Whisson v Eastland Technology Australia Ltd

[2004] WASCA 272

JURISDICTION     :   SUPREME COURT OF WESTERN AUSTRALIA

TITLE OF COURT :   THE FULL COURT (WA)

CITATION:   WHISSON & ANOR -v- EASTLAND TECHNOLOGY AUSTRALIA LTD [2004] WASCA 272

CORAM:   STEYTLER J

MCKECHNIE J
JENKINS J

HEARD:   11 AUGUST 2004

DELIVERED          :   25 NOVEMBER 2004

FILE NO/S:   FUL 55 of 2003

BETWEEN:   MAXWELL EDMUND WHISSON

First Appellant (First Respondent)

DEAN BRIAN PRESTIDGE
Second Appellant (Second Respondent)

AND

EASTLAND TECHNOLOGY AUSTRALIA LTD
Respondent (Applicant)

ON APPEAL FROM:

Jurisdiction              :  SUPREME COURT OF WESTERN AUSTRALIA

Coram  :ACTING MASTER CHAPMAN

Citation  :EASTLAND TECHNOLOGY AUSTRALIA LTD v WHISSON & ANOR [2003] WASC 54

File No  :COR 334 of 2002

Result  :Appeal dismissed

Catchwords:

Statutory demand - Whether issue estoppel created by previous statutory demand - Arguments not then advanced - Whether issue estoppel created by judgment and declaration - Turns on own facts

Legislation:

Nil

Result:

Appeal dismissed

Category:    B

Representation:

Counsel:

First Appellant (First Respondent)           :        Mr A J N Aristei

Second Appellant (Second Respondent)   :        Mr A J N Aristei

Respondent (Applicant)  :        Mr P I Jooste QC &

Mr D K J Skender

Solicitors:

First Appellant (First Respondent)           :        B W Ashdown

Second Appellant (Second Respondent)   :        B W Ashdown

Respondent (Applicant)  :        Gadens Lawyers

Case(s) referred to in judgment(s):

Bryant v Commonwealth Bank of Australia (1995) 57 FCR 287

Eastland Technology Australia Ltd v Whisson [2003] WASC 54

Eastland Technology Australia Pty Ltd v Whisson [2002] WASC 150

Eumina Investments Pty Ltd v Westpac Banking Corporation (1998) 84 FCR 454

Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589

Case(s) also cited:

Barclays Australia (Finance) v Mike Gaffikin Marine (1996) 21 ACSR 235

Bell Construction Services Pty Ltd v Form-Kwip Building Services Pty Ltd [2001] NSWSC 73

Civil Systems Pty Ltd v ET Constructions Pty Ltd [2000] NSWSC 1119

Eagle Homes Pty Ltd v LED Builders Pty Ltd [1999] NSWSC 1049

Financial Solutions Australasia Pty Ltd v Predella Pty Ltd (2002) 26 WAR 306

Graywinter Properties Pty Ltd v Gas & Fuel Corporation Superannuation Fund (1996) 70 FCR 452

Henderson v Henderson (1843) 3 Hare 100

Hoare Bros Pty Ltd v Deputy Federal Commissioner of Taxation (1995) 16 ACSR 213

Predella Pty Ltd v Financial Solutions Australasia Pty Ltd [2001] WASC 54

Scope Data Systems Pty Ltd v BDO Nelson Parkhill (2003) 199 ALR 56

Shum Yip Properties Development Ltd v Chatswood Investment & Development Co Pty Ltd (2002) 16 FLR 451

1. STEYTLER J: On 21 December 2001 the appellants served on the respondent a demand under s 459E of the Corporations Law (as it then was).  In their demand they claimed the sum of $623,965.02.  Of that sum, $30,000 was said to have been due on or before 30 September 1999 pursuant to cl 5.2 of a Licence Agreement dated 25 January 1999 made between the parties, as varied by a deed of variation dated 5 June 1999.  That clause reads as follows:

   "Subject to the provisions appearing below, the Licensee [the respondent] shall, on or before 30 September 1999, advance the Licensor [the appellants in partnership] a sum of money up to but not exceeding $30,000 to assist the Licensor to register the Australian and International applications for patents in respect of … [specified] Products."

2. The balance of the amount claimed was said to be due by way of a licence fee payable under cl 3(a) of the Licence Agreement as varied, which provided for "a licence fee of 10 per cent of all upfront fees … received from any licence, sub‑licence or assignment" of any of a number of defined products.

3. The respondent applied to a Master of this Court, Master Bredmeyer, to set aside the demand.  In a nutshell, its contention was that the whole of the claimed amount was genuinely disputed and that there was other litigation presently before the Court (action COR 347 of 1999) involving the same parties (and one other) which might resolve that dispute.  It submitted that, if it was to succeed in that action, the Licence Agreement as varied would, in effect, be set aside and nothing would consequently be payable by it under the terms of that agreement.  That submission was upheld by the Master, who found a genuine dispute and set aside the demand.

4. The proceedings the subject of action COR 347 of 1999 came to trial before Templeman J in April 2002.  On 14 June 2002 he dismissed the respondent's claim and upheld a counterclaim which had been made by the appellants:  Eastland Technology Australia Pty Ltd v Whisson [2002] WASC 150. The counterclaim was one for a declaration that the appellants had validly terminated the Licence Agreement, as varied, on 22 March 2000. Templeman J made the declaration sought. He did so on the basis of a finding that the respondent had breached cl 5.2, thereby entitling the appellants to terminate the agreement as they had done. Implicit within that finding was, of course, a finding that a sum of money should have been, but was not, advanced by the respondent to the appellants under cl 5.2. However, as is common cause, he made no finding as regards the amount "up to but not exceeding $30,000" which should have been advanced. He said, in that respect, only the following (at [352] of his judgment):

   "Disputes … arose between the parties as to the extent of the obligations arising under the licence agreement, as varied by the formal Deed of Settlement.  It is not necessary for present purposes to deal with this matter in any detail.  It is sufficient to note that Eastland did not, on or before 30 September 1999, pay any moneys to … [the appellants] to assist them in registering the Australian and international applications for patents in respect of the … products, pursuant to cl 5.2 of the licence agreement."

5. Buoyed by their success before Templeman J, the appellants issued another demand under s 459E of the Corporations Law.  They did so on 22 October 2002.  This time they claimed $320,000.  As can be seen from the judgment of McKechnie J (who has set out the terms of the demand in full), this amount once again included the sum of $30,000 earlier demanded, with the balance being made up of licence fees claimed under cl 3(a) of the Licence Agreement as varied.  However, on this occasion the total of the licence fees claimed was reduced to $290,000.

6. The respondent applied, once again, to set aside the demand. Its application came before Acting Master Chapman. Counsel for the respondent contended that the whole of the amount claimed remained in dispute. He submitted, as was common cause, that, so far as the licence fees were concerned, Templeman J had made no findings in regard to what, if anything, was due by the applicant, that having been unnecessary for his Honour's decision. That was an issue which was to be determined in arbitration proceedings. He also pointed to the fact that Templeman J had not determined what amount was payable under cl 5.2 (that, too, having been unnecessary for his Honour's decision) and said that the sum of $30,000 claimed under that head was disputed. There was, on the respondent's submission, consequently no basis upon which it could be said that any amount equal to or greater than the statutory minimum (as to which see s 9 of the Corporations Law) was owing by the respondent to the appellant.

7. By a judgment given on 25 March 2003 (Eastland Technology Australia Ltd v Whisson [2003] WASC 54) the Acting Master upheld the respondent's contentions and set aside the demand. In the course of that judgment he rejected a submission, made on behalf of the appellants, that the respondent was estopped by the judgment of Templeman J "from disputing the amounts claimed in the statutory demand". He said, in that respect, that he took into account the fact that an appeal had been instituted against Templeman J's decision. He added that this was a relevant, but not decisive, factor. He found that there was "a number of issues which are open to be argued in relation to the existence of the debt, the amount of any debt and whether or not there is an offsetting claim". There is no appeal against his decision that the dispute is genuine.

8. The appellants appeal against the judgment of the Acting Master on seven grounds.  On analysis, and as argued, these come down to four points:

   (1)No valid application had been made to set aside the statutory demand dated 22 October 2002 because the application which was filed referred to a statutory demand dated 21 December 2001 and not to the demand dated 22 October 2002.  This point was not taken before the Acting Master.

   (2)The Acting Master erred in finding that the respondent was not estopped by the judgment of Templeman J from disputing that it owed to the appellants the sum of $30,000 under cl 5.2 of the Licence Agreement as varied.

   (3)The Acting Master should have found that, because the respondent did not raise, before Master Bredmeyer, the points now raised in support of their application, they are estopped from raising them.  This issue, if it was raised before the Acting Master, finds no mention in his judgment.

   (4)The Acting Master should have found that the fact of an appeal from the judgment of Templeman J was irrelevant.

9. I will deal with each of these points in turn.

Was the application valid?

1. The first point can be disposed of simply.

2. The appellants' point is that, under s 459G(1), a company is given the right to apply to the Court only "for an order setting aside a statutory demand served on the company" and, in this case, there was no such application because the statutory demand referred to, being that dated 21 December 2001, had already been set aside and was no longer in existence.  That being so, counsel for the appellants submitted, the Court had no jurisdiction to embark upon the application.

3. In my opinion this submission is without merit.  It was obvious to all concerned that there was a typing error in the application and that it was the statutory demand dated 22 October 2002 that was intended to be referred to.  The hearing before the Acting Master proceeded upon the assumption that this was the statutory demand which was sought to be set aside.  The supporting affidavit made this plain.  It referred to the demand dated 22 October 2002 and annexed a copy of it.  Consequently, the Court had jurisdiction to make an order setting aside that statutory demand.

Was the respondent estopped by the judgment of Templeman J?

1. The second point, too, can be disposed of quickly.

2. I have already said that, while Templeman J found that the respondent breached cl 5.2, he made no finding as regards the amount which should have been advanced under that clause.  There is nothing at all in his Honour's judgment to support the proposition that an amount of $30,000 was owing, or even that any amount equal to or in excess of the statutory minimum was owing.  His Honour specifically said that it was unnecessary for him to make any finding in that respect.  Consequently, no question of estoppel can arise.

Was the respondent estopped by failing to raise issues before Master Bredmeyer?

1. As to the third point, it is settled that an estoppel by omission can arise in circumstances in which a defence which could have been raised in one action, but was not, is sought to be raised in a subsequent action between the same parties or their privies:  Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589. In Anshun, Gibbs CJ and Mason and Aickin JJ said (page 602) that there would be no estoppel unless it appears that the matter relied upon as a defence in the second action was so relevant to the subject matter of the first that it would have been unreasonable not to rely upon it.  They added (ibid) that, generally speaking, it would be unreasonable not to plead a defence if, having regard to the nature of the plaintiff's claim, and its subject matter, the defendant might be expected to raise the defence and thereby enable the relevant issues to be determined in the one proceeding.  Importantly, for present purposes, their Honours went on to say (pages 602 and 603):

   "In this respect, we need to recall that there are a variety of circumstances, some referred to in the earlier cases, why a party may justifiably refrain from litigating an issue in one proceeding yet wish to litigate the issue in other proceedings eg expense, importance of the particular issue, motives extraneous to the actual litigation, to mention but a few."

2. Their Honours also said (page 603) that the likelihood that the omission to plead a defence will contribute to the existence of conflicting judgments is an important factor to be taken into account in deciding whether the omission to plead can found an estoppel in a second proceeding.

3. In this case, it seems to me, it cannot be said that the respondent was unreasonable in not relying, before Master Bredmeyer, upon the defences raised before the Acting Master (cf, as to the test to be applied, Bryant v Commonwealth Bank of Australia (1995) 57 FCR 287 at 297). Rather, it seems to me to have been entirely sensible to raise the one obvious, and overwhelming, point in their favour, being that to the effect that there were current proceedings in the Supreme Court which, if determined in their favour, would mean that no amount could be payable by them under the Licence Agreement as varied. In that circumstance, the issues now raised must have seemed comparatively unimportant and the additional expense of raising them would not have been justified.

4. I am consequently not persuaded that there should have been any finding of estoppel even if (which is not apparent) the point was raised before the Acting Master.

The appeal from the judgment of Templeman J

1. That leaves only the fourth point, being that to the effect that the Acting Master should have found that the fact of an appeal from the judgment of Templeman J was irrelevant.

2. This point, too, can be simply disposed of.

3. Even if the appellants are right in their contention (see, in this respect, Eumina Investments Pty Ltd v Westpac Banking Corporation (1998) 84 FCR 454), it does not advance their position. The appeal was only one of a number of factors taken into account by the Master and was not considered by him to be decisive. More importantly, perhaps, the existence of an appeal from the judgment of Templeman J (which might, of course, result in the setting aside of Templeman J's finding of breach,

by the respondent, of cl 5.2) is irrelevant to the analysis which I have made in respect of point (2).  There is no other point, raised by the appellants, in respect of which it could have any bearing.

Conclusion

1. It follows that I would dismiss the appeal.  This makes it unnecessary to consider the notice of contention, by which the respondent contends that it has an offsetting claim far in excess of the debts alleged to be due.

   MCKECHNIE J: 

Background to the appeal

1. There has been extensive litigation between the parties to do with a novel form of parenteral device known as the Di‑Med Invention.  In 1999, Eastland Technology Australia Ltd ("Eastland") commenced an action against Dr Whisson, Mr Prestidge and an associated company.  The action was subsequently settled on 16 May 1999.  On 3 December 1999, Eastland commenced further proceedings seeking to set aside the Deeds of Settlement of May and June 1999.  These further proceedings were resolved by Templeman J in Eastland Technology Australia Pty Ltd v Whisson [2002] WASC 150 on 14 June 2002. An appeal against that decision is pending. On 22 October 2002, Dr Whisson and Mr Prestidge served on Eastland a statutory demand pursuant to the Corporations Law par 459E in the sum of $320,000 broken down as follows:

"1.    payment of $30,000 due on or before 30 September 1999 pursuant to clause 5.2 of the License Deed as varied by the Variation Deed:

$30,000.00

2.     payment of 10% of all up front fees (whether paid in one or multiple installments) from any license, sub‑license, or assignment of products.

       2.1     $100,000.00 due and payable on 28 August 1999 by Urban Management Consultants Pty Ltd (ACN 008 718 812) to the Company and which was paid on 16 February 2000 by Eastland Medical Systems Ltd (ACN 090 987 250).  License fee payable to the Creditor by the Company at 10% =

$10,000.00

       2.2     $100,000.00 due and payable on 31 December 1999 by Urban Management Consultants Pty Ltd (ACN 008 718 812) to the Company and which was paid on 16 February 2000 by Eastland Medical Systems Ltd (ACN 090 987 250).  License fee payable to the Creditor by the Company at 10% =

$10,000.00

       2.3     13,750,000 shares in Eastland Medical Systems Ltd (ACN 090 987 250) issued and transferred to the Creditor on 31 January 2000 of a value of $0.20 each share for which the Company paid $0.04 per share providing the Company with a benefit of $0.16 per share of $2,200,000.00.  License fee payable @ 10% =

$220,000.00

       2.4     a share sale agreement non‑refundable option fee of $49,650.00 together with a second payment installment of $100,000.00, being a total of $149,650.00.  License fee payable @ 10% =

$14,965.00

       2.5     United Kingdom license fee deposit received by the Company of $100,000.00.  License fee payable @ 10% =

$10,000.00

       2.6     Licence fee earnt (sic) prior to 22 March 2000 as disclosed in letter from company's solicitor dated 7 January 2000 arising from revenue resulting in a net profit of $700,000.00 (license fee payable @ 10% = $70,000.00).  If figure includes items 2.4 and 2.5 then after deduction of potential overlap additional revenue is $450,350.00 (additional license fee payable @ 10% = $45,035.00).  If figure includes items 2.1, 2.2, 2.4 and 2.5 then after deduction of potential overlap additional revenue is $250,350.00 (additional license fee payable @ 10% = $25,035.00).  Additional license fee payable @ 10% =

$25,035.00

Total Amount

$320,000.00"

1. Eastland applied to set aside the statutory demand and was successful before Acting Master Chapman: Eastland Technology Australia Ltd v Whisson [2003] WASC 54.

2. There had been earlier proceedings (in COR 18 of 2002) when Dr Whisson and Mr Prestidge issued a statutory demand against Eastland in the sum of $623,965.02.  Eastland applied to set aside the statutory demand and Master Bredmeyer, in a judgment that was delivered on 15 March 2002, but not published, held that Eastland had raised a genuine dispute and the demand should be set aside.  At that stage, as Master Bredmeyer noted, the proceedings were then pending before Templeman J.  Master Bredmeyer decided then that if Eastland succeeded in that action the licence agreement will, in effect, be set aside and no fees of any kind will be repayable by Eastland to the respondents.

3. No appeal was taken against the Master's decision, perhaps understandably in the circumstances.

The issues on the appeal: estoppel

1. Grounds 1, 2 and 3 claim that Eastland is estopped from disputing that the judgment of Templeman J adjudicated upon the matters the subject of the statutory demand and established the appellant's liability to pay.  Ground 3 raises issue estoppel in relation to Master Bredmeyer's decision.

2. The Acting Master held at [6] of his reasons:

   "There are, in my view, a number of issues which are open to be argued in relation to the existence of the debt, the amount of any debt and whether or not there is an offsetting claim.  There are issues such as the correct interpretation of the licence agreement, the correct calculation of any licence fee, whether any debt was due and payable at the relevant time, the effect of the termination notice and any breach of the licence agreement."

3. The argument on the appeal centred on the amount of $30,000 due on or before 30 September 1999 pursuant to cl 5.2 of the Licence Deed.

1. It was submitted that Eastland was estopped from disputing that amount because of the findings of Templeman J.  The judgment is comprehensive but only certain passages need be referred to for the resolution of this appeal.

2. The proceedings before Templeman J by way of claim and counterclaim were for declarations.  It was not necessary for Templeman J to find, and he did not find, that particular amount of money was owing between the parties.

3. At [352] Templeman J held:

   "Disputes then arose between the parties as to the extent of the obligations arising under the licence agreement, as varied by the formal Deed of Settlement.  It is not necessary for present purposes to deal with this matter in any detail.  It is sufficient to note that Eastland did not, on or before 30 September 1999, pay any moneys to Dr Whisson and Mr Prestidge to assist them in registering the Australian and international applications for patents in respect of the Di‑Med products, pursuant to cl 5.2 of the licence agreement."

4. At [555] he held:

   "Eastland, however, breached its obligations to Dr Whisson and Mr Prestidge pursuant to cl 5.2 of the licence agreement of 25 January 1999, as amended by the Deed of Settlement.  On the case as presented in this application, there is no answer to the counterclaim based on that breach." 

5. At [548]:

   "It was contended in the notice of appointment of arbitrator, that Di Med had committed various breaches of the licence agreement (6/2153-5).  However, it is common ground in the present application that I am not to be concerned with those matters.  The only question for me is whether the reference to arbitration precludes the respondents from proceeding on their counterclaim."

6. Clause 5.2 of the Licence Deed as varied provides:

   "Subject to the provisions appearing below, the Licensee shall, on or before 30 September 1999, advance the Licensor a sum of money up to but not exceeding $30,000 to assist the Licensor to register the Australian and International applications for patents in respect of Di‑Med Products."

7. The effect of the judgment of Templeman J on cl 5.2 of the Licence Deed is that Eastland breached that clause.  However, the amount which Eastland ought to have advanced was not decided by Templeman J and, as the Acting Master found, remains a matter of genuine dispute.  In any event, having regard to cl 5.2, I doubt that the amount can be properly characterised as a debt, at least until the amount has been determined.

8. In the circumstances, I do not consider that any issue of res judicata or estoppel arises in respect of the sum claimed in Item 1.

9. The appellants also argued that in some way Master Bredmeyer's decision setting aside the previous statutory demand somehow worked an estoppel against Eastland.  However, if the principles of estoppel had any relevance in relation to Master Bredmeyer's judgment, they would be more apt to deny the appellant the opportunity of contesting the issue that the amounts claimed in the statutory demand are in dispute, rather than working against Eastland.

10. The better and correct position is that the statutory demand issued before Acting Master Chapman was a different statutory demand albeit with some common features to the earlier statutory demand and no estoppel arises.  I also agree with Steytler J that Eastland's conduct before Master Bredmeyer was reasonable, and for the reasons he gives, that there should be no finding of estoppel.

11. Before Acting Master Chapman, Eastland, supported by evidence, asserted that there was a genuine dispute as to the amounts that were being claimed by the appellant and also that there was a cross‑claim which would set off any debts which might be payable to the appellant.  Application to amend the grounds at the hearing of this appeal to argue more widely as to the sufficiency of evidence was refused as coming too late in the proceedings.  The proposed ground was yet to be articulated.  The appeal is based on the issues estoppel raised by the judgment of Templeman J and Master Bredmeyer. 

12. The Acting Master made reference to the pendency of the appeal by the respondent which he said was a relevant, though not decisive, factor.  Accepting this observation, it is difficult for the appellant to establish that the pendency of the appeal so affected the decision as to manifest error.  In my review of the matters giving rise to the existence of the dispute, I have disregarded the pendency of the appeal entirely.

First ground of appeal: invalid application

1. The essence of the amended ground 1A of appeal is that no valid application to set aside the statutory demand dated 22 October 2002 had been made pursuant to s 459G of the Corporations Act (2001) because the respondent, in its claim for a declaration, referred to the statutory demand as being dated 21 December 2001.  The application was supported by an affidavit of Mr Sharland sworn 11 November 2002, to whom reference has been made.  In [4] of his affidavit Mr Sharland says:

   "On 23 October 2002 the Applicant received a Creditors Statutory Demand for Payment of Debt ('the Second Statutory Demand') dated 22 October 2002 issued by Mr Brendan Ashdown on behalf of the Respondents."

2. The statutory demand was annexed to Mr Sharland's affidavit together with the affidavit accompanying the statutory demand of Messrs Whisson and Prestidge dated 22 October 2002.  I do not consider the dating error in the application gives rise to any jurisdictional issue at all.  Issues were joined before the Acting Master on the correct statutory demand.  Nobody was in any doubt as to what was being asserted in the statutory demand and which statutory demand was being resisted.  The ground is without merit.

Notice of contention

1. It is unnecessary to resolve the notice of contention filed by Eastland because of the limited way in which the appeal has been brought on questions of estoppel and the refusal of leave by the Full Court to allow the appellant to amend the grounds of appeal to argue more generally adequacy of the genuineness of the dispute.

2. In my opinion, the appeal should be dismissed.

1. JENKINS J:  I have had the advantage of reading, in draft, the reasons to be published of Steytler and McKechnie JJ.  I agree with those reasons and have nothing to add.