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.