Plaintiff v Defendant

2 On 4 October 2021, El Zain commenced this proceeding seeking, inter alia:

(a) a declaration that a purported notice of extension given under the MOU was valid and effective such that the term of the MOU had been extended from 31 December 2020 to 31 December 2021; and

(b) an injunction restraining Vitrafy from acting inconsistently with El Zain's rights under the MOU including by selling or agreeing to sell, or licensing or agreeing to licence, the technology and intellectual property referred to in the MOU, to another person or persons.

3 At the first directions hearing held on 5 November 2021, the parties sought orders by consent for the hearing and determination of a preliminary question pursuant to r 47.04 of the Supreme Court (General Civil Procedure) Rules 2015 ('the Rules'), submitting that the determination of a preliminary question would either determine or markedly confine the issues in this proceeding. Accordingly, on that day, I made an order by consent that the following question be tried as a separate question in the proceeding:

On its proper construction, does clause 4.7 of the MOU allow for more than one extension of the MOU ?

4 The trial of the separate question was heard on 7 December 2021. In the evidence on the separate question, El Zain tendered three affidavits:

(a) an affidavit of his solicitor Demetrious (Jimmy) Diakou sworn 19 November 2021 ('the Diakou affidavit'); and

(b) two affidavits of Bernard Joseph O'Shea, a partner at Norton Rose Fulbright made 19 November 2021, which were said to constitute expert opinion evidence ('the O'Shea affidavits).

5 The exhibits to the Diakou affidavit include the MOU.

6 The Diakou affidavit and the O'Shea affidavits were relied upon by El Zain as extrinsic evidence for the purposes of determining the proper construction of clause 4.7 of the MOU.

7 Although Vitrafy maintained that this evidence (aside from the MOU) is not properly receivable as an aid to construction of the MOU, it made no formal objection to its tender and instead submitted that the extrinsic evidence was of no assistance in determining the answer to the preliminary question.

8 The recitals to the MOU record that 'Vitrafy[2] is the owner of the 'Vitrafy Intellectual Property'. 'Vitrafy Intellectual Property' is defined in the MOU to mean 'all the Intellectual Property relating to the Vitrafy Technology which Vitrafy owns and has rights to licence'.

9 Vitrafy Technology is also defined as 'the high-speed ultra-low temperature chilling technology which, when used with the Vitrafy Intellectual Property, delivers a high quality, long-life preservation process for food and biological material'.

10 The purposes of the MOU are set out in clause 2.1.1 which reads:

2.1.1 The purpose of this MOU is to:

(a) provide the framework for and facilitate the granting of the Licence to El Zain and/or any partner and/or funder and/or purchaser nominated and/or procured by El Zain subject to certain terms and conditions; and

(b) provide for obligations to be fulfilled prior to the execution of the Licence.

11 Licence is defined as 'an exclusive licence in writing from Vitrafy to El Zain for El Zain to use the Vitrafy Intellectual Property for the Purposes in the Territory for the Term, on the terms and conditions consistent with this MOU'.

12 Purposes is defined as 'the use of the Vitrafy Technology for any use whatsoever relating to the human body and all of its parts including without limitation for preservation, development and research'.

13 The Territory is defined as 'the World', and the Term as 'the period of twenty (20) years from the date the Licence is executed by both parties, with an option for a further period of ten (10) years with the consent of Vitrafy, which shall not be unreasonably withheld or delayed'.

14 Clause 2.2 sets out the guiding principles which include an obligation imposed upon each party to 'cooperate and work together reasonably using their best endeavours and in good faith to carry out their respective obligations set out in this MOU'.

15 Clause 2.3 provides that 'nothing in the MOU shall be construed or deemed to constitute a partnership, joint venture or employee, employer or representative relationship between any of the parties'.

16 Clause 2.4 confirms that the MOU is intended to constitute a legally binding contractual arrangement between the parties.

17 Clause 3 is headed 'Term' and provides that the MOU commences on the date the MOU is executed by both parties and continues 'until the MOU End Date, unless terminated earlier by the parties in accordance with the terms of this MOU'.

... the date which is the earlier to occur of the following:

(a) 31 December 2019; and

(b) the date upon which the Licence is executed by both parties; and

(c) if El Zain fails to make either of the payments set out in clauses 5.2.1 or 5.2.2 in accordance with and by the relevant dates set out in clause 5.2.1 and 5.2.2.

19 Clause 4 headed 'Licence', and subclause 4.1 headed 'Timing', provides that 'the parties will use their best endeavours acting reasonably and in good faith to enter into the Licence by 31 December 2019'.

20 Subclause 4.2 headed 'Proposed Terms of Licence' provides that 'subject to El Zain making each of the payments of the MOU Fee and the Licence Procurement Fee pursuant to clauses 5.2.1 and 5.2.2 respectively, Vitrafy will grant and enter into the Licence with El Zain or any party nominated by El Zain'.

21 'MOU Fee' is defined as the sum of $100 and the 'Licence Procurement Fee' is defined as the sum of $2,500,000.

22 Subclause 4.3 headed 'Scope of Work' specifies that Vitrafy 'shall provide and procure to and for El Zain all reasonable assistance as required by El Zain to support and assist El Zain to procure a partner and/or funder and/or purchaser to enter into a commercial licence for the use of the Vitrafy Technology, including any technical or research material and information'.

23 Subclause 4.4 specifies that the Licence will provide for minimum sales targets and KPIs after the first year of the Term to be agreed by both parties acting reasonably and in good faith.

24 Subclause 4.5 headed 'Royalties' provides that El Zain pay Vitrafy 12% of the Applicable Revenue derived under the Licence.[3]

25 Subclause 4.6 is headed 'Warranties' and provides in subparagraph (a) for various warranties by Vitrafy, and in subparagraph (b) for various warranties provided by El Zain. In each case, the warranties are expressed to be given both at the date of execution of the MOU and monthly thereafter.

...

(i) that Vitrafy has the rights to enter into this MOU and to grant the rights as set out in this MOU without any challenge or dispute from any third party;

(ii) that the Vitrafy technology is efficacious for its intended use;

(iii) that Vitrafy owns the Vitrafy Intellectual Property;

(iv) that [Vitrafy] consents to this MOU and the proposed licence to be entered/granted pursuant to this MOU;

(v) that there is no litigation or threatened litigation with respect to any matter which affects or may affect this MOU or the proposed Licence to be entered/granted pursuant to this MOU; and

(vi) that Vitrafy is in compliance in all respects with its statutory duties including without limitation its obligations in relation to taxation and other duties.

27 The warranties provided by El Zain are relevantly identical to (i), and (iv)-(vi) provided by Vitrafy,[4] but also include the following:

...

(iii) that El Zain has reasonable grounds for believing that a partner and/or funder is prepared to enter into a sub licence with him to commercialise the Vitrafy Intellectual Property at a meaningful international level.

Extension to Date

The parties agree that if El Zain is in discussions with a potential funder and/or funder and/or purchaser to enter into a commercial licence for the use of the Vitrafy Technology, the date of 31 December 2019 wherever it appears in this MOU shall be extended for as much time as nominated by El Zain, acting reasonably and in good faith, to enable those discussions to progress and to be concluded.

(underline added)

29 Clause 5 is headed 'Licence Procurement Fee'. Subclause 5.1 provides that El Zain 'agrees to pay the MOU Fee and the Licence Procurement Fee to Vitrafy in consideration of Vitrafy entering into this MOU'. Subclause 5.2 provides that the MOU Fee is to be paid on the date of execution of the MOU, and the Licence Procurement Fee to be paid on the Payment Date. Payment Date is defined in clause 1 as 'the earlier of the date that the licence is executed by both parties and 31 December 2019'.

Vitrafy shall be absolutely entitled to the MOU Fee and the Licence Procurement Fee and no part of it shall be refundable even if the Licence is not executed or is subsequently terminated or the MOU is terminated unless the MOU or the Licence expressly provides otherwise or unless Vitrafy is in material breach of the terms of the MOU or the Licence in which case El Zain shall be entitled to a refund of the MOU Fee and the Licence Procurement Fee on demand by El Zain from Vitrafy.

For the avoidance of any doubt, the parties agree that if this MOU ends on the MOU End Date or is terminated earlier by the parties in accordance with the terms of this MOU and by that date the Licence has not been executed by both parties, there will not be any obligation on El Zain to pay any of the Licence Procurement Fee which remains unpaid.

32 The date '31 December 2019' therefore appears in four places; in the definition of 'MOU End Date',[5] in the definition of 'Payment Date',[6] in clause 4.1 which is headed 'Timing',[7] and in clause 4.7 itself headed 'Extension of Time.'

33 In paragraph 7 of the statement of claim dated 4 October 2021 (the 'Statement of Claim'), El Zain alleges that since at least 2018 he has, to the knowledge of Vitrafy, been in discussions with a number of third parties for one or more of them to be a potential partner and/or funder and/or purchaser to enter into a commercial licence for the use of the Vitrafy Technology and the discussions are in good standing and are continuing. The statement of claim particularises discussions with five separate third parties.

34 El Zain then alleges in the Statement of Claim that by a notice in writing dated 29 December 2019 ('the first notice'), he exercised his right under clause 4.7 of the MOU and nominated 31 December 2020 as the time by which the date of '31 December 2019' wherever it appeared in the MOU, would be extended to enable the discussions with third parties to progress and to be concluded.

35 Vitrafy accepts that the first notice was effective such that the references to 31 December 2019 in the definitions of 'MOU End Date', 'Payment Date', and in subclause 4.1 headed 'Timing' should be read to now read '31 December 2020'. It accepts therefore that the first notice extended the term of the MOU to 31 December 2020. It does not accept that that the notice changed the reference in clause 4.7 to '31 December 2019' to '31 December 2020'.

36 El Zain next relevantly pleads that by a notice in writing dated 29 December 2020 ('the second notice'), he exercised his right under clause 4.7 of the MOU and nominated that '31 December 2020' (the date that arose following the first notice) wherever it appeared in the MOU to be extended to '31 December 2021' to enable the discussion to progress and to be concluded.

37 El Zain alleges that he is entitled to serve such a notice because the effect of the service of the first notice enabled the date '31 December 2020' to be read as if it appeared in the definitions of 'MOU End Date', 'Payment Date' and the timing subclause (as Vitrafy accepts), but also enabled the reference to '31 December 2019' in clause 4.7 to read '31 December 2020'.

38 Vitrafy accepts that the first notice extended the term of the MOU from '31 December 2019' to '31 December 2020', but asserts that clause 4.7 of the MOU as a matter of its proper construction can only be exercised once. Accordingly, it asserts that the second notice had no effect on the term of the MOU[8] or any other part of the MOU.[9]

39 In addition, El Zain further pleads that on the proper construction of the MOU, the right conferred by clause 4.7 may be exercised more than once and as often as may be necessary in order to achieve the purposes of the MOU.

40 Thus, where the parties join issue is not simply as to the validity of the second notice, but whether further notices may be issued by El Zain.[10]

41 The answers to those questions, and necessarily the answer to the preliminary question, involves a question as to the proper construction of clause 4.7 of the MOU.

42 The applicable principles are well established and were summarised by French CJ, Nettle and Gordon JJ in Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd ('Mount Bruce Mining') as follows:[11]

The rights and liabilities of parties under a provision of a contract are determined objectively, by reference to its text, context (the entire text of the contract as well as any contract document or statutory provision referred to in the text of the contract) and purpose.

In determining the meaning of the terms of a commercial contract, it is necessary to ask what a reasonable businessperson would have understood those terms to mean. That enquiry will require consideration of the language used by the parties in the contract, the circumstances addressed by the contract and the commercial purpose or objects to be secured by the contract.

Ordinarily, this process of construction is possible by reference to the contract alone. Indeed, if an expression in a contract is unambiguous or susceptible of only one meaning, evidence of surrounding circumstances (events, circumstances and things external to the contract) cannot be adduced to contradict its plain meaning.

However, sometimes, recourse to events, circumstances and things external to the contract is necessary. It may be necessary in identifying the commercial purpose or objects of the contract where that task is facilitated by an understanding "of the genesis of the transaction, the background, the context [and] the market in which the parties are operating. It may be necessary in determining the proper construction where there is a constructional choice.

...

Each of the events, circumstances and things external to the contract to which recourse may be had is objective. What may be referred to are events, circumstances and things external to the contract which are known to the parties or which assist in identifying the purpose or object of the transaction, which may include its history, background and context and the market in which the parties were operating. What is inadmissible is evidence of the parties' statements and actions reflecting their actual intentions and expectations.

Other principles are relevant in the construction of commercial contracts. Unless a contrary intention is indicated in the contract, a court is entitled to approach the task of giving a commercial contract an interpretation on the assumption "that the parties ... intended to produce a commercial result". Put another way, a commercial contract should be construed so as to avoid it "making commercial nonsense or working commercial inconvenience".

43 Guided by those principles of construction, the Court's task is to interpret the contractual provision assuming a commercial intention between the parties. The Court must have regard to the text of the contractual provision, its context (the entire text of the contract as well as any contract document or statutory provision referred to in the text of the contract) and the purpose of the contract.

44 El Zain submits that whilst clause 4.7 does not state that El Zain is allowed to extend the MOU more than once, neither does it state that only one extension is possible. Accordingly, he submits that the language of clause 4.7 of the MOU is neutral on the question as to whether Mr El Zain may extend the MOU term only once or alternatively more than once.

45 El Zain then submits, reading clause 4.7 in its internal context (that is within the MOU), and having regard to the purpose of the MOU, the parties must be taken to have intended that El Zain shall be allowed to extend the MOU term more than once. El Zain's primary submission therefore is that the proper construction of the MOU requires no reference to surrounding circumstances.

46 In support of that submission, El Zain argues that the purpose of the MOU is to bring the Vitrafy Technology to meaningful commercialisation on a worldwide basis, and that ancillary to that purpose, a reasonable businessperson would have understood that El Zain would be permitted to extend the term of the MOU for such times as was necessary for that end to be achieved via the grant of the Licence to El Zain (or his nominee, funder or partner) including by giving notice to extend the MOU more than once.

47 The parties did not qualify the entitlement to serve an extension notice on a quantitative basis, such as by specifying a particular and limited number of extensions. El Zain argues that the parties qualified the capacity to extend the term of the MOU by qualitative criteria viz that El Zain must be in discussions with a potential partner, funder and/or purchaser in relation to a commercial licence for the use of the Vitrafy Technology, and by providing that the period of extension nominated by him had to be one that he considered, acting reasonably and in good faith, would allow those discussions to progress and be concluded.

48 El Zain points to the arbitrariness and unreasonableness of an underestimate on his part of the time for discussions to be concluded as having the effect of the MOU coming to an end. Accordingly, he submits that a construction of clause 4.7 which would treat a single 12 month extension as valid but the second of two, sixth month extensions as invalid, is arbitrary and capricious, and thus discordant with the manner in which reasonable business persons would have understood the clause to operate.

49 Alternatively, El Zain submits that if the context and purpose of the MOU do not make it clear that Mr El Zain can extend the MOU more than once, the words 'shall be extended for such time as nominated' as used in clause 4.7 are ambiguous and thus permit the receipt of the extrinsic evidence for the purpose of giving meaning to clause 4.7.

50 Vitrafy submits that the language of clause 4.7 is not capable of supporting a construction which permits a conclusion that the clause allows for more than one extension. It submits that a construction that allows for multiple extensions of the MOU rests on an artificial reading of the clause, lacks textual support, is productive of circularity, and results in a commercially unrealistic outcome.

51 It emphasises two matters in particular; first, that to provide that the date of 31 December 2019 whenever it appears in the MOU shall be 'extended' is not to provide that the MOU is to be read as if that date did not appear in the MOU. Vitrafy submits that to extend something is to add to that which already exists, not to erase and replace the word. It submits that the effect of the clause was to add time to the date of '31 December 2019' which date otherwise remained written in the agreement.

52 Secondly, Vitrafy submits that if it is possible for the language of clause 4.7 to accommodate El Zain's construction, an interpretation of the clause which results in clause 4.7 as operating upon itself is both circular and commercially improbable in light of the number of contextual matters which point to such commercial improbability. It submits that the parties contemplated that the MOU would come to an end either upon the entering into of the Licence with El Zain,[12] or otherwise by effluxion of time, in which latter case Vitrafy would be entitled to engage with other potential licensees or counter parties; and also that the parties initially contemplated that this would occur by 31 December 2019, but recognised that El Zain had the capacity to extend that period if discussions were on foot with potential partners or funders, and a further period may be necessary to enable those discussions to be concluded.

53 I am not much persuaded by Vitrafy's first argument; whilst I accept that extend means 'add to' not 'replace', the reference in clause 4.7 to the phrase 'wherever it appears in this MOU' begs the question as to whether the added time to the original 31 December 2019 date, wherever it so appears in the agreement, includes clause 4.7 itself so that the reference to 31 December 2019 in clause 4.7 following the first notice, was itself extended to 31 December 2020.

54 I find Vitrafy's second argument far more persuasive; whilst a literal reading of the phrase 'wherever it appears in this MOU' could include reference to clause 4.7 itself, such an interpretation sits at odds with considerations of objective context, purpose and commercial rationality.

55 Taking the text of clause 4.7 on its own, El Zain's submissions pay insufficient regard to the introductory words of clause 4.7 viz '... if El Zain is in discussions with a potential funder and/or funder or and/or purchaser to enter into a commercial licence for the use of the Vitrafy Technology ... (the date of 31 December 2019 wherever it appears in this MOU shall be extended for as much time as nominated by El Zain ... enable those discussions to progress and to be concluded ...' (underline added).

56 Thus, the fact of discussions being on foot as at the date of the giving of the extension notice is not simply a matter which conditions El Zain's entitlement to give the notice, but serves to illustrate the purpose for which the ability to give an extension notice exists. The purpose of an extension notice is to facilitate the conclusion of those discussions which were on foot as at the date of the extension notice.

57 As was accepted by El Zain at the hearing, on his construction of clause 4.7, certain discussions could be on foot as at the date of the first extension notice; an extension notice could be given for 12 months, those discussions could then conclude within the first 6 months of the extended period and yet El Zain could then serve a second extension notice provided discussions were on foot with another potential counter party at the time of the second extension notice. The same could occur for a third time, a fourth time and so on.

58 Such an outcome follows from accepting that the reference in clause 4.7 to 'the date of 31 December 2019 wherever it appears in this MOU, shall be extended' includes a reference to the date as it appears in clause 4.7 itself; in effect, after the giving of the first notice, the clause would read '31 December 2020' such that the next extension notice can be given provided that discussions are on foot as at 31 December 2020.

59 In that event, on El Zain's preferred construction, a second extension notice could be given for the purposes of facilitating the conclusion not of the discussions which precede the first extension notice but different discussions which precede the second notice and so on. In that respect, such a construction alters the purpose for which the clause 4.7 extension facility exists. Rather than facilitating the extension of the MOU to enable only the pre-31 December 2019 discussions to be concluded, El Zain's construction includes facilitating the extension of the MOU to enable the completion of whatever discussions are in place during the extended term of the MOU. In such circumstances, Vitrafy would have no certainty as to the point at which it, as the owner of the Intellectual Property, would start to derive a commercial benefit from its exploitation, whether as a result of the entering into of the Licence contemplated by the MOU or otherwise.

60 On execution of the MOU, the parties expected that by the End Date (31 December 2019), either the MOU would end, in which case Vitrafy could seek an alternative counter party, or means of exploiting the Intellectual Property, or that the Licence would be executed with El Zain (or his nominee), and that the Licence Procurement Fee ($2.5 million) would be paid. That expectation was qualified by the fact that El Zain could extend the MOU term for such period as he may reasonably and in good faith nominate, for the purpose of concluding the discussions then on foot. Following the receipt of that extension notice, Vitrafy would then have the certainty of an end date, either for the termination by effluxion of time of the MOU or the execution of the Licence by a new end date.

61 To interpret the clause in a way so as to permit multiple extensions with the attendant rolling uncertainty as to the point at which the MOU would end or the Licence would be executed, is at odds with the expectation of reasonable business people and would work commercial inconvenience, if not give rise to a commercial nonsense.[13]

62 Such a conclusion is reinforced by three further matters drawn from the text of the MOU; first, El Zain has provided consideration of a mere $100 for the rights obtained by him under the MOU, which on his construction permit the giving of multiple extension notices whilst he engages in and aspires to conclude discussions with potential partners or funders; secondly and the corollary of the first, that Vitrafy is locked out from any other means of commercially exploiting the technology in the meantime; and thirdly, that at the time the parties entered into the MOU, El Zain warranted that he had 'reasonable grounds to believe that a partner and/or funder [was] prepared to enter into a sub licence with him to commercialise the Vitrafy Intellectual Property' at a meaningful international level.

63 Thus, the parties stipulated the date of 31 December 2019, whilst providing for its extension in the circumstances contemplated by clause 4.7 in the belief that on the date of entering into the MOU, El Zain believed on reasonable grounds that a partner or funder, was on that date, prepared to enter into a sub-licence enabling commercialisation of the technology at a meaningful international level. It can hardly be supposed that in those circumstances the parties contemplated that clause 4.7 could be permitted to operate on some sort of rolling and continued basis.

64 I do not accept El Zain's submission that such a construction produces an arbitrary or capricious result in that El Zain may lose the benefit of the MOU by a miscalculation on his part of the time needed to conclude the discussions then on foot with his funder/partner. El Zain is entitled to give an extension notice under clause 4.7 for such period as he deems necessary to conclude the discussions. Provided that he is acting reasonably and in good faith in determining the extension period, there is no impediment to El Zain taking a conservative approach to the necessary extension period. The clause permits of an extension period of some considerable time, subject only to El Zain's belief as to the duration of the necessary extended period being reasonably and honestly held.

65 Whilst it may well be unfortunate if the period nominated by El Zain proves insufficient, in my view that outcome is not unjust or arbitrary where it is the product of El Zain's own judgment, fettered only by considerations of good faith and reasonableness. Further, it is not within the scope of these reasons to undertake a hypothetical analysis of what a reasonable timeframe may have been for the conclusion of discussions between El Zain and any potential partner or funder. Ultimately, it was for El Zain to make that assessment in nominating an extension of time, which he estimated to be 12 months.

66 El Zain's argument relies in part on the purpose of the MOU being one to bring the technology to commercialisation on a worldwide basis. In my view, this overstates its purpose which appears clearly enough from subclause 2.1.1; namely, that it provides 'the framework for and facilitates the granting of the Licence to El Zain and/or his partners/funders or nominees.' The reference to 'framework' necessarily permits of the Licence not coming into being.

67 Having regard to the above, I accept the submission that clause 4.7 is a mechanical provision which operates to extend the time referred to in the three operative parts of the MOU; the MOU End Date, the Request Date, and the timing subclause 4.1. Extensions of the date appearing in those parts of the MOU were necessary so as to extend the term of the MOU so as to enable the facilitation and completion of the discussions which were on foot at 31 December 2019.

68 Further, whilst I accept that an evaluation of the competing arguments as to the proper construction of clause 4.7 involves a 'constructional choice',[14] and accordingly it is permissible to have recourse to appropriately receivable extrinsic evidence, the material relied by El Zain is of no assistance in resolving the competing arguments in favour of his preferred construction.

69 Turning first to the O'Shea affidavits, it is difficult to envisage any circumstance where expert evidence might properly be receivable as part of the extrinsic material that the Court may have regard to in determining the construction of the MOU. Moreover, and in any event in the present case, I have real doubts as to whether the O'Shea affidavits would be properly admissible for the purposes of s 79 of the Evidence Act 2008 (Vic) at all, much less as an aid to the proper construction of the MOU.

70 Nevertheless, and noting that no formal objection was made to its admissibility, I will set out briefly my reasons as to why the evidence is of no assistance in resolving the controversy between the parties.

71 First, the O'Shea affidavits provide answers to some 21 questions (including sub-questions) in respect of which Mr O'Shea's opinion is sought. The nature of the questions in respect of which the opinion is sought generally appears from questions 1 and 2. In question 1, Mr O'Shea is asked to opine as to what would be a typical time period and timeline for taking up biotechnology development from the patent pending research and test result stage to independent test results or clinical trial stage and to any government approval and onto commercialisation, and then in question 2 Mr O'Shea is asked to answer the same question but by reference to the Vitrafy technology for any use whatsoever relating to the human body at all of its parts (ie, the purposes set out in the MOU) and in particular for blood and blood products such as red blood cells and for difference cells such as stem cells. In answer to those questions, Mr O'Shea's answers are necessarily qualified. For example, in his answer to question 1 Mr O'Shea says:

This question begs a number of issues which could profoundly impact the answers. If we take as a start the lodgement of a patent specification including exemplification data to demonstrate utility, the question then becomes whether and what regulatory pathway may be required to be pursued in order to ultimately commercialise a relevant product.

From my, albeit limited, knowledge of the product, it may be possible to commercialise certain biotechnology technologies, particularly whether they are to be used in a research context, without the need to undertake clinical trials or obtain government approval. Conversely some implementations of biotechnology technology require extensive data to be generated, clinical trials to be undertaken and regulatory approvals to be obtained for a product can be commercialised ... subject to the foregoing, it is difficult to contemplate any type of biotechnology development moving from the patent pending and test result stage, through to a commercial product in a period of less than four years. At the other end of the spectrum, one can readily contemplate a development taking in excess of 12 years from that stage to commercialisation.

72 In respect to his answer to the more narrow enquiry posed by question 2, Mr O'Shea answers:

As highlighted in my response to question 1, the critical variable here is going to be the regulatory requirements required to be met in order to commercialise the technology for its chosen application. Alternative (1) above which talks in terms of 'any use whatsoever relating to the human body and all of its parts', implies in my view the necessity to obtain the approval of the implementation of the Vitrafy Technology as a Class IIA Medical Device. Given the breadth of the uses (which would as I read it include whole organs, or indeed a whole body) I do not consider it is feasible to provide an estimate, because the scope of represented or approved use is so broad. However, it is difficult to envisage a scenario in which the commercialisation end point could be less than 10 years from the starting point.

As regards alternatives (2) and (3), being much narrower categories of materials to be used with the Vitrafy Technology and leaving open the possibilities that such materials might be used solely in a research context and therefore outside the scope of the relevant regulatory frameworks, I would suggest that it may be possible to produce a commercial version of the Vitrafy Technology in as little as four years.

73 Mr O'Shea's opinion is therefore necessarily expressed in highly qualified terms. Understandably, it is replete with qualifiers as to his limited knowledge of the product, and necessarily an attendant inability to be precise as to the relevant end point at which commercialisation could be achieved.

74 Even if I were to ascribe the matters the subject of O'Shea's opinions to knowledge of facts held by the parties at the time of the entering into of the MOU (in respect of which there is little evidence), and putting to one side the warranty given by El Zain in subclause 4.6(b)(iii) which arguably points in a contrary direction,[15] then those matters point to the possibility of a necessity of the part of El Zain to initiate an extension under clause 4.7 possibly for some considerable period. It does not militate however in favour of a construction which suggests any mutual contemplation of more than one extension. The O'Shea affidavits are of no assistance.

75 Secondly, the Diakou affidavit deposes to the previous entering into of an MOU (relating the Supachill Technology, a predecessor to the Vitrafy Technology) with Fernside Technologies Pty Ltd ('Fernside') and with its sole director Brian Wood ('the Fernside MOU'). Clause 4.7 of the first Fernside MOU read:

Clause 4.7

The parties agree that if El Zain is in advanced discussions with a potential funder and/or funder to enter into a commercial licence for the use of the Supachill Technology, the date of 31 March 2018 wherever it appears in this MOU shall be extended for as much time as nominated by El Zain and agreed by Fernside both parties acting reasonably and in good faith, to enable those discussions to progress and to be concluded.

76 Mr Diakou then deposes to a meeting on 15 November 2018 with Brian Taylor and James Groom, the former of whom was a director of Vitrafy. In the course of that meeting, Mr Diakou deposes that Mr Taylor said that he and Mr Groom considered that their improvements to the Supachill Technology were patentable by them; that he would support the ongoing discussions El Zain was having with the companies he was dealing with for the commercialisation of the technology for biological products; that they were willing to enter into an MOU on similar terms to the Fernside MOU; and that Mr Diakou could prepare an MOU based on the Fernside MOU.

77 Mr Diakou deposes that at that meeting he told Mr Taylor and Mr Groom that 'we don't want to be having the same issues we had with Brian Wood every time we want to extend the MOU - he either wanted money or said we are not yet in advanced discussion. I want it to be easy to extend the MOU'. Further, Mr Diakou deposes that he told Mr Taylor and Mr Groom that for the proposed MOU 'we needed to be able to extend the MOU for as long as necessary to enable our discussions with the third parties we are talking to, to be concluded, including to undertake the testing we needed to undertake to prove the technology and ensure it was efficacious for the intended use'.

78 Thus, Mr Diakou then drafted the MOU in the terms set out above.

79 A comparison of clause 4.7 of the MOU, the subject of these proceedings, and clause 4.7 of the Fernside MOU is shown below with additions underlined and deletions struck through and italics:

I set out below a comparison between clause 4.7 of the Cryogenics MOU, the subject of the proceedings, and clause 4.7 of the Fernside MOUs is shown below, with additions underlined and deletions struck-through in italics:

Clause 4.7, The parties agree that if Elzain is in advanced discussions with a potential partner and/or funder and/or purchaser to enter into a commercial licence for the use of the Vitrafy Supachill Technology, the date of 31 March 2018 31 December 2019 wherever it appears in this MOU shall be extended for as much time as nominated by Elzain and agreed by Fernside both parties, acting reasonably and in good faith, to enable those discussions to progress and to be concluded.

80 The critical change between the Fernside MOU and the MOU was that the extension of the Fernside MOU required agreement by the counterparty, Fernside. In contrast, the MOU gave the right to El Zain to unilaterally extend the term, provided he was in discussions with a potential partner and/or funder and/or purchaser, and subject to the extended period being a period nominated by him acting reasonably and in good faith. It removed the requirement of agreement on the part of the counterparty which was the vice present in the Fernside MOU.

81 In my view, such pre-contractual discussions are of no assistance in resolving the present controversy. They do not point to a construction which militates in favour of providing for more than one extension of the MOU. Rather, it is clear that the enacted solution to the problem of extension which had arisen under the Fernside MOUs was to confer the right unilaterally upon El Zain.

82 Accordingly, the extrinsic evidence relied upon in this case, is of no assistance in resolving the respective contentions of the parties.

83 Rather, the text of the MOU, and considerations of objective context, purpose and commercial rationality, all militate against the construction urged by El Zain, and in favour of that contended for by Vitrafy.

84 Accordingly, the answer to the preliminary question is no; on its proper construction, clause 4.7 of the MOU does not allow for more than one extension of the term of the MOU.

85 I shall hear the parties as to any other necessary orders or directions which follow from the determination of the preliminary question.

[1] The Licence may also be granted to any partner and/or funder and/or purchaser nominated and/or procured by El Zain.

[2] Vitrafy was previously known as Cryogenics Holdings Pty Ltd ('Cryogenics') and in referred to in the MOU as Cryogenics. For clarity and consistency, any reference to Cryogenics in the MOU is replaced with Vitrafy in this judgment.

[3] Applicable Revenue is defined as 'net revenue actually received by El Zain (including grants) net of any sales, taxes and other applicable taxes and levies and any moneys paid for the purposes of research and development, with moneys paid for the purposes of research and development to be with the prior written consent of Vitrafy which shall not be unreasonably withheld or delayed (it being agreed that Vitrafy will be invited by El Zain to participate in appropriate research and development on separately negotiated commercial terms).

[4] Save that they refer to El Zain, not Vitrafy.

[8] Vitrafy further pleads in its defence that the second notice is ineffective as El Zain did not identify the basis upon which the three requirements of clause 4.7 were satisfied. This contention did not form part of the determination of the preliminary question.

[9] In particular clause 4.7, which on El Zain's construction is now to be read as if it specified 31 December 2020.

[10] Subject to El Zain being in discussions with a potential funder and/or funder and/or purchaser to enter into a commercial licence for the use of the Vitrafy Technology, as clause 4.7 recognises.

[11] [2015] HCA 37; (2015) 256 CLR 104, [46]-[52] (footnotes omitted). The quoted paragraphs were cited with approval by five members of the High Court (French CJ, Kiefel, Bell, Keane and Gordon JJ) in State of Victoria v Tatts Group Ltd [2016] HCA 5; (2016) 328 ALR 564.

[13] Mount Bruce Mining (n 11), [52].

[14] Mount Bruce Mining (n 11), [49].

[15] That is, that El Zain has reasonable grounds for believing that a partner and/or funder is prepared to enter into a sub licence with him to commercialise the Vitrafy Intellectual Property at a meaningful international level.