'43. The Memorandum was with respect to:
(a) the acquisition by Longreach Group of the assets sold by Ericsson Australia, pursuant to the sale pleaded in paragraph 28 herein;
(b) replacement of the patent licensing arrangements between QPSX Communications and Ericsson Australia pursuant to the Jtec Contract (as amended by the Jtec Amendment Contract and the Assignment Deed);
(c) the further and expanded global licensing of:
(i) Ericsson Australia, LME and related bodies corporate; and
(ii) Longreach Group, Longreach Networks and related bodies corporate,
to make broad and unfettered use of the method which is the subject of the SAR Patents, and the protocol which is the subject of the QP Patents, in order to manufacture, use and sell ATM products.
Particulars
See paragraphs 1, 2, 3, 7 and 10 of the Memorandum.'
17 The authority of those who executed on behalf of Ericsson Australia, LME, Longreach Group, QPSX and QPSX Communications is pleaded (pars 44 to 48). Then it is said (par 49):
'In the circumstances pleaded in paragraphs 44, 45, 46, 47 and 48 herein, the Memorandum formed a legally binding agreement between:
(a) QPSX, QPSX Communications and QPSX Europe;
(b) Ericsson Australia and LME; and
(c) Longreach Group and Longreach Networks.'
18 An alternative plea is made that if Mr Darling, who signed the Memorandum on behalf of Ericsson Australia and LME, was not authorised to do so on behalf of LME, it nevertheless formed a legally binding agreement between the other parties named in par 49 (par 50).
19 Material terms contained in the Memorandum are pleaded (par 51) along with terms to be implied (par 52). By those terms the applicants agreed to grant a non-exclusive licence to Ericsson Australia, LME and related bodies corporate and to Longreach Group, Longreach Networks and related bodies corporate to use the SAR Patents, the QP Patents, the QPSX Designs and the QPSX Chipset to manufacture all ATM Products and to sell or use those ATM Products globally. There was a requirement that within 30 days of the completion of each quarter during the term of the Memorandum Ericsson Australia and LME jointly and, alternatively Ericsson Australia, would:
(i) provide a report to the applicants setting out the forecast sales for the following quarter and an estimate of the actual Sales Value for the previous quarter;
(ii) a calculation showing the amount of royalty that is payable to the applicants; and
(iii) an estimation of the nature of the ATM Product in respect of which sales were made during the previous quarter.
Similar covenants were made by the Longreach Group and Longreach Network jointly. Covenants under which royalties were to be paid by Ericsson Australia and LME jointly and, alternatively, Ericsson Australia and by Longreach Group and Longreach Network jointly are also pleaded. There was a specific term that within 30 days of executing the Memorandum the parties to it would use their best endeavours to enter, and procure their related bodies corporate to enter, a further agreement incorporating the terms of the Memorandum and necessary supplementary terms pending the execution of which the Memorandum remained in force between the parties. The proposed further agreement is called the Further Agreement in the statement of claim. The various licensees under the Memorandum of Agreement were also responsible for the reasonable legal and travel costs of the applicants associated with its negotiation and execution and that of the Further Agreement provided that the costs did not exceed $50,000.
20 Breach of the Memorandum of Agreement is alleged against Ericsson Australia and against LME for failure to provide reports, to make royalty payments and to pay the applicants' reasonable legal and travel costs associated with negotiating and executing the Memorandum and the costs of negotiating the Further Agreement. In addition, an implied term that the parties would use their best endeavours to finalise the Further Agreement is said to have been breached. LME is said to have failed to use its best endeavours to procure its related bodies corporate to become parties to the Further Agreement.
21 The statement of claim then turns to representations said to have arisen from the execution of the Memorandum. Paragraph 55 says:
'In the circumstances pleaded in paragraphs 15-20, 23-27 and 30-41 herein, and by executing the Memorandum as pleaded in paragraphs 44, 45, 46 and 47 herein, Ericsson Australia and LME represented to each of the applicants that:
(a) the licences granted by the applicants pursuant to the Memorandum, and the Further Agreement, would apply globally to cover ATM Products manufactured, sold or used by LME, Ericsson Australia or related bodies corporate;
(b) the Licensees pursuant to the Memorandum, and the Further Agreement, would be LME, Ericsson Australia and related bodies corporate;
(c) Ericsson Australia and LME jointly, alternatively Ericsson Australia, would pay the royalties due in respect of the licences pleaded in paragraph 55(d)(i) herein;
(d) the terms of the Memorandum had the meaning that:
(i) the licences granted by the applicants pursuant to the Memorandum, and the Further Agreement, would apply globally to ATM Products sold by LME, Ericsson Australia or related bodies corporate;
(ii) the Licensees pursuant to the Memorandum, and the Further Agreement, would be LME, Ericsson Australia and related bodies corporate;
(iii) Ericsson Australia and LME jointly, alternatively Ericsson Australia, would pay the royalties due in respect of the licences pleaded in paragraph 55(d)(i) herein;
(the representations in subparagraphs (a), (b), (c) and (d) above are together the Licence Representations).'
22 It is said that Ericsson Australia represented to each of the applicants that LME had authorised Ericsson Australia and Mr Darling to negotiate and execute the Memorandum on its behalf (the Authority Representation) (par 56). Further LME represented to each of the applicants that it would procure and alternatively use its best endeavours to procure the execution of the Further Agreement by its related bodies corporate (the Procurement Representation) (par 57).
23 The statement of claim alleges misleading or deceptive conduct on the part of the respondents. In respect of the Licence Representations, par 58 asserts:
'If, which is denied, the Memorandum does not on its proper construction contain the terms pleaded in paragraph 51(d)-51(j) herein:
(a) the Licence Representations were, in the circumstances alleged in paragraphs 4, 5 and 28-42 herein, made in trade or commerce;
(b) the Licence Representations were representations as to future matters;
(c) the Licence Representations were misleading and deceptive in the circumstances alleged in paragraph 58(b) herein, by reason of s 51A(1) of the Trade Practices Act 1974 (Cth), in that Ericsson Australia and LME did not have reasonable grounds for making these representations;
(d) further, the Licence Representations were misleading and deceptive if the Memorandum did not on its proper construction contain the terms pleaded in paragraph 51(d)-51(j) herein,
contrary to section 52 of the Trade Practices Act 1974 (Cth).'
Then it is said that if, 'which is denied', Mr Darling was not authorised to execute the Memorandum for LME, the Authority Representation was misleading or deceptive contrary to s 52 of the TPA. The Procurement Representation was a representation as to a future matter and was misleading and deceptive in that LME did not have reasonable grounds for making it and never intended to procure the execution of the Further Agreement by its related bodies corporate. Reliance is placed upon s 51A of the TPA (par 60).
24 It is alleged that if the Memorandum does not contain the terms pleaded and if the Licence Representations had not been made, the applicants would have refused to sign the Memorandum without those terms. Similarly, if Mr Darling were not authorised and the Authority Representation had not been made the applicants would have refused to sign the Memorandum without LME being a party to it (par 62). A similar pleading is made in respect of the Procurement Representation (par 63). An alternative plea of involvement in the alleged contraventions on the part of LME is also set out (par 64).
25 The statement of claim alleges a breach of the warranty of authority attributed to Ericsson Australia in the event, 'which is denied', that LME did not authorise Ericsson Australia and Mr Darling to negotiate and execute the Memorandum on its behalf (pars 65 and 66).
26 As to loss and damage it is pleaded in par 67:
'As a consequence of the breaches of the Memorandum pleaded in paragraphs 53(b) and 54(b) herein, the applicants have suffered loss and damage in that they have not been paid any royalties at all by LME or Ericsson Australia for the sale by Ericsson Australia, LME or any of its related bodies corporate, of ATM Products (as defined in paragraph 51(b)) herein)...'
Particulars are given.
27 Loss and damage flowing from the misleading or deceptive conduct is pleaded in par 68. It is alleged that because of that conduct and the reliance of the applicants upon it they have suffered or are likely to suffer loss and damage in that they are not parties to a contract to be paid any royalties by Ericsson Australia, LME or any of its related bodies corporate for the manufacture, sale or use of ATM Products outside Australia by LME or any of its related bodies corporate. Similar loss and damage flowing from the alleged breach of warranty of authority is also pleaded (par 69).
The Attacks on the Statement of Claim
28 Ericsson Australia and LME seek to strike out the statement of claim as a whole on the grounds that it fails to disclose any reasonable cause of action and that in various respects it has a tendency to cause embarrassment or delay in the proceedings by raising false issues.
29 Ericsson Australia and LME first contend that the pleading of the technology covered by the SAR and QP Patents is irrelevant to any cause of action relied upon in the proceedings and so is embarrassing. They identify the technology issues by reference to the descriptions of the subject matter of the Patents contained in pars 8 to 11 inclusive.
30 The pleading of the technology may be justified as a way of labelling or identifying the Patents by reference to their subject matter. It plays no other role in the statement of claim that is relevant to any cause of action. It conveys no implication as to the validity of the Patents. Although the pleading in this respect may be said to go beyond what is strictly necessary to identify the Patents, I do not consider that it has a tendency to embarrass and I would not accede to the proposition that the relevant paragraphs should be struck out.
31 It would be sufficient, in the defences, to plead to the existence of the Patents set up in the statement of claim without giving rise to any need for inquiry into the content and nature of the technology and, in particular, without any need for discovery of documents in connection therewith. For the most part the content of the Patents themselves will either bear out or falsify the description of their subject matter.
32 Counsel for Ericsson Australia and LME referred to his clients' anxiety that by admitting the subsistence of the pleaded Patents they might somehow be compromising their position on the validity of those Patents. There is, in my opinion, no basis for that stated fear which has any bearing upon the statement of claim. The existence of the Patents may be acknowledged without any implied concession as to their validity. The attack on pars 8 to 11 of the statement of claim fails.
33 Ericsson Australia and LME accept that the Jtec Contract is a background agreement which is properly pleaded (pars 12-14). However they contend that the pleading of a sequence of discussions leading up to the making of the Assignment Deed is unnecessary, there being no actionable representations to be derived from them nor any other fact relevant to any cause of action relied upon. I accept that contention. The various communications and dealings set out in pars 15 to 20 are by way of evidentiary background. They do not have a bearing upon any cause of action. And although later invoked in par 55 as circumstances relevant to the content of pleaded representations, there is no logical connection shown between those circumstances and the representations relied upon. I would therefore strike out pars 15 to 20 of the statement of claim as embarrassing.
34 The pleading as to the execution and content of the Assignment Deed can stand (pars 21 and 22). The Assignment Deed is referred to in the Memorandum of Agreement.
35 The Negotiation Agreement has no role to play on the current pleading and the paragraphs relating to it, namely pars 23 and 24, should also be struck out as embarrassing. So too should pars 25 to 27 which may provide some evidentiary background, but do not raise any factual material relevant to any pleaded cause of action. And again, although they are invoked in par 55 as circumstances relevant to the content of the pleaded representations, there is no logical connection made which would justify that invocation.
36 The sale of Ericsson Australia assets to Longreach Group is referred to in the Memorandum of Agreement and although not strictly necessary, in my opinion can stand (pars 28 and 29).
37 The lengthy pleading of negotiations leading up to the formation of the Memorandum of agreement is also unnecessary and embarrassing. None of the representations pleaded in the case is shown to derive content from them or have any logical connection to those negotiations. Nor is any relevant representation said to have been made in the course of the negotiations. Paragraphs 30 to 41 should be struck out as embarrassing.
38 The execution, terms and breach of the Memorandum support the cause of action in breach of contract and will stand.
39 When it comes to the pleading of representations arising from the execution of the Memorandum, reliance is placed upon '... the circumstances pleaded in paragraphs 15-20, 23-27 and 30-41 herein', but as previously noted no logical connection is made between those 'circumstances' and the representations asserted in par 55. The Licence Representations which are pleaded in par 55 are in terms representations about the meaning and effect of the Memorandum of Agreement. It is then said, in effect, that if the Memorandum does not bear those meanings the Licence Representations were misleading or deceptive (par 58).
40 Counsel for Ericsson Australia and LME submitted that the execution of a document does not involve a representation as to its meaning. I agree with that submission. That is not to say that the execution of a document may not involve representations about a party's capacity and intention to perform any obligations it imposes or representations about the truth or existence of reasonable grounds for warranties contained in it. There is, however, nothing in the act of signing an agreement that imports a representation as to the meaning of its terms. Nor is there any logical connection made in this case between the external circumstances relied upon and the Licence Representations. In my opinion, pars 55 and 58 do not disclose any reasonable cause of action. A claim based upon misleading or deceptive conduct in connection with the Licence Representations cannot stand.
41 Then it is said that if the various representations had not been made the applicants would have refused to sign the Memorandum (pars 62 and 63). But if that were the counterfactual pleading under which no loss would have arisen, it is not apparent from the pleading how the loss does arise (pars 68 and 69). That is to say, there are no material facts pleaded to support the necessary claim of loss and damage flowing from the alleged misleading or deceptive conduct.
Conclusion
42 In my opinion, the only element of the statement of claim that survives the attack made upon it is the contract claim based upon breach of the Memorandum of Agreement. In the circumstances I will strike out the following paragraphs of the statement of claim:
Paragraphs 15-20, 23-27, 30-41, 55, 58, 62-64 and 69
There will be leave to replead and I will give directions accordingly.
I certify that the preceding forty-two (42) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice French.