Western Electric Australia v Acn 067 853 454 No. DCCIV-00-249

[2000] SADC 133

Western Electric Australia Pty Ltd v
ACN 067 853 454 Pty Ltd
[2000] SADC 133

Judge Kitchen           
Civil

1. By a sale and purchase agreement in writing dated 8th August, 1999, Exhibit P14 Part 1, (“the SPA”) the defendant (then called Pope Electric Motors Pty. Ltd and sometimes referred to as “Old Pope”) agreed to sell to the plaintiff Western Electric Australia Pty. Ltd. (“WEA”) and/or its nominee the “business” and “assets” of the defendant as defined in the agreement. The SPA was varied by a deed made on 3rd September, 1999;  on the same date two other deeds, one concerning the assignment of intellectual property and the other technology transfer, were also entered into - those three deeds are comprised in Exhibit P14 Parts 2-4 inclusive.

2. The business of the defendant included the manufacture and the sale, both in Australia and abroad, of a range of electric motors; the “business” sold to the plaintiff is defined in the SPA to mean such motors “with a capacity of up to 5,000 kw but (excluding) the capacity to manufacture electric motors of a capacity greater than that set out in Schedule One (which will be one of the matters covered in the technology transfer agreement)”.  Schedule One listed high voltage motors ranging from 300 to 3,000 kw.  The “assets” is defined in the SPA to include, inter alia, “business records” and “intellectual property rights”;  each of those expressions is separately defined.  For the intellectual property rights component of the price, the plaintiff paid $1m.

3. The SPA   was completed on 3rd September, 1999.  After that date a dispute arose and continued between the parties concerning the defendant’s alleged obligation pursuant to the SPA to deliver up to the plaintiff what are described as “Certificates of Conformity”, ten in number, and various related drawings and test reports in the name and possession of the defendant.  Each certificate of comformity was issued by one or other of two Australian authorised testing bodies certifying that the electric motor of the design and manufacture described in the certificate complied with Australian standards for electric motors for use in hazardous areas.

4. On 21 February, 2000 the plaintiff issued proceedings against the defendant seeking (as subsequently amended)

   ·....... declarations pursuant to the SPA that the Certificates of Conformity (together with the related test reports and drawings) and the defendant’s intellectual property rights therein were transferred to the plaintiff, and that the defendant is in breach of the SPA by its failure to transfer the Certificates of Conformity to the plaintiff.

·....... an order that the defendant deliver up to the plaintiff the Certificates of Conformity (with the related test reports and drawings) and all copies of them in its possession.

·....... an order that the defendant give to the plaintiff its written consent to the issue to the plaintiff of Certificates of Conformity in respect of motors the subject of the certificates in the defendant’s possession and to the plaintiff’s exclusive use, to the exclusion of the defendant, or those claiming through or under the defendant, of the test reports and drawings relating to the Certificates of Conformity whether in the custody of an authorised testing body or otherwise.

·....... an injunction against the defendant restraining it from dealing in, disposing of or transferring the Certificates of Conformity or its intellectual property in the related test reports and drawings or authorising any application for the issue of supplementary or new certificates, other than in favour of the plaintiff.

·....... damages, an account of profits and costs.

1. The plaintiff’s application was supported by several affidavits.  The defendant filed affidavits in counter to the factual version asserted by the plaintiff.  On account of the claimed urgency attending the plaintiff’s claims concerning its need to have the Certificates of Conformity, and the related test reports and drawings in its possession for the purposes of the business acquired under the SPA a Judge of the Court set the application for hearing. with an estimate of one day.  The hearing in fact extended over nineteen sitting days, during which further affidavits were tendered, deponents to affidavits were cross-examined, other witnesses were called and numerous documents were tendered.  I hasten to point out that the extended course of the hearing was a consequence of what, after hearing extensive submissions from counsel for each of the parties, I judged to be the need to accord to each side a reasonable opportunity to deal with the numerous issues which emerged in the early part of the hearing, including the defendant’s developed claim that if the equitable relief sought by the plaintiff were to likely result in orders favourable to the plaintiff there is good reason to refuse that relief upon the grounds of equitable defences alleged by the defendant.

2. The plaintiff is a company incorporated in Western Australia on 6th June, 1986;  it is an wholly owned subsidiary of Lindeteves-Jacoberg Limited (LJL) a corporation incorporated in Singapore.   Lim Say Hui (Mr Lim), a resident of Singapore is the Managing Director of LJL.  Lai King Chan (Mrs Lau), also a resident of Singapore, is the Finance Director of LJL.

3. The business of the plaintiff is the manufacture of, or the assembly of components for, electric motors.  It has a factory in Dalian, China and a plant at Belmont in New South Wales for those purposes.

4. Ronald John Griffiths (Mr Griffiths) was the Managing Director of the Australian interests of David Brown Gear Industries Limited (David Brown).  That company designed and manufactured heavy duty gear boxes for the mining and mineral processing industries.  In about 1990 David Brown purchased from Email all the assets of that part of a division of Email’s business which manufactured or assembled electric motors and traded under the name of Pope Electric Motors.

5. In and after 1990 Mr Griffiths as Managing Director of David Brown and for the purposes of Pope Electric Motors’ business investigated several manufacturers of small electric motors in China - motors of that description were being made in China at a lesser cost than those made in Australia.  After importing and testing motors from a number of Chinese manufacturers Mr Griffiths selected Nan Yang Explosion Proof Electric Motor Company (“Nan Yang”) as a supplier, judging that it was able to repeatedly produce a quality product.  Thereafter David Brown purchased from Nan Yang low voltage motors in the range 0.37 kilowatts up to 250 kilowatts.

6. The commercial relationship between Pope Electric Motors and Nan Yang continued after Griffiths White Pty. Ltd., (all the shares in which were owned by Mr Griffiths and his wife), purchased in April 1995 a shelf company, Pelanic Pty Ltd, which then purchased from David Brown certain fixed and other assets, in effect the business of Pope Electric Motors, changed its name to Pope Electric Motors Pty Ltd and conducted that business in the same factory premises at Woodville North from which David Brown had traded under the name Pope Electric Motors.  Mr Griffiths moved from Victoria to live in South Australia.  In 1997, as I understand, Griffiths White by means of another shelf company purchased the assets and the name of Perry Engineering from Boral Industries.  Perry was a manufacturer of large electric motors.  Mr Griffiths moved Pope Electric Motors to Perry’s premises at Mile End and integrated a number of the functions common to both (computer facilities and a design office) at that place.  Mr Griffiths was appointed as the Managing Director of the Pope/Perry group.

7. Kevin William Cowan (Dr Cowan) is an engineer.  He was employed by the defendant from August 1997 to September 1999 as the Technical Manager responsible to the Managing Director (Mr Griffiths) for, inter alia, the design of new low voltage motors and high voltage motors for use in safe areas and hazardous areas and obtaining hazardous area certification for such motors.  In September 1999, and as an incident of the plaintiff’s purchase under the SPA, Dr Cowan accepted employment with the plaintiff.

8. By Section 59 of the Electricity Act 1996 a person who connects an electrical installation to an electricity transmission or distribution network must comply with technical and safety requirements imposed by the regulations made under that Act. It is not in dispute that the installation and connection of electric motors of the kind the subject of these proceedings is controlled by that Act. Section 61(1) of the same Act imposes on the person who carries out work on an electrical installation, or proposed electrical installation, an obligation to ensure that the work, examination and tests are carried out as required by the regulations and that the requirements of the regulations as to notification and certificates of compliance are complied with.

9. By Regulation 17 of the Electricity (General) Regulations 1997 electrical installations “must comply with AS 3000 and any other Australian Standard called up by AS 3000”. Regulation 18 sets out for the purposes of Section 61(1) what it is the person who carries out work on an electrical installation must do - it involves completing and signing “a Certificate of Compliance in a form approved by the Technical Regulator”.

10. AS 3000, commonly known as ‘the wiring rules’, deals in paragraph 7•9 with hazardous areas which are designated to be either Class 1 areas or Class 2 areas;  the first are areas in which the presence of flammable gases or vapours produces an explosive gas atmosphere;  the second are areas which are hazardous because of the presence of combustible dust, fibres or “flyings”.  These categories of areas and the applicable standards and features of electrical equipment for use in them are more particularly set out in SAA HB 13.  Paragraph 7•9•3•1 of AS 3000 requires that electrical equipment selected for use in hazardous areas is to comply “with the appropriate requirements specified in the various parts of AS 2381 Series” and refers the reader to SAA MP 69 (MP 69)for “details of the certification scheme administered by Standards Australia”.  That document, in a preface, describes that it

    “...  contains details of the policy and administration that apply to the Standards Australia Certification and ExMark Licensing Scheme for Hazardous area electrical equipment.  The procedures for this Scheme are available in a separate document from Standards Australia Quality Assurance Services Pty Ltd. (SAQAS) and Testing Stations that have an agency agreement with SAQAS”

The Scheme is earlier described in the preface to be

“... a two tier scheme ... with the following criteria:

(a)...... the equipment, which conforms to one or more of the Australian, New Zealand or Joint explosion-protected electrical equipment Standards will carry a Certificate of Conformity

(b).... the Certificate holder, subject to appropriate quality assurance standards being met, may apply for a licence to use the Australian ExMark.”

The preface also includes

“Standards Australia Committee P/8, the Ex Mark Certification Management Committee, determines policy issues associated with the introduction of” in 1993 “the new Scheme and, in addition, oversees the operation of SAQAS, the body administering the new Scheme.

SAQAS permits accredited testing stations, acting as its agent, to issue certificates and licences to manufacturers to use the ExMark logo following a Satisfactory Report of Conformance.”

1. Testing stations which have been accredited, and act as agents for SAQAS, are Workcover Authority of NSW, Londonderry Occupational Safety Centre (LOSC subsequently renamed Testsafe) and Redbank Testing and Certification Centre (SIMTARS).

2. MP 69 includes a form of application for a Certificate of Conformity with respect to the equipment described, and submitted, by the applicant for testing.

3. Paragraph 2•4 of MP 69 concerns Certificates of Conformity.

   “2•4 Certificate of Conformity.  Certificates are issued on the basis of a type test and do not provide any assurance regarding continued conformance during production, i.e. product quality assurance.  The applicant undertakes to ensure that, in production, every item will comply with the drawings specified in the Certificate, and that production models will be identical to the models submitted for testing and examination, complying with the relevant Australian, New Zealand or Joint Standards.”

The undertaking mentioned in that paragraph is the subject matter of another form, provided by the applicant, the substance of which is

“I/We confirm that I/We have read, understood and agree with the Policy and Procedure for Certification of Explosion Protected Electrical Equipment and undertake:

1...... To comply in all respects with the Policy and Procedure for Standards Australia Certification of Explosion Protected Electrical Equipment.

2.To apply the Certificate number only to goods which comply with the relevant Australian, New Zealand or Joint Standard.

3...... To ensure that the goods are manufactured in accordance with the drawings and conditions specified in the Certificate, and that they are the same as the samples submitted for testing, and found to comply with the requirements of relevant Australian, New Zealand Joint Standard.

4.Not to make any modification whatsoever to the equipment before applying and obtaining a Supplementary Certificate covering such modification.

5.     To advise of any alteration to the above conditions.

6.     To pay the fees fixed for certification and administration.”

1. Paragraph 2.8 of MP 69 reads

   “2.8 Transfer of Certificates or Licence   Certificates of Conformance or a Licence to use the ExMark cannot be transferred from a Company or person to whom they were issued to any other Company or person, except with the agreement in writing of both parties, and the acceptance of a supplementary application for transfer.  Licences require additional formalities to be met before any transfer can take place.”

2. The form of the Certificate of Conformance is not prescribed in MP 69 and neither is it prescribed in Q7134  a document of some 60 pages published by SAQAS titled “Explosion - Protected Electrical Equipment - Procedure to Obtain Certificate of Conformance” which as its title indicates sets out in detail the procedures applying to the certification scheme for equipment of that description.  However each of the ten certificates the subject matter of this action is in the same general form and include

   “This certificate if not transferable and remains the property of Standards Australia Quality Assurance Services and must be returned in the event of its being revoked or not renewed” ;  See as an example Certificate Number AUS Ex 3618x, Exhibit P6.

3. Section 6•1•6 of Q7134 provides

   “6•1•6  Supplementary Certificates

   Supplementary Certificates are generally issued to cover the following:

   (a)     a modification to certified equipment

   (b).... an extension to certified equipment in the form of a new model or a new option

   (c)a change in one or more of the components which form part of the certified equipment

   (d)     a change of catalogue or part number

   (e)     a change of brand or trade name

   (f)     a change in name or address of the certificate holder

   (g)     a change of name of manufacturer

   (h)     revalidation of an existing certificate

   An application for a Supplementary Certificate must be submitted to an accredited testing station.  For modifications of a minor nature, the testing station may elect not to carry out any physical tests and issue an evaluation report.

   Exemption from testing can be claimed only for an application where the amendment is purely administrative, e.g. change of name, address, brand name or catalogue number.

   An application for a Supplementary Certificate can only be made by the holder of the original certificate unless it is supported by a valid letter of authority from the authorised person signing the application for the original certificate.”

4. It will be necessary to return to these various publications in the context of the evidence of Dr Cowan, Michael John Lewis (Mr Lewis) the Group Commercial Manager of the defendant and Perry Engineering, and Christopher John Agius (Mr Agius) employed by SAQAS in the position Programme Manager Product Certification. 

5. At some time before 1998, probably in 1995, Mr Lim contacted Mr Griffiths to explore the possibility of LJL purchasing all the shares, or the whole of the business, of the defendant his purpose being to expand the range of electric motors in LJL’s inventory and so enhance its business in the Australian and international markets.  Nothing eventuated from that approach but in late 1998 Mr Lim renewed contact with Mr Griffiths, there were discussions between him (or Mrs Lau) and Mr Griffiths and in October 1998 Mr Griffiths sent to Mr Lim a copy of the defendant’s financial statements to 30th June 1998 together with a list of the defendant’s “manufacture and design standards and motor certification through the appropriate authorities”. (Exhibit P15 document 6);  It identified motors certified in the categories of Exn, Exd, and DIP each of which designates the particular kind of hazardous area in which a motor so certified may be installed and operated.

6. In about January 1999 there was a meeting between Mr Lim, Mrs Lau and Mr Griffiths at the plaintiff’s premises in Belmont, New South Wales;  there were subsequent discussions and on 9th April, 1999 (Exhibit P15 document 7) Mr Griffiths sent to Mr Lim a two page proposal that, among other things, the defendant’s manufacturing operation for low voltage motors be sold to LJL, or its nominee, and a joint venture marketing company be formed to merge the defendant’s and the plaintiff’s sales and distribution operations;  it also proposed a payment of $1.5 million to the defendant’s owners as good-will for the defendant’s “world wide rights to the Pope name, equipment and expertise” and that “all LV motors up to and including 315 Frame would be manufactured in China once suitably accredited”.  Mr Lim reflected upon that proposal, spoke with Mr Griffiths on the telephone and replied on 17th April 1999 (Exhibit P15 document 8) to the effect that further discussions were necessary upon a number of the topics contained in Mr Griffiths’ proposal;  Mr Lim in evidence said the telephone discussions with Mr Griffiths focussed on good-will and intellectual property, Mr Griffiths explaining to him “How successful (the defendant) had been, how many years it had taken to design all these big motors, small motors, all the these flame proof motors and how much it would cost us to do it ...  all the approvals they had ...”  (Page 502).  Mr Lim’s evidence is that the matter of good-will, which he described comprehended intellectual property, “was the most troubling aspect of my negotiations with Mr Griffiths”.

7. In a meeting in Singapore about two weeks before 3rd May 1999 there were further discussions between Mr Lim and Mr Griffiths.  Mr Lim put a proposal to Mr Griffiths which he later summarised in a facsimile to Mr Griffiths dated 3rd May 1999 (Exhibit P15 document 10) concluding it “forms a basis for us to negotiate details”. 

8. The parties moved to the preparation of a Heads of Agreement.

9. Mrs Lau is a director of both LJL and the plaintiff.  She also took part in the negotiations which led to the SPA.  She said that initially the discussions centred upon LJL acquiring the defendant but, as I understand, after receiving and considering the financial statements concerning the defendant she and Mr Lim confined later discussions with Mr Griffiths to the possible purchase of the defendant’s means of manufacture, the designs and the intellectual property of motors less than l.5 mW.  Her evidence is that the plaintiff had some approvals for hazardous area motors but not the complete range, and it wished “to purchase Popes because Popes sort of complements, and they have approvals for those range that we make”   (Page 473).  She said “.... certainly approvals of certification were mentioned (in discussions between Mr Lim and Mr Griffiths) because we were very clear that our interest in buying Pope was to acquire these approvals because we don’t have them ourselves and during the last two years actually our business was affected because we, ourselves, were also in the process of getting all these approvals, especially Exd and because we knew that Mr Ron Griffiths told that us that he had these approvals and that’s why we were keen to purchase the business”  (Page 471).  Her evidence is that she, or Mr Lim in her presence, told Mr Griffiths “they” wished to buy whatever approvals the defendant had.

1. On 17th June 1999 Mr Griffiths sent to Mr Lim a draft Heads of Agreement (part of  Exhibit P15 document), then followed a telephone discussion between Mr Lim/Mrs Lau and Mr Griffiths, and on 22nd June 1999 a different form of Heads of Agreement was sent (Exhibit P15 document 14) to Mr Griffiths;  an accompanying letter stated in effect that the assets to be purchased were to be identified on completion of due diligence.  It is evident that there were some further conversations between Mr Lim/Mrs Lau and Mr Griffiths;  on 1st July 1999 Mr Griffiths sent to Mr Lim a facsimile (Exhibit P15 document 20) setting out his understanding - it included:

   “1.     Lindeteves - Jacoberg Ltd. (LJ) will purchase the name Pope Electric Motors, goodwill and intellectual property for all low voltage motors and high voltage motors up to 1500 kW (4 pole) for A$1.0 million.

   ...

   4.     Intellectual property for motors between 1500kW (4 Pole) and 5,000 kW (4 Pole) will be available to LJ on an exclusive basis, with LJ having sole selling rights in Australia for these motors under the name of Pope.

   12.    LJ’s Due Diligence Team will be in Adelaide the week of 19 July 1999.”

2. On 19th July 1999 Mr Lim informed Mr Griffiths that the plaintiff’s due diligence would be conducted, beginning on 27th July 1999, by a team of three including Richard Wilson Haffenden (Mr Haffenden);  Mr Haffenden is an electrical engineer and a director of the plaintiff.  Mrs Lau, it seems, was also co-opted as part of the team.  She said that before due diligence commenced she was given a note headed “Action Required” written by Mr Lim listing topics for the due diligence investigation and on which she wrote the initials of the person or persons responsible for each of the topics.  The note is Exhibit P15 document 24.

3. Mrs Lau said that on 28th July 1999 she prepared with Mr Haffenden a document headed “Pope Intellectual Property, 28/7/99” after speaking with Dr Cowan, to whom she said she and Mr Haffenden were introduced by Mr Griffiths in mid-July who told them that Dr Cowan would provide whatever information was needed concerning the defendant’s business.  Mrs Lau said that on the occasion she was first introduced to Dr Cowen she and Mr Haffenden asked him what approvals and certificates the defendant had whereupon Dr Cowan took them to his office and showed her a cupboard to the door of which was affixed a sheet of paper headed “Pope Electric Motors Pty Ltd Hazardous Area Motors”.  She asked for and was given a copy of it which she used, and made notes on, in discussions she and Mr Haffenden had with Dr Cowan.  It is Exhibit CLK 2 to her affidavit, Exhibit P11.

4. At this time, that is July 1999, Dr Cowan was still employed by the defendant as its Technical Manager.  His evidence is that he was told by Mr Griffiths to be open with the plaintiff and give it every assistance.

5. Mrs Lau said that following, or perhaps as part of, the due diligence process she expanded her document “Pope Intellectual Property” to the form which appears in Exhibit P15 document 26.  In both documents 25 and 26 the topic item (2E) “Approvals and Certificates” appears.  Mrs Lau said that the second document was prepared by her to assist the parties respective legal advisers to complete the schedules to be attached to the SPA which had been executed.  The schedules included Schedule Five “Intellectual Property Rights” and Schedule Ten “Technology Transfer Agreement”.

6. The SPA was executed on 8th August 1999.  It provided in Clause 2 that it was a condition precedent to the rights and obligations of the parties that, inter alia, on or before 16th August 1999 (subsequently varied to 3rd September 1999) the purchaser had completed and was satisfied with the results of its due diligence review.

7. On 3rd September 1999 the parties and Perry Engineering executed the “Deed of Assignment of Intellectual Property” which recited, inter alia, that

   ·....... by the SPA the defendant had “agreed to transfer certain intellectual property rights to” the plaintiff

·....... “some of the intellectual property rights” the defendant had agreed to transfer may be owned by Perry Engineering

·....... “to ensure that all of the intellectual property rights referred to in (the SPA) are effectively transferred” the defendant and Perry Engineering “agreed to transfer the intellectual property rights in accordance with the terms and conditions of this Deed”.

1. The Deed included the following within Clause 1 headed “Definitions and Interpretation”.

   “1.1   Definitions

   In this Deed unless something else is clearly intended:

   1.1.1.... “Business” means the business conducted by Pope internationally and in Australia of the manufacture and sale of electric motors with a capacity of up to 5,000 Kw but excludes the capacity to manufacture electric motors of a capacity greater than that set out in Schedule One of the Sale and Purchase Agreement (which will be one of the matters covered in the Technology Agreement).

   1.1.2“Intellectual Property Rights”  means all intellectual property rights of the Business:

   (a)including but not limited to the patents, all trade names, service names, trade marks, service marks, registered designs and copyright in any part of the world (including without limitation those listed in the Schedule to this Deed but only to the extent they are of the Business), computer software, trade secrets, product information, any rights to the names “Pope”, “Pope Electric” or “Pope Electric Motors” and the copyright in all drawings, plans, specifications and designs and any copyright in the Jigs, Tools and Patterns, the right to protect the reputation of the products distributed under the above names and against passing off by others, business names set out in the Schedule to this Deed used in or for the purposes of the Business and all circuit layout rights, know-how, technical records, marketing literature, sales aids and confidential information used in the manufacture and sale of the range of motors set out in Schedule One of the Agreement; but

   (b).... excluding the intellectual property which is referred to in the Technology Transfer Agreement, all intellectual property rights owned or licensed by any third party in any components not manufactured by the Transferors and all intellectual property rights which are licensed pursuant to a Contract.

   1.1.3.... “Technology Transfer Agreement” means a deed between the Transferors and the Transferee dated on or about the date of this Deed:

   1.1.4“Transferors” means Pope and Perry;

   1.1.5.... words or expressions importing the singular include the plural and vice versa;

   1.1.6words or expressions given meaning in the Recitals have the same meaning in the body of this Deed;   

   1.1.7.... the Recitals, Schedules and Annexures to this Deed form part of this Deed and have effect as if set out in full in this Deed.”

2. The Schedule referred to in clause 1.1.2 “Definitions” is headed “Intellectual Property”, item 3 of which reads:

   “3..... COPYRIGHT IN THE DESIGNS, DRAWINGS AND DATA PERTAINING TO THE EXISTING DESIGN OF MOTORS OF THE KIND AND UP TO THE SIZES SET OUT IN SCHEDULE ONE OF THE SALE AND PURCHASE AGREEMENT INCLUDING:

   A.     Drawings - Both Hard and Soft Copies;

   B.     Electrical and Mechanical Designs;

   C.     Engineering Instructions;

   D.     Data Sheets and Test Data;

   E.     Approvals and Certificates;

   F.     Bill of Materials;

   G.     Quotation and Estimate Sheets;

   H.     Certified Outline Drawings; and

   I.      Costing Sheets.”

3. Mr Haffenden is an electrical engineer.  In 1987 he became a director of the plaintiff.  In his affidavit (Exhibit P5) he described that part of the business of the plaintiff in Australia involves the supply of electric motors suitable for use in hazardous areas, the motors being especially modified or designed to comply with Australian standards applying to situations where the motor is in proximity to flammable materials or in potentially explosive environments like dusty areas in flour mills, coal mines or grain terminals.  He deposed (at paragraph 4) that :

   “It is common for contracts for which tenders are requested to involve at least some situations where a motor suitable for use in hazardous areas is required.  Typically the larger the contract the more likely it is that the tenderer will have to be able to supply one or more motors for use in hazardous areas to be successful in relation to the whole tender...  Having a range of motors suitable for use in hazardous areas is an important part of (the plaintiffs’) business both in terms of the sale of such motors and tendering for large contracts a component of which requires the supply of such motors.”

4. In paragraphs 5 to 12 inclusive of his affidavit Mr Haffenden set out his understanding of, and his experience with obtaining, Certificates of Conformity concerning electric motors for use in potentially flammable or explosive environments, the time and the cost involved to secure them, the way in which Testing Authorities keep secure from access by others the drawings and other information provided to the Authority by an applicant for such a certificate and his dealings in the past with such certificates by way of “transfer”.  The topic of “transfer” is canvassed by Mr Haffenden in paragraphs 9 to 12 inclusive of his affidavit. 

   “9..... It is my experience that to complete a sale and Transfer of a Certificate the vendor has to at least give the purchaser the original or a copy of the relevant Certificate.  In addition, the testing authorities require the authority and consent of the vendor to the purchaser having access to and relying upon the relevant test results and other information in support of the purchaser’s own application for a Certificate of Conformity.  Now shown by me annexed hereto and marked “RH-1” is a true copy of a similar Certificate which I had previously managed to obtain a Transfer of.

   10.The process described in the previous paragraph is known to myself and to the best of my knowledge others in the industry familiar with the certification process simply as “transferring” a Certificate and I use the expression “Transfer” in this affidavit to describe that process, but that expression is a misnomer in the sense that a Certificate of Conformity itself is not transferable;  it is really the benefit of what the vendor has done in getting its Certificate that is being transferred to assist the purchaser in obtaining its own Certificate of Conformity.

   11.... Before issuing a Certificate to a purchaser QAS may or may not require further information, examination, assurances or testing to be done, but that is a matter between QAS and the purchaser, fundamentally there is no assurance that QAS will issue to the purchaser a Certificate of Conformity without further requirements or at all and that is a risk the purchaser takes.

   12.Having the benefit of an existing Certificate is of value in a number of respects including:

   12.1. Being of assistance in obtaining a Certificate of Conformity where the product in relation to which certification is sought is the same or has similarities with the product in relation to which the Certificate relates.

   12.1  Developing products that are similar to the product the subject of a Certificate of Conformity where the product under development is the subject of a later application for a Certificate of Conformity.

   12.3. The ability to sell and Transfer the Certificate to a third party to assist the third party with its own application for a Certificate.”

5. In his evidence Mr Haffenden said that he was present at a meeting in Belmont which he thought was probably in June 1999 attended by Mr Lim, Mrs Lau and Mr Griffiths during which he said Mr Griffiths “explained that there were hazardous location approvals which Pope held, and that those had a value which contributed towards the overall valuation we were expected to pay for the Intellectual Property...  I think we were talking around about $l.5 million at that time” (Page 674)

6. Mr Haffenden deposed that his primary role concerning the negotiations which led to the  SPA “Was to focus on ensuring the technical quality and quantity of the business we were purchasing;  the technical side of Due Dilligence” and in that connection he was introduced to Dr Cowan by Mr Griffiths in about June 1999.  He said that in the second half of July 1999 he spoke to Dr Cowan about Certificates of Conformity at the defendant’s premises asking him for “Details of your approvals and certificates”, that Dr Cowan answered “There is a summary listing of all the relevant Certificates of Compliance upstairs in the Design Office” and conducted Mr Haffenden and Mrs Lau to the office, showed to them a document sticky-taped to a cupboard and provided to him a copy of it;  the copy is RH-2 to Mr Haffenden’s affidavit.

7. Mr Haffenden deposed in paragraph 20 of his affidavit that on 22nd October 1999 he and Dr Cowan, who by that date was employed by the plaintiff, met Mr Lewis “To address a number of outstanding issues at that time including the Certificates”.  He said he attended that meeting equipped with a copy of the SPA, that Mr Lewis said words to the effect he was “not sure that the Contract provides for the transfer of the Certificates,  there was discussion about the definition clauses in the SPA and then Mr Lewis said “I am not sure that the Certificates are transferable because they say on the face ‘Not Transferable’” to which Mr Haffenden deposed he responded “I have previously been involved in transferring certificates.  WEA will have to apply for a Supplementary Certificate and all that is needed from Old Pope is the copies of the Certificates together with a letter of authority advising of the change of ownership of the benefit of the certificate” and Mr Lewis replied “I will give you the letter and a copy of the Certificates”.  In his affidavit sworn on 8th March, 2000 Dr Cowan deposed he agreed with Mr Haffenden’s recounting in paragraph 20 of the meeting on 22nd October 1999.

8. In his evidence Mr Haffenden said that after the meeting on 22nd October, 1999 he “felt quite comfortable that Old Pope would write the letters that we required to go with the copies of the approvals to obtain our own Supplementary Approvals in our own name for those Certificates of Conformity” (page 683).  He said it was not until February 2000 that, not having received “the letters” from the defendant “We had to get serious about finding out why we weren’t getting those letters”.

9. Mr Haffenden iterated his reasons why in his view it is that the plaintiff needs the original Certificates of Conformity:

   ·.. It would make it easier to obtain overseas certification for a conforming motor;  for that purpose the plaintiff, he said, would need to produce or at least be in possession of the original Certificate of Conformity.

   ·       Purchasers of motors may want to sight the Certificate.

   ·       Possession of the Certificates would prevent a competitor (he exampled CMG) obtaining them or copies of them and so gain an advantage it could not otherwise have obtained.

   ·       As to those Certificates concerning motors manufactures by Nan Yang the plaintiff may wish to include those motors in its own inventory or need to replace or repair such motors or provide spares for them.

   ·       As to motors manufactured by Nan Yang but modified after importation and as modified Certificates were obtained for the modified type, the plaintiff can adapt the concept of the modification to the motors the plaintiff manufactures in Dalian so that Certificates of Conformity may be more readily and quickly obtained for them.

   ·       As to motors manufactured by Old Pope in Australia and the subject of Certificates of Conformity the plaintiff can produce identical motors in Dalian and seek a Certificate of Conformity for those motors on the basis of identicality.

10. On 21st October, 1999 the plaintiff gave to Perry Engineering notice of its intention to vacate the premises the plaintiff occupied as a licensee of Perry pursuant to the Deed of Variation.  As I understand the evidence, the plaintiff on settlement of the SPA went into those premises and conducted from them the “Business” it had bought from the defendant and in consequence all the assets which the plaintiff had purchased effectively remained where they had been at the date of settlement.  The plaintiff’s decision to vacate the premises was the, or a, reason for a meeting on 29th October, 1999 between Dr Cowan representing the plaintiff and Mr McFarlane representing the defendant.

11. From the evidence of Dr Cowan the purpose of the meeting on 29th October 1999 was to identify what documents of a particular kind existed and were in the defendant’s possession relating to the subject matter of the SPA.  A list was prepared by or on the instructions of Mr McFarlane.  It is exhibited to Mr McFarlane’s affidavit, and headed “Intellectual Property Catalogue & Record of Technology Transfer”, the document being the final form of several drafts discussed between Dr Cowan and Mr McFarlane in the days before 29th October 1999.  I accept the evidence of Dr Cowan that neither he nor Mr McFarlane, as he understood, were making decisions concerning the legal rights of either of the parties under the SPA to the originals of documents although Dr Cowan, as I accept, believed and told Mr McFarlane that the plaintiff was entitled to the original certificates of conformity - they appear in item I of the document, against which it is recorded the defendant was to keep the originals of those.  In my opinion the document, which is “signed off” by Dr Cowan and Mr McFarlane, evidences only which party at the end of the process had possession of the original of the particular identified document and which party had a copy.  Dr Cowan said that his brief was “to take the materials that I’d identified as belonging to (the plaintiff)” but concerning the certificates of conformity he did not happily agree to Mr McFarlane, on behalf of the defendant, retaining the originals; however “it was no good me arguing with Don McFarlane, because we maintained a good relationship even during that period and I was lead to believe that he was under instructions not to let us have the originals ... (this) ... was a mad removalist exercise, packing boxes, taking materials that we had to get before we left the building.  That was the last day that we were in that building and there was every chance that we wouldn’t be allowed back”( 334/5).

12. On 11th December 1999 LJL wrote to the defendant asking that the defendant “notify the issuing body for the list of certificates enclosed of your consent to the transfer of the same to Western Electric Pty Ltd in accordance with (the SPA)” (Exhibit P15 document 69). The defendant replied on 21st December 1999 (Exhibit P15 document 73).

    “Further to your letter to me of 11 December 1999, I have reviewed the terms on which the various certificates were issued.

    It is clear from these terms that it is inappropriate for (the defendant) to consent to the transfer of the certificates to (the plaintiff) where the manufacturer of the motors, the subject of the certificates, is to change.

    I understand that these motors are to be manufactured by your plant at Dalyan in China and not by the present manufacturers as stated in the certificates.

    Under the terms on which the certificates are issued, if the manufacturer is changed without obtaining the testing authorities approval then the certificate is automatically invalidated and may no longer be used.

    Given the above, I seek your immediate written confirmation that these certificate numbers are not being affixed to any motors manufacturer other than strictly in accordance with the certificates.”

13. There then followed an exchange of correspondence between the parties upon the same topic which I summarise in part.

    .        29 December 1999;

.................. LJL reiterated its request for the defendant’s consent to the transfer, that the plaintiff would deal with obtaining any approval by a testing authority; and rejected the defendant’s demand concerning affixation of certificate numbers to motors.

.6 January 2000;

LJL again requested the consent to transfer.

.10 January 2000;

The defendant stated its understanding to be that motors the subject of the certificates “will not be manufactured by/at the places nominated on the certificates” and if that is the plaintiff’s intention the conditions of the certificates “make it inappropriate for us to offer our consent”

.12 January 2000;

LJL drew the defendant’s attention to clause 8.1.10 of the SPA and stated that if the place of manufacture of motors be relevant it was a matter for the appropriate authority.  LJL asserted the defendant was in breach of the SPA in not providing the consents.

.17 January 2000;

The defendant rejected as irrelevant LJL’s reliance on clause 8.1.10, asserted that LJL had been given access to, or copies of, the certificates and denied it was in breach.

1. Each of the plaintiff and defendant approached QAS concerning the question of transfer of the certificates, or some other appropriate mechanism by way of supplementary certificates.

2. The first request was made by Dr Cowan in his letter to QAS dated 19th January2000 (P15 doc. 95) headed “Transfer of Hazardous area approvals”.  He referred to the purchase, stated that the defendant “has some doubts that the certificates can be transferred and require confirmation from QAS that transfer can take place”, described that motors or major components would be manufactured in Dalian to the “existing” designs, dealt with matters relating to manufacturing capacity and quality control and put his belief that “supplementary applications are required to deal with the relevant changes occurring as a result of the transfer...”.  On 21 January 2000 QAS replied (P15 doc. 98) confirming “that transfer of the certificates in your case would be appropriate”;  that was signed by Mr David Wood whom Mr Agius agreed was “a responsible officer of QAS, empowered to put the views of QAS”.

3. Dr Cowan sent to the defendant a copy of those two letters and requested “a letter that authorises the transfer of all the existing hazardous area certificates of conformity to the new owners.  This letter will be passed on to QAS together with the supplementary applications as instructed by QAS”.

4. On 28 January, 2000 Mr Lewis on behalf of the defendant wrote to QAS, addressing his letter to Mr Agius; it is Exhibit P15 Doc. 104:

   “28 January 2000

Mr C Agius,

Programme Manager Certification

Quality Assurance Services
                  Locked Bag No 2032
                  STRATHFIELD  NSW  2135  By Fax: [phone]

Dear Chris

RE:            HAZARDOUS AREA CERTIFICATES

We refer to our recent telephone conversations and confirm:-       

Our company recently sold certain assets including the rights to the name Pope Electric Motors to Western Electric Pty Ltd.  As part of this sale of certain assets we did not sell or purport to sell the above hazardous area certificates as we understand these certificates to be non-transferable.

Further, we have been requested by WE/Pope to provide our consent to a supplementary certificate being issued by you wherein WE/Pope become the certificate holder.  We have not agreed to provide this consent as we have also been advised by WE/Pope that the manufacturer is to change to a Chinese factory with whom we have limited knowledge and no experience.

In writing to you we would require you to confirm to us that our position is correct and appropriate under the circumstances outlined above.

Should you wish to discuss this matter further prior to your response, please contact the undersigned.

Yours faithfully,

M J LEWIS      
                  GENERAL MANAGER”

1. Mr Agius replied on 11 February, 200 (it is part of Exhibit 15 doc. 112)

   “I refer to your fax dated 28 January and subsequent telephone conversations and advise that the transfer of the AUS Ex Certificates to Western Electric Pope is acceptable under the rules of the AUS Ex Scheme providing:

   (a)The original certificate holder, Pope Electric Motors, authorise the transfer of the certificate.  Given that the original certificate holder has signed an undertaking, such authorisation is regarded as an endorsement of the new certificate holders capability for the continued compliance with the rules and procedures of the scheme.

   and

   (b)A new form U “Undertaking” signed by an authorised person from the new company, accompanies the application for change of certificate holder supplementary.

   Item (a) above may require an assessment of the new company, by the original certificate holder, to satisfy themselves that the same level of controls and checks are implemented by the new company.”

2. Upon learning of QAS view the plaintiff, on 14th February 2000, offered to indemnify the defendant against any liability arising out of the defendant’s endorsement “of our capability to comply with the rules and procedures of the AUS Ex Scheme”.

3. While these exchanges were occurring the plaintiff became aware that the plaintiff was treating with CMG Pty Ltd and had consented to a supplementary certificate being issued to CMG in relation to certificate of conformity Ex 3618x.  Additionally the plaintiff judged itself to be in difficulties in completing what is referred to as the Fenner contract because it could not affix a compliance plate to motors on account of the defendant’s alleged failure to consent to a “transfer” of the relevant certificate of conformity relating to motors of the description of those the subject of the Fenner contract.

4. Negotiations concerning the plaintiff’s proferred indemnity came to naught when the plaintiff issued these proceedings.

5. The defendant called Mr Agius.  As I have said he is employed by Quality Assurance Services Pty Ltd (a wholly owned subsidiary of Standards Australia International Limited formerly the Standards Association of Australia) known as QAS in the position Product Certification Program Manager.  His evidence included, by consent, his affidavit sworn on 6 March 2000 (exhibit D77) other than paragraphs 11, 14 and 21 to 23 inclusive of that affidavit.

6. QAS is Australia’s leading provider of certification services in respect of Australian and international standards for products and management systems.  One of the certification schemes offered by QAS is the type test scheme for explosion protected electrical equipment, the EPEE scheme, which QAS administers on behalf of a committee of Standards Australia International, known as the P8 Committee, under guidelines and rules.  The rules known as the EPEE Scheme rules are contained in the document Q7134 I have already referred to; the guidelines as I understand are those set out in the document MP69 which I have also previously mentioned.

7. Mr Agius’ duties include managing the development, design and maintenance of product certification schemes, including the EPEE scheme.  Concerning certificates of conformity I extract the following paragraphs from Mr Agius’ affidavit:

   “7.     A Certificate of conformity issued by QAS under the EPEE Scheme:

   7.1demonstrates that a product has been appropriate identified, examined and tested by an accredited testing station under a testing plan;

   7.2shows that a sample tested conforms with the relevant Australian and or New Zealand standard for the type of explosion protection as detailed on each product marking plate; and

   7.3grants the certificate holder the right to affix a certification mark to the product specified in the certificate, such as the AUS EX Mark.

   8.The holder of a Certificate of Conformity is required to and does undertake that every item produced will be identical in design and manufacture to the sample submitted for testing, and that each product strictly conforms to applicable standards and any conditions specified in the certificate which relate to manufacture.

   9.The holder of a certificate of conformity must ensure that it retains the capability to comply with its obligations for the duration of the certificate, being 10 years from the date of issue.  If there is any change to product design or to the certificate holder’s capability to comply, the certificate holder must notify QAS pursuant to the Undertaking it gives to QAS under the EPEE Scheme Rules.  A representative copy of the Undertaking is at page 54of Annexure CJA-1.

   ...

   13.QAS, in its discretion, may vary a Certificate of Conformity by the issue of a supplementary certificate.  The guidelines regarding the basis on which a supplementary certificate may be issued are detailed in clause 6.1.6 of the EPEE Scheme Rules.  These are guidelines only and QAS as a certifier of the EPEE scheme, is charged with the ultimate discretion and responsibility either to issue a Supplementary Certificate, or to refuse the issue.

   ...

   15.Each of the Certificates of Conformity issued to Old Pope involve a requirement that the products listed in the certificate itself have been subjected to a Type Testing plan.  A Type Testing plan means a planned approach to testing samples that are representative of the range of products for which certification is sought.

   16.To ensure ongoing future compliance with type testing requirements and the other conditions specified in the Certificate of Conformity, the mechanism is the requirement to execute a written undertaking.

   17.Based on my knowledge and experience, I can say that the application and administration of the EPEE scheme is particularly stringent.  It is obvious that an electrical spark or fire in the wrong place can be disastrous.  Broadly, the scheme works by requiring that electrical equipment, such as motors, used in hazardous areas comply to a specific standard, with the aim of ensuring safety, and providing that “safety” can only be achieved by either removing the explosion hazard or using electrical equipment specifically designed to incorporate an explosion protection technique, in accordance with established principles, such as Australian and International Standards.  The potential consequences of a spark in a flammable or combustible area, such as an oil refinery, underground coal mine or grain storage and handling area, entail clear risks of the loss of life and property, as well as potential exposure to massive economic loss claims.”

8. Mr Agius deposed to discussions and correspondence he and Mr Wood, also of QAS, have had with Dr Cowan to the effect “that WEA wants old Pope to “transfer” the original certificate to WEA together with a letter of authority with the intention that WEA will then bring an application to QAS for the grant of a supplementary certificate.  Mr Cowan has mentioned that the aim of this activity is to replace old Pope with WEA as the certificate holder for the relevant certificates of conformity” (paragraph 20).  Paragraphs 21 to 23 inclusive of his affidavit relate to his own opinion and views concerning the appropriateness of that proposal within the EPEE scheme.  He deposed that, told by Dr Cowan the matter of the certificates of conformity was urgent, he referred the question to a subcommittee of the P8 committee, known as the P8/1 committee, which met on 1st March 2000.  Mr Agius is the Chairman of the P8/1 committee.  He deposed (paragraph 28):

   “In summary, the P8/1 committee concluded that the circumstances in which it is appropriate to issue a supplementary certificate do not include the situation in which WEA stands.  As a consequence WEA will be advised that it has no alternative but to apply for a new certificate of conformity, as a new applicant, and to provide such supporting documentation relevant to its design and manufacture as may be required.”

9. In giving evidence Mr Agius produced a draft (exhibit D78) of the minutes of the P8/1 meeting.  The function of the P8/1 subcommittee is to consider technical matters and to report to the P8 committee.

10. In evidence Mr Agius described what is meant by a type test scheme, leading to the issuing of a certificate of conformity, to be the testing of a sample of the product against the product standards by an accredited laboratory under a plan developed in conjunction with the manufacturer, or the submitter of the product, following which a test report is issued.  Typically the process takes six to nine months.  QAS does not have facilities for testing and so it has accredited the facilities of others, Test Safe and Simtas, to carry out the type testing and product assessment and to issue the certificate of conformity on behalf of QAS which maintains a central register for such certificates.

11. Mr Agius was examined and cross-examined at some length concerning his understanding of the procedures, requirements or inquiries of QAS relating to the issue of Certificates of Conformity and, by reference to MP69 and Q7134, when and in what circumstances and subject to what assurances inquiries or tests, a transfer, or procedure akin to transfer, of such certificates can occur. 

12. For the purpose of investigating an application for a Certificate of Conformity the Testing Authority requires, depending on the nature of the equipment sought to be certified, the provision to it of drawings, specifications or other material.  If the application is successful a Certificate of Conformity is issued to the applicant together with a copy of the Testing Authority’s Compliance Report and copies of the drawings, bearing the testing authority’s stamp, identified in the Certificate of Conformity.  Mr Agius’ view is that the Compliance Report and the drawings provided to the applicant are the property of the applicant, not QAS or the Testing Authority although the Testing Authority retains a copy of the drawings and the report for its own records.  However clause 6•10•3 of Q7134 provides:

    “At the conclusion of assessment and testing, and satisfactory completion of any other requirements, a Report of Conformance will be issued, together with one of the copies of relevant drawings and other documents, duly stamped by the Testing Station as being associated with the Certificate.  The Certificate holder is required to hold these documents/drawings as a record of those listed on the Certificate.  A copy of such documents may be requested by a Testing Station, in the event of any Supplementary Certification being performed at other than the originating Testing Laboratory.”        

13. An example of a Certificate of Conformity, the relevant stamped drawing and the material compliance report is Exhibit D40 concerning Certificate Number Ex:3618X.  The Certificate states that it is granted “... subject to the conditions as set out in Standards Australia Miscellaneous Publication MP69 and the procedures (Doc Q7134) of the Scheme” and lists the date of issue and the expiry date, the name of the Certificate holder, the equipment, the type of protection to which the equipment conforms, the marking code and the name of the manufacturer.  I note here that “manufacturer” is defined in clause 4•1 of Q7134 as follows:

    “A manufacturer is one who makes part or whole of the product but is primarily responsible for the final assembly which forms the basis of the certified product.  It is the responsibility of the “manufacturer” to ensure that the whole design remains unaltered following certification.”

and clause 4•2 headed “Certificate of Conformance” of the same document includes “The Certificate holder undertakes to ensure that in production, every item will be identical to the design of the sample submitted for type test”.  As I referred to earlier in these reasons, an applicant for a Certificate of Conformity is required (clause 6•1 Q7134) to complete and sign Form U, an annexure to Q7134, entitled (inter alia) “Undertaking”.

1. The first Certificate of Conformity is given the issue number “0”.  Any subsequent proposed change to any of that which is certified in the Certificate, including the name of the Certificate holder, must be the subject of an application for a Supplementary Certificate which, if approved, results in the issue of another Certificate identifying the change and its effective date, an issue number is ascribed to it and it also shows the immediately preceding issue number or numbers and date:  an example is Certificate of Conformity   Ex 2418X in Exhibit P16.

2. Mr Agius explained in his evidence what he termed the Certification Review Process and the purpose of it:

   “Q.... Before lunch you mentioned that part of the process in the issue of a certificate of conformance was what you described as a certification review.

.................. A.     Yes.

Q.I wanted to ask a few questions about that.  First of all, at what stage of the process is that certification review done.

A...... The certification review is conducted prior to the issuing of a certificate of conforming and would be done at the end of the type testing stage for a new application.

.................. Q.     Who performs the certification review.

A.The certification authority, where we have QAS as the certificate issuing body that has received the application, it would be done by QAS.  Alternatively, it can be performed by TestSafe or SIMTARS who are authorized under the scheme to act as agents for QAS.

Q...... If it’s done, say, by SIMTARS, who have also performed the test, is there any procedure that is followed as to who within SIMTARS will do the certification review.

A.There is a requirement under the agency arrangement between QAS and SIMTARS and TestSafe that the certification review be performed by somebody that has been independent to the testing that was conducted. (T1639)

...      

Q...... What is involved, from your experience, in a certification review.  Can I help you to direct your answer by reference perhaps to two different types of situations.  On the one hand, let’s say a certificate is sought for one single and specific motor on the one hand as opposed to the type of case where a certificate is sought in connection with a broad range of motors.  Perhaps help his Honour to understand what happens in the certification review by telling us what happens in those two types of example.

A.The certification process involves first of all a development of a testing plan.  The development of the testing plan identifies what tests are going to be conducted, and where we have a situation of only one type, or one product type, one product that we have an application for certification, the testing plan is obvious.  The one sample is subject to all the test requirements dictated to by the standard.  In that situation, once the testing has been completed and a test report has been issued, the certification review stage is an independent review to ensure that the testing has actually been performed and that all the testing has actually been performed and that all the requirements of the standard have been followed.  Where we have multiple products or models or ranges for which certification has been sought, the testing plan, at the start, identifies what samples are going to be required to conduct which tests.  Because there may be some tests that would be common to a range of products and therefore would only be necessary to subject one sample for that particular test.  When the testing is completed the certification reviewer reviews the test plan and again, the test report to make sure that the test laboratory has actually done their job.

Q...... You have told us who does the reviewing.  What is actually reviewed.  What documents and/or bits of paper or other things.  What are actually reviewed?

OBJECTION:  MY ABBOT OBJECTS.

HIS HONOUR:          Do I need to know that sort of detail?  He has explained what he meant by ‘review’.

Mr HOILE:I accept that.

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Q.Does that process of certification review take place as part of the process whereby type tests are done and actual motors are tested.

A...... The certification review stage takes place irrespective of whether a type test is conducted for a new certificate, or a supplementary certificate is issued, or even if the application for a supplementary is of an administrative nature.

Q.In all cases.

A...... In all cases a certification review must be undertaken.”

1. In cross-examination Mr Agius was taken to the topic of the transfer of a Certificate of Conformity.

   “Q.... Now can we go to the scheme itself.  Do you have before you Q7134 and MP69.  Do you have those two documents before you.  Here is your copy from your file if you want to refer to those.  (PRODUCED)  I don’t want to trace everything through, but there are a couple of questions I need to ask you about the scheme.  The scheme, as you understand it, and of course as only your understanding, you don’t speak for Mr Ezrakovich, do you.

   A.No.

   Q...... Is contained in those two documents insofar as hazardous area certificates of conformity are concerned.

   A.Yes.

   Q...... As you have told us, I think I am right in saying this, that whilst there are three testing authorities, ITACS SIMTARS and TestSafe, only two of those act as the agents of QAS.

   A.That’s correct.

   Q...... QAS itself has no testing facilities and relies upon those two and some other certified laboratories to do the testing with -

   A.One of those three laboratories.

   Q...... But there are other laboratories that are certified.

   A.There are other laboratories accredited to do the testing.  However commercial testing for the scheme, the scheme recognises those three laboratories.

   Q...... So in short, whilst there are three recognised laboratories for the purpose of testing, only two of those three has the power to issue a certificate of conformity.

   A.That’s correct.

   Q...... Plus QAS as the overriding body.

   A.Yes.

   Q...... That is what 2.7 is referable to, of MP69, when it talks about accredited testing stations, correct.

   A.Sorry, did you say 2.7 of MP69.

   Q...... Yes, issue of documentation.

   A.Yes.

   Q...... And 2.8 deals with the transfer of certificates of conformity, does it not.

   A.Yes. 

   Q...... How do you interpret 2.8, that is you personally.  Omit the references to license of X marks, just deal with certificate of conformity.

   A.This provides for the application to transfer a certificate from one company to another, with the agreement in writing of both parties, and of course, the successful assessment of the product and the transfer.  The final certification decision and certification review process still needs to be undertaken.

   Q...... If applicable, because it might just be a change of name.

   A.No, no, no, no, there is always a certification review. 

   Q...... But in any event, certificates of conformity can be transferred from one company to another.

   A.Yes.

   Q...... And you told Mr Lewis that.        

   A.Yes, in that response, in the sense that they can be transferred providing there is an endorsement of the new manufacturing facilities.

   Q...... Well that is assuming that the transfer is referable to a proposal to use new manufacturing facilities.

   A.Right.

   Q...... Just pausing there, let’s assume that there is just an application in the example I have put to you.  Company X sells its assets to company Y and company Y moves in.

   A.Yes.

   Q...... And does exactly the same thing as company X.

   A.At the same location?

   Q...... Yes, as I put it to you.  No funny business.  Company X moves out.  It gets the money and runs.  Company Y moves in and does the same thing.  Now in those circumstances, the certificates of conformity that were formally owned by company X can be transferred to company Y, by virtue of the mechanism in 2.8.

   A.Yes.

   Q...... More importantly, of course, company X can hand over the test reports and the drawings as part of the sale process.

   A.Yes.

   Q...... And company X, all it would need to do to achieve that result for company Y, would be to write a letter agreeing to the change.

   A.That would still undergo the certification review process.

   Q...... All company X would need to do would be to write a letter.

   A.Company X writing a letter endorsing or agreeing to the transfer does not mean an automatic issuing of a certificate        

   Q...... I know that.  I am just asking you a simple situation.

   A.Right.

   Q...... Company X sells its plant in Adelaide to company Y.  Company Y walks in.  Company X has got the money.  Company Y starts doing what company X was doing.

   A.Right.

   Q...... Company Y says:  ‘We would like a transfer to your certificates company X’.  And then company Y says to company X:  ‘We had like a letter agreeing to the transfer’.  In that scenario is there anything else that company X has to do, physically has to do.

   A.Advise us that the same procedures and everything is in place.

   Q...... Where is that in these rules and regulations.

   A.That is implicit in the undertaking that has been signed by the original certificate holder.

   Q...... You say it is, but where is it stated in these rules. 

   A.I would suggest it would be stated in the reference to the undertaking.

   Q...... I put that forward as being the Agius gloss, as being your gloss.

   HIS HONOUR:          No, it is this gentleman’s interpretation.

   Q...... That is effectively what you said in that letter. was it 11 February, when you wrote back to Mike.

   A.Yes.  (T.1654/1658)

   ...

   Q.Now, let’s just deal with the requirements as set out in 2.8.  If company Y wants a transfer from company X of ten certificates of conformity, I put aside delivering up of the test reports and the drawings where are not - we don’t have to worry about those, do we, because they are not covered, they should go anyway.  There is nothing in this scheme that prevents them being handed over, is there.

   A...... No, that is right.

   Q.So we are just dealing with the actual certificates themselves, aren’t we.

   A...... Yes.

   Q.According to 2.8, all company Y would have to do would be to make application for a supplementary certificate, fill in forms C, U and T, if T were necessary and it may not be, and obtain a letter from company X saying ‘We agree to the transfer’.

   A...... In the scenario that the manufacturing location remains the same, yes.

   Q.In the scenario I have put to you.

   A...... Yes.

   Q.You agree that form T may not be necessary in the scenario I have put to you.

   A...... That’s correct.

   Q.So really, if company Y moves in where company X was, and company X has taken the money and run, and company Y has got the assets and is doing the same thing as company X was formerly doing, all you would need to do is fill in form C, the application for the supplementary certificate, form U being the undertaking by company Y, and have a letter from company X saying ‘We agree’.

   A...... We would also, as part of the certification review process -

   Q.I am not asking what you would do.  I am asking what company X has to do.

   A...... I am trying to answer the question.  As part of the certification review process we may require confirmation from the new owners.

   Q.That is company Y.

   A...... As well as the existing certificate holder, that in fact the same quality of procedures and so forth are in place.

   Q.Or you may not.

   A...... If we felt that that was a question.  It is part of the certification review where we need to consider each case on its merits.

   Q.It would depend, I suppose, on the probity of company Y and the probity of company X, that is right.

   A...... That’s right.

.................. Q.     You have no problems with the probity of Western Electric, do you.

.................. A.     Not at this point, no.

Q.So putting aside the possibility that that might happen, we are left with a situation where according to 2.8, all we would need from company X, or company Y would need from company X, is a letter.

OBJECT:Mr HOILE OBJECTS.

MR HOILE:Can my friend clarify?  All we need for what?

MR ABBOTT:    I wish you wouldn’t interrupt.

HIS HONOUR

Q...... As I understand it, Mr Abbott is taking it in stages and to this point you have received an application by the buyer company, together with the form C, U and perhaps T, and a consent to the transfer by the certificate company.  That is what you would expect to receive.

A.Yes.

XXN

Q.At that point, you then go into this system called review procedure and that may or may not require something else from company X.

A...... That’s correct.

Q..Now the only other part of these, I call them regulations, but you know what I am talking about.

A...... Rules of the scheme.

Q.About transfer is to be found in Q7134 and that is at para.6.1.6, is it not.

A...... Yes.

Q.I am not omitting from my consideration, or from yours, 6.6 which deals with making an application, but in terms of transference, the only other section of the rules apart from 2.8 in MP69, is 6.1.6 in Q7134.  That is so, isn’t it.

A...... Could you repeat that?

Q.We are dealing with the open topic of transferring certificates.  I have taken you to MP69, to para.2.8.  We have dealt with that.  It is headed Transfer of Certificates.  I am suggesting to you the only other section in the rules is in Q7134 para.6.1.6., which is named supplementary certificates, but which implicitly is a mechanism for transfer.

A...... Yes.

Q.Now you told us during the course of your evidence that the word supplementary certificate was an historical, perhaps aberration, because you don’t issue supplementary certificates at all.  You told us they are not called supplementary certificates, they are reissues of the original certificate, correct.

A...... They are reissues of the original certificate, showing the change, the variation.  Now depending on the application for the supplementary, or the change is probably the best term, the change.  There may be an instance for transparency.  It is better to issue a certification and only cover that change that has been applied for.

Q.That is what I wanted to ask you about when we came to supplementary certificate.  See, we are all clear about, I have an electric motor which is the subject of certificate of conformity.  I want to put a terminal box on the side.  The way to go around about that would be, one way would be to apply for a supplementary certificate, as it is called, would it not.

A...... Yes.

Q.If that application via the supplementary certificate system were successful, the original certificate would be reissued showing that modification.

A...... The original certificate would not be reissued.  The new certificate of conformity would be issued identifying the product, as well as identifying the change.  The reason for this is that the manufacturer of the certificate holder, may choose to still produce a motor with a terminal box on the other side.  So in other words have two options.

Q.Put it this way then.  I am company Y.  I have got my certificates of conformity transferred to me from company X because I have put in the letter of consent from company X, I have put in my form C, I have put in my undertaking form U, and the certificates of conformity have been transferred into my name now, so that I am now the new holder.

HIS HONOUR:          The review process has been undertaken.

XXN

Q.     The review process has been undertaken and I am the new holder.

A.     Right.

Q.     That happens, does it not.

A.     Yes.

Q...... I have decided now that I want to put, in relation to the ten certificates I hold, a terminal box on one of the motors as a modification, and have it certified.

A.Yes

Q...... Prior to 18 February, are you aware of cases where that was achieved by an application for a supplementary certificate which resulted in a reissue of the original certificate.

A.Yes.  I think the point to clarify is that the original certificate was not withdrawn.

Q...... Withdrawn or not withdrawn, it was reissued, showing the modification which was the subject of the application for a supplementary certificate, was it not.

A.Yes.

MR.. HOILE:              Can my friend redefine ‘reissued’?

HIS HONOUR

Q...... When Mr Abbott speaks of a ‘reissue’, and you have agreed to that phrase, is the reissued certificate complete in itself or do I understand you to say it requires the modification.

A.It could be either, depending on the circumstances.  I think the point to be clear about is that the original issued certificate remains active and is not withdrawn.

XXN

Q.Exactly.  I have got that.

A...... Yes.

Q.Because I am company Y and I have got company X’s letter of consent, so I have got the original certificate and I have got the reissue, which is the result of my supplementary application - you understand all of this.

A...... I think the term ‘reissue’ - I am understand that to mean a new issue.

Q.I use the phraseology on the actual certificate.

A...... I don’t think we call it reissue.  On the certificate we call it the issue number.

Q.Issue No.3, right, or issue No.1 - issue No.1 onwards can be one of two things, can it.  I can be the original certificate, that’s issue zero.

HIS HONOUR:          The information.

Q.The information on the certificate can be one of two things.  If it’s issue three, for example, that can be discrete; in other words, only what was sought by way of the supplementary certificate as a modification.  In the example I have given you, it might just be the terminal box.  That’s possible.

A...... As you would appreciate, this scheme is covering a whole variety of electrical equipment to use in hazardous areas.  In the past the practice under the old scheme has been to issue the supplementary certificate and only address the details covered by the modification or change.  The difficulty that presented the industry was that if they held a supplementary certificate, they didn’t have the information contained on the previous issues.  So, therefore, where possible, the practice is to include the information contained on the old certificate but there may be instances where it is simpler and more transparent, to show what that new issue is.

Q.I want to put a position to you;  in relation to these 10 certificates that we are dealing within part in this case, where there were issues - more than just zero, do you agree that the subsequent issues have incorporated what was on issue zero.

A...... I have to review them.  It’s been some time since I have had a look at them.  In most cases they would contain a lot of the information contained in the previous issue.

Q.Except for the material the subject of the supplementary - all of the information.

A...... I have to look at them.

Q.I am suggesting the practice at least up to 18 February 2000, when an application for a supplementary certificate has been made and granted, the original certificate is reissued - if you don’t like the word ‘reissue’, the original certificate plus the information the subject of the supplementary certificate is then made available in the form of a certificate which is identical with the original certificate except it has the new information on it as well as the old information.

A...... That is the preferred approach and it has been for some time.  However, this issue was discussed during previous meetings of the PA1 technical committee and again to try and ensure common approach, but we did realise that there were instances where this may not be possible so, therefore, the preferred position is to include the information but it’s not the only process.

Q.If I am company Y and I have got issue three of a particular certificate of conformity, and let’s say that there’s been an original application, as there must have been, plus three applications for modifications or changes to that original application, by the fact I have got issue three in my hands as well -

A...... That would be three changes.

Q.Let’s say the three applications for supplementary certificates were additions, things that could be put onto the motor, I want you to assume that.

A...... Okay.

Q.Would issue three enable me to sell the bare motor with the certificate of conformity.

A...... No.

Q.I wouldn’t need the original certificate.

A...... Providing all the information was contained on issue three.

Q.Issue three would enable me to sell the bare motor.  The modification, that would be an addition that resulted in issue one.  The same thing for issue two, and now for issue three.  Do you agree with that.

A...... Could you repeat that?

Q.If the three applications for supplementary certificates were for add-ons to the motor, and I am the holder of issue three, then that would enable me to sell the bare motor with the certificate of conformity.

A.     Yes.

Q...... The bare motor with the modification which was an add-on as per applications one, two and three.

A.Providing all of the information is there, yes.  Supplementary certificates are also used or new issues are also used for the revalidation process which means at the end of the 10 year life of the certificate, when an application for revalidation is applied for, and then we go through the processes, testing and the certification, we will be issuing a new certificate and that will identify a new expiry date as well as details of the product.

Q...... Would you to go para.6.1.6, and the last paragraph on the page, “An application for a supplementary certificate’ etc.  could you read it carefully to yourself please.  Do you see that.

A.Yes.

Q...... How do you interpret that.

A.That the application for a supplementary certificate is to be made by the holder of the original certificate or the application is to be supported by a letter of authority authorising the person signing the application for the original certificate.

Q...... So an application for supplementary certificate can either be made by the original holder, that is the person who is named as the holder on the certificate;  right.

A.Yes.

Q...... In which case they don’t need a letter from themselves, do they.

A.Sorry -

Q...... An application for a supplementary certificate can either be made as the person who appears as the holder.

A.Right.

Q...... And is named as the holder on the original certificate.

A.Yes.

Q...... Or it can be made by the person who makes the application for a supplementary certificate, whoever that might be, provided they have a letter of authority from the holder.

A.That’s correct.

Q...... Quite simple, isn’t it.

A.Yes.

Q...... That’s really no different from the regime which we find in para.2.8 of MP69.  It’s the same thing, isn’t it, is that right.

A.Yes.

Q...... This is how it’s been and how it is today.

A.Yes.

Q...... There’s nothing to stop company Y making any application for any supplementary certificate providing it has a letter from the original holder saying they consent to the application being made.

A.Correct.

Q...... In my example of company Y and company X, where company Y stays on and does the manufacturing, and company X takes the money, there is nothing else company X has to do other than provide a letter, is there.

A.Also during the recertification process, we identify other issues that need to be resolved.

Q...... You may not.

A.We may not.

Q...... Mr Hoile put to you a whole host of permutations.  You know what I am talking about.

A.Yes.

Q...... This was manufactured here and the name was changed there and different manufacturers and different holders and this sort of stuff.  In the light of the questions I have put to you and the answers you have given, if Western Electric demand from old Pope that old Pope transfer to Western Electric so that the certificates are in the name of Western Electric, then I suggest what’s needed from old Pope is the letter that’s referred to in 2.8 and 6.1.6, plus an application for a supplementary certificate filed by Western Electric or new Pope, with forms C and U and possibly T.

116 However it is necessary to distinguish between essential and non-essential obligations.  In the first case a lack of readiness or willingness on the plaintiff’s part renders specific performance inappropriate; Bahr v Nicolay (No 2) (1988) 164 CLR 604 at pp 619/620 per Mason CJ and Dawson J. In the second case inability or unwillingness does not result in refusal of specific performance unless it would be unjust to grant the remedy because of harshness or unfairness or for other discretionary reasons Measures Bros. Ltd v Measure (1910) 2 Ch. 248 at 254.

The Debt Issue 

117 By Clause 32 of the SPA, as varied by the Deed of Variation, the defendant, for which Perry, as the defendant’s subcontractor, had been performing work between 2nd August 1999 and the date of the completion of the SPA in relation to specified contracted job numbers, assigned those contracts to the plaintiff on the completion date.  Perry was to continue after the completion date to “continue to perform these contracts as a sub-contractor”.  The defendant was to procure from Perry an invoice within seven days after the delivery of the completed motors and the plaintiff was to pay that proportion of the invoice “which has not already been paid to the defendant”.

118 By Clause 5 of the Technology Transfer Deed (which is the document identified in the SPA as the Technology Transfer Agreement) Perry, which was a party to the Deed but not to the SPA, undertook for nine months after completion to manufacture for the plaintiff motors, based on the technology, upon such reasonable terms and conditions as stipulated by the plaintiff or as otherwise agreed;  Perry was to charge “actual materials cost plus the cost of labour charged at $54 per hour”, payable by the plaintiff within sixty days of delivery of the motor to the plaintiff.   A protocol was agreed to check or identify time sheets concerning such work. 

119 Work was done in the period September to November 1999 in the manufacture of motors and claims were made upon the plaintiff for payment.  Mr Lewis deposed that the plaintiff “consistently failed to meet the terms of payment”, payments made were “in the form of lump sum amounts which were not referrable to any of the specific invoices by the defendant and which always fell well short of meeting the full amount of Western Electric’s indebtedness on the face of the invoices in aggregate”;  he produced copies of written exchanges with LJL concerning those matters and he deposed to a meeting he had on 25th November, 1999 in Singapore with officers of LJL including Mr Lim who assured him payment would be made of “everything we owe you”.  He said that further discussion and examination of the claims followed, principally with a Miss Lim but also with a Mr Woo, which culminated in him receiving from Mr Woo on 23rd December 1999 a sheet which set out various items of the claim, commented on them and concluded “Proposed final settlement, other than items to be resolved, $45,019.00”;  the items to be resolved were set out on the sheet either by reference to an amount or a topic.  The sheet is Exhibit MJL5 to Mr Lewis’s affidavit (Exhibit D57).  A telephone conference was arranged between Mr Lewis and Mr Lim, Mrs Lau,  Mr Woo and Miss Lim.  Mr Lewis’s evidence is that Mr Lim agreed to pay $45,019 on account and he wrote to Mr Lim on 24th December, 1999 to “confirm our understanding of the agreement reached namely ...”  inter alia that the $45,019 “is on account of moneys owed to our company and is not full and final settlement of the claims between us”;  on the same day he received a response by facsimile stating “We have one major disagreement.  The payment of $45,019 should represent full and final settlement of all matters contained (in Mr Lewis’s letter of 24th December, 1999) other than those disputed or to be clarified”. 

120 Further communications passed upon this topic until 3rd February, 2000, each side maintaining its own position about what had been agreed in December concerning the $45,019, but both expressing a desire to resolve the matter.  It came to naught.  Mr Lewis deposed that $100,248 is owed by the plaintiff as set out in  exhibit MJL11 to his affidavit.

121 It was put to Mr Lim   in cross-examination that, during the conference call which preceded the letter written by Mr Lewis on 24th December, 1999, he (Mr Lim) thrice agreed with Mr Lewis that the $45,019  would be paid “on account”;  Mr Lim said (page 878) “That is Mr Lewis’s recollection, and I don’t have a recollection of that.  My position is what I have written to Mr Lewis and I wrote this letter after discussing with my colleagues who were present.” - he was referring to his facsimile to Mr Lewis dated 24th December, 1999.  He said that there was a misunderstanding between Mr Lewis and him about the matter of the $45,019  which, he implied, was corrected in his facsimile to Mr Lewis on 24th December, 1999.  Taxed about the document “Proposed Settlement...” which was prepared by Mr Woo and prompted the telephone conference, Mr Lim said he could not say whether that set out his (Mr Lim’s) intention.

122 Those on the plaintiff’s side who took part in the telephone conference were located in Singapore;  they all reside there.  Mrs Lau, who gave evidence was not questioned about the subject matter of that conference.  Mr Woo was not called but it being the case that he resides in Singapore I decline to draw an inference against the plaintiff that his evidence would not have assisted the plaintiff.

123 Counsel for each of the parties were, to a greater or lesser extent, critical of the, or some of the, witnesses who were called by the other of them either about their motives for their actions or their veracity as witnesses.  My view is that no witness deliberately lied and aside from the tension the issues between the parties had generated, which may have  unconsciously coloured some of what they said, I am satisfied each of them was endeavouring to relate events to the best of their memory.

124 Mr Lewis’s letter to LJL, following the telephone conference, did not state to the effect “the agreement is” but rather his “understanding” of the agreement;  to that letter he received a prompt response from LJL by facsimile on the same day rejecting his understanding that the $45,019 was to be paid on account and stipulating that the payment was to be in final settlement, subject to the qualifications contained in that facsimile.

125 The proceedings before the Court are not to determine what, if any, moneys are owed by LJL, whether to the defendant or Perry, and counsel for the defendant quite properly made that plain.  The correspondence between those involved in the claim against the plaintiff for work done discloses to my mind that there are significant disputes on a number of matters the subject of the account rendered to the plaintiff.  Mr Lewis in cross-examination agreed that $65,000 is to be deducted from the approximately $100,000 claimed to be due as shown in exhibit MJL 11 to his affidavit, and as to the balance there is an ongoing dispute which if resolved in the plaintiff’s favour would mean that the defendant is indebted to the plaintiff.  Having regard to the evidence which led to the exchange of facsimiles concerning the $45,019  I am not persuaded that the plaintiff, by those who represented it, has evinced a contumacious or reprehensible attitude to its obligations under the SPA either concerning the payment of that sum or to resolving the larger issue of what moneys, if any, are owed by it;  and, more particularly, on the evidence the apparent dispute about those matters does not in my opinion show any unreadiness or unwillingness (in the sense those expressions are used in the cases) on the plaintiff’s part to perform its obligations, whether or not the payment of the debt (if any) is to be categorised as an essential obligation, which I find it unnecessary to decide;  neither for present purposes do I find it necessary to decide whether the obligation arises under the SPA or not.

The Stocktaking Issue

126 By Clause 4.2.2 of the SPA the plaintiff was required to pay for fast moving components

“l      One half of the amount specified in Clause 4.1.2 

·....... The amount of the cost of all such items consumed by the purchaser in the three months period after Completion (such items to be identified by a stocktake to be conducted by Price Waterhouse Cooper) within seven days after the stocktake

·(Provision is made for the payment of the balance)”

127 The three month period from Completion expired on 3rd December, 1999.

128 On 29th November, 1999 Ms Su-Lynn Lim (Ms Lim), an officer of LJL visited the defendant in Adelaide from Singapore;  on that occasion the topic of the stocktake for the fast moving items was raised by Mr Lewis.  On 14th December 1999 Mr Lewis wrote to LJL;  the letter (Exhibit D39 document 187) included this paragraph:

“5.     Stocktake

As per the agreement, a stocktake is to occur within the 3 month period after completion of the fast moving components.  We advised Su-Lynn Lim of this matter during her visit to our offices during the week commencing 29th November, 1999.  She was to revert to us after discussion with Singapore as to the method and best timing - this matter was again raised by phone to Mr Lim who advised Stanley Wu who would provide a plan acceptable to WE/LJL.  This remains outstanding;  we require to complete this stocktake as soon as possible.”

129 LJL replied on 16th December, 1999.  The letter (Exhibit D39 doc. 193) is signed by Ms Lim;  it includes:

“Stocktake

g...... We will provide you with a schedule for the stocktake in due course”.

130 Clause 6 of the SPA required the plaintiff to use its reasonable endeavours to sell all the fast moving components, finished goods, components and spares within twelve months from 2nd August, 1999.  The clause provided that any such items unsold at the end of that period would be repurchased by the defendant at the same price paid for them by the plaintiff.  To secure that and other obligations of the defendant under the SPA the defendant provided to the plaintiff a bank guarantee for $1m.;  concerning that guarantee it was stipulated that the plaintiff and the defendant within fourteen days from 2nd February, 2000 would meet to review whether the plaintiff would be protected by a bank guarantee in a lesser amount and if so a substitute bank guarantee would be provided.  Whether a lesser amount might be adequate would, practically, depend upon inter alia the number and value of fast moving components, finished goods etc. still to be sold at 2nd February, 2000. 

131 The stocktake concerning fast moving components to be done at three months after completion, was to be conducted by Price Waterhouse Coopers and, it would appear, at the cost of the defendant.

132 Mr Lewis’ evidence is that “in late December 1999 in discussion with Western Electric, Western Electric indicated” that the stocktake of fast moving components “should be further delayed until January 2000, on the basis of the disruption associated with year end and the Christmas break.  I reluctantly agreed” (paragraph 42 of his affidavit).  He deposed that at a meeting with Ms Lim at Adelaide in late January 2000 she agreed to a complete stocktake, that is not limited to fast moving components, and he wrote to LJL on 31st January, 2000 (part of Exhibit D39) confirming that, but on 9th February, 2000 he received an email (part of Exhibit D39) attaching procedures for a stocktake on 25th February, 2000 of the fast moving components and stating that the plaintiff “did not have enough resources to conduct a full stocktake”.  Mr Lewis, in a letter dated 10th February, 2000, protested that was not what had been agreed and asked that the plaintiff reconsider.  He was told on about 16th February, 2000 the stocktake was to be of the fast moving components only, and that was confirmed to him in a letter dated 3rd March, 2000 from Ms Lim who identified the location of those components and stated that the stocktake was to be conducted by Price Waterhouse Cooper at the defendant’s expense.

133 Mr Lim’s evidence in cross-examination (pages 899-904) is that he became aware that Mr Mascaro, the financial controller of the plaintiff (or LJL, it is not clear) had prepared a procedure for a stocktake not limited to fast moving components - he became alarmed at what that entailed for the plaintiff’s manpower resources and that Mr Mascaro was apparently engaging Price Waterhouse Cooper at the plaintiff’s expense;  he spoke with Ms Lim, reminded himself of the SPA concerning the stocktake of the fast moving components and concluded that it was a relatively simple procedure with little involvement on the part of the plaintiff’s staff, to be carried out at the defendant’s expense.  He said he formed the view that Ms Lim, whom he described to be young and relatively inexperienced, had simply accepted what Mr Lewis had told her concerning a more extensive stocktake.  He said he was not told and was not aware of any agreement for such a stocktake other than what was asserted by Mr Lewis in Mr Lewis’s letter dated 31st January, 2000.

134 No stocktake had been carried out by the time these proceedings were launched.

135 The defendant’s submission is that the plaintiff is in breach of its obligations under the SPA, and has been since 3rd December 1999, that it has demonstrated an unwillingness to perform its obligations, that the court could not order the plaintiff to comply “in specie” including using its best endeavours to sell the fast moving components and other things for that would require continuous supervision by the court and therefore it would not be fair for the court to order the delivery up of the Certificates of Conformity by the defendant when the court cannot provide a remedy for the plaintiff’s breaches.  The defendant referred to Thomas v Harper (1935) 36 SR (NSW) 142. In that case Long Innes CJ In Eq. said, at page 147:

“It is well settled that as a general rule and subject to certain exceptions which are immaterial in the present case, want of mutuality is a ground for refusing specific performance:  in other words, that a plaintiff cannot obtain a decree for specific performance of a contract which could not be so enforced against himself, notwithstanding that the consideration to be performed by the defendant is not of a nature to exclude specific performance.”

136 The defendant had agreed to apply to transfer a liquor licence from existing premises to other premises to be built by the plaintiff in accordance with plans the plaintiff was to provide at his own expense.  His Honour found that the building work for the new premises was not defined in the contract, therefore the court could not order specific performance by the plaintiff of his obligations under it and it followed the plaintiff’s claim must be dismissed.

137 Insofar as the defendant relies on the asserted breach by the plaintiff concerning a stocktake of fast moving components pursuant to Clause 4.2.2 of the SPA I do not accept that the court could not, in suitable terms, order the plaintiff to permit the defendant, by Price Waterhouse Cooper, to conduct a stocktake of those components.

138 The provision that the parties in effect confer about the question of the adequacy of the bank guarantee provided by the defendant is not one which lends itself to any equitable remedy. The parties not having expressly stipulated for a stocktake of all fast moving components, finished goods etc. as a step in a review of the bank guarantee, the question of the court ordering such a stocktake does not arise.

139 Similarly the plaintiff’s obligation to use its reasonable endeavours to sell fast moving components, finished goods etc. is not susceptible to an order for specific performance.

140 The contract between the parties contains a complexity of obligations, one to the other, only some of which might be the subject of an equitable remedy such as specific performance, but in my opinion, merely that a party seeking such relief is in breach of an obligation on his part which is not or may not be similarly enforced does not mean there is a want of mutuality;  see Sun’s case.  It is at best to be considered in the exercise of the discretion to grant the order sought. 

141 Ms Lim was not called to give evidence.  She resides in Singapore.  From the evidence of Mr Lim and the exchange of correspondence to which I have referred it appears that Ms Lim did agree to a stock take not limited to fast moving components but in my opinion that was dehors the express terms of the SPA;  it may have been desirable as a step which, practically, would aid the parties in considering the need for the bank guarantee to continue in the amount originally provided by the defendant but I am not persuaded that the plaintiff’s retreat from the arrangement on that account made by Ms Lim should, as a matter of the exercise of the Court’s discretion, disentitle the plaintiff from the relief which would otherwise be appropriate.  I am satisfied on Mr Lim’s evidence that, but for the intrusion of the arrangement for a more extensive stock take, the plaintiff would not have refused or impeded a stock take of fast moving components pursuant to the SPA.

142 For completeness, and as to each of the debt issue and the stocktaking issue, in my opinion neither of them amount to an “essential” obligation on the plaintiff’s part such that a breach of them makes inappropriate the granting of the remedy sought by the plaintiff.

Defendant’s susceptibility to Civil Suit

143 I have dealt with the substance of this submission earlier in these reasons;  the “endorsement” by the defendant of the plaintiff’s capacity and ability to comply with the conditions of the Certificates of Conformity, which the procedure Mr Agius set out in his letter dated 28th January, 2000 (Exhibit P15 document 104) envisaged, is not required by QAS as a condition of that organisation’s review of any application by the plaintiff concerning those certificates.

Futility

144 I do not accept that the order for delivery up of the Certificates of Conformity and/or the provision by the defendant of a “consent” so that any application that the plaintiff might make to QAS concerning the certificates can proceed, would be so empty of any real advantage it is therefore futile.  I accept Mr Haffenden’s evidence that at the very least there may be commercial advantages and those, in my view, are of sufficient substance to bring them within the principles in Dougan v Ley.

Clean Hands

145 The gravamen of this submission is that the plaintiff in these proceedings falsely represented that without possession of the Certificates of Conformity, its ability to carry on the business it had purchased from the defendant is and will be adversely affected, most particularly in the context of its capacity to complete what was identified as the “Fenner” contract.

146 The plaintiff’s application to the Court was made in reliance upon, inter alia, Dr. Cowan’s affidavit sworn on 24th February, 2000 (Exhibit P4) in which he deposed:

“That the plaintiff could not obtain the benefit of the ten Certificates of Conformance and thereby be able to sell motors for use in hazardous areas unless the defendant delivered up the original certificates to the plaintiff and provided a suitable letter of authority” (paragraph 17)

147 That the contract which the defendant had entered into with Fenner Power Transmissions Pty Ltd, before the SPA, for the supply of three electric motors for installation in an hazardous environment (the Fenner contract) was assigned by the SPA to the plaintiff for completion and on the date he swore his affidavit “all that is required by WEA to complete the contract is a fixing of compliance plates and give the customer a copy of the certificate but WEA cannot affix the requisite compliance plates without the Certificate Ex 1510x.  The contract with (Fenner) is therefore unable to be completed.  The contract price is approximately $70,000.  The date for completion of the supply of the said motors pursuant to this contract has now expired”.  (Pargraphs 22 and 23)

148 Dr Cowan’s evidence concerning the motors for the Fenner contract is that the construction of the motors was taken out of the defendant’s hands in November 1999 before they were completed and work, which included machining raw castings and the manufacture of the rotor, was thereafter carried out not by the defendant but either by the plaintiff or, as I understand, subcontractors engaged by the plaintiff.  That being the case, Dr Cowan agreed that a plate representing that the motors complied with Certificate of Conformity Ex 1510x could not be affixed to the motors on completion because the motors were not “manufactured” by the defendant.  Further, and in any event, the motors were of a different voltage from that within the conditions of Ex 1510x.  Each of these departures from the ambit of Certificate Ex 1510x, Dr Cowan said, would require an application for a supplementary certificate to encompass the differences, that is a different manufacturer and a different voltage which is what Dr Cowan said (at pages 256 ff and pages 321 ff) the plaintiff applied for in November 1999.  That application was made without the plaintiff being in possession of the original certificate or the originals of the related drawings.  However, the application became the subject matter of exchanges between Dr Cowan and QAS concerning pressure-testing of the relevant motors, the outcome of which is not clear on the evidence.

149 My assessment of Dr Cowan’s evidence concerning the contract for the Fenner motors, and the application to and exchanges with QAS concerning supplementary certificates in that connection, is that he had a working knowledge of the rules and procedures of QAS but not a thorough understanding of them and in particular what is the precise meaning of “Manufacturer” as defined in the EPEE Rules.  In my opinion this uncertainty on his part, or his view of what “Manufacturer” means is reflected in paragraphs 22 and 23 of his affidavit.  It also permeated some of the submissions made by counsel for the plaintiff to the Court when an order was made directing a hearing of the plaintiff’s application.  In that respect, and also on the issue of the plaintiff’s claimed need for the originals of the Certificates of Conformity as first put to the Court at the preliminary stages, there is some substance in the submissions by counsel for the defendant critical of the plaintiff, but I am far from persuaded that there was a knowing misleading of the court either at the outset of the plaintiff’s application or subsequently.  It seems to me that the plaintiff, and those advising it, formed a view of the operation of the EPEE rules, and the critical features of Certificates of Conformity in what it transpires is, as Mr Agius acknowledged, the unusual circumstances of the SPA transaction when set against the EPEE rules and QAS’s administration of them.  To the extent the plaintiff can be said to have put forward assertions of fact, or submissions, to the Chamber Judge concerning the consequences to it of not having the original Certificates of Conformity, or an appropriate letter from the defendant consenting to the “transfer” of them, which have not been borne out in the testing of them in the evidence now before the court, they do not in my opinion, show that the plaintiff untruly and deliberately mislead or attempted to mislead, the court and therefore should be refused equitable relief which would otherwise be granted:  Armstrong v Sheppard and Short Ltd (1959) 2 QB 384.

150 Under this same heading the defendant submitted that the raising by the plaintiff before the Chamber Judge of the defendant’s dealings with CMG Pty. Ltd. concerning Certificate 3618x misrepresented to the Court the attributes or advantages attaching to that and the other Certificates of Conformity.

151 The defendant’s dealings with CMG are contained in the correspondence and other documents included in Exhibit P2.  On 6th January, 2000 the defendant entered into an agreement with CMG by which the defendant agreed, inter alia, that it would give its consent to the issuing to CMG of a Supplementary Certificate to Certificate of Conformity 3618x.  On 25th January, 2000 the defendant wrote to Test Safe consenting to the issue of such a certificate showing CMG as the holder in lieu of the defendant.  CMG’s application to Test Safe for the supplementary certificate included drawings copied from drawings provided to CMG by the defendant, the latter drawings being those, or some of those, related to the Certificate 3618x and bearing the Testing Authority’s stamp.

152 The plaintiff adduced that evidence to show that the defendant had done for CMG what it had refused or declined to do for the plaintiff, namely to provide a letter addressed to QAS consenting to an application by the plaintiff for the issue of a supplementary certificate in the plaintiff’s name;  it was also agitated as being evidence of a breach by the defendant of the plaintiff’s rights, pursuant to the SPA, as the assignee of the defendant’s copyright in the drawings, and other material, related to the electric motors the subject of the SPA, but I do not find it necessary to finally determine at this stage whether there has been such a breach on the defendant’s part.  I note that the defendant, by its counsel, submitted that, while not admitting its dealings with CMG infringed the plaintiff’s copyright, any such breach was an innocent mistake and it will not deal in the relevant drawings in the future.

153 Aside from the issue of copyright, the defendant’s case, principally on the evidence of Mr Lewis, is that the circumstances of the CMG matter were entirely different from those concerning the plaintiff’s request for its “consent”, on the grounds that, in particular, the motors the subject of Certificate of Conformity 3618x were wholly manufactured by Nanyang, were to be imported, and on-sold, by CMG and therefore the defendant had no qualms that by consenting to CMG’s application it thereby, perhaps implicitly, endorsed the motors as complying with the certificate.

154 In a letter dated 6th January 2000, (signed by Mr Lewis) to CMG (part Exhibit P2) the defendant also intimated it was “willing to support (CMG’s) application for supplementary certificates” in respect of Certificates of Conformity 1506x 1509x and 1511x, each of which related to electric motors manufactured by Nanyang.  In the letter the defendant noted that it had “sold the intellectual property associated with the upgrading of the Nanyang motors to meet the requirements” of those certificates and “we are aware that WE do not intend sourcing their motors from Nanyang, so in this regard we have not consented to the issue of Supplementary Certificates to WE or any associated company”.  The letter concluded:

“Please confirm that you do not rely on the Intellectual Property sold by us to (the plaintiff) in order to manufacture these motors together with confirmation from the issuing authority that they will provide you supplementary certification on this basis.  We will then provide our consent as previously indicated in our letter to you dated 31st December, 1999.”

A copy of that letter was included in CMG’s application relating to Certificate 3618x.

155 The plaintiff at the time it instituted these proceedings was not aware of all this particularity concerning the dealings between the defendant and CMG relating to Certificates of Conformity but it was aware of the application by CMG in relation to Certificate 3618x.  I reject the defendant’s submission that the introduction into this case of those dealings was “an irrelevance”.  It seems to me that the plaintiff reasonably brought those dealings forward as evidence going to an issue in the case, namely the matter of the “consent” and the form of it sought from the defendant and what the plaintiff, somewhat colourfully, categorised as the defendant’s double dealing in that connection.  In my opinion the bringing in of that material by the plaintiff cannot be and should not be seen as evidence that the plaintiff culpably mislead or attempted to mislead the Court. 

156 I mention, but dismiss as being of no moment, the defendant’s submission that the plaintiff abused the processes of the court by pressing for what the defendant described to be “an unnecessary and unmerited timetable in an effort that the defendant be strategically deprived of the protection of the Rules of Court”.  As I said at the beginning of these reasons the issues which emerged early in the hearing prompted the court to give each party a reasonable opportunity to do what was necessary to advance their respective cases, or counter that of their opponent.  I am wholly unpersuaded that in all the circumstances the defendant was propelled into an unfair position in the conduct of its case, or deprived of any proper protection, as a consequence of the course of the proceedings. 

The relief sought by the plaintiffs

157 In my judgment the plaintiff is entitled:

1.... to a declaration that, pursuant to the SPA, the defendant sold to the plaintiff and agreed to transfer to the plaintiff all the defendant’s rights and interests in the Certificates of Conformity AUS Ex numbers 1478X, 1506X, 1509X, 1510X, 1511X, 2417X, 3098X, 3111X and 3618X together with the documents identified in, and the test report referred to in, each such certificate and bearing the stamp of, or a signature by or on behalf of the body which issued such certificates (“the certificates”).  I have omitted from the listed certificates the Certificate of Conformity AUS Ex 2418X because of the reservations both parties expressed concerning that certificate;  I will hear the parties upon whether or not that certificate should be included and if so with what restrictions or limitations.

2.    to an order that the defendant deliver up the certificates to the plaintiff.  I defer making the order sought by the plaintiff that the defendant deliver up to the plaintiff all copies of the certificates in the defendant’s possession;  I wish to hear further submissions from the parties concerning any need the defendant may have in the future for a copy of the certificates or any of them, to discharge its potential obligations upon contracts it entered into before the SPA and not assigned to the plaintiff.

3.    to a declaration that the defendant is in breach of the SPA  in failing to deliver up the certificates to the plaintiff.

4.... to an order that the defendant do all things and execute all documents necessary for it to do or execute to enable the plaintiff to present a proper application to the body, or bodies, which issued the certificates to obtain a transfer of the certificates or the issue of Supplementary Certificates to the plaintiff to the extent the provisions of MP69 and Q7134 permit that to be done.

5.    to an injunction restraining the defendant by its servants or agents or otherwise from

(a).... dealing in, disposing of or agreeing to deal in or dispose of

(b)transferring, authorising or endorsing the transfer or agreeing or arranging to transfer, authorise or endorse the transfer to any person ,

(c).... authorising or agreeing or arranging to authorise an application by any person for the issue of supplementary or new certificates for the subject matter

of the certificates other than to, for or in favour of the plaintiff.

6.... to an assessment of damages for the defendant’s breach of the SPA by its failure to deliver up the certificates to the plaintiff or its failure to do all things and execute all documents necessary to enable the proper application described in paragraph 4 hereof.

1. In the preceding numbered paragraphs I have indicated the substance of the orders I am prepared to make;  as to the precise form of them I will hear the parties further.  I will also hear the parties further concerning the other relief or remedies claimed in the plaintiff’s summons as amended, and as to the future conduct of the proceedings.