FEDERAL COURT OF AUSTRALIA

 

Jack Brabham Engines Limited v Beare [2010] FCA 872

Citation:		Jack Brabham Engines Limited v Beare [2010] FCA 872
Parties:		JACK BRABHAM ENGINES LIMITED, ALAN CASEY, GAIL CASEY and SIR JOHN ARTHUR BRABHAM OBE v MALCOLM JOHN BEARE, STYLIANOS ELEFTHERIADIS, BEARE TECHNOLOGY PTY LIMITED, SIXSTROKE ENGINE DEVELOPMENTS PTY LTD and REFERENCE AUDIO VISUAL PTY LTD; MALCOLM JOHN BEARE v ALAN CASEY and JACK BRABHAM ENGINES LIMITED
File number(s):		NSD 2132 of 2007
Judge:		JAGOT J
Date of judgment:		19 August 2010
Catchwords:		PRACTICE AND PROCEDURE – function and importance of pleadings CORPORATIONS – ss 180 to 183 of the Corporations Act 2001 (Cth) TRADE PRACTICES – misleading and deceptive conduct CONTRACTS – construction – implied terms TORTS – elements of the tort of injurious falsehood – elements of the tort of intimidation – elements of the tort of deceit
Legislation:		Corporations Act 2001 (Cth) Evidence Act 1993 (Cth) Fair Trading Act 1987 (SA) Fair Trading Act 1989 (QLD) Fair Trading Act 1999 (Vic) Trade Practices Act 1974 (Cth)
Cases cited:		Allied Pastoral Holdings Pty Ltd v Commissioner of Taxation [1983] 1 NSWLR 1 Australian Competition and Consumer Commission v INFO4PC.com Pty Ltd [2002] FCA 949 Australian Securities Commission v Gallagher (1993) 10 ACSR 43 Ballina Shire Council v Ringland (1994) 33 NSWLR 680 Browne v Dunn (1894) 6 R 67 Bulstrode v Trimble [1970] VR 840 Commonwealth v Amann Aviation Pty Limited (1991) 174 CLR 64 Commonwealth v Verwayen (1990) 170 CLR 394 Coward v Stapleton (1953) 90 CLR 573 Creative Brands Pty Ltd v Franklin [2001] VSC 338 Dare v Pulham (1982) 148 CLR 658 Keen Mar Corporation Pty Ltd v Labradour Park Shopping Centre Pty Ltd [1988] ATPR 40-853 Re Elders Trustee and Executor Company Limited v EG Reeves Pty Limited [1987] FCA 332 Placer (Granny Smith) Pty Ltd v Thiess Contractors Pty Ltd (2003) 196 ALR 257; [2003] HCA 10 Sellars v Adelaide Petroleum NL (1994) 179 CLR 332; [1994] HCA 4 Tabet v Gett (2010) 84 ALJR 292; [2010] HCA 12 Western Australia v Wardley Australia Limited (1991) 30 FCR 245
Date of hearing:	26-30 October 2009, 17-20 November 2009, 27-29 January 2010 and 19 February 2010
Date of last submissions:	24 May 2010
Place:	Sydney
Division:	GENERAL DIVISION
Category:	Catchwords
Number of paragraphs:	375
Counsel for the Applicants and Cross-Respondents:	Mr P E King
Solicitor for the Applicants and Cross-Respondents:	Grahame W Howe & Co Solicitors
Counsel for the Respondents and Cross-Claimant:	Ms S Gatford
Solicitor for the Respondents and Cross-Claimant:	Lewis & Weir Solicitors

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION	NSD 2132 of 2007

 

BETWEEN:	JACK BRABHAM ENGINES LIMITED First Applicant/Second Cross-Respondent   ALAN CASEY Second Applicant/First Cross-Respondent   GAIL CASEY Third Applicant   SIR JOHN ARTHUR BRABHAM OBE Fourth Applicant
AND:	MALCOLM JOHN BEARE First Respondent/Cross-Claimant   STYLIANOS ELEFTHERIADIS Second Respondent   BEARE TECHNOLOGY PTY LIMITED Third Respondent   SIXSTROKE ENGINE DEVELOPMENTS PTY LTD Fifth Respondent   REFERENCE AUDIO VISUAL PTY LTD Sixth Respondent

 

JUDGE:	JAGOT J
DATE OF ORDER:	19 AUGUST 2010
WHERE MADE:	SYDNEY

 

THE COURT ORDERS THAT:

 

1.                  The application and statement of claim (as amended) be dismissed.

2.                  The cross-respondents return to the cross-claimant, within 28 days of the date of these orders, the following items (identified at paragraph 14 of the cross-claim):

(a)                A shim reed valve steel coil;

(b)               1 MoteC M400;

(c)                8 Kawasaki throttle bodies and fuel rails and injectors;

(d)               125 Suzuki oil line;

(e)                1, 35mm Mukini carburetor for Ducati 680;

(f)                 2 into 1 exhaust for Ducati 680 with reverse cone megaphone;

(g)                Honda 125 sixstroke head. Cast iron. One piece; and

(h)                Bridgestone Battlax BT 58 R Radial, 160/60ZR17 tire.

3.                  The cross-claim otherwise be dismissed.

4.                  The applicants pay the respondents’ costs of the proceeding (including of the cross-claim), as agreed or taxed.

5.                  Leave be granted to each party to notify the Associate to Jagot J within 14 days of the date of these orders whether that party wishes to be heard on costs.  If either party exercises this leave, order 4 be vacated and the following directions take effect:

(a)                any party exercising the leave file and serve written submissions on costs within 7 days from the expiry of the 14 day period;

(b)               the other parties file and serve any written submissions on which they wish to rely within 7 days after service of the written submissions in accordance with (a); and

(c)                the first-mentioned party file and serve any written submissions in reply within 7 days after service of the written submissions in accordance with (b).

6.                  The Registrar of the Court refer the reasons for judgment to the Australian Securities and Investment Commission for it to take such action, if any, as it may see fit.

 

 

 

 

 

Note:Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
The text of entered orders can be located using Federal Law Search on the Court’s website.

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION	NSD 2132 of 2007

 

BETWEEN:	JACK BRABHAM ENGINES LIMITED First Applicant/Second Cross-Respondent   ALAN CASEY Second Applicant/First Cross-Respondent   GAIL CASEY Third Applicant   SIR JOHN ARTHUR BRABHAM OBE Fourth Applicant
AND:	MALCOLM JOHN BEARE First Respondent/Cross-Claimant   STYLIANOS ELEFTHERIADIS Second Respondent   BEARE TECHNOLOGY PTY LIMITED Third Respondent   SIXSTROKE ENGINE DEVELOPMENTS PTY LTD Fifth Respondent   REFERENCE AUDIO VISUAL PTY LTD Sixth Respondent

 

JUDGE:	JAGOT J
DATE:	19 AUGUST 2010
PLACE:	SYDNEY

REASONS FOR JUDGMENT

INTRODUCTION

1                                             Sir Jack Brabham is a legend of world motor sport and an Australian hero.  He was the Formula One World Driver Champion in 1959, 1960 and 1966 and the Formula One World Constructor Champion in 1966 and 1967.  He contested 126 Grand Prix races between 1955 and 1970 with fourteen wins and thirteen Formula One pole positions.  He was Australian of the year in 1966.  He was awarded an Order of the British Empire in 1967.  He was knighted for his services to motor sport in 1979. 

2                                             Much more could be said of Sir Jack Brabham’s life and contribution to motor sport.  No more, however, need be said here.  Despite the names of the first and fourth applicants (Jack Brabham Engines Limited and Sir John Arthur (Jack) Brabham OBE), Sir Jack Brabham has had little real involvement with the events which have given rise to this case. 

3                                             This case is not about Sir Jack Brabham.  It is a case about the conduct of other people and the corporations through which they chose to conduct themselves.  It is a case which principally involves three people – Malcolm Beare and Alan Casey, who were involved from the outset, and Stylianos Eleftheriadis, who became involved some years later.  

4                                             Mr Beare, the first respondent, is the inventor of a device known as the Beare Head engine.  The Beare Head engine is intended to improve the conventional internal combustion engine.  The essence of the invention involves the modification of the cylinder head of a conventional four stroke engine (in which there is one piston per cylinder) to accommodate a second piston in an arrangement in which the second piston moves in unison with the main piston at half its frequency.  For this reason the Beare Head engine was also called a six stroke engine (referring to the four strokes of the main piston in addition to the two strokes of the secondary piston). 

5                                             Mr Beare is a motorcycle enthusiast.  He first conceived of his version of a six stroke engine in the mid 1970s whilst he was working as a farmer in South Australia where he grew up.  Over the years Mr Beare developed various prototypes of his engine using his own funds.  By 1988 Mr Beare had started his own business in Bordertown, South Australia, known as General Industries, Beare.  In 1989 he established Beare Technology Pty Ltd, the third respondent.  Mr Beare is the sole director and shareholder of Beare Technology Pty Ltd.  By the mid 1990s Mr Beare had built five prototypes including those known as prototype 4 based on a Yamaha four stroke motorcycle (the Yamaha prototype) and prototype 5 based on a Ducati motorcycle (the Ducati prototype).  He also managed to obtain registration of various provisional patents over the years, culminating in the grant to him of Australian Patent No. 685683 on 9 July 1998 for his “dual piston internal combustion engine”, otherwise known as the Beare Head engine.

6                                             Alan Casey, the second applicant, is the inventor of a nozzle for delivering liquid and gas mixtures.  Mr Casey resides in Queensland with his wife Gail Casey, the third applicant. 

7                                             Depending on whose version of events is accepted, Mr Casey and Mr Beare first had substantial contact with each other in or about 2000 or 2001, in both cases the contact being after the grant to Mr Beare of the patent for the Beare Head engine.  Many of the dealings between Mr Casey and Mr Beare thereafter are subject to dispute.  There is no dispute that on 15 July 2004 their dealings culminated in a proprietary company, known as Pulse Fuel Technologies Pty Ltd (registered in February 2004), changing its name to Jack Brabham Engines Limited (JBE) and its constitution to a public company limited by shares.  JBE is the first applicant.  By various agreements and arrangements, Mr Casey became and remains the managing director and a shareholder of JBE.  Mr Beare also became a director and shareholder of JBE.  He is no longer a director but remains a shareholder.  On Mr Beare’s resignation on 22 November 2005, Mrs Casey became and remains a director of JBE.  Sir Jack Brabham, through other agreements and arrangements, became a shareholder in JBE in 2004 and, for a time after Mr Beare’s resignation, was also a director of that company. 

8                                             Mr Eleftheriadis, the second respondent, had no involvement with Mr Casey or Mr Beare before late 2005 or June 2006 (again, depending on whose version of events is accepted).  Mr Eleftheriadis resides in Victoria.  He is a businessman and car racing enthusiast.  Many of the dealings between Mr Eleftheriadis and Mr Casey are in dispute.  Not in dispute is the fact that Mr Eleftheriadis is a director and shareholder of the sixth respondent, Reference Audio Visual Pty Ltd (Reference Audio Visual).  Reference Audio Visual is a company through which Mr Eleftheriadis and his son conduct a hi-fi retail business.  Reference Audio Visual has a relatively minor role in the proceeding relating to some domain names.  The fifth respondent, Sixstroke Engine Developments Pty Ltd (SSED), has a more substantial role.  As a result of an agreement between Mr Beare and Mr Eleftheriadis, SSED was registered in September 2006.  Mr Eleftheriadis and Mr Beare are 50% co-shareholders in SSED and Mr Eleftheriadis is its director.

9                                             Some other opening comments are required. 

10                                          The applicants commenced the proceeding on 26 October 2007.

11                                          On 19 December 2007 Bennett J made interlocutory orders (amended on 15 February 2008) in which, on the basis of the applicants’ undertakings as to damages, and without admissions, the parties gave certain undertakings intended to preserve the status quo pending the final determination of the proceeding. 

12                                          On 8 December 2008 Bennett J ordered that the parties attend a case management conference before the District Registrar “to consider the most economic and efficient means of bringing the proceedings to trial and of conducting the trial”.  The parties, thereafter, attended six case management conferences before the District Registrar for this purpose.  Ultimately, on 11 June 2009, the District Registrar listed the proceeding for hearing commencing on 27 October 2009.  

13                                          Despite the applicants having had ample time and opportunity and the Registrar’s case management (as well as the striking out of the original statement of claim), the respondents’ overall contention that the applicants have never adequately pleaded their claims is correct.  The amended statement of claim filed on 17 March 2008 does not adequately identify the nature of the applicants’ claims or the material facts said to give rise to them.  The particulars said to support the claims suffer from similar deficiencies.  The consequences of these matters are dealt with in the reasons below. 

14                                          A not dissimilar difficulty is presented by the affidavit evidence.  In June 2009 (early in the case management process), directions were made reflecting the common position of the parties that evidence should be by way of affidavits.  The affidavits ultimately relied upon ranged widely.  Much of this material was the subject of objection.  The affidavits were prepared with little apparent regard for the rules of evidence, including the basic rule that only relevant evidence is admissible.  Relevant in this context means relevant to a fact in issue, with facts in issue being those facts which arise for determination by reason of the pleadings (insofar, it might be added, as the facts in issue may be gleaned from the statement of claim as amended).

15                                          Practical necessity dictated that the time set aside for the hearing not be consumed by dealing with the numerous objections to evidence.  Accordingly, and with the consent of the parties, I ruled only on objections said to be critical and deferred ruling on the balance.  The remaining objections, however, are numerous. 

16                                          Some of the more obvious problems in many of the affidavits from non-expert witnesses (amongst whom Mr Casey must be included despite certain attempts to assert to the contrary by the applicants) include: – (i) extensive commentary on and purported characterisation (legal, factual or otherwise) of documents, both where the documents themselves were in evidence and where they were not, (ii) the giving of repeated lay opinions, as well as the expression of conclusions (legal, factual or otherwise), assertions, arguments and submissions in the guise of evidence, (iii) purported reliance on hearsay potentially relevant only for a hearsay purpose, and (iv) assertions about beliefs and states of mind when neither could be relevant to any fact in issue.  Given the scope of the objections to the non-expert affidavits, the practical course (which I adopt in these reasons) is to rule on objections only where necessary – that is, where the evidence is relevant to a fact in issue and prima facie entitled to weight.  Irrespective of the rules of admissibility of evidence, commentary on and purported characterisation of documents and conclusions, assertions, arguments and submissions are not entitled to weight.  Including material of that character in an affidavit does not attract to it weight that it is rationally incapable of bearing. 

17                                          As to identification of the facts in issue, one of the recurrent aspects of the hearing was the dispute between the parties as to the scope of the applicants’ case as pleaded.  The difficulties presented by the inadequacies of the statement of claim were compounded by the applicants’ attempts, without leave and over the general and specific objection of the respondents, to recast, expand and add to their claims throughout the hearing.  I should reiterate in these reasons what I attempted to make clear to the applicants whenever this issue arose during the hearing.  Pleadings perform important functions.  Amongst other things, “they furnish a statement of the case sufficiently clear to allow the other party a fair opportunity to meet it” (Dare v Pulham (1982) 148 CLR 658 at 664).  The respondents were entitled to insist that the matter be determined on the basis of the pleadings.  The respondents never waived that right.  It follows that this is not a case where “the parties [chose] to disregard the pleadings and to fight the case on issues chosen at the trial”, which is the only proper basis for any grant of relief not founded on the pleadings (Dare v Pulham at 664).  Fairness in this case thus demands that any relief be based on the pleadings and not otherwise. 

18                                          The problems did not cease with the applicants’ pleadings, the evidence, or the way in which the applicants sought to recast, expand and add to their claims during the hearing.  The applicants’ written submissions, as the respondents said, “do not make any reference to the pleadings… do not identify the evidence relevant to the pleaded causes of action and do not adequately identify the claims against each respondent or at all”.  The applicants’ submissions, moreover, were not confined to the evidence received and made serious allegations of misconduct in the proceeding against the respondents unsupportable on a rational and objective view of the events said to support the allegations.

19                                          I should also confirm at the outset my rejection of a general submission made for the applicants and which was said necessarily to lead to a verdict in their favour.  I do not accept that the consequence of the respondents having tendered copies of the applicants’ chronology and statement of factual findings (that is, findings the applicants said should be made) is that the respondents are taken to have admitted the truth of all matters asserted in those documents.  These documents are themselves submissions.  They are not evidence of the asserted facts which they contain.  The respondents’ tender of the documents did not convert their status from a mere submission about what findings of fact should be made on the evidence into evidence of the facts themselves. 

20                                          With these introductory matters in mind, I turn now to the pleaded claims.  I do so in the context of the deficiencies in pleadings, evidence and submissions identified above. 

21                                          The claims (as best as they can be understood and meaningfully articulated) and cross-claims may be summarised as follows:

Claims against Mr Beare

(1)               Mr Beare and Mr Casey, along with Stewart Smith, entered into an oral agreement with each other in or about March 2004.  Pursuant to that oral agreement they agreed to pool their “internal combustion engine related” technology collectively known as the Pulse Fuel Technologies into one business to be known as JBE in consideration for the issue of shares in JBE.  This oral agreement contained certain express and implied terms (the March 2004 oral agreement claim).

(2)               Mr Beare breached the terms of the March 2004 oral agreement by:

(a)                failing to pool: - (i) “the technology known as the Beare Head patents (Dual Piston Combustion Engine PCT/AU95/00691)”, “together with the prototypes and intellectual property”, and (ii) “any developments thereof” in the assets and business of JBE but instead “has sought to exploit the said technology for his own personal benefit and covertly take the benefit of the said technology for himself”;

(b)               failing to act in the best interests of JBE and Sir Jack Brabham and instead having sought to obtain and obtained the benefit of JBE’s “intellectual property and confidential information for the benefit of himself”;

(c)                not using the name Jack Brabham in an ethical or appropriate manner but instead made adverse public statements about Sir Jack Brabham and sought to disrupt the business relationship between JBE and Sir Jack Brabham;

(d)               failing to co-operate with JBE in promoting and maintaining the business of JBE;

(e)                claiming that he owns the intellectual property in respect of the Beare Technology Engine and Beare Head Technology and those names; and

(f)                 not doing all things necessary to give effect to the March 2004 oral agreement but instead having “deliberately undermined” the Pulse Fuel Technologies and refused to “co-operate or give effect to the assignment of [the intellectual property in respect of the Beare Technology Engine and Beare Head Technology] to [JBE]”.

(the breaches of the March 2004 oral agreement claim).

(3)               Further or in the alternative to the March 2004 oral agreement Mr Beare agreed to “sell to [Mr Casey] and jointly to commercialise inter alia, the Beare engine technology including all current patented material and ideas, and all future ideas whether patented or not of the said technology, and the intellectual property associated with the said technology including the names: ‘six-stroke’, ‘Beare head engine technology’, ‘Sixstroke engine’, ‘Beare Head Engine’, ‘Beare sixstroke engine’ and logos together with a CD and website www.sixstroke.com”.  The benefit of this contract “was assigned to [JBE] as part of the pooling agreement referred to in [the March 2004 oral agreement]” (the alternative pre March 2004 agreement claim).  Mr Beare has breached the terms of the alternative agreement by:

(a)                claiming that he owns the intellectual property and the names referred to in the alternative agreement; and

(b)               not doing all things necessary to give effect to the agreement and instead “deliberately undermined the commercialisation of the [Pulse Fuel] Technologies and has refused to cooperate or give effect to the assignment of the said intellectual property” to JBE.

(the breaches of the pre March 2004 alternative agreement claim).

(4)               By reason of certain alleged acts, Mr Beare, in his capacity as a director of JBE until 22 November 2005, breached his duty as a director under s 180 of the Corporations Act 2001 (Cth) (the duty of a director to exercise their powers and discharge their duties with the degree of care and diligence that a reasonable person would exercise if they were a director of a corporation in the corporation's circumstances and occupied the office held by, and had the same responsibilities within the corporation as, the director) (the failing to exercise reasonable care as a director claim).

(5)               By reason of the same alleged acts, Mr Beare breached his duty as a director under s 181 of the Corporations Act (the duty of a director to exercise their powers and discharge their duties in good faith in the best interests of the corporation) (the failing to act in good faith as a director claim).

(6)               By reason of the same alleged acts, Mr Beare breached his duty as a director under s 182 of the Corporations Act (the duty of a director not to improperly use their position to gain an advantage for themselves or someone else) (the improper use of position as a director claim).

(7)               By reason of the same alleged acts, Mr Beare breached his duty as a director under s 183 of the Corporations Act (the duty of a person who is or has been a director not to improperly use information obtained because they have been a director to gain an advantage for themselves or someone else) (the improper use of information obtained as a director claim).

(8)               Mr Beare “disclosed or used the confidential information” of JBE in breach of cl 10.2 of the ratification of pre-registration contracts and share subscription agreement dated September 2004 by which he was bound (the breach of cl 10.2 of the September 2004 agreement claim).

(9)               The March 2004 oral agreement was a joint venture in respect of which the parties had fiduciary obligations including “a duty of confidence with respect to the information of” JBE and the Pulse Fuel Technologies (the fiduciary obligations by reason of the March 2004 oral agreement claim).

(10)           “In breach of fiduciary duty and unconscientiously” and without the authority of the parties to the March 2004 oral agreement, Mr Beare appropriated to himself and for his own advantage at the expense of others and JBE “the intellectual property, logos, prototypes and trade marks of the joint venture” and the March 2004 oral agreement (the breach of the fiduciary obligations claim).

(11)           In consequence, Mr Beare holds in trust for JBE the “intellectual and property of or pertaining to the joint venture and/or the profits or revenues accruing or arising therefrom” (the trust claim).

(12)           Mr Beare, in trade or commerce, engaged in conduct that is misleading and deceptive or likely to mislead or deceive in contravention of s 9 of the Fair Trading Act 1999 (Vic) and/or s 38 of the Fair Trading Act 1989 (Qld) by: – (i) representing to the public that he is the true owner of the “technology listed in Schedule 1” (to the application), (ii) representing to the public that he is the true owner of confidential information described as bank statements of JBE, contracts and shareholder lists of JBE, “customer and client lists and commercial contacts”, (iii) representing to the public that he is the true owner of the Ducati and Yamaha prototypes, (iv) representing  to accredited domain name service providers that he or companies controlled by him “own the intellectual property and technology in Schedules 1 and 3” (to the application), and (v) representing that the testing, research and development results of JBE’s “three prototypes are that of his own”  (the misleading and deceptive conduct by Mr Beare claim).

(13)           Mr Beare, in trade or commerce, in connection with the supply or possible supply of goods or services to a person engaged in unconscionable conduct in contravention of ss 7 and/or 8A of the Victorian Fair Trading Act and s 39 of the Queensland Fair Trading Act by representing to third persons in the motor vehicle industry and other industries that “he is the owner of the technology confidential information and prototypes” and by certain other conduct said to be particularised in paragraphs 15 and 16 of the statement of claim (the unconscionable conduct claim).

(14)           Mr Beare made and published injurious falsehoods about each of the applicants in their profession or trade in the motor vehicle industry and other industries (the injurious falsehoods by Mr Beare claim).

(15)           By reason of Mr Beare having “continually interfered with links to [JBE]’s website from the Wikipedia site” for Sir Jack Brabham to “divert traffic and posted material which caused harm, detriment and embarrassment to” Sir Jack Brabham, special damage has been suffered (the special damage claim).

(16)           Since the making of the March 2004 oral agreement JBE has become the registered proprietor of Australian Patent No. 685683 (which is valid and subsisting) and has “widely advertised and promoted the Beare Technology Engine” and, by reason thereof, JBE has “acquired a valuable goodwill in the name Beare Technology Engines and Beare Head Technology when used for vehicular engines and the name denotes to the trade and the public the vehicular engine of [JBE] and none other”.  However, Mr Beare, with Mr Eleftheriadis and SSED, used and exploited the names Beare Technology Engine and Beare Head Technology “not connected with [JBE] and without the consent of [JBE]”.  Alternatively, the same matters involve a breach of s 9 of the Victorian Fair Trading Act and s 38 of the Queensland Fair Trading Act (the passing off and related misrepresentations claim).

Claims by Mr Beare

(17)           In mid 2001 Mr Casey represented to Mr Beare that he had funds of approximately $2 million immediately available to assist Mr Beare in the development of the Beare Head technology and that if Mr Beare entered into an agreement with Mr Casey: – (i) Mr Casey would pay all the fees in relation to all then existing Beare Head patents and patent applications and ensure that all such patents would be prosecuted and maintained at Mr Casey’s expense, (ii) Mr Casey would fund the research and development of the invention the subject of the Beare Head patents until the invention was commercialised, (iii) Mr Casey would ensure the invention was rapidly developed and commercialised for their mutual benefit, and (iv) Mr Beare would make a large profit through, among other things, the receipt of patent licence fees worldwide in relation to the invention (the 2001 representations claim).

(18)           During 2003 and 2004 Mr Casey represented to Mr Beare that: – (i) it was in Mr Beare’s interests and would assist in the marketing and exploitation of the Beare Head invention for Mr Beare and Mr Casey to join with Mr Smith and to market and exploit the Beare Head invention in combination with an invention developed by Mr Smith and an invention developed by Mr Casey, (ii) it was in Mr Beare’s interests and would assist in the marketing and exploitation of the Beare Head invention for a public company to be created, endorsed by and named after Sir Jack Brabham for this purpose, and (iii) under the new arrangement Mr Casey would ensure that all patents in relation to the Beare Head invention and the inventions of Mr Smith and Mr Casey were maintained and paid for (the 2003 and 2004 representations claim).

(19)           The 2001 and the 2003 and 2004 representations were made by Mr Casey in trade and commerce and were misleading and deceptive and/or likely to mislead and deceive and, insofar as they relate to future matters, Mr Casey did not have reasonable grounds for making the representations.  As such the 2001 oral representations and the 2003 and 2004 oral representations contravened s 9 of the Victorian Fair Trading Act, s 38 of the Queensland Fair Trading Act and s 56 of the Fair Trading Act 1987 (SA) entitling Mr Beare to claim damages from Mr Casey and an order that the 2001 agreement and the 2004 agreements are void and consequential orders for transfer to Mr Beare of all the Beare Head patents (the misleading and deceptive conduct by Mr Casey claim).

(20)           In reliance on the 2001 representations Mr Beare entered into an agreement with Mr Casey in October 2001 (the 2001 agreement) by which Mr Beare agreed to assign 50% of his rights in and to the Beare Head patents to Mr Casey (the 2001 agreement reliance claim).

(21)           In reliance on the 2001 and the 2003 and 2004 representations Mr Beare entered into “whatever written agreements” Mr Casey told Mr Beare were required to implement the new arrangement including a written agreement with Mr Casey, Mr Smith and Sir Jack Brabham in March 2004, a written partnership agreement with Mr Casey and Mr Smith in May 2004 and a written agreement with Mr Casey, Mr Smith and JBE in May 2004 titled “agreement for sale of patents in exchange for shares” (together, the 2004 agreements) (the 2004 agreements reliance claim).

(22)           Mr Casey and JBE detained from Mr Beare certain goods and chattels as identified (the goods and chattels claim).

Claims against Mr Eleftheriadis

(23)           In or after May 2006 Mr Eleftheriadis contacted JBE and met with Mr and Mrs Casey and Sir Jack Brabham “posing as a potential investor but with the secret intention of stealing [JBE’s] technology, confidential information and prototypes” (the false pretences claim).

(24)           In and from July 2006, and after rejection of his advances by JBE and Sir Jack Brabham, Mr Eleftheriadis intimidated the applicants of and concerning JBE’s business and future prospects (the intimidation claim).

(25)           From about the middle of 2006 Mr Eleftheriadis engaged in conduct that is misleading and deceptive or likely to mislead or deceive in contravention of s 9 of the Fair Trading Act 1999 (Vic) and/or s 38 of the Fair Trading Act 1989 (Qld) by: – (i) representing to the public that Mr Beare is the joint owner of the technology known as the Beare Head patents, (ii) representing to the public that Mr Beare is the joint owner of confidential information described as bank statements of JBE, contracts and shareholder lists of JBE, “customer and client lists and commercial contacts”, (iii) representing to the public that Mr Beare is the joint owner of the Ducati and Yamaha prototypes, and (iv) representing on the sixstroke.com website that Mr Beare is the owner of the technology (the misleading and deceptive conduct by Mr Eleftheriadis claim).

(26)           Mr Eleftheriadis made and published injurious falsehoods about each of the applicants in their trade and profession in the motor vehicle industry and business community (the injurious falsehoods by Mr Eleftheriadis claim).

(27)           Mr Eleftheriadis knowingly involved himself in the “breaches of trust [by Mr Beare] and unconscientiously advantaged himself” with the consequence that he holds the technology and prototypes, “including improvements, modifications or further patents deriving therefrom or any profits and revenues” on trust for JBE (the breach of trust claim).

Claims against Beare Technology Pty Ltd

(28)           The name Beare Technology Pty Ltd is associated with and is an asset of JBE’s business and, until the conduct of the respondents about which complaint is made, was representative of JBE’s asset, name, business and trade reputation (the Beare Technology Pty Ltd name claim).

(29)           From about the middle of September 2006 Beare Technology Pty Ltd, in trade or commerce, engaged in conduct that was misleading and deceptive or likely to mislead and deceive in contravention of s 52 of the Trade Practices Act 1974 (Cth) by representing to the public that Mr Beare is the true owner of technology and intellectual property identified, including by reference to the sixstroke.com website and by advertising across the internet (the misleading and deceptive conduct by Beare Technology Pty Ltd claim).

(30)           Beare Technology Pty Ltd knowingly involved itself in the “breaches of trust [by Mr Beare] and unconscientiously advantaged itself” with the consequence that it holds profits and revenues arising therefrom on trust for JBE (the breach of trust claim).

Claims against SSED

(31)           SSED’s name is associated with and is an asset of JBE’s business and, until the conduct of the respondents about which complaint is made, was representative of JBE’s asset, name, business and trade reputation (the SSED name claim).

(32)           From September 2006 SSED engaged in conduct that was misleading and deceptive or likely to mislead and deceive in contravention of s 42 (I infer, s 52) of the Trade Practices Act by: – (i) representing that Mr Beare is the true owner on the intellectual property and technology as identified on the website SSED purports to own, (ii) representing to the public that Mr Beare is the true owner of the confidential information described as bank statements of JBE, contracts and shareholder lists of JBE, “customer and client lists and commercial contacts”, as identified on the website SSED purports to own, (iii) representing to the public that Mr Beare is the true owner of the Ducati and Yamaha prototypes as identified on the website SSED purports to own, (iv) asserting by a “deed of confirmation” ownership of the intellectual property owned by JBE, (v) registering domain names using the terms as identified in Schedule 1 of the Application to describe the Beare Head Engine technology “with the purpose or effect of diverting internet traffic away from JBE’s website to its own”, www.sixstroke.com, (vi) entering into a shareholder agreement with Mr Beare by which Mr Beare brings JBE’s technology to SSED for SSED’s benefit, and (vii) its intention to commercialise the technology of JBE (the misleading and deceptive conduct by SSED claim).

(33)           SSED published injurious falsehoods about each of the applicants in their trade in the motor vehicle industry and other industries (the injurious falsehoods by SSED claim).

(34)           SSED knowingly involved itself in the “breaches of trust [by Mr Beare] and unconscientiously advantaged itself” with the consequence that it holds the assets “detailed in the “Deed of Confirmation” between [SSED] and [Mr Beare] and any profits and revenues arising therefrom” on trust for JBE (the breach of trust claim).

Claims against Reference Audio Visual

(35)           Reference Audio Visual, in trade or commerce, engaged in conduct that was misleading or deceptive or likely to mislead or deceive in contravention of s 52 of the Trade Practices Act by: – (i) aiding Mr Beare and Mr Eleftheriadis to acquire domain names which relate to the business and assets of JBE and thereby representing that business and assets are not owned by JBE, (ii) purchasing in October 2006 domain name licences which relate to the business and assets of JBE with the intention of diverting internet traffic away from JBE, (iii) securing and holding passwords, keys and administrative details on domain names which relate to the business and assets of JBE and thereby representing that business and assets are not owned by JBE, and (iv) wilfully ignoring advice dated June 2006 of an accredited domain name registrar on the “known redirection of sixstroke.com” to JBE’s website (the misleading and deceptive conduct by Reference Audio Visual claim).

(36)           Reference Audio Visual knowingly involved itself in the “breaches of trust [by Mr Beare] and unconscientiously advantaged itself” with the consequence that it holds assets “including domain names and any intellectual property or any profits and revenues arising therefrom” in trust for JBE (the breach of trust claim).

All respondents

(37)           The applicants claim that each of Mr Beare, Mr Eleftheriadis, Beare Technology Pty Ltd, SSED and Reference Audio Visual, unless restrained by order, will continue with the alleged conduct thereby causing the applicants further loss and damage (the continuing threat claim).

22                                          Insofar as practicable, I will deal with the claims in chronological order and in groups that appear related.  Before doing so, paragraph 40 of the statement of claim should be mentioned.  This paragraph states “The First Respondent, contrary to Orders of the Court, paragraph 4, made contact with the First Applicant and its directors by entering the AGM on 3 March 2008”.  If this claim is meant to raise a breach of orders of the court, it cannot be done in this way.  The claim is vague; presumably it is referring to paragraph 4 of the orders made by Bennett J on 19 December 2007 (as amended on 15 February 2008) which states “The Applicants on the one hand and the First to Sixth Respondents and the Eighth Respondent on the other hand respectively agree not to contact each other except through their respective lawyers”.  Order 40 of the Federal Court Rules provides the procedure for resolving alleged contempts.  The procedure requires the statement of charge to specify the contempt alleged so as to allow the accused person to know the case he or she has to meet and defend.  It has long been accepted that a person should not be punished for contempt unless the specific charge against him or her be distinctly stated and an opportunity of answering it given to that person (Australian Competition and Consumer Commission v INFO4PC.com Pty Ltd [2002] FCA 949 at [9] citing Coward v Stapleton (1953) 90 CLR 573 at 579-580).  Paragraph 40 is insufficient to establish any breach of the orders of the court; further, no particulars were provided and no submissions made in support of paragraph 40.  For these reasons, paragraph 40 of the statement of claim does not need to be dealt with further. 

the 2001 representations

Did Mr Casey make the 2001 representations (issue 17)?

23                                          Before Mr Beare had any involvement with the applicants, he had invented the Beare Head engine.  He had also obtained patents in various countries in respect of this invention including Australian Patent No. 685683 granted on 9 July 1998.  He had constructed prototypes including the Yamaha prototype and the Ducati prototype.  He used the prototypes in demonstrations.  His invention was the subject of favourable publicity.  He arranged for his invention to be showcased on a website that was established on his behalf in 1999 by Russell White, a web designer.  The address of this website was www.sixstroke.com. 

24                                          By about 1997, it became apparent to Mr Beare that he did not have the money to undertake the further development of his invention essential to the realisation of any prospect of its commercialisation. 

25                                          According to Mr Casey, Mr Beare contacted him during 2000 and raised the possibility of them developing a prototype involving both the Beare Head engine and Mr Casey’s fuel injection and nozzle invention about which Mr Beare had become aware.  On Mr Casey’s version of events Mr Casey then travelled from his home in Queensland to Mr Beare’s home in South Australia with Austin Meredith.  Thereafter, Mr Casey and Mr Beare had a number of telephone conversations.  Mr Casey said that these communications resulted in them agreeing in mid 2001 to “pool resources” and “work together” including, according to Mr Casey, Mr Beare agreeing to “pool” his prototypes so they could work on them together.  Their dealings culminated in Mr Beare and Mr Casey entering into the 2001 agreement whereby Mr Beare agreed to assign 50% of his rights in and to the Beare Head patents to Mr Casey.

26                                          Mr Beare’s version of the events leading up to the 2001 agreement is different.  According to Mr Beare Mr Casey first contacted him in 1998 and they kept in contact on an irregular basis thereafter.  By 2001 Mr Beare had made a 3D acrylic model of his invention.  In June 2001 he took this model to Stuttgart, Germany where he presented his invention to people involved in motor racing.  He returned to Australia buoyed by the reception his invention received including favourable coverage in the press.  Money, however, was still tight and patent fees were overdue.  After he returned to Australia Mr Casey called him.  Mr Casey had Mr Meredith with him who also spoke to Mr Beare.  Mr Beare’s evidence is to the effect that during this conversation Mr Casey made the 2001 representations to him – that is, Mr Casey represented to Mr Beare that he had funds of approximately $2 million immediately available to assist Mr Beare in the development of the Beare Head technology and that if Mr Beare entered into an agreement with Mr Casey: – (i) Mr Casey would pay all the fees in relation to all then existing Beare Head patents and patent applications and ensure that all such patents would be prosecuted and maintained at Mr Casey’s expense, (ii) Mr Casey would fund the research and development of the invention the subject of the Beare Head patents until the invention was commercialised, (iii) Mr Casey would ensure the invention was rapidly developed and commercialised for their mutual benefit, and (iv) Mr Beare would make a large profit through, among other things, the receipt of patent licence fees worldwide in relation to the invention. 

27                                          Mr Beare says he relied on those representations to enter into the 2001 agreement.  Mr Casey and Mr Meredith, said Mr Beare, first visited him in South Australia in 2002, after execution of the 2001 agreement. 

28                                          The applicants objected to those parts of Mr Beare’s affidavits relating to the 2001 representations.  While objection could have been taken to the form of those paragraphs (the conversations are not in direct speech), that was not the basis of the applicants’ objections.  Had a form objection been taken I would have acceded to a request to lead evidence-in-chief in respect of the conversations in question.  The applicants could not have been prejudiced by Mr Beare being able to say in proper form that which he had already said in the affidavits albeit not in direct speech.  The applicants, however, objected on the grounds of hearsay (to the relevant parts of the affidavit of 17 December 2007) and relevance (to the relevant parts of the affidavit of 30 September 2008).  Neither objection can be sustained.  The evidence of the conversations is not hearsay because it is relevant for the fact of the statements having been made.  The evidence is also relevant to a fact in issue.  Moreover, in response to a question in cross-examination Mr Beare asserted that the 2001 representations were made.  There is thus a proper evidentiary foundation for Mr Beare’s claim about the making of the 2001 representations. 

29                                          Certain other matters also must be taken into account. 

30                                          First, in the defence to the cross-claim Mr Casey admitted that in mid 2001 he told Mr Beare that he, Mr Casey, would fund the “research and development of the invention the subject of the Beare Head patents” until the invention was commercialised.  In cross-examination Mr Casey said that he told Mr Beare that he would try to commercialise Mr Beare’s invention over a three year period and promised to pay all Mr Beare’s patent fees for that three year period.  However, Mr Casey denied telling Mr Beare that he (Mr Casey) had $2 million immediately available to assist Mr Beare in the development of the invention.  According to Mr Casey, he told Mr Beare that “if I was to take his invention under my wing and that I would fund it personally for certain periods but I never promised any quantities of moneys [to] him”.  These admissions are generally consistent with the thrust of Mr Beare’s evidence about what Mr Casey told him.  They convey both willingness and financial capacity to fund development of Mr Beare’s invention.

31                                          Second, while Mr Beare was short of money, he had the benefit of patents protecting his invention, the prototypes which he had developed, favourable publicity and an unshakeable belief in his invention.  In these circumstances it would make little sense for Mr Beare to give up any of his rights unless he had a real basis for believing that Mr Casey could give something valuable in return – namely, as Mr Beare identified, financial capacity to fund the development of Mr Beare’s invention in the form of the $2 million which, according to Mr Beare, Mr Casey said he had immediately available for that purpose.

32                                          Third, both versions of events involved Mr Meredith.  According to Mr Casey he entered into a contract with Mr Meredith on 3 April 2001.  The contract provided for Mr Meredith to purchase equity of $2 million progressively over two years for a percentage of the rights to Mr Casey’s fuel injection nozzle invention.  The figure of $2 million is the same as that referred to in Mr Beare’s allegations that Mr Casey made the 2001 representations.  In context this is difficult to characterise as a mere coincidence.

33                                          Fourth, there is the fact of the 2001 agreement.  The agreement is dated 25 October 2001.  Recital B records that Mr Casey, as purchaser, “desires to become involved in the development of the Beare engine technology”.  The agreement provides for the sale of 50% of the rights to that technology by Mr Beare, as vendor, to Mr Casey, as purchaser.  Recital F records that all “fuel injection and nozzle technology” remains Mr Casey’s property.  In other words, by the 2001 agreement Mr Beare was transferring rights to Mr Casey, but Mr Casey was not transferring any rights to Mr Beare in respect of the fuel injection and nozzle technology.  The transfer was subject to Mr Casey paying all due and payable patent fees within 30 days (which Mr Beare warranted to be approximately $6,000) and paying to Mr Beare $4,000 within 15 days to be used to procure the creation of a one piece crank for the technology.  Otherwise, the consideration for the transfer of rights from Mr Beare to Mr Casey was in the form of Mr Casey agreeing as follows:

·                    to pay all patent fees in relation to the Beare engine technology for a minimum period of three years;

·                    to fund further research and development of the Beare engine technology for the next three years or until commercialisation (whichever is the shorter);

·                    to use his best endeavours to market and commercialise the patented technology through all existing and future business associates and contacts for a minimum period of three years.

34                                          The terms of the 2001 agreement are generally consistent with the essence of Mr Beare’s evidence about the representations Mr Casey made to him in 2001.  The differences (for example, the three year period in the agreement) do not undermine the weight of evidence supporting the inference that Mr Casey made the 2001 representations.

35                                          These matters support Mr Beare’s version of events.  They support the inference that Mr Casey made the 2001 representations to Mr Beare.  The applicants’ submissions to the contrary are not persuasive.  Mr Beare’s version of events is cogent and internally consistent.  The applicants’ submission that there is no evidence of communications in mid 2001 is incorrect.  Mr Beare was not a supplicant to Mr Casey.  He was certainly keen to progress the development of his invention.  But he believed his invention had prospects and wanted to know what he would be getting in return for giving Mr Casey “50% equity”.  The terms of the 2001 agreement are not inconsistent with Mr Casey having made the 2001 representations.

36                                          Nor do I accept the applicants’ general submission that Mr Beare’s evidence, if not corroborated, should be rejected on the grounds of lack of credit.  Nothing in the substance of Mr Beare’s evidence or the manner in which he gave it supports a finding that Mr Beare was an unreliable witness.  I reject the attempts in the applicants’ submissions to paint Mr Beare as someone posing as a “naïve inventor” but in truth intent only on achieving his own ends at the expense of others.  I also did not find Mr Beare an evasive witness.  I reject the submission that he was prepared to lie in giving evidence.  I also reject the submission that he tampered with evidence.  The latter submission did not have a sound evidentiary foundation.  The fact that Mr Beare copied over information from one DVD to another and, in consequence, the opening image on the DVD was incompletely or incorrectly reproduced does not show that Mr Beare tampered with evidence.  A note in the properties of the DVD that there was a modification when the DVD was copied also does not prove that allegation.  There was no evidence to indicate that the same note would not have appeared even if nothing more had been done than create a copy.  Mr Beare denied making any change to the DVD.  I accept his evidence. 

37                                          In contrast to Mr Beare, when matters potentially unfavourable to Mr Casey’s interests were in issue, Mr Casey’s evidence was vague, self-serving or unpersuasive.  A number of examples from the course of the hearing are discussed later in these reasons, namely: – (i) his evasive answers to questions about his financial position during 2001 before entry into the 2001 agreement, (ii) his unsatisfactory explanation of the use of his personal bank account for investments paid by third parties in 2003 and 2004, (iii) his unconvincing evidence to the effect that he believed that the Beare Head engine had achieved commercialisation through the arrangement with Mr Sun about the Yingyang prototype, and (iv) his attempt to characterise his relationship with Mr Eleftheriadis as one which had always been sour rather than concede (what was obvious from objective material) that the relationship changed from one of cordiality to hostility after a telephone call Mr Casey made to Mr Eleftheriadis on 6 June 2006.  Undisputed aspects of Mr Casey’s conduct also do not withstand close scrutiny.  In particular, he banked into his personal bank account moneys from third party investors in 2003-2004 before JBE’s incorporation (a total of some $1.3 million on the evidence of which at least some $493,000 went into Mr Casey’s own bank account).  It is clear that, after the dates on which investors’ funds were banked, Mr Casey continued to use the account for his everyday personal expenses.  Mr Casey, moreover, appeared not to consider these circumstances of any concern.  While this was described by the applicants as a matter of mere convenience, the unsatisfactory consequence is that it is not possible to separate Mr Casey’s personal expenditure from any expenditure made in accordance with the purpose of the investments.

38                                          I am satisfied that Mr Casey, in trade and commerce, made the 2001 representations to Mr Beare.  Other than Mr Casey’s denials of certain aspects of those representations (specifically, that he had approximately $2 million available immediately to further develop the engine), all of the evidence supports this inference.  The inference is consistent with Mr Casey’s admissions.  The inference is consistent with the circumstances prevailing at the time.  The inference is consistent with, and a compelling rational explanation for, Mr Beare’s subsequent conduct in entering into the 2001 agreement and the terms of that document.  I further deal with the representation claims below under the headings “Were Mr Casey’s Representations misleading and deceptive?” and “Remedies – Mr Beare”.

The rights transferred by the 2001 agreement

39                                          The operative clause of the 2001 agreement is cl 3.  Under cl 3(a) Mr Beare transferred to Mr Casey 50% of the “intellectual property known as the Beare Engine Technology (refer Schedule A)” (also referred to as “the intellectual property” (cl 3(b)) and “50% of the intellectual property rights in the Beare Engine Technology as per the attached Schedule A” (cl 3(c)).

40                                          Clause 1.1 of the 2001 agreement defines “intellectual property” as referring to “the intellectual property associated with the Beare engine technology – refer annexure A which is to be known as the ‘Beare Engine Technology’”.  It also defines “intellectual property rights” as meaning “all inventions, improvements, patents, copyright and related rights, trade marks (whether registered or not) design rights, circuit layout rights, trade secrets, confidential information and know-how”. 

41                                          Schedule A to the 2001 agreement is a list of patents for Mr Beare’s invention. 

42                                          Mr Beare did not transfer an interest in the prototypes to Mr Casey by the 2001 agreement.  This is clear from the provisions identified.  It is also clear from cl 3(k)(ii) which requires Mr Beare to make the prototypes available to Mr Casey for demonstration purposes.  Mr Beare did not agree to transfer anything else to Mr Casey.  The definition of “intellectual property rights” is only relevant to the use of that term in any other substantive provision of the agreement.  The definition involves “all rights” as identified insofar as another substantive provision requires the transfer of those rights.  The term is used in cl 3(c) to define the time by which the transfer required by cl 3(a) is to occur.  The transfer required by cl 3(a) is of the intellectual property associated with the Beare Engine Technology being that listed in Schedule A (that is, the patents).  I thus accept the respondents’ case that by these provisions Mr Beare transferred to Mr Casey 50% of Mr Beare’s rights in each of the listed patents.  Hence, insofar as the applicants’ submissions depended on the 2001 agreement involving Mr Beare transferring to Mr Casey anything other than 50% of his rights in the patents listed in Schedule A to the 2001 agreement, the submissions must be rejected. 

43                                          It is also the fact that the statement of claim does not plead any such transfer by the 2001 agreement.  The statement of claim refers to the 2001 agreement as a particular to the alleged March 2004 oral agreement.  The particular describes the 2001 agreement as an agreement by Mr Beare to “contribute inter alia his existing marketing materials, compact disc, website, engineering and test results relevant to commercialisation”.  There is no such obligation of “contribution” in the 2001 agreement.  Clause 3(k)(iv) is inconsistent with the particular if, by “contribute”, some form of transfer of rights is intended.  Clause 3(k)(iv) requires Mr Beare to “make available” to Mr Casey all “existing marketing materials… which may be reasonably useful and/or necessary to commercialise the technology”.  In other words, except for the specified transfer of 50% of the rights in the patents, Mr Beare’s obligations with respect to all other matters (the prototypes and marketing materials) were to make them “available”.  The obligation to make something available cannot be equated to the yielding up of any right, title or interest in the thing to be made available. 

44                                          It follows that, pursuant to the 2001 agreement, Mr Beare transferred nothing to Mr Casey but 50% of the rights in the patents listed in Schedule A to the agreement.  Mr Beare retained full right, title, and interest in and associated with his prototypes, his website www.sixstroke.com, and his marketing materials. 

The alternative pre March 2004 agreement claim (Issue 3)

45                                          Insofar as the applicants’ case depended on the alternative pre March 2004 alternative agreement, set out in paragraphs 32 to 38 of the statement of claim, the following observations must be made.  The claim alleges that “further, or in the alternative,” to the March 2004 oral agreement Mr Beare agreed to “sell to [Mr Casey] and jointly to commercialise inter alia, the Beare engine technology including all current patented material and ideas, and all future ideas whether patented or not of the said technology, and the intellectual property associated with the said technology including the names: ‘six-stroke’, ‘Beare head engine technology’, ‘Sixstroke engine’, ‘Beare Head Engine’, ‘Beare sixstroke engine’ and logos together with a CD and website www.sixstroke.com”.  The claim is unclear and provides no particulars of when or how the alleged pre March 2004 alternative agreement was made.  There is no evidentiary foundation to support any such pre March 2004 alternative agreement having been made and the applicants’ submissions provide no assistance in this regard.  As far as this claim is intended to refer to the 2001 agreement, as explained above, under the 2001 agreement Mr Beare sold 50% of the rights in the patents only.  It follows that all of the applicants’ claims based on the existence of the pre March 2004 alternative agreement must fail.  Insofar as the applicants’ case might depend on contrary propositions, never articulated in the pleadings, it must be rejected.

The partnership issue - 2001

46                                          At this point it is convenient to deal with another issue that arose during the hearing.  Throughout the hearing the applicants referred to the existence of a partnership between Mr Casey and Mr Beare arising in 2001 and subsequently joined by Mr Smith.  The applicants referred to this partnership as founding various aspects of the claimed relief.  The respondents made the point that no such partnership had been pleaded.  The applicants contended that the partnership was pleaded, and even if it was not pleaded, the existence of the partnership (or partnerships) was a circumstance relevant to the claims that were pleaded. 

47                                          There are difficulties with the applicants’ approach.  If the alleged partnership was a material fact then it had to be pleaded.  The statement of claim does not plead the existence of a partnership.  It is not open to a party to attempt to shift the ground of their pleaded case by referring to a matter which has not been pleaded over repeated objection by the other party; no partnership was pleaded and thus no relief can be founded on it.  These observations suffice to dispose of the partnership issue, but more can be said. 

48                                          As the respondents submitted, and irrespective of Mr Beare’s later description of the arrangements (on which the applicants relied), cl 17 of the 2001 agreement provides that nothing in that document “creates or is taken to create any partnership between the parties”.  While that statement is not conclusive it is relevant to the parties’ intention.  It is also consistent with other facts pointed out by the respondents: – (i) the 2001 agreement did not involve Mr Casey transferring any of his interest in his nozzle invention to Mr Beare, (ii) the evidence establishes that Mr Casey controlled all funds and paid Mr Beare, and (iii) no partnership accounts were tendered. 

49                                          For these reasons I need say nothing more in answer to, and rejection of, the applicants’ submission that the dealings between Mr Casey and Mr Beare in 2001, including the 2001 agreement, gave rise to a partnership between them.

SOME EVENTS FROM 2002-2004

2002

50                                          I accept Mr Beare’s evidence that in early 2002 Mr Casey visited Mr Beare’s home in South Australia and that Mr Meredith accompanied Mr Casey.  Mr Beare gave a demonstration of the Yamaha and Ducati prototypes.  After this Mr Casey arranged for Mr Beare to ship the prototypes overseas.  Mr Beare and Mr and Mrs Casey travelled to Europe.  Mr Beare demonstrated the prototypes.  The Ducati broke down and had to be repaired.  The trio then went to the United States.  The Ducati prototype was left with a testing company, SRI International, for tests.  Mr Casey asked Mr Beare to give SRI International 4% equity in Mr Beare’s invention in exchange for research and development which, in a two line letter of 9 February 2002, Mr Beare agreed to do. 

51                                          Mr Beare returned to South Australia and Mr and Mrs Casey to Queensland sometime in May 2002  According to Mr Casey, Mr Meredith came into financial difficulty and could not fulfil his side of the agreement relating to Mr Casey’s fuel injection and nozzle invention.  Mr Casey also had a falling out with SRI International and the proposed arrangement with that company proceeded no further.

52                                          Mr Casey said he was very disappointed with Mr Beare and the performance of the prototype.  Mr Casey thought that Mr Beare had breached cl 3(c)(ii) of the 2001 agreement which provided for Mr Beare to procure a one piece crank for the Beare Head engine.  Mr Beare, however, had made the crank as required.  More relevantly, the applicants did not plead any claim about the performance of the prototypes or anything Mr Beare said in this regard.

53                                          At or around this time Mr Casey asked Mr Beare to ship to Queensland the Yamaha prototype, Mr Beare’s bike dynamometer and some equipment.  Mr Beare did so and, in consequence, could not work on the prototypes (as the Yamaha was in Queensland and the Ducati with SRI International in the United States at that time).

Larry Sun – the Yingyang prototype

54                                          Mr Casey also decided to contact Larry Sun, a businessman in Taiwan.  This contact resulted in a tripartite “joint development agreement” between Mr Casey, Mr Beare and Mr Sun of 30 December 2002.  By this agreement (a term necessary to use loosely as the document styles itself as being intended to “identify the principle [sic] elements as the basis of documentation (is subject to agreement)”), Mr Sun agreed to pay $154,000 in three instalments into a bank account in Mr Casey’s sole name, in exchange for the design of a prototype motorcycle engine head using Mr Beare’s Beare Head engine invention and Mr Casey’s nozzle invention.  The finished prototype was to be owned by Mr Sun.  Mr Beare agreed “to be responsible for fitting and tuning of the prototype” at Mr Sun’s Taiwanese premises or in Australia at a cost to be determined.  The prototype which came into existence as contemplated by this agreement became known as the Yingyang prototype.

55                                          Mr Beare started work on the design of the Yingyang prototype for Mr Sun.  I accept Mr Beare’s evidence that, despite the fact that the agreement of 30 December 2002 referred to the three technologies (of Mr Beare, Mr Casey and Mr Smith), the work was done by Mr Beare and the Yingyang prototype that he designed incorporated only the Beare Head engine. 

56                                          As noted, Mr Beare had shipped his tools and equipment to Mr Casey in Queensland at Mr Casey’s request.  I accept Mr Beare’s evidence that Mr Casey insisted that Mr Beare complete work on the Yingyang prototype in Queensland.  Mr Beare had a family and a job in South Australia.  It must also be recalled that he had established Beare Technology Pty Ltd in 1989 and built five prototypes of his invention using his own resources and from his own workshop.  I am satisfied that, but for Mr Casey’s requirements and possession of Mr Beare’s equipment, Mr Beare would have preferred to carry out the work from his own home.  Nevertheless, Mr Beare left his family and job in South Australia to spend many months in Queensland in 2003 working on the Yingyang prototype.  His family considered moving to Queensland to be with him but they decided against it.  When he had completed the design Mr Beare returned to his home in South Australia.

57                                          According to Mr Casey the agreement with and the payment by Mr Sun represented “commercialisation” of the Beare Head engine as referred to in cl 3(e) of the 2001 agreement.  Under that clause Mr Casey had agreed to fund further research and development of the Beare Head engine “for the next three years or until commercialisation (whichever is the shorter)”.  Mr Casey’s evidence about this issue was unsatisfactory.  Mr Casey said “commercialisation” meant any sale of an item or the design of an item.  The agreement with Mr Sun involved a sale and thus, according to Mr Casey, commercialisation of the Beare Head engine was achieved when Mr Sun paid for the Yingyang prototype. 

58                                          I do not accept that the payment by Mr Sun for the work Mr Beare did on the Yingyang prototype satisfied Mr Casey’s obligations under cl 3(e) of the 2001 agreement.  In the context of the 2001 agreement as a whole, the word “commercialise” means making the Beare Head engine fit for commercial trade.  Fixing the Beare Head engine to one Yingyang motorcycle for a third party did not involve any development of the invention so as to make it fit for commercial trade.  The Yingyang prototype was no different in substance from the other prototypes Mr Beare had developed for himself.  I also note that Mr Casey appeared to hold a different view about commercialisation at other times when acknowledging that commercialisation had not occurred.  For example the 2002 tripartite, itself, provided that the parties would work “towards commercialisation of the technologies” – a clear indication that commercialisation had not occurred under this agreement.  The draft offer information statement from 2005 described the stage of development as remaining at that of “working prototypes” with money required to develop “pre-production prototypes”.  The same document described negotiations with Mr Sun and Primero Enserve (India) Pvt Ltd (Primero Enserve) about commercialisation of JBE’s products as “proceeding” with no formal agreement as yet.  The document also described certain risks to the technologies being developed to “fruition”.  Further, in an email to Nidamangala Srinivasa Balamukundan (a director of Primero Enserve) of 7 June 2006 Mr Casey said that it “was not that we don’t want to commercialise the head but you have given few details of what is involved ie ‘kick start’… I have not said that we will commercialise all three technologies together or none”.  In JBE’s 2006 business plan (which identifies Mr Casey as the relevant contact person) the company’s activities were described as including “pursuing commercialisation contracts”.  

59                                          Mr Casey said the Yingyang prototype failed and had to be shipped back to Australia and rebuilt, implying some fault on Mr Beare’s part.  It is apparent, however, that Mr Beare’s design specifications were not followed in Taiwan.  Be that as it may, the performance of the Yingyang prototype is not material to any pleaded cause of action and thus I say no more about Mr Casey’s evidence of the various difficulties and costs associated with them.

The oral agreement said to create a partnership in November 2002

60                                          The applicants’ submitted that another agreement came into existence on 13 November 2002 between Mr Casey, Mr Beare and Mr Smith.  According to Mr Casey they orally agreed to carry on a business in partnership of developing and commercially exploiting Mr Beare’s Beare Head engine, Mr Casey’s nozzle invention and Mr Smith’s hydrogen and oxygen generator. 

61                                          This submission confronts the same problems as the applicants’ submissions about a partnership arising in 2001. 

62                                          First, the applicants did not plead the existence of a partnership by reason of an oral agreement on 13 November 2002 between Mr Casey, Mr Beare and Mr Smith.  In paragraph 3 of the statement of claim, which pleads the existence of the March 2004 oral agreement, there is a reference to “the benefit of technology and marketing agreements collectively known as the Pulse Fuel (PF) Technologies”.  The particulars to this paragraph contain a reference to “prior agreements… relating to the technologies”.  These obscure references cannot be said to plead the existence of an oral agreement to form a partnership dated 13 November 2002.  Mr Casey’s affidavit of 6 July 2009 contains information about this alleged oral agreement.  This affidavit purported to comply with orders for further and better particulars of the statement of claim made on 27 March 2009.  However, the orders required the particulars to be provided within 28 days.  Further, the orders required particulars of the contention in paragraph 3 of the statement of claim that Mr Beare had agreed to “pool” his prototypes by the terms of the alleged March 2004 oral agreement.  Mr Casey’s affidavit, in referring to another alleged oral agreement of 13 November 2002, cannot be said to provide particulars to paragraph 3 of the statement of claim.  If the applicants wished to assert a cause of action founded on an alleged oral agreement of 13 November 2002 then they had to plead the material facts on which they relied to prove the existence of that agreement and its terms.  The applicants have not done so.

63                                          Second, the evidence said to found the oral agreement is unsatisfactory both in terms of form and substance.  The evidence rarely rises above mere assertion or submission and fails to prove an agreement to establish a partnership.  The conversation to which Mr Casey deposes in paragraph 13 of his affidavit of 6 July 2009 is an inadequate foundation for any inference that a partnership was formed on and from 13 November 2002.  The claim is not assisted by Mr Smith’s evidence or the later documents to which Mr Casey refers in that affidavit (including the partnership agreement which did come into existence on 20 May 2004).  Nor is it assisted by Mr Beare’s later references to a partnership with Mr Casey in an email to JBE shareholders. 

64                                          Third, and in any event, nothing in the evidence of the conversation said to give rise to the partnership on 13 November 2002 provides support for an inference that the terms of the agreement bear any resemblance to those which Mr Casey asserts in paragraphs 15 and 16 of his affidavit of 6 July 2009.  Those paragraphs are mere assertion and provide no rational evidentiary foundation for any inference that Mr Beare put into the venture his Yamaha engine, the website www.sixstroke.com, test results or anything else. 

The MAKING OF THE 2003 and 2004 oral representations (ISSUE 18)

65                                          Mr Beare contended that Mr Casey made the 2003 and 2004 representations in those years thereby inducing Mr Beare to enter into a series of agreements with Mr Casey. 

66                                          In the defence to the cross-claim Mr Casey admitted the first representation – that he represented to Mr Beare at this time that it was in Mr Beare’s interests and would assist in the marketing and exploitation of the Beare Head invention for Mr Beare and Mr Casey to join with Mr Smith and to market and exploit the Beare Head invention in combination with an invention developed by Mr Smith and an invention developed by Mr Casey.  This admission is qualified only insofar as Mr Casey contends that he made this representation on the basis that Mr Beare was aware at the this time that the Beare engine would not be viable without other applied technologies and further refinements and development of the Beare technology due to inherent combustion and pollution problems with the Beare engine.

67                                          Two observations may be made about the basis of the admission.  First, the state of Mr Beare’s alleged awareness does not alter the fact that Mr Casey admits making the first of the 2003 and 2004 representations to Mr Beare.  Second, the basis of the admission, particularly the reference to the Beare engine not being “commercially viable” at the time, is difficult to reconcile with Mr Casey’s view that the Beare Head engine achieved “commercialisation” by reason of the payment made by Mr Sun for the Yingyang prototype. 

68                                          Mr Casey also admitted the second representation, that, at this time, he represented to Mr Beare that it was in Mr Beare’s interests and would assist in the marketing and exploitation of the Beare Head invention, in combination with an invention developed by Mr Smith and an invention developed by Mr Casey, for a public company to be created, endorsed by and named after Sir Jack Brabham. 

69                                          Mr Casey denied, however, the third representation – that he represented to Mr Beare that under the new arrangement Mr Casey would ensure that all patents in relation to the Beare Head invention and the inventions of Mr Smith and Mr Casey were maintained and paid for.

70                                          In his affidavit of 6 July 2009, Mr Casey said that at about the time the Yingyang prototype was returned to Australia for rebuilding in early 2003, the investor in his nozzle technology suffered financial difficulties with the consequence that Mr Casey’s projects in the United States for his technology had to be “put on hold indefinitely”.

71                                          On 8 April 2003 Mr Casey, as the principal of Pulse Fuel Technologies, released a document styled “Explanatory Memorandum and Seed Capital Offer”.  This document refers to Mr Casey’s nozzle technology, the Beare Head engine and Mr Smith’s hydrogen/oxygen generator.  The document described itself as a “proposal for seed capital”.  The document stated that:

Currently we are nearing finalisation of a self-funded project with a Taiwanese organisation; this project will culminate with the return, in around a month, of a fully engineered prototype Beare Head made to our design.

72                                          The document referred to the Yamaha and Ducati prototypes.  It said that “it is intended that further patents will be applied for (as many as 3 more can be applied for immediately)”; and further, that:

Concurrently we have been working with one of the largest automobile manufacturers in America over a two-year period to develop my nozzle technology… this is now at the stage of full prototype within a car; testing and evaluation is still progressing under a confidentiality agreement…

My initial backer is in financial difficulty and this makes it necessary to approach other investors to top up working capital…

I am looking for a minimum of $300,000 and maximum of $500,000 to pay ongoing patents and provisional patent applications and ongoing overhead costs together with the establishment of a company structure and preparation of a prospectus to raise further capital to take the technologies to full market commercialisation…

A deed of agreement will be made between the investor and the three patent holders for the agreed percentage of the technologies involved; this deed will remain in place until a company structure (or structures) is formed where shares will be issued in a public float to raise an agreed amount for future development.

73                                          The document referred to a business plan which was said to provide “detailed financial revenue and expense costings”.  The business plan is a document entitled “Business Plan (2003) Pulse Fuel Technologies Group” identified on the cover page as involving “Pulse Fuel Injector and Nozzle”, “Beare Technology” and “Smith’s Hydrogen/Oxygen Generator”.  Mr Casey drafted this document.  According to the business plan “Pulse Fuel Technologies is seeking to further develop and commercialise the technologies” for which further “working capital is required”.  This is described as being “significant funding” required for research and development and independent analysis.  The business plan also referred to the agreement between Mr Casey, Mr Beare and Mr Sun described above.  The business plan represented this agreement as a “south-east Asian partnership… pertaining to the commercialization of the Beare Head and Nozzle Technologies for use in motorcycles throughout the Asian region”. 

74                                          The business plan contained valuations based on projected income streams from the inventions.  The author of the projections is not identified but I infer it to be Mr Casey.  The assumptions underlying the projections are not supported in any meaningful way.  Many appear self-evidently unsupportable.  For example, market penetration for the nozzle is assumed to commence in 2004 and to rise to 6% of some 52 million cars by 2012.  Royalties are then calculated by reference to these assumptions leading to an overall valuation.  The page before the projections describes the royalties on which the so-called valuations are based as a “fair and reasonable ‘guestimate’”.  The “Explanatory Memorandum and Seed Capital Offer”, however, described the business plan as containing “detailed financial revenue and expense costings”.  It did not disclose that those costings and revenues were a “guestimate”.  The “Explanatory Memorandum and Seed Capital Offer”, however, contained a disclaimer that the information related to “investments of a speculative nature” and that no representations were made as to the accuracy and reliability of the information contained in the document. 

75                                          One thing apparent from the business plan which Mr Casey used as the basis to call for public investment is that the guesses about revenues (and thus values) resulted in Mr Casey’s invention being allocated 57.5% of the total value (said to be US $1,447,896,734), Mr Beare’s invention 37.5% and Mr Smith’s 5%. 

76                                          I make the following further observations about “Explanatory Memorandum and Seed Capital Offer”.  The document shows that there were ongoing arrangements between Mr Casey and Mr Beare (as well as Mr Smith).  Mr Beare signed a copy of the document indicating his knowledge of, and agreement to, its issue.  Acknowledgment of this fact is not inconsistent with my rejection of the applicants’ (not pleaded) claim of a partnership between these three made by oral agreement on 13 November 2002.  The document confirms Mr Casey’s evidence that he did not have $2 million or anything like that amount to fund research and development of the Beare Head engine.  The document gives prominence to the need to obtain funds to pay for ongoing and new patents.  The document also refers to funds being required “to take the technologies to full market commercialisation” (which further undermines Mr Casey’s evidence about the deal with Mr Sun representing commercialisation of the invention). 

77                                          The document is thus consistent with Mr Beare’s evidence that Mr Casey, at this time, represented to him that under the new arrangement Mr Casey would ensure that all patents in relation to the Beare Head invention and the inventions of Mr Smith and Mr Casey were maintained and paid for.  I am satisfied that Mr Casey made this representation to Mr Beare.  It is consistent not only with the terms of the April 2003 document, but also the 2001 agreement.  Under that agreement, Mr Casey was bound to pay all patent fees for the Beare Head engine patents for three years (which did not expire until 25 October 2004 at the earliest) and to fund and research development of the Beare Head engine for the same three years or until commercialisation.  Mr Casey agreed to do these things in exchange for 50% of the rights to the patents listed in Schedule A to the 2001 agreement.  However, by the document dated 8 April 2003, Mr Casey was calling for funds to do the same things he had already agreed to do for Mr Beare but at the price of other investors also obtaining a share in the rights to Mr Beare’s invention.  In these circumstances Mr Beare’s evidence about the making of all of the 2003 and 2004 oral representations should be accepted. 

78                                          A number of investors responded to Mr Casey’s proposal of 8 April 2003.  Mr Sun entered into an agreement with Mr Casey, Mr Beare and Mr Smith on 19 May 2003.  Mr Sun invested $100,000 in exchange for 0.6% equity in any future entity or entities to be established “for the holding, research and development and commercialisation of the intellectual property known as the PFT technologies”.  The PFT technologies were the three inventions of Mr Beare, Mr Casey and Mr Smith.  The $100,000 was to be paid under the agreement directly into a bank account in Mr Casey’s sole name.  Over the next six or so months similar agreements were entered into with other investors.  Pursuant to these initial investor agreements some $438,528 was banked into the account in Mr Casey’s name.  According to other evidence, by the time that the proposal with respect to JBE had been finalised (May 2004) up to $1.3 million of investment had been received. 

79                                          One investor was Speed of Light Pty Ltd, a company controlled by Russell White, the person who had designed the website www.sixstroke.com for Mr Beare in 1999.  Under an agreement dated 22 October 2003 between Mr Casey, Mr Beare, Mr Smith and Speed of Light, the latter agreed to pay $100,000 for 0.6% equity in the future entity or entities to be established “for the holding, research and development and commercialisation of the intellectual property known as the PFT technologies”.  Speed of Light Pty Ltd obtained a further 0.6% equity on the basis of “$10,000 previously paid to Malcolm Beare, Work in kind done in past years, value for work to be completed for next 2 years in developing and maintaining a web site for promotion of the technologies; as per schedule C”.  According to the applicants, there was, by this agreement, a sale of the website www.sixstroke.com to JBE.  I do not accept this submission.  The agreement does not provide for a sale of the website www.sixstroke.com to JBE; further, JBE had not been created at the time Speed of Light entered into the agreement dated 22 October 2003. 

80                                          For the reasons set out above I am satisfied that Mr Casey made the 2003 and 2004 representations to Mr Beare.  I deal with the consequences of this finding below under the headings “Were Mr Casey’s representations misleading and deceptive” and “Remedies – Mr Beare”.

The March 2004 oral agreement (ISSUes 1, 2, 3, 9, 10 and 11)

81                                          A number of the applicants’ claims are founded on the existence of an oral agreement alleged to have been entered into by Mr Casey, Mr Beare and Mr Smith in March 2004.  Mr Beare denied the existence of this agreement. 

82                                          Mr Casey’s affidavit of 15 October 2007 says that this oral agreement came into existence as follows:

In early 2004 I said to Beare and Smith “I propose that we pool all our engine related technologies into a company that will have the endorsement as well as the involvement of Sir Jack Brabham”. Beare and Smith each said to me “I agree with your proposal”.

83                                          Mr Casey’s affidavit of 13 June 2008 expanded on this evidence.  Mr Casey said that in the first week of March 2004, Mr Beare came to Queensland where he was met by Mr Casey and Mr Smith.  Mr Casey referred to Sir Jack Brabham backing the technologies.  After a technical discussion Mr Casey said “the solicitors in Sydney are in the process of setting up a company right now which will mean interstate travel to Sydney to sign the paperwork.  As you know we have each sold part of our individual technologies, prototypes and patents to all foundation investors. Do you both agree to put all our intellectual property of the technologies, patents and prototypes together in the one company to be named Jack Brabham Engines Limited?”.  Mr Casey said “they both agreed” and Mr Beare also said that “this can only go ahead on the proviso that I am a director – I wish to be the Technical Director”.  According to Mr Casey, he and Mr Smith agreed.  Mr Beare then said “When we get more funds in then I can get stuck into it with the software and hardware needed for improvements and refinements over time”.  

84                                          Mr Casey’s affidavits contain many other references to the “pooling agreement” (and the like) to describe this alleged agreement.  However, those other references are conclusions or opinions and cannot found the existence of the agreement.

85                                          In his affidavit of 27 March 2008, Mr Smith said that in March 2004 when Mr Beare was in Queensland “we” (that is, Mr Smith, Mr Beare and Mr Casey) “agreed to pool our various patents, prototypes and technologies and form a company…”.  Further, that Mr Smith, Mr Beare and Mr Casey signed an agreement with Sir Jack Brabham “that we would be formally pooling or grouping together the patents and technologies in a company to be called ‘Jack Brabham Engines Limited’”. 

86                                          Mr Beare said in his affidavit of 30 September 2008 that he did not make any agreement with Mr Smith and Mr Casey (in March 2004 or otherwise) to “pool our technologies”.  Rather, Mr Beare agreed to the setting up of a company and to transfer “whatever patents we held in our own names into that company”.  Further, that they agreed on their percentage respective shareholdings in that proposed company.  Mr Beare, in the same affidavit, denied that a conversation occurred as claimed by Mr Casey.  Mr Beare said he never agreed to sell his prototypes but had agreed to make them available as required which he had done.  Mr Beare was cross-examined about the alleged March 2004 agreement.  Throughout cross-examination Mr Beare maintained that he had agreed that a company would be formed but no other conversation or agreement as alleged by Mr Casey had occurred or been made.

87                                          Mr Casey was not cross-examined about the alleged March 2004 oral agreement.  The applicants submitted that they must succeed on these claims in consequence.  This submission, I infer, is based on the rule in Browne v Dunn (1894) 6 R 67.  Hunt J explained this rule as follows in Allied Pastoral Holdings Pty Ltd v Commissioner of Taxation [1983] 1 NSWLR 1 at 16

… unless notice has already clearly been given of the cross-examiner's intention to rely upon such matters, it is necessary to put to an opponent's witness in cross-examination the nature of the case upon which it is proposed to rely in contradiction of his evidence, particularly where that case relies upon inferences to be drawn from other evidence in the proceedings. Such a rule of practice is necessary both to give the witness the opportunity to deal with that other evidence, or the inferences to be drawn from it, and to allow the other party the opportunity to call evidence either to corroborate that explanation or to contradict the inference sought to be drawn. That rule of practice follows from what I have always believed to be rules of conduct which are essential to fair play at the trial and which are generally regarded as being established by the decision of the House of Lords in Browne v Dunn (1894) 6 R 67.

88                                          The rule is thus based on principles of fairness.  According to Cross on Evidence (LexisNexis Butterworths, subscription service) at [17445] (excluding footnotes):

The rule does not apply where the witness is on notice that the witness's version is in contest. The notice may come from the pleadings, or a pre-trial document indicating issues, or the other side's evidence, or the other side's opening; it may come from the general manner in which the case is conducted; it may come from the way an earlier trial between the parties on the same issues was conducted. In general, however, this exception to the rule should only operate where the issue is a fairly clear and obvious one. Even where there has been an exchange of affidavits or statements, a cross-examiner must put to the witness any non-obvious implications which the cross-examiner proposes to submit can be drawn from the evidence.

89                                          Further, if the rule applies and has been breached, a court is not thereby bound to accept the evidence which has not been subjected to cross-examination.  A decision of the Supreme Court of Victoria, Bulstrode v Trimble [1970] VR 840 at 848, is cited by Cross at [17460] as follows:

[I]f a witness's evidence upon a particular matter appeared in his evidence-in-chief to be incredible or unconvincing, or if it was contradicted by other evidence which appeared worthy of credence, the fact that the witness had not been cross-examined would, or might, be of little importance in deciding whether to accept his evidence.

90                                          In their defence filed on 21 July 2008, the respondents contended that paragraph 3 of the statement of claim (asserting the existence of the March 2004 oral agreement) should be struck out as embarrassing on various grounds and, subject to the identified objections to the applicants’ pleading, denied each and every allegation the applicants made in that paragraph.  As noted, in his affidavit of 30 September 2008 Mr Beare also denied the conversations by which the March 2004 oral agreement is said to have been made and the existence of any agreement to the effect claimed by Mr Casey.  In written opening submissions the respondents contended that:

The Court ought find that there is no oral agreement of the nature contended for by the Applicants at paras 3 and following of the Amended Claim but rather that the following written contracts were prepared by Casey and/or his solicitors and executed…

91                                          In exchanges about the admissibility of certain additional evidence early in the hearing the respondents’ counsel referred to the March 2004 oral agreement as “the oral agreement that the respondents deny”.

92                                          These matters disclose that the applicants could not have been in any doubt that Mr Beare denied the evidentiary foundation for and the existence of the March 2004 oral agreement.  The respondents’ defence and written submissions put the applicants on notice that the respondents’ case was that the conversations referred to by Mr Casey did not take place and that there was no oral agreement as claimed.  In these circumstances I am satisfied that the rule in Browne v Dunn does not apply.  Even if applicable, the consequence of a failure to cross-examine Mr Casey, in the circumstances described, would not be that the applicants necessarily succeed on this part of their case.  Mr Beare’s evidence contradicted that of Mr Casey.  The strength of Mr Beare’s evidence on these matters was not weakened in cross-examination.  For example, the fact that Mr Beare may well have been in Queensland at the relevant time and met Mr Casey (which I accept occurred in or about March 2004) does not make it more or less likely that the content of any conversations were as claimed by Mr Casey or Mr Beare.  Mr Beare had every reason to be in Queensland and meet Mr Casey and Mr Smith at this time.  JBE was in the process of being established.  Mr Beare accepted that he had discussions with Mr Casey and Mr Smith about JBE before its constitution.  What he did not accept was the conversations about pooling all technologies, prototypes and patents or his entry into an oral agreement to that effect.

93                                          For these reasons Mr Casey’s evidence must be weighed along with all other admissible and relevant evidence in order to resolve the issue in dispute about the March 2004 oral agreement.

94                                          First, Mr Smith’s evidence.  The respondents objected to many parts of Mr Smith’s evidence including paragraph 11 of his affidavit of 27 March 2008 in which Mr Smith said that “we agreed to pool our various patents, prototypes and technologies and form a company…”.  Paragraph 11, insofar as it refers to the agreement, is inadmissible.  It is a conclusion presumably based on an unidentified evidentiary foundation.  Mr Smith does not identify the terms of any conversation by which the conclusion of “we agreed…” is said to be founded.  Mr Smith’s evidence, accordingly, is incapable of providing any assistance to the applicants in respect of the alleged March 2004 oral agreement.

95                                          Second, the context.  As discussed, pursuant to the 2001 agreement, Mr Beare transferred to Mr Casey 50% of the rights in the patents listed in Schedule A to the agreement.  Mr Beare, however, retained full right, title, and interest in and associated with his prototypes, his website www.sixstroke.com, and his marketing materials.  In 2003 a number of investors gave money to Mr Casey in exchange for equity in a company to be established “for the holding, research and development and commercialisation of the intellectual property known as the PFT technologies”.  Many steps were taken thereafter directed to the establishment of the required corporate entity including the drafting of various documents by solicitors that were subsequently executed.

96                                          Pulse Fuel Technologies Pty Ltd was incorporated on 24 February 2004 as a proprietary company limited by shares.

97                                          On 29 March 2004 Sir Jack Brabham entered into a deed with Mr Casey, Mr Smith and Mr Beare.  By this deed Sir Jack Brabham obtained 3.5% equity in the prospective entity to be named Jack Brabham Engines Limited in exchange, in effect, for the use of his name and marketing rights in association with the prospective entity (of memorabilia and the like). 

98                                          Not long after the date of the alleged March 2004 oral agreement, on 20 May 2004, Mr Casey, Mr Beare and Mr Smith attended a meeting of Pulse Fuel Technologies Pty Ltd in Sydney.  Mr Casey was appointed chairman of the meeting.  It was resolved that the company be changed to a public company limited by shares.  A new constitution was adopted.  The name of the company was changed to Jack Brabham Engines Limited. 

99                                          On the same day (20 May 2004), Mr Casey, Mr Smith and Mr Beare executed a document called a partnership agreement.  This document provides in cl 2.1 that:

The Partners agree that as from 13 November 2002 they have carried on and will continue to carry on the Business in partnership on the terms set out in this Deed until 30 June 2050.

100                                       The Partners are Mr Casey, Mr Smith and Mr Beare.  The Business is the business of developing and commercially exploiting the Patents.  The Patents means all the right, title and interest in the inventions described in Schedule 1 to the deed including the registered patents and applications for registration of patents described in Schedule 2.  Schedule 1 lists the inventions of Mr Casey, Mr Smith and Mr Beare and Schedule 2 lists various patents. 

101                                       It is convenient to make the following observations about this deed:

(1)               The deed is not pleaded as a material fact in the applicants’ statement of claim.

(2)               The partnership referred to as having been carried on since 13 November 2002 is not pleaded as a material fact in the in the applicants’ statement of claim (see the discussion above about this matter).

(3)               The deed does not identify or refer to the existence of an oral agreement in March 2004 by which Mr Casey, Mr Smith and Mr Beare agreed to pool “all our engine related technologies” or otherwise.

(4)               When asked about this deed Mr Beare said that he had been advised by the solicitors responsible for its preparation that it was to exist for one day only pending the constitution of JBE as a public company.  A letter dated 6 April 2004 to Mr Casey from the solicitors preparing the documents records that Mr Casey had sought advice on the capital gains tax issues associated with the transfer of certain assets from “individuals” to Pulse Fuel Technologies Pty Ltd.  The individuals are Mr Casey, Mr Beare and Mr Smith and the assets are the patents.  The letter advised that the simplest and most effective form of rollover relief obtainable involved the formation of a partnership between Mr Casey, Mr Beare and Mr Smith in which each party retained their assets.  The partnership would then transfer the assets to Pulse Fuel Technologies Pty Ltd and obtain rollover relief.  This letter supports Mr Beare’s characterisation of the purpose of the deed, as well as his denial of the existence of any partnership being entered into at any earlier time (a matter which, as noted, the applicants did not plead in any event). 

102                                       On the same day (20 May 2004), Mr Beare and others executed many more documents prepared by the solicitors.  One such document was an “Agreement for Sale of Patents in Exchange for Shares” (or patent sale agreement) executed between Mr Beare, Mr Casey, Mr Smith and Pulse Fuel Technologies Pty Ltd.  This agreement refers to the “Business” as “the business of developing and commercially exploiting the Patents carried on by [Mr Casey, Mr Beare and Mr Smith] in partnership pursuant to a partnership agreement dated 20 May 2004”.  According to this agreement Mr Casey, Mr Beare and Mr Smith, as vendors, agreed to sell to Pulse Fuel Technologies Pty Ltd all their right, title and interest in the Patents in exchange for the issue and allotment of shares in certain proportions to the vendors.  The Patents are defined in the same terms as in the partnership deed. 

103                                       At this point it is convenient to make certain further observations about the proportions in which the shares were allotted to Mr Casey, Mr Beare and Mr Smith.  The patent sale agreement refers to consideration to the vendors in the form of a share issue.  Of the total of 4,999,999 shares to be issued, 3,212,499 were to be allocated to Mr Casey (64%), 1,612,500 to Mr Beare (32%) and 175,000 to Mr Smith (3.5%).  This allocation must reflect some valuation process but none is disclosed on the face of the patent sale agreement (or, indeed, the other agreements into which Mr Beare entered in May 2004).  There is expert evidence in this case relating to certain valuation issues (from Mr Anthony Bennett on behalf of the applicants and Ms Piera Murone on behalf of the respondents).  For present purposes it is sufficient to note that the patent sale agreement resulted in Mr Casey obtaining 64% of the initial allocation of shares in the company to which the Patents were transferred with the shares representing a total value of $4,999,999 (a directors’ valuation unsupported by any independent assessment). 

104                                       The same parties, on the same date, executed a short form confirmation of assignment deed.  By this deed they confirmed that for value received under the patent sale agreement the vendors, Mr Casey, Mr Beare and Mr Smith, had transferred all their right, title and interest in the Patents.

105                                       In common with Mr Casey and Mr Smith, Mr Beare signed an application for shares on 20 May 2004.  He sought an allotment of 1,612,500 shares in the company in consideration for the sale of the Patents as defined in the patent sale agreement.  Mr Casey obtained 3,212,499 shares and Mr Smith 175,000 shares.  Mr Beare also signed a consent to act as a director of Pulse Fuel Technologies Pty Ltd.

106                                       On 15 July 2004 the Australian Securities and Investment Commission (ASIC) issued a certificate of change of company name from Pulse Fuel Technologies Pty Ltd to Jack Brabham Engines Limited and the conversion of JBE to a public company. 

107                                       At around this time Mr Casey and Mr Beare visited Mr Sun in Taiwan where, according to Mr Casey, Mr Sun said he proposed to finance the development of “off the shelf” Beare Head engines able to be retro-fitted with an investment of $350,000 for that purpose. 

108                                       Mr Casey, Mr Beare, Mr Smith, and JBE entered into a series of agreements on 23 September 2004 with the investors who had responded to the seed capital offer in 2003 and executed the investor agreements.  These further agreements are entitled “Ratification of Pre-Registration Contract and Share Subscription Agreement.  By these agreements JBE ratified the earlier agreements by which the investors had paid money in anticipation of an issue of shares in the company when registered.  According to the agreements: – (i) JBE had a current issued share capital of 5,000,000 shares, (ii) JBE ratified the earlier investor agreements (s 131 of the Corporations Act 2001 (Cth)), and (iii) the investors (as subscribers) applied for and JBE issued shares in exchange for the consideration paid under the earlier investor agreements. 

109                                       The existence and content of the written agreements described above is inconsistent with the alleged March 2004 oral agreement.  The history of dealings between Mr Casey and Mr Beare shows that Mr Casey had no difficulty in either documenting agreements in writing or, where required, instructing solicitors to do so on his behalf.  From early 2003 Mr Casey intended to create a corporate vehicle for the purpose of raising money to enable development of the inventions.  I infer that Mr Casey must have retained solicitors from some time in late 2003 for the specific purpose of advising on the arrangements necessary to constitute such a corporate vehicle.  Those solicitors drafted a series of detailed documents putting in place the necessary arrangements.  These arrangements included the partnership deed and the patent sale agreement.  These agreements do not refer to any pre-existing oral agreement made in or about March 2004 by which Mr Beare, Mr Smith and Mr Casey agreed to “pool all our engine related technologies into a company” or to “put all our individual technologies, patents and prototypes together in the one company”.  If there had been such an oral agreement, its existence would have been reflected in some way in the written agreements.  The written agreements were executed within a few months of the alleged making of the oral agreement.  The written agreements are detailed documents prepared by solicitors at presumably considerable expense for the very purpose of documenting the legal arrangements required to sell the patents (as defined) to the corporate vehicle, JBE.  The partnership deed does refer to a pre-existing arrangement from November 2002 but not to any oral agreement of March 2004 of the type alleged by Mr Casey.  Further, the terms of the written agreements are not consistent with the contents of the alleged oral agreement.  The written agreements, for example, make no reference to prototypes.  The subject matter of the written agreements is the patents as defined. 

110                                       This context is also relevant to the question whether the evidence supports the inference of any intention to create legal relations by reason of the conversations to which Mr Casey referred.  Any subjective intention on Mr Casey’s part is immaterial.  The question of intention is to be determined objectively.  As at March 2004 Mr Casey, Mr Smith and Mr Beare must all have known that solicitors were preparing a detailed series of documents for the purpose of ensuring legally appropriate and enforceable arrangements between them with respect to the sale of their patents to a company in exchange for shares.  Mr Casey, in the second version of the conversations he gave in respect of the alleged oral agreement, referred to the work which the solicitors were then performing.  Against this background it is improbable that the parties to the alleged oral agreement would have intended to enter into legal relations by reason of the words Mr Casey identified as having been said. 

111                                       This unlikelihood is reinforced by consideration of Mr Casey’s evidence (even when taken at face value).  Insofar as that evidence identified any matter potentially relevant to the formation of the alleged oral agreement, the content of what was said weighs against any inference of an intention to create legal relations.  The first version of the conversation (Mr Casey saying “I propose…” and Mr Beare and Mr Smith each responding “I agree…”) is a bald statement, practically devoid of content.  The second expanded version is different.  The reference to “engine related technologies” becomes “all our intellectual property of the technologies, patents and prototypes”.  Mr Beare and Mr Smith’s response is said to be “they both agreed” – evidence which yields little support for an inference of an intention to be bound.  Most importantly, the key conversation is said to have occurred following Mr Casey’s reference to the work the solicitors were doing to set up the very company said to be the subject of the alleged oral agreement.  Mr Casey told Mr Beare and Mr Smith they would need to travel to Sydney to sign the paperwork.  In this context, given that they were about to execute detailed written agreement dealing with the same or a similar subject matter, the idea that any of the parties to the alleged agreement would have intended to bind themselves to some additional or side oral agreement is untenable. 

112                                       Another problem is the inconsistency between the first and second versions of the conversations by which Mr Casey alleged the oral agreement was made.  The two versions are different.  The second version, as noted, has been expanded to cover “all our intellectual property” with an express reference to (unidentified) “prototypes”.  It is difficult not to infer that the expanded version of the conversation reflects a process of reconstruction many years after the event and with knowledge of the applicants’ claims in this proceeding. 

113                                       For these reasons, even if Mr Casey’s evidence about the alleged oral agreement is taken at its highest, it fails to meet the required standard of proof.  The evidence, considered in context, is insufficient to establish the existence of the oral agreement alleged.  To the contrary, the context strongly supports the position which Mr Beare maintained at all times – namely, that there was no oral agreement in or about March 2004.  Mr Beare communicated his intention to enter into the written agreements which were being prepared at that time, as indeed he did when those agreements were ready for execution.  

114                                       The financial statements for JBE for the year ending 30 June 2004 do not assist the applicants in this regard.  Those statements incorporate financial information relating to activities before the incorporation of the company.  They do not, however, lend support to the existence of the March 2004 oral agreement. 

115                                       Accordingly, I do not accept the applicants’ claim that in or about March 2004 Mr Beare entered into an oral agreement with Mr Casey and Mr Smith.  It follows that all of the applicants’ claims based on the existence of this alleged oral agreement must fail. 

116                                       If I had been satisfied as to the existence of the March 2004 oral agreement, the applicants would have confronted another insuperable difficulty.  As the respondents pointed out, based on Mr Casey’s evidence, the alleged oral agreement is to “pool all our engine related technologies into a company” or “to put all our intellectual property of the technologies, patents and prototypes together in one company”.  If that is the agreement, all obligations under it cease to exist on the contemplated transfer of the technologies to the company.  In the present case, the parties entered into the patent sale agreement.  If the oral agreement existed, the execution of the patent sale agreement by the same parties as the parties to the alleged oral agreement must be seen as the mutual discharge of any and all obligations under that alleged oral agreement.  Accordingly, even if the March 2004 oral agreement was made (which I have concluded it was not), it has been satisfied; there are no outstanding and thus no ongoing obligations under the alleged oral agreement. 

117                                       The applicants contended, in response, that the alleged March 2004 oral agreement was perpetual.  The obligations under it continued to exist at all times.  That contention, however, finds no support in Mr Casey’s evidence about the making of the agreement and its terms.  In both versions of the conversation said to have founded the existence of the agreement, the principal obligation is to pool or put certain assets “into” or “in” a company.  Nothing in the conversations by which the agreement is said to have come into existence suggests any obligation other than to pool or put certain assets “into” or “in” a company.  Once that has been done there is no term of the alleged oral agreement by which the parties have any ongoing obligations.  No such term, moreover, can be implied.  For a contractual term to be implied in fact, the term must be reasonable and equitable, necessary to give business efficacy to the contract (in the sense that the contract is unworkable without it), objectively obvious, capable of clear expression and not contradict any express term (Halsbury’s Laws of Australia (LexisNexis Butterworths) Vol 6, 110 Contracts “Terms Implied in Fact” at [2125]-[2153]).  A term requiring parties to an agreement to pool or put certain assets “into” or “in” a company to do something more pursuant to some unspecified continuing obligation is not necessary to give business efficacy to the alleged contract, is not objectively obvious, is not capable of clear expression and does contradict the express term of the alleged contract.

118                                       Each of these conclusions indicates that other aspects of the applicants’ claims about the alleged March 2004 oral agreement must be rejected. 

119                                       Paragraph 3 of the statement of claim alleged that the agreement extended to “future property comprising inventions patented and otherwise, technologies and prototypes”.  As there was no oral agreement there cannot have been any such term.  Further, nothing in the conversations said to found the making of the alleged agreement identify any obligation in respect of future property.  Nor could such a term be implied into the alleged agreement.  It is not necessary to give business efficacy to the alleged contract, is not objectively obvious, is not capable of clear expression and does contradict the express term of the alleged contract.

120                                       Paragraph 3 also alleged that the agreement was to put the property into “one business and to do all such things necessary to give effect thereto…”.  As there was no oral agreement there cannot have been any such term.  Further, if that alleged obligation is said to extend beyond the requirement to pool or put certain assets “into” or “in” a company it is not supported by the conversations said to found the making of the agreement.  On the same bases as identified above for the other alleged terms, such a term also cannot be implied.

121                                       Paragraph 3 refers to the alleged oral agreement being entered into in consideration of shares to be issued in the company.  However, that was the consideration for entry into the patent sale agreement, being the subsequent agreement in writing.  Nothing in the conversations said to found the making of the alleged oral agreement refers to consideration in the form of a share issue.

122                                       Paragraph 4 of the statement of claim alleged that the March 2004 oral agreement included an express term that the parties would pool their intellectual property “including in the PF Technologies” and act in relation thereto in the motor vehicle and other industries and “that each would act at all times during [JBE’s] existence in the best interests of the company such company to be established and known as ‘Jack Brabham Engines Limited’”.  The conversations about which Mr Casey gave evidence, taken at their highest and disregarding the inconsistencies between the two versions, do not support the existence of any such terms.  In particular, there is no suggestion in those conversations that the parties to the alleged oral agreement agreed that “each would act at all times during [JBE’s] existence in the best interests of the company”.  There is no basis for inferring that anything like that was said or agreed to by Mr Beare. 

123                                       Paragraph 4A of the statement of claim alleged that the March 2004 oral agreement included an express term that the name “Jack Brabham” be used “in an ethical manner by the parties signing…”.  I assume that the reference to “the parties signing” is intended to be a reference to the parties who would be signing the written agreements in Sydney.  In any event, the evidentiary foundation for the making of the alleged oral agreement does not support the existence of any such express term.  The term, moreover, would have been redundant.  On 29 March 2004, Mr Casey, Mr Beare, and Mr Smith had entered into a written agreement with Sir Jack Brabham in which Sir Jack Brabham agreed to the use of his name for the company and the “seller” (as I read that agreement, the Mr Casey, Mr Beare, and Mr Smith) agreed to use the name “‘Jack Brabham’ in an “ethical manner at all times”.  Having already agreed in writing to that effect with Sir Jack Brabham it is difficult to understand why, in an alleged oral agreement to which Sir Jack Brabham is not said to be a party, Mr Casey, Mr Beare, and Mr Smith would again have agreed between themselves to the same effect. 

124                                       Paragraph 4B of the statement of claim alleged that the March 2004 oral agreement included an implied term that each of the parties would co-operate with the other and JBE in “promoting, establishing and maintaining the business of the company”.  Again, nothing in the evidence said to found the existence of the March 2004 oral agreement supports the existence of any such implied term.  Even if Mr Beare had agreed with Mr Casey and Mr Smith in March 2004 to put all his “engine related technologies” or “all… intellectual property of the technologies, patents and prototypes together in the one company”, as Mr Casey alleged (which I do not accept), that would not enable implication of a term as alleged in paragraph 4B of the statement of claim.

125                                       Paragraph 5 of the statement of claim alleged that “in performance of the contract” (which I read as a reference to the alleged March 2004 oral agreement), the parties procured the issue of 32.25% of the shares in JBE to Mr Beare and continued to market the Pulse Fuel Technologies as that of JBE.  To the contrary, Mr Beare was issued 32.35% of the shares in JBE pursuant to the written agreement described as the patent sale agreement (specifically, cl 2.2).  Nothing in the evidence said to found the existence of the March 2004 oral agreement suggests any reference to a term requiring an issue of shares to Mr Beare.  Nor does that evidence refer to marketing the Pulse Fuel Technologies as those of JBE. 

126                                       Paragraph 5A of the statement of claim alleged that in “further performance of the agreement” (which I read as another way of referring to the alleged March 2004 oral agreement), Mr Beare signed other agreements, being the “Ratification of Pre-Registration Contract and Share Subscription Agreements”.  But the evidence said to found the existence of the March 2004 oral agreement does not suggest any such obligation.

127                                       Paragraphs 32 to 35 of the statement of claim also make allegations against Mr Beare “further or in the alternative” to the March 2004 oral agreement (these claims are rejected above under the heading “The alternative pre March 2004 agreement claim (issue 3)”).  So far as these claims are dependent on the March 2004 oral agreement, which I have found does not exist, the claims must be rejected.

128                                       In summary:

(1)               I do not accept the applicants’ case that Mr Casey, Mr Beare and Mr Smith entered into any oral agreement in or about March 2004 as claimed.  To the contrary, Mr Casey, Mr Beare and Mr Smith were well aware at that time that detailed written agreements were being prepared which they intended to execute and which, on execution, would define their rights and obligations.  Mr Casey’s evidence in support of the alleged agreement is inconsistent, vague and, considered in the context of the relevant circumstances at the time, inherently improbable.  Insofar as Mr Casey’s evidence in this regard conflicted with that of Mr Beare, I accept Mr Beare’s evidence.  Mr Beare’s evidence, in contrast to that of Mr Casey in this respect, was consistent and rational in the context of the relevant circumstances at the time.

(2)               Even if Mr Casey’s evidence (insofar as admissible and capable of supporting the existence of any such oral agreement) is taken at face value and at its highest, it supports only an agreement to pool or put certain assets “into” or “in” a company.  The applicants’ case asserted, but failed to explain, how the agreement alleged could impose ongoing obligations on the parties after they had done what the agreement required by selling certain assets to JBE through the patent sale agreement which they executed on 20 May 2004.

(3)               Again, if Mr Casey’s evidence (insofar as admissible and capable of supporting the existence of any such oral agreement) is taken at face value and at its highest, it is incapable of providing support for the various express and implied terms the applicants claimed were part of the agreement. 

129                                       It follows from these conclusions that the applicants have failed to establish the existence of the alleged March 2004 oral agreement.  The applicants, accordingly, also fail in respect of all of their claims that Mr Beare has acted in breach of that agreement.  Further, it will be apparent that the specific allegations of breach assume that the agreement imposed ongoing obligations in circumstances where Mr Casey’s evidence provided no evidentiary foundation for the existence of any such obligations.  The specific allegations of breach also assume that the agreement contained various express and implied terms in circumstances where Mr Casey’s evidence provided no evidentiary foundation for the existence of any such terms.  Issues 1 and 2, and the paragraphs of the statement of claim which they represent, therefore are resolved in favour of the respondents. 

130                                       For the same reasons, it follows that the applicants’ claims based on a fiduciary relationship by reason of the March 2004 oral agreement must also be rejected.  In paragraph 15 of the statement of claim, the applicants alleged that the March 2004 oral agreement was a joint venture giving rise to certain fiduciary obligations.  As there was no such agreement the claim about a joint venture cannot succeed.  In paragraph 16, the applicants alleged that in breach of fiduciary duty and unconscientiously, Mr Beare appropriated without the authority of the parties to the “said agreement” various matters.  In paragraph 16 the “said agreement” is the March 2004 oral agreement.  As there was no such agreement, the claims in paragraph 16 must also be rejected.  So too must paragraph 17 which claims loss and damage to the joint venture.  Paragraph 18, which claimed that Mr Beare held certain assets in trust for JBE, being the property “of or pertaining to the joint venture and/or the profits or revenues accruing or arising therefrom [that is, from the joint venture]”, must fail as well.  The claim depends on the existence of a joint venture arising from the March 2004 oral agreement which I have found not to exist.  Paragraph 24 seeks a declaration that Beare Head technology and “any improvements, modifications or further patents deriving therefrom is the property of [JBE] and an order that [Mr Beare] transfer the legal and equitable title for those improvements, modifications including any further patents deriving therefrom to [JBE]”.  The declaration is sought pursuant to the alleged March 2004 oral agreement and the fiduciary obligations said to arise as a result of this oral agreement.  As the claim for declaratory relief depends upon the March 2004 oral agreement, it must fail.  In terms of the issues as identified above, issues 9, 10 and 11 must also be resolved in the respondents’ favour.

131                                       It is convenient to make another observation at this point.  In closing submissions the applicants, for the first time, characterised the March 2004 oral agreement as a “promotion” agreement by which, apparently, Mr Beare had accepted the obligations of a promoter.  The applicants relied on Re Elders Trustee and Executor Company Limited v EG Reeves Pty Limited [1987] FCA 332.  As the respondents observed, no such allegation was pleaded.  Until closing submissions the idea that Mr Beare had accepted the legal duties of a promoter was not mentioned.  Counsel for the applicants submitted that the label was a mere description.  The problem with this, however, is that “promoter” in respect of a company has a specific legal connotation, as the discussion in Re Elders Trustee at [157]-[163] discloses.  A promoter is “stamped as a fiduciary” (at [161]).  In the present case, the only pleaded basis for Mr Beare’s alleged fiduciary obligations, apart from his obligations as a director of JBE, was the March 2004 oral agreement.  It is not open to the applicants, in closing submissions, to attempt to recast their case by describing that agreement as a “promotion agreement” and Mr Beare as a promoter.  Those submissions do not support any pleaded claim and therefore cannot found any claim against Mr Beare.

WERE MR CASEY’s REPRESENTATIONS MISLEADING AND DECEPTIVE (ISSUe 19)?

132                                       Mr Beare claimed that the representations which Mr Casey made to him in 2001 and in 2003 and 2004 were in trade and commerce and misleading and deceptive and thus in contravention of certain statutory provisions (ss 9, 38 and 56 respectively of the Victorian, Queensland and South Australian Fair Trading enactments).  Those provisions are in similar terms and proscribe a person from engaging in conduct in trade or commerce that is misleading or deceptive or likely to mislead or deceive.

133                                       The first aspect of this issue (the representations being made in trade and commerce) was not in serious dispute.  The definitions section of each of the relevant statutes defines those words “in trade or commerce” as including any business or professional activities.  Mr Casey’s representations were made in business.

134                                       The second aspect requires further consideration of the nature of representations.  The relevant statutes contain provisions equivalent to s 51A of the Trade Practices Act (Cth) (dealing with representations as to future matters).  By s 4 of the Victorian Fair Trading Act, s 37 of the Queensland Fair Trading Act and s 54 of the South Australian Fair Trading Act a person who makes a representation as to a future matter who does not have reasonable grounds for making that representation is taken to have made a representation that is misleading and deceptive.  Further, the person making the representation has the onus of proving that they had reasonable grounds for making the representation.  

135                                       First, in 2001 Mr Casey represented to Mr Beare that Mr Casey had funds of approximately $2 million immediately available to assist Mr Beare in the development of the Beare Head technology.  This is a representation about the funds Mr Casey in fact had available to him at the time the representation was made.  By his own admission Mr Casey did not have $2 million or anything like that amount immediately or otherwise available to assist Mr Beare in the development of the Beare Head technology.  This representation was thus false, misleading and deceptive.

136                                       Second, in 2001 Mr Casey represented to Mr Beare that if Mr Beare entered into an agreement with Mr Casey: - (i) Mr Casey would pay all the fees in relation to all then existing Beare Head patents and patent applications and that all such patents would be prosecuted and maintained at Mr Casey’s expense, (ii) Mr Casey would fund the research and development of the invention the subject of the Beare Head patents until the invention was commercialised, (iii) Mr Casey would ensure the invention was rapidly developed and commercialised for their mutual benefit, and (iv) Mr Beare would make a large profit through, among other things, the receipt of patent licence fees worldwide in relation to the invention.  These are representations as to future matters.  Mr Casey thus bore the onus of proving reasonable grounds for the making of the representations.  In assessing whether Mr Casey discharged that onus, it must be kept in mind that these representations were made as part of the whole of the 2001 representations.  Although representations as to future matters, they were made in a context concerning Mr Casey’s financial capacity to fund the development of Mr Beare’s invention.  That is the context in which the question whether Mr Casey had a reasonable basis for the making of these representations must be assessed.

137                                       The evidence indicates that Mr Casey did not have reasonable grounds for the making of these representations as to future matters.  Representations (i), (ii) and (iii) assume financial capacity to fulfil the promises made.  Mr Casey did not have the financial capacity which he represented he had (and in consequence of which Mr Beare was induced to sign over 50% of his patent rights to Mr Casey).  The evidence also does not support any inference that Mr Casey had sufficient financial capacity to make good the promises he made to Mr Beare.  When asked what funds he had available Mr Casey’s evidence was vague and uninformative.  He said he had “funds like any normal person” but would have to look at his accounts.  When pressed for further information he said he could not recall what funds he had or had access to at that time.  When pressed further he described his financial situation at the time as “very variable”.  Mrs Casey also could provide no assistance about Mr Casey’s financial position at the time.

138                                       The contact Mr Casey made with Mr Sun in 2002 indicates that, without the support of third parties, there were no funds available to develop Mr Beare’s invention.  The documents which Mr Casey created in 2003, being the business plan and Explanatory Memorandum and Seed Capital Offer, lead to the inference that in order to fund any material development of Mr Beare’s invention, funds from third parties would be required.  The same inference should be drawn from the fact that a government grant (some $52,000) was obtained in 2004. 

139                                       Nor can it be suggested that the raising of these funds from these third parties itself should lead to the conclusion that Mr Casey had reasonable grounds for making representations (i), (ii) and (iii).  By the 2001 representations Mr Casey obtained 50% of the rights in Mr Beare’s patents.  It was the obtaining of these rights from Mr Beare that enabled Mr Casey to raise funds for the purpose of doing the things which Mr Casey told Mr Beare Mr Casey himself would do with his own funds.  Further, when he raised these funds Mr Casey did not do so by reference to any value connected to his own 50% entitlement.  He raised funds from investors by reference to the value (whatever it be – a separate issue) of Mr Beare’s invention as a whole, the effect of which was to further dilute Mr Beare’s ultimate interest in the patents to which he initially had a 100% entitlement.  Moreover, there is no basis for inferring that, when he made the representations, Mr Casey had any reasonable grounds to believe that he would be able to raise sufficient funds to fulfil his promises.  The Explanatory Memorandum and Seed Capital Offer, in the disclaimer, identified the investments as being of a “speculative nature”.  The raising of funds from business contacts (such as Mr Sun), the public and the government to enable development of Mr Beare’s invention, at the time of the making of the 2001 oral representations, also was speculative on Mr Casey’s part.  Equally, Mr Casey had no basis for representing to Mr Beare that Mr Beare would make a large profit through, among other things, the receipt of patent licence fees worldwide in relation to the invention.  Such fees would be potentially payable only on development and commercialisation of Mr Beare’s invention.  Mr Casey had no funds available to facilitate development and commercialisation and no basis to believe that sufficient funds would become available.

140                                       The question whether the representations were misleading and deceptive is to be assessed in the circumstances at the time they were made.  The matters identified above lead to the conclusion that the 2001 representations were misleading and deceptive. 

141                                       The 2004 representations also involve both present and future aspects.  The question whether those representations were misleading and deceptive must be determined in context.  As noted, by the arrangements instigated by Mr Casey in 2001, Mr Beare’s 100% entitlement to the patents for the Beare Head engine had been reduced to 50%.  Mr Casey had obtained 50% of the rights to Mr Beare’s patents by reason of his representations to Mr Beare that he would fund the development and commercialisation of the Beare Head engine.  Instead of funding that development and commercialisation, Mr Casey instigated another arrangement in 2003 and 2004 by which he raised and banked into his own account funds from investors for the purpose of the development and commercialisation of the Beare Head engine.  This arrangement involved Mr Beare’s 50% entitlement to the rights in the patents to the Beare Head engine being converted to a 30% entitlement to the shares in a company owning the patents to the three inventions (of Mr Beare, Mr Casey and Mr Smith). 

142                                       Apart from the last representation in 2003 and 2004 on which Mr Beare relied (relating to Mr Casey ensuring that all patent fees for the three inventions would be paid), those representations are of a different character from those in 2001.  The representations are a statement by Mr Casey that the proposed arrangements would assist in the marketing and exploitation of the Beare Head invention and be in Mr Beare’s interests.  The difficulty for Mr Beare in this regard is that the evidence does not support a finding that Mr Casey did not believe the statements he made or that he had no reasonable grounds for making them.  It is not difficult to conclude that the support of Sir Jack Brabham for a new engine technology would be likely to assist in the marketing and exploitation of the Beare Head engine.  Further, the creation of a public company might well have been appropriate to facilitate that purpose.  Further, Mr Casey and Mr Smith had their own inventions.  While the absolute and relative value of the inventions is a different matter, the inventions existed as did various patents for them.

143                                       As to the patent fees at the time of the 2003 and 2004 representations, Mr Casey had assumed responsibility for paying the fees for Mr Beare’s patents since October 2001 and had control over the patents for his own invention.  Mr Casey provided the information about the patents which appears in Schedule 2 to the patent sale agreement to Mr Beare and, I infer, the solicitors preparing the agreement.  The evidence of Matthew Pini, registered patent attorney, discloses that information contains material inaccuracies.  For example, the Czech Republic patent for Mr Casey’s gas/liquid mixing apparatus was not registered as at the date of the agreement.  It had lapsed in 2001 due to non-payment of fees.  Similarly, the Czech Republic patent application for Mr Casey’s nozzle invention was not “pending” as Schedule 2 to the patent sale agreement represented but was refused in 1998.  The Argentine patent for Mr Casey’s gas/liquid mixing apparatus was also not “pending” as per Schedule 2 but forced to be withdrawn in 1999.  The New Zealand patent for Mr Casey’s nozzle invention was not “pending” as per Schedule 2 but voided before acceptance in 2000. 

144                                       However, Mr Beare’s case was not that he relied on Schedule 2 to the patent sale agreement as an accurate representation of the status of all patents and thereby was wrongly induced to enter into that agreement.  Further, while that schedule contains material inaccuracies, Mr Casey’s evidence that his patent attorneys kept him up to date about all of the patents (including those of Mr Beare after October 2001, as responsibility for those patents was transferred to Mr Casey’s patent attorneys at that time), does not allow any inference to be drawn that Mr Casey was aware of the inaccuracies or doubted the accuracy of the schedule. 

145                                       Mr Beare’s case was that Mr Casey told him that Mr Casey would ensure that all patents in relation to the three inventions would be maintained and paid for.  This representation was made in a context of a proposed arrangement involving the creation of a public company as the vehicle for the development and exploitation of the inventions of Mr Beare, Mr Casey and Mr Smith.  In this context Mr Casey was not representing, as he did in 2001, that he could and would pay all patent fees.  The representation as made in 2003 and 2004 could not have been understood in that way by Mr Beare.  Moreover, by that time Mr Casey was aware that he had managed to raise money from the public willing to invest in Mr Beare’s invention.  Mr Casey also had the support of Sir Jack Brabham for the proposed company.  In these circumstances there was a reasonable basis for Mr Casey’s representation in 2003 and 2004 that he would ensure that under the new arrangement Mr Casey would ensure that all patents in relation to the Beare Head invention and the inventions of Mr Smith and Mr Casey were maintained and paid for.

146                                       For these reasons I do not accept that the 2003 and 2004 representations which Mr Casey made to Mr Beare were misleading and deceptive or likely to mislead and deceive.

RELIANCE ON THE REPRESENTATIONS (issueS 20 and 21)

The 2001 agreement (issue 20 )

147                                       Mr Beare contended that he relied on the 2001 oral representations in respect of his entry into the 2001 agreement.  It must be inferred that Mr Casey intended Mr Beare to be induced to enter into the 2001 agreement by reason of the representations.  A person is generally inferred to intend the logical consequences of their acts, and entry into an agreement with Mr Casey was the logical consequence of Mr Casey making the 2001 oral representations.  Further, Mr Beare did enter into the 2001 agreement.  In the ordinary course, these two matters would warrant the drawing of an inference that Mr Beare relied on the 2001 oral representations as he claimed.  The applicants submitted to the contrary.  I deal now with those submissions.

148                                       I do not accept that the communications between Mr Beare and Mr Casey before entry into the 2001 agreement disclose Mr Beare as a “supplicant” (as the applicants submitted), presumably desperate to take advantage of Mr Casey’s claimed experience and connections.

149                                       It is true that Mr Beare’s communications refer to him having received “some advice” and “as much advice as I could… but time constraints did not allow an adequate review” of the 2001 agreement.  I do not accept that Mr Beare obtained legal advice about the 2001 agreement.  He said he did not.  He refers in the contemporaneous communications to advice from “several engineering friends” as well as advice from the Adelaide Business Centre.  John Hancock was Mr Casey’s solicitor and was not in a position to provide Mr Beare with advice.  So much is clear from the terms of Mr Beare’s email to Mr Hancock of 17 October 2001.  The same communications disclose Mr Beare asking numerous questions of Mr Casey and requesting a meeting to resolve his queries.  They also disclose that while Mr Beare received advice from the Adelaide Business Centre about the 2001 agreement, Mr Beare’s response to that advice appeared to be another request to discuss the issues with Mr Casey and Mr Hancock.  This is important.  The advice from the Adelaide Business Centre was overwhelmingly negative.  According to the email recording that advice Mr Beare’s immediate net financial benefit was zero, if commercialisation failed Mr Casey would still own 50% of Mr Beare’s “IP”, and Mr Beare’s rights to any income from the proposal were uncertain.  The advice cautioned Mr Beare that “regardless of the integrity of A Case[y] you would be entering into a legally binding agreement and to protect your interests I feel it would be wise to document precisely what you expect”.

150                                       Contrary to the applicants’ submissions I do not see the advice which Mr Beare received as proof of Mr Beare relying on his own inquiries and acting at his own risk.  Mr Beare entered into the 2001 agreement despite having received advice that its terms were inadequate to protect his interests and largely dependent on the integrity of Mr Casey.  This fact supports the inference that the 2001 representations were a material inducement to Mr Beare entering into the 2001 agreement.  So too does the reference to Mr Casey’s integrity in the terms of the advice Mr Beare received.  The express reference to this supports Mr Beare’s evidence that he trusted Mr Casey and relied on the 2001 representations.  They do not support the applicants’ submission that Mr Casey emphasised to Mr Beare that the transaction was at Mr Beare’s risk.  If that were so the inevitable question which arises is why Mr Beare would have entered into a transaction which, on its face, offered Mr Casey so much and Mr Beare so little.  The very terms of the 2001 agreement, which appear to give nothing to Mr Beare except for Mr Casey’s promises of future action and reward, support Mr Beare’s evidence that he was induced to enter into the agreement by the 2001 oral representations. 

151                                       The fact that representations inducing entry into a contract are oral does not preclude consideration of the terms of the contract to assess whether or not they support or undermine a finding of reliance.  There is no inconsistency in the respondents’ case in this respect.  Indeed, the applicants themselves, in closing submissions, sought to rely on the warranties in the 2001 agreement as a fact excluding reliance by Mr Beare.  According to the applicants in the 2001 agreement “Mr Beare sets out the specific warranties on which he relied and does not include any of those pleaded… Further the agreement specifically provides after setting out warranties made… and states at [cl 6C] that Mr Beare acknowledges that Mr Casey gives no warranties”.  However, the warranties to which the applicants’ submissions referred are those given by Mr Beare as vendor.  How these warranties can be said to exclude reliance by Mr Beare on the 2001 oral representations is not apparent.  Nor is it apparent how reliance on the 2001 representations can be excluded by reason of a clause in the 2001 agreement specifying the matters which Mr Beare did not warrant.  Specifically, cl 6C of the 2001 agreement is not one by which Mr Beare acknowledges that Mr Casey gives no warranties in relation to the technology.  Clause 6C is an acknowledgment by the purchaser (that is, Mr Casey) that the vendor (that is, Mr Beare) gives no warranties as identified.  Even if the terms of the 2001 agreement were as submitted by the applicants (which they are not), there is a difficulty in attempting to exclude reliance by reference to the terms of the very contract which a party was induced to enter by reason of pre-contractual representations. 

152                                       For these reasons I am satisfied that Mr Beare was induced to enter into the 2001 agreement by the 2001 representations which Mr Casey made to him, being representations in trade and commerce that were misleading and deceptive. 

The 2004 agreements (issue 21)

153                                       Mr Beare contended that he entered into “whatever written agreements” Mr Casey told him were required to implement the new arrangement including each of the 2004 agreements as identified above in reliance on not only the representations made in 2003 and 2004, but also in 2001.

154                                       I concluded that the 2001 representations were misleading and deceptive but the 2003 and 2004 representations were not.  Accordingly, in order to establish his claim to damages for contravention of the fair trading legislation (an issue to which I will return) Mr Beare must prove that he entered into the 2004 agreements in reliance on the 2001 representations. 

155                                       To recapitulate, I have found that:

(1)               In mid 2001 Mr Casey represented to Mr Beare that Mr Casey had funds of approximately $2 million immediately available to assist Mr Beare in the development of the Beare Head technology and that if Mr Beare entered into an agreement with Mr Casey: - (i) Mr Casey would pay all the fees in relation to all then existing Beare Head patents and patent applications and that all such patents would be prosecuted and maintained at Mr Casey’s expense, (ii) Mr Casey would fund the research and development of the invention the subject of the Beare Head patents until the invention was commercialised, (iii) Mr Casey would ensure the invention was rapidly developed and commercialised for their mutual benefit, and (iv) Mr Beare would make a large profit through, among other things, the receipt of patent licence fees worldwide in relation to the invention.

(2)               In reliance on the 2001 representations Mr Beare entered into an agreement with Mr Casey in October 2001 by which Mr Beare agreed to assign 50% of his rights in and to the Beare Head patents to Mr Casey.

(3)               Pursuant to the 2001 agreement, Mr Beare transferred to Mr Casey 50% of the rights in the patents listed in Schedule A to the agreement.  Mr Beare, however, retained full right, title, and interest in and associated with his prototypes, his website www.sixstroke.com, and his marketing materials. 

(4)               In February 2002 Mr Beare acceded to Mr Casey’s request that Mr Beare transfer another 4% of his equity in Mr Beare’s invention to SRI International, a testing company as a form of payment for the carrying out of tests.  This transfer appears not to have taken place and the tests were never completed due to some falling out between Mr Casey and SRI International.

(5)               Also in 2002 Mr Casey asked Mr Beare to ship his Yamaha prototype, bike dynamometer and some equipment to Queensland.  Mr Beare acceded to this request of Mr Casey.

(6)               During 2003 and 2004 Mr Casey represented to Mr Beare that: - (i) it was in Mr Beare’s interests and would assist in the marketing and exploitation of the Beare Head invention for Mr Beare and Mr Casey to join with Mr Smith and to market and exploit the Beare Head invention in combination with an invention developed by Mr Smith and an invention developed by Mr Casey, (ii) it was in Mr Beare’s interests and would assist in the marketing and exploitation of the Beare Head invention for a public company to be created, endorsed by and named after Sir Jack Brabham for this purpose, and (iii) under the new arrangement Mr Casey would ensure that all patents in relation to the Beare Head invention and the inventions of Mr Smith and Mr Casey were maintained and paid for.

(7)               In April 2003 Mr Casey issued the “Explanatory Memorandum and Seed Capital Offer”.  By this document Mr Casey called for funds from investors to do the things Mr Casey had already agreed with Mr Beare to do in the 2001 agreement in exchange for 50% of the rights to Mr Beare’s patents as therein identified.  Mr Casey’s document promised the investors equity in (amongst other things) Mr Beare’s patents in consideration for their investment.  Mr Casey’s document also, by the so-called valuations it contained (based on self-styled “guesstimates” as to royalties on the basis of assumptions which I infer Mr Casey provided), ensured that Mr Casey attributed to his own invention the majority of the total value in the three inventions. 

(8)               Mr Casey banked some $438,528 between 1 July 2003 and 30 June 2004, being the funds raised by the issue of the “Explanatory Memorandum and Seed Capital Offer”.  This money was banked into Mr Casey’s personal account.  Other funds (combining to total up to $1.3 million) were also received. 

(9)               A company limited by shares, Pulse Fuel Technologies Pty Limited, was incorporated in February 2004. 

(10)           Mr Casey, Mr Beare and Mr Smith entered into a series of written agreements including an agreement with Sir Jack Brabham about the use of his name in March 2004 and the agreements necessary to establish JBE as a public company limited by shares in May 2004, with JBE having had transferred to it the patents (as defined), in exchange for an issue of shares.  By these agreements Mr Casey, Mr Beare and Mr Smith were issued shares in the company in the proportions of 64%, 32% and 3.5% respectively. 

156                                       The first difficulty that Mr Beare must confront is the passage of time.  Between the making of the 2001 representations and the entry into the 2004 agreements some three years passed.  During those three years, moreover, Mr Beare had numerous dealings (and no doubt countless conversations) with Mr Casey.  The second difficulty is that the events from those three years must have put Mr Beare on notice that Mr Casey did not have $2 million immediately available to develop the Beare Head engine.  If Mr Casey had that money available, then Mr Beare had not seen any sign of it.  Mr Beare knew about the money Mr Casey had raised from investors but was also aware that little had been done with that money relating to the development of the Beare Head engine.  Indeed, Mr Beare said that he believed that very little development had taken place (which the events described above confirms).  Mr Beare said that the development of the Beare Head engine had stalled after 2002.  Mr Beare was enthusiastic about Mr Casey’s new proposed arrangement in 2003 and 2004 because he felt that it would assist in getting development work started again. 

157                                       When these factors are weighed with the content of the representations which Mr Casey made in 2003 and 2004, particularly those concerned with the involvement of Sir Jack Brabham, I do not accept that Mr Beare entered into the 2004 agreements in reliance on the 2001 representations.  Mr Beare wanted work on his engine to re-commence.  He felt frustrated by the lack of results thus far.  Mr Casey had raised money on the basis of Mr Beare’s invention but, apart from the work funded by Mr Sun, the evidence shows little real development of the Beare Head engine.  In these circumstances Mr Casey proposed the new arrangement which would have the support of Sir Jack Brabham.  It is hardly surprising that Mr Beare jumped at this opportunity of receiving Sir Jack Brabham’s support with little or no apparent regard to the details of the arrangements which he was entering. 

158                                       I accept that, in one sense, the 2001 representations and the 2004 agreements may be characterised as related in some way.  But for the making of the 2001 agreement (which Mr Beare was induced to enter by reason of the 2001 representations), Mr Beare might have had no reason for an ongoing commercial relationship with Mr Casey.  Between the 2001 representations and the 2004 agreements, however, years had passed and circumstances had changed.  Mr Beare had many dealings with Mr Casey in those years.  Before he entered into the 2004 agreements Mr Casey made further representations to Mr Beare (which I have found were not misleading and deceptive) directly relevant to the new arrangements.  The idea that, in these circumstances, Mr Beare had in mind the 2001 representations when entering into the 2004 agreements, in my view, is far fetched.  The relationship between the 2001 representations and the 2004 agreements, accordingly, is remote and tenuous.  The relationship is one of connection but not cause.

159                                       For these reasons, I am not satisfied that there is any or sufficient causal connection between the representations Mr Casey made in 2001 and Mr Beare’s entry into the 2004 agreements. 

Mid 2004 onwards – AN OVERVIEW

160                                       By 20 May 2004 JBE had been established as a public company limited by shares.  Mr Casey held the majority of shares (64% of the initial shares issued).  Mr Beare was a substantial minority shareholder (32% of the initial shares issued).  Mr Casey was also a director of JBE, as were Mr Beare and Mr Casey’s son, Nathan Casey.  Mr Casey was the managing director and Mr Beare the technical director.  JBE owned the inventions described in Schedule 1 and patents listed in Schedule 2 to the patent sale agreement.  In this regard, I do not accept the applicants’ attempts to characterise the 2004 agreements as involving a sale by Mr Beare to JBE of an amorphous class of rights described as “all intellectual property associated with the patents”.  The fact that, more than two years later (on 30 November 2006), Mr Beare used the words “intellectual property associated with the dual piston internal combustion engine” to describe the arrangements in his complaint to ASIC cannot alter the true scope of the transactions which are as set out in the agreements.  In any event, as Mr Beare said in cross-examination, he intended in that complaint to refer to the patents. 

161                                       According to various documents, a total of some $1.3 million had been invested in JBE as a result of the various calls for third party investment (including the pre-incorporation investments referred to above).

162                                       By the share subscription agreements of September 2004, JBE, Mr Casey, Mr Beare and Mr Smith and each of the investors who had paid money to Mr Casey in 2003 and 2004 entered into an arrangement whereby JBE issued an additional 529,750 shares (resulting in a total of 5,529,749 shares on issue) with an allocation to the investor of a proportion of those shares equivalent to the value allocated to their investment. 

163                                       Although the applicants attempted to characterise the evidence as showing substantial ongoing development of the Beare Head engine not much of substance seems to have happened in that regard from mid 2004 onwards.  While some work was done it could not be described as substantial.  In May 2004 Mr Casey and Mr Beare visited Mr Sun in Taiwan who apparently remained keen to invest in the Beare Head engine.  By this time it appears most of the money raised in 2003 and 2004 had been spent.  Because the investors’ money was paid into Mr Casey’s personal account from which he paid his personal expenses it is not possible to work out what money was spent for what purpose.  By September 2004 a separate bank account for JBE showed a balance of $15,000.  Ms Murone’s evidence is relevant to these matters.  As Ms Murone said:

From the information provided it has not been possible to determine the expenses personal to Mr Casey and/or from which he derived personal benefit.

164                                       I accept Ms Murone’s evidence.

165                                       Further, Ms Murone said that JBE’s accounts after financial year 2004 showed little activity and relatively small expenditure.  Approximately $422,000 of funds was raised after 2004 but JBE had limited operating expenses after that time also. 

166                                       In November 2004 JBE received a government grant of $52,000 for further development of the Beare Head engine.  Some of this money was used to offset the cost of the trip to Taiwan.  Mr Casey was also contacted by a business friend of Mr Sun’s, Mr Balamukundan.  Mr Balamukundan was the director of an Indian company known as Primero Enserve.  They met in Sydney when Mr Balamukundan visited Australia. 

167                                       By February 2005 Mr Balamukundan was expressing an interest in investing $300,000 in JBE.  In May 2005 Mr Balamukundan’s company, Primero Enserve, applied for an allotment of 75,000 shares in JBE at a cost of $50,000.  Mr Balamukundan invited Mr Casey and Mr Beare to travel to India in July 2005 for the purpose of presenting Mr Beare’s prototypes to bike manufacturers.  It is apparent that these prototypes had not been substantially advanced over the period of nearly five years since Mr Casey’s involvement.  According to a subsequent email sent by Mr Balamukundan to Mr Casey in June 2006 he had understood from Mr Casey that JBE had two prototypes that could be shown to manufacturers. However, after seeing a prototype Mr Balamukundan realised that “a phenomenal amount of work needed to be done on it to get it to even testing levels”.  This is consistent with part of Mr Casey’s evidence in which Mr Balamukundan referred to the need for there to be a “fully validated and tested prototype”.  Mr Casey told Balamukundan that “we already have three prototypes”.  During this trip JBE and Primero Enserve signed a memorandum of understanding about the hydrogen/oxygen generator invented by Mr Smith.  This was a loosely drafted document about co-operation between the two companies in respect of that technology and did not involve any payments to or by JBE.  After the trip to India Mr Casey then told Mr Beare (but not Mr Balamukundan) that they would need to raise further funds by an offer information statement to develop a new prototype.  I infer that this new prototype was intended to be the fully tested and validated prototype Mr Balamukundan required (and presumably believed existed given the information which Mr Casey had provided to him).  Mr Casey then started work on this offer information statement intending, he said, to raise $2 million to fully develop the Beare Head engine and integrate it with his own nozzle invention. 

168                                       While Mr Casey was working on the offer information statement, Mr Beare had started work on a new prototype requested by Mr Sun.  When Mr Casey found out Mr Beare was building this new prototype Mr Casey asked Mr Beare to bring the work to Queensland.  Mr Beare acceded to this request and gave the partly built prototype to Mr Casey.  According to Mr Casey, Mr Beare told Mr Casey that he was using his own funds and then said that Mr Sun had given him $5,000 to build this prototype.  Mr Casey later found out from Mr Balamukundan that Mr Sun had paid Mr Beare $10,000 for this purpose. 

169                                       Mr Beare’s version of these events is different.  According to Mr Beare he became concerned in early 2005 when Mr Casey wanted to use JBE’s funds to buy a second company car from a friend of Mr Casey’s.  Mr Beare considered that he had been working on a “shoestring budget for a long time” and objected to this use of JBE’s funds.  Mr Beare later discovered that Mr Casey had purchased the car using JBE’s funds (some $15,000, plus an issue of 40,000 shares in JBE), despite his objection.  According to Mr Beare he did not want to go to India but agreed to do so because he believed his prototypes would need his help to run well.  Mr Beare demonstrated the prototypes as required.  However, Mr Beare said his relationship with Mr Casey had deteriorated because of Mr Casey’s conduct in respect of the car and the trip generally.  Mr Beare said that Mr Sun also expressed concern to him about Mr Casey’s conduct and asked Mr Beare to accept $10,000 to finish building the parts for Mr Sun’s Yingyang prototype.  Mr Beare told Mr Sun he would think about it and let Mr Sun know.  After he got back to South Australia, Mr Beare said that Mr Sun contacted him again about difficulties Mr Sun was having with Mr Casey in respect of finalising work on the Yingyang prototype.  Mr Beare said that he considered that finishing the Yingyang prototype could only assist the development of the Beare Head engine which appeared to Mr Beare to have stalled completely.  Mr Beare said he thus agreed to help Mr Sun.  Mr Sun paid him $10,000 in two $5,000 instalments to do so.  Mr Sun shipped Mr Beare an engine to work on and he began carrying out the required work.  Mr Beare, in this regard, referred to the agreement between Mr Casey, Mr Beare and Mr Sun of 30 December 2002 in which those parties agreed that Mr Beare would be responsible for fitting and tuning the Yingyang prototype at a cost to be determined.  Mr Beare acknowledged that Mr Casey did not know about this work or the payment but denied that he told him that he was using his own funds.  Mr Beare was also cross-examined about the amount of the payment.  The attempts to paint Mr Beare as a dishonest person because of the amount of the payment ($5,000 or $10,000), overlooked the fact that the payment was made in two instalments of $5,000 and Mr Beare’s own statements in his affidavit that he was paid $10,000 by Mr Sun. 

170                                       The subsequent conduct is not easy to understand.  Mr Casey prepared minutes on 28 July 2005 (which, I note, Mr Beare signed) recording that the $5,000 was “mistakenly” paid into Mr Beare’s account which would be rectified, including by a further issue of shares to Mr Sun.  Subsequently, the minutes record that the amount Mr Beare received from Mr Sun was $9,985 and Mr Sun was issued 9,985 shares.  Despite this, and the fact that he returned the unspent $5,000 to Mr Sun, Mr Beare also paid $9,985 to JBE.  These minutes of 19 August 2005, I note, also record that the motorbikes such as the Ducati and Yamaha “are the personal property of [Mr Beare]… on loan to the Company”. 

171                                       Mr Beare and his wife visited Mr Casey in August 2005 in what Mr Beare described as an “attempt at reconciliation”.  Later events disclose that the attempt failed.  Mr Beare sent a letter to Mr Casey in September 2005.  The letter asked to see JBE’s bank statements and observed that “the JBE accounts should be completely separate from Alan and Gail Casey’s personal or domestic accounts”.  In the letter Mr Beare expressed the view that he wished to continue work on the prototypes but believed his attempts to advance JBE were continually thwarted or sidelined. 

172                                       Matters deteriorated rapidly.  By November 2005 Mr Beare was writing to Nathan Casey, another director, to the effect that “no matter how you cut it JBE is completely paying for [Mr Casey’s] lifestyle”.  Mr Beare resigned as a director of JBE on 22 November 2005 due to what he described as “unresolvable differences” with the managing director, Mr Casey.  Despite Mr Beare’s objection Mrs Casey was appointed as a director of JBE on 23 November 2005.  Sir Jack Brabham was appointed a director of JBE on 15 December 2005.  The “unresolvable differences” between Mr Beare and Mr Casey escalated in 2006, with Mr Eleftheriadis becoming involved.  The escalation of the dispute is the foundation of the balance of the applicants’ claims against the respondents.  I deal with the facts in greater detail insofar as relevant to these claims.

the corporations Act claims (issues 4, 5, 6 and 7)

173                                       The provisions of the Corporations Act which the applicants allege Mr Beare contravened are as follows:

Section 180

(1)        A director or other officer of a corporation must exercise their powers and discharge their duties with the degree of care and diligence that a reasonable person would exercise if they:

(a)        were a director or officer of a corporation in the corporation's circumstances; and

(b)        occupied the office held by, and had the same responsibilities within the corporation as, the director or officer.

Section 181

(1)        A director or other officer of a corporation must exercise their powers and discharge their duties:

(a)        in good faith in the best interests of the corporation; and

(b)        for a proper purpose.

Section 182

(1)        A director, secretary, other officer or employee of a corporation must not improperly use their position to:

(a)        gain an advantage for themselves or someone else; or

(b)        cause detriment to the corporation.

Section 183

(1)        A person who obtains information because they are, or have been, a director or other officer or employee of a corporation must not improperly use the information to:

(a)        gain an advantage for themselves or someone else; or

(b)        cause detriment to the corporation.

174                                       It will be apparent from these provisions that ss 180-182 impose obligations on a person who is a director or officer of a corporation.  Section 183 imposes obligations on a person who has obtained information because they are or have been a director or officer.  Mr Beare was a director of JBE from 20 May 2004 until 22 November 2005.  Those dates must be kept in mind in the assessment of the alleged breaches of ss 180-182.  There was no suggestion in the applicants’ case, pleaded or otherwise, that Mr Beare had any involvement in the management of JBE after his resignation as a director on 22 November 2005.  Nor was it suggested that the applicants’ claims extended beyond the allegations of breach of the statute.  Accordingly, the duties of directors under the general law, and the remedies that might be available for breach of any such duty, need not be considered. 

175                                       The principles relevant to the application of these provisions and how they applied to the facts received scant, if any, attention in the applicants’ submissions.  For present purposes it is sufficient to note the following principles based on Ford’s Principles of Corporations Law (LexisNexis Butterworths, subscription service) (Ford).

(1)               Requisite degree of care and diligence (Ford at [8.305])

·                    The test which has been applied is “basically an objective one in the sense that the question is what an ordinary person, with the knowledge and experience of the defendant, might be expected to have done in the circumstances if he was acting on his own behalf” (Australian Securities Commission v Gallagher (1993) 10 ACSR 43 at 53 per Pidgeon J).

·                    In applying this standard the circumstances of the company and the director’s responsibilities are relevant. 

·                    The company’s circumstances, according to Brereton J in Australian Securities and Investments Commission v Maxwell (2006) 59 ACSR 373; [2006] NSWSC 1052 at [100], can include:

… the type of company, the provisions of its constitution, the size and nature of the company’s business, the composition of the board, the director’s position and responsibilities within the company, the particular function the director is performing, the experience or skills of the particular director, the terms on which he or she has undertaken to act as a director, the manner in which responsibility for the business of the company is distributed between its directors and employees, and the circumstances of the specific case …

·                    The director’s responsibilities include those responsibilities which the director has acquired through arrangements as a matter of fact and not merely by specific delegation or resolution.

·                    In determining whether the duty has been breached the foreseeable risk of harm of the action in question may be weighed against the potential benefits to the company.  Potential conflicts of interest, however, call for a greater degree of vigilance.

(2)               Good faith and proper purpose (Ford at [8.070], [8.200])

·                    To act in good faith a director must act honestly, but must also not act to promote his or her own interest at the expense of that of the company.

·                    A poor decision does not mean that a director has acted improperly.  The question is whether a substantial actuating motive of a director was a purpose collateral to the purposes for which the power was given. 

·                    While the issues of purpose and the interests of the company are to be determined objectively, subjective beliefs in the propriety of the conduct are relevant.

(3)               Improper use of position (Ford at [9.280])

·                    The relevant question is the purpose of the director or officer being to gain an advantage or cause a detriment, not whether the purpose in fact was achieved.

·                    Again, while the applicable standards of conduct are not determined by the state of mind of a director or officer, that state of mind might be relevant to the application of the standards in the particular case.

(4)               Improper use of information (Ford at [9.280])

·                    To engage s 183 the information must have been acquired by reason of the person’s position as a director or officer of the company.

·                    The information must be such that equity would protect it by injunction for breach of fiduciary duty

176                                       I will quote in full the particulars to the allegations of Mr Beare’s breaches of ss 181-183 of the Corporations Act.  Those particulars are:

a.         The First Respondent appropriated without authority the intellectual property and technology of the First Applicant specified in Schedule 1 after representing the First Applicant and its ownership of the intellectual property, in Australian and overseas markets.

b.         The First Respondent appropriated without authority the prototypes being property of the First Applicant specified in Schedule 3; after representing the First Applicant and its ownership of the prototypes, in Australian and overseas markets.

c.         The First Respondent appropriated without authority the confidential information being property of the First Applicant specified in Schedule 2; after representing the First Applicant and its ownership of the confidential information.

d.         The First Respondent has permitted or authorized public statements on websites vilifying the First Applicant of which he is or has been a director and other directors including the Second, Third and Fourth Applicants.

e.         The First Respondent signed documentation permitting the First Applicant to proceed to formal fund raising of an Offer Information Statement.

f.          The First and Second Respondents have stated that they propose to destroy the First Applicant and ruin its business and has set about doing so.

g.         The First Respondent has diverted investment opportunities of the First Applicant in particular those committed to the First Applicant by the Mr Larry Sun, Taiwan and Primero Enserve, India, (the first applicant’s overseas representatives) to himself and destroyed the relationships.

h.         The First Respondent has written to shareholders and directors of the First Applicant demanding the return of “his” technology namely the technology specified in item A to Schedule 1 which does not belong to him.

i.          The First Respondent stated that money from an overseas representative of the First Applicant was incorrectly transferred to the bank account of Third Respondent instead of the First Applicant’s bank account.

j.          The First Respondent misled the Board of the First Applicant on the amount of funds incorrectly transferred.

k.         The First Respondent had private conversations discussing the confidential business of the First Applicant with its overseas representatives in Taiwan and India, and discussed confidential Board business without the consent of the Board.

l.          The First Respondent wrote to a Federal Member of Parliament stating that the First Applicant did not own the technology, prototypes and that the Second Applicant had misappropriated money at the time the First Respondent was a director.

m.        The First Respondent used the confidential information including business contacts, correspondences, quotations, relating to the ongoing development of the technology of the First Applicant to his advantage and that of the Second and Fifth Respondents.

n.         The First Respondent provided the confidential and personal home address and email contact of the Fourth Applicant to the Second Respondent without authority.

o.         The First Respondent has interfered with the relationship between the First Applicant and its overseas company representatives in Taiwan and India, whom he would not otherwise known or had contact with, for his own advantage and gain and that of the Second and Fifth Respondents.

p.         Made various threats and continuing intimidation of the First Applicant and the other Applicants being his fellow directors – Particulars are supplied separately “Intimidation and Threats: First Respondent”.

177                                       As the respondents submitted, those particulars are grossly deficient.  None specify a date or range of dates for the alleged conduct.  None specify the conduct with sufficient precision to be able to identify what act or acts are in issue.  Even where it might be inferred that the drafter of the particulars had a particular document in mind (for example, particulars (h) and (l)) the date of the document is not provided.  The particulars claim that Mr Beare made numerous statements and representations but provide no information about when the statements or representations were made or to whom they were made.  For these reasons, I accept the respondents’ submissions that most of the particulars “are so general that the conduct referred to cannot be identified and thus cannot be answered”.  It is no answer to this proposition, as the applicants’ submissions appeared to assume, that the essence of the applicants’ complaint can be ascertained by reading the particulars in the light of the evidence.  As noted, the evidence in this case ranges over many topics with little regard to forensic purpose.  In any event, that task is not one for the respondents.  It was always a matter for the applicants to plead their case with the requisite degree of precision to enable the respondents to know what they had to meet.  Paragraphs 10 to 14 of the statement of claim (to which issues 3 to 6 relate) fall so far below the standard which is required that it would work a serious injustice to Mr Beare to make any findings against him by reason of these vague allegations.

178                                       If this conclusion is an insufficient basis for my rejection outright of these claims then another insuperable difficulty confronts the applicants.  As the respondents submitted, the particulars fail to draw any distinction between the time when Mr Beare was a director of JBE and the time when he was not.  In closing submissions the applicants sought to recast their case (again) by suggesting that Mr Beare could not take advantage of the fact of his resignation to avoid his responsibilities because it should be found that Mr Beare exercised his very power of resignation for an improper purpose (apparently, the purpose of avoiding his responsibilities as a director after being “found out” in terms of his dealings with Mr Sun).  No such claim was made in the pleading.  The claim cannot be entertained.  If it could, it must be rejected.  It has no proper evidentiary foundation.  No authority was cited to support it.  Mr Beare resigned as a director of JBE on 22 November 2005.  On the evidence, he did so after Mr Casey used JBE’s funds and a share issue to buy another company car over Mr Beare’s objection and after he was forced to obtain copies of JBE’s bank statements from the bank as he could not obtain them from Mr Casey despite a number of requests.  I do not accept Mr Casey’s evidence that Mr Beare agreed to the purchase of the second vehicle.  According to Mr Beare his belief that withdrawals from JBE’s account were not being used on development of the technology, his concerns about misuse of JBE’s funds and his rapidly deteriorating relationship with Mr Casey led to his resignation.  I accept that evidence. 

179                                       Mr Beare’s conduct after 22 November 2005 cannot give rise to any breach of ss 180-182.  Insofar as Mr Beare, as person who had been a director of JBE, remained subject to the obligations imposed in s 183, the applicants had to identify the alleged confidential information and uses with sufficient particularity to ensure Mr Beare could know the case he had to meet.  The applicants also bore the onus of proving all elements of contravention of that section.  The observations above demonstrate the applicants’ failure to fulfil the former requirement.  I deal with the latter requirement as part of the discussion below.  That discussion assumes (contrary to my principal conclusion) that I should not dismiss these claims outright and that it is necessary to attempt to deal with each of the vague and opaque allegations in the particulars to paragraphs 10 to 14 of the statement of claim.

180                                       Particular (a): This appears to be a reference to the applicants’ allegations in connection with events in or about September 2006 when Mr Beare, with the assistance of Mr Eleftheriadis, took it upon himself to retrieve his two prototypes (the Yamaha and Ducati) from a storage facility controlled by Mr Casey.  Mr Beare had requested the return of his motorcycles but Mr Casey asserted (incorrectly, as discussed above) that they belonged to JBE and refused to return them to Mr Beare, leading to the events of September 2006.  This (and related) events prompted numerous serious allegations by the applicants against Mr Beare and Mr Eleftheriadis during the course of the hearing, none of which were properly raised as specifically articulated claims in the statement of claim.  Insofar as capable of being relevant to the allegations against Mr Beare in respect of the Corporations Act:

·                    Mr Beare ceased to be a director of JBE on 22 November 2005

·                    The evidence does not disclose any conduct by Mr Beare in any way capable of being described as set out in particular (a) before 22 November 2005.

·                    If the particular is to be construed as referring to the events of September 2006, Mr Beare was no longer a director of JBE at that time.  Sections 180-182 are thus inapplicable.

·                    Section 183 also cannot apply.  Nothing in particular (a) identifies any information which Mr Beare obtained because he had been a director of JBE.

181                                       Particular (b): this particular refers specifically to the prototypes.  The particular wrongly identifies the prototypes as belonging to JBE.  As found above, Mr Beare did not sell the prototypes to JBE at any time.  Mr Beare made the prototypes available to JBE but no more.  Late in the hearing, the applicants attempted to recast this claim – that the Beare Head engines on the prototypes, but not the prototypes themselves, belonged to JBE (whilst, nevertheless, continuing to make allegations of serious misconduct against Mr Beare for taking action to retrieve the prototypes, his own property which was being withheld from him).  That is a different case from the one pleaded.  Be that as it may, and as set out above, the particular provides no support for any alleged breach by Mr Beare of the Corporations Act.

182                                       Particular (c): Schedule 2 identifies “bank statements of [JBE], contracts and shareholder lists of [JBE], the customer and client lists, commercial contacts”.  Those are inadequate particulars of an alleged misuse of information to found an allegation of contravention of the Corporations Act.  The particular appears to be referring to events from late 2006 and 2007 in which Mr Beare and Mr Eleftheriadis posted certain information on websites.  Even on the applicants’ version of events Mr Beare did nothing capable of being described as set out in particular (c) at any time while a director of JBE.  Sections 180-182 are thus inapplicable. 

183                                       As to s 183, the following observations may be made. 

184                                       First, much was made in the applicants’ case about Mr Beare having taken a laptop from JBE when he resigned as a director on 22 November 2005.  The evidence does not bear out the applicants’ characterisation of these events.  On any reasonable view of the evidence it appears that Mr Beare had been provided with a laptop by Mr Casey (whether on behalf of JBE or not is immaterial).  Mr Beare had that laptop in his possession in South Australia when he resigned.  Mr Casey asked for the laptop to be returned.  Before returning the laptop Mr Beare arranged for his son to remove Mr Beare’s personal information from the laptop and otherwise to delete the balance.  Mr Beare then returned the laptop as requested.  The evidence did not establish that Mr Beare kept, disclosed or used any information belonging to JBE form the laptop. 

185                                       Second, the applicants’ focus on Mr White’s activities was also misdirected.  Mr White’s evidence, taken with the other evidence in the proceeding, discloses that when Mr White re-established the www.sixstroke.com website (an event which prompted many allegations by the applicants which is discussed further below) he placed on it the information originally located on that website, which was brought into existence well before the constitution of JBE.  That information, accordingly, cannot attract any obligations under s 183 of the Corporations Act.

186                                       Third, the applicants seemed to rely on the so-called “chapter of truth” which Mr Beare and Mr Eleftheriadis caused to be posted on the www.sixstroke.com website in 2007 in support of this claim.  That information is in issue in respect of the claims of injurious falsehood (discussed below).  Insofar as relevant to Mr Beare’s alleged breached of the Corporations Act, the applicants’ case faces many difficulties.  The information posted, according to the version in evidence, comprises a series of emails mostly between Mr Eleftheriadis and Mr Casey, but also including copies of correspondence from Mr Beare.  It is not apparent how information of that character could satisfy the statutory description of information obtained by Mr Beare because he had been a director of JBE.  Similarly, insofar as the website contained information about the Beare Head engine, the evidence of Mr White and Mr Beare establishes that the information was from Mr Beare’s original sixstroke website which existed before the constitution of JBE.  There are references in the applicants’ submissions to JBE’s bank accounts having been placed on the website. However, no bank statements appear in the version of the website included in the evidence.  The closest the evidence comes is a page said to have been extracted from the website showing what appears to be a hyperlink titled “JBE Bank Statements” but there is no evidence showing what documents would be downloaded by clicking on this hyperlink.  The applicants’ submissions also provided no assistance in respect of the primary evidentiary foundations for these claims.  The submissions refer to an exhibit to Mr Beare’s affidavit of 30 September 2009 showing copies of the JBE bank statements he obtained from the bank after he could not obtain them from Mr Casey.  Nowhere in this affidavit does Mr Beare say he placed these bank statements on the website.  Even if Mr Beare was responsible for placing JBE’s bank statements on the website, the requirements of s 183 remain unsatisfied.  The bank statements of JBE in evidence (which may or may not be the ones said to have been posted on the website) disclose nothing about JBE’s operations other than unsourced deposits and withdrawals and a current account balance from time to time.  Further, Mr Beare’s purpose, if he did in fact place the bank statements on the website, was to prove his concerns about how company funds were being used, namely, that funds were withdrawn without his approval while he was a director; and that, as JBE was not undertaking any work which could justify such expenditure, the funds were withdrawn by Mr Casey to pay for Mr Casey’s own living expenses.

187                                       The evidence is simply insufficient to find that Mr Beare placed this material on the website or that he did so for a purpose proscribed by s 183 of the Corporations Act. 

188                                       Particular (d): This particular also appears to relate to events from late 2006 and 2007 in connection with the so-called “chapter of truth”.  As such, it cannot be material to any obligation Mr Beare had under ss 180-182 of the Corporations Act.  As to s 183, the particular is deficient on its face.  It is not apparent how permitting public statements on websites said to vilify JBE can engage any obligation under s 183 of the Corporations Act which is concerned with the improper use of information obtained by reason of being a director or officer of a company.

189                                       Particular (e): It is not apparent how Mr Beare signing a document of any character could be said to involve a contravention of ss 180-183 of the Corporations Act.

190                                       Particular (f): It is not apparent how an alleged statement of intention to destroy JBE after Mr Beare ceased to be a director (even if made) could engage the operation of ss 180-183 of the Corporations Act.

191                                       Particular (g): This is the only particular which, while grossly inadequate for the reasons already given, is at least capable of being related to an event which took place while Mr Beare was a director of JBE, namely, Mr Beare’s dealings with Mr Sun in 2005.

192                                       While the applicants’ submissions sought to undermine Mr Beare’s credibility, the events in question must be viewed against the circumstances prevailing at the time.  Despite the applicants’ efforts to submit otherwise, the conclusion which must be drawn (consistent with Ms Murone’s opinion) is that it is impossible to identify how JBE’s funds have been spent in developing the technology, being the purpose for which JBE was established.  Primary source documents relevant to this question were few and far between.  A bundle of invoices provided shows payments to Beare Technology Pty Ltd in the amount of $70,000 and to third parties of $44,000.  However, including the initial investments before the constitution of JBE, some $1.3 million had been invested in the company.  It is not possible from the evidence to identify any expenditure of or approaching that magnitude on the development of the technology.  Yet the Beare Head engine was not developed materially beyond its state as it existed in October 2001 before Mr Casey’s involvement started.  It is also apparent that the money (some $1.3 million) has been spent.  In other words, it must have been (and from his evidence was) apparent to Mr Beare by the latter part of 2005, before the meeting with Mr Sun in Taiwan, that his priorities for development of the Beare Head engine had not been achieved over the four years of Mr Casey’s involvement and that he and Mr Casey had, as Mr Beare put it, different priorities.

193                                       It is against this background, and that of the agreement with Mr Sun from December 2002, that the work done by Mr Beare on finalising Mr Sun’s Yingyang prototype must be seen.  In that context, the following becomes apparent.

194                                       First, the work Mr Beare agreed to do and accepted payment for was to refine and finish the development of the Beare Head engine on the Yingyang prototype.  It was in JBE’s interests for that work to be done.  Mr Sun was an existing and potential future investor in JBE.  Mr Sun wanted the engine work completed.  An agreement from December 2002 provided that it was necessary for Mr Beare to do this work in the interests of quality control.  While the money was given directly to Mr Beare and not to JBE, the work Mr Beare did was in his capacity as technical director of JBE.  All of the practical arrangements of JBE recognised that the only person physically working on the development of the Beare Head engine was Mr Beare.  For that development work to continue, which Mr Beare and Mr Sun both wanted as investors in JBE, Mr Beare had to have access to money.  Mr Casey controlled JBE’s accounts and it is apparent that, by this time, Mr Beare was not receiving any funds adequate to further develop the Beare Head engine.  There is no suggestion that Mr Beare misapplied the money.  The money was in fact spent on doing that which Mr Sun requested and which it was in JBE’s interests to see completed. 

195                                       Second, JBE itself, by the subsequent minutes, acknowledged that Mr Sun had requested the modifications and “mistakenly” paid money into Mr Beare’s account and that the “verbal agreement with Larry Sun should be more formalized with expectations and responsibilities on both sides”.  Subsequently, Mr Beare clarified that he had received $9,985 which Mr Beare then paid over to JBE.  After this, and Mr Beare delivering the Yingyang to Mr Casey as required, no further work on that engine took place. 

196                                       It was not inappropriate for Mr Beare to want to finish the Yingyang prototype.  It was not inappropriate for Mr Beare to discuss that directly with Mr Sun (Mr Beare was JBE’s technical director).  Nor was it inappropriate for Mr Beare in fact to have done the work.  What then of Mr Beare’s decision to permit the direct payment by Mr Sun without Mr Casey’s knowledge?  I am satisfied that, in so doing, Mr Beare acted honestly and in good faith (albeit misguidedly) in what he perceived to be the best interests of JBE, which is a proper purpose.  Indeed, before his resignation in November 2005 there is no evidence from which it properly might be inferred that Mr Beare was doing anything other than acting in what he perceived to be in JBE’s best interests, consistent with his obligations as a director and technical director.  Accordingly, no contraventions of ss 181-183 may be founded upon these events. 

197                                       I am also satisfied that Mr Beare’s decision to permit the direct payment by Mr Sun without Mr Casey’s knowledge at this time was the result of frustration at the lack of development of the Beare Head engine and loss of confidence in Mr Casey (a loss of confidence which I infer Mr Sun shared and which explains the making of the payment directly to Mr Beare).  Both Mr Beare’s frustration and loss of confidence are explicable given the events described above. 

198                                       Insofar as particular (g) might be read as suggesting some greater loss of opportunity than the payment by Mr Sun to Mr Beare for work on the Yingyang prototype, the evidence is to the contrary.  The evidence does not support an inference that anything Mr Beare did, or failed to do, had any adverse impact on investment decisions of Mr Sun or Mr Balamukundan (as principal of Primero Enserve). 

199                                       These matters must be given weight as relevant to JBE’s circumstances at the time.  When given the weight they deserve, and having regard to the inadequacies in pleading described above, I am satisfied that no finding that Mr Beare contravened s 180 of the Corporations Act can or should be made by reason of particular (g) of the statement of claim.

200                                       Particular (h): As there is no evidence of any such letter at the time when Mr Beare was a director, ss 180-182 are immaterial.  I also cannot see how writing a letter of demand can involve any misuse of information within the scope of s 183 of the Corporations Act.  The letter is not identified by date but, to speculate, might be a letter of 27 August 2006 or, perhaps, 10 October 2006 which Mr Beare sent to all shareholders.  Precisely what information in these letters or either of them which Mr Beare is said to have obtained by reason of being a director of JBE remains unclear.  Accordingly, further speculation about this particular is inappropriate and should not be entertained.

201                                       Particular (i): This particular also appears to relate to the payment by Mr Sun.  Contrary to the particular, Mr Beare acknowledged that the payment had been made into his (in fact, Beare Technology Pty Ltd’s) bank account.  The minutes of JBE, which Mr Casey prepared and signed (and Mr Beare also signed), are the source of the suggestion that this payment was a mistake.  In consequence, how this particular can be said to give rise to any contravention by Mr Beare of ss 180-183 of the Corporations Act remains obscure. 

202                                       Particular (j): This appears to be a reference to the fact that Mr Beare initially identified the amount Mr Sun paid as $5,000 and then clarified that he had in fact been paid $9,985.  As the minutes record, Mr Beare checked his bank statements after the meeting on 28 July 2005.  This caused him to correct the information at the meeting on 19 August 2005.  Further, Mr Beare said in cross-examination that he had returned an unspent $5,000 to Mr Sun.  I accept Mr Beare’s evidence.  I am satisfied that Mr Beare made a genuine error in respect of the amount disclosed at the meeting of 28 July 2005 which he subsequently corrected.  No contravention of ss 180-183 can arise from these circumstances.

203                                       Particular (k): This remains at the level of mere unspecified allegation.  If it is intended to refer to dealings with Mr Sun in 2005 before Mr Beare’s resignation, then nothing in the evidence about those dealings additional to the matters discussed above indicates any “private conversations” in which Mr Beare engaged about JBE’s “confidential information” of “confidential Board business”. 

204                                       Particular (l): As there is no evidence of any such letter at the time when Mr Beare was a director, ss 180-182 are immaterial.  I also cannot se how writing a letter to a member of parliament can involve any contravention of s 183 of the Corporations Act. 

205                                       Particular (m): This appears to relate to events which took place after the involvement of Mr Eleftheriadis, who is the second respondent and the director of SSED, which is the fifth respondent.  If so, all of these events relate to a period after Mr Beare’s resignation as a director.  Thus, ss 180-182 cannot apply. 

206                                       As to s 183, the inadequacy of the particular is such that it could never form the basis for any finding against Mr Beare.  As the respondents submitted, where a pleaded cause of action includes breach of confidentiality, as here, fairness demands that the information said to be confidential and the use said to be in breach of the duty be identified with specificity (a summary of the relevant principles is provided in Creative Brands Pty Ltd v Franklin [2001] VSC 338 at [16]-[23]).

207                                       As discussed, it was always the applicants’ responsibility to plead their case in a manner that enabled Mr Beare to know the case he had to meet.  Particular (m) fails to identify the confidential information in question, what Mr Beare is said to have done with it or when he is said to have done so.  It was never Mr Beare’s responsibility to trawl through the evidence the applicants filed in an attempt to work out exactly what was being put against him either generally or by reference to an inadequate particular such as particular (m).  As such, no finding based on particular (m) can or should be made against Mr Beare.

208                                       Particular (n): This particular is neither supported by the evidence nor capable of founding any contravention by Mr Beare of ss 180-183 of the Corporations Act.  Mr Eleftheriadis did not obtain Sir Jack Brabham’s contact details from Mr Beare.  He obtained them from Sir Jack Brabham and staff at the location of Sir Jack Brabham’s residence.  In any event, it is difficult to understand how particular (n) could be said to involve information that Mr Beare obtained because he was a director of JBE.  Further, the shareholders of JBE are a matter of public record. 

209                                       Particular (o): This is a further vague assertion that appears to be related to Mr Sun and Mr Balamukundan.  Insofar as relevant to the facts in issue it has been dealt with above.  In this regard, I should record that I do not accept that Mr Beare’s dealings with Mr Sun after he ceased to be a director in respect of engineering projects are part of the case pleaded against Mr Beare.  There is no patent infringement claim in this proceeding.  In any event, I accept Mr Beare’s evidence that the subsequent work he did for Mr Sun related to other projects.  Otherwise the particular suffers from the same defects as particular (m).  For the same reasons, particular (o) cannot be a proper basis for any finding against Mr Beare.

210                                       Particular (p): All allegations relate to the period after Mr Beare ceased to be a director.  Thus, ss 180-182 are inapplicable.  As to s 183, it is not possible to divine from particular (p) how any of the statements referred to by cross-reference to the separate document titled “Intimidation and Threats: First Respondent” are capable of constituting a breach of that statutory provision.  The particulars said to constitute intimidation and threats by the first respondent are pleaded only in respect of the Corporations Act claims.  No such claim can be sustained.  Accordingly, no further consideration need be given to these particulars.

211                                       For these reasons, each of the applicants’ allegations against Mr Beare for contravention of ss 180-183 of the Corporations Act must be dismissed.

THE SEPTEMBER 2004 AGREEMENT (ISSUe 8)

212                                       This claim relates to the September 2004 share subscription agreements which Mr Casey, Mr Beare, Mr Smith, JBE and each investor signed in order to ratify the earlier contracts by which investors had paid money to Mr Casey in exchange for a share in the proposed company. 

213                                       The difficulty with this claim by the applicants is that cl 10.2, in terms, imposes an obligation on “the Subscriber” with respect to confidential information.  Mr Beare was not “the Subscriber” in any such agreement.  As such, nothing Mr Beare did or did not do could give rise to a breach of cl 10.2 of the share subscription agreements.

214                                       This claim, accordingly, cannot succeed.

MISLEADING AND DECEPTIVE CONDUCT CLAIMS

Mr Beare (Issue 12)

215                                       The misleading and deceptive conduct claims all relate to Mr Beare allegedly representing his ownership of various items and information.

216                                       The first allegation relates to ownership of “the technology listed in Schedule 1”.  This is a reference to Schedule 1 to the application.  Schedule 1 to the application lists the “technology known as the Beare Head patents (Dual Piston Combustion Engine PCT/AU95/00691), the technology known as the Smith Hydrogen/Oxygen Unit (Method and Means for Hydrogen/Oxygen Generation PCT/AU02/01541)” and “the technology known as Casey Technology patents (Nozzle for Delivering Liquid/Gas Mixture PCT/AU96/00346)”. 

217                                       As the respondents submitted, there is no evidentiary foundation that Mr Beare made any representations at any time about the ownership of the technology known as the “Smith Hydrogen/Oxygen Unit (Method and Means for Hydrogen/Oxygen Generation PCT/AU02/01541)” or the technology known as the “Casey Technology patents (Nozzle for Delivering Liquid/Gas Mixture PCT/AU96/00346)”.  It follows that these allegations are misconceived and must be dismissed immediately.

218                                       As to the remaining item of technology, Mr Beare undoubtedly is the inventor of the technology known as the Beare Head patents (dual piston combustion engine PCT/AU95/00691).  At all times before the October 2001 agreement Mr Beare also owned 100% of the rights to all of the patents for the Beare Head engine including PCT/AU95/00691.  Between October 2001 and May 2004 Mr Beare owned 50% of those rights.  After 20 May 2004 JBE owned 100% of those rights. 

219                                       The respondents submitted that because the transfer of Mr Beare’s patents to JBE was induced by Mr Casey’s misleading and deceptive conduct Mr Beare remains the rightful owner of all of the Beare Head patents with the consequence that any representation he made as to his ownership could not be characterised as misleading or deceptive.  I do not accept this submission for the reasons that follow. 

220                                       First, although I have found that Mr Casey’s misleading and deceptive conduct induced Mr Beare to transfer 50% of his rights to the Beare Head patents to Mr Casey in October 2001, I rejected Mr Beare’s claim that he was also induced to transfer his remaining rights to JBE by reason of misleading and deceptive conduct by Mr Casey. 

221                                       Second, the respondents’ claim for re-transfer of the Beare Head patents to Mr Beare failed to recognise that those patents have been transferred to JBE, a publicly listed company in which people unconnected with the dispute between Mr Casey and Mr Beare have invested funds.  Mr Beare transferred his remaining 50% rights in his patents to JBE in exchange for the shares he was issued.  Mr Casey also transferred his 50% rights in Mr Beare’s patents (which I have found Mr Casey obtained by reason of his misleading and deceptive conduct) to JBE for shares (being a proportion of Mr Casey’s shares in JBE).  Rights that Mr Beare has against Mr Casey for Mr Casey’s misleading and deceptive conduct in 2001 are necessarily affected by the fact of Mr Casey’s transfer of his rights to JBE. 

222                                       Third, even if Mr Beare had a right to bring a proceeding against Mr Casey for re-transfer of patent rights (which he does not as Mr Casey does not own any of the Beare Head patents) the existence of that right would not make Mr Beare the owner of the patents.  Mr Beare, at best, would own the rights to the cause of action against Mr Casey. 

223                                       While dealing with this issue, I should also dismiss one other aspect of this proceeding.  Although Mr Casey and Mr Beare transferred the patents in the Beare Head engine to JBE by the patent sale agreement of 20 May 2004, Mr Beare remained the registered owner of the patents until 3 May 2007.  The applicants attempted to submit that this showed some breach of an obligation on Mr Beare’s part either related to the alleged March 2004 oral agreement (which I have found did not exist) or otherwise.  Mr Beare, however, had no responsibility to arrange the change in registration details.  It is not Mr Beare’s fault that JBE failed to take the required administrative steps to alter the registration details.  Nor, despite the applicants’ reference to it in submissions, is any claim pleaded against Mr Beare that he held the registration rights on trust for JBE.  This, however, does not alter the fact that Mr Beare had transferred rights of ownership in the patents, first to Mr Casey (as to 50%), and second to JBE (as to Mr Beare’s remaining 50%). 

224                                       In common with many of the applicants’ claims, the allegation in respect of Mr Beare’s representation that he is the true owner of the rights to the technology listed in Schedule 1 to the application fails to provide adequate particulars of the date of the representation, the manner in which the representation was conveyed, whether the representation was express or implied, whether the representation was by words or conduct or both, or the words, pictures, conduct or other matters said to convey the representation.  Accordingly, the pleading of this claim is also grossly inadequate.  Insofar as can be surmised from the course of the hearing the applicants’ complaint relates to the material on the www.sixstroke.com website after it was reinstated by Mr White in late 2006.  The respondents submitted that Mr White placed archived material from Mr Beare’s original www.sixstroke.com website onto the reinstated website without reference to Mr Beare (or, for that matter, Mr Eleftheriadis).  While this accords with Mr White’s description of events, there is evidence of material posted on the www.sixstroke.com website after late 2006 which, from its terms, could not have been sourced from the original website.  The vagueness of the applicants’ allegations, without identification of any specifically pleaded representation or its date, creates insuperable difficulties.  For example:

(1)               A page from the www.sixstroke.com website refers to Mr Beare as the inventor and owner of “this revolutionary Aussie bred Dual Oppo [illegible] Internal Combustion Engine technological breakthrough”.  If this is the representation (not particularised) the applicants intended to rely on, it is wrong to select a particular extract which may be considered misleading in isolation however does not have that character when viewed in context.  The sixstroke website contained the so-called “chapter of truth”, setting out much correspondence between Mr Beare, Mr Eleftheriadis, Mr Casey and others where the ownership of the rights to the Beare Head engine was in dispute.  In the context of the website a person would not be misled by the above statement.  It would be clear on a reasonable reading of the website that, while Mr Beare considered himself the owner, there was a dispute as to the ownership of rights to the Beare Head engine. 

(2)               Another page from the www.sixstroke.com website contains a picture of a patent seal with the words “US Patent No. 5,713,314 Feb 3^rd 1998” underneath it.  This is not misleading or deceptive – Mr Beare did own that patent as at 3 February 1998.  Moreover, this picture has been reinstated by Mr White from Mr Beare’s original website.  Mr Beare cannot be held responsible for Mr White’s actions.  Finally, nothing on that page conveys a representation that Mr Beare owns that patent.

(3)               Some pages of the website contain entries which were written by Mr Eleftheriadis.  Read as a whole those pages convey nothing more than Mr Eleftheriadis’ opinions about the treatment of Mr Beare and the conduct of Mr Casey. 

(4)               Amongst the pages said to have been extracted from the www.sixstroke.com website, when read in context, it is not possible to identify any clear representation by Mr Beare that he is the owner of the patents for the Beare Head engine owned by JBE (as opposed to being the inventor of that invention). 

225                                       I accept the respondents’ submission that this claim against Mr Beare is “based on a clearly inadequate pleading and on cross-examination conducted after the close of the Applicants’ case.  The need to have clearly pleaded the precise [representations] relied on, including whether they are express or implied, who they are made by, and when and how they are made is very important.  The Applicants’ closing submissions do not assist in this regard, and …any finding of actionable misrepresentation based on them would be unsafe in the circumstances of this case”.

226                                       The second allegation relates to the “confidential information listed in Schedule 2” to the application.  This information, as noted, is described as bank statements of JBE, contracts and shareholder lists of JBE, the customer and client lists, and commercial contacts.  The allegation is that Mr Beare represented to the public that he was the “true owner” of this information.  Again, the pleading is grossly inadequate in that it fails to provide adequate particulars of the date of the representation, the manner in which the representation was conveyed, whether the representation was express or implied, whether the representation was by words or conduct or both, or the words, pictures, conduct or other matters said to convey the representation.  Moreover, nothing in the course of the hearing enables even a speculative attempt to identify the evidentiary foundation for this allegation that Mr Beare represented that he owned this material.  It follows that this claim must be rejected.

227                                       The third allegation relates to “prototype property listed in Schedule 3” to the application.  This is described as “Motorcycles: Ducati and Yamaha unregistered machines containing the JBE technology together with parts, wiring, electrical system, electronics and brakes”.  The allegation is that Mr Beare represented to the public that he is the “true owner” of these items.  Again, the pleading is grossly inadequate presenting the same deficiencies as all of the applicants’ other claims of misleading and deceptive conduct against Mr Beare.  In any event, I am satisfied that Mr Beare is the owner of the Ducati and Yamaha motorcycles (or prototypes as they are called).  Mr Beare purchased the motorcycles, worked on them and constituted them as prototypes years before Mr Casey or JBE came on the scene.  Mr Beare never transferred his ownership of these items to Mr Casey or JBE.  Accordingly, if Mr Beare did represent ownership of the motorcycles such a representation could not be misleading or deceptive.  Nor (as the applicants appeared to assume towards the end of the hearing) can the applicants properly alter their case to suggest some lesser representation (such as ownership of some part, wiring, or electrical system on the motorcycles).  Given that Mr Beare owns the motorcycles themselves any representation of ownership about some part on the motorcycles would need to be precisely identified, as would full particulars of the date of the representation, the manner in which the representation was conveyed, whether the representation was express or implied, whether the representation was by words or conduct or both, and the words, pictures, conduct or other matters said to convey the representation.  It follows that this claim must be rejected.

228                                       The fourth allegation relates to “the intellectual property and technology in Schedules 1 and 3” to the application.  The inadequacy of those descriptions has been identified above.  The allegation appears to be that Mr Beare has provided statutory declarations to domain name service providers that he or companies controlled by him own that intellectual property and technology.  The date of those statutory declarations and parts said to convey the representations is not particularised.  No such statutory declarations appear in the evidence.  The course of the hearing does not assist in speculation about the validity or otherwise of these allegations.  The most that was put to Mr Beare during cross-examination was that 11 domain names had been established by Mr Eleftheriadis with Mr Beare’s consent and knowledge.  The only evidence which resembles what the applicants have described are certain forms provided to a domain name service provider said to give the provider “authority to register/renew and transfer” the domain name specified on the form (the domain names being bearehead.com, bearehead.com.au, 6stroke.com.au, sixstroke.net, sixstroke.com.au).  The forms are said to be signed on behalf of Beare Head Pty Ltd, however they are not signed by Mr Beare and it is unclear who has signed the forms and under what authority.  The forms appear to relate to transferring the domain name licences to SSED.  This evidence does not show any misleading and deceptive conduct of the type alleged by the applicants.  Accordingly, this claim must be dismissed.  The claim must also be dismissed for the reasons set out below in relation to issues 16, 28 and 31.

229                                       The fifth allegation relates to “the testing, research and development results of [JBE’s] three prototypes”.  It is claimed that Mr Beare “is representing” that these matters “are that of his own”.  The three prototypes are not identified.  Presumably, they include at least the two motorcycles nominated in Schedule 3 to the application.  No particulars are provided about where, when, how or to whom Mr Beare is said to have made this representation.  The problems caused by this lack of specificity are real.  For example, Mr Beare had carried out and obtained various test results well before Mr Casey’s involvement and the constitution of JBE.  That information remains Mr Beare’s property.  As I have said about other claims in this category, nothing in the course of the hearing enables even a speculative attempt to identify the evidentiary foundation for this allegation that Mr Beare represented that he owned this material.  It follows that this claim must be rejected.

230                                       For these reasons the applicants’ claims of misleading and deceptive conduct by Mr Beare must be rejected.

Other respondents (Issues 25, 29, 32 and 35)

231                                       Other than in one respect, the claim of misleading and deceptive conduct by Mr Eleftheriadis (paragraph 43 of the statement of claim) involves the same allegations made (and dismissed) against Mr Beare above.  Paragraphs 50 to 51, 56 to 57 and 62 to 63 of the statement of claim make similar allegations against Beare Technology Pty Ltd, SSED and Reference Audio Visual. 

232                                       The claims against Mr Eleftheriadis, Beare Technology Pty Ltd, SSED and Reference Audio Visual should be dismissed for the reasons given in respect of the same claims against Mr Beare.

233                                       Particular (d) to the claim against Mr Eleftheriadis is different from the claims against Mr Beare.  Paragraph (d) says “the second respondent continues to make a personal statement on the website that the First Respondent is the owner of the technology”.  In common with the other allegations of this type, the applicants have not identified the statement in question or where it might be found in the evidence.  Given the importance of context to assessing a claim of misleading and deceptive conduct these deficiencies make it inappropriate to speculate about what statement the applicants might have had in mind. 

234                                       As to Beare Technology Pty Ltd, there is a further reason for dismissing the claims additional to those specified in respect of Mr Beare.  There is no sound evidentiary foundation for the making of any factual finding that Beare Technology Pty Ltd had anything to do with the www.sixstroke.com website or any statements on it.

235                                       Insofar as there are additional claims the respondents’ submissions are compelling.  It cannot have been misleading and deceptive conduct by SSED merely to have entered into the deed of confirmation with Mr Beare and Mr Eleftheriadis of 27 March 2007.  Nor in the circumstances of this case can it be misleading and deceptive conduct merely to register a domain name without ever having used the name.  Reference Audio Visual, on the evidence, has had no involvement other than being the corporate vehicle for the reservation of domain names. 

UNCONSCIONABLE CONDUCT CLAIMS (ISSUE 13)

236                                       These claims are based on ss 7 and/or 8A of the Victorian Fair Trading Act and s 39 of the Queensland Fair Trading Act.  Those provisions are directed towards the unconscionable conduct of a supplier or potential supplier of goods to a consumer or potential consumer of goods.  It is not necessary to identify the gross inadequacies of the pleading of these claims to observe that nothing in the evidence provides a proper foundation for these allegations.  The inadequacies, nevertheless, exist. 

237                                       The particulars state that “the First Respondent has represented to third persons in the motor vehicle industry and other industries, that he is the owner of the technology confidential information and prototypes which is untrue”.  Assuming these to be the technology, confidential information and prototypes listed in Schedules 1, 2 and 3 to the application, the inadequacy of the descriptions there provided have been discussed above.  No details are given about the date of the representation, the manner in which the representation was conveyed, whether the representation was express or implied, whether the representation was by words or conduct or both, or the words, pictures, conduct or other matters said to convey the representation.  Moreover, no details are given as to how this alleged representation constitutes unconscionable conduct.  It is not appropriate to attempt to speculate about the possible locations in the evidence of any source material said to found the allegations. 

238                                       The particulars also relate to allegations made in paragraphs 15 and 16 of the statement of claim.  However, paragraph 15 relates to the alleged March 2004 oral agreement which I have found did not exist.  Paragraph 16 alleges breaches of fiduciary duties based on that non-existent agreement.  These particulars of alleged unconscionable conduct are thus necessarily rejected.  Moreover, the particulars to paragraph 16 cannot be related in any meaningful way to the allegation of unconscionable conduct in the sense used in ss 7 and/or 8A of the Victorian Fair Trading Act and s 39 of the Queensland Fair Trading Act.  Those particulars have nothing to do with any alleged relationship between Mr Beare as the supplier or potential supplier of goods or services and a consumer or potential consumer of those goods or services. 

239                                       The claims that Mr Beare engaged in unconscionable conduct are inadequately identified and, to the extent that they can be identified, misconceived.  For these reasons they must be rejected.

INJURIOUS FALSEHOOD AND RELATED CLAIMs (ISSUES 14 AND 15)

240                                       The injurious falsehood claims against Mr Beare in the statement of claim (paragraphs 23 and 23A) refer to particulars supplied separately “Injurious Falsehoods: First Respondent”.  A document entitled “Injurious Falsehoods by First Respondent” was included in a folder provided by the respondents during closing submissions.  After the hearing had concluded (and without obtaining leave for any further communication to the Court) the applicants’ solicitor, by email, advised that this document was incomplete.  According to the applicants’ solicitor another document had been served under cover of a letter dated 10 June 2008.  The documents the applicants’ solicitor attached to the email, apparently as part of the material said to have been enclosed with the letter of 10 June 2008, included a document with a title page “Detailed List of Injurious Falsehoods ANNEXURE ‘A’”.  This annexure identified many pages said to be quotes constituting injurious falsehoods.  By contrast, the document entitled “Injurious Falsehoods by First Respondent” is a single page of quotes.  This communication from the applicants’ solicitor prompted a response from the respondents’ solicitor.  The respondents’ solicitor pointed out that the document “Detailed List of Injurious Falsehoods ANNEXURE ‘A’” was not served under cover of the letter of 10 June 2008.  That letter makes no reference to this annexure.  According to the respondents’ solicitor the annexures to the applicants’ solicitors’ email (there also being an annexure ‘B’ relating to the passing off claims) were never served pursuant to directions made by Bennett J on 7 May 2008 in respect of the pleadings or particulars.  Those annexures were attached to the applicants’ closing written submissions (filed on 8 February 20010) with a title page “Submission – Detailed List of Injurious Falsehoods and Detailed list of assertions/claims of ownership of patented technology”. 

241                                       The first observation about these communications is to repeat what the parties were advised in response on 3 March 2010, namely, that if either party wished to make further submissions a notice of motion was required, failing which I would proceed on the basis of the communications as they stood.  Neither party filed a notice of motion in response.

242                                       The second is to record that I am satisfied that the respondents’ solicitor has accurately described the true course of events.  On 7 May 2008 Bennett J made the following order:

Directs that the Respondents on or before 12th May request clarification of particulars of the statement of claim by forwarding to the Applicants’ solicitors a copy of the material previously served as particulars supplied separately of the Amended Claim dated 4 April 2008, and that on or before 19th May the Applicants will flag which paragraph of the statement of claim dated 29 April 2008 each such document refers to and return the documents duly marked to the Respondents.

243                                       The letter of 10 June 2008 was the applicants’ response (albeit belated) pursuant to that order.  The letter identified its attachments.  The attachments did not include the documents styled Annexures A and B attached to the email from the applicants’ solicitors.  The respondents were entitled to rely on the particulars as served.  The respondents never agreed to or acquiesced in the attempts by the applicants during the hearing to alter and expand the scope of the allegations pleaded against them.  As stated at the outset this is not a case where both parties chose to fight the case on the issues run at the hearing.  In these circumstances fairness demands that the matter be determined on the basis of the claims as pleaded and particularised.  The claims of injurious falsehood against Mr Beare as pleaded and particularised are those contained on the single page entitled “Injurious Falsehoods by First Respondent”.  It was not open to the applicants to attempt to expand the claims by attaching an annexure to their closing submissions.  In this regard insistence on the applicants being limited to the case as pleaded is critical.  Many of the statements in Annexure A are extracted from website forums.  The respondents do not control postings on website forums by third parties.  It cannot simply be assumed that any of the respondents made or authorised the posting of any statement on a website forum.  Annexure A further includes allegations which the respondents had not had the opportunity to meet during the hearing.  For these reasons, the applicants should not be allowed to rely on Annexure A as particulars to the claims of injurious falsehood against Mr Beare.

244                                       That having been said, I do not accept the respondents’ submission that the pleading must be construed as alleging injurious falsehoods against JBE alone because the requirement of malice is only specified in paragraph 23A of the statement of claim against JBE.  The applicants applied for, and were granted leave, to amend the statement of claim during the hearing in accordance with a document I signed and which bears a stamp recording the filing of the document in Court on 19 February 2010.  Of the five amendments therein specified one is to add the words “maliciously and” before the words “without justification” in paragraph 23.  The pleading remains deficient (for example, particulars of the alleged damage are not identified and must be inferred by reference to another document, discussed below).  Nevertheless, it can be gleaned that the claims are made for each applicant identified in the particulars as having been the subject of the alleged injurious falsehood.

245                                       The substance of those claims makes certain other observations appropriate.  The claim is injurious falsehood, not defamation.  The two causes of action are different.  In Ballina Shire Council v Ringland (1994) 33 NSWLR 680 at 694C Gleeson CJ exposed this distinction as follows:

The tort of defamation protects reputation, and it does so in a manner that involves a balancing of various considerations including the right of free speech. The tort of injurious falsehood protects against provable economic loss resulting from false and malicious statements.

246                                       The person alleging injurious falsehood bears the onus of proving each and every element of the cause of action (that is, the falsity of the statement, the making of the statement by the relevant party with malice, and the suffering of actual damage).  Accordingly, the onus was on the applicants to prove that the statements on which they relied to found the cause of action were false, made maliciously and caused actual loss.  Because of these requirements, a statement not proved to be false cannot found an action for injurious falsehood.  A statement not proved to have been made maliciously also cannot found the action. Nor can a statement not proved to have caused actual loss. 

247                                       In terms of the second requirement, malice, Halsbury’s Laws of Australia (Vol 10, 145 Defamation “Injurious Falsehood” at [145-860]) provides the following useful summary (footnotes excluded):

The false publication must have been made maliciously. A person who acted in good faith is therefore not liable. Malice is a question of motive, intention or state of mind and involves the use of an occasion for some indirect purpose or indirect motive such as to cause injury to another person. Malice may exist without an actual intention to injure. Malice may not be inferred from the fact of publication but will be inferred where the false publication was made with:

(1)        an intent to injure without just cause;

(2)        knowledge of their falsity; or

(3)        reckless indifference to its truth or falsity.

No action will lie where the false publication was made with mere lack of care or with an honest belief in its truth. An honest belief in the truth of the statement will rebut any inference of malice.

248                                       In terms of the third requirement, actual damage, that proven damage must be the “direct and natural result of the false publication” for the cause of action to be sustained (Halsbury’s Laws of Australia at [145-865]). 

249                                       The particulars claim that the statements in question were published on the www.sixstoke.com website as part of the so-called “chapter of truth”.  Accordingly, it is not possible (as the applicants appeared to assume) to take one or other sentence from that publication out of context and determine the injurious falsehood claims on that basis.  The “chapter of truth”, which I accept was published with the authority of Mr Beare and Mr Eleftheriadis, was placed on the website after the annual general meeting of JBE on 11 December 2006 and removed on 8 May 2008.  The covering statement to this section of the website comprises a statement by Mr Eleftheriadis which in part records as follows:

The following postings are cut and paste of the actual Email communications which took place between myself, Alan Patrick Casey, Gail Casey, & Sir Jack Brabham between the 7th of May 2006 and the 3rd of September 2006.

The company records and documents posted relating to the involvement of the above mentioned individuals with “Malcolm Beare the inventor”, and the “Beare Head Six Stroke technology” appear exactly as provided by Alan & Gail Casey.

Further communications and documents exchanged between Malcolm Beare and Alan Casey, Nathan Casey and other JBE members, have been provided since early September 2006.  These appear exactly as provided by a JBE shareholder.

I invite you to read through the pool of documents/communications, and form your own opinion regarding the conduct, legality, propriety, moral and ethical standards, of the above mentioned company and the individuals involved.

250                                       A series of emails, letters and other communications bearing earlier dates then follows.  As the respondents submitted, there was no challenge to the fact that these earlier documents had in fact been sent and received.  Read in context, they are what Mr Eleftheriadis identified them to be – a “cut and paste” from other documents in fact sent and received setting out the positions and opinions of, primarily, Mr Eleftheriadis and Mr Beare about their dispute with, primarily, Mr Casey and JBE.  This context is important.  So too is the fact that, insofar as the allegations against Mr Beare are concerned, Mr Beare attested that the positions and opinions expressed in the documents attributable to him were in fact his positions and opinions and he honestly believed them to be true.  Nothing in the cross-examination altered Mr Beare’s evidence in this regard.  No cause of action for injurious falsehood can lie without proof of falsity, malice and damage.  Mere assertions of falsity, malice and damage are insufficient.  The applicants’ case, however, failed to grapple adequately with the fundamental issues of proof in respect of which they bore the burden. 

251                                       The respondents’ submissions about malice expose these inadequacies in the applicants’ case.  As the respondents submitted, the applicants’ case against Mr Beare appeared to proceed on the basis of an unproved (and unpleaded) assumption that Mr Beare was part of a conspiracy to destroy JBE.  One of the principal documents cited in support is an email from Mr Beare to Mr Eleftheriadis of 9 June 2006 in which Mr Beare said:

If nothing is resolved I will take this option.

Would it be possible to use Beare technology, BEARE HEAD Pty Ltd, as the vehicle to further the project and offer the other shareholders in JBE shares for nothing, (maintaining their %) when JBE is liquidated the Casey clan excluded.

252                                       The email attached a blank complaint form to ASIC.  Although Mr Eleftheriadis was cross-examined about this document (of which Mr Beare was the author), Mr Beare was not.  The document does not prove malice on Mr Beare’s part.  By late 2005, and his resignation as a director of JBE, it is apparent that Mr Beare had lost all confidence in Mr Casey.  Mr Beare is a substantial, albeit minority, shareholder in JBE.  The fact that Mr Beare, as a minority shareholder in JBE, may have considered complaining to ASIC (as he in fact did subsequently) and taking steps leading to the liquidation of JBE does not prove malice on his part in respect of the statements said to found the injurious falsehood allegations.  The Corporations Act provides a range of remedies for minority shareholders including, in an appropriate case, the winding up of the company.  By June 2006 events had occurred (described above) which might have prompted Mr Beare to consider applying for the winding up of JBE.  In January 2006 he had discovered that many of the fees for the Beare Head engine patents had not been paid.  Communications between Mr Beare and Mr Casey throughout 2006 became more hostile.  Mr Beare also had learned of Mr Eleftheriadis’ dealings with Mr Casey (discussed below in respect of the claims against Eleftheriadis).

253                                       After June 2006, and before the publication of the so-called “chapter of truth” on the www.sixtroke.com website, other events occurred.  Mr Beare had requested the return of his prototype motorcycles but they had not been returned.  He had lodged a complaint with ASIC to no avail.  He had attended the annual general meeting of JBE on 11 December 2006 where, as Mr Casey agreed, Mr Beare was subjected by Mr Casey to a body search (apparently involving being patted down from the shoulders to the shoes both front and back by Mr Casey) to address Mr Casey’s concern that there be no unauthorised recording made of the meeting. 

254                                       The so-called “chapter of truth” was published on the www.sixstroke.com website after these (and other) events.  Mr Beare said he wanted the “chapter of truth” published after his experience at the annual general meeting of JBE.  His stated motivation was so that the truth about his experiences with Mr Casey and JBE could be known.  Mr Beare maintained his position that, insofar as the “chapter of truth” contained statements by him, he honestly believed them to be true. 

255                                       Against this background I am satisfied that Mr Beare’s evidence as to his motives in publishing (or being involved in the publication of) the so-called “chapter of truth” on the website (the source of the alleged injurious falsehoods) should be accepted.  Mr Beare was not motivated by malice.  He may have been acting in desperation (as the respondents acknowledged), but he honestly believed the statements he made to be true.  It is not to the point that the publication may have been ill-advised or inappropriate.  In the context of this case the relevant question is whether the applicants have established, for any of the particularised statements, each of the elements of injurious falsehood, including malice.  The answer is that they have not.

256                                       The applicants’ case on damage was also misconceived.  The case appears to have proceeded on the assumption that global generalised assertions of damage would suffice.  Actual damage, however, is an element of the cause of action of injurious falsehood.  Damage as a direct and natural consequence of the allegedly false statement, made maliciously, had to be proved.  The evidence of Mr Bennett, purporting to value JBE, is not evidence of the requisite character.  Even without the benefit of Ms Murone’s evidence, the flaws in Mr Bennett’s approach to the valuation require his evidence to be rejected.  Mr Bennett, in his own words, took at “face value” the benefits of the technologies and the notional values attributed to them.  Mr Bennett assumed that the notional values attributed to the technologies (I infer by Mr Casey) in May 2004 represented a fair market value.  These assumptions are not able to be sustained as sound. 

257                                       As Ms Murone indicated, the directors (Mr Casey and Mr Beare) determined the value of the patents.  Based on the evidence (including the fact that his own invention was attributed by far the highest value), it should be inferred that Mr Casey was the driving force behind these valuations.  Insofar as it was suggested by the applicants I reject the notion that the values ascribed to the technologies by Mr Casey and Mr Beare are reliable given their status as the inventors of their inventions.  In my view, their views of the value of their own inventions, for that reason alone, are unreliable.  Moreover, by as early as June 2005 the audited financial accounts of JBE included recognition that the patents were overvalued. 

258                                       According to Ms Murone (whose evidence I accept), the value of JBE could be ascertained only by a person with the requisite skills in valuing intangible assets of the kind in question.  By his own admission, Mr Bennett was not that person.  Ms Murone’s criticisms of Mr Bennett’s report are sound.  For example, the schedule of share issues on which Mr Bennett relied does not indicate shares issued for cash or for other consideration.  This is an important distinction when value is in question.  The share issue value ranged from $nil to $5.425 per share with no attempt by Mr Bennett at explanation or analysis of this wide variation.  Mr Bennett agreed that he “made no inquiries as to why someone paid a certain price for a share”.  He simply took an average of 15 transactions which showed the range in question.  Further, Mr Bennett accepted that the arrangements between Mr Casey, Mr Beare, Mr Smith and JBE could not be described as at arm’s length, yet was prepared to accept the value underlying those arrangements as representing a fair value.  It is apparent from these factors that, as Ms Murone said, prices of share issues is not a reliable indicator of value of JBE in this case.  Similarly, capitalisation of earnings is an inappropriate method because it assumes reasonable stability of earnings – a situation inapplicable to JBE.  The discounted cash flow method is also inappropriate because, as Ms Murone said, this method relies on the initial directors’ forecasts which were themselves based on an unreliable approach.  The discount of these forecasts by 90-95% is arbitrary.  The expense projections have no support.  The discount rate of 18%, given the risks in the technology, is far too low.  The ascribed value of JBE at 22 November 2005 ($6.5 million to $7 million) is nearly double the result from the discounted cash flow method.  The reduction to the ascribed value at 18 August 2008 ($0.6 million to $0.7 million) is not explained.  The Bennett report acknowledged the existence of two competitors in Australia alone at 22 November 2005 with no analysis of their relevance to value at that date. 

259                                       Mr Casey’s attempt to answer the evidence of Ms Murone was not persuasive.  Mr Casey was not called or qualified as an expert in this proceeding.  Nor could his evidence be considered impartial.  His affidavit of 24 September 2009 containing his answers to Ms Murone (as well as Mr Pini), to which substantial objection was properly taken, is mostly mere argument, conclusion and submission. 

260                                       For these reasons Mr Bennett’s report cannot rationally prove anything about the value of JBE at any time.  It cannot be relied on as providing any proof of damage either generally or in respect of the injurious falsehood claims.  Nor can any of the other evidence.  Indeed, the applicants’ particulars of loss and damage provide no rational basis for inferring that there has been any actual loss as a direct and natural consequence of the alleged injurious falsehoods.  The evidence, where not mere assertion, at best permits speculation as to why Mr Casey did not proceed with his attempts to attract further investors, as well as why dealings with Mr Sun and Mr Balamukundan did not bear fruit.  But it does not prove any actual loss or damage caused by the alleged injurious falsehoods.  This issue is discussed further under a separate heading about damage below.

261                                       The discussion which follows about the specific allegations against Mr Beare is subject to these conclusions which, of themselves, require the applicants’ injurious falsehood claims to be dismissed.

262                                       The first particularised claim relates to the following statement:

…I shook hands with Sir Jack Brabham and received a blank look and a hello, I don’t think that he even recognised me… Sir Jack appeared non compis mentis, and only to responded [sic] when called loudly

263                                       This statement appears in a document “Recollections Malcolm Beare of the JBE AGM 11/12/2006”.  The document, on its face, provides Mr Beare’s recollection of JBE’s annual general meeting of that date.  Mr Beare said in evidence that this was his opinion as it was exactly how Sir Jack Brabham appeared to Mr Beare to be.  The fact that Sir Jack Brabham, as the applicants suggested, was simply ignoring Mr Beare may be true but is immaterial.  Even if the statement could be construed as one of fact rather than Mr Beare’s mere honestly held opinion, the evidence does not support any finding of malice.  Nor does it support any damage to the business reputation of Sir Jack Brabham.  As noted, Sir Jack Brabham is a legend of the motor racing world.  It is inconceivable that his business reputation suffered any actual damage as a direct and natural consequence of Mr Beare’s expression of opinion.  After the publication, Sir Jack Brabham was made an Officer of the Order of Australia for his services to motorsport which tends to confirm this conclusion.  Moreover, the particulars of loss and damage which the applicants identified (said to be at pp 436.218-219 of the court book) do not identify any class of damage that could be characterised as a direct and natural consequence of this statement.

264                                       The second particularised claim relates to the following statement:

… the Board meetings were not held on a regular basis and usual meeting procedure was not adhered to… the company’s financial affairs do not appear to be completely autonomous from the Managing Directors personal affairs.  ... denying me access to financial information of the company… I do not believe that JBE is the owner of the Beare Head IP… Alan is trying to suck in new investors… an offer was made to get the company out of trouble for $3,000,000 and proceed the technologies to commercial readiness.  Alan made a request for a personal $6,400,000 in addition to the offer… there have been house renovations at the MD residence.  Namely the shifting of an internal wall and a show block added.

265                                       These statements appear in Mr Beare’s complaint to ASIC made on 30 November 2006.  The complaint as a whole was subsequently posted on the www.sixstroke.com website.  Apart from the fact that the applicants have not proved any malice on Mr Beare’s part in publishing a copy of his complaint to ASIC, the other difficulty is that they have not proved that any of these statements are false.  The respondents had no onus to prove that the statements were true.  The applicants had the onus of proving them false.  The applicants have not done so.  As these reasons (both above and below) disclose, the applicants have not proved that meetings of JBE’s board were held on a regular basis.  They have not proved that JBE’s financial affairs were completely autonomous from Mr Casey’s personal affairs.  They have not proved that they did not deny Mr Beare access to financial information.  They have not proved that Mr Beare did not believe that he owned the “Beare Head IP”.  They have not proved that Mr Casey was not trying to “suck in” new investors.  They have not proved the lack of an offer as described.  They have not proved that Mr Casey did not request a personal payment of $6.4 million.  They have not proved that the renovations referred to were not made.  Moreover, insofar as the evidence goes, it is at least capable of indicating that at least some of the statements are true.  For example, there is evidence that Mr Beare, a director of JBE, could not get copies of JBE’s bank statements other than from the bank itself.  Mr Beare does not believe that JBE owns “the Beare Head IP”.  Mr Casey was trying to attract new investors at or around the time of this complaint.  Mr Eleftheriadis was willing to invest in JBE.  Further, the applicants also have not proved any actual damage caused as a direct and natural consequence of the publication of these statements. 

266                                       The third particularised claim relates to the following statement:

I was once a director of JBE but resigned once I realised that company funds were being used inappropriately - reference www.sixstroke.com/truth.htm... really makes my blood boil knowing that Mr Casey has received another $10,000 from unsuspecting old investor…

267                                       This is an extract from a statement Mr Beare made on Wikipedia (a free online encyclopaedia).  From the context it appears that Mr Beare wrote to Wikipedia to complain about his posts on the site being removed by users identified as AP or G Casey.  Again, falsity, malice and actual damage have not been proved.

268                                       The fourth particularised claim relates to the following statement:

I resigned as a director of Jack Brabham Engines Ltd when it became obvious that the MD APC was utilising shareholders funds inappropriately reference to www.sixstroke.com/truth.htm... it became obvious that the MD APC was utilising shareholders funds inappropriately… Not to mention the trouble I have had with the MD of JBE who pocketed cash

269                                       This is an extract from material Mr Beare posted on a web forum.  The statement starts with the words “this is my personal opinion based on my experience”.  The statement does not end with the words “pocketed cash”.  It continues “…who pocketed cash instead of paying for patents as was originally agreed to.  This is my personal opinion gleaned from my experience”.

270                                       The same problems as already stated arise for the applicants.  I am satisfied Mr Beare honestly held these opinions.  In any event, the applicants have not proved the statements to be false.  For example, it is not possible from the evidence to be satisfied that JBE’s funds have been used appropriately.  Mr Beare did resign when he became concerned about the purchase of a car over his objection using JBE’s funds and an issue of shares.  Mr Casey did promise to maintain all of the patents.  A number of the patents have lapsed due to failure to pay fees.  The applicants have not proved actual damage caused by the statements.

271                                       The fifth particularised claim relates to numerous statements in a letter from Mr Beare to Edward Hall dated 17 July 2007, one of the initial investors in 2003 and a shareholder of JBE.  Mr Hall became a director of JBE in June 2007.  However, the quotes particularised by the applicants are selective, taken out of context and thus inaccurate.  Mr Beare sent the letter in question to Mr Hall shortly after Mr Hall’s appointment as a director.  The letter is marked “without prejudice”.  The respondents submitted that it was inadmissible as a without prejudice communication from Mr Beare in an attempt to settle the dispute with Mr Casey.  However, the letter is to Mr Hall in his personal capacity and not to Mr Hall as a representative of JBE, as the first sentence discloses.  It is not apparent to me how the letter could attract privilege as a without prejudice communication.  Be that as it may, it clear that the letter was not published other than to Mr Hall.  Mr Hall plainly placed no credence in the letter.  As such, there can be no suggestion of any actual damage resulting from the letter.  If the letter was published on some or other website the fact nevertheless remains that, irrespective of the content and tone of the letter, the opinions and events recorded in it have not been proven false.  Nor has actual damage been proven as a consequence. 

272                                       For these reasons the injurious falsehood claims against Mr Beare in paragraphs 23 and 23A of the statement of claim must be rejected.

273                                       As noted, there is also a claim (paragraph 23B of the statement of claim) that Mr Beare “continually interfered with links to” JBE’s website “from the Wikipedia site” for Sir Jack Brabham to “divert traffic which caused harm, detriment and embarrassment to” Sir Jack Brabham, special damage has been suffered.  As far as it is possible to understand this claim, it appears to be related to the injurious falsehood allegations.  If so, it suffers from the same deficiencies of proof as identified above for the other injurious falsehood claims.  If it is intended to allege some other cause of action then the nature and elements of that action remain obscure.  The pleading might have been intended to refer to some other tort but, if so, it has not been sufficiently identified.  It follows that this claim must also fail.

THE PASSING OFF AND RELATED MISREPRESENTATION CLAIMS (ISSUES 16, 28 and 31)

274                                       Paragraphs 25 to 29 of the statement of claim allege that JBE has acquired valuable goodwill in the names “Beare Technology Engine” and “Beare Head Technology” such that alleged use of those names by Mr Beare (as well as Mr Eleftheriadis and SSED) constitutes the tort of passing off.  Paragraphs 49 to 51, 55 to 57 and 62 to 63 of the statement of claim make the same allegations against Beare Technology Pty Ltd, SSED and Reference Audio Visual.

275                                       Some preliminary observations about these claims are required.

276                                       JBE is the registered proprietor of Australian Patent No. 685683.  Australian Patent No. 685683 was granted to Mr Beare on 9 July 1998, with registration transferred to JBE on 3 May 2007.  It should be stressed that one claim which the applicants do not make in the statement of claim as amended is that of infringement of Australian Patent No. 685683 or any other patent.  Owning a patent is one thing; owning naming rights to the invention disclosed in the patent is another.  JBE does not assert rights in the names “Beare Technology Engine” and “Beare Head Technology” by reason of any form of statutory registration (such as a registered trade mark).  Accordingly, JBE must be asserting rights to those names based on common law. 

277                                       With this in mind the following facts must be considered:

(1)               Mr Beare is the inventor of the invention disclosed in Australian Patent No. 685683 (being a dual piston internal combustion engine). 

(2)               Mr Beare referred to his invention as “Beare Head” and “six-stroke” from early in its development.

(3)               Beare Technology Pty Ltd was registered on 11 August 1989.  Mr Beare is the sole director and shareholder of Beare Technology Pty Ltd.

(4)               Beare Technology Pty Ltd carried on business activities referring to Mr Beare’s invention as the “Beare Head”, “Beare Technology”, “the sixstroke engine” and variants thereof.

(5)               Beare Head Pty Ltd was registered on 17 May 1996.  Mr Beare is the sole director and shareholder of Beare Head Pty Ltd.  

(6)               In late 1999, with the assistance of Mr White, Mr Beare established a website under the domain name www.sixstroke.com.  Mr White’s company, Speed of Light Pty Ltd, owned the domain name www.sixstroke.com.  This website referred to “Beare Technology” and “Beare Technology Australia”.  It referred to Mr Beare’s invention as the “Beare Head” and “the sixstroke engine”.  Mr Beare carried out his business and engineering activities through Beare Technology Pty Ltd.

(7)               Mr Beare remains the sole director and shareholder of Beare Technology Pty Ltd and Beare Head Pty Ltd.

(8)               At Mr Casey’s request (and without objection from Mr Beare), in August 2004 Mr White transferred the contents of the www.sixstroke.com website to a new website that Mr White had established (also at Mr Casey’s request), being www.jack-brabham-engines.com.  Mr White also redirected all traffic to the www.sixstroke.com website to this new website, www.jack-brabham-engines.com.  Accordingly, when a person entered the www.sixstroke.com website the person could click on a link “Please visit our new site: Jack Brabham Engines”.  After Mr Casey terminated Mr White’s involvement in the maintenance of the www.jack-brabham-engines.com (by arranging its transfer to another server), Mr White (as noted) rebuilt the original www.sixstroke.com website.  Mr White also removed the redirects on that website to the www.jack-brabham-engines.com website.

(9)               From mid 2004 JBE issued documents referring to its ownership of various patents including patents for Mr Beare’s invention.  For example, JBE documents refer to Mr Beare’s invention as “the Head Technology”, “the Beare Head Engine Technology”, “the Beare Head”, “the Sixstroke Engine”.

278                                       These facts must be considered because they are fundamental to the nature of the rights which the applicants must assert are vested in JBE in order to found the claims which they make.  “Beare Technology Engine” and “Beare Head Technology” are not registered trade marks.  “Beare Technology”, “Beare Head” and “Beare Head Engine” and variants thereof, as well as “sixstroke engine”, are trade names (which may also be trade marks, albeit unregistered) used by Mr Beare and Beare Head Technology for many years to describe Mr Beare’s invention before the constitution of JBE and the sale of the patents for Mr Beare’s invention to JBE. 

279                                       As the respondents submitted, ownership of a patent does not govern the rights to the name or names that might be used in connection with the invention the subject of the patent.  Insofar as those names are not protected by statutory registration, they may be protected by the common law of trade marks.  However, rights to trade marks at common law are acquired by use.  According to Shanahan’s Australian Law of Trade Marks and Passing Off (4^th ed, Lawbook Co, 2008) at [10.505]:

At common law a person who uses a trade mark may thereby acquire the right to preclude its use by others, that right being, however, an adjunct of the goodwill of the business in which the trade mark is used and incapable of separate existence.

280                                       The applicants’ passing off case and related misrepresentation claims assumes a right vested in JBE to exclude others from using the names “Beare Technology Engine” and “Beare Head Technology”.  The source of the right is said to be use by JBE of those names and their association with JBE’s goodwill.  Yet the applicants’ case appears to overlook the fact that, for many years before JBE’s constitution, Mr Beare and Beare Technology Pty Ltd were the users of the trade names described as part of the engineering business which Mr Beare conducted through Beare Technology Pty Ltd.  If the names are trade marks acquired by use they were acquired in association with the business of Beare Technology Pty Ltd. 

281                                       The question which thereby arises is: what is the nature and source of any rights that JBE might have acquired in those trade names?  There is no suggestion in the statement of claim of an assignment of those trade names to JBE.  In any event, according to Shanahan at [75.05] a trade mark is only assignable at common law with the goodwill of the business in which the trade mark is used.  The statement of claim does not suggest any sale of the business and goodwill of Beare Technology Pty Ltd to JBE.  In these circumstances while it may be inferred that Beare Technology Pty Ltd and Mr Beare authorised JBE’s use of the trade names to describe Mr Beare’s invention the subject of the patents owned by JBE, it cannot be inferred that this licence excluded the rights of Beare Technology Pty Ltd and Mr Beare to use the names.  Nor can it be inferred that JBE has established a reputation in the trade names exclusive of or separate from that of Beare Technology Pty Ltd and Mr Beare.  Given these matters, JBE has not established any right to use the names “Beare Technology Engine” and “Beare Head Technology” without the continuing authority of Beare Technology Pty Ltd and Mr Beare.

282                                       The particulars of the passing off and related misrepresentation claims disclose another difficulty for the applicants.  It must be remembered that the claims concern the use of the names “Beare Technology Engine” and “Beare Head Technology”.  The particulars are identified in paragraph 28 and also the attachment to the applicants’ solicitor’s letter of 10 June 2008 titled “Wrongful Claims of ownership by First Respondent” (as noted, the particulars do not include Annexures A and B attached to the applicants’ closing submissions).  Those particulars are said to be particulars of the passing off and related misrepresentation claims about the use of the names.  It may be acknowledged that websites, including the www.sixstroke.com website, contain statements referring to “the Beare Head Development”, the “Beare Head Sixstroke Invention”, “the Beare Head and sixstroke engine technologies” and variants thereof.  However, it could not be suggested that the use of these names in these statements (even read in isolation as the particulars invite) are capable of representing any connection with JBE’s business.  When this is considered with the lack of any proof of any right in JBE to the names in question it becomes apparent that the passing off and misrepresentation claims against Mr Beare cannot be accepted. 

283                                       For the same reasons the claims to the same effect against Beare Technology Pty Ltd, SSED and Reference Audio Visual must also fail.  

THE FALSE PRETENCES CLAIM (ISSUE 23)

284                                       The applicants allege that in or after May 2006 Mr Eleftheriadis contacted JBE and met with Mr and Mrs Casey and Sir Jack Brabham “posing as a potential investor but with the secret intention of stealing [JBE’s] technology, confidential information and prototypes”.  Presumably, in the context of this civil proceeding, the applicants intended to allege a cause of action against Mr Eleftheriadis for the tort of deceit.  If so, the applicants had to prove the elements of that cause of action (namely, a knowingly false representation made with the intention of the applicants being induced to rely thereon which, by reason of the applicants so relying, has resulted in them suffering loss or damage). 

285                                       By way of conclusion in summary form, a rational view of the facts established by, or which may be inferred from, the evidence provides no support for this allegation against Mr Eleftheriadis.  The cross-examination did not undermine Mr Eleftheriadis’ credit.  I am satisfied that Mr Eleftheriadis gave a reliable account of events from his perspective. 

286                                       The findings of fact which the evidence supports are these.  Mr Eleftheriadis is a successful businessman in his own right and also a racing enthusiast.  In or about April 2006 he saw an old article about Mr Beare’s invention.  He did an internet search and found the www.jack-brabham-engines.com website.  Mr Eleftheriadis sent an email to the JBE on 7 May 2006 expressing his interest in Mr Beare’s invention.  Nothing in that email suggests anything other than a genuine enthusiast interest in the development of the Mr Beare’s invention.  Mr Casey called Mr Eleftheriadis.  The prospect of Mr Eleftheriadis investing in JBE was discussed.  Mr Eleftheriadis requested more information.  Mr Casey sent Mr Eleftheriadis an email on 7 May 2006 which said that JBE was “looking for second stage investment to provide final prototypes”.  According to this email Mr Casey was preparing an offer information statement in which Mr Eleftheriadis might be interested.  Alternatively, Mr Casey said that if Mr Eleftheriadis did not wish to take a major shareholding a “good deal” could still be offered before the issue of the offer information statement.  On 8 May 2006 Mr Casey sent Mr Eleftheriadis a copy of JBE’s business plan.  Mr Casey continued to send Mr Eleftheriadis material relating to JBE and a possible investment over the next few weeks.  Mr Eleftheriadis met with Mr Casey and Sir Jack Brabham in Queensland on 23 May 2006.  Mr Casey prepared an agenda for that meeting.  Mr Casey showed Mr Eleftheriadis the two prototypes (the Ducati and Yamaha), as well as the Yingyang motorcycle.  They discussed the possibility of a substantial investment (some $2 million to $3 million) by Mr Eleftheriadis in JBE. 

287                                       After this meeting Mr Eleftheriadis, on 24 May 2006, sent Mr Casey an email requesting financial statements, a list of directors and shareholders, details of shareholders’ investments and the projected position as at 30 June 2006.  Mr and Mrs Casey sent information to Mr Eleftheriadis in response to this request.  Mr Eleftheriadis read it and said he became concerned.  On 26 May 2006 Mr Eleftheriadis sent an email to Mr Casey.  The email supports Mr Eleftheriadis’ evidence that the information he received caused him concern.  The email queried numerous matters, particularly details of the figures relating to investments and expenditure.  Mr Eleftheriadis decided that if he were to make any substantial investment in JBE, he would want to control how his money was spent.  Mr Eleftheriadis informed Mr Casey of this.  On 5 June 2006 Mr Casey sent an email to Mr Eleftheriadis which said that while you (that is, Mr Eleftheriadis) “suggest you have the resources to move the project forward if you take control of the Company and its assets”, he (that is, Mr Casey) had spent “a considerable amount of my time, money and effort to get to this stage”.  The email said also:

If I could see a monetary benefit for me to move away from the Company and the existing shareholders were not disadvantaged, I would… concentrate on other business ventures; otherwise I will carry on with the company as it is with Jack now assisting me to raise funds.

288                                       On 6 June 2006 Mr Casey called Mr Eleftheriadis.  Mr Eleftheriadis said that during this call Mr Casey requested a payment to him of a substantial sum of money (over $6 million) in order to relinquish his control of JBE to Mr Eleftheriadis.  Mr Eleftheriadis’ position is that he wanted to control his investment not JBE.  Mr Eleftheriadis considered Mr Casey’s conduct inappropriate.  Mr Eleftheriadis said he rejected Mr Casey’s offer and terminated the call.  Mr Eleftheriadis gave evidence to this effect in his affidavit of 17 December 2007.  This evidence remained unshaken by cross-examination.  Mr Eleftheriadis described the effect of the conversation in cross-examination as Mr Casey requiring a “personal payment” or a “payment under the table” to him in order to relinquish control of JBE.  Mr Eleftheriadis denied the suggestion that the request was not for a “personal payment” but rather was advice from Mr Casey about the amount of money that would be required for Mr Eleftheriadis to obtain a sufficient issue of shares to obtain control of JBE. 

289                                       After 17 December 2007 and before the hearing started, Mr Casey swore another eight affidavits.  Mr Casey did not respond to this evidence by way of denial in any of these affidavits.  It was not until close to the end of the hearing (after he had given evidence) that Mr Casey, in an affidavit of 29 January 2010 which I gave leave to be relied upon, that Mr Casey addressed this conversation.  Mr Casey said he had called Mr Eleftheriadis and said that the “technicalities of a public company are that if you want to control it you must gain over 50% of the shares.  Based on the valuations I have sent you, at this stage that means you will need to pay at least $6.4 million for shares in the company, and get the approval of the shareholders.  All shareholders must receive the offer”.  Further, that if Mr Eleftheriadis wanted to make a private placement and buy new shares he would have to buy at least 30 million shares which would also cost $6.4 million.  When cross-examined about this evidence Mr Casey agreed that in his email of 5 June 2006 he offered to step down if shareholders would not be disadvantaged.  When it was put to Mr Casey that the offer was to step down if there was a “monetary benefit” to him, Mr Casey said “The only reason I’m in JBE is to make money”.  Mr Casey denied asking for any money “under the table” but agreed that he had been the one to raise the figure of $6.4 million in the conversation with Mr Eleftheriadis.  When asked why he had not dealt with the issue in one of his numerous affidavits Mr Casey said “because Mr Eleftheriadis pressed the issue, and I thought that the whole thing was clarified before it even came to court.  So had no reason to worry about this.  This is a payment necessary to take more than 50 per cent of control of the company”.

290                                       Subject to one matter, I accept Mr Eleftheriadis’ version of the events in respect of this telephone call on 6 June 2006.  The one matter which requires qualification is that in his affidavit of 17 December 2007 Mr Eleftheriadis did not use the words “payment under the table”.  He used the words “personal payment to himself”.  I understand Mr Eleftheriadis’ evidence in cross-examination about a payment under the table to represent his understanding of the effect of what Mr Casey had said rather than Mr Casey’s actual words.  Subject to this matter, Mr Eleftheriadis’ version of the call should be accepted. 

291                                       First, Mr Eleftheriadis’ version (unlike Mr Casey’s) fits with the terms of Mr Casey’s own email of 5 June 2006.  In that email Mr Casey clearly raises the requirement of a “monetary benefit for me to move away from the Company”.  Although Mr Casey’s email also qualifies this requirement by referring to the need for other shareholders not to be disadvantaged, the topic which he is raising, as a requirement for Mr Eleftheriadis to make and control his investment, is the need for there to be a monetary benefit to himself in light of the “considerable amount of my [that is, Mr Casey’s] time, money and effort to get to this stage”.  The topic is thus the personal financial benefit to Mr Casey and not the steps needed for an investor in a public company to gain control of sufficient shares to control the company itself. 

292                                       Second, Mr Eleftheriadis’ version is consistent with subsequent events.  After the call, Mr Eleftheriadis took steps to find out Sir Jack Brabham’s contact details and sent him an email on 6 June 2006.  This email set out numerous concerns that Mr Eleftheriadis held about proceeding with a substantial investment in JBE (the figure mentioned was some $3 million for this purpose) including Mr Casey’s “stranglehold” on JBE as director and shareholder, the “speculative figures” in the business plan, as well as the “grossly inflated values” in JBE’s documents, and the fact that many of the patents had lapsed.  The email also said:

I received a phone call from Alan this morning 06/06/06, he seemed to have been rather agitated and was quite aggressive in his manner, he stated that before I can inject 3 million dollars worth of funds into your company, become actively involved in driving the development of the technologies to their fruitful conclusion, and help the many investors realize a return for their investment, I would need to firstly pay him 6.4 million dollars in buying 30.000 [sic] of his personal currently worthless shares.

293                                       This email is consistent with Mr Eleftheriadis’ version of the call and, indeed, the terms of Mr Casey’s own email of 5 June 2006.  Mr Eleftheriadis sent an email to the same effect to Mr Casey on 8 June 2006.  Mr Casey responded on 8 June 2006.  While the response denied that Mr Casey’s earlier email sought a personal payment the email makes no reference to Mr Eleftheriadis’ allegations about the telephone call.  This is surprising given that Mr Eleftheriadis’ email to Mr Casey squarely records the details of the telephone call and its outright rejection by Mr Eleftheriadis.  Mr Eleftheriadis also noticed this discrepancy and pointed it out to Mr Casey in a further email later on 8 June 2006 in which Mr Eleftheriadis said Mr Casey’s reference to the email not making the offer was correct which perhaps might explain why Mr Casey’s request for a personal payment of $6.4 million was made in a telephone call instead of in writing.  As far as can be ascertained from the evidence, Mr Casey never denied this allegation by Mr Eleftheriadis until his affidavit of 29 January 2010.  Mr Casey’s explanation of why he did not do so was unconvincing. 

294                                       Further, after the call of 6 June 2006 Mr Eleftheriadis decided to make contact with Mr Beare.  Mr Casey had informed Mr Eleftheriadis about the dispute with Mr Beare and thus Mr Eleftheriadis was aware of Mr Beare’s role as the inventor of the Beare Head engine and as a former director of JBE.  In other words, in response to the call and Mr Casey’s attempt to gain a personal financial advantage for himself, by which Mr Eleftheriadis said he was shocked, Mr Eleftheriadis decided to contact the other person whom he knew to be in dispute with Mr Casey. 

295                                       Finally, it is obvious that after this call of 6 June 2006 Mr Eleftheriadis’ opinion of Mr Casey changed.  This is apparent from Mr Eleftheriadis’ actions (described above) and also the tone and content of his communications.  Mr Eleftheriadis explained his changed regard for Mr Casey as the direct result of this telephone call.  This explanation fits with the objective evidence.  When asked about this issue in cross-examination Mr Casey responded “I believe the relationship was fairly stern and sour right from the beginning”.  This, however, does not accord with the evidence of Mr Casey’s dealings with Mr Eleftheriadis until the telephone call in question.  To the contrary the evidence shows that Mr Casey was keen to secure an investment from Mr Eleftheriadis.  This explains his prompt provision of information to Mr Eleftheriadis (without, it might be added, imposing any requirement of confidentiality in respect of that information, being the same information said by the applicants to be confidential in this proceeding).  It also explains his invitation to Mr Eleftheriadis to meet Sir Jack Brabham in Queensland.  I infer that Mr Casey gave this evidence that the relationship was always sour knowing that any other answer would provide support for Mr Eleftheriadis’ version of the telephone call.  The fact that Mr Casey felt it necessary to give this evidence in the face of contemporaneous records which disclose the warmth of his relationship with Mr Eleftheriadis before the telephone call of 6 June 2006, together with my other observations about Mr Casey’s evidence, provides support for the conclusion I have reached that in the event of any dispute between Mr Casey on the one hand and Mr Beare or Mr Eleftheriadis on the other hand the evidence of the latter two is to be preferred. 

296                                       I am satisfied, therefore, that Mr Eleftheriadis’ evidence about the telephone call of 6 June 2006 should be accepted and that of Mr Casey rejected.  In that call, consistent with his own email of 5 June 2006, Mr Casey sought a payment to himself of some $6.4 million in exchange for him relinquishing his control of JBE.  Mr Eleftheriadis rejected that request outright.  The request, together with his assessment of serious deficiencies in the financial information about JBE provided by Mr and Mrs Casey, led Mr Eleftheriadis to form an unfavourable view of Mr Casey.  The applicants’ claims about Mr Eleftheriadis’ subsequent actions have to be assessed in light of these matters.

297                                       Mr Eleftheriadis contacted Mr Beare at about the same time (around 6 June 2006).  I do not accept the applicants’ suggestions (not pleaded) that Mr Eleftheriadis met Mr Beare at some earlier time and plotted with him to act under false pretences.  It is apparent that Mr Beare and Mr Eleftheriadis had detailed discussions about their respective dealings with Mr Casey.  On 9 June 2006 Mr Beare sent to Mr Eleftheriadis the email which said “If nothing is resolved I will take this option.  Would it be possible to use Beare technology, BEARE HEAD Pty Ltd, as the vehicle to further the project and offer the other shareholders in JBE shares for nothing (maintaining their %) when JBE is liquidated the Casey clan excluded”.  As noted, the option in question was a complaint to ASIC about Mr Casey.  The email discloses that Mr Eleftheriadis and Mr Beare were discussing ways in which the Beare Head engine might be developed, but without the involvement of the Caseys.  Given the experiences of each as described above, this is unsurprising.  It does not establish or in any way support the allegation that Mr Eleftheriadis approached JBE under false pretences.  To the contrary, it is consistent with Mr Eleftheriadis having had a genuine interest in the Beare Head engine which he sought to explore by a possible investment in JBE. 

298                                       As noted, the applicants suggested that Mr Eleftheriadis and Mr Beare were in contact earlier than was in fact the case.  As far as I can understand it, this was part of an attempt by the applicants to claim the existence of some conspiracy between Mr Eleftheriadis and Mr Beare by which Mr Eleftheriadis would, as paragraph 41 of the statement of claim asserts, pose “as a potential investor [in JBE] but with the secret intention of stealing [JBE]’s technology, confidential information and prototypes”.  As the above description of the facts discloses, this claim finds no support in the facts.  The applicants placed substantial weight on Mr Beare’s email of 9 June 2006 to support this claim (a document, I note, also not particularised in any of the claims).  Mr Beare was not asked about this email.  In any event, its terms do not support the applicants’ submissions.

299                                       It is apparent that Mr Eleftheriadis was genuinely interested in investing in JBE.  He maintained that interest until he reviewed the financial and related documents of JBE.  He then became concerned and decided that he wanted to control any investment he made which meant that he would have to control JBE.  After so advising Mr Casey, he received a telephone call in which Mr Eleftheriadis considered Mr Casey made an inappropriate request for purchase of a percentage of his shares.  At that point, Mr Eleftheriadis formed a different, and unfavourable, view of Mr Casey, prompting his direct contact with Sir Jack Brabham and Mr Beare.  Sir Jack Brabham, by email of 10 June 2006 to Mr Casey and Mr Eleftheriadis, indicated that he would not agree to Mr Eleftheriadis having complete control of JBE as that would mean he also had control of the name.  Sir Jack Brabham also said that if Mr Casey wanted to proceed to do a deal with Mr Eleftheriadis then he was happy to drop out of the picture as Sir Jack Brabham believed the technology should be developed either with or without his involvement. 

300                                       Later events also provide no support for the allegation against Mr Eleftheriadis.  There is no doubt that, from mid June 2006 and after Mr Eleftheriadis visited Mr Beare in South Australia (which occurred on 16 June 2006), Mr Eleftheriadis became convinced that Mr Beare had been wronged in numerous ways by Mr Casey and took it upon himself to see Mr Beare vindicated.  Mr Eleftheriadis, like Mr Beare during this period, did so in various ways some of which (such as publishing the so-called “chapter of truth” over the internet) may be seen to be inappropriate.  But that is not the point.  In this proceeding the applicants have sued Mr Eleftheriadis claiming that he is liable for damages for having falsely posed as an investor but with the true intention of stealing things from JBE.  This is a serious allegation which finds no foundation in the evidence.  It is not made good by any of the subsequent events on which the applicants relied.  Insofar as it is necessary to deal with those events in the context of this claim, I observe the following:

(1)               The fact that by September 2006 Mr Eleftheriadis intended to form a joint venture with Mr Beare to develop engine technology, including the Beare Head engine, does not establish that Mr Eleftheriadis approached JBE in May 2006 under false pretences.  To the contrary it establishes Mr Eleftheriadis’ genuine interest in the technology.  In this context it must be remembered that one claim the applicants do not make against the respondents is infringement of any patent owned by JBE.  Nor can bad faith on the part of Mr Eleftheriadis (or Mr Beare) be inferred from their proposal to develop the Beare Head engine.  Mr Beare believed that he was the rightful owner of the Beare Head engine on the basis that he invented it and, in his view, had been cheated out of his patent rights by Mr Casey.  The events support the inference that, after Mr Casey’s telephone call of 6 June 2006, Mr Eleftheriadis had an unfavourable view of Mr Casey and, in consequence, was willing to assist Mr Beare in what Mr Beare then wanted to do – namely, retrieve his prototype motorcycles, retrieve ownership of the patents which Mr Beare believed were rightfully his, and develop the Beare Head engine as Mr Beare had always intended for many years before Mr Casey’s involvement and the establishment of JBE. 

(2)               The same considerations apply to Mr Eleftheriadis’ decision and action to establish SSED as the corporate vehicle for this proposed development work, and related decisions and actions thereafter to establish various domain names (bearehead.com, bearehead.com.au, 6stroke.com.au, sixstroke.net, sixstrokeenginesdevelopments.com, malcolmbeare.com, sixstroke.com.au, sixstrokeenginesdevelopments.com.au bearetechnologies.com.au, bearetechnologies.com, bearetechnology.com, and others).  None of these matters permit any inference that would support the false pretences claim against Mr Eleftheriadis.

(3)               I accept Mr Eleftheriadis’ evidence that he assisted Mr Beare to retrieve Mr Beare’s two prototype motorcycles in September 2006 on the basis of a genuine belief that Mr Beare owned those prototypes (which I have found to be the true position) and that they were being wrongly withheld by Mr Casey who had proposed to sell them without Mr Beare’s permission.  I am satisfied that Mr Beare also acted on the same basis.  During the hearing the applicants’ made numerous allegations about these events, all based on the incorrect assumption that JBE owned the prototypes.  Having resolved that ownership issue in Mr Beare’s favour, the numerous other allegations by the applicants about the way in which Mr Beare and Mr Eleftheriadis retrieved Mr Beare’s property from a warehouse cannot and should not be resolved in this proceeding.  Beyond resolving the issue of disputed ownership, I do not accept that the evidence about these events was relevant to any fact in issue other than, possibly, the credit of Mr Eleftheriadis and Mr Beare.  However, credibility evidence is inadmissible unless in cross-examination of a witness the evidence could substantially affect the assessment of the credibility of the witness (s 103 Evidence Act 1993 (Cth)).  The evidence about the way in which the prototype motorcycles were retrieved did not satisfy this test.  Mr Eleftheriadis and Mr Beare believed that Mr Casey and/or JBE were wrongly withholding Mr Beare’s property from him and wrongly threatening to sell his property without permission.  Their beliefs were correct.  They took a self-help remedy which led to allegations of (at least) theft and break and enter, as well as the involvement of the police.  Whatever the details of the involvement of the police, no charges were prosecuted.  Mr Eleftheriadis’ explanation of how they entered the warehouse (that is, recalling the security code Mr Casey used when Mr Casey took him to the same premises) is not implausible.  Whether Mr Eleftheriadis could or could not recall the same number when giving evidence in 2010 (more than three years later) is not a proper basis for the applicants’ submissions that this evidence could substantially affect the assessment of Mr Eleftheriadis’ credit as a witness.  The same conclusion applies also to Mr Beare’s credit.

(4)               The deed of confirmation into which Mr Eleftheriadis, Mr Beare and SSED entered on 27 March 2007 also does not support the false pretences allegation.  The deed records Mr Beare as the patentee of Australian Patent No. 685683 and other patents (in fact, strictly correct as the patents had not been transferred to JBE at this time).  The deed records that “on or about June 2006 through a meeting of minds and verbal agreement Steve and Malcolm undertook to form” SSED and to transfer to it “the intellectual properties”, being the patents and related rights.  It may be acknowledged that this deed assumes and asserts that Mr Beare owns the patents.  The basis for this incorrect belief is discussed above.  What is relevant for the present claim, however, is the fact that Mr Eleftheriadis and Mr Beare reached their meeting of minds in June 2006.  This is consistent with and supports Mr Eleftheriadis’ version of events and provides no support for the false pretences claim.  

301                                       For these reasons the false pretences claim against Mr Eleftheriadis must be dismissed.

THE INTIMIDATION CLAIM (ISSUE 24)

302                                       The applicants claim that in and from July 2006, and after rejection of his advances by JBE and Sir Jack Brabham, Mr Eleftheriadis intimidated the applicants of and concerning JBE’s business and future prospects.  The particulars to this claim were provided in the attachment to the letter dated 10 June 2008 titled “Intimidation and Threats: Second Respondent” (which, as noted, did not include Annexures A and B attached to the applicants’ closing written submissions).  The particulars provided are not capable of sustaining a cause of action for intimidation.  Intimidation is a tort.  According to Halsbury’s Laws of Australia, Vol 26, 415 Tort, “Intimidation” at [415-1575]:

The tort of intimidation is committed where a person makes an intentional threat of an unlawful act to a third party or the plaintiff, the consequence of which is sufficient to induce the threatened person to submit, resulting in economic loss to the plaintiff.

303                                       At [415-1580] of Halsbury’s Laws of Australia, the elements of the tort are described as follows (footnotes excluded):

(1)        the defendant must have had the intention to harm the plaintiff;

(2)        there must be a threat by the defendant to use unlawful means to compel the person threatened to obey the defendant’s demand;

(3)        the person threatened must have complied with the demand; and

(4)        the plaintiff must have suffered damage as a consequence of the compliance.

304                                       Ill-considered actions, inflammatory words, unfortunate and inappropriate conduct do not constitute the tort of intimidation.  To establish that the tort has occurred a plaintiff bears the onus of proving each and every element of the cause of action.  The applicants in this case have neither adequately particularised their claim nor addressed their case to the required elements of the tort.  The gross inadequacy of the particulars is disclosed by the matters said to constitute the intimidation.  It is also disclosed by the fact that there is neither pleaded nor any evidence of the applicants complying with any demand Mr Eleftheriadis is said to have made.  Without the element of compliance with a demand no tort has been committed.

305                                       The first particular alleged intimidation by Mr Eleftheriadis by reason of the sending of correspondence directly to Sir Jack Brabham and Lady Margaret Brabham.  The nominated correspondence includes correspondence from people other than Mr Eleftheriadis.  How, for example, a letter from the respondents’ solicitor to Sir Jack Brabham at his residential address (noting that Sir Jack Brabham is a party to this proceeding) can be a particular of alleged intimidation by Mr Eleftheriadis remains inexplicable.  It may be accepted that people in the position of Sir Jack Brabham and Lady Margaret Brabham would wish to protect their privacy and not receive correspondence at their residential address.  That does not make the act of sending them correspondence at their residential address the commission of a tort.  There was much cross-examination of Mr Eleftheriadis about how he obtained Sir Jack Brabham’s email and residential address.  The cross-examination was not capable of establishing any of the elements of the cause of action pleaded against Mr Eleftheriadis and did not do so.  Mr Eleftheriadis’ evidence should be accepted.  He obtained the information by proper means from staff at the location where Sir Jack Brabham lives.  The suggestion that he (or, for that matter, any of the other people who appear in this particular of the claim) communicated directly with Sir Jack Brabham for any purpose capable of constituting the elements of the tort of intimidation is without substance and must be rejected.  Further, and as noted, the demand said to have been made by Mr Eleftheriadis and the action taken to comply with that demand remains obscure. 

306                                       The second particular alleged intimidation by Mr Eleftheriadis by reason of statements said to have been made in a telephone call to Mr Casey and supported by a deed of undertaking and agreement by which Mr Casey agreed to withdraw a complaint made under the Peace and Good Behaviour Act 1982 (QLD) against Mr Eleftheriadis.  That agreement was entered into by Mr Eleftheriadis without admission.  People may seek to settle court proceedings against them for numerous reasons.  As such, neither the making of the complaint by Mr Casey nor the entry into the agreement by Mr Eleftheriadis proves the making of any threat by the latter.  The alleged intimidation by Mr Eleftheriadis relates to two statements said to have been made to Mr Casey in a telephone call on 1 September 2006, that Mr Eleftheriadis would “destroy you and your company” and “take your daughters’ house from them”.  The particulars identified by the applicants are insufficient on their own to establish the tort of intimidation – the demand said to have been made by Mr Eleftheriadis and the action taken to comply with that demand remains obscure.  During the course of the hearing, the applicants appeared to rely on an email from Mr Eleftheriadis to his solicitor (published on the so-called “chapter of truth”) to support their claims of intimidation.  In the email Mr Eleftheriadis explains what he understood the verbal threats, referred to in Mr Casey’s complaint, to mean:

I presume that The Verbal Threats referred to within the Complaint relate to my advising Mr. Casey quite a while ago, that selling/disposing the Beare Head technology which belongs to Malcolm Beare and which does not belong to JBE, will result in Alan Casey acting illegally and that he and JBE will suffer financially by his actions, I warned him that I would make it my mission to financially destroy him should he chooses [sic] to cheat and dud Malcolm out of his invention.

I also advised him that misappropriating and spending JBE shareholders/subscribers money on renovations to his home which is apparently in his daughters [sic] names, may well result in the family home becoming entangled in the financial affairs of JBE and could well result in their daughters loosing [sic] the Casey Family Home in the event of his illegal activities be [sic] investigated and addressed, his daughters would therefore suffer due to the bent actions of their bent father.

307                                       Insofar as the applicants contended that this email supported their intimidation claims against Mr Eleftheriadis the following observations must be made.  First, the email and its contents are not identified in the particulars.  Even if the statements identified in the particulars arise from the same facts as the events described in the email, the statements are taken out of context.  Second, the email was not put to Mr Eleftheriadis during cross-examination (it was, confusingly, put to Mr Beare).  This is different from the failure of the respondents to cross-examine Mr Casey on the 2004 oral agreement – there the applicants were on notice that the conversation founding the 2004 agreement was in dispute.  However, here the most that was put to Mr Eleftheriadis in cross-examination was that he made the two statements alleged in the particulars.  Mr Eleftheriadis denied making these statements but admitted saying to Mr Casey that he thought it unfortunate that Mr Casey’s daughters would suffer economically due to their father’s “bent actions”.  I am satisfied that this is an accurate description of what Mr Eleftheriadis said to Mr Casey.  It is consistent with the terms of the email Mr Eleftheriadis sent to Mrs Casey on 1 September 2006 (another particular of the alleged intimidation, addressed below).  Even if I were to accept that the applicants’ claims of intimidation were based on the threat of destroying Mr Casey financially, which is not pleaded, the applicants have failed to satisfy all the elements of the tort of intimidation.  There is no suggestion in the pleadings (or the evidence) that Mr Casey or any of the applicants at any time yielded to the threat they claim to have perceived by complying with some demand of Mr Eleftheriadis (presumably, that JBE not sell or dispose of the Beare Head technology) and, by reason of that compliance, suffered damage.

308                                       The third particular alleged intimidation by Mr Eleftheriadis by reason of a claimed charge of stalking.  This was said to be supported by an electronic extract from a court website.  How this claimed charge (which was withdrawn in any event) can prove the tort of intimidation is unclear.

309                                       The fourth (and final) particular alleged intimidation by Mr Eleftheriadis based on an email of 1 September 2006 sent by Mr Eleftheriadis to Mrs Casey.  The context of this email is relevant.  On 31 August 2006 Mr Eleftheriadis sent an email to Mr Casey referring to a proposal Mr Casey had made to transfer the patents for the Beare Head engine back to Mr Beare for a price.  Mr Eleftheriadis said in the email that if Mr Casey’s shares were worth $6.4 million then Mr Beare’s shares, according to Mr Casey’s own valuation, must also be worth many millions of dollars.  The email invited Mr Casey to considerer an offer by which Mr Beare returned all of his shares in JBE in exchange for the return to him of “his Beare Head Six Stroke technology unencumbered”, his motorcycles, parts, hardware, software and the like, in which event Mr Beare would refrain from taking any further action against Mr Casey and JBE.  This email led to the call from Mr Casey in which Mr Eleftheriadis said that he thought it unfortunate that Mr Casey’s daughters would suffer economically due to their father’s “bent actions”.  Mrs Casey sent Mr Eleftheriadis an email saying that Mr Eleftheriadis should “refrain from engaging my daughters and their lives into your spite – either act like a man or keep quiet.  They are not able to defend themselves”.  Mr Eleftheriadis responded in an email of 1 September 2006 to Mrs Casey.  The email said:

Hi Gail,

It is unfortunate that your girls are likely to suffer due to the bent actions of their father.

It is Alan you should be directing these comments to, Alan has been made aware of exactly what will occur if he chooses to deal with the Beare Head Six Stroke technology in any other manner other than handing it back unencumbered to Malcolm Beare in return for Malcolm’s JBE shares back to the company.

310                                       Whatever might be thought of the propriety or otherwise of Mr Eleftheriadis making any reference to Mr and Mrs Casey’s children in the context of his taking on Mr Beare’s cause against Mr Casey, it is apparent that the evidence is incapable of establishing the elements of the tort of intimidation.  Even if the applicants had proved that Mr Eleftheriadis intended to harm JBE (a matter not proved and difficult to reconcile with the offer made in the email of 31 August 2006), there is no suggestion that the applicants or any of them at any time yielded to the threat they claim to have perceived by complying with some demand of Mr Eleftheriadis (presumably, accepting the offer made in the email of 31 August 2006) and, by reason of that compliance, suffered damage.  Nor, on any reasonable view of the pleading, do the applicants even allege that they yielded to some demand and suffered loss thereby.  In other words, the claim of intimidation, as pleaded, is incapable of satisfying the elements of the tort and the evidence equally incapable of founding the claim.

311                                       For these reasons the claim of intimidation against Mr Eleftheriadis must be dismissed.

OTHER INJURIOUS FALSEHOODS (ISSUES 26 AND 33)

312                                       The applicants alleged in paragraphs 45 and 45A of the statement of claim that Mr Eleftheriadis published false statements about them knowing them to be false and with the intent of disparaging JBE’s goods and services and promoting his own or that of SSED or his joint venture with Mr Beare.  The particulars of the alleged injurious falsehoods are set out in the attachment to the letter of 10 June 2008 (which, as noted, did not include Annexures A and B attached to the applicants’ closing written submissions).  As against SSED, the applicants alleged in paragraphs 58 and 59 of the statement of claim that it published injurious falsehoods.  The particulars are said to be supplied separately.  However, the letter of 10 June 2008 does not identify particulars for SSED separate from those said to have been published by Mr Eleftheriadis. 

313                                       The observations about the tort of injurious falsehood made above in respect of the claims against Mr Beare apply equally to the claims against Mr Eleftheriadis.  In particular, the applicants had the onus of proving each of the elements of the tort including falsity of the statements, malice and damage.  An honest belief in the truth of the statements will negative any inference of malice.  Insofar as the statements particularised against Mr Eleftheriadis formed part of the so-called “chapter of truth” the statements must be read in context and subject to the covering letter from Mr Eleftheriadis identifying the contents as a “cut and paste” of actual email communications.  Further, Mr Eleftheriadis maintained (and I accept) that he and Mr Beare decided to publish an account of their dealings with Mr Casey and JBE after the events at JBE’s annual general meeting in December 2006 (where for example, as Mr Casey acknowledges, he subjected Mr Beare to a body search) and ASIC’s refusal to investigate the complaints at that time.  Mr Eleftheriadis also said that the contents of the “chapter of truth”, insofar as they referred to his involvement, were true and correct and also gave a true account of what Mr Beare had told Mr Eleftheriadis.  Insofar as the applicants’ case proceeded on the assumption that certain documents proved the existence of a conspiracy between Mr Beare and Mr Eleftheriadis to destroy JBE (discussed above in the context of the injurious falsehood claims against Mr Beare), the documents prove no such thing.  The statements said to found the injurious falsehoods must be assessed against this background.

314                                       The first type of particulars relate to extracts from Mr Eleftheriadis’ covering statement to the so-called “chapter of truth”.  The extracts are taken out of context.  The reference to the “paperback horror story” occurs as part of a sentence describing what Mr Eleftheriadis said he discovered about Mr Beare’s encounter with Mr Casey in 2001 and his later “Casey driven involvement with [JBE], Gail Casey, Sir Jack Brabham, Nathan Casey” “panning out more like a paperback horror story than a real life occurrence”.  There cannot be any doubt that this sentence reflects Mr Eleftheriadis’ honest opinion.  Moreover, I have found that Mr Beare was misled by Mr Casey into the 2001 agreement.  The reference to “conduct, legality, propriety, moral and ethical standards” appears as part of an invitation to the reader to read the material and form their own opinion about these matters.  Inviting a reader to form their own opinion about these issues cannot constitute a false statement. 

315                                       The balance of the particulars extracted from the so-called “chapter of truth” is from emails and correspondence in fact sent and received.  Moreover, despite the extravagance of the language, the applicants have not established any of the statements made by Mr Eleftheriadis to be false.  As noted, the applicants had the onus to prove the falsity of the statements in order to maintain the cause of action; Mr Eleftheriadis did not have to prove the truth of the statements.  This is not a case where (as the applicants appeared to assume) the serious nature of the allegations made in the statements the subject of the applicants’ complaint, in particular those directed at Mr Casey, meant that the applicants’ burden of proof was anything less than the ordinary civil standard.  In this regard, it must be recognised that I am satisfied that Mr Beare was misled by Mr Casey into making the 2001 agreement.  By his misrepresentation Mr Casey obtained a 50% interest in the patents for the Beare Head engine.  The valuations on which the calls for investment into JBE were made were based on mere speculation by Mr Casey and self-evidently questionable assumptions both in terms of absolute value and relative values as between the three technologies (resulting, as discussed, in Mr Casey’s invention being worth more than that of Mr Beare).  The funds raised before the incorporation of JBE were banked into Mr Casey’s personal bank account from which he made personal payments.  It is not possible from the evidence to separate funds used for the purpose of developing the technologies and funds used to pay Mr Casey’s personal expenses.  The evidence also does not permit any positive finding that the $1.3 million of investors’ funds has been spent on the purpose of developing the technologies.  No such conclusion can be drawn from the financial statements of JBE or related financial records.  Moreover, despite Mr Casey’s assertions to the contrary, the evidence indicates that no real progress was made in the development of the technologies, certainly not of the Beare Head engine.  Yet the $1.3 million has been spent.

316                                       As the respondents submitted, it would be expected that a public company (and, for that matter, its director) asserting that statements made about it (and him), that funds had been misapplied, were false would provide cogent evidence establishing that falsity, including cogent explanations of how the funds were spent.  The applicants have failed to do so.  As such, they cannot succeed in establishing the tort of injurious falsehood in respect of statements (no matter how colourfully expressed) about misrepresentation, mismanagement and misappropriation of funds merely by asserting, without more, falsity, malice and damage coupled with the serious of the nature of the allegations made in the statements the subject of the applicants’ complaint. 

317                                       The same conclusions apply to the extracts from postings on the internet forums said to be particulars of injurious falsehood against Mr Eleftheriadis.  Insofar as the statements can be attributed to Mr Eleftheriadis (in respect of which I accept his use of the name “Steve E” on the postings) they have not been proven to be false, made with malice or to have resulted in damage as a direct and natural consequence of having been made (in respect of which see the separate discussion on damage below). 

318                                       For these reasons the claims of injurious falsehood against Mr Eleftheriadis and SSED are rejected.

INVOLVEMENT IN BREACH OF TRUST (ISSUES 27, 30, 34 and 36)

319                                       The applicants alleged in paragraph 46 of the statement of claim that Mr Eleftheriadis involved himself in Mr Beare’s breaches of trust.  The same allegations are made against Beare Technology Pty Ltd, SSED and Reference Audio Visual in paragraphs 52, 60 and 64 of the statement of claim.

320                                       I have rejected the applicants’ claims of breach of trust against Mr Beare.  These claims were based on the alleged oral agreement of March 2004 and fiduciary obligations said to arise from that agreement.  As there was no such oral agreement the claims were rejected.  It follows that the claims against Mr Eleftheriadis, Beare Technology Pty Ltd, SSED and Reference Audio Visual also must fail.  Further, and as the respondents submitted, irrespective of the rejection of the claims against Mr Beare, these claims could not have succeeded.  Mr Casey does not suggest that he told Mr Eleftheriadis, Beare Technology Pty Ltd, SSED or Reference Audio Visual about an oral agreement with Mr Beare as claimed.  Mr Beare denied the existence of any such agreement.  As such, it is unclear how Mr Eleftheriadis, Beare Technology Pty Ltd, SSED or Reference Audio Visual could have been involved in any legally relevant sense in the alleged breaches of trust.

Mr BEARE’s GOODS and CHATTELS (Issue 22)

321                                       Mr Beare said that certain property he had sent to Mr Casey had not been returned to him despite his requests.  In the cross-claim Mr Beare sought an order that Mr Casey and/or JBE return these items to him.  As the respondents submitted, there was no dispute that Mr Casey and/or JBE continued to possess these items.  Rather, the applicants’ case was that Mr Beare had sold these items to JBE and thus JBE owned them.  Reliance was placed in this regard on an invoice dated 30 August 2005 and signed by Mr Beare.  The invoice records four classes of items the subject of the sale all said to have been “shipped to Tallai, Queensland” or “located at Tallai”.  The items listed are:

1) Second hand dynamometer used for testing bike performance…

2) Various hand tools and specialized lathe pieces of equipment…

3) Various manuals, books, magazines…

4) Ducati, Yamaha tuning books used to tune bike...

322                                       When asked about the invoice Mr Beare specified that each of the items the subject of the cross-claim was different from the items sold to JBE in August 2005.  Despite the generality of the invoice there are clear differences between the items specified in the cross-claim and in the invoice (other than the claim in the cross-claim for “various books belonging to Beare, reports from the University of Adelaide, and engine design books”).  Further, and leaving aside the claim for the return of “various books belonging to Beare, reports from the University of Adelaide, and engine design books”, which lacks specificity, there is no reason to doubt Mr Beare’s evidence that Mr Casey and/or JBE continues to hold the items nominated in the cross-claim in his or its possession in circumstances where the items are owned by Mr Beare and a request for their return has been made.  A wrongful refusal to return the goods of another, upon lawful request for their return being made, constitutes the tort of detinue. 

323                                       On the evidence Mr Beare has an immediate right to possession of the goods in question other than the goods described as “various books belonging to Beare, reports from the University of Adelaide, and engine design books”.  As to those goods Mr Beare has not discharged his onus of proving that they were not sold to JBE as per the invoice dated 30 August 2005.  It follows that an order should be made against Mr Casey and JBE requiring them to return to Mr Beare the other goods identified in the cross-claim, namely:

(a)                A shim reed valve steel coil;

(b)               1 MoteC M400;

(c)                8 Kawasaki throttle bodies and fuel rails and injectors;

(d)               125 Suzuki oil line;

(e)                1, 35mm Mukini carburetor for Ducati 680;

(f)                 2 into 1 exhaust for Ducati 680 with reverse cone megaphone;

(g)                Honda 125 sixstroke head. Cast iron. One piece; and

(h)                Bridgestone Battlax BT 58 R Radial, 160/60ZR17 tire.

INTERIM CONCLUSIOn and issue 37

324                                       For the reasons given above I have dismissed all of the applicants’ substantive claims against the respondents.  The one remaining claim, namely, that unless restrained the respondents would continue to commit the alleged wrongs (see issue 37), depends on one of the substantive claims being upheld.  As all have been rejected, this dependent claim must also fail.  Despite this, it is appropriate that I record my conclusion that, if the applicants had managed to sustain any of their numerous claims of wrongful conduct by the respondents, the evidence would not have permitted any finding that there was a continued threat.  The reasons for this are the following.

325                                       The applicants commenced the proceeding on 26 October 2007.  On 19 December 2007 Bennett J made interlocutory orders on the basis of various undertakings which were given without admissions (these orders were slightly amended on 15 February 2008).  In substance, Mr Beare, Mr Eleftheriadis and SSED undertook not to sell or dispose of the Ducati and Yamaha motorcycles until after the determination of the hearing.  They also undertook to maintain records of any development work relating to the prototypes and patents for the Beare Head engine.  SSED undertook to remove from the www.sixstroke.com website a picture of a hammer with legal books in the background, JBE’s bank statements, a reference to Sir Jack Brabham, a representation of a patent seal, claims to ownership of the Beare Head patents, and any references to the residential addresses of Mr and Mrs Casey and Sir Jack Brabham.  The applicants and respondents agreed not to contact each other except through their lawyers and not to post material on websites about the proceeding.  The respondents agreed not to contact certain people and entities without notice for a nominated period.  The applicants agreed to remove certain material from an entry in Wikipedia. 

326                                       In May 2008, and despite the more limited reach of the undertakings and agreements, all content was deleted from the www.sixstroke.com website.  Further, Mr Beare swore an affidavit on 30 September 2008 in which he said that although he continued to believe that he was the true inventor of the Beare Head engine (which is correct) and the owner of the Beare Head patents because, in his view, the circumstances meant that JBE had no rights thereto (which is incorrect), he recognised that “this is what these proceedings will determine”.  Mr Beare said that because of this recognition, on 2 May 2008 he and Mr Eleftheriadis arranged for the whole of the www.sixstroke.com website to be removed.  Mr Eleftheriadis, in his affidavit of 9 September 2008, also said that he arranged with Mr Beare to take down the whole of the www.sixstroke.com website on 2 May 2008 because by then he recognised that it was a matter for the Court to determine the true ownership of everything including the prototypes, patents and right to use the name “sixstroke”. 

327                                       In the face of this evidence of the position of Mr Beare and Mr Eleftheriadis on and from at least 2 May 2008, being evidence which was not subject to any real challenge, the applicants could never have sustained their claims of any continuing threat of alleged wrongdoing by the respondents. 

328                                       Accordingly, the whole of the applicants’ application and statement of claim must be dismissed.

329                                       In terms of the cross-claim I have made two findings in Mr Beare’s favour.  First, I have found that Mr Casey’s misleading and deceptive conduct in trade and commerce in 2001 induced Mr Beare to enter into the 2001 agreement by which he sold 50% of his rights in various patents for the Beare Head engine to Mr Casey.  Second, I have found that Mr Casey and/or JBE are wrongfully detaining certain goods that belong to Mr Beare.  In respect of the second finding, the order that should be made is straightforward: Mr Casey and JBE should be ordered to return the goods to Mr Beare.  In respect of the first finding, the position (as briefly indicated above) is not straightforward.  I now turn to that issue.

REMEDIES - MR BEARE

330                                       In the cross-claim Mr Beare claimed that he had suffered loss and damage estimated to be in the sum of $2 million by reason of the misleading and deceptive conduct alleged against Mr Casey (namely, the 2001 representations which I have upheld, as well as the 2003 and 2004 representations which I have rejected).  The loss and damage is characterised in the cross-claim as “loss of opportunity to exploit the Beare Head invention and loss of Beare Head patent rights worldwide”.  Mr Beare claimed orders that Mr Casey had contravened ss 9, 39 [sic, 38] and 56 of the Fair Trading Acts in Victoria, Queensland and South Australia respectively, orders voiding the 2001 and 2004 agreements, orders that JBE transfer to Mr Beare ownership of the remaining patents for the Beare Head engine, and orders for the payment of damages under ss 159, 99 and 84 of the Fair Trading Acts in Victoria, Queensland and South Australia respectively.

331                                       For the reasons set out above I am satisfied that Mr Casey, by the making of the 2001 representations, did contravene ss 38 and 56 of the Fair Trading Acts in Queensland and South Australia respectively (and I deal with the Victorian legislation below).  However, a number of issues arise in respect of the appropriate remedies.

332                                       First, I do not accept the respondents’ case that Mr Beare first became aware that Mr Casey’s 2001 representations were misleading and deceptive in late 2005.  By the time that he entered into the 2004 agreements Mr Beare must have known that: – (i) Mr Casey had not funded the research and development of the invention the subject of the Beare Head patents until the invention was commercialised, (ii) Mr Casey had not ensured the invention was rapidly developed and commercialised for the mutual benefit of Mr Beare and Mr Casey, and (iii) Mr Beare had not made, and had no real prospect of making, a large profit from the invention.  Indeed, it seems clear that the reason Mr Beare allowed himself to be persuaded by Mr Casey to enter into the 2004 agreements relating to JBE was because these things Mr Casey had promised Mr Beare in 2001 (and which led Mr Beare to give 50% of his patent rights to Mr Casey) had not happened.  In other words, the effect of the 2001 representations induced Mr Beare to enter into the 2001 agreement and continued for some time thereafter – but by 2004, and Mr Beare’s acceptance of Mr Casey’s proposals in respect of JBE, Mr Beare could not have been acting in reliance on the 2001 representations.  Apart from the promise about the payment of patent fees those representations had been proved by time and events to be false.  As to the payment of patent fees, the same representation was made by Mr Casey in 2003 and 2004, albeit not involving a promise to pay by Mr Casey personally.  The idea that Mr Beare, in the face of his knowledge of the proposal with respect to JBE in 2003 and 2004 and Mr Casey’s representation that he would ensure the patent fees would be paid, continued to rely on the 2001 representation is untenable.

333                                       Accordingly, any damage which Mr Beare incurred by reason of the 2001 representations must be damage in respect of events before his entry into the 2004 agreements.  During this period (2001 to May 2004), Mr Beare resided in South Australia and Mr Casey in Queensland.  They communicated with each other via telephone, email and letter.  They visited each other in their respective States.  Mr Beare executed the 2001 agreement into which he was induced to enter by Mr Casey’s misleading and deceptive conduct in South Australia.  Accordingly, the provisions of the South Australian and Queensland Fair Trading Acts in respect of misleading and deceptive conduct are engaged.  The Victorian Fair Trading Act applies outside Victoria to the extent that the Victorian Parliament has power to so provide (s 6).  However, there is no evidence indicating any connection between these events and that State.  Without such a connection I do not accept that the terms of s 6 have the effect of making the Victorian Fair Trading Act apply. 

334                                       Second, the respondents’ arguments have not disclosed any principled basis for the making of an order that JBE transfer the patent rights to Mr Beare in circumstances where: – (i) Mr Beare did not transfer his remaining 50% rights in the patents for the Beare Head engine to JBE because of the misleading and deceptive 2001 representations, (ii) Mr Casey did not transfer his 50% rights in the patents for the Beare Head engine to JBE because of the misleading and deceptive 2001 representations, (iii) although Mr Casey obtained his 50% right in the Beare Head patents from Mr Beare by reason of his misleading and deceptive conduct, JBE is a corporation with a separate legal identity from Mr Casey, (iv) Mr Beare must have known that Mr Casey’s 2001 representations (apart from the promise to pay patent fees), were misleading and deceptive before Mr Beare entered into the 2004 agreements by which the patent rights were sold to JBE, (v) Mr Beare must have known that third parties had and would continue to buy shares in JBE in reliance on JBE’s ownership of the patent rights, and (vi) Mr Beare, knowing these things, entered into the 2004 agreements by which the rights in the Beare Head patents were transferred to JBE and obtained an issue of shares in consideration for the transfer of his rights in the patents.  Given these circumstances I am unable to see any appropriate basis on which the orders for transfer as sought by Mr Beare could be made.  Mr Beare’s willingness to transfer his shares to JBE in exchange for the patent rights cannot address these difficulties. 

335                                       Third, and as a consequence of the above, I consider that Mr Beare’s remedies against Mr Casey for contravention of ss 38 and 56 of the Fair Trading Acts in Queensland and South Australia are limited to damages under ss 99 and 84 respectively of those Acts.  Each of those statutory provisions for damages specifies that an action for damages may be brought within three years after the date the cause of action accrued.  Assuming 20 May 2004 (the date he entered into the 2004 agreements) to be the latest date of accrual of Mr Beare’s cause of action against Mr Casey, the three year period would have expired on 20 May 2007.  This assumption is appropriate.  On 20 May 2004 Mr Beare entered into a series of agreements which had the effect of transferring the patent rights to JBE.  He did so, as explained, for reasons unconnected to the 2001 representations.  Moreover, the fact that he did so shows that by that time he must have known the 2001 representations (but for payment of the patent fees) were false.  The cross-claim on behalf of Mr Beare was filed after 20 May 2007.  Neither party referred to these matters during the hearing.  Accordingly, on 3 May 2010 I invited the parties to make a further submission in writing addressing these (but no other) issues. 

336                                       The respondents filed further written submissions on 10 May 2010 in accordance with this invitation.  Insofar as not already dealt with in the discussion above, the respondents submitted that the applicants had not raised the limitation provision in their defence (which is correct).  Further, there is binding authority that a limitation provision is procedural in character and must be pleaded in defence (Western Australia v Wardley Australia Limited (1991) 30 FCR 245 at 259).  Failure to plead the limitation period as a defence may be taken as a waiver or create an equitable estoppel (Commonwealth v Verwayen (1990) 170 CLR 394).  In the present case the applicants failed to plead the limitation period and never raised or referred to any such defence at any time after the filing of the cross-claim on 21 July 2008.  The parties had thus conducted all interlocutory steps and the hearing on the basis that no such defence was relied upon. 

337                                       The applicants’ submissions in response filed on 17 May 2010 did not answer the respondent’s submissions about the failure to plead the limitation period in defence.  The reference in an affidavit of Mr Casey to Mr Beare having made no complaint about misleading and deceptive conduct in the seven years is not the equivalent of pleading a limitation period in defence of the claim.  Keen Mar Corporation Pty Ltd v Labrador Park Shopping Centre Pty Ltd [1988] ATPR 40-853, to which the applicants referred, is concerned with s 87 of the Trade Practices Act (Cth) (orders other than orders for damages).  In Keen Mar Pincus J concluded that if a claim for damages was barred by the limitation provision in s 82(2) of the Trade Practices Act an alternative claim for compensation under the ancillary provisions in s 87 could not be maintained.  The applicants appeared to rely on Keen Mar for the principle that where, as a result of a defendant’s negligent misrepresentation, the plaintiff enters into a contract which exposes him or her to loss, the cause of action accrues on entry into the contract.  First, this principle is only relevant in determining when the cause of action accrues and does not go to the applicants’ failure to address the limitation period.  Second, and as the respondents submitted, this principle was not followed by the High Court in Wardley Australia Ltd v State of Western Australia (1992) 175 CLR 514 at 527 to 533.  The High Court said, at 527, “[i]n many instances the disadvantageous character or effect of the agreement cannot be ascertained until some future date when its impact upon events as they unfold becomes known or apparent and, by then, the relevant limitation period may have expired. To compel a plaintiff to institute proceedings before the existence of his or her loss is ascertained or ascertainable would be unjust.”  

338                                       As to the limitation period in respect of damages claims, I accept the respondents’ submissions.  In Western Australia v Wardley Australia Ltd (affirmed in the High Court decision of Wardley Australia Ltd v State of Western Australia) Spender, Gummow and Lee JJ held, at 259, as follows:

…it is for a defendant to assert non-compliance, rather than for a plaintiff to assert compliance with s 82(2) [of the Trade Practices Act] as an element of the cause of action.

The need for compliance with s 82(2) may be waived by the defendant and an estoppel may prevent the defendant denying such a waiver. If the defendant fails to plead the limitation, this may be taken as a waiver of the need for compliance with s 82(2).

339                                       The applicants did not assert non-compliance with ss 99(3) or 84(2) of the Queensland and South Australian Fair Trading Acts (being the provisions specifying the limitation period).  Given the conduct of the proceeding the applicants (specifically, Mr Casey) should be taken as having waived that right.  It follows that Mr Beare can claim damages (as he has done) in reliance on ss 99(1) and 84(1) of the two statutes, provided the other requirements of those provisions are satisfied. 

340                                       Section 99(4) of the Queensland Fair Trading Act provides that the damages provision, s 99(1), does not apply “unless the loss or damage is suffered by a consumer”.  Neither party addressed this issue either until the submissions in response to the invitation of 3 May 2010 were made.  The respondents submitted that Mr Beare was a consumer in respect of the patent share sale agreement of 20 May 2004.  However, as I have not found misleading and deceptive conduct induced Mr Beare’s entry into that agreement that is not to the point.  Given the definition of “consumer” in s 6(1) of the Queensland Fair Trading Act, “a person who, in a particular transaction, whether a separate contract or separate transaction within a contract, acquires goods or services or an interest in land as a consumer”, I am not persuaded that Mr Beare falls within the definition. 

341                                       Nevertheless, s 84(1) of the South Australian Fair Trading Act (a “person who suffers loss or damage by conduct of another in contravention of a provision of Part 10 (other than section 57) may recover the amount of the loss or damage by action against that other person or against any person involved in the contravention”) is not subject to the same limitation.  Section 56 of that Act (a “person must not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive”) is a provision of Pt 10.  It follows that Mr Beare may recover from Mr Casey loss or damage Mr Beare suffered by Mr Casey’s conduct (that is, the making of the 2001 representations) in contravention of s 56.

342                                       According to Mr Beare, he valued his invention and patent rights before the 2001 agreement at between ($4 million to $5 million).  Mr Beare said that between 1985 and 1995 he spent $250,000 in developing his invention.  Between 1996 and 2001 he spent a further $25,000 to $50,000 each year on further development.  His total outlay, accordingly, was between $400,000 and $550,000.  He also spent numerous hours of his time on development.  At an hourly rate of $100 per hour, which is Mr Beare’s current hourly rate as a consultant in his business, Mr Beare estimates the value of his time spent developing the invention up to October 2001 is $2,500,000.  Mr Beare said that by entering into the 2001 agreement he lost the opportunity for three years to exploit his patents (and, of course, he lost 50% of his rights in those patents).  Further, Mr Beare said Mr Casey made it difficult for Mr Beare to continue to develop the invention because he did not have access to the Ducati and Yamaha prototypes.  In consequence, the development of the invention is in “very much the same state that it was in” in October 2001.  Mr Beare also said that he had lost further opportunities after May 2004 due to the sale of his remaining 50% patent rights to JBE.  However, I have rejected that aspect of Mr Beare’s claim (having found that Mr Beare was not induced to enter into the 2004 agreements by reason of misleading or deceptive conduct).  Finally, Mr Beare said that if the assessment of Mr Bennett (called in the applicants’ case) is accepted then the estimated profit from sales of the Beare Head engine in India and China for the first three years would have been $5.25 million.  Mr Beare said his loss of opportunity could be estimated to be 10% of this amount, that is $2.5 million.

343                                       These claims need to be assessed having regard to the relevant principles.  The concepts of “loss or damage” are not narrow and are not limited to economic loss.  However, mere risk of loss is insufficient; until the contingency is satisfied, there is no loss.  A comparison between the position in which the person found themselves by reason of the misrepresentation and the position they otherwise would have been in is a relevant but not necessarily exclusive consideration.  If satisfied that loss or damage has been caused, a court must do its best to quantify the loss even if some speculation and guesswork is required.  The standard of proof that damage has occurred is the ordinary civil standard of the balance of probabilities.  Damages for a lost commercial opportunity (where the chance itself can be regarded as of value and not merely speculative) are to be assessed having regard to the likely outcomes, prospects or probabilities or possibilities of success if that opportunity had not been lost (see, for example, Commonwealth v Amann Aviation Pty Limited (1991) 174 CLR 64, Sellars v Adelaide Petroleum NL (1994) 179 CLR 332; [1994] HCA 4, Tabet v Gett (2010) 84 ALJR 292; [2010] HCA 12 at [123]-[124] and, generally, Miller’s Annotated Trade Practices Act (31^st ed, Thomson Reuters, 2010 at [1.82.21]-[1.82.94]). 

344                                       By reason of the 2001 representations made by Mr Casey to Mr Beare, which were misleading and deceptive, Mr Beare entered into the 2001 agreement.  By that agreement he transferred 50% of his rights in the Beare Head patents to Mr Casey.  He also gave control of the management of the patents to Mr Casey because of Mr Casey’s agreement to pay all patent fees for a minimum of three years.  He gave Mr Casey joint control over future research and development of the Beare Head engine for three years or until commercialisation.  He agreed to make his prototypes and himself available as required to demonstrate the invention.  He agreed to make available all existing marketing materials, engineering and test results.  When JBE came to be incorporated, Mr Beare’s share allocation was less than it otherwise would have been because his rights related to his 50% of the patents for the Beare Head patents rather than 100% of the rights.  But for Mr Casey’s misleading and deceptive conduct Mr Beare would not have entered into the 2001 agreement.  He would have owned 100% of his patent rights and would have been allocated shares in JBE based on that ownership rather than 50%.  Equally, Mr Casey’s allocation of shares in JBE would have been reduced to reflect the fact that the only patent rights he brought to JBE were for his invention and not Mr Beare’s invention. 

345                                       It is apparent from the evidence that Mr Casey did not fulfil the 2001 representations.  As a general observation, none of the evidence demonstrates that Mr Casey personally paid any money towards development of the Beare Head engine.  There is evidence that some payments were made.  However, and as noted, all funds received from third parties in 2003 to 2004 were banked into Mr Casey’s own bank account.  Funds from investors were thus mixed with whatever personal funds Mr Casey had.  Similarly, payments from the bank account included Mr Casey’s personal living expenses.  In these circumstances the inference that should be drawn is that any money paid in connection with the development of the Beare Head engine was sourced from investors and government grants.  Further, I accept Mr Beare’s evidence that there has been no real development of the Beare Head engine since entry into the 2001 agreement.  This evidence is supported by Ms Murone’s observation that after 30 June 2004 JBE’s accounts do not indicate significant activity by a company seeking to develop and commercialise patented inventions.  It is also supported by Dr Damon Honnery’s conclusion that there was insufficient performance test data to draw any reasoned conclusions about the commercial potential and value of any of the three inventions.  I do not accept Mr Casey’s evidence to the contrary.  As also found, the Beare Head engine has not been commercialised and Mr Beare has made no profit from his invention by reason of commercialisation. 

346                                       The non-payment of patent fees and the consequential lapse of certain patents was a principal feature of Mr Beare’s claims of loss.  However, comparison of the patents referred to in the 2001 agreement with Mr Pini’s analysis of the status of various patents does not disclose any lapse of a nominated patent before the date of the 2004 agreements.  After the 2004 agreements neither Mr Casey nor Mr Beare owned the patents.  JBE owned them.  As Mr Beare was not induced to enter into the 2004 agreements by reason of misleading and deceptive conduct, those transactions cannot be impugned.  It follows that Mr Beare cannot have suffered any loss in respect of the lapse of patents by reason of Mr Casey’s misleading and deceptive conduct in 2001.  Rather, Mr Beare’s loss or damage, if any, is reflected in the rights he gave to Mr Casey in the 2001 agreement (including 50% of the rights in the patents for the invention) and the opportunity Mr Beare thereby lost otherwise to proceed with the development and commercialisation of the invention.  The question is whether those rights and that opportunity had anything other than a merely speculative value. In other words, does the evidence prove that the rights which Mr Beare gave up by reason of Mr Casey’s misleading and deceptive conduct had value and caused Mr Beare a loss of the opportunity otherwise to exploit those rights, being an opportunity which provided a “substantial, and not merely a speculative, prospect of acquiring a benefit” (Sellars v Adelaide Petroleum at 364)? 

347                                       At the time of entry in the 2001 agreement, the Beare Head engine was the subject of patents granted in Australia, New Zealand, Brazil, Singapore and the United States, with patents pending in Canada, Europe, China and Japan.  The engine had received favourable reviews in various motorcycle magazines.  However, development had largely ceased due to Mr Beare’s lack of funds.  This lack of funds to take the engine to the next stage and possible commercialisation led Mr Beare to recognise that he needed capital from third parties.  But for their willingness to invest, the further development of the engine could not take place.  By 1996 Mr Beare had a business plan envisaging the creation of a company structure to pursue commercial development of the invention.  This led to the incorporation of Beare Head Pty Ltd.  None of these efforts bore fruit.  Mr Beare was under financial stress and money remained tight.  In October 1999 the website “Beare Technology Australia” which Mr White established for Mr Beare said that “Beare Technology was seeking a developer and investors to commercially manufacture the head”.  Again, nothing happened to provide Mr Beare with the capital he needed to further develop the engine.  In June 2001 Mr Beare exhibited the Beare Head engine at the Stuttgart Engine Expo.  By October 2001 Mr Beare had entered into the agreement with Mr Casey.  But for Mr Casey’s misleading and deceptive conduct this agreement also would not have eventuated.

348                                       The inescapable fact is that Mr Beare’s invention had not attracted any proposals for commercial investment until Mr Casey’s proposal which, as found, involved misleading and deceptive conduct.  Further, in answer to the applicants’ case on damages, the respondents called evidence from Dr Honnery.  Dr Honnery is an Associate Professor in Mechanical Engineering at Monash University.  Dr Honnery’s opinion was sought on the “scientific merit and commercial potential” of the three inventions (of Mr Beare, Mr Casey and Mr Smith) at various dates including October 2001 and May 2004, being the dates of the 2001 agreement and the 2004 agreements respectively.  Dr Honnery was well qualified to give these opinions.  I found his opinions cogent and persuasive.  Sir Jack Brabham, in an affidavit of 24 September 2009, responded to Dr Honnery’s report.  However, the response is mostly argument and conclusion about JBE’s intentions in circumstances where neither could be based on personal knowledge; as the evidence makes plain, the day to day running of JBE has always been under the control of no one but Mr Casey with Sir Jack Brabham having little involvement. 

349                                       Dr Honnery accepted the merit of the objectives of the Beare Head engine.  However, Dr Honnery said he could not assess the value and commercial potential of the invention at any time as there was insufficient data about basic performance parameters for all of the inventions.  Dr Honnery identified that obtaining the required performance information would itself involve a significant investment in the order of $2 million (or possibly more, depending on the results obtained).  I accept this evidence.  It is apparent from Dr Honnery’s evidence that the Beare Head engine would require substantial investment for further development before any prospect of returns could reasonably be assessed.  Indeed, the respondents themselves accepted this proposition when dealing with Mr Casey’s misleading and deceptive conduct.  Accordingly, the respondents submitted (and I accept) that in 2001 Mr Casey knew or ought reasonably to have known that commercialisation of the Beare Head engine required substantial sums of money which Mr Casey did not have.  Yet when it came to Mr Beare’s claim the respondents sought to avoid the logical consequences of Dr Honnery’s evidence by framing the claim as a lost opportunity.

350                                       Contrary to the respondents’ submissions, I consider Dr Honnery’s evidence relevant to the assessment of the loss and damage which Mr Beare has suffered by reason of Mr Casey’s misleading and deceptive conduct.  Dr Honnery’s evidence demonstrates that no reliance can be placed on the valuations which Mr Casey prepared and issued in his call for investments in 2003.  It demonstrates also that no reliance can be placed on the absolute or relative values (as between the three inventions) which Mr Casey ascribed for the purpose of the 2004 agreements and the consequential proportional issue of shares to himself, Mr Beare and Mr Smith.  Dr Honnery’s evidence discloses what a fully informed investor into the technologies should have known in order to make a proper investment decision.  His evidence confirms that the investment decisions which were made in 2003 and thereafter were based on material misinformation about the true state of development of the technologies, their commercial potential and their value.  His evidence confirms Ms Murone’s opinions that Mr Bennett’s evidence (which assumed that the valuations for the purpose of the constitution of JBE were sound) must be rejected.  It follows that, insofar as Mr Beare’s claim relied on Mr Bennett’s evidence as providing any meaningful basis for an assessment of Mr Beare’s loss, I do not accept it. 

351                                       Dr Honnery’s opinions were also generally consistent with those of Ms Murone, whose evidence I also accept.  Ms Murone said that:

The financial resources of the patent holder impact the ability of the patent holder to continue to develop, commercialise and market the product. Many technology intangibles require significant upfront funding, with the returns, if any, not generated for many years going forward. Consequently, despite the potential, in many instances the value of various intangible assets, including patents, is never realised as the inventor has insufficient funding. Therefore, despite its potential value, the market value may be nil if at the end of the day there is no willing buyer.

352                                       When asked for her opinion about the value of the patents at various times Ms Murone, properly in my view, said that she could not attempt this task given the range of information that would be required for this purpose, none of which was available in the present case. 

353                                       In other words, the two experts that the respondents called, one a mechanical engineer and the other an accountant, both concluded that on the basis of all of the available information, the commercial potential and value of the Beare Head engine could not be assessed.  There was simply insufficient information to conclude whether or not it had any commercial potential or value.  The same lack of basic information existed at all times.  Yet potential investors in the Beare Head engine were led to believe that it was a proven technology which had a substantial value from a future royalty stream, which underlying documents (but not the documents issued to potential investors) disclosed to be nothing but a “guesstimate” based on numerous unproven and self-evidently unfounded assumptions. 

354                                       The evidence the respondents called from Dr Honnery and Ms Murone to answer the applicants’ damages claim (if the applicants had sustained any of their causes of action) cannot be disregarded in the context of Mr Beare’s own claim for damages.  Characterising Mr Beare’s loss and damage as a “lost opportunity” does not render the evidence of Dr Honnery and Ms Murone invalid or inapplicable; a lost opportunity can sound in damages only if the opportunity itself is proved to have some real value over and above mere speculation.  Accordingly, although I accept the principle that difficulties presented by the evidentiary inadequacies do not relieve me of the burden of assessing Mr Beare’s loss and damage as best I can, that burden is enlivened only if the evidence enables me to conclude that by reason of Mr Casey’s misleading and deceptive conduct Mr Beare has lost a “substantial, and not merely a speculative, prospect of acquiring a benefit” (Sellars v Adelaide Petroleum at 364).  The fact that a claimant need only prove damage “with as much precision as the subject matter reasonably permitted”(Placer (Granny Smith) Pty Ltd v Thiess Contractors Pty Ltd (2003) 196 ALR 257; [2003] HCA 10 at [37]), so that some degree of estimation or guesswork is permissible, did not relieve Mr Beare of the burden of proving some real and not merely speculative loss and damage.  The evidence of Dr Honnery and Ms Murone, called by the respondents, leads to the conclusion that the patents in the Beare Head engine and the associated rights to control its development and potential commercialisation, at all relevant times, involved nothing more than a merely speculative prospect of acquiring a benefit (with even that speculative prospect depending on substantial investment of funds which Mr Beare did not have and had never managed to attract). 

355                                       What then is the countervailing evidence that the benefit Mr Beare lost was something of real and not merely speculative value? 

356                                       The fact that Mr Beare believes strongly in the value of the Beare Head engine, spent substantial time and money in developing it, and managed to obtain the protection of patents does not mean that any opportunity he lost involved other than a speculative benefit.  Mr Beare’s opinions on this matter are subjective and (understandably given the amount of time and events that have transpired) coloured by emotions. 

357                                       The fact that Mr Casey was willing to become involved and issued many documents asserting the value of the Beare Head engine is not of material weight.  Despite his evidence to the contrary, I am not satisfied that Mr Casey put any of his own money towards the development of the engine or in any way at risk in its development.  Moreover, Mr Casey attracted substantial investment based on misinformation about the true state of development, commercial potential and value of the invention much of which went into his own bank account (in circumstances, it might be added, where his personal expenditure and expenditure on the purpose of the investments cannot be distinguished on the available evidence).  Mr Casey thus had an interest in asserting the value of the engine and continues to have an interest in this case in asserting its value at least to the extent that it is relevant to the applicants’ causes of action.  Given these matters and the overall impression I formed of Mr Casey’s evidence his opinions also should not be given weight in assessing the value of what Mr Beare lost by entering into the 2001 agreement.

358                                       Mr Sun was willing in 2002 to pay for the development of the Yingyang prototype.  However, later evidence discloses that Mr Sun believes the state of development and value of the technology was misrepresented to him.  Mr Sun used strong language to convey his views, saying in correspondence of 11 July 2007 to Mr Hall (a newly appointed director of JBE) that he believed Mr Casey had used him (that is, Mr Sun) to “lure” Mr Hall into investing in the Beare Head engine.  Further that he thought Mr Casey had “taken advantage” of him and was “deeply offended” by Mr Casey’s behaviour, describing Mr Casey as having “presented factitious engine related investment proposals as a means to con me out of my hard earned money”, as well as “scamming from innocent investors”.  Although Mr Sun also said in the same letter that the “only viable technology of any value” was the Beare Head engine, it is clear that Mr Sun considered that he had invested based on information that was “factitious”.  What he would have been willing to invest, if anything, if he had been a fully informed investor remains a matter of speculation.  The same conclusion applies to Mr Balamukundan and Primero Enserve.  In a letter of 10 May 2007 their lawyers said that Mr Casey had represented the Beare Head engine as having enormous investment prospects and the like.  Further, that their clients were lured and induced into investing on the basis of Mr Casey’s representations described as involving intentional and premeditated misrepresentations.  The correspondence shows that these investors do not consider themselves fully informed with the consequence that their investments are not a reliable indicator of value.  The correspondence also undermines the applicants’ case that anything the respondents did caused the falling out with Mr Sun, Mr Balamukundan and Primero Enserve.  According to Mr Sun, Mr Balamukundan and Primero Enserve, responsibility for that lay with Mr Casey.

359                                       Sir Jack Brabham described the Beare Head engine as a technology which in 2003 “looked very promising both in theory and in its practical application”.  This may be true but it makes no allowance for the factors Ms Murone and Dr Honnery identified as relevant. 

360                                       A number of investors in 2003 were willing to pay for shares in the proposed company in order to obtain rights through their shareholdings in the development of the three inventions including the Beare Head engine.  However, and as noted, the explanatory memorandum and seed capital offer prepared by Mr Casey and to which these investors responded contained numerous unfounded assertions as to the state of development, commercial potential and value of the inventions which, on the evidence in this case (particularly that of Dr Honnery), must be characterised as involving speculation, exaggeration, puffery and misrepresentation.  There was no product that could have been described as ready for the Chinese market in six weeks or at any other time.  The deal with Mr Sun was incapable of yielding any product ready for any market without substantial time, money and risk (none of which is mentioned in the explanatory memorandum and seed capital offer).  Mr Casey’s invention had apparently run into difficulties overseas and there is no basis apparent in the evidence for the statement that it had been developed to a “full prototype”.  None of the technologies had been proven (as explained by Dr Honnery’s evidence).  The claimed values said to be based on “detailed financial revenue and expense costings” were based on unfounded assumption, speculation and exaggeration.  For these reasons the directors’ values adopted at the time of the 2004 agreements and the subsequent shareholders’ ratification of those values cannot be accepted to be reliable.  As Ms Murone said, directors’ valuations are not uncommon if supported, but the valuations in this case were unsupported and, in my view on the evidence, unsupportable.

361                                       For these reasons investors in JBE cannot be described as fully informed buyers.  In fact, the nature and extent of the misinformation in the explanatory memorandum and seed capital offer (which is repeated thereafter in many of the documents produced by JBE seeking further investment) makes it impossible to accept that any person, properly informed as to the true state of development and risks associated with the technology (as made apparent by the evidence of Dr Honnery and Ms Murone), would have been willing to invest.  In fact, the only person willing to invest in the Beare Head engine with an apparent appreciation that the information provided by Mr Casey was unreliable was Mr Eleftheriadis.  However, Mr Eleftheriadis’ initial willingness (after reading about the invention in an old motorcycling magazine) was based on the same information, provided to him by Mr Casey, that induced the investments in 2003 and 2004.  Once Mr Eleftheriadis became aware of the figures relating to investments and expenditure, he decided he was only willing to invest if he controlled his investment.  The arrangements between Mr Eleftheriadis and Mr Beare after June 2006 cannot be separated from the present dispute and thus also are not a reliable indicator of the commercial potential and value of the Beare Head engine patents. 

362                                       My acceptance of the evidence of Dr Honnery and Ms Murone, together with the fact that Mr Beare had not attracted any commercial development opportunities or investment before Mr Casey’s involvement, indicates that the Beare Head engine patents, at best, represented a mere speculative benefit.  The evidence as a whole leads to the conclusion that Mr Beare, by reason of the 2001 agreement into which he was induced to enter by Mr Casey’s misleading and deceptive conduct, lost an opportunity which, at best, offered a merely speculative benefit.  As such, no loss and damage by Mr Casey’s misleading and deceptive conduct has been proved.  This conclusion, of course, applies with equal force to the applicants’ case insofar as they claimed damages based on the alleged value of the patents for the Beare Head engine. 

363                                       No other order in Mr Beare’s favour is appropriate.  Mr Casey cannot be ordered to return the rights in the patents as he sold his 50% interest to JBE in May 2004.  A declaration as to misleading and deceptive conduct, in these circumstances, has no utility.  JBE cannot appropriately be ordered to re-transfer the patents to Mr Beare.  JBE is separate from Mr Casey.  JBE did not induce Mr Beare to do anything either in 2001 or thereafter.  Further, JBE is a public company in which third parties hold shares.  Mr Beare retains the shares he was issued in JBE in exchange for transfer of his 50% rights in the patents.  Insofar as Mr Beare may object to Mr Casey’s management of JBE that is a matter outside the scope of this proceeding. 

DAMAGES – THE APPLICANTS

364                                       I have dismissed all of the applicants’ claims against the respondents. Nevertheless, insofar as practicable, I should deal with the applicants’ claims for damages.  As noted, the hearing was conducted on the basis that all particulars of the applicants’ claims for loss and damage were set out on pages 436.218-219 of the court book.  These particulars appear as follows:

Damages and Losses:

The actions of all respondents by their injurious falsehoods:

Lost opportunity of Offer Information Statement                                     $5,000,000

Planned for early 2006 - The Second Respondent

provided a copy of JBE Business Plan as part of

his Affidavit to the Court.  The OIS was to include

Letters of Intent from China via Larry Sun and the

MOU on the Hydrogen Unit from Primero in India.

The money we were to receive from both Primero Enserve

and Larry Sun was to be used to fund and promote the OIS

and to continue development of all technologies

____________________________________________________________________

The actions of the First, Second, Third, Fifth and Eighth Respondents:

a)         interference with Larry Sun promised money                              $350,000

b)         interference with Bala, Primero Enserve

            Promised extra shares to value of                                               $250,000

____________________________________________________________________

The actions of all Respondents:

By deliberate and intentional misleading conduct; diverting potential customers and joint development partners by advertising wrong ownership of the technology

Loss of income from joint development agreements

and lost opportunities for licensing agreements                                        $6,000,000

____________________________________________________________________

By actions of the Seventh Respondent (Speed of Light P/L)

…

 

Due to the lack of fund raising via the OIS, the applicants have suffered losses:

First Applicant Loss:

1          R & D Tax Offset x 2 years (refund of specified

            expenditures for technology innovation companies                       $200,000

2          Commercial Ready Grants on technology development

            available through Ausindustry to assist in research

            and development costs, project based                                          $1,000,000

                                                                                                            $1,200,000

3          Share price and company valuation changes:

            from the Audited Accounts:

            20 cents per share in June 20096 [sic] valuing the

Company at $12,000,000 to 1 cent per shares in  

January 2008 resulting in a loss of value of

            $11,000,000 based on share sales                                    Loss     $11,000,000

                                                                                                            $12,200,000

Second Applicant Loss:

1          non payment of director fees for three years                               $60,000

2          MD salary sacrifice                                                                   $60,000

3          Director time spent on the actions of all respondents

            cost of time@ $120/hr 10 hrs/week/3 years=                               $187,200

                                                                                                            $307,200

Third Applicant Loss:

1          non payment of director fees                                                      $50,000

2          Unpaid administration 5 years                                                     $80,000

3          Director time spent on the actions of all respondents

            since early 2006 until present

            Cost of time@$50/5hr/wk/3 years=                                            $39,000

                                                                                                            $169,000

Fourth Applicant Loss:

1          by agreement signed by Beare promised

            $200,000 when 2 million raised by OIS                                        $200,000

2          Royalty stream from memorabilia loss due

            To interference with traffic from Wiki                                        $65,000

3          Time spent on the actions of all respondents

            Cost of time@$500/1hr/wk/3years =                                           $78,000

                                                                                                            $343,000

365                                       These particulars present numerous problems.  For example, by the time of the hearing, the proceeding had been discontinued or dismissed as against the fourth, seventh, eighth, ninth and tenth respondents (Beare Head Pty Ltd, Speed of Light Pty Ltd, Mrs Beare, Primero Enserve and Mr Sun).  The particulars, however, involve rolled-up assertions of loss against “all respondents”, and nominated respondents as a group including those who are no longer respondents.  As the respondents submitted, the particulars do not link any alleged injurious falsehood to any particular or identified damage said to have been suffered.

366                                       The loss of $5,000,000 said to be from the “actions of all respondents by their injurious falsehoods” refers to a lost opportunity of an offer information statement planned for early 2006.  This statement is said to have been intended to include letters of intent from Mr Sun and Primero Enserve (who were respondents to the proceeding).  However, the particulars of injurious falsehoods relate to statements made over the internet and, principally, on the www.sixstroke.com website by the publication of the so-called “chapter of truth”.  That website was not re-established by Mr White until late 2006.  The “chapter of truth” was not posted on the website until after the JBE annual general meeting on 11 December 2006.  In other words, the principal injurious falsehoods said to have caused the loss and damage claimed (abandoning an offer information statement said to have been planned for early 2006) occurred after the alleged abandonment of the offer information statement.  Further, and as the respondents pointed out, by August 2006 Mr Casey advised Mr Balamukundan that JBE was “seriously considering selling off the Beare technology as we are concentrating on other items”.  In December 2006 Mr Casey proposed that the shareholders approve the sale of all of JBE’s technologies.  This was one of the items on the agenda for the JBE meeting of 11 December 2006.  Moreover, there is no rational evidentiary basis for this claimed loss.  Finally, the offer information statement was to call for funds to further develop the Beare Head engine.  If potential investors were fully informed about the true state of development of that technology, and its true commercial potential (in accordance with Dr Honnery’s evidence and that of Ms Murone), it is not apparent that any investment, let alone substantial investment, could have been attracted. 

367                                       There are no particulars of damage of the alleged intimidation. 

368                                       As the alleged losses by reason of what is described as “interferences” with Mr Sun, Primero Enserve and Mr Balamukundan, it is not apparent what cause of action is intended to be identified.  In this regard, it must not be overlooked that the applicants sued Mr Sun and Primero Enserve as part of this proceeding for the same amounts.  The applicants discontinued their proceedings against Mr Sun and Primero Enserve yet then included the same amounts in the claim against the remaining respondents.  In any event, and as mentioned above, the evidence indicates that Mr Sun, Primero Enserve and Mr Balamukundan became discontented with Mr Casey and made their own decisions not to make further investments.  As to Mr Sun, so much is clear from a letter he wrote to Mr Hall (one of the directors of JBE), on 11 July 2007, the terms of which make plain Mr Sun’s strongly adverse view of Mr Casey’s dealings with him.  As to Mr Balamukundan and Primero Enserve, the correspondence from their lawyers to JBE and its directors of 10 and 14 May 2007 also discloses their strongly adverse view of Mr Casey’s dealings with them.  These letters, consistent with the conclusions in these reasons for decision, refer to misinformation in the calls for investment into JBE both when proposed and when existing.  Against this evidence, the idea that anything the remaining respondents did caused Mr Sun and Mr Balamukundan and Primero Enserve not to continue investing in JBE is unsustainable. 

369                                       The claim for $6,000,000 for “misleading conduct” and “loss of income from joint development agreements and lost opportunities for licensing agreements” fails to identify which action of which respondent is connected to which element of loss.  In any event, there is no rational basis in the evidence for the claim either as a class of potential loss or as to the amount claimed.  If the lost opportunities relate to Mr Sun or Mr Balamukundan, as indicated, they had their own reasons for wishing to deal no further with Mr Casey.  If the applicants had other lost opportunities in mind neither they nor their value are apparent from the evidence. 

370                                       The other classes of loss claimed also cannot be related to any particular cause of action.  Insofar as they might be said to be related to the alleged injurious falsehoods, they suffer from the deficiencies already identified.  If so, it is not apparent how the itemised matters could be said to be a direct and natural consequence of the statements said to found the cause of action. 

371                                       In summary the applicants’ claims for loss and damage are deficient to such an extent that they cannot be meaningfully related to the causes of action insofar as those causes of action themselves can be identified from the statement of claim.  The evidence said to support the claimed loss either does not rise above mere assertion and speculation (in the case of the non-expert affidavits) or is unpersuasive (in the case of Mr Bennett’s opinions).  One example of the former is the series of statements in paragraph 20 of Mr Casey’s affidavit of 13 June 2008.  The statements are mere unsupported assertions and (if admissible) incapable of proving any loss or damage.  Similarly, those parts of paragraph 23 of that affidavit asserting reasons for the offer information statement not proceeding are self-serving conclusions.  Paragraphs 24 and 25 are also mere conclusions, arguments and opinions.  Leaving aside the fact that it is clear that Mr Sun and Mr Balamukundan had their own reasons for no longer wishing to deal with Mr Casey, paragraphs 26 (except the second sentence), 27 and 28 are nothing more than conclusion, argument and opinion.  Other evidence to the same effect suffers from the same deficiencies and thus (if admissible) cannot be given weight.  For example, Mr Smith’s affidavit of 16 June 2008 in paragraphs 7 to 9 says something about loss and damage but the statements do not rise above mere conclusions.  Sir Jack Brabham’s affidavits of 4 August 2007 (particularly paragraphs 18 to 27) and 13 October 2009 contain much said to go to damage which, in truth, is no more than conclusion and argument. 

372                                       On this basis, and having regard to my conclusions about the evidence of Mr Bennett, Ms Murone and Dr Honnery and the lack of proof that an opportunity to exploit the patents for the Beare Head engine constituted other than a merely speculative benefit, if any cause of action had been sustained by the applicants, I would have concluded that the applicants (like Mr Beare) had failed to prove any loss or damage.

ORDERS

373                                       For the reasons set out above, the application (as amended) and statement of claim (as amended) should be dismissed.  The cross-claim should be dismissed but for an order requiring Mr Casey and JBE to return certain items to Mr Beare. 

374                                       As to costs, the respondents have succeeded in whole on the application and in part on the cross-claim.  Although the part on which Mr Beare succeeded on the cross-claim was small, the cross-claim arose from the same facts as the application and took up little additional time.  In these circumstances, the usual order would be that the applicants pay the respondents’ costs of the proceeding as a whole.  I propose to so order but on the basis that the order will be vacated if either party wishes to be heard on the issue of costs. 

375                                       Finally, I propose to direct that the Registrar of the Court refer the reasons for judgment to ASIC for it to take such action, if any, as it may see fit.

 

I certify that the preceding three hundred and seventy-five (375) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Jagot.

Associate:

Dated:         19 August 2010