or unnecessary. However, irrelevant or unnecessary material may be struck out on the ground that it may prejudice, embarrass or delay the fair trial of the action. Pleadings may be struck out on this ground because they are evasive, they conceal or obscure the real questions in controversy, they are ambiguous or not reasonably intelligible, they raise immaterial or irrelevant issues, they fail to confine the issues or state the case of the party in question with reasonable particularity, or they raise a case in terms which are simply too general: Kidd v Artus t/as Downings Legal [2013] WASC 264 [26] (Allanson J) citing Hart-Roach v Public Trustee (Unreported, WASC, Library No 980044, 11 February 1998) (Murray J).
Legal principles - extrinsic evidence
17 The objective approach is to be adopted in determining the rights and liabilities of parties to a contract. In Energy Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640 French CJ, Hayne, Crennan and Kiefel JJ said:
The meaning of the terms of a commercial contract is to be determined by what a reasonable businessperson would have understood those terms to mean. That approach is not unfamiliar. As reaffirmed, it will require consideration of the language used by the parties, the surrounding circumstances known to them and the commercial purpose or objects to be secured by the contract. Appreciation of the commercial purpose or objects is facilitated by an understanding 'of the genesis of the transaction, the background, the context [and] the market in which the parties are operating' [35].
18 The 'true rule' as stated by Mason J in Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337 at 352 is that evidence of surrounding circumstances is admissible to assist in the interpretation of the contract if the language is ambiguous or susceptible of more than one meaning. However, notwithstanding that the language of a contract is ambiguous or susceptible of more than one meaning there remain limits on the use of evidence of background or surrounding circumstances. The background cannot be used to introduce by a side wind evidence of the subjective intention of the parties, since that is contrary to the objective theory of interpretation of contracts.
19 In Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd (1979) 144 CLR 596 the High Court was asked to construe certain leases. The respondent sought to rely on the oral testimony given by officers of the appellant and the respondent as to what was said and done during the course of negotiations leading up to the making of the contract, with a view to demonstrating that the parties had 'commercial' leases in mind. This was said to be evidence of surrounding circumstances to which recourse could be had in interpreting the contract. Mason J, with whom Gibbs and Stephen JJ agreed, held that the evidence of the antecedent oral negotiations and expectations of the parties could not be used to construe the words of the contract. Mason J stated:
In truth the evidence is not evidence of surrounding circumstances; it is evidence of the antecedent oral negotiations and expectations of the parties and as such it cannot be used for the purpose of construing the words of a written contract intended by the parties to comprehensively record the terms of the agreement which they have made. As Lord Wilberforce said in Prenn v Simmonds [1971] 1 WLR 1381 at 1385; [1971] 3 All ER 237 at 241:
'… evidence of negotiations, or of the parties' intentions … ought not to be received, and evidence should be restricted to evidence of the factual background known to the parties at or before the date of the contact, including evidence of the 'genesis' and objectively the 'aim' of the transaction.
As to the circumstances, and the object of the parties, there is no controversy in the present case. The agreement itself, on its face, almost supplies enough, without the necessity to supplement it by outside evidence' (606).
- In Prenn v Simmonds [1971] 1 WLR 1381 a mass of oral and documentary evidence as to the parties' intentions was let in by a claim for rectification of the contract document. Once this claim failed, the House of Lords held that the evidence was not admissible in the construction of the words at issue, namely 'aggregate profits of RTT … available for dividend'.
20 Evidence of prior negotiations may be admissible if it establishes objective background facts known to both parties but is not admissible insofar as it is evidence of the subjective intentions or expectations of the parties. In Codelfa Mason J formulated principles that limit the extent to which evidence of prior negotiations and even those that relate to common beliefs may be admissible in construing the terms of a written contract. Mason J said:
Generally speaking facts existing when the contract was made will not be receivable as part of the surrounding circumstances as an aid to construction, unless they were known to both parties, although, as we have seen, if the facts are notorious knowledge of them will be presumed.
It is here that a difficulty arises with respect to the evidence of prior negotiations. Obviously the prior negotiations will tend to establish objective background facts which were known to both parties and the subject matter of the contract. To the extent to which they have this tendency they are admissible. But in so far as they consist of statements and actions of the parties which are reflective of their actual intentions and expectations they are not receivable. The point is that such statements and actions reveal the terms of the contract which the parties intended or hoped to make. They are superseded by, and merged in, the contract itself. The object of the parol evidence rule is to exclude them, the prior oral agreement of the parties being inadmissible in aid of construction, though admissible in an action for rectification.
Consequently when the issue is which of two or more possible meanings is to be given to a contractual provision we look, not to the actual intentions, aspirations or expectations of the parties before or at the time of the contract, except in so far as they are expressed in the contract, but to the objective framework of facts within which the contract came into existence, and to the parties' presumed intention in this setting. We do not take into account the actual intentions of the parties and for the very good reason that an investigation of those matters would not only be time consuming but it would also be unrewarding as it would tend to give too much weight to these factors at the expense of the actual language of the written contract (352).
21 In BP Australia Pty Ltd v Nyran Pty Ltd (2003) 198 ALR 442 at [34] and [46] RD Nicholson J said that objective background facts can include statements and actions of the parties which reflect their mutual actual intentions but that communication of a subjective intention by one party to another in the course of contractual negotiations does not of itself result in the subjective intention becoming a mutually known objective background fact of the type qualifying for admission. His Honour said that what is needed in addition to the fact of communication is the element of concurrence which creates the mutuality. The decision of RD Nicholson J was affirmed by the Full Federal Court in BP Australia Ltd v Nyran Pty Ltd [2004] FCAFC 163.
22 It can be seen, therefore, that in determining whether prior negotiations may be admissible in construing a written contract a distinction must be drawn between negotiations that tend to establish objective background facts which were known to both parties and negotiations insofar as they consist of statements and actions of the parties which are reflective of their actual intentions and expectations.
23 Prenn v Simmonds was confirmed by the House of Lords in Chartbrook Ltd v Persimmons Homes Ltd [2009] 1 AC 1101 [30] - [41]. Lord Hoffman said, after a detailed examination of the reason for the rule excluding evidence of prior negotiations in construing written contracts:
The rule may well mean … that parties are sometimes held bound by a contract in terms which, upon a full investigation of the course of negotiations, a reasonable observer would not have taken them to have intended. But a system which sometimes allows this to happen may be justified in the more general interest of economy and predictability in obtaining advice and adjudicating disputes [41].
- After confirming the exclusionary rule formulated by Lord Wilberforce in Prenn v Simmonds, Lord Hoffman addressed where evidence of what was said during negotiations could be used:
The rule excludes evidence of what was said or done during the course of negotiating the agreement for the purpose of drawing inferences about what the contract meant. It does not exclude the use of such evidence for other purposes: for example, to establish that a fact which may be relevant as background was known to the parties, or to support a claim for rectification or estoppel. These are not exceptions to the rule. They operate outside it [42].
25 BlackBox submits that the 2002 Agreement and the 2005 Agreement are part of the context of the Licence Agreement. Counsel for BlackBox submitted that the evolution of cl 10.4 is part of the context within which it came to be inserted in the Licence Agreement. Counsel referred to the judgment of Leeming JA, with whom Ward and Emmett JJA agreed, in Mainteck Services Pty Ltd v Stein Heurtey SA [2014] NSWCA 184 where the court had regard to an earlier contract - the first consortial agreement - in considering the proper interpretation of article II.1 of a subsequent agreement - the second consortial agreement. Leeming JA said that article II.1 of the second consortial agreement was ambiguous or susceptible of more than one meaning and hence evidence of surrounding circumstances was admissible to assist in its interpretation. His Honour said that one aspect of the immediate context of the execution of the second consortial agreement is that the parties were already bound by a very similar document, the first consortial agreement, on which their new bargain was based. His Honour had regard to the terms of the first consortial agreement and the similarities and differences between the two agreements. In support of its construction of article II.1 of the second consortial agreement Mainteck sought to rely upon what was said by representatives of Stein Heurtey and Mainteck at 'scope meetings' about six months before the second consortial agreement was executed and about two months before the first consortial agreement was executed. Leeming JA held that evidence of what was said at those meetings was inadmissible as an aid to the construction of article II.1 of the second consortial agreement. Leeming JA said:
Seventhly, although evidence of context and purpose expands the scope of the litigation, none of the foregoing should be seen as opening the door to lengthy litigation in commercial causes. As will be seen below, the evidence of 'surrounding circumstances' sought to be relied on by Mainteck was lengthy, contested, vague, and divorced - by many months in time, and a markedly different commercial position - from the execution of the Second Consortial Agreement. This makes it quite distinct from evidence which is apt to assist the process of construction [85].
- and:
… the available evidence is too general and too removed from the Second Consortial Agreement to perform any significant role in construction. It is to be recalled that the evidence was originally led in support of Mainteck's misrepresentation claim. There was no challenge to the statement by the primary judge that what occurred in late March and early April was largely unrecorded. One of the principal participants, Mr Atie, had died shortly prior to the hearing before the Referee, and his affidavit evidence was in general terms. The meetings took place in quite different circumstances, at a time when Mainteck had supplied a tender to BSL in the amount of $45,614,798 as a direct contractor, in response to its February 2004 invitation. It was only after the Scope Meetings that Mainteck received a copy of the draft Head Contract, and was formally told by BSL (on 31 May 2004) that it was not proceeding on its February 2004 invitation.
The underlying problem Mainteck faces is that the Final Design was unspecified and, expressly, could change and was intended to change. It was inevitable that if the Final Design changed, not only the materials supplied but also the services required to install it would change. Mainteck is to be taken to have entered into the Second Consortial Agreement knowing that that was the nature of its obligations. In those circumstances, it is not possible to give any meaningful weight to the pictures of WBF components handed over at the Scope Meetings [128] - [129].
26 The provisions of the Licence Agreement, and in particular cl 10.4, are relevantly ambiguous or susceptible of more than one meaning and therefore evidence of background or surrounding circumstances is admissible to assist in the interpretation of the agreement. The critical issue is the extent to which evidence of surrounding circumstances or background, including antecedent agreements and prior negotiations, can be used to construe the Licence Agreement.
27 BlackBox does not dispute that evidence of the subjective intentions and expectations of the parties is inadmissible. Rather, it argues that the matters which it pleads in [3A] of the amended defence are evidence of the objective factual matrix or surrounding circumstances in which the court must place itself when construing the Licence Agreement. For the reasons which follow I disagree. Paragraph 3A of the amended defence pleads matters which fall within the exclusionary rule and cannot be used as an aid to the proper construction of the Licence Agreement.
Paragraph 3A
28 The structure of [3A] is as follows. The chapeau, or introductory words, are 'at the time at which the plaintiff and the defendant entered into the License Agreement the following facts, matters and circumstances were known to the parties'. Those facts, matters and circumstances are then set out in subpars (a) to (k).
29 Subparagraph 3A(a) refers to matters at the time of the incorporation of BlackBox. Subparagraph 3A(a)(iii) refers to things that were 'proposed' by directors of TerraVision and BlackBox. Subparagraphs 3A(a)(iv) and (v) refer to things that were 'proposed' but do not say by who they were proposed. Subparagraph 3A(b) is 'in or about 2002 [TerraVision] and [BlackBox] entered into [the 2002 Agreement] to give effect to the matters pleaded in subparagraphs 3A(a)(iii) to (v)'. Subparagraph 3A(c) refers to matters that are and are not contained in the 2002 Agreement.
30 Subparagraph 3A(d) is 'in or about 2005 [TerraVision] and [BlackBox] entered into [the 2005 Agreement]'. Subparagraph 3A(e) refers to terms of the 2005 Agreement. Subparagraph 3A(f) pleads matters prior to the execution of the 2005 Agreement. Subparagraphs 3A(f)(i) to (iv) plead discussions between representatives of TerraVision and BlackBox. Subparagraph 3A(g) pleads the purpose of cl 10.4 of the 2005 Agreement and cl 9.3 of the 2005 Agreement by reason of the facts, matters and circumstances pleaded in [3A(a)] to [3A(f)].
31 Subparagraph 3A(h) pleads that prior to the execution of the Licence Agreement it was known to TerraVision and BlackBox that BlackBox was selling a range of products to its third party customers that did not comprise software, hardware or services otherwise available to BlackBox from TerraVision, inclusive of the products and services then particularised. Subparagraph 3A(i) pleads that at no material time prior to the execution of the Licence Agreement did TerraVision require BlackBox to notify it, or make payments in relation to, any of the transactions pleaded in [3A(h)] under cl 10.4 of the 2005 Agreement.
32 Subparagraph 3A(j) pleads that prior to the execution of the Licence Agreement the transactions pleaded in [3A(h)] were not contemplated by TerraVision and BlackBox to fall within cl 10.4 of the 2005 Agreement or within 'BlackBox products or services' within the meaning of cl 9.3 of the 2005 Agreement.
33 Subparagraph 3A(k) pleads that cl 10.4 of the Licence Agreement is in terms substantially similar to cl 10.4 of the 2005 Agreement except for three differences there particularised.
Application of principles to [3A]
34 The making of the 2002 Agreement and the 2005 Agreement, their terms and when they were executed are part of the surrounding circumstances which are admissible in aid of the interpretation of the Licence Agreement. However, [3A] goes beyond that. Unfortunately, it is necessary to consider each subparagraph and whether the matters pleaded in those paragraphs may be used as an aid to the construction of the Licence Agreement. If they can, they are relevant and may be pleaded. If they cannot, they are not relevant and should be struck out if they may prejudice, embarrass or delay the fair trial of the action.
Paragraph 3A(a) and (b)
35 The pleading in [3A(a)(iii) - (v)] of things that were 'proposed' is a plea of the subjective intention or expectation of representatives of the parties, and is inadmissible for that reason. Subparagraph 3A(b) pleads that TerraVision and BlackBox entered into the 2002 Agreement to give effect to the matters pleaded in subpars 3A(a)(iii) to (v). Those are not matters which may be used as an aid to the construction of the Licence Agreement. The terms and objects of the 2002 Agreement, insofar as they are relevant to the construction of the Licence Agreement, are to be ascertained from the 2002 Agreement itself. The matters pleaded in [3A(a)] are too removed from the Licence Agreement to be considered as an aid to its construction.
Paragraph 3A(c), (d) and (e)
36 Subparagraph 3A(c) pleads terms of the 2002 Agreement. That is an objective fact, not evidence of the subjective intention or expectations of the parties. It is a permissible aid to the construction of the Licence Agreement. Subparagraph 3A(d) which pleads that the parties entered into the 2005 Agreement and [3A(e)] which pleads terms of the 2005 Agreement are objective facts and are permissible aids to the construction of the Licence Agreement.
Paragraph 3A(f)
37 Subparagraph 3A(f) pleads subjective intentions of the parties in the course of negotiating the 2005 Agreement under the guise of objective background facts. What was said in the course of negotiations are objective facts within the knowledge of the parties. But the purpose of negotiations is to produce a written instrument containing the parties' concluded agreement. Where such an instrument is produced its terms constitute the parties' bargain. Negotiations have achieved their objective and the history of the negotiations is normally irrelevant. It is not permissible, as an aid to construction of the instrument, to single out particular demands or assertions by one party. Communication of a concern, demand or intention by one party to another in the course of contractual negotiations does not of itself result in the concern, demand or intention becoming a mutually known objective background fact which may be used as an aid to the construction of the instrument giving effect to the concluded agreement. Furthermore, statements made in the course of negotiations for the 2005 Agreement are not the relevant context of the Licence Agreement. The circumstances at the time of making the Licence Agreement are different from those at the time of the negotiation of the 2005 Agreement. It is not legitimate to construe cl 10.4 of the Licence Agreement by reference to statements made in the course of negotiations leading to the execution of the 2005 Agreement. The matters pleaded in pars 3A(f) are too removed from the Licence Agreement to be considered as an aid to its construction.
Paragraph 3A(g)
38 Subparagraph 3A(g) depends upon pars 3A(a) to 3A(f), some of which are not permissible aids to the construction of the Licence Agreement. For that reason subpar 3A(g) should be struck out.
Paragraph 3A(h)
39 Subparagraph 3A(h) appears to plead objective background facts known to the parties at the time of the execution of the Licence Agreement. The subparagraph pleads that TerraVision and BlackBox knew that BlackBox was selling the range of products to its third party customers that did not comprise software, hardware or services otherwise available to BlackBox from TerraVision. TerraVision objects to that plea on three particular grounds. First, there is no plea as to the basis or source of the knowledge of TerraVision. Secondly, the content of the paragraph generally suggests an attempt to pierce the corporate veil. Thirdly, a company is not bound by conversations between individual directors (or shareholders) or by knowledge that an individual director (or shareholder) may or may not have. In the circumstances of this case, the matters raised in the second and third objections are matters to be argued and considered at the trial of the action and, in the circumstances of this pleading, are not grounds for striking out the pleading.
40 As to the plea of knowledge, [3A(h)] must be read with [3AA] and [3AB] which plead that a reference in [3A] to TerraVision's knowledge and BlackBox's knowledge is a reference to Mr Clifford's knowledge on behalf of TerraVision in his capacity as the sole director of TerraVision and to the knowledge of Whitton, Langmead and Langford on behalf of BlackBox in their capacities as directors of BlackBox. The present issue is whether it is sufficient as a matter of pleading for BlackBox to allege TerraVision and BlackBox had knowledge in the way the pleading has done. Order 20 r 13 of the Rules of the Supreme Court 1971 (WA) does not require a party to plead particulars of a plea of knowledge. However, the court may order particulars in an appropriate case or refuse to allow an amendment which does not give adequate particulars. There will be cases where the mere allegation of knowledge by a plaintiff will be sufficient as a matter of pleading. The circumstances may make it obvious how it can be said that a plaintiff had actual knowledge of something. This is not such a case. The plea is that Mr Clifford had knowledge in his capacity as the sole director of the plaintiff. That may be sought to be proved in a number of ways. It may be done by direct evidence that somebody told Mr Clifford the facts and stated that Mr Clifford was being told in his capacity as director of TerraVision. However, it is likely that the allegation of knowledge by Mr Clifford in his capacity as director of TerraVision will be sought to be made out by inviting the court to infer that from other objectively proved facts.
41 The contemporary role of pleadings has to be viewed in the context of contemporary case management techniques and pre-trial directions which, in this court, will almost invariably include a direction for the preparation of a trial bundle identifying the documents that are to be adduced in evidence in the course of the trial, the exchange well prior to trial of non-expert witness statements and expert reports and the exchange of chronologies and written submissions. In Barclay Mowlem Construction Ltd v Dampier Port Authority (2006) 33 WAR 82 at [16] Martin CJ said that those processes leave little opportunity for surprise or ambush at trial and pleadings today can be approached in that context and therefore in a rather more robust manner than was historically the case, confident in the knowledge that other systems of pre-trial case management will exist and be implemented to aid in defining the issues and apprising the parties to the proceedings of the case that has to be met. The Chief Justice said at [7] that provided a pleading fulfils its basic functions of identifying the issues, disclosing an arguable cause of action or defence and apprising the parties of the case that has to be met, the court will properly be reluctant to allow the time and resources of the parties and the limited resources of the court to be spent extensively debating the application of technical pleadings rules that evolved in and derived from a very different case management environment.
42 However, this is a case where it is appropriate that the defendant give particulars of the plea that Mr Clifford had knowledge of the relevant facts in his capacity as a director of the plaintiff and the amendment should not be allowed without those particulars. That is so for three reasons. First, if the defendant seeks to prove the pleaded knowledge by inference from other objective facts then the plaintiff is entitled to know what those objective facts are and not be left to trawl through the trial bundle and witness statements and speculate which are the objective facts on which the defendant relies to prove the plea. Secondly, in the absence of particulars the court is not able to scrutinise the legal relevance of the plea and hence the admissibility of evidence adduced at the trial of the preliminary question.
43 The third reason arises from my determination that there should be a trial of a preliminary question concerning the 'transactions of the defendant' issue. I made that determination before the defendant amended its defence by the introduction of [3A(h)]. The preliminary question to be tried has not been formulated. The formulation of that question and whether or not it is still appropriate to decide the question as a preliminary question may be affected by the matters to be considered as an aid to the construction of the Licence Agreement and the evidence which might be led on that issue. In opposing TerraVision's application for the trial of a preliminary issue BlackBox submitted that it would adduce evidence of the factual matrix relevant to the construction of the Licence Agreement which evidence would add to the time required for the hearing of the construction issue and 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. I gave little weight to those submissions because BlackBox had not pleaded any facts or circumstances relevant to the construction of cl 10.4 of the Licence Agreement and in his submissions 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 of the Licence Agreement. Before determining the question to be determined at the preliminary hearing, or whether it is appropriate to determine a preliminary question in light of the amended pleading, the court will be assisted by knowing the factual issues raised by the plea and the nature and extent of the evidence likely to be adduced in relation to it.
44 In the absence of particulars of the plea that Mr Clifford had knowledge of the relevant facts and that he had that knowledge in his capacity as a director of TerraVision, [3A(h)] should be struck out.
Paragraph 3A(j)
45 Paragraph 3A(j) pleads certain matters that were and were not contemplated by TerraVision and BlackBox. This delphic plea cries out for inclusion of particulars, not only to give TerraVision notice of the case it has to meet but also to permit the court to scrutinise the legal relevance of the plea. In its present form, the paragraph is no more than a plea that each of the parties thought that the transactions referred to did not fall within cl 10.4 of the 2005 Agreement which in turn is based on the parties' subjective view of the terms of the 2005 Agreement, their unstated knowledge of the relevant transactions and how they related those transactions to the 2005 Agreement, if they averted to the matter at all. That is no more than a plea of the parties' subjective view of the meaning of the 2005 Agreement. The parties' subjective view of the meaning of the Licence Agreement is not a permissible aid to the interpretation of the Licence Agreement. The parties' subjective view of the meaning of the 2005 Agreement is all the more not a permissible aid to the interpretation of the Licence Agreement.
Paragraphs 3A, 3BD, 3(A)(a), (b), (f), (g), (h) and (j) should be struck out
46 For the reasons stated, subpars 3A(a), (b), (f), (g), (h) and (j) plead matters that are not permissible aids to the construction of the Licence Agreement and thereby raise irrelevant issues or they fail to state the defendant's case with reasonable particularity. The matters which are to be included in the party's witness statements for trial of the preliminary question, and what evidence may be led at that trial, depends on the pleadings. If those paragraphs remain in the amended defence they will embarrass, prejudice or delay the fair trial of the action by raising false issues and permitting or requiring the parties to lead evidence which is not admissible or by failing to inform TerraVision and the court of BlackBox's case with sufficient particularity to enable TerraVision to properly prepare its witness statements and the court to determine the relevance and admissibility of the evidence adduced.
47 Paragraphs 3AA and 3AB relate to subparagraphs of [3A] and hence should be struck out.
Amended defence - [2(d)]
48 In [2] of the statement of claim TerraVision pleads that BlackBox was governed in accordance with law by its members and office holders, which office holders included Mr Clifford who is responsible for information technology (Technical Director) without any involvement in the financial management of BlackBox and without access to financial records, except as disclosed to the directors of BlackBox in board papers from time to time. In [2(d)] of the amended defence BlackBox pleads that Mr Clifford was provided with unfettered access to BlackBox's financial records in his capacity as a director of BlackBox and Mr Clifford was separately provided each month with an extract of BlackBox's general ledger report and a purchase order to enable TerraVision to issue its invoice for royalties payable under the Licence Agreement. Particulars are given of that assertion.
49 TerraVision says that the plea is not a plea of material fact, it is inconsistent with the pleading at [5(b)] and the particulars at [7(b)] and [10(b)]. TerraVision further says that the plea suggests an attempt to pierce the corporate veil. It is said that a company is not bound by conversations between individual directors (or shareholders) or by knowledge that an individual director (or shareholder) may or may not have.
50 I do not accept that the plea in [2(d)] is not a plea of a material fact nor that it is necessarily inconsistent with the other paragraphs of the amended defence referred to. As to what knowledge of Mr Clifford or conversations with Mr Clifford may bind TerraVision or be evidence of knowledge of TerraVision, those are all matters for argument and not matters which should lead to the plea being struck out.
Conclusion
51 Paragraphs 3AA, 3AB and 3A(a), (b), (f), (g), (h) and (j) should be struck out.
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