Who Ya Gonna Call Bark Busters Pty Ltd v Brooke

District Court of NSW|2013-02-27

Introduction 1The defendant, Andrew Brooke, had a conditional right to payment of USD 1,000,000 from Dingo Inc ("Dingo") pursuant to a document called a promissory note ("the Note"). The plaintiff ("Bark Busters") was entitled to payment of USD 125,000 when Mr Brooke received final payment under the Note. 2In March 2009 Mr Brooke relinquished his rights under the Note in return for a tranche of Dingo shares. The plaintiff seeks USD 125,000 converted to Australian dollars at the time of the issue of shares. I accept the plaintiff's claim.

Background 3Bark Busters is the owner of certain intellectual property related to the training of dogs. On 9 December 2003 Bark Busters licensed to Dingo the right to use the intellectual property, under a License Agreement, in return for a royalty of eight per cent during the life of the License Agreement. Unless terminated earlier, the License Agreement was to remain in effect until the beginning of 8 December 2013. Dingo was entitled to renew the agreement for 10 years on certain conditions. Those conditions included clause 13.2: "13.2 Assignment to Third Party. Subject to Licensor's Right of First Refusal set forth in Section 16, Licensee may request in writing Licensor's consent to sell or assign its rights under this Agreement, which consent shall not be unreasonably withheld, delayed, or conditioned. If Licensor grants its consent, Licensee shall pay to Licensor twelve and one-half percent (12.5%) of the gross sales price. In determining the gross sales price tor purposes of this Section 13.2, Licensee shall be entitled to deduct (1) all state and federal sales, excise, or transfer taxes (but not state and federal income taxes) imposed on Licensee as the result of the sale, and (2) any brokerage commission paid to an independent third-party for services rendered in securing a buyer or otherwise facilitating the sale, but shall not be entitled to make any other deductions from the sales price". 4Andrew Brooke was a stockholder in Dingo. 5Bark Busters, Dingo, Mr Brooke and Vectra Bank Colorado, National Association entered into an agreement dated 11 January 2008 titled Transfer Payment and Stock Redemption Acknowledgement Agreement ("Transfer Agreement"). The Transfer Agreement contained the following recitals: "TRANSFER PAYMENT AND STOCK REDEMPTION ACKNOWLEDGEMENT AGREEMENT This Transfer Payment and Stock Redemption Acknowledgement Agreement ("Agreement"), dated as of January 11,2008 ("Effective Date"), is made by and between WHO YA GONNA CALL BARK BUSTERS PTY LTD (ACN 056 484 103), a New South Wales, Australia corporation ("Licensor"), DINGO, INC, a Colorado corporation ("Licensee"), ANDREW BROOKE, an individual ("Brooke"), and VECTRA BANK COLORADO, NATIONAL ASSOCIATION ("Vectra"). WHEREAS, Licensor and Licensee have entered into that certain License Agreement dated December 2003 ("License Agreement"); WHEREAS, Section 13.2 of the License Agreement states that if Licensee sells, assigns or transfers its rights under the License Agreement, Licensee shall pay to Licensor twelve and one-half percent (12.5%) of the gross sales price ("Transfer Payment"); WHEREAS, Licensee is redeeming 82,370 shares of common stock ("Common Stock") of Licensee from Brooke ("Stock Redemption"), which represents forty percent (40%) of the outstanding Common Stock of Licensee, for a total purchase prices of $4,000,000 ("Redemption Proceeds"); WHEREAS, Licensor, Licensee, and Brooke have agreed that Brooke will pay to Licensor a portion of the Transfer Payment ("Redemption Transfer Payment") in accordance with the terms of this Agreement in exchange for Licensor's agreement that any Transfer Payment owed to Licensor in the future shall be equal to the Adjusted Transfer Payment set for the [sic] in this Agreement; WHEREAS, the parties acknowledge that the Stock Redemption is being funded in part by a loan to Licensee from Vectra ("Vectra Loan") and the Vectra Loan is being secured in part by all of the outstanding Common Stock of Licensee; and WHEREAS, Licensor desires to formally acknowledge and agree that, in the event that Vectra is required to foreclose upon the Common Stock as the result of a default by Licensee, such action by Vectra shall not be deemed a default of the License Agreement and Vectra shall be entitled to obtain ownership of all of the Common Stock of Licensee without risk that Licensor will terminate the License Agreement as the result of such action; provided, however, Vectra agrees that Licensor shall be permitted the opportunity to play an active role in selecting a suitably competent administrator with the knowledge required for running such a business and that Licensor's rights are otherwise reserved and protected. NOW, THEREFORE, in consideration of the above premises, which are incorporated into and made a part of this Agreement, and the mutual covenants contained herein, and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties agree as follows". 6The first two clauses of the Transfer Agreement provided as follows: "1. Transfer Payment 1.1 Brooke shall pay Licensor a Transfer Payment in the amount of $500,000 U.S. Dollars which represents 12.5% of the Redemption Proceeds received by Brooke from the Stock Redemption. 1.2 Licensee acknowledges that Brooke will receive the Redemption Proceeds in two separate transactions: (1) $3,000,000 on or about the date that Brooke tenders all of his Common Stock to Licensee ("Closing Date"), and (2) $1,000,000 upon the payment by Licensee of the promissory note ("Promissory Note") issued to Brooke on the Closing Date. 1.3 Brooke shall tender the Transfer Payment as follows: a, $375,000 within 30 days of the Closing Date ("Initial Transfer Payment"), b. $ 125,000 within 30 days of Brooke's receipt of final payment under the Promissory Note ("Financed Transfer Payment"). 2. Adjusted Transfer Payment. 2.1 Licensor acknowledges and agrees that the Transfer Payment satisfies 40% of Licensee's liabilities under Section 13.2 of the License Agreement. Licensor further acknowledges and agrees that once Licensor has received the Initial Transfer Payment Licensor shall only be entitled to receive an adjusted transfer payment ("Adjusted Transfer Payment") equal to twelve and one half percent (12.5%) multiplied by seventy percent (70%) of the gross sales price received by Licensee upon an approved assignment, transfer or sale of the License Agreement. Licensor further acknowledges and agrees that once Licensor has received the Financed Transfer Payment Licensor shall only be entitled to receive an Adjusted Transfer Payment equal to twelve and one half percent (12.5%) multiplied by sixty percent (60%) of the gross sales price received by Licensee upon an approved assignment, transfer or sale of the License Agreement. 2.2 Licensor and Licensee acknowledge and agree that this Agreement shall act as an amendment to Section 13.2 of the License Agreement and this Agreement satisfies the conditions of Section 17.3 of the License Agreement". 7The Transfer Agreement contained an entire agreement clause, and also provided: "4.4 Severability. If any term or provision of this Agreement will be held by a court of competent jurisdiction to be invalid or unenforceable, the remainder of this Agreement will not be affected thereby and each term and provision will be valid and enforceable to the fullest extent permitted by law. ... 4.6 Headings. The headings in this Agreement are for convenience purposes only and will not be construed as part of this Agreement or in any way limiting or amplifying any of the provisions of this Agreement, ... 4.8 Governing Law. This Agreement will be governed by the substantive laws of the State of New South Wales, Australia, without regard to the application of conflicts of law principles. 4.9 Attorneys Fees. Each party will be responsible for the payment of its own attorneys fees incurred with the respect to the preparation of this Agreement. In the event that a dispute arises between two or more parties regarding the interpretation of any provision of this Agreement, the prevailing party will be entitled to recover its reasonable attorneys' fees and other court costs incurred in connection therewith". 8The parties accepted that clause 4.8 required me to apply New South Wales law to the dispute irrespective of the proper law of the contract. 9Also in evidence was a copy of the Note. In handwriting across each page of the Note were two parallel diagonal lines, and within the lines were recorded the words "CANCELLED 3/16/09" [being 16 March 2009] and a signature of Liam Crowe, the President of Dingo. 10The Note stated: "PROMISSORY NOTE State of Colorado $1,000,000,00 January 11,2008 FOR VALUE RECEIVED, the undersigned Dingo, Inc. a Colorado corporation ("Borrower"), hereby promises to pay to the order of Andrew Brooke ("Lender'"), the principal sum of ONE MILLION DOLLARS ($1,000,000.00) ("Principal Sum"), with an interest rate of TEN PERCENT (10%), principal and interest payable in lawful money of the United States, which at the time of such payment shall be legal tender for the payment of all public and private debts ("Note"), as follows: 1. Term. Lender acknowledges that Borrower received the proceeds of a loan issued by Vectra Bank in the principal amount of TWO MILLION FIVE HUNDRED THOUSAND DOLLARS ($2,500,000.00), and dated January 11, 2008 ("Vectra Loan"). Lender further acknowledges and agrees that a primary term in the Vectra Loan is that the Borrower must refrain from making any principal payments on this Note until either the Vectra Loan is paid in full or the Vectra Loan is refinanced in full and the terms of the refinancing allow for repayment of the principal of this Note ("Principal Repayment Option"). The initial term of this Note ("Interest Repayment Term") shall begin on the date first written above and shall continue until the occurrence of a Principal Repayment Option. The subsequent term of tin's Note shall begin on the occurrence of a Principal Repayment Option and shall continue for a maximum period of one year and shall terminate upon payment of this Note in full ("Principal Repayment Term"). 2. Interest. Interest is to be computed at TEN PERCENT (10%) per annum. 3 Payments. (a) Payments. Borrower shall remit payments as follows: During the Interest Repayment Term, Borrower shall make interest only quarterly payments in arrears of TWENTY FIVE THOUSAND DOLLARS ($25,000.00) beginning on April 1,2008. During the Principal Repayment Term, Borrower shall pay accrued interest in arrears until the Principal Sum is repaid in foil, in payments of EIGHT THOUSAND THREE HUNDRED THIRTY THREE and 33/200 DOLLARS ($8,333.33) per month of the Principal Repayment Term, up to twelve (12) months, commencing on the first day of the first month following the commencement of the Principal Repayment Term and ending when the Principal Sum is paid in full. Borrower shall make a single, final payment of ONE MILLION DOLLARS ($1,000,000.00) before the second day of the thirteenth month of the Principal Repayment Term. 4. Default. (a) Default Interest Rate. If the Borrower shall default in the payment when due of any or all payments due hereunder, default interest shall begin to accrue on the unpaid balance at the rate of TWELVE PERCENT (12.0%) per annum, retroactively to the date of this Note. (b) Default. If any of the events listed in this Section (b) occur ("Events of Default"), Lender shall have the option to convert all, but not less than all, of the outstanding principal balance of this Note into shares of Common Stock of the Borrower. The conversion rate shall be EIGHTY FIVE AND 15/100 DOLLARS ($85.15) per share of Common Stock. An Event of Default shall consist of any of the following: any amount owing under this Note not paid when due and such nonpayment continues for a period of sixty (60) days after Borrower receives notice from Lender; a breach of any representation or warranty under this Note or under any such guarantee or other agreement that remains uncured for a period of sixty (60) days after Borrower receives notice from Lender; the liquidation, dissolution of the undersigned or any corporation, partnership, trustees or other entity guaranteeing or providing security for the payment of this Note; the filing of a petition under any bankruptcy, insolvency or similar law by the undersigned or by any individual, corporation, partnership, trustees or other entity guaranteeing or providing security for the payment of this Note; the making of any assignment for the benefit of creditors by the undersigned or by any individual, corporation, partnership, trustees or other entity guaranteeing or providing security for the payment of this Note; the filing of a petition under any bankruptcy, insolvency or similar law against the undersigned or against any individual, corporation, partnership, trustees or other entity guaranteeing or providing security for the payment of this Note and such petition not being dismissed within a period thirty (30) days of the filing. 5. General Terms and Conditions. (a) Prepayment. Borrower may prepay any portion of this Note at any time without penalty. Any prepayments shall be first applied to any other sums due hereunder and then to the outstanding principal balance. (b) Attorneys' Fees. Borrower agrees to promptly reimburse Lender for all reasonable costs and expenses, including attorneys' fees and court costs, incurred to collect this Promissory Note or any installment hereunder, if not paid when due. (c) No Waiver. No failure on the part of Lender to exercise, and no delay in exercising any right hereunder shall operate as a waiver of such right; nor shall any single or partial exercise by Lender of any right hereunder preclude the exercise of any other right. The remedies herein provided are cumulative and not exclusive of any remedies provided by law. (d) Amendment. This Note may not be amended, modified, or changed, nor shall any waiver of any provision hereof be effective, except by an instrument in writing and signed by the party against whom enforcement of any waiver, amendment, change, modification or discharge is sought. (e) Governing Law. The parties hereby acknowledge and agree that this Note shall be governed by and construed in accordance with the laws of the State of Colorado. For the purposes of any proceeding involving this Note or any of the obligations of the undersigned, the undersigned hereby submit to the exclusive jurisdiction of the courts of the State of Colorado and the United States having jurisdiction in Denver, Colorado and agree not to raise and waive any objection to or defense based upon the venue of any such court or based upon forum non conveniens. The undersigned agree not to bring any action or other proceeding with respect to this Note or with respect to any of their obligations in any other court unless the state and federal courts of Colorado determine that they do not have jurisdiction in the matter. (f) Compliance With the Laws. Both parties shall be bound by, and, at their own cost, shall comply with all applicable laws, statutes, regulations or ordinances of the United States of America. Federal Agencies and State and Local Government Entities. (g) Severability. In the event that any provision of this Note shall be held to be invalid or unenforceable for any reason, such invalidity or unenforceability shall attach only to such provision and shall not effect or render invalid any other provisions of this Note. (h) Assignment. Except as provided below, neither party shall, without the prior written consent of the other party, sell, assign, transfer, or otherwise hypothecate or encumber any of its interest in this Note or in any contract(s) entered into in accordance with this Note. Such consent shall not be required for the assignment or transfer by Borrower of its entire interest in this Note to a company wholly owned by Borrower, but no such assignment or transfer made by Borrower without the consent of Lender shall relieve Borrower from any of its obligations or liabilities under this Note. Subject to the limitations set forth above, this Note shall be binding upon and inure to the benefit of the respective successors and permitted assigns of the parties. (i) Section Headings. The headings contained in this Note are for reference purposes only and are not deemed to be a part of this Note or to affect the meaning and interpretation of this Note. (j) Amendment. This Note may not be amended or terminated except by and instrument in writing signed by the Borrower and the Lender. (k) Entire Agreement. This Note represents the entire understanding of the parties and supersedes all prior or contemporaneous agreements relating to the subject matter contained herein. None of the terms contained herein can be waived or modified except by the written consent of both parties. (l) Rights and Remedies. The Lender will not be required to resort to or pursue any of its rights or remedies under or with respect to any other agreement or with respect to any other collateral, guarantee or other security before pursuing any of its rights or remedies under this Agreement. The Lender may pursue its rights and remedies in such order as it determines. (m) Subordination. The payment of principal of and interest under this Note is subordinated, to the extent and in the manner hereinafter set forth, in right of payment to the payment of the Vectra Loan. This subordination provision is made for the benefit of all parties who, in reliance upon such provision, are holders of, become holders of or continue to hold the Vectra Loan, and they or any of them may proceed to enforce such provisions against the Lender without the necessity of joining the Borrower as a party. The Lender and any transferee of the Note agree to confirm in writing to any holder of the Vectra Loan or any prospective holder of the Vectra Loan identified to the Lender or such transferee by the Borrower the subordination provision set forth in this Note. (n) Notices. All notices regarding this Note, requests, demands and other communications must be in writing and may be delivered personally or sent by certified mail, courier or other written means of communication, other than email, with verification of delivery addressed to the Borrower or the Lender, as the case may be, at its address set forth below or to such other address as to which notice is given: if to the Borrower: if to the Lender: Dingo, Inc. Andrew Brooke 250 West Lehow Ave., Suite B Englewood, CO 80110 IN WITNESS WHEREOF, the Borrower has executed this Note as of the day and year first above written". 11Also on 11 January 2008 Mr Brooke and Dingo entered an agreement entitled "Redemption Agreement", which provided as follows: "REDEMPTION AGREEMENT This REDEMPTION AGREEMENT ("Agreement") is entered into as of January 11, 2008 ("Effective Date"), by and between DINGO, INC., a Colorado corporation ("Company"), and ANDREW BROOKE, an individual ("Shareholder"). RECITALS A. As of the date hereof, the Shareholder owns, of record and beneficially, 100,000 shares of the Company's common stock ("Common Stock"). B. The Shareholder and the Company desire to provide for the redemption of 88,600 shares of the Common Stock owned by the Shareholder ("Shares"), subject to the terms and conditions of this Agreement. C. The Shareholder and the Company desire to each pay half of all costs associated with the drafting of the Agreement and all related documents, including those documents related to the loan from Vectra Bank Colorado ("Vectra Bank Loan") to the Company for purposes of funding this Agreement. NOW, THEREFORE, in consideration of the mutual covenants contained in this Agreement, and for other good and valuable consideration the receipt and adequacy of which are hereby acknowledged, the Company and the Shareholder agree as follows: AGREEMENT 1. Redemption of Shares. (a) Subject to the terms and conditions of this Agreement, the Shareholder shall put the Shares to the Company, and the Company shall redeem such Shares, for a redemption price of $4,000,000 (approximately $45.15 per Share) ("Redemption Price") on January II, 2008 at 9;00 a.m. or such other date and time designated by the Company and the Shareholder at the Company's offices or at such other location designated by the Company and the Shareholder ("Closing"). (b) The Redemption Price for the Shares shall be paid to the Shareholder as follows: (i) $3,000,000.00 in immediately available funds on or before the Closing; and (ii) $1,000,000.00 in the form of a Promissory Note attached hereto as Exhibit A. (c) At the Closing, the Shareholder shall provide any and all certificates or other documentation representing the Shareholder's ownership in the Common Stock to the Company. (d) At the Closing, the Shares shall be transferred and conveyed to the Company by the Shareholder free and clear of all liens, claims and encumbrances ("Liens"). (e) At the Closing, the Company shall issue a certificate to Shareholder representing ownership of 11,400 shares of Common Stock. ..." 12An unexecuted form of the document entitled "PROMISSORY NOTE" was annexed to the Redemption Agreement. 13The evidence also included a stock certificate of Dingo dated 25 March 2009, which certified that Mr Brooke was the registered holder of 11,106 shares in Dingo, and a signed acknowledgement by Mr Brooke dated 14 March 2009 in the following terms: "Agreement to Convert Brooke Note to equity in Dingo, Inc. I, Andrew C Brooke, hereby acknowledge and agree to convert $1 Million Promissory Note currently held by me into stock in Dingo, Inc. on terms and conditions mutually agreed upon by both parties". 14Bark Busters received the Initial Transfer Payment of $375,000 within 30 days of the Closing Date as provided in clause 1.3a of the Transfer Agreement. Bark Busters seeks the further amount of $125,000, known as the Financial Transfer Payment in clause 1.3b. 15No parties gave oral or affidavit evidence in the proceedings. To the extent that there was any dispute of fact I was left to determine it on the documents in evidence.

The Issues 16The parties agreed that the dispute involved the following issues:

Is the document titled "PROMISSORY NOTE" (annexure B in exhibit A) the "promissory note" referred to in clauses 1.2 and 1.3 of the Transfer Payment Agreement (annexure A in exhibit A)? a. If not, when (if at all) did/does the USD125,000 referred to in clause 1.3(b) of the Transfer Payment Agreement become due? b. If so, did the cancellation of the promissory note on 16 March 2009 or the conversion of the promissory note on 14 March 2009: i. constitute "receipt of final payment under the Promissory Note" in accordance with clause 1.3 of the Transfer Payment Agreement, or ii. by reason of waiver, election, estoppel or failure of condition (so as to) cause the USD125,000 to become due on or about 30 days after 16 March 2009.
Assuming the USD125,000 became due: a. should the court give judgment in AUD, b. if so, at what date should the USD125,000 be converted to AUD, what is the source of the rate, and what is the AUD amount produced by that conversion.
Should the prescribed statutory interest rate or some applicable US interest rate (and if so, what rate) be applied to any amount due?
Should the plaintiff, if successful, receive any (and what) amount in respect of "reasonable attorneys fees" apart from the usual costs order in favour of a successful party?

The promissory note 17One effect of clause 1.2 of the Transfer Agreement is that Dingo acknowledged that Brooke would receive $1,000,000 "upon the payment by [Dingo] of the promissory note...issued to Brooke on the Closing Date". 18The Closing Date is the date Brooke tended all his stock to Dingo. The Redemption Agreement evidences that this event occurred on 11 January 2008. Thus, the Note is submitted by Mr Brooke to be "the promissory note...issued to Brooke on the Closing Date" because it is called a promissory note, it bears the appropriate date to answer the description of the promissory note in the Transfer Agreement, it contains a promise to pay the amount of $1,000,000 and it is between the correct parties, being issued by Dingo to Mr Brooke. 19Bark Busters is not a party to the Note, and disputes that the Note is the promissory note in clause 1.2(2). 20The Transfer Agreement provided that it would be governed by the "substantive laws of New South Wales". The "substantive laws" must include both the written and unwritten laws (cf s 11 of the Jurisdiction of Courts (Cross-vesting) Act 1987 (NSW)) and would include the laws of the Commonwealth applicable to New South Wales by virtue of the Constitution (see ss 1, 51 and 109). Thus, relevantly, the Bills of Exchange Act 1909 (Cth) is part of the substantive law of New South Wales enacted under the power in s 51(xvi) of the Constitution. 21Section 89 of the Bills of Exchange Act 1909 (Cth) defines a "promissory note", relevantly, as an "unconditional promise" to pay "on demand or at a fixed or determinable future time" a sum of money. The Note issued by Dingo to Mr Brooke on 11 January 2008 was not unconditional. Payment of principal was conditional on prior payment or refinance of the Vectra loan. Bark Busters submits that this means that the Note was not "the promissory note...issued to Brooke on the Closing Date". 22I accept that because of its terms the Note issued on 11 January 2008 by Dingo was not a promissory note under s 89 of the Bills of Exchange Act 1909 (Cth). That matter did not appear to be in contest. It may have some consequences if a party has promised to issue or receive a promissory note. But, the present question is: what is "the promissory note...issued to Brooke" on 11 January 2009. Apart from the Note there is no other document that answers that description. Nor did either party submit that there was another document which answered that description. 23Clause 1.2(2) uses the past tense. The Note is "issued to Brooke on the Closing Date" (which is the date of the Transfer Agreement) rather than "to be issued to Brooke". This, coupled with the acknowledgement by Dingo in clause 1.2 suggests "the promissory note...issued to Brooke" was a matter acknowledged by all parties, rather than promised by one. If there was any promise about the form of the promissory note it could only have been by Dingo, which is not material to these proceedings. And it cannot be disputed that as between Mr Brooke and Dingo, the Note was the "promissory note" agreed in the Transfer Agreement. 24It is true that there is an element of unfairness in using the description "the promissory note" to refer to a document which is not a promissory note. But Bark Busters was not obliged to enter the agreement in that form. It could, for example, have refused to sign until it saw a copy of the promissory note, executed or unexecuted, or it could have required a copy to be an annexure to the Transfer Agreement (as occurred with the Redemption Agreement). It could also have required Mr Brooke to promise expressly that he had received a promissory note in the desired terms. None of these things occurred. Bark Busters may even have been mislead about the nature of "the promissory note". But the circumstances surrounding the Transfer Agreement persuade me that the parties, and in particular Bark Busters, must be taken to have accepted a note in whatever form it took, and that the Note, even if its form and content were unknown to Bark Busters, was "the promissory note" referred to in clauses 1.2 and 1.3. The fact that a substantial obligation, a payment of $125,000 under clause 1.3, was referable to "the promissory note" is a further matter in Mr Brooke's favour on this point. 25For these reasons, I am persuaded that the Note is the promissory note referred to in clauses 1.2 and 1.3 of the Transfer Agreement. Cancellation of the Note 26In March 2009 Mr Brooke traded his interest in the Note for 11,601 shares. Although Mr Brooke submitted that this event resulted from financial difficulties encountered by Dingo, there was no evidence to this effect. 27Mr Brooke originally sold his shares at an average price of about $48.56 per share ($4,000,000 for 82,370 shares). The Note provided that if there was an event of default, Mr Brooke: "shall have the option to convert all, but not less than all, of the outstanding principal balance of this Note into shares of Common Stock of [Dingo]" at a "conversion rate" of $85.15 per share. 28The evidence did not identify any act of default by Dingo. There could have been no default in a failure to pay a principal amount of the Note because the promissory note records that the "principal repayment term", when principal repayments became payable, did not commence until the Vectra loan was repaid or refinanced on terms that allowed principal repayment to Mr Brooke, and it was an admitted fact that this had not occurred. Thus, the only possible default on the Note could have been in the payment of interest. Dingo was obliged to pay interest at 10 per cent per annum until the principal repayment term commenced. Thus, interest of $100,000 was payable in quarterly payments of $25,000. 29But there was no evidence of any default on the payment of interest, and in any event, the Note did not provide for the interest to be converted into stock. The principal thus remained at $1,000,000, and at a conversion rate of $85.15 per share, would entitle Mr Brooke to an amount of about 11,744 shares. In fact Mr Brooke received 11,106 shares. If default had occurred, Mr Brooke should have received 11,744 shares or more (if interest was converted), not less. 30For this reason, and because of the absence of any evidence of default, I have concluded that the conversion of the promissory note into 11,106 shares was not pursuant to the terms of the promissory note, but by reason of some other agreement between the parties. The acknowledgement by Mr Brooke dated March 14th, 2009 indicates this. In effect, Mr Brooke has traded the $1 million conditional note for 11,106 shares. There is no evidence identifying the true market value of those shares. It may be that the shares have the same value as the Note issued by Dingo, but that begs the question. 31The important matter concerns whether the trading of the Note for the consideration of 11,106 shares in Dingo, and the consequent cancellation of the Note, constituted "receipt of final payment under the Promissory Note". Although the precise value of the Note, and the shares, may be uncertain, there is no evidence to indicate that the shares were other than valuable consideration for cancellation of the Note. 32The terms of the Transfer Agreement are of limited assistance in assessing whether there has been final payment under the Note. Clause 1.1 states that USD 500,000 "represents 12.5% of the Redemption Proceeds received by Brooke", and clauses 1.2 and 1.3 refrain from requiring payment to Brooke of $1,000,000. Both the latter clauses appear to deem "payment...of the promissory note" or "final payment under the Promissory Note" as amounting to receipt of $1,000,000. Further, the Transfer Agreement does not, strictly, require the "Promissory Note" to be in the amount of $1,000,000, although that amount is, or is deemed to be, received on final payment and the Promissory Note that I had found is for an amount of $1,000,000. 33Nor does the final payment being termed "Financed Transfer Payment" assist. The use of that title did not mean that Mr Brooke was a debtor to Bark Busters, though he clearly was. The title may have referred to Dingo being a debtor of Mr Brooke. 34Whilst payment is commonly made by the provision of money, that is not an essential characteristic. "Payment in kind" is an obvious counter example. In "The Law Relating to Bills of Exchange in Australia" (LBC, 1953) BB Riley stated at p 194: "Payment. The order or promise being to pay in money, the holder is entitled to insist upon payment in money, but he may elect to treat satisfaction in some other form as equivalent to payment in money, and if he does he will be held to his election". 35To similar effect, see F A A Russell and D S Edwards in a work bearing the same title (LBC 1928) at 187. Weaver and Craigie in "The Law Relating to Banker and Customer in Australia" (Lawbook Co, [4.1830]) state that "Payment is the discharge of a monetary obligation". 36In Baker & Davies plc v Leslie Wilks Associates (a firm) [2005] 3 All ER 603 at p 608: "[16] The word 'payment' in ordinary parlance is capable of including a payment in kind, as that well-known expression exemplifies. One talks, for example, of paying a debt to society by the performance of community service. In my judgment, the word 'payment' in these statutory provisions includes a payment in kind, at any rate where the payment in kind is capable of valuation in monetary terms. In such a case the 'amount to be paid by him' in s 10(4) of the 1980 Act refers not to the amount of the work, but to its value. That construction, in my judgment, best gives effect to what appears to me to be the intention of Parliament." 37That was a statutory provision, but contractual provisions have been given similar meaning. See Elmdene Estates Ltd v White [1960] AC 528: "the court must look at the substance and reality of a transaction, not its form" (per Viscount Simonds at p 538). "Can a tenant be said to have paid a premium if he has agreed to discharge a debt due to him by the landlord? I would say 'Yes.' If such discharge is a pecuniary consideration he has satisfied the landlord's demand for a premium by agreeing to the discharge, and such satisfaction in the context of this Act is, in my opinion, equivalent to payment" (per Lord Keith of Avonholm at p 543). "[T]he 'payment' of it must include any means appropriate to the subject-matter by which the consideration or benefit in question is passed from the one to the other. ...the cancellation of the debt would amount to payment of the 'pecuniary consideration' in question, although no money actually passed" (per Lord Jenkins at p549). And in White v Elmdene Estates Ltd [1959] 3 WLR 185, p192 per Lord Evershed MR: "the word 'payment' in itself is one which, in an appropriate context, may cover many ways of discharging obligations. It may even (as is well known, although it does not arise in this case) include a discharge, not by money payment at all, but by what is called 'payment in kind'". 38These authorities suggest that "payment" or "final payment" of the promissory note would be the provision of some consideration which is accepted to discharge the obligations under the note. Here the transfer of shares was perhaps a form of "payment in kind" and operated to discharge the obligations of Dingo under the Note, as the cancellation of the Note confirms. 39Accordingly, in my view, final payment "under the Promissory Note" does not require that Mr Brooke receive $1,000,000. Rather, final payment means a payment such that no other payments are due or payable because the obligations under the Note are fully discharged. 40Here the obligations under the Note are fully discharged. There is to be no further payment under the Note. If there has been no "final payment", it will never occur. The Note has been "converted" to stock on 14 March 2009 and "cancelled" on 16 March 2009. 41Effectively, Dingo has paid the Note by the issue or transfer of the 11,106 shares to Mr Brooke on 25 March 2009. On this construction, final payment of the Note occurred on 25 March 2009. The alternative is to hold that receipt of Dingo shares in return for the Note is not receipt of final payment. Such a construction would allow Mr Brooke to trade the Promissory Note for something other than cash to avoid the $125,000 payment to Bark Busters. That seems to be an uncommercial construction, not required by the literal words of the contract and unlikely to have been the intention of the parties. If it were intended that the "final payment" needed to be USD 1,000,000 cash, then it would be a simple matter to say so: there is no reason why "the sum of USD 1,000,000 in cash" could not have been used, rather than "final payment", in clause 1.3(b). 42Mr Brooke raises two arguments against the conclusion that final payment under the Note occurred on 25 March 2009. 43First, he relies upon clause 2.1 of the Transfer Agreement. The effect of this clause is to reduce the amount Bark Busters is to receive under the License Agreement in the event of an "approved assignment, transfer or sale of the License Agreement". As Bark Busters is entitled, under clause 13.2 of the License Agreement, to 12.5 per cent of the gross sale price by Dingo of any sale of the rights under the license, clause 2.1 operates to treat the redemption of Mr Brooke's stock (being 40 per cent of Dingo's common stock) as equivalent to a sale of 40 per cent of the rights under the License Agreement. Hence, upon payment of the $375,000 under clause 1.3, Bark Busters' entitlement was reduced to 70 per cent of the 12.5 per cent of the sale proceeds, and it would reduce by a further 10 per cent upon payment of the USD 125,000 "Financed Transfer Payment". 44I do not see how this clause assists Mr Brooke. Of course payment of the $125,000 would reduce Bark Busters' entitlement, but that says nothing about whether the payment is or was due. The fact that Bark Busters has a greater entitlement in respect of the sale of licence rights by Dingo, if the "Financed Transfer Payment" has not been made is not, in my view, probative of whether or not that payment was due. 45Mr Brooke also argued that clause 1.1 indicates that Bark Busters was intended to receive a fixed percentage of the Redemption Proceeds. So much may be true. But by stating "$500,000 U.S. Dollars which represents 12.5% of the Redemption Proceeds" the clause has flagged a possible controversy if for any reason USD 500,000 differs from 12.5 per cent of the Redemption Proceeds. In that event, the primary amount specified as payable is $500,000, and (absent other factors) the amount it "represents", the 12.5 per cent, must give way. 46Bark Busters advanced an alternative argument that part of the payment of the Redemption Proceeds was the receipt by Mr Brooke of the Note. This argument finds some support in clause 1(b)(ii) of the Redemption Agreement. It provides: "1. Redemption of Shares. ... (b) The Redemption Price for the Shares shall be paid to the Shareholder as follows: ... (ii) $1,000,000.00 in the form of a Promissory Note attached hereto as Exhibit A." 47Thus, the Redemption Agreement indicates that provision of the Note constituted payment of the Redemption Price. But Bark Busters was not a party to this agreement, nor was there evidence that Bark Busters was aware of its terms. Unlike the "Promissory Note", the Redemption Agreement was not referred to in the Transfer Agreement. 48In the Transfer Agreement receipt by Mr Brooke is relevantly by "payment by [Dingo] of the promissory note" or by "final payment under the Promissory Note". Payment of, or under, the Note is not the same as receipt of the Note, and thus mere receipt of the Note by Mr Brooke is not receipt of the second part of the Redemption Proceeds. 49Thus, in the Redemption Agreement Dingo and Mr Brooke appear to have agreed that Mr Brooke receives payment (in part) by tender of the Note, whereas in the Transfer Agreement they agree Mr Brooke will receive payment (in part) by "payment ...of the promissory note". The Transfer Agreement is the governing agreement so far as Bark Busters' rights are concerned, and the terms of that agreement cannot be read down according to the terms of an agreement to which Bark Busters is not a party. Accordingly, I do not accept this alternative argument of Bark Busters.

Waiver election estoppel or failure of condition 50Bark Busters also submits that in accordance with the principles in Mackay v Dick (1881) 6 App Cas 251, the postponement of the payment of USD 125,000 lapsed because of the failure of the implied condition that Mr Brooke take no steps to preclude payment under the Note. In Stirling v Maitland & Boyd (1864) 5 B & S 840 at [852]; (1864) 122 ER 1043 at p 1047, Cockburn CJ said: "if a party enters into an arrangement which can only take effect by the continuance of a certain state of circumstances, there is an implied engagement on his part that he shall do nothing of his own motion to put an end to the state of circumstances, under which alone the arrangement can be operative." 51In Butt v M'Donald (1896) 7 QLJ 68 at pp 70-71, Griffith CJ said: "It is a general rule applicable to every contract that each party agrees, by implication, to do all such things as are necessary on his part to enable the other party to have the benefit of the contract." See also Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd (1979) 144 CLR 596 at 607 and Butts v O'Dwyer [1952] HCA 74; (1952) 87 CLR 267. 52But I have found that Mr Brooke received payment under the Note by receipt of the 11,106 shares in Dingo and thus I have found that no condition has failed, so this issue does not arise. 53Bark Busters also argued that the Note required payment in a reasonable time. But the terms of the Note were to the contrary, and even s 89 of the Bills of Exchange Act 1909 (Cth) did not impose such a requirement on a promissory note.

Currency issues 54In United Railways of Havana and Regla Warehouses Ltd [1961] AC 1007, the House of Lords held that the foreign currency entitlements of the plaintiff under a contract the proper law of which was a foreign country was to be converted into the local currency at the rates of exchange prevailing when the amounts fell due and were not paid, whether the amount due was a debt or damages (see eg at pp 1048-1049 per Viscount Simonds, p 1053, p 1058 per Lord Reid, p 1071 per Lord Denning). The House of Lords reconsidered the matter in Miliangos v George Frank (Textiles) Ltd [1976] AC 443. At p 461 Lord Wilberforce inferred that: "if Lord Reid had been persuaded that action could be brought for payment of dollars, and procedural and practical difficulties in doing so could be overcome, his inclination on grounds of justice would have been in favour of a separate rule relating to payment of money debts expressed in foreign currency, at least where they arise under a contract whose proper law is foreign." 55But Lord Wilberforce concluded that (pp 462-463): "The courts have evolved a procedure under which orders can be made for payment of foreign currency debts in the foreign currency. The Court of Appeal has given its approval to the form: 'It is adjudged... that the defendant do pay to the plaintiff [the sum in foreign currency] or the sterling equivalent at the time of payment.'" and held that this rule should apply for "foreign money obligations", that is "obligations of a money character to pay foreign currency arising under a contract whose proper law is that of a foreign country and where the money of account and payment is that of that country, or possibly of some other country but not of the United Kingdom" (at p 467). 56Lord Wilberforce left open whether this rule should also apply to damages (at p 468, see also Lord Cross of Chelsea at p 497). 57It can be seen that this case does not conveniently fit within the test espoused in Miliangos. Although there is an "obligation of a money character to pay foreign currency arising under a contract", and "the money of account and payment is that of that country" the parties have chosen the law of New South Wales, not the laws of any of the United States of America as being the governing law. Additionally, the plaintiff is an Australian company. These differences bear a significance to which I shall return. 58The Court of Appeal considered the matter in Brown Boveri (Aust) Pty Ltd v Baltic Shipping Co (1989) 15 NSWLR 448, pp 463-4 per Kirby P (see also at p 472 per Hope JA and McHugh JA): "Before 1977 in England, and a little later in Australia, it was generally considered that a party could only sue to recover a judgment in the local currency. However, it is now plain that this is not so. A plaintiff can seek to recover a judgment expressed in a foreign currency...However, this enlargement of the power of a court to proceed to express a judgment in terms of a foreign currency is not authority for a requirement that the court must do so... The court's duty is to express a judgment in the currency which best expresses the loss of the party which has sued. That test begs, and does not solve, the question which is before the Court now. The appellant then argued that it was up to it to elect the currency which best expressed the loss...[see Barclays Bank International Ltd v Levin Brothers (Bradford) Ltd [1977] QB 270 at 277] where his Lordship said: '... when someone is under an obligation to pay another a sum of money expressed in a foreign currency but to pay it in this country, the person under the obligation has an option, if he is to fulfil his obligation at the date when the money is payable, either to produce the appropriate amount in the foreign currency in question or to pay the equivalent in sterling at the rate of exchange prevailing at the due date.' ... However, there is an important point of distinction. Mocatta J was careful to point out that the option to pay in sterling was applicable only where the obligation to pay the sum was 'to pay it in this country', ie the United Kingdom. Each country is entitled to expect that, special provision apart, a debt for civil wrong will be settled in the currency of that country, at least if a party entitled to sue there so claims. The currency of Australia is Australian dollars. The respondent has lawfully sued it in the Supreme Court of this State of Australia claiming a judgment expressed in that currency. There is nothing to require it to accept payment in pounds sterling in this country. Therefore, I would not accept the entitlement of the appellant to discharge its obligation under Art 4, r 5 in this jurisdiction by tendering to the respondent £100 sterling in notes or the gold value of such sum in 1982 when the loss occurred." 59In Norsemeter Holdings AS v Boele (No 3) [2002] NSWSC 390, Einstein J stated (at [7]): "The governing principle is that a judgment should be expressed in foreign currency if such an order is sought by the claimant, and that currency is the currency in which the claimant's loss was felt or which most truly expresses its loss". 60Austin J considered these matters in Daewoo Australia Pty Ltd v Suncorp-Metway Ltd [2000] NSWSC 35; (2000) 48 NSWLR 692. At p 700 [27] his Honour recognised: "the overriding proposition that the duty of the court is to express its judgment in the currency which best expresses the loss of the party who has sued" (see also BHPB Freight Pty Ltd v Cosco Oceania Chartering Pty Ltd [2009] FCA 1448 at [4], The Folias [1979] AC 685). At p 701 [31] in Daewoo, Austin J rejected the proposition that "a claim for failure to pay foreign currency is a claim for damages rather than debt". 61In the present case Bark Busters sued for "$125,000" which I took to mean AUD 125,000. When I raised this during the hearing Bark Busters asserted that in fact it sought USD 125,000 converted to Australian dollars at the time the money was due. The submissions of both parties had proceeded on this basis, and Mr Brooke eschewed any objection to the plaintiff's claim being so regarded. 62Brown Boveri is authority for the proposition that the plaintiff is entitled to seek judgment in Australian dollars. It indicates that while Miliangos enlarged the power of the court to express a judgment in terms of a foreign currency it did not require a court to do so. Thus, a court should not reject a plaintiff's claim for relief which is formulated in accordance with the principles in Havana. In other words, the plaintiff remained entitled, although not bound, to seek judgment in the local currency, with the foreign currency conversion occurring at the date the money was due. This seems to be accepted by the BHPB decision at [7]. 63In the Daewoo decision Austin J indicates that the currency best expressing the plaintiff's loss is the governing rule. This is not simply a matter of choosing Australian or, in this case, United States dollars, but also when the conversion is to occur. Indeed, the latter is the more important question, since an expression of the damages in one currency or the other converted at the day of judgment might be of little consequence. 64In the present case, the plaintiff is an Australian company with entitlements under a contract governed by Australian law. Although a payment of USD 125,000 became due because of the cancellation of the Note, it is reasonable to expect that the loss to the plaintiff is the Australian dollar equivalent of USD 125,000 as at the time the funds became due. In the absence of evidence I would infer that Australian dollars at that time best expresses the loss to this Australian company. Had the USD 125,000 been paid on the due date it was open to Bark Busters to immediately convert the USD 125,000 into the local currency. In the circumstances of this case, both the option to elect an approach equivalent to the traditional rule in Havana (endorsed in Brown Boveri and BHPB), and the currency best expressing the plaintiff's loss (espoused in Daewoo) both result in the same approach sought by Bark Busters. 65For the reasons I have given, the final payment under the Promissory Note occurred when Mr Brooke was issued with the 11,106 shares on 25 March 2009. The Transfer Agreement clause 1.3(b) required payment of the USD 125,000 within 30 days, which is by 24 April 2009. 66Accordingly, the amount of USD 125,000 should be converted to Australian dollars on 24 April 2009. As the debt is to be converted into Australian dollars, interest should run on the amount at the prescribed rates from that date until judgment. 67As to the conversion rate, s 85A(1) of the Reserve Bank Act 1959 (Cth) provides: "Judicial notice of statistical information published by Bank (1) All courts, judges and persons acting judicially are to take judicial notice of statistical information contained in a publication issued in the name of, by, or under the authority of, the Bank". 68I am entitled to take judicial notice of those rates: see Frank Jasper Pty Ltd v Glew (No 3) [2012] WASC 24 (S) at [19]. The calculation is as follows: As at 24 April 2009 USD AUD 1 1.3853749166 125,000 173,171.90 (125,000 x 1.3853749166)

69The statutory interest calculation to 15 July 2013 is as follows: Start of period End of period Number of days in period Annual interest rate (%) Daily interest rate (%) Interest for period per dollar Interest for period (AUD)

24-Apr-2009 30-Jun-2010 433 9 0.0247 0.1068 18,489.07 1-Jul-2010 31-Dec-2010 184 8.5 0.0233 0.0428 7,420.30 1-Jan-2011 30-Jun-2011 181 8.75 0.0240 0.0434 7,514.00 1-Jul-2011 31-Dec-2011 184 8.75 0.0240 0.0441 7,638.54 1-Jan-2012 30-Jun-2012 182 8.25 0.0225 0.0410 7,104.31 1-Jul-2012 31-Dec-2012 184 7.5 0.0205 0.0378 6,547.32 1-Jan-2013 30-Jun-2013 181 7 0.0192 0.0347 6,011.20 1-Jul-2013 31-Jul-2013 31 6.75 0.0185 0.0057 992.77 61,717.50

70Accordingly, in my opinion the plaintiff is entitled to judgment in the sum of $234,889.40 (being $173,171.90 principal plus $61,717.50 interest).

Costs 71The plaintiff seeks an order for indemnity costs. Clause 4.9 entitles Bark Busters to "recover its reasonable attorneys' fees and other court costs incurred in connection" with a dispute regarding the Agreement. 72Bark Busters cites Sandtara Pty Ltd v Australian European Finance Corp Ltd (1990) 20 NSWLR 82 at pp 97-98 as justifying an indemnity costs order. In that case the contractual provision entitled recovery of "costs as between solicitor and client". Clause 4.9 is not in those terms. 73I accept that where a contractual provision entitles a party to recover indemnity costs, generally such a provision should be given effect: Macquarie International Health Clinic Pty Ltd v Sydney South West Area Health Service (No 3) [2010] NSWSC 1139 at [39]. However, this is not such a provision. It entitles Bark Busters to its reasonable attorneys' fees and other court costs. In my view, this requires Bark Busters to establish both its attorneys' fees and court costs, and the reasonableness of the attorneys' fees claimed. This provision is indicative of an order on the usual basis. Clause 4.9 does not create any presumption in favour of the reasonableness of those fees, as would be the case if an indemnity costs order was made. 74I also take into account that on some of the arguments before me Bark Busters was unsuccessful. 75In my view, the usual order should apply. 76Accordingly, the orders of the Court shall be:

Judgment for the plaintiff in the sum of $234,889.40 inclusive of interest.
Defendant to pay the plaintiff's costs.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 08 August 2013

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