Metstech Pty Ltd v Park

1. [1]

   HER HONOUR: The first plaintiff, Metstech Pty Ltd, designs and distributes telecommunications systems for use in underground mines. The thirteenth defendant, Metstech IP Pty Ltd, was intended to hold the intellectual property.

2. [2]

   The plaintiffs contend that copyright in Metstech’s products is, in fact, held by Metstech. Further, the defendants – being former directors and employees of Metstech and their corporate entities or advisers – were involved in a tortious conspiracy to injure the plaintiffs and Metstech IP by unlawful means, by transferring the business and assets of Metstech and Metstech IP to other entities with the intention that the plaintiffs would hold a lesser or no interest in the "Metstech" business and the plaintiffs’ loans to the companies would not be repaid. The plaintiffs also seek equitable remedies in respect of the defendants’ breach of their obligations of confidence, either under the shareholders agreements for Metstech and Metstech IP or generally.

3. [3]

   The central factual dispute is whether – as the plaintiffs contend – Metstech’s products were designed by its employee, and thus it holds the copyright. The employee in question, the third defendant, Chung-Chieh (Jason) Chou, denies this. Thus, a particularly granular analysis of the contemporaneous documents is required, which does not make for easy reading. To assist, a brief summary of this judgment follows.

SUMMARY

1. [4]

   The first defendant, John Park, is an electronics engineer. Through his work in communication systems in mines, Mr Park met electronic engineers, Phil Clifton and Mr Chou. They considered that the technology in use was outdated and had ideas as to how it could be modernised. Mr Park saw a business opportunity and turned to the third plaintiff, Chad Jefferson, to provide funding. Mr Park also sought to bring a software developer, the eighth defendant, Christopher Martin, into the business. Mr Martin was not then interested but was willing to write software if needed. Metstech was formed. As Mr Clifton later stated, “We believe that this will be the next major evolution in underground construction communications … Jason and I have been dreaming about creating this product for many years. We are finally in a position to make it happen.”

2. [5]

   As a general manager of the new company, Mr Park proceeded to run the business with a degree of informality which is now unhelpful. In particular, there were no contracts of employment nor contracts between Metstech and other companies which worked with Metstech to develop its products.

3. [6]

   Key to developing Metstech’s products was employee, Mr Chou, of whom Mr Clifton later stated, “Jason is the finest telecommunications/RF Engineer I have ever met or had the pleasure to work with and gratefully learn from”. Mr Chou designed Metstech’s products. Mr Chou was reimbursed for expenses such as components and software by rendering invoices from his family company, Welldesign Electronics Pty Ltd, to Metstech. Welldesign is the fourth defendant and then a shareholder in Metstech and Metstech IP. Mr Park offered Mr Chou additional financial returns by way of manufacturing rights, although this does not appear to have been further discussed or finalised. Rather, an informal practice developed whereby Mr Chou billed Metstech for manufactured products through Welldesign at a mark-up.

4. [7]

   Mr Martin developed software for Metstech on a speculative basis. In March 2018, Mr Jefferson was keen to complete the software development but Mr Martin was then preoccupied with other business and legal problems. He provided Mr Jefferson with the source code so that Metstech could use the software and alter it if needed to achieve the desired result. Mr Martin had no involvement in the software development for almost a year, before he re-engaged with Metstech. In July 2019, Mr Martin became an employee of Metstech and continued to update and revise the software.

5. [8]

   In 2018, shareholders agreements were executed for Metstech and Metstech IP. These imposed confidentiality obligations on the shareholders and directors, including Mr Park, Mr Chou and Welldesign. These obligations continued to bind the shareholders until they unanimously agreed to terminate the agreements or the company was wound up or its business or all shares were sold. Absent these circumstances, a shareholder continued to be bound by confidentiality after ceasing to be a shareholder.

6. [9]

   Over five years, Metstech designed and developed its products with the financial support of Mr Jefferson and, in later years, Challenge Networks Pty Ltd, which had agreed to pay $750,000 for 20% of the shares in both companies. When Challenge insisted on paying the manufacturer directly rather than Welldesign, invoices were rendered by ChampWin Technology Co Ltd instead. Whilst this company was thought to be the manufacturer, it was another family company of Mr Chou. Mr Chou now says that both Welldesign and ChampWin were the ‘front’ for another Taiwanese company, Yo Kao Technology Co Ltd, who in fact designed Metstech’s products.

7. [10]

   Metstech’s products began to receive substantial interest from Australian and overseas companies. The tenth defendant, Rorque Poisson, was a business consultant later brought in by Mr Park; he was told by two customers – a large telecommunications company and a major mining company – that the Metstech system was “the best on the planet”.

8. [11]

   As the financial constraints on Metstech began to ease with the receipt of substantial orders, disharmony emerged amongst the directors. Directors other than Mr Jefferson sought a salary ‘catch up’. Mr Jefferson resisted this until his loans to the company were repaid. Mr Jefferson’s loans to the companies then stood at some $700,000. Mr Park removed Mr Jefferson from the companies’ bank accounts without warning and staged a ‘coup’ at a board meeting, replacing Mr Jefferson as managing director.

9. [12]

   Challenge Networks also became impatient to complete its acquisition of shares and to have a director appointed to the board, having already outlaid the bulk of the share price to fund Metstech’s operations. Mr Park made enquiries to resolve the difficulties posed by Mr Jefferson and Challenge by placing Metstech into administration and pursuing the development and sale of Metstech’s products through a new company with an American customer (US Co). The palpable ingratitude of Mr Park is difficult to overlook: Metstech had been funded – and he had been paid a salary – for three years by Mr Jefferson and, more recently, by Challenge. When the hard graft of design and development was largely behind them, with “blue sky” ahead, Mr Park had no qualms in ‘ditching’ those who had made that possible.

10. [13]

    Mr Park approached Mr Poisson and plans were hatched. At Mr Park’s suggestion, Welldesign raised a false invoice to Metstech for some $246,000. Mr Poisson registered a false security interest over the assets of Metstech, with a view to giving Welldesign the ability to wind up the company and free the shareholders from restrictions in the shareholders agreement in respect of trade secrets and confidential information.

11. [14]

    With 45 minutes notice, Mr Martin called a meeting of directors and Metstech was placed into voluntary administration. Despite the administrator’s warnings, the directors other than Mr Jefferson continued to deal with Metstech’s clients and make plans to sell Metstech’s products through new companies, including Metstech (Trading) Pty Ltd. Metstech Trading was incorporated by Mr Poisson, who stood to prosper from these plans. In seeking to enlist Mr Chou and his wife’s support in this new venture, Mr Park proposed that the new company would licence intellectual property from Welldesign, this being the first suggestion that intellectual property rights did not belong to Metstech.

12. [15]

    Challenge and Mr Jefferson funded a deed of company arrangement (DOCA), which Mr Park, Mr Corbett, Mr Chou and Mr Martin sought to frustrate. At a meeting of directors of Metstech IP, they purported to invalidate the shareholders agreements of both companies. They deleted Metstech’s data. The trademark and domain name of Metstech IP was ‘warehoused’ with a colleague of Mr Poisson’s, with a view to the trademark and domain name being used by the new company. More specifically, Mr Smith of 10Telco raised a false invoice to Mr Corbett’s company, which Mr Corbett paid. Mr Smith used these funds to buy the domain name and trademark. Mr Poisson prepared the documents.

13. [16]

    In order to protect Mr Chou and Welldesign from claims which may be brought in respect of intellectual property rights, Mr Chou resigned as a director of Metstech IP and sold his shares to Mr Martin and Mr Corbett. At a meeting of Metstech IP convened on an hour’s notice, Metstech IP purported to resolve to execute a deed of release with Mr Chou and Welldesign, releasing them from the confidentiality obligations imposed under the shareholders agreements.

14. [17]

    After entry into the DOCA, Mr Park and his colleagues continued to pursue their plans to exploit Metstech’s technology and products in a new company. Metstech Trading registered a similar domain name and applied for a trademark with a similar logo. Discussions continued with Metstech’s customers, including seeking their investment in the proposed new corporate arrangements. These efforts continued even after commencement of these proceedings and interlocutory injunctions. The defendants now say that Mr Chou did not design Metstech’s products. In any event, they contend that the products are not unique but derivative and Metstech’s information and documents are not confidential, nor for that matter in their possession.

15. [18]

    In the result, I am satisfied that the plaintiffs are entitled to most, but not all, of the relief that they seek. Mr Chou designed Metstech’s products and prepared the associated documentation to enable the products to proceed to manufacture. The disputed works must have been created and insofar as they are original literary or artistic works (or both) and to the extent that they still exist, the employer owns them. Mr Chou created such works in the course of his employment, with the consequence that copyright in the works vests in the employer, Metstech. Copyright in the software, however, continues to vest in Mr Martin, subject to an exclusive licence to Metstech to use and alter the software. The defendants are obliged to deliver up the copyrighted work. Given the terms of the software licence, Mr Martin is obliged to deliver up the source code.

16. [19]

    The contractual obligations in the shareholders agreements continue to apply, together with equitable obligations of confidence, entitling the plaintiffs to injunctive relief and, at their election, either an account of profits or damages. Given the oppressive conduct of the affairs of Metstech IP, a buy-out order is appropriate, entitling Mr Jefferson to buy-out Mr Park and Mr Martin. The tortious claim of conspiracy, however, fails for want of evidence of pecuniary loss.

PARTIES, WITNESSES AND DOCUMENTS

1. [20]

   The third plaintiff, Chad Jefferson, is a surveyor and businessman. He is a director of Metstech and Metstech IP. Mr Jefferson is also a director and shareholder of the second plaintiff, Auxilia Holding Pty Ltd, and the fourth plaintiff, Auxilia Investments Pty Ltd. Auxilia Holding is a shareholder in Metstech and Metstech IP while Auxilia Investments is a creditor of both companies, having effectively ‘bank rolled’ their operations in the early years.

2. [21]

   Mr Jefferson gave evidence and was cross-examined. He was keen to answer questions and did so in an open and clear manner, making reasonable concessions. Mr Jefferson appeared to have a good recollection of events and was unshaken in any material respect. I accept his evidence.

3. [22]

   The plaintiffs also relied on the evidence of Graeme Corbett. Through his company, Chlobo & Bluey Pty Ltd, Mr Corbett was a former shareholder in Metstech and Metstech IP, while his wife was a director of both companies. Mr Corbett was a pleasant fellow who made fair concessions and was a credible witness.

4. [23]

   The plaintiffs also called officers and employees of Challenge Networks Pty Ltd – which ‘bank rolled’ Metstech’s operations in later years – being director, Simon Lardner and engineers, Gehan Manuel and Mark Gasseling. No issues of credit arose. I accept their evidence. The plaintiffs also relied on the expert evidence of Dr George Georgevits, who was a knowledgeable and authoritative expert. I accept his evidence.

5. [24]

   The first defendant, John Park, is an electronics engineer and former director and employee of Metstech. The second defendant, Old Name Pty Ltd, is Mr Park's family company. Mr Park remains a director and secretary of Metstech IP. His company continues to hold 40 shares (25%) in Metstech IP.

6. [25]

   Mr Park gave evidence and was cross-examined at great length. He was keen to give his version of events and volunteered self-serving remarks. He was, on occasion, non-responsive and, on other occasions, evasive and argumentative. Mr Park was prone to speeches. Some of Mr Park’s evidence seemed unlikely, for example, that he did not care who Mr Chou was getting to design Metstech’s products, where intellectual property rights was clearly a subject dear to Mr Park’s heart. On occasion, Mr Park referred to conversations not in his three affidavits. Mr Park maintained a position at odds with contemporaneous documents. The disconformity between Mr Park’s evidence and contemporaneous documents is endemic.

7. [26]

   Mr Park appeared to laugh at various questions or when giving an answer, in an apparent effort to make the question appear to have been ridiculous. Mr Park did not take responsibility for anything but blamed others; he sought to ‘verbal’ Mr Jefferson whenever he could. He destroyed documents. He appears to have breached restraining orders made in the early days of these proceedings. Ultimately, I have not accepted Mr Park’s evidence unless corroborated by contemporaneous documents, the evidence of another reliable witness, or where his evidence was against interest.

8. [27]

   The third defendant, Chung-Chieh (Jason) Chou, is an electronics engineer and a former director and employee of Metstech and a former director of Metstech IP. Mr Chou specialises in radio frequency (RF) engineering. He trained in Taiwan and, in 2005, moved to Australia with his wife, Yi-Jia (Isabella) Chen. In 2007, Mr Chou and Ms Chen incorporated Welldesign Electronics Pty Ltd, the fourth defendant, which undertook electronics design in RF communication. Welldesign was a former shareholder in Metstech and Metstech IP. Ms Chen is the director of Welldesign, while Mr Chou and Ms Chen are equal shareholders.

9. [28]

   Mr Chou had a translator on stand-by if needed but was able, by and large, to give evidence in English. Mr Chou can read English well. It is apparent that other Metstech directors or employees – Phil Clifton then Mr Corbett and Christopher Martin and, to a lesser extent, Mr Park – acted as an interface between Mr Chou and others, apparently by reason of his English-speaking abilities and his focus on highly technical matters: see also at [345]. Mr Lardner also observed this pattern, as did Rorque Poisson, who believed that Mr Martin essentially acted as a mediator for Mr Chou.

10. [29]

    Mr Chou’s evidence was given in most emphatic and fervent terms; he was keen to speak at length. Mr Chou was, on occasion, fiery and argumentative and made a few speeches although, on other occasions, was non-responsive or evasive: see, for example, at [241]. Mr Chou’s evidence that he did not know the fee, and had never discussed a fee, with an ODM (an Original Design Manufacturer) was unlikely. On occasion, Mr Chou’s version of events was clearly at odds with contemporaneous documents and, when pressed as to the difference between his evidence and the document, Mr Chou’s answer was usually preceded with “Not really”, which, over the course of his cross examination, was generally an indication that what followed was going to be difficult to accept.

11. [30]

    It did appear that, outside matters of engineering, Mr Chou had little interest in what was going on at the time. Mr Chou denied reading important emails from the administrator appointed to Metstech in any detail; I accept his evidence in this regard. Mr Chou did not understand, nor apparently care, about the legal niceties of Australian law; he was focussed on securing the financial interests of his family. His actions at the time of a deed of company arrangement (DOCA) were probably guided by his solicitor, his wife and the other defendants. He does not appear to have complied with court orders for disclosure. I have approached his evidence with caution.

12. [31]

    Ms Chen was also cross-examined. Ms Chen has a law degree from Taiwan but, at the time of these events, her role appeared to have been to run the family household and keep the books of the family business. Ms Chen had little knowledge of accounting or computers. When problems emerged with Metstech, it appears that Ms Chen took charge of the matter on behalf of her husband and their family companies. Ms Chen sought to secure the best outcome for their family interests with the assistance of their solicitor, Sean Li.

13. [32]

    Ms Chen appeared generally honest and very concerned, indeed, quite emotional about money, but then said she was not interested in being paid $90,000, which was unlikely. Ms Chen said she read parts of emails but not other parts which were problematic; this was also unlikely. On occasion, Ms Chen’s evidence was extremely guarded and very protective of her and her husband’s position in these proceedings. This resulted in some evasion and, on occasion, inconsistent answers: Ms Chen initially disclaimed knowledge of ChampWin Technology Co Ltd but later agreed that her husband established the company (Mr Chou said he did so on his wife’s advice) and she had as much involvement in the company as she had in Welldesign. I have approached her evidence with caution.

14. [33]

    The eighth defendant, Christopher Martin, is a software developer experienced in network and software engineering. He is a former employee of Metstech. The ninth defendant, CSM Family Investments Pty Ltd, is his company. Mr Martin’s company is a former shareholder of Metstech and remains a shareholder of Metstech IP, holding 32 shares (20%). Mr Martin was never a director of either company. To some extent, Mr Martin appears to have been independent from the directors of Metstech and Metstech IP as, while they were ‘at war’ with each other, he was entrusted with taking the minutes of meetings.

15. [34]

    Mr Martin was an energetic and quickly spoken witness who gave fulsome answers and was obviously knowledgeable and enthusiastic about his work. He did make gratuitous remarks in support of his case. Mr Martin was emphatic about the terms on which he was prepared to work for Metstech. Mr Martin appeared to have a good and actual recall of events and was generally fair in the answers he gave, including making plain when he did not know something. Mr Martin frankly agreed that he did not know much about the duties of a director. He was firm when saying that he did not agree to transfer his intellectual property in the software in return for shares in Metstech and Metstech IP. Some of his evidence appeared unlikely, for example, that he did not give instructions to solicitors to send a letter on his behalf. Overall, he appeared honest and credible but I will defer to the contemporaneous documents. Sadly, those documents depart significantly from Mr Martin’s version of events in several material respects.

16. [35]

    The tenth defendant, Rorque Poisson, is a business consultant. The eleventh defendant, Metstech (Trading) Pty Ltd, is his company. Mr Poisson represented himself and his company. He appeared open, honest and straightforward. He gave evidence in a clear manner and made reasonable concessions. I have generally accepted his evidence, which was, on occasion, adverse to his interests. In particular, Mr Poisson accepted that he registered a charge when he understood there was, in fact, no security interest. That said, the corporate strategies which Mr Poisson promoted to the defendants were highly questionable and his approach to these proceedings was generally to accept, I think, that the ‘game was up’ and to try and resolve these proceedings as painlessly as possible. I have not accepted some of Mr Poisson’s more benign explanations of events.

17. [36]

    Finally, Heath Smith is a director of the former twelfth defendant, 10Telco Pty Ltd, against whom these proceedings settled. He was obviously reluctant to attend at court but appeared straightforward. Mr Smith agreed that he rendered a false invoice in order to try and get a bad debt paid. Mr Poisson used Mr Smith as a ‘pawn’; Mr Smith agreed that he did not read the documents but just did what Mr Poisson said. I accept his evidence in that regard.

18. [37]

    The documentary evidence is substantially incomplete, in particular, as the defendants took steps to delete Metstech’s data and emails: see [438]. The surviving documents are riddled with technical terms and abbreviations, many of which have been translated by Mr Manuel and Mr Gasseling. Understanding what the parties were talking about in any particular email or communication was not always easy. I have endeavoured not to place too much weight on individual documents, where the technical language was not entirely clear. Overall, however, the emails convey a consistent impression of the tasks being undertaken by Metstech’s directors and employees during the course of product development.

ONUS AND INFERENCES

1. [38]

   Drawing on my judgment in In the matter of Anna Bay Resort Pty Ltd [2022] NSWSC 331 at [11]-[17], the burden of proof rests on the plaintiffs. The standard of proof is the civil standard, being proof on the balance of probabilities but qualified having regard to the gravity of the questions to be determined: section 140(2), Evidence Act 1995 (NSW); Briginshaw v Briginshaw (1938) 60 CLR 336 at 362 (per Dixon J). Further, at 361: “The truth is that, when the law requires the proof of any fact, the tribunal must feel an actual persuasion of its occurrence or existence before it can be found.”

2. [39]

   Whilst the plaintiffs bore the onus in proving that Mr Chou designed the products in question, “where material evidence is peculiarly within a party's knowledge, it may be sufficient for the opposing party to adduce slight evidence of a matter in issue”: Gerard Cassegrain & Co Pty Ltd v Cassegrain (2013) 87 NSWLR 284; [2013] NSWSC 453 at [26] (per Beazley P), citing Lord Mansfield CJ’s maxim in Blatch v Archer (1774) 1 Cowp 63; (1774) 98 ER 969 at 970. As Gleeson J likewise summarised in BCI Finances Pty Ltd (In Liq) v Binetter (No 4) [2016] FCA 1351; (2016) 348 ALR 227 at [125]:

3. [40]

   Of course, the principle from Blatch v Archer does not alter the onus of proof, nor the position that “the circumstances in which … the absence of evidence may be taken to account are confined by known and accepted principles …”: Australian Securities and Investments Commission v Hellicar (2012) 247 CLR 345; [2012] HCA 17 at [165] (per French CJ, Gummow, Hayne, Crennan, Kiefel and Bell JJ). The Court may draw inferences to choose between competing versions of events. As Buchanan J explained in Australian Competition and Consumer Commission v Metcash Trading Ltd (2011) 198 FCR 297; [2011] FCAFC 151 at [31]: (citations omitted)

4. [41]

   A party’s failure to produce documentary evidence to corroborate their account, where they might be expected to be in possession of such documents, may give rise to an inference that such documents as they may be expected to have would not support their account: Jones v Dunkel (1959) 101 CLR 298 at 320 (per Windeyer J), citing with approval Wigmore on Evidence (3rd ed., 1940, Little, Brown and Co.), (“the failure to bring before the tribunal some circumstance, document or witness …”); Burke v LFOT Pty Ltd (2002) 209 CLR 282; [2002] HCA 17 at [134] (per Callinan J); Ronchi v Portland Smelter Services Ltd [2005] VSCA 83 at [44] (per Eames JA, with whom Buchanan JA agreed, noting that “the Jones v Dunkel principle can equally apply to missing documents as to missing witnesses”); Challenger Property Asset Management Pty Ltd v Stonnington City Council (2011) 34 VR 445; [2011] VSC 184 at [131]–[132]; Sino-Resource Imp & Exp Co Ltd v Oakland Investment Group Ltd [2018] QSC 98 at [112].

INTRODUCTION TO THE TECHNOLOGY

1. [42]

   It may assist to say something about the products which Metstech was endeavouring to design – products to be used in a ‘leaky feeder system’ – and the steps involved in designing an electronic device.

Leaker feeder systems

1. [43]

   A ‘leaky feeder system’ is a communications system designed to be used underground, where electromagnetic signals cannot penetrate. Leaky feeder systems can provide reliable long distance two-way radio communications between locations that would otherwise be out of radio range of each other. Mobile phones may also be used, using wireless broadband communication technology known as long term evolution (LTE).

2. [44]

   Leaky feeder systems use leaky coaxial cable to radiate a radio frequency (RF) signal into a predefined area and pick up wanted RF signals from that area. Because RF signal leaks out along the feeder, miners equipped with compatible two-way radios can pick up the desired signal at any location along the leaky feeder system route. A simple example of a leaky feeder system can be seen in drawings prepared by Metstech:

3. [45]

   Dr Georgevits described the components in a typical leaky feeder system. First, a leaky coaxial cable (often referred to in the evidence as a leaky coax) running the full length of the tunnel where communications are required. Leaky coaxial cable has regular slots in the outer conductor or shield to permit RF signals to radiate out of the cable and also couple into the cable from outside, as shown in the photograph:

4. [46]

   Second, a headend containing a controller and a BDA that is connected to the first length of leaky coax. Metstech’s controller provides an obvious example, as seen in the below photographs, both externally and internally:

5. [47]

   The Metstech headend controller contains a Raspberry Pi single board computer, which can be purchased ‘off the shelf’ and are popular with computer hobbyists. (The software for this device was designed by Mr Martin; ownership of this copyright in this software is in dispute). Dr Georgevits explained that the prime function of the Metstech headend controller is to monitor the status of the BDA amplifiers by periodically polling them.

6. [48]

   The controller also contains an RF power combiner, the purpose of which – for downstream signals – is to combine the LTE signals and two-way radio signals and feed these to the leaky coax at the head end. For upstream signals, the LTE and two-way radio signals are extracted from the leaky coax as an RF stream and separated, after which they are connected to the relevant terminal equipment. The controller also acts as a DC power injector, powering the first few BDAs downstream from the head end. A power supply is required to supply DC power to the control unit.

7. [49]

   Third, a BDA is an amplifier designed to be inserted into a transmission line that carries power or signals. The purpose of the BDA is to compensate for losses incurred by the required signals as they travel along the leaky coax feeder. The BDA does this by amplifying the wanted signals that are travelling in both directions along the feeder; the BDA is designed to selectively amplify signals only in the desired frequency bands of operation. BDAs are placed at regular intervals along the length of the coax to make up for line and radiation losses for signals travelling in both directions, thus ensuring that sufficient signal strength is maintained along the coax. This can be seen in the following photograph:

8. [50]

   Internally, the BDA has a baseboard into which printed circuit boards (PCBs) are slotted. A photograph of Metstech’s BDA, both externally and internally, may be seen below:

9. [51]

   PCBs are a base that mechanically supports and electrically connects electronic components using conductive tracks, pads or other features etched in sheet layers of copper laminated onto or between sheet layers of a non-conductive material such as fibreglass.

10. [52]

    The BDAs must be set up so that the signal transmitted by the first BDA in each band is reproduced at the same power level by all the other BDAs downstream, in a procedure called downstream balancing: each BDA downstream from the head end is set up locally using a laptop computer running the required BDA setup software and connected to the BDA by a Bluetooth link. The same procedure is repeated for the reverse direction, called upstream balancing.

11. [53]

    Fourth, a splitter is a passive RF device which divides the input signal into two or more equal output downstream signals. Whenever the leaky feeder system design requires a branch point, a splitter is inserted in-line to feed equal downstream signals into each branch of the leaky feeder system.

12. [54]

    In addition, the splitter may perform the function of a combiner for upstream signals. When an upstream signal encounters an output port of a splitter, the upstream signal from the first branch combines with the signal from the second branch and is fed out of the splitter’s input port. A photograph of Metstech’s splitter/combiner, both externally and internally, follows:

13. [55]

    Fifth, a terminating unit or EOL Device is connected at the end of each branch of the leaky feeder system tree. The function of the EOL Device is to provide a connection point for a signal generator so that the gain of each BDA can be set in the upstream direction, to block the DC power present on the leaky coax and to provide a connection point for each end of run termination, such as a resistive load or an antenna. The end of line termination is required to prevent the end of the coax generating signal reflections, which would travel back up the coax in the upstream direction and interfere with wanted upstream signals. A photograph of Metstech’s EOL, both externally and internally, follows:

14. [56]

    Sixth, a leaky feeder system requires power supplies, power cabling and power injected devices that supply power to all BDAs installed along the length of the coax. Each BDA contains the required electronics to separate the DC power from the coax without adversely affecting the upstream and downstream signals. A power injector enables DC power to be injected in-line into the leaky coax cable and feed DC power to BDAs that are connected in-line. A photograph of Metstech’s power injector, both externally and internally, follows:

15. [57]

    Finally, the term “multiple-in-multiple-out” (MIMO) is a term used for two-way radio systems that make use of more than one antenna to transmit and receive signals. Where two antennas are used, this is known as the 2 X 2 MIMO, which may be used in a leaky coax system by running two leaky coax cables in parallel, with each cable acting as an antenna for both the send and receive paths. The aim of this technology is to provide better service for users throughout the coverage area of the leaky coax system. “Maths Boxes” is a technique used to enable a single leaky coax cable to form a 2 X 2 MIMO system.

16. [58]

    As will be seen, the controller, BDA, power injector, splitter, EOL and “maths box” were components of Metstech’s leaky feeder system.

Designing an electronic device

1. [59]

   Notwithstanding that leaky feeder systems and BDAs have been available on the market for many years, Dr Georgevits considered that those designing a BDA today “would need to start almost from scratch. Because different applications require different designs of BDAs and also, as time goes by, the availability of components changes. So with more modern electronics, amplifiers perform much better, they require less power, they have different requirements. There's all these issues that you have to cover so … it's not simply a matter of just plucking one out of the air and saying all right, well we started there.” Likewise, designing the splitter and filters is “a very non-trivial task”.

2. [60]

   The first step is to develop “Functional Specifications”, which define what the device is intended to do, how well it is required to do it and the environment in which it is intended to work. This step requires in-depth knowledge of the industry and involves a high level of innovation and creativity to create a successful new product. Mr Chou referred to this step as concept design. Mr Chou agreed that he did the concept design for Metstech’s products.

3. [61]

   The second step is “Electrical Design and Design Prototyping”, that is, to realise the functional specification into a physical device. This task is carried out by an electrician designer, who designs and constructs a circuit that meets the requirements of the functional specification. It is a routine task but nonetheless requires a high level of technical expertise and familiarity with electronics, together with the appropriate tools and software. In Dr Georgevits’ view, “these tasks were all of a routine nature and although they may have involved a significant amount of work, they did not involve significant innovation.”

4. [62]

   Perhaps in contrast, Mr Chou said that “for the real things” like a schematic or PCB, he needed to outsource to a company with the tools to do these services for him for a fee. Likewise, Mr Park did not see any complexity or difficulty arising from the functional specifications for Metstech’s BDA but rather in the selection of components, the layout of the electrical, electronic and RF components and ensuring that impedance and interference were removed, that is, the electrical design aspect of production development. I prefer the evidence of Dr Georgevits, who was a knowledgeable, dispassionate and impressive witness, unaffected by credit issues.

5. [63]

   An electrical schematic is normally created and optimised using a circuit simulation software package such as Altium Designer. As Dr Georgevits explained, a schematic is a two-dimensional graphical circuit representation using standard electrical component symbols and interconnections to show the functionality and connectivity between electrical components. An electrical schematic diagram can be drawn by hand but more often by computer software, especially for more complex designs.

6. [64]

   Once the simulated circuit performance is satisfactory, a PCB layout is generated using PCB design software. A PCB layout is a computer generated graphical file that shows the position of all components on the PCB together with the interconnecting tracks, interconnects and overlays. For simple designs, a PCB layout can be created automatically from the electrical schematic file. For more complex designs, a PCB layout may be automatically generated by computer software.

7. [65]

   A bill of materials is also completed, usually by the PCB layout software. Most circuit design software packages can do these functions automatically, although some manual intervention is usually required for complex circuits or circuits with RF applications where interference, shielding, signal trace impedance and line termination considerations become critical.

8. [66]

   The PCB layout file is then given to the PCB manufacturer, who uses it to generate the necessary control files that the PCB manufacturing equipment uses to make the PCB. Dr Georgevits provided an example of a typical PCB layout graphical representation (on the left) and the corresponding manufactured PCB (on the right):

9. [67]

   The required components are then sourced and a design prototype is built and performance tested against the requirements of the functional specification. If one or more performance parameters is not met, the design will need to be modified and re-tested in an iterative process until all required performance parameters are met. The design then needs to be documented, including updated versions of the schematic, PCB layout and bill of materials. Test points need to be incorporated at critical points in the circuit. Test and calibration procedures and signal levels at these test points need to be documented.

10. [68]

    The third step is “Production Prototyping”, where the design prototype is optimised for production in terms of physical component layout, type and location of input and output connectors, housing, cost of production, ease of manufacture and troubleshooting. Several samples of the PCB will need to be manufactured, populated with components, calibrated and tested against the required performance specifications; this is an iterative process and needs to be repeated until all the performance and other physical specifications are met.

11. [69]

    The fourth step is manufacture. Component supplies need to be found and sufficient quantities of the components purchased for a trial small production run of, say, 20 units. These units should be field trialled to ensure that there are no unforeseen problems. When any issues associated with the field trial units are resolved and the design altered and retested, if necessary, a larger production run can be considered

Using ODMs and OEMs

1. [70]

   The steps involved in designing an electronic device can be carried out in-house or outsourced. As Mr Lardner lamented, “Australia, sadly, almost had no manufacturing capability anymore. So, our intellectual property is what we essentially sell as a country and as companies. … a company … designs things and the actual nuts and bolts and putting it together may be outsourced, just like Apple does with its iPhones.”

2. [71]

   Here, two acronyms warrant specific explanation, being ODM and OEM, albeit neither have a fixed or universally agreed meaning in the industry.

3. [72]

   ODM means Original Design Manufacturer, which Dr Georgevits explained is an entity that designs and manufactures component parts or sub-assemblies into completed products. The products are often branded with the names of other entities who distribute the finished product. An ODM can design products to a client’s functional specifications; the design information must be kept confidential by the design house and must only be used for the benefit of the client. When the design is completed, ownership of the design is normally retained by the client, subject to the contractual arrangements between the client and the design house.

4. [73]

   This is to be contrasted with an OEM or Original Equipment Manufacturer, which is an entity that purchases components from other manufacturers or suppliers and uses them to assemble their own finished products that are then sold under the brand name of the OEM. OEMs also make parts and sub-assemblies that are resold to other companies who assemble them into their own finished products. An issue in this case is whether Metstech used an ODM or OEM and for what purpose.

WHAT HAPPENED

1. [74]

   Mr Park is married to Mr Jefferson’s cousin. Through his work in communication systems in mines, Mr Park met electronic engineers, Phil Clifton and Mr Chou. They considered that the technology being used was outdated and had ideas as to how it could be modernised. Mr Park saw a business opportunity and turned to Mr Jefferson to provide funding. Mr Park suggested that a company be formed to develop products to fill a gap in the market. As Mr Clifton later stated, “We believe that this will be the next major evolution in underground construction communications … Jason and I have been dreaming about creating this product for many years. We are finally in a position to make it happen.”

Metstech

1. [75]

   In October 2014, Metstech was incorporated. Mr Park thought of the name, based on the acronym “METS” using in the industry, meaning “mining electronic technology services”. Mr Park and Mr Jefferson were appointed directors and their companies, Old Park and Auxilia Holding, were allotted one share each. Mr Park’s daughter designed a logo.

2. [76]

   Mr Park invited Mr Chou, Mr Martin and Mr Clifton to become shareholders and directors. Mr Martin declined but offered to assist when needed and suggested that they hold his shares for him, if and when he joined the company full-time. Mr Chou and Mr Clifton became directors and, through their various corporate entities, equal shareholders with Mr Park and Mr Jefferson.

3. [77]

   Mr Park wrote a business plan. The business owners of Metstech were described as Mr Jefferson (managing director and operations manager), Mr Park (general manager and business development), Mr Clifton (senior communications engineer and project director) and Mr Chou (senior system delivery engineer / design engineer). A fifth owner, Mr Martin, was “under negotiation” and would either join as a contractor or shareholder, with his role to be technology officer.

4. [78]

   According to the business plan, Metstech planned to develop a channelized BDA, which was “seen as having global opportunities”. As for the company’s “Intellectual property strategy”, the business plan noted “We are currently investigating the possibility of a patent for the BDA system”.

5. [79]

   Of the “business owners”, Mr Chou might be thought to have been particularly important to achieving this objective. Mr Chou was described in the business plan as having “been employed by some of the big names in telecommunications and leaky feeder system manufacturers. … spending time in the Asian tunnelling industry”. Mr Clifton later stated, “Jason is the finest telecommunications/RF Engineer I have ever met or had the pleasure to work with and gratefully learn from”.

6. [80]

   Metstech opened a bank account. On 18 November 2014, Auxilia Investments transferred $10,000 into the account, with the description “Mets Loan”. On 17 December 2014, Auxilia Investments transferred another $20,000 into Metstech’s bank account, with the description “Loan Metstech”. These were the first of many loans made by Auxilia Investments to Metstech which, as is evident from bank statements, paid the wages of Metstech’s employees, including Mr Park and, later, Mr Chou and, later still, Mr Martin. In addition, as the design and development of Metstech’s products progressed, Auxilia Investments advanced funds to Metstech to pay for components, necessary software and manufactured products.

7. [81]

   In December 2014, Metstech was engaged by Motorola as a reseller of commercial radios. Mr Jefferson explained that, initially, half of the company’s efforts were directed to designing a new product and half to selling Motorola products “to fund the development of the product”. It is apparent, however, from the first business plan that Metstech’s raison d’etre was to develop new products which may be worthy of intellectual property protection.

Designing new products: splitter and BDA

1. [82]

   Mr Chou was then working part-time for Metstech while also working for another company, AMPcontrol Ltd. On 20 January 2015, Mr Park reported to Mr Clifton, after “Spen[ding] a very productive couple of hours” with Mr Chou, that they had decided to buy some “development boards for the UHF/VHF BDA” and develop three BDA units for demonstration to Motorola, “we will then decide if we want to OEM”. It will be recalled that an OEM is an entity that purchases components from other manufacturers or suppliers and uses them to assemble a finished product, as opposed to an ODM, which also designs the product. It is unclear whether Mr Park was considering using, or being, an OEM. In any event, Mr Chou provided a link to a website to purchase development boards from the United States.

2. [83]

   In February 2015, Auxilia Holding purchased a property in Mayfield East for Metstech’s operations. Auxilia Investments transferred a further $34,200 into Metstech’s bank account as loans. In March 2015, Mr Jefferson also registered a new company, Centurion Survey Pty Ltd, which also began to operate from the Mayfield premises. In April 2015, Auxilia Investments transferred a further $20,000 into Metstech’s bank account as a loan.

3. [84]

   On 24 March 2015, Mr Clifton sent mechanical drawings to Mr Park in respect of “Development Work For Underground Radio Product”. Mr Clifton reported: (emphasis added)

4. [85]

   The emphasis of Mr Clifton’s email was on designing something new and unique, such that there was a need to “hide the technology from competitors.” Mr Clifton suggested that an internal metal brace be developed using a 3D printer to make a model for manufacture; “As you can see the PCB and enclosures are pretty much finished, in order to create the internal [brace] we will need to create working models.” It would thus appear that, using the demonstration boards obtained from the United States, Mr Chou and Mr Clifton had made significant progress in developing the design of the BDA, including PCB layout, and the next stage was “proof of concept testing”.

5. [86]

   On 15 April 2015, Mr Park asked Mr Chou to provide a brief description of developments, and supplied a table to be completed. Mr Chou promptly replied: (emphasis added)

6. [87]

   The first product in the table was a splitter. According to the table completed by Mr Chou, the current position was “board developed, need to develop enclosure with 3D printer”. The next step was “com[m]it to manufacture. Design encl[osu]re and manufacture”. Cost to production was estimated to be less than $15,000 with an estimated timeframe of six weeks.

7. [88]

   The second product in the table was a Pre-Amp. The current position was “design complete”. The next step was to “build PCBs”. Cost to production was $30,000 with a timeframe of three months. The third product was a Data Modem (WiFi board): the command test software was finished, a link test was the next step. The balance of the products were at the schematic design stage, with some circuit simulations completed; a PCB layout was listed as the next step.

8. [89]

   Dr Georgevits said this email was an example of correspondence indicating that Mr Chou was undertaking electrical design and prototyping work. Here, Mr Chou listed a set of electrical design tasks he was working on at the time and the stage that each task was at. Mr Chou also stated that Metstech needed to buy software. If the splitter was already completed, then Mr Chou either had access to unlicensed versions of the required software and performed the work himself or arranged for an ODM to perform the work that he could not undertake himself. Mr Chou told Mr Park that he had access to Altium, “He said he had a friend.” Mr Chou’s ability to complete these tasks with the necessary software was not in doubt; Mr Park considered that, if Mr Chou had an Altium Designer full licence, “then he could develop components with that without any question.”

Leaving it to third parties?

1. [90]

   According to Mr Park, about a fortnight later, he met with Mr Jefferson, Mr Clifton and Mr Chou. Mr Jefferson said that he did not want to spend the amounts needed to buy the development software and asked if there were other options. Mr Chou said that he could do a deal with third parties to design with them, using their software, to ensure that the products were legal and to keep the costs low. Mr Chou said he knew many companies in Taiwan that he could work with to produce the products on their software and equipment. Mr Park, Mr Jefferson and Mr Clifton are said to have agreed that Mr Chou’s suggestion was the best option at that stage.

2. [91]

   Mr Jefferson denies this. Rather, Mr Jefferson said he told Mr Chou on numerous occasions, “I will fund whatever purchases you need for the development of the Metstech product”. There is contemporaneous evidence which corroborates Mr Jefferson’s account: see [116], [240], [251]. Mr Jefferson said he was willing to pay for necessary costs associated with the development of the product, having already purchased the Mayfield site and advanced significant sums through Auxilia Investments.

3. [92]

   The conversation described by Mr Park is not referred to by Mr Chou in his affidavits. Mr Clifton did not give evidence. I have generally preferred the evidence of Mr Jefferson to that of Mr Park but, in any event, the contemporaneous emails provide little support for Mr Park’s version of events. There is contemporaneous evidence that Mr Chou requested Metstech to buy software, which it did, funded by Mr Jefferson: see [251]-[252], [259]. There is no reference in the contemporaneous documents to a proposal that Mr Chou would do the design work with others.

Mr Chou becomes full-time employee

1. [93]

   It became clear that Mr Chou could not maintain other employment and devote the required time to Metstech. Mr Chou resigned from AMPcontrol to work fulltime for Metstech, designing and manufacturing amplifiers. Mr Chou commenced employment with Metstech in May 2015.

2. [94]

   On 28 May 2015, Mr Park asked Mr Chou and Mr Corbett for further information in advance of a meeting with the Global Head of LTE for an IT company, who “wants to know how our project will connect to his to deliver LTE underground. So I need information …” On 29 May 2015, Mr Chou provided a diagram.

3. [95]

   On 5 June 2015, Mr Chou enquired of Mr Clifton and Mr Jefferson:

4. [96]

   Initially, at least, Mr Chou proceeded to submit bills to Metstech for payment, being invoices from companies based in China or Taiwan for components used in the manufacture of prototypes for Metstech products. The first such invoice was from a Hong Kong company dated 18 June 2015 for US$6,600. On 23 June 2015, a Chinese company rendered an invoice to Metstech, apparently for components. Payment was made using funds deposited by Auxilia Investments to Metstech’s bank account. It is apparent that Metstech’s payment of these invoices was not always immediate and Mr Chou was quick to follow up payment. Mr Chou was not always forthcoming in providing invoices for payment: at [115], [116].

5. [97]

   On 18 June 2015, Mr Chou provided drawings to Mr Clifton entitled “Leaky Feeder to N-type” and “3WAY”. An N type RF connector was used to connect the leaky feeder cable to other components. In the Metstech BDA system, the N connector was installed to connect the cable to the headend controller, BDAs and splitters. “3Way” is another name for a splitter. The drawing of the splitter bore the name and logo of Metstech. Mr Chou advised Mr Clifton that the file “is the new enclosure 3D model that you can send to them to get the quote.”

6. [98]

   Mr Clifton forwarded the drawings to a Taiwanese company, Bencent Tzeng Industry Co Ltd, requesting a quote for tooling and an initial product run of the splitter. Mr Clifton also provided a photograph of a standard splitter from an existing manufacturer and explained, “we have chosen to change the standard design”. Mr Clifton proceeded to described the new design features, “This is important.”

7. [99]

   Mr Clifton requested a small number of units for testing in the field, “After a field trial we may update the design if needed.” It appears that, for the splitter, the third step in designing an electronic device, as explained by Dr Georgevits, was then underway, being Production Prototyping. It is also apparent from Mr Clifton’s email that Metstech’s splitter had an unusual or different design from existing products. Bencent Tzeng Industry Co Ltd rendered an invoice on 23 June 2015 for US$2,279.36, presumably to attend to the task requested by Mr Clifton.

Metstech IP

1. [100]

   In June 2015, Metstech IP was incorporated. Presumably by this point the directors of Metstech considered that there was, or soon would be, intellectual property worthy of protection. Mr Park, Mr Jefferson, Mr Chou and Mr Clifton became directors and shareholders of Metstech IP through their various corporate entities.

2. [101]

   Metstech IP opened a bank account. Metstech IP registered the domain name metstech.com.au, although Metstech paid the invoices of the entity hosting the website. All employment and other expenses continued to be incurred by Metstech.

3. [102]

   Mr Park said Metstech IP was formed with the sole purpose of owning all intellectual property separately to Metstech, which was to be the business’s trading entity, employer and contracting party with customers. The plaintiffs accept that it was intended that Metstech IP would hold the intellectual property associated with Metstech’s business; what intellectual property the company in fact held is contentious.

Design process continues

1. [103]

   On 5 July 2015, Mr Chou sent his fellow directors some photographs of the splitter enclosure “for our Leaky system”. Presumably, the item had been made by Bencent Tzeng Industry Co Ltd, as requested. Mr Chou advised, “Will publish the pcb and build few working samples for test”. In cross-examination, Mr Chou said that he used the word “publish” to mean manufacturing PCBs in the factory. On 15 July 2015, Mr Chou forwarded an invoice from a Chinese company for US$485, apparently for various components, and requested Mr Park to attend to payment.

2. [104]

   On 31 July 2015, Mr Chou sent his fellow directors a document containing diagrams, descriptions and specifications. Mr Chou advised, “I just finished the design and the attach file is the module draft datasheet for your reference.” (emphasis added).

3. [105]

   On 12 August 2015, Mr Clifton emailed Evolution Mining, requesting a meeting to discuss Metstech providing communications services. Amongst the services offered, Mr Clifton referred to “NEW!!” products being developed by Metstech, including a hybrid leaky feeder cable – “We believe this is the future of underground leaky feeder systems” – and radio bi-directional amplifier. Mr Clifton also advised, “We have begun testing”.

4. [106]

   By August 2015, however, Metstech had become somewhat distracted by efforts to generate income, in particular, by undertaking radio installation work for Tritton Resources Pty Ltd. Metstech installed a radio system at Tritton’s copper mine in western New South Wales. Mr Clifton was responsible for the project. Mr Chou also attended the mine a couple of times. On 29 September 2015, Mr Park emailed Mr Jefferson and Mr Chou, requesting a meeting “to discuss the immediate, short and long term options for the company”. Mr Park encouraged his fellow directors to re-focus their attention on developing new products rather than installing products designed by others. Mr Park stated: (emphasis added)

5. [107]

   Mr Park noted in his email that the company had access to several technical staff, including Mr Chou and Mr Martin, as well as significant opportunities including Australian telecommunication and IT companies and a number of mines sites, “Basically, in 25 years of business development I have not had a pipeline like this, as long as we do not fuck it up”. Moving forward, Mr Park said they needed to focus on development and, “Basically until we have our own product we should minimise funding deployments.”

6. [108]

   Mr Park repeated the need to develop new products in an email to Mr Clifton on 14 October 2015, copied to Mr Jefferson and Mr Chou: (emphasis added)

7. [109]

   It would appear from Mr Park’s email that the development of the BDA was nearing completion, with Mr Park calling for preparation of a bill of materials. Dr Georgevits identified this task as forming part of “Electrical Design and Design Prototyping”.

8. [110]

   On 19 October 2015, Mr Park also reported to a colleague (in the field of robotics) of “where everything is up to”: (emphasis added)

9. [111]

   On 3 November 2015, Mr Chou provided test results to his fellow directors, having spent a few days trying to build a particular element of a component “to confirm that I can design [it] … The bad thing is that I need [to particular construction work] by myself. I think I can use this … in the BDA …”

10. [112]

    On 23 December 2015, Mr Clifton circulated a draft specification for the BDA to Mr Park and Mr Chou. Mr Park replied, “Still waiting on engineer in Taiwan to get back to me. Attached is the [BDA] we would want to use for main deployment”. (As I read the email chain, the “engineer in Taiwan” is a reference to Mr Chou.) Mr Chou circulated “the updated Draft spec”, including to Progility Technologies, the proposed supplier of radios and engineering, together with a technical explanation.

Mr Chou quits temporarily

1. [113]

   In October 2015, Auxilia Investments advanced a further $5,000 loan to Metstech but no payment was made to Mr Chou. In November 2015, Auxilia Investments advanced a further $20,000 loan to Metstech; Mr Chou was paid but only $4,000. In December 2015, Auxilia Investments advanced a further $63,000 loan to Metstech and Mr Chou was paid his salary of $5,068. That is, Mr Chou had not been paid consistently, either as to frequency or amount.

2. [114]

   This prompted Mr Chou, on 24 December 2015, to tender his resignation. Mr Chou explained: (emphasis added)

3. [115]

   Following Mr Chou’s resignation, a number of emails were exchanged. Mr Park asked Mr Chou to reconsider, noting “Chad has paid you and also Tritton are starting to pay bills”. Further:

4. [116]

   Soon after, Mr Park sent another email, explaining the reasons why Metstech had not paid him regularly and assuring Mr Chou, “You will receive all outstanding back pay from the company.” Going forward, Tritton was expected to place a substantial order, which would place the company in funds. Further: (emphasis added)

5. [117]

   These emails highlight three matters. First, Mr Chou was entrusted with the task of designing products for Metstech, where “the IP for the products resides in Metstech IP”. There was no mention in these emails, or any preceding document, that the design was being undertaken by a third party such as an ODM.

6. [118]

   Second, Mr Park now appreciated the vulnerability of Metstech’s intellectual property rights where the key employee engaged to design the products was threatening to leave the company and had yet to hand over the “paperwork for the PCBs” or the prototype BDA. In cross-examination, Mr Park agreed that Mr Chou was the key to the intellectual property: “without Jason we have nothing and that has always been a massive risk in the business.” In an apparent endeavour to secure Mr Chou’s loyalty to the endeavour which had been begun by Metstech, Mr Park was prepared to offer Mr Chou additional financial returns on Metstech’s products by way of manufacturing rights.

7. [119]

   Third, Mr Chou does not appear to have been entirely forthcoming with ‘paperwork’, such that his fellow directors did not know precisely which companies he was dealing with in Taiwan and for what purpose.

8. [120]

   The following day, 25 December 2015, Mr Chou relented but sought assurance that his salary would be regularly paid, as well as “spent cost for the project”, which I understand to be a reference to expenses incurred by Mr Chou on Metstech’s design project. Mr Chou advised, “Every development spent I still use Welldesign till I receive first pay,” by which I understand that Mr Chou intended to pay for the development costs using his company, Welldesign, and then seek reimbursement from Metstech rather than have Metstech pay the development costs directly. The downside with Mr Chou’s proposal was that Metstech would continue to have no visibility as to who Mr Chou was dealing with in Taiwan, or for what purpose. Mr Chou concluded his email: (emphasis added)

9. [121]

   In cross-examination, Mr Chou said this meant he would go to an ODM to carry out the design work. Further, he did not need to ensure that his fellow directors understood the arrangements that he was entering into in relation to the design of the BDA system as “no one asked me”. I consider this unlikely and do not accept Mr Chou’s evidence. It is apparent that Mr Chou’s fellow directors were keenly interested in how Metstech’s products were developed. The development costs were being paid by the company, funded by Mr Jefferson. Mr Park clearly wished to ensure that the intellectual property rights associated with the products belonged to Metstech, presumably so that shareholders could benefit from exploiting these rights.

10. [122]

    After this, Mr Chou’s salary was paid promptly. Cashflow problems appear to have alleviated in January 2016, when Tritton placed substantial purchase orders with Metstech, totalling some $430,000.

11. [123]

    Also in January 2016, Metstech produced a Specification Document for the BDA – Version 1.2 – with the footer noting “COPYRIGHT 2016 METSTECH PTY LTD”. It will be seen that, whilst the directors envisaged that the intellectual property associated with Metstech’s products would be held by Metstech IP, the documents produced by Metstech in respect of those products almost invariably claimed copyright in favour of Metstech.

12. [124]

    On 18 February 2016, Mr Chou circulated “the spec of Metstech BDA” to Progility Technologies, together with some “blurb”, apparently prepared by Mr Park, regarding the state of development and testing, “Samples of the [BDA] are currently being manufactured. … In three months we expect to release [a BDA with additional features]”. Further, “We are very fortunate that our development team is led by an engineer with [substantial] experience … As a group we have invested significantly into this technology.”

Successful test of BDA

1. [125]

   On 29 February 2016, Mr Park emailed Mr Clifton, “Jason advises that the first BDA has been made and tested well”, and requested some “blurb” which he could pass onto potential customers:

2. [126]

   Mr Chou provided a document, “The attach file was I had done for your reference.” Mr Park appears to have expected that the sort of documentation described by Dr Georgevits would be available in relation to Metstech’s new products. Mr Chou was able to answer Mr Park’s request promptly, without suggesting that no such documents existed.

3. [127]

   On 1 March 2016, further emails ensued between Mr Clifton, Mr Park and Mr Chou regarding test results, ordering components, finding suppliers for the enclosure and labelling. Mr Clifton advised that he would like to “finalise the Splitter Combiner product”. Further:

4. [128]

   On 4 March 2016, Well Electronics Pty Ltd (not to be confused with Welldesign) issued an invoice to Metstech, apparently for components. The contact email on the invoice was Max Chen. He was Ms Chen’s brother (and Mr Chou’s brother-in-law) and had a business supplying components for factories. Metstech paid the invoice on 7 March 2016, authorised by Mr Park, with the transaction description “BDA sample build”. It would also appear that the BDA was at prototype stage.

5. [129]

   On 11 March 2016, further emails ensued between Mr Clifton and Mr Chou concerning fitting various components within an enclosure. Mr Clifton enquired “Does our supplier have a similar 4 way combiner? This might create enough room. Also can you please send the dimensions of the … splitter and … combiner PCB you have designed for the leaky feeder system. I will use this to layout the RX equipment”. Mr Chou supplied drawings of “the … Splitter that I design a year ago. The PCB shape can change to fit any small enclosure if we want.”

6. [130]

   On 14 March 2016, Mr Chou supplied updated specifications for the BDA “that match [what] I am building now for your reference”. Mr Chou said that, although his email referred to him building something, in fact, it meant that the ODM was doing the building. Mr Chou assumed his fellow directors knew “because they all knew they did not have any tool can do these things.” I consider this evidence unlikely where the terms of his email were clear and consistent with other emails at the time and where the invoices which Mr Chou was submitting to Metstech for payment related to components rather than design services.

7. [131]

   On 30 March 2016, Mr Chou requested a quote from Well Electronics for further components. The email was copied to “Microdel”, being a Taiwanese company which later rendered invoices to Metstech in respect of PCBs: see [195]. It will be seen that both companies were associated with Mr Chou’s brother-in-law. On 26 April 2016, Well Electronics rendered an invoice for $5,684.80, which was promptly paid by Metstech. On 28 April 2016, another Taiwanese company issued a quote to Mr Chou for components (US$7,200), which Metstech promptly paid.

Jefferson becomes largest shareholder

1. [132]

   In April 2016, Mr Clifton ceased to be a director of Metstech and Metstech IP. His shares in the companies were transferred to the other shareholders such that each of Mr Park, Mr Jefferson and Mr Chou’s corporate entities held 40 shares each. Mr Jefferson obtained the domain name metstech.com.au which, until then, had been held by Mr Clifton.

2. [133]

   In May 2016, Metstech and Metstech IP each issued 16 shares to Auxilia Holding such that Mr Jefferson’s corporate entity became the largest shareholder in both companies. Presumably, this reflected Mr Jefferson’s substantial financial outlay to support the companies’ endeavours.

3. [134]

   On 19 May 2016, Mr Chou emailed Mr Park, as Mr Jefferson was on holidays, asking, “I need purchase many components for BDA, 3Way passive manufacture. Is there anyone [who] can pay for these [purchase orders], or [do] I need [to] pay by myself first then charge Metstech later”. The invoices were promptly paid, although receipt of the funds in Hong Kong appears to have taken some time, prompting Mr Chou to email Mr Park that, unless payment was made promptly, “supplier seemed not want have business with us. I’ll need find out other solution and change design”.

4. [135]

   On 23 and 24 May 2016, Mr Chou undertook testing of the BDA at Motorola’s offices in Melbourne. In June 2016, Well Electronics issued an invoice to Metstech for $14,126.54. Mr Chou asked Mr Park to “pay the bill to the supplier for the BDA components”. On 23 June 2016, Auxilia Investments transferred $70,000 to Metstech as a loan.

5. [136]

   On 7 July 2016, Mr Chou sent Mr Park and Mr Jefferson a drawing for a BDA built-in repeater concept proposal.

First product launched: BDA

1. [137]

   On 26 July 2016, Mr Park issued a press release on behalf of Metstech, releasing the company’s first product, described as an Ultra Linear TETRA BDA for Leaky Feeder systems. Those who wished to become resellers were invited to contact Mr Park.

2. [138]

   In July 2016, Metstech entered into the first of many confidentiality agreements with third parties in relation to distribution and re-sale of its products. Metstech’s practice was to also enter into confidentiality and non-disclosure agreements with customers and potential customers in order to preserve the confidentiality of Metstech’s technology.

3. [139]

   On 1 August 2016, a draft business plan was prepared by Mr Park for Metstech, referring to a change of business model to focus on developing new products, where “the market we can attack is worth between US$10-15B per year.” The organisational chart now described Mr Jefferson as managing director / finance manager, Mr Park as general manager / business development, Mr Martin as IT and software manager. (Mr Martin said that he started work on the software for the RF controller for the BDA in 2016.) Mr Chou is described as hardware manager, with a “contract manufacturer” and “hardware development” personnel (unnamed) reporting to him. It would appear that no particular person had been engaged to perform those roles, unlike other staff sitting beneath Mr Park in the organisational chart and identified by name.

4. [140]

   As to the company’s products, the draft business plan stated:

5. [141]

   In respect of marketing strategy, the draft business plan noted that Mestech was “currently being on-boarded” by an Australian telecommunications company (Telco) for its underground products. As to the first product launched, the business plan noted, “We are currently ready to submit the module to manufacture.” The next development was “well within our current skillsets. … We expect to have the channelised product in production by the end of 2016”. That is, it was not suggested that the company needed to look externally for design skills to development its products.

6. [142]

   Finally, as to intellectual property, the business plan stated:

7. [143]

   Consistently with the business plan, on 2 August 2016, Mr Park contacted the Australian Communications and Media Authority to begin the approval process for the BDA, noting “We are currently in the final development of a channelised BDA for two way radio”.

Yokao

1. [144]

   On 15 August 2016, Mr Chou sent Mr Park and Mr Jefferson a photograph of the BDAs PCB board “that manufacture in Taiwan for your reference”. As Mr Lardner explained, very few Australian companies prepare PCBs and this activity is usually outsourced overseas. The green board had electrical circuits installed and bore “Metstech” in large print. The PCB bore an identification code “168-000002-R1 / Metstech”.

2. [145]

   Each of Metstech’s products contained one or more PCBs. As becomes apparent from invoices rendered to Metstech for the PCBs, each model of the PCB assemblies was identified by a code comprising the digits “168” followed by a hyphen then six digits indicating the function of the PCB, followed by a hyphen, then the letter “R”, denoting a revision, followed by the revision number. Working one’s way through these invoices and back again, “168-000002-R1 was the first revision of a PCB used in Metstech’s BDA.

3. [146]

   To the left of “METStech” on the PCB and in much smaller text was stamped:

4. [147]

   Little is known of “Yokao”. On 2 April 2017 – that is, eight months later – a Taiwanese company, Yo Kao Technology Co Ltd, was certified as meeting the requirements of ISO 9001:2015 in respect of the manufacturing of double-sided, multi-storey PCB.

5. [148]

   Later, Mr Lardner became aware of the word “Yokao” stamped on the PCB “because we were trying to work out who actually was the final factory … we were sort of essentially trying to do reverse diagnosis of working out where all these things were coming from.” Mr Lardner knew someone who lived in Taiwan, Judy Ho, and he asked if she could find out the location of some of these factories and their relevance to Metstech “because we didn’t know anything about them … The only think that we knew about these companies was … essentially via Google Earth and the like.” A number of people, including Mr Lardner, tried to establish contact with Yokao, “We got one or two responses which were essentially to the effect of “Go away”.

6. [149]

   Mr Chou said that Well Electronics exported Yokao’s products. It is this company which Mr Chou now says he was using in Taiwan as an ODM to design products to Metstech’s specifications.

7. [150]

   Dr Georgevits agreed that the fact that Yokao was printed on the PCB “could be” consistent with Yokao being involved in the design of the PCB, “depending on who made that circuit board, they would have been instructed to … print certain things on that board. It could [have been designed by] somebody else … Maybe John Smith & Co made the board and they were told that the … printer overlay is to contain these texts and that’s what appears on the board.” Further: (emphasis added)

8. [151]

   Having regard to the contemporaneous documents already described, together with Mr Chou’s cover email referring to the manufacture of the PCB, I consider it more likely that “Yokao” was engaged to manufacture the PCBs, giving effect to Mr Chou’s design.

Development of headend

1. [152]

   On 6 September 2016, Mr Chou updated the Specification Document for the BDA, which noted that the “monitoring Headend” would be released in the fourth quarter of 2016. The footer of the document continued to reserve copyright to Metstech. It may be noteworthy that, when updating the document, Mr Chou did not make any amendments which detracted from Metstech’s copyright by, say, suggesting the involvement of an ODM or “Yokao”. Well Electronics issued further invoice for components. Mr Chou requested Mr Park to “pay the BDA components to supplier … These components are used in … this batch SMD job”, which means surface-mounted device. It apparent from Well Electronics’ invoices that PCBs were being assembled and tested in Taiwan and shipped to Sydney.

2. [153]

   On 20 September 2016, Mr Chou sent a design of a Metstech Headend Control Board with a list of features, noting “I had publish this PCB and should get the PCB by end of next week. Then I can build few boards by myself and programming it for test. If time is enough, I’ll show you how to use the small PI with touchscreen to do monitor/configure BDA system.” The accompanying document had the name and logo of Metstech, a photograph of a PCB on which was printed “Metstech” (but not Yokao), together with a list of features of the PCB for Metstech’s headend. The PCB bore a product code “168-000005-R0 / Metstech”. Working one’s way through the invoices, this was the initial version of the PCB for Metstech’s headend. The next day, Mr Chou asked Park to pay an invoice for “PCB assembly and testing”.

3. [154]

   In September 2016, Auxilia Investments lent Metstech a further $15,000. In October 2016, Auxilia Investments lent Metstech a further $15,000. In November 2016, Auxilia Investments lent Metstech a further $30,000.

4. [155]

   In November 2016, Mr Park approved Metstech’s User Manual for the Underground BDA System. The footer of the document stated “COPYRIGHT 2016 METSTECH PTY LTD”. The User Manual contained details of the headend control unit and described the Raspberry Pi software, adding, “A more pictorial view will be developed and will be available in a future firmware release.”

5. [156]

   Dr Georgevits explained that firmware is a software program or set of computer instructions stored in a non-volatile memory such as a programmable memory chip. The memory is called “non-volatile” because the data in the memory chip is retained even when the power to the chip is switched off. Firmware source code is usually written on a computer in a high-level programming language such as C, C++ and then downloaded as machine language onto the memory chip. Firmware is written in a “programming language” and is then compiled into “machine language” before being installed on a memory chip. The code in the programming language is known as “source code”. The “compiled” code in the machine language is known as “object code”, which is “unintelligible” and very difficult to convert back to intelligible source code. (The plaintiffs contend that Mr Chou designed the source code.)

6. [157]

   Mr Chou was then working on a new BDA design. On 29 December 2016, Mr Park emailed Mr Chou, “Chad and I were discussing how long it would take to produce 50 or 100 of the new BDA you are currently designing. It may be quicker to get these and then you can slowly complete the existing boards.” As I read Mr Chou’s reply, he advised that the circuit in the new BDA design “is not change[d] too much” and the components were available; “I’ll check the supplier this week”. In cross-examination, Mr Chou denied that he designed the circuit, “I did not have tool”. His evidence is at odds with the contemporaneous document, which I prefer.

7. [158]

   On 21 January 2017, Mr Park and Mr Chou exchanged emails in respect of the manufacture and testing of components. Mr Chou advised, “I had send to manufacture and ask them give me 20 pcs ASAP”. He requested compliance labelling issued by the Australian Communications and Media Authority to “supply to Test Lab”. Mr Chou also advised, “I am working with Test lab and prepare the technical document for compliance test request”.

8. [159]

   On 23 January 2017, Mr Park sought confirmation from Mr Chou on each of the items then in development. Three items were then listed as “Designed, waiting for quote for manufacture” whilst others were in the process of design and development. As for production, the manufacturer had some capacity after Chinese New Year. On 26 January 2017, Mr Chou responded, providing a quote obtained from a manufacturer for the enclosure but without otherwise correcting Mr Park’s earlier email as to the status of items in development.

Developing software

1. [160]

   As mentioned, Mr Martin was then working on the software for the RF controller for the BDA, which related to the monitoring aspect of the BDA. The first proof of concept was delivered on 30 January 2017. Mr Martin said that he used two ‘open source’ pieces of software to develop the monitoring system, together with licensed software. Mr Martin understood that the terms of the open source software required that, once the monitoring system software was released, he was obliged to make it publicly available and free. Mr Martin said he never considered these components of the software to be confidential or a trade secret to himself, Metstech or Metstech IP. However, Mr Martin considered the proprietary component of the software relating to the network management of the BDAs to be his own work. (The plaintiffs do not claim copyright in the open source component of the Raspberry Pi Software but the “proprietary component”.)

2. [161]

   Mr Martin was then neither an employee nor shareholder of Metstech or Metstech IP. Nor was he asked to sign a non-disclosure or confidentiality agreement. Mr Martin was highly regarded by Metstech’s directors and appears to have enjoyed their trust. Mr Martin was not paid and did he seek payment for the software. Rather, Mr Martin said “It was freelance work, carried out on a speculative basis with the belief that one day I might be compensated by the company if and when it was successful.” It is inherent in Mr Martin’s observation that he understood that the software was being developed for Metstech (or Metstech IP) that the product of his efforts was not to be shared with the world at large. His ability to “be compensated by the company if and when it was successful” depended upon the software remaining exclusive to Metstech.

3. [162]

   Mr Martin worked closely with Mr Chou in developing the software. In February and March 2017, emails passed between Mr Park and Mr Chou regarding Mr Martin’s efforts to resolve software issues. Mr Chou advised he was “working on modify the 6 bda now.” Mr Chou provided test results, on which comments were exchanged. This was a highly technical and collaborative process where Mr Martin directed his questions to Mr Chou, and answers were provided directly.

4. [163]

   On 30 and 31 March 2017, Mr Martin sent new release notes for the Raspberry Pi software and asked , “I need John/Jason to provide a comment/explanation …”. Mr Chou responded with an explanation, which apparently found its way into the software. Mr Martin asked Mr Chou whether there was an error in the code in the “command file”: “You have a space between ‘CAL’ and ‘+’. I am assuming that this is a typo …”. Further, “Jason, what are the power limits …”. Mr Chou responded promptly. Mr Chou had a detailed knowledge of the products being developed and the associated software and firmware. At no point did Mr Chou say that he needed to ask someone else before answering Mr Martin’s detailed questions.

5. [164]

   On 5 April 2017, Mr Martin provided Mr Park, Mr Jefferson and Mr Chou with an update on Metstech’s firmware, noting improvements that had been made, known issues and matters still to be done, including for the production build. On 6 April 2017, Mr Martin forwarded a further update to Mr Park, Mr Jefferson and Mr Chou, asking Mr Park and Mr Jefferson to “let me know if there are any features that we have not added that will stop it from shipping.”

Successful demonstration of leaky feeder system

1. [165]

   On 6 April 2017, Mr Park advised Telco that a demonstration of Metstech’s leaky feeder system was to be held on 10 April 2017. It was hoped that Telco would be able to attend; Mr Park noted, “the client is hot”. The demonstration took place as planned. Mr Jefferson attended with Mr Park and Mr Chou.

2. [166]

   On 11 April 2017, Mr Park published an article on LinkedIn entitled, “METStech Deliver LTE over simple leaky feeder for mines and tunnels”, reporting that Metstech successfully demonstrated LTE propagation utilising its leaky Feeder BDA. Features of the product were described, with the product said to be due to be submitted for approvals in June 2017. Various comments were posted in respect of the article. In answer to a comment, Mr Park stated: (emphasis added)

3. [167]

   On 11 April 2017, Mr Park also reported to Telco on the results of the test. A comprehensive report bore the footer, “Copyright 2016 Metstech Pty Ltd”. Mr Park’s report concluded, “The Tests were successful in proving the METStech BDA can propagate LTE signals [for] significant lengths.”

4. [168]

   On 11 April 2017, Mr Park also exchanged emails with Mr Chou and Mr Jefferson, with thoughts on development of Metstech’s product. Mr Chou responded, “I had thought these issues awhile … I finally find that just back to my original thought [a] few years ago.” Mr Chou provided his thoughts on how to improve the products, being to use a frequency shift module to change the LTE bands on the LTE boards. Mr Chou advised what he was doing to improve the product, “I am checking … I am using … I’ll try to connect more BDA and do more tests and let you know the result.” On 13 April 2017, Mr Chou emailed Mr Martin, “I’ll try log read to check the event.”

5. [169]

   On 19 April 2017, Mr Park also met with Bin Fu of Zetel Solutions Pty Ltd, to obtain assistance to licence the band on which the BDA would operate. On 20 April 2017, Metstech was invoiced $42,000 for trial production units.

R&D application

1. [170]

   On 27 April 2017, Mr Park reported that he was “knee deep in last year’s R&D application form.” Metstech IP applied for research and development (R&D) tax offsets under Division 355 of the Income Tax Assessment Act 1997 (Cth), which was registered by the Department of Industry, Innovation and Science under section 27A of the Industry Research and Development Act 1986 (Cth) on 8 May 2017. Mr Park prepared the application and declared that the contents of the application were true and correct.

2. [171]

   The supporting activities described in the application indicated that Metstech IP had been undertaking design work, including in relation to functional specifications, PCBs and software. The core R&D activity was described as “Low Latency High Linear BDA amplifier to support multiple communication products over multiple frequency bands”. The description of this activity included:

3. [172]

   The application required a description of the “new knowledge” intended to be produced by the core activities, which were described as follows: (emphasis added)

4. [173]

   The application reported that $164,945 had been spent on the project that year. The problem was that all expenditure had been incurred by Metstech, not Metstech IP. Mr Jefferson had earlier sought advice from Jaye Mankelow of Blackburn Business Advisors, who advised on 11 July 2016: (emphasis added)

5. [174]

   In accordance with Mr Mankelow’s advice, Metstech invoiced Metstech IP for the expenses which it had borne. Metstech IP’s profit and loss statement recorded an R&D expenditure fee paid to Metstech of $164,945. The financial statements for Metstech for the 2016 financial year, as later approved by its directors, including income of $164,945, described as “R&D Expenditure Fee METStech IP Pty Ltd”. On 16 May 2017, Mr Park emailed Mr Chou the tax return for Metstech IP for the 2016 financial year, requesting his signature, “This is for the R&D tax refund.” However, no actual payment was made by Metstech IP to Metstech.

6. [175]

   In this way, Metstech’s expenditure on R&D activities was claimed by Metstech IP, which received a rebate. Of the $164,945 expended, Metstech IP received a tax rebate of $90,817.49 (according to Metstech IP’s bank statement). On receipt, Metstech IP transferred $90,136 to Metstech’s bank account; the funds were used to pay salary and repay $60,000 of the funds advanced by Auxilia Investments. As such, Metstech was re-paid some but not all of the “R&D Expenditure Fee” reported in its financial statements. Later in June 2017, however, Auxilia Investments deposited a further $10,000 and $5,500 to Metstech’s bank account, apparently to pay Mr Chou and Mr Park’s salaries.

Mr Corbett joins Metstech

1. [176]

   On 6 June 2017, Mr Park posted a further article on LinkedIn, “METStech release LTE “PLUS” Radio Dual [BDA]”. Mr Park circulated the article to Mr Chou and Mr Corbett. Mr Chou also provided a draft 3D view image of the dual band BDA.

2. [177]

   Mr Corbett had earlier executed a confidentiality agreement with Metstech for the purpose of considering whether to distribute Metstech products. Mr Corbett was then interested in investing in Metstech, having attended a meeting with Mr Park, Mr Jefferson and Mr Chou at Metstech’s office. Mr Corbett said the meeting lasted for most of the day and was focussed on the status of the further development of the LTE BDA. For some 75% of the meeting, Mr Chou explained the work he was undertaking on the design and development of the LTE BDA product. Mr Chou drew various diagrams and details on a whiteboard in relation to the BDAs and provided significant detail on the status of the development process. Mr Chou said he needed to buy more components to build more BDAs.

3. [178]

   Having worked in the mining industry for many years, Mr Corbett considered that the product was a unique development, being the first BDA in the world that could simultaneously transmit both UHF, VHF and LTE signals on a single leaky feeder cable. When Mr Park told him that more capital was needed to buy components and keep working on developing the LTE BDA, Mr Corbett was very keen to invest. Mr Corbett made arrangements for his self managed superannuation fund to invest $250,000, based on what he had learnt in the meeting.

Use a design house?

1. [179]

   On 3 July 2017, Mr Jefferson emailed Mr Chou regarding “BDA final design to be Published”, checking whether ideas that had been discussed were covered in the current design. Further, “I would also like to discuss the possibility of you talking to a design house whilst you are in Taiwan. We were thinking we might be able to get them started on the fibre to coax converter device you have mention[ed] to John …” Mr Jefferson also proposed an idea for a test rig. Further, “I have also been thinking about the headend box. I think we should source a box built and packaged for the factory you have been talking to.”

2. [180]

   Mr Jefferson said the reference to the use of a design house was in respect of another possible Metstech product being discussed. As Mr Chou was very busy with Metstech’s BDA and did not have the capacity to work on this, Mr Jefferson suggested retaining a design house. Mr Jefferson’s evidence is consistent with the email when read as a whole. Relevantly, Mr Jefferson’s email indicated that the use of a design house was not a foreign concept. It does also highlight the fact that there are no emails suggesting that a design house was being used on the design of Metstech’s products already underway. Another example of the parties discussing the potential use of a design house is at [191]-[192].

3. [181]

   On 4 July 2017, Mr Chou replied to Mr Jefferson, Mr Park and Mr Martin, having spent a day “thinking what the solution that can do in the design now. Sorry the late response to you, I need time to solve out the questions.” Mr Chou proceeded to comment on the various queries raised by Mr Jefferson, including “The OTA for firmware update will have a problem in our design now. … When I get the unit, I’ll [be] setting a test system in office that everyone can do the test that base on the simple attenuates circuit.” Mr Chou’s email suggests that he was centrally involved in the design work.

4. [182]

   On 7 August 2017, Mr Park emailed Mr Chou, “Trying to leave you alone as much as possible. I do need you to organise the enclosure – we want to ensure we have the headend ready for the control board”. Mr Chou replied, “I’ll make a call to supplier to shipping the blank enclosure to office ASAP.” Mr Park had also enquired as to whether the BDA could support certain features. Mr Chou replied: (emphasis added)

5. [183]

   Of this, Mr Chou said he was talking about the concept design, not the schematic or PCB layout, “This is only is idea, concept.” To put the idea into a schematic or PCB needed someone who had the tool to do these things and he gave his idea to the ODM engineers and asked them to design this for him. That is, Mr Chou essentially accepted that he undertook the first step in the design process described by Dr Georgevits, where a high level of innovation and creativity is required to create a successful new product. However, subsequent steps were undertaken with the assistance of others, being the second and subsequent steps described by Dr Georgevits, being “of a routine nature and … do not involve significant innovation.” As such, copyright in such designs would ordinarily reside in Mr Chou (or, as he was an employee, Metstech), subject to the terms of any contract with an ODM.

6. [184]

   In July 2017, Auxilia Investments lent $10,000 to Metstech. In August 2017, Auxilia Investments lent $11,000 to Metstech. Cashflow appears to have been tight, as Mr Park’s salary was being paid in weekly instalments.

Moving to manufacture

1. [185]

   On 1 September 2017, Mr Park asked Mr Chou for an update as to how the BDA was going, and was informed by Mr Chou:

2. [186]

   Mr Chou said the SMD house was Yokao, which undertook the manufacturing and assembly of the PCB. Mr Chou said the PCB engineer was involved in the layout of the PCB. Where the email addresses the manufacturing stage of the process and makes no reference to PCB layouts, I do not consider that his email indicates that “Yokao” designed the BDA or its PCBs.

3. [187]

   It would appear that Mr Park incorporated the information from Mr Chou into a further draft business plan for Metstech dated 1 September 2017, which stated that the channelised BDAs were a significant development, with the key component being to design a frequency shift module. The module was said to be in pre-production and samples expected at the end of September 2017. Mr Chou was described as the engineering hardware manager, working full time for the company. The intellectual property strategy remained as had been stated in earlier business plans: see [141]. Target sales for the initial product range were expected to be $2.2 million in the 2018 financial year, generating a gross margin of some $1.4 million.

4. [188]

   Mr Park followed up Mr Chou again, who advised on 4 September 2017:

5. [189]

   Mr Park replied that he would buy the power injectors from the supplier in Hornsby suggested by Mr Chou and asked whether Mr Chou “need[ed] to come home for a week to be with your family and then go back.” Mr Chou advised on 6 September 2017 that he had just returned to where he was staying “from manufacture site” and would return to Sydney shortly, “I need bring the last yellow leaky cable I kept in the Sydney to connector manufacture engineer to finish the tooling build. … And I need bring more 300 pcs BLE [Bluetooth] module to here. The 600 units I brought here is not enough for 300 BDA and 15 Headend controller. And I’ll drive to office meeting with you and Chad for these batch production here before I fly back to here to finish every things.” Mr Chou was now busy with the manufacture of Metstech’s products, as described in the business plan.

Customer interest

1. [190]

   Metstech was now receiving interest in its products. In particular, in September 2017, an Australian mining company (MineCo) expressed interest in Metstech’s LTE BDA for one of its mines. In October 2017, Metstech prepared drawings for an underground pilot project in Michigan, USA.

2. [191]

   On 19 October 2017, Mr Park sought an update from Mr Chou in advance of a meeting with Telco. Mr Chou replied: (emphasis added)

3. [192]

   Importantly for present purposes, whilst Mr Park explained that the “in-CAB LTE mobile device” had nothing to do with the leaky feeder system and did not progress, Mr Chou communicated with Mr Park on the potential use of a design house. By contrast, the absence of any mention of a design house being used in connection with the design of Metstech’s products is noteworthy.

4. [193]

   On 26 October 2017, Metstech signed a confidentiality agreement with an American company supplying telecommunications networks (US Co). Mr Park told Mr Jefferson that he had been contacted by US Co, “they are a potential customer”. Mr Park reported to Mr Chou on his meeting with Telco and opportunities in the United States (with US Co) and the United Arab Emirates, “So opportunities are really starting to come to the front at this time.” Mr Chou replied:

5. [194]

   On 28 October 2017, Mr Chou reported to Mr Park and Mr Jefferson, “Finally, I got the boards!! … I am so tired and need have a good sleep.” Attached to the email was a photograph of three PCBs. One had a product code “METSTECH / 168-000004-R1”, which I take to be the first revision of the PCB for the BDA base board. One had a product code “METSTECH / 168-000007-R0”, being revision 0 of the PCB connected to the baseboard for LTE frequencies. One PCB did not have a visible product code but appears from an invoice issued soon afterwards to be product code “METSTECH / 168-000008-R0”, which I take to be the frequency shift module PCB: see [195]. Metstech’s name was stamped in large font on the PCBs. In smaller font, “Yokao” was also printed on at least two of the PCBs.

6. [195]

   On 6 November 2017, Microdell Corp of Taiwan rendered an invoice to Metstech for “LTE BDA pcb and BDA control pcb charge”. On 20 November 2017, Mr Chou requested Mr Park to help him pay this bill, which included shipping for one BDA mock-up sample and one for the “2U enclosure”, with the balance for the BDA PCB. However, on 6 December 2017, Well Electronics rendered an invoice to Metstech for some $14,000 for engineering fees in respect of PCB assembly, together with a charge for a PCB board, manual assembly and components. The font and general appearance of the invoice from Microdell Corp and Well Electronics are the same.

7. [196]

   As earlier noted [at 131], when Mr Chou requested a quote from Well Electronics, the email was copied to “Microdel”. I infer that there was a connection between the two companies or, more particularly, between these companies and Mr Chou’s brother-in-law. In his cover email, Mr Chou asked Mr Jefferson and Mr Park to pay the bill to Well Electronics instead of the bill from Microdell Corp due to “a Taiwan/Australia Tax legal issue for previous invoice from Taiwan company.” It appears that Mr Chou had embraced Mr Park’s suggestion that his company would derive further income from the manufacturing of Metstech’s products: see [116]. More particularly, Mr Chou appears to have been on-charging Yokao’s manufacturing fees to Metstech via his brother-in-law’s company, Well Electronics. Presumably, Mr Chou or his family derived additional income by a mark-up of some kind.

8. [197]

   The invoice from Well Electronics referred to the product codes stamped on the three PCBs in the photograph referred to at [194]. Through a process of elimination, the product code for the smaller PCB was “168-000008-R0”. The same day, Auxilia Investments deposited $15,000 into Metstech’s bank account, presumably to attend to payment of this bill.

9. [198]

   On 12 December 2017, Mr Park circulated his thoughts to Mr Jefferson, Mr Corbett and Mr Chou in advance of a meeting with Telco, including:

10. [199]

    On 13 December 2017, Telco met with Mr Jefferson, Mr Chou and Mr Corbett and signed a confidentiality agreement. A number of emails were exchanged between Mr Corbett, Mr Park, Mr Jefferson and Mr Chou regarding issues raised by Telco.

Maths box

1. [200]

   On 22 December 2017, Mr Chou provided Mr Corbett, Mr Park and Mr Jefferson with a confidential document, “Metstech leaky feeder” to be provided to Telco, presumably to address its concerns. The document described “Maths box.” Mr Chou thought they could apply for a patent for the Maths box, “So this … concept need [to be] very careful to release” as Eriksson had earlier tried to patent a different approach to this problem. Further, “The N connector is ready to shipping to our office when we pay the bill to manufacture.”

2. [201]

   On 28 December 2017, Mr Chou emailed Telco, advising that he had been working long hours over Christmas, “so that I can bring 6 working LTE BDA and few power injector with me to Taiwan. That I can keep working to finish all things.” Mr Chou attached a basic description of the leaky feeder system and MIMO underground approach.

3. [202]

   On 3 January 2018, Mr Park asked various questions of Mr Chou “because I know you are busy”, in particular, “Am I correct in assuming this [part] is what we need to patent?” Mr Chou replied, copied to Mr Corbett and Mr Jefferson, “Yes, I think we can apply new design patent for that concept.” As to whether this could be developed in 2018 if he was given engineering support on current products, Mr Chou replied, “Yes, everything almost there, just need to have budget to finish it. … The tooling cost for metal enclosure was very exp[e]nsive, but I still ask manufacture prepare a quote for us.” Further:

4. [203]

   In sharp contrast to his email, Mr Chou said in cross examination that the idea of the Maths Box came from Yokao’s engineer and was not his idea at all. I prefer to rely on his contemporaneous email, which strongly indicates that it was Mr Chou’s idea. Mr Chou was reluctant to accept that, in order for Metstech to apply for a patent, it would need to have undertaken the design or have the rights to the design, “Not really”. I did not accept his evidence in this regard.

5. [204]

   On 8 January 2018, Mr Chou provided a further update to Mr Park and Mr Jefferson, advising, “I had 6 working LTE BDA on my hand. And 2 will patch 2 VHF BDA board inside and now is working how to placement and jump wire.” In relation to the “black box”, Mr Chou advised that he needed to try to find a suitable enclosure and then conduct manual soldering and build the PCB. He enquired, “what’s the test plan?”.

6. [205]

   On 19 February 2018, Mr Chou ordered software from element14 Pty Ltd for PCB design, costing $721.60. The order was placed by Welldesign. Mr Chou said this was to purchase “Circuit Studio software”.

7. [206]

   On 26 February 2018, Precision Mining Solutions provided test results for the BDA. Emails were exchanged between Mr Park, Mr Chou, Mr Corbett and Mr Jefferson in respect of further information to be sent to the tester, including the specifications for the yellow leaky cable. On 27 February 2018, Mr Chou supplied test results for the yellow leaky cable as well as the noise figure calculations based on the components data sheet. Both documents supplied by Mr Chou bore the footer “Copyright 2018 Metstech Pty Ltd”. As to the results for the yellow leaky cable, the document supplied by Mr Chou stated that Metstech encouraged customers to use an N type connector for the cable, “It took few weeks time discussing and co-work with RF connector manufacture’s engineer, finally Metstech had successful customize the world first N type RF connector for this yellow leaky cable.”

8. [207]

   On 11 March 2018, Auxilia Investments deposited $12,000 into Metstech’s bank account. The same day, Metstech paid $10,000 as “Deposit BDA”. On 14 March 2018, Welldesign issued a receipt to Metstech for “Metstech BDA Manufacture Deposit”.

Further R&D grant

1. [208]

   In December 2017, an R&D tax incentive application was also prepared for Metstech IP, which described the company’s progress in developing its unique products. Total expenditure by Metstech IP on its project for the financial year ending 30 June 2017 was stated to be $195,468. When Mr Mankelow circulated the draft financials for Metstech and Metstech IP for the 2017 financial year, he raised an issue with the R&D incentive, where Metstech IP was entitled to claim for expenses paid but those expenses had been paid by loans from Auxilia Investments to Metstech. Mr Mankelow advised:

2. [209]

   Mr Jefferson said that, on the advice of Mr Mankelow, loans from Auxilia Investments to Metstech were transferred from Metstech to Metstech IP. This occurred through book entries only. No money was paid from Metstech IP to Metstech. On 6 December 2017, the financial statements for Metstech were signed, including income of $195,468 in respect of an R&D expenditure fee rendered to Metstech IP. In February 2018, Metstech IP received a tax refund of amount unknown, of which $86,190 was transferred to Metstech’s bank account and part used to repay $60,000 to Auxilia Investments. Thus, of the $195,468 expended by Metstech on the development of its products, some $86,190 was reimbursed by Metstech, albeit less than the income recorded in Metstech’s financial statements.

3. [210]

   In addition to the R&D grant, Metstech applied for a grant to accelerate the commercialisation of its product. A consultant, Karl Putnis, was retained to assist. On 12 March 2018, Mr Putnis provided a document explaining Metstech’s technology to the government for feedback, describing Metstech’s LTE BDA as “a world first communication product and communication system.” Further: (emphasis added)

4. [211]

   This document, albeit not authored by Mr Park, was consistent with the R&D grant applications and likely prepared in consultation with Mr Park, where R&D applications were his province. The document is a powerful, contemporaneous statement that Metstech’s IP was “100% developed” in-house; no ODM was involved.

5. [212]

   The document provided further details about the state of development of Metstech’s products. The BDA LTE product was said to be currently in production, with three planned Australian mine site trials at a mine in New South Wales (with Telco), MineCo’s mine in Western Australia (with Challenge) and another mine in Queensland. (Mr Jefferson said the Queensland mine was to be used as a pilot project for the Metstech BDA LTE technology.) An additional pilot was planned in Michigan, commencing on 3 August 2018 with “very strong interest … to conduct a trial in Chile.” The product was said to have huge market demand, with well over 100,000 km of underground tunnelling worldwide in mines and with Metstech’s system far less expensive than existing products.

6. [213]

   On 19 March 2018, the Department of Industry, Innovation & Science advised Mr Park advising that Metstech’s expression of interest had been approved to continue to a full draft application.

Partnering with Challenge

1. [214]

   Mr Park contacted Mr Lardner of Challenge, looking for partners with the capability to implement Metstech’s technology underground. Metstech and Challenge executed a Confidentiality Agreement.

2. [215]

   Mr Gasseling was a telecommunications engineer at Challenge, who was assisting MineCo to develop a communications system at its mine in Western Australia. Mr Lardner asked Mr Gasseling to look at Metstech’s products as a potential solution. On 8 March 2018, Mr Park emailed Mr Lardner a list of Metstech’s products and prices, which Mr Lardner forwarded to Mr Gasseling. On 19 March 2018, Mr Lardner emailed Mr Park, advising, “We are all ‘go’” for the mine in Western Australia. On 19 March 2018, Mr Gasseling provided a bill of materials required for a 1 km trail and Metstech issued a quote to Challenge.

3. [216]

   On 25 March 2018, Challenge accepted Metstech’s quote for $42,471, which included Metstech BDAs, controllers and splitters. Mr Jefferson said that these items were all considered prototypes, being hand built by Mr Chou and scheduled to be replaced by production units at a later time. Metstech was about to install its first leaky feeder system using Metstech’s new products.

Software licence?

1. [217]

   It will be recalled that Mr Martin had earlier worked with Mr Chou on the software for Metstech’s controller. On 15 January 2018, Mr Mankelow emailed Mr Park, copied to Mr Jefferson, thanking Mr Park for his time discussing the proposed issue of shares in Metstech and Metstech IP to Mr Martin. Mr Mankelow noted that Mr Martin had been engaged one to two years’ earlier to develop software and it had been, “Agreed to provide 5% equity within both companies in return for the development of software”. Further, additional options to purchase further equity had been provided to, but not exercised by, Mr Martin. The market value of Mr Martin’s services was thought to be worth $20,000 to $100,000 (or 5%) and “An agreement was entered into with Mr Martin with specific details.” Mr Mankelow requested a copy of the agreement with Mr Martin.

2. [218]

   Mr Martin said there was no agreement with him in the terms described by Mr Park to Mr Mankelow. That does appear to be the case, as the parties continued to discuss the terms on which Mr Martin would become a shareholder, and no one suggested that an agreement had already been reached. However, while Mr Park may have over-stated the state of negotiations with Mr Martin to Mr Mankelow, it is likely that Mr Park was negotiating with Mr Martin along these lines.

3. [219]

   Two months later, in March 2018, the finishing touches were being made to a Shareholders Deed of Agreement in respect of each of Metstech and Metstech IP. On 12 March 2018, Mr Jefferson emailed Mr Martin, entitled “Moving forward”, and enquired as to Mr Martin’s position “as we would all still like you to become part of the business. … The longer we leave it to allocate shares to you the greater the tax liability will be … If you’re not planning to join at this stage could you please call to discuss payment for the works on the monitoring application as it is a critical component and we will need it to finalise the headend. As a last resort I can try and pass the development onto another party or take it up myself however I feel it would be better for you to complete the work and invoice us. If you are too busy to work on completion the monitoring app it would be extremely helpful if you could send through the source [code] and any notes you have … if this happens we would still like to discuss you joining our business once things settle down for you. I believe that your commit to date has earned you that right.” Mr Jefferson also reported that he had paid the deposit for the first production run, with Mr Chou leaving on 15 March 2018, “to finalise the testing and certification procedures and ship the product.”

4. [220]

   Mr Martin said that he did not read Mr Jefferson’s email. However, in an apparent response, on 13 March 2018, Mr Martin provided Mr Park and Mr Jefferson with a link to the source code and files, including test results thus far. Mr Martin also provided a link to a private Google site, where the code was stored in “bitbucket” and advised that a bitbucket account would be needed to access the code “if you plan to build the code yourselfs”. Mr Jefferson promptly replied, thanking Mr Martin for his quick response and asked whether he had any thoughts on the extent of his participation going forward so that Mr Jefferson could begin planning for the future, “I have the feeling this is a handover of sorts (correct me if I’m wrong) and will start working on alternative plans if so. Please confirm either way … I would prefer you join us and the door will always be open.”

5. [221]

   If, as Mr Martin said, he had not read Mr Jefferson’s email of 12 March 2018, then Mr Jefferson’s email of 13 March 2018 would have made little sense. But there is no email from Mr Martin seeking clarification. It may be a coincidence that Mr Martin handed over the source code the day after Mr Jefferson asked him to choose whether he wanted to receive shares or be paid for the work he had done on the software. More likely, the provision of the source code was in response to Mr Jefferson’s request. Ordinarily, one might conclude that Mr Martin read Mr Jefferson’s email at the time and does not now recall having done so, but the choice is more stark where Mr Martin said Mr Jefferson’s email was marked “unread”. I will, for the moment, simply note it as a curiosity.

6. [222]

   On 15 March 2018, Mr Jefferson provided Mr Martin with details of his Google account, as had been requested by Mr Martin. Mr Martin gave Mr Jefferson ‘view only’ access to the build documentation. According to Mr Martin, Mr Jefferson also asked Mr Martin to transfer the intellectual property for the source code to Metstech IP. Mr Martin said that Metstech IP could have an unlimited and exclusive licence to use the monitoring software as it wished, but he would keep the copyright. Mr Jefferson said that he would get the documentation organised for a licence, but did not do so.

7. [223]

   Mr Martin said their conversation was confirmed by an exchange of emails between himself and Mr Jefferson, but he has not been able to find the email and considered it possible that he had deleted the emails. It is certainly the case that Mr Martin has deleted a very large number of emails concerning Metstech but, notwithstanding this, I am hesitant to accept Mr Martin’s evidence in this regard where Mr Jefferson has not produced such emails either. On a matter of importance to both gentlemen, one would expect such an agreement to be recorded in a contemporaneous email. This is the second curiosity arising from Mr Martin’s evidence.

8. [224]

   On 29 March 2018, Mr Martin granted Mr Jefferson on-line access to edit the build documentation. According to Mr Martin, Mr Jefferson asked Mr Martin to transfer the source code to Mr Jefferson’s account at bitbucket. Mr Martin talked Mr Jefferson through the process of creating such an account. On 31 March 2018, Mr Jefferson granted Mr Martin “administrator access”. Mr Martin moved three source code repositories from his personal bitbucket account to the Metstech team account.

9. [225]

   According to Mr Martin, Mr Jefferson also asked if Mr Martin could do the same with the intellectual property associated with other components of the system developed by Mr Chou. Mr Martin contacted Mr Chou and asked whether he could set up a repository for the intellectual property and related documentation for the system he had developed. Mr Chou said that he would not hand over the intellectual property as Mr Jefferson owed him money, he did not trust Mr Jefferson “and the design information is held by a third party. It will not be transferred to Metstech IP until a minimum number of units are shipped, as I have agreed with the design houses that have the design.” Mr Martin said, “He didn’t mention who and … he didn’t mention how much it was.” Mr Martin said he passed this information onto Mr Jefferson.

10. [226]

    Mr Jefferson denies this conversation. Mr Chou does not refer to this conversation in his four affidavits. It is also unlikely that Mr Chou said these things to Mr Martin as, at the time, Mr Chou was not owed money by Mr Jefferson, nor is there any apparent reason why Mr Chou would then have said that he did not trust Mr Jefferson. As such, this is not a third curiosity but evidence of Mr Martin which I do not accept. Mr Martin may be conflating later events, when he was asked to set up a repository for intellectual property (at [331]). There also appears to be a ‘dash’ of Mr Park’s evidence, which I have not accepted.

11. [227]

    It is necessary to determine at this juncture whether Mr Martin granted an exclusive software licence to Metstech or Metstech IP, or at all. An exclusive licence is an agreement according to which a copyright owner permits the licensee to use the copyright work and also promises that they will not grant any other licences and will not exploit the work themselves. The licence confers a right in respect of the copyright work to the exclusion of all others including the licensor: Lionel Bently, et al, Intellectual Property Law (5th ed, 2018, Oxford University Press) at 308.

12. [228]

    At the time of the conversation described by Mr Martin, it was obviously important to Mr Jefferson to ensure that Metstech was entitled to use the software developed by Mr Martin and to finish software development so that Metstech’s headend could be completed. Mr Jefferson was keen to pay Mr Martin for his efforts, by either equity or payment. It is also apparent from Mr Mankelow’s earlier email (at [217]) that Mr Park was negotiating the acquisition of the intellectual property rights in the software for equity.

13. [229]

    Mr Martin was not then interested in either option. Mr Martin was in some difficulty with unrelated litigation and another business. Mr Martin’s actions in enabling Metstech to access detailed information associated with the software is consistent with Mr Martin being unwilling or unable at that time to continue to develop the software but prepared to allow others at Metstech to do so. Mr Martin was obviously prepared to permit Metstech to access and work on the software.

14. [230]

    The fact that he gave access to Mr Jefferson to edit the documentation supports the implication of a licence to use the software developed to that point in time, even if a licence was not discussed. The circumstances described gave rise to an implied licence as explained in William van Caenegem, et al, Intellectual Property in Australia (7th ed, 2022, LexisNexis) at [7.16]. The most common situation in which a licence will be implied is where copyright material is specifically commissioned. As Jacobs J explained in Beck v Montana Constructions Pty Ltd (1963) 5 FLR 298, “The engagement for reward of a person to produce material of a nature which is capable of being the subject of copyright implies a permission or consent or licence in the person making the engagement to use the material in the manner and for the purpose in which and for which it was contemplated between the parties that it would be used at the time of the engagement”: at 304. The purpose in question is to be determined objectively, by reference to the parties’ contract and the circumstances in which it was made: Acohs Pty Ltd v R A Bashford Consulting Pty Ltd (1997) 37 IPR 542 at 562 (per Merkel J). A licence may include the capacity to alter the material to suit the licensee’s purposes: Gruzman Pty Ltd v Percy Marks Pty Ltd (1989) 99 FLR 116; (1989) 16 IPR 87 (per McLelland J).

15. [231]

    Here, Mr Martin was not “engaged for reward”, although that was not for want of trying on Metstech’s part but by reason of Mr Martin’s wishes. Mr Martin was obviously willing to hand over the software to Metstech to use in its products and to alter if needed to achieve the desired result. I consider that in these circumstances a licence would be implied to permit Metstech to use, and alter, the software.

16. [232]

    There are no contemporaneous emails referring to a licence, either before or after the time of the conversation described by Mr Martin. Mr Jefferson denied that they discussed a licence, while Mr Martin was emphatic that he had done so. Further, Mr Martin said it “was drilled into us [that] Metstech IP was … to be the holder of all the IP and that’s why the licence was to Metstech IP.” Whilst this may have been “drilled” into the actors at some point in time, and certainly when Metstech went into administration, the contemporaneous emails passing between Mr Jefferson and Mr Martin up to March 2018 made no reference to Metstech IP. I doubt that any conversation on the subject would have referred to “Metstech IP”, as opposed to “Metstech”. This detail may be an incorrect recollection by Mr Martin or a late embellishment.

17. [233]

    With some hesitation, I accept Mr Martin’s evidence that he offered “Metstech” an unlimited and exclusive licence to use the monitoring software as it wished, but he would keep the copyright. However, I consider it unlikely that Mr Martin made any reference to Metstech IP. In the absence of such a conversation, the circumstances gave rise to an implied licence to Metstech in any event. Further, if I am wrong about this and Mr Martin gave a licence to Metstech IP, the circumstances gave rise to an implied licence from Metstech IP to Metstech where the software would be installed in Metstech’s headend, for sale to its customers. Either way, Metstech had the right to use the copyright work.

Shareholders Deed of Agreement

1. [234]

   On 15 March 2018, a Shareholders Deed of Agreement was executed by the corporate entities of Mr Jefferson, Mr Chou, Mr Park and Mr Corbett in respect of Metstech Pty Ltd. A second Shareholders Deed of Agreement was executed by the same parties, and in the same terms, in respect of Metstech IP.

2. [235]

   Each shareholder with at least 10% of the shares in the company was entitled to appoint one director to the board: clause 3.1. (Mr Corbett’s wife, Tracy Sibthorpe, represented their family company on the board of Metstech and Metstech IP.)

3. [236]

   Each director acknowledged that they stood in a fiduciary relationship with the company and also with each shareholder: clause 3.7. Clauses 3.8 and 3.9 recorded that the company and each of the shareholders would be entitled to take proceedings against any director that breached their duties under the shareholders agreement for damages and/or injunctive relief, with the right of each shareholder being in addition to its rights to bring a derivative suit or oppression suit under the Corporations Act 2001 (Cth): clauses 3.8, 3.9.

4. [237]

   Clause 4 provided that no board meeting could proceed without a quorum, being two directors representing at least 70% shareholding: clause 4.1. Certain resolutions could only be passed with the approval of shareholders collectively holding at least 90% of the issued shares, including any substantial change in the nature of the Business. “Business” meant the business of Original Equipment Manufacturer: clause 5.1.4; clause 1.2. Whilst Original Equipment Manufacturer was not defined, it is nonetheless significant and may point to Metstech and Metstech IP working with components designed and made by others, rather than designing products themselves. Board meetings could be called by giving at least three business days’ written notice to all directors, such notice to set out in an agenda of the business proposed to be transacted together with any proposed resolution: clause 4.3, 4.4.

5. [238]

   Clause 10 contained restrictive covenants. Clause 12.1 imposed extensive confidentiality obligations on each shareholder in respect of Trade Secrets and Confidential Information. It is unremarkable that, where these two companies were involved in developing new products and protecting the intellectual property associated with such products, the shareholders agreements would impose such obligations.

Manufacture underway

1. [239]

   On 19 March 2018, Mr Chou emailed Mr Park and Mr Jefferson the components invoice for the BDA, splitter and 20 headend control boards. Welldesign rendered an invoice to Metstech for $52,984.49 for components. A handwritten note on the document records part-payments of $10,000 on 9 March 2018, $10,000 on 12 March 2018 and the balance on 21 March 2018. As to the last payment, Metstech’s bank account had recently been replenished by $250,000 deposited in respect of shares; these funds came from Mr Corbett for his shares in Metstech and Metstech IP.

2. [240]

   On 27 March 2018, Mr Chou emailed Mr Park and Mr Jefferson, asking whether he could claim the expense of an A3 printer from Metstech, as he needed the printer “for our project and paperwork with manufacture and supplier”. Mr Jefferson readily agreed, adding “How’s things going? Is there anything we can do to help from this end. Documents or tidying up drafting of plans.” On 28 March 2018, Mr Chou reported:

3. [241]

   Mr Chou said the “manufacture engineer” was an engineer at Yokao, but became evasive when it was suggested that the “manufacture engineer” was involved in the manufacture of the product rather than its design.

4. [242]

   It is apparent that manufacture of the products was now underway and the engineer was, as Mr Chou’s email stated, the “manufacture engineer”. The design had been completed sometime earlier and, according to the contemporaneous emails, by Mr Chou.

5. [243]

   On 6 May 2018, Welldesign rendered an invoice to Metstech for $15,026.44, being for PCB and SMT (surface mount technology) for various units of product code 168-000001-R3 (being revision 3 of the PCB for the splitter), product code 168-000004-R2 (being revision 2 of the PCB for the BDA baseboard), product code 168-000005-R2 (being revision 2 of the PCB for the headend), product code 168-000007-R1 (being revision 1 of the PCB inserted into the BDA baseboard to receive and amplify LTE frequencies for Band 28), product code 168-000010-R0 (being revision 0 of the PCB inserted into the BDA baseboard to receive and amplify VHF frequencies) and product code 168-000011-R0 (being revision 0 of the PCB inserted into the BDA baseboard to receive and amplify LTE frequencies for Bands 3 and 12).

Orders coming in

1. [244]

   Mr Gasseling, Mr Lardner and Mr Park continued to arrange a trial at MineCo’s mine in Western Australia. Telco also corresponded with Mr Park to pursue its interest in Metstech’s products. On 16 April 2018, Telco enquired when a tri-band BDA would be available to enable a second LTE carrier to run down the leaky feeder for carrier aggregation.

2. [245]

   Mr Park reported to Mr Chou on 17 April 2018, “[Telco] are getting serious” with two mines “back on the cards”. Mr Chou was asked what Band 1 and Band 7 filters were available. Mr Chou replied to Mr Park, Mr Jefferson and Mr Corbett that he had ”Just checked with the SAW filter manufacturer” and a bigger enclosure may be needed for a tri-band BDA, “And for the dual directional BDA, the progress now is yes, I had found some semiconductor RF switch that may use in this feature, but need to confirm that the isolation in the switch.”

3. [246]

   On 2 May 2018, Telco issued a purchase order to Metstech. Mr Park forwarded the purchase order to Mr Jefferson, Mr Corbet and Mr Chou, “Finally. Only took 2 yrs.”

4. [247]

   On 23 May 2018, Mr Park emailed Mr Chou, Mr Jefferson and Mr Corbett regarding “Patentability”. Mr Park advised that he had spent several hours “looking at what has been patented in this space” including the efforts of Ericsson and others, “So, it looks like (so far) … we have a unique and novel way of delivering real benefits.” Mr Chou provided a paper published on Ericsson’s concept, “That’s why I use another way … And I’ll meeting x-cell manufacture in their company for more understand their configure today.” The fact that Mr Chou was continuing to look into obtaining a patent for the design suggests that it was he, and not a design house, which had hit upon the idea.

A successful pilot

1. [248]

   On the June long weekend, Mr Gasseling installed a pilot of Metstech equipment at MineCo’s mine in Western Australia together with Mr Chou and Mr Lardner. On 13 June 2018, Challenge issued a report on the test results at the mine, which included BDAs, splitters, a headend unit and a test of the monitoring software: the phase one pilot “can be considered a success”, with no technical reasons why the project could not proceed to phase 2.

2. [249]

   Mr Park posted an article on LinkedIn, entitled “METStech pilots its dual LTE underground BDA in two mines on two continents, two bands, two cores and two types of cables”. Mr Park reported that the pilots proved that Metstech’s BDA could propagate LTE underground in a low cost, low complexity solution. In response to a comment posted on the article, Mr Park added “our partners Challenge are writing a report and then a white paper.”

Mr Chou gets licences in order

1. [250]

   On 26 June 2018, Mr Chou provided Mr Park, Mr Jefferson and Mr Corbett with a quote to purchase designer software from Altium for $3,844.50. Mr Chou asked whether Welldesign should purchase the software, as it had been offered a substantial discount, and then bill Metstech “Or I just need absorb this myself?”. Mr Chou suggested:

2. [251]

   Mr Chou confirmed in a further email, “I just don’t want any legal trouble when people challenge me what legal tool that I used for my design.” Mr Jefferson replied, “Happy to support you any way you need. We can pay for the licence any way that suits. … Jason never worry about asking to cover cost. Just let me know.” Mr Chou replied, “No worries at all. … my though[t] is simple, how to get the cheapest legal tool licence to protect Metstech IP right that’s all.”

3. [252]

   On 27 June 2018, Mr Chou paid for the software himself, but was later reimbursed by Metstech: see [259]. Mr Chou’s efforts to acquire the correct software so that no challenge could be made to Metstech’s intellectual property does not sit well with his evidence at trial that he had done a deal to design Metstech’s products using an ODM’s software.

4. [253]

   On 28 June 2018, emails passed between Mr Lardner, Mr Chou, Mr Park, Mr Corbett and Mr Gasseling on the draft report of test results to be provided to MineCo. Mr Lardner noted, “Generally we can see that the solution works which is great.” However, Mr Lardner was concerned that each BDA increased the noise by 5 db, “If I’m right (and I don’t want to be!) – then we have a big problem!!! We only have one shot at [MineCo]”. Mr Lardner also suggested that the price list be revised, where it seemed necessary to use one BDA every 150 metres. The headend also needed to be redesigned. Mr Lardner noted that a new product was required.

5. [254]

   Mr Chou replied, “happy to answer any technical question that you ask!!” Mr Chou provided detailed explanations as to why noise should not present a problem in the system, supported by data and reference to literature. Mr Chou said he was working on adding an additional amplification stage so that they could use one BDA every 200 metres. Further, the headend board would have another version. As to the new product suggested by Mr Lardner, Mr Chou advised that he was working on it. Notwithstanding that Mr Chou provided this information himself, he said that the information came from the ODM. I doubt it.

6. [255]

   On 29 June 2018, Mr Lardner advised that he had just met with another Australian mining company (MineCo2) in relation to their mine in Western Australia, “They are going to go ahead!” MineCo2 was a long-standing customer of Challenge and interested in developing a solution for underground LTEs. This led to two pilot deployments at MineCo2 mine sites, both in Western Australia.

7. [256]

   On 29 June 2018, Mr Chou emailed Mr Park, Mr Jefferson and Mr Corbett, “Thought of Dual(Multi) Band BDA patent”, I just got a thought for new design/feature/product patent of our BDA. There is none [like this] product in the world. So I just wondering why we can not apply this … new function/feature patent? If we can, then we stop all other company to this market with this all in one BDA solution.” This is a clear, contemporaneous statement by Mr Chou that the idea for this new product came from him.

8. [257]

   On 10 July 2018, Telco sought further information from Mr Park on the performance of its product “to give some confidence to certain parts of the [Telco] organisation”. After obtaining information from Mr Chou, Mr Park provided further information to Telco noting “Jason and I have been with a patent lawyer for most of the day”. Telco raised further questions of a technical nature, which Mr Park drew on Mr Chou’s expertise to answer.

9. [258]

   On 17 July 2018, a Teaming Agreement was executed between Metstech andTelco, the recital of which noted that Telco intended to submit a proposal to another Australian mining company (MineCo3) in response to an underground LTE high level design development for one of its mines. The agreement contained confidentiality clauses. Telco posted an article on its website, “We’re building one of the world’s largest LTE networks for digital mining”, announcing a partnership with MineCo3 for a private 4G LTE network at their Northwest Queensland mine. An underground network of 6.5 km would be built over a leaky feeder cable using LTE-capable bi-directional amplifiers. Leaky feeder solutions were being provided by specialist manufacturer, METStech.

10. [259]

    On 3 August 2018, Welldesign rendered an invoice to Metstech for $3,800.50. Further invoices was rendered on 13 August 2018 for $14,960, $2,007.50 and $3,844.50, the last being for the Altium software licence. That is, although Welldesign initially paid for the software, it sought reimbursement from Metstech, as Mr Jefferson had offered.

SA Distributor and MineCo

1. [260]

   On 1 October 2018, Metstech signed a Confidentiality Agreement with a South African company (SA Distributor), with which Mr Corbett proceeded to communicate about potential opportunities for Metstech products in mining operations. As Mr Corbett later described it, SA Distributor was looking at being the distributor in Africa for Metstech and had a good relationship with various mining companies operating in the region.

2. [261]

   On 12 October 2018, MineCo circulated the test results, observing that “there is an issue and it is not production ready.” A Skype conference was set up between Mr Chou and Mr Gasseling to discuss the technical issues; Mr Chou suggested waiting for the new production version. Mr Gasseling said that MineCo told him they were happy with the pilot and wanted to go ahead with running it as an operation and not just a smaller trial.

3. [262]

   On 15 October 2018, Mr Park supplied Mr Chou with various specifications while Mr Chou provided drawings for the headend controller and sought comments on printing, such as company logo and model number. On 19 October 2018, Welldesign rendered an invoice to Metstech for $3,844.50 in respect of the Altium design software licence. Further invoices were rendered on 28 October 2018 of $14,960 and $2,007.50, including a large number of SAW filters.

4. [263]

   On 30 October 2018, MineCo issued a purchase order to Challenge for $230,714 for, largely, Metstech products including power injectors, termination devices, splitters, VHF and LTE Band 3 dual band BDAs and headend units.

5. [264]

   On 12 November 2018, Mr Park circulated a proposed joint venture term sheet between Metstech and Challenge to Mr Corbett, Mr Jefferson and Challenge’s managing director, Jack Smyth, for comment. On 13 November 2018, Mr Park instructed Baker McKenzie to register a new company for the purposes of the joint venture.

6. [265]

   On 16 November 2018, Mr Chou emailed Mr Park, Mr Jefferson and Mr Corbett photographs of “New B3 BDA BOARD”. The photograph depicted two PCBs, one with product code “METSTECH IP / 168-000011-R0” and one with “METSTECH IP / 168-000011-R1_B3”, being revision 0 and revision 1 of the PCB inserted into the BDA baseboard to support Band 3 LTE. According to Mr Manuel and Mr Gasseling, revision 1 had the additional feature which Mr Chou had said he was adding to the BDAs. Stamped in large print on the PCB board was “METSTECH IP”. Smaller type appears elsewhere on the PCB board, which is not particularly legible but was suggested by the defendants to include “Yokao”. I could not tell.

7. [266]

   On 23 November 2018, Mr Chou provided Challenge with a headend unit for the MineCo2 deployment, which appeared to Mr Gasseling to be hand-built. Mr Chou continued to work with Mr Gasseling and Mr Lardner to address questions and problems with the operation of the BDA. On 28 November 2018, Mr Chou and Mr Lardner exchanged emails in relation to the Bluetooth modules in the BDAs. Mr Chou advised, “I set the BLE (Bluetooth low energy) play as iBeacon”, which required an alteration to the firmware on the BDAs.

8. [267]

   On 24 November 2018, Mr Corbett updated the SA Distributor on Metstech’s progress, advising that testing would be conducted on 10 December 2018; “[MineCo] are going forward will full rollout and have purchased for same. … [MineCo3] are going with full rollout and purchasing for same.” On 4 December 2018, Mr Corbett reported to SA Distributor that a test had begun of dual band VHF and LTE Band 3 BDAs with MineCo2 in Western Australia over 2.5 km of tunnel in a hard rock mine. The SA Distributor expressed interest in using the product in a MineCo2 mine in South Africa. The SA Distributor invited Mr Corbett to South Africa to introduce Metstech and its technology to the SA Distributor team and visit mines near Johannesburg.

9. [268]

   On 3 December 2018, Mr Park emailed an intellectual property solicitor, providing “Metstech Patent information”. Mr Park advised that the product had “started to gain traction with the mines and we now have several hundred dollars worth of orders to be delivered over the next 4 months. We have done some initial testing … It worked extremely well. We have just purchased an isolation chamber (not cheap) for the full testing. When Jason is in Taiwan he will continue testing and producing results … I want to start the Patent process as soon as possible.” The fact that Mr Park was then pursuing a patent application in respect of this component is consistent with an understanding on his part that the intellectual property belonged to Metstech.

10. [269]

    On 10 December 2018, Mr Chou sent to Mr Park, Mr Jefferson and Mr Corbett photographs of the “manufacture SMD line that make our UHF BDA and RADIO BOARD PHOTOS”. Ten photographs showed various working stations in a factory, equipment and people apparently assembling PCB boards using soldering irons, microscopes and various equipment. Presumably, the industrial site was in Taiwan but, beyond that, the photographs do not reveal the business or company operating at the premises. On 18 December 2018, Mr Chou provided Mr Park, Mr Corbett and Mr Jefferson with test results for their reference, being measurement results for the UHF 380/390 MHz BDA.

Second offer to Martin

1. [270]

   There is no record of any communication with Mr Martin from April to November 2018: [217]. On 19 December 2018, Mr Park emailed Mr Martin, copied to Mr Jefferson, requesting his company’s name and ABN “to add into the contract offer.” Further:

2. [271]

   Attached was a “Memorandum of Understanding Proposal” between Metstech and Mr Martin’s company for one year, commencing on 21 January 2019. It was proposed that Mr Martin would be engaged as Chief Software Architect to develop Metstech’s “Ultra Linear BDA range and other products”. Mr Martin regarded this as a ‘second offer’ to join Metstech. He did not proceed with the 12 month contract, nor was he issued with any shares.

3. [272]

   Mr Chou continued to work with Mr Gasseling on the installation of Metstech’s products at MineCo. On 22 December 2018, Mr Park asked Mr Chou to update Mr Gasseling on the MineCo delivery dates. Mr Chou advised that he was working on “gain setting programming”. On 3 January 2019, Mr Chou reported to Mr Gasseling that the hardware was ready but he needed to fix a bug in the firmware code, “I had figure out the issue and will do more tests today and will organise shipping tomorrow.” In the absence of Mr Martin’s involvement in the continuing development of the software to address problems being experienced, it must have fallen to Mr Chou to revise the software to deal with such issues.

4. [273]

   Meanwhile, Mr Corbett was working with SA Distributor to present Metstech’s leaky feeder system to a mining company in Mali. The mine was operated by a customer of SA Distributor, and it was proposed to install the Metstech system to conduct ‘proof of concept’ testing. On 2 January 2019, SA Distributor asked Mr Corbett to put a quote together for the Mali mine “and we can get this rolling. I’m told the orders are going to be in place in January, so it is a great opportunity to accelerate a METStech deployment.”

5. [274]

   On 6 January 2019, Mr Corbett provided further information on Metstech’s products to SA Distributor, copied to Mr Park, Mr Lardner and Mr Gasseling, advising that for the first installation (at least) SA Distributor would need support from Challenge “who have the necessary expertise” until SA Distributor achieved distributor status. Challenge was not as keen on the potential installation in Africa: Mr Smyth emailed Mr Corbett on 9 January 2019, “I’m not sure if there is anything in this for [Challenge] – aside from transferring our IP to a competitor.”

6. [275]

   In January 2019, Mr Gasseling sent a series of emails to Mr Corbett requesting confirmation that the parts needed to complete the MineCo project were to hand. It would appear that Mr Corbett was unable to obtain the necessary confirmation from Mr Chou and sought to delay a response several times. On 17 January 2019, Mr Corbett emailed Mr Chou, “Challenge are not going to accept any more delays.” Mr Chou replied that he “had build” ten splitters and ten EOLs and “will build” ten more of each and “keeping build 20 BDAs(VHF) and 5 BDA(UHF)”; two headend controllers were “ready to go but without [the Raspberry] Pi”. Mr Chou also emailed Mr Gasseling advising that he had removed a feature in the controller board – “working so far so good” – which he would send. After further follow-up emails from Mr Gasseling, with no apparent response, Mr Chou reported on 21 January 2019 to Mr Gasseling, Mr Park and Mr Martin that there was a bug in the Pi software, “So? I need sleep.”

ChampWin

1. [276]

   Mr Jefferson said Challenge’s managing director, Mr Smyth, objected to paying for manufacturing through Mr Chou’s company and said “we need to be funding the manufacturer directly.” There was “a concern that the company needed to be dealing directly with the manufacturer in case something should happen to Jason Chou and that was part of the discussions with Challenge getting involved. That they wanted Metstech to be dealing direct with the manufacturer …” After this conversation, manufacturing invoices for products purchased by Challenge came from ChampWin Technology of Taiwan instead of Welldesign.

2. [277]

   On 22 January 2019, invoices were rendered to Metstech by Welldesign and Champwin:

3. [278]

   Mr Jefferson understood that ChampWin was the manufacturer in Taiwan and operating in its capacity as an OEM. Mr Martin also thought that ChampWin was the manufacturer as invoices were coming from that company but “nobody seemed to know. … I recall asking John Park and he said he doesn’t know and when Simon Lardner approached me after we went into administration who … was … Champwin, I told him that I thought it was the manufacturer.”

4. [279]

   Whilst little is known of ChampWin, it appears that it was not the manufacturer but another company incorporated by Mr Chou and his wife. Mr Chou said he incorporated ChampWin at the suggestion of his wife, to act as agent for Welldesign when dealing with ODM companies and exporting the BDAs. As I understood Ms Chen’s evidence, ChampWin outsourced the manufacturing and charged Metstech a markup. That is, Welldesign was simply replaced by ChampWin as the means by which Mr Chou derived additional revenue for the “manufacturing rights’ in respect of Metstech’s products. Challenge’s insistence that it deal directly with the manufacturer appears to have been met with subterfuge.

Software problems

1. [280]

   On 10 February 2019, Mr Jefferson, Mr Chou, Mr Martin and Mr Park met to discuss a bug in the Raspberry Pi software. Mr Jefferson’s notes of the meeting indicate they discussed changes to the software, “This should solve things for this week.” The gentlemen also discussed how to develop the software going forward.

2. [281]

   Further emails were exchanged canvassing the finer points of a solution to the software problem. Mr Chou suggested making changes to the BDA naming protocol in the BLE modules, to which Mr Jefferson replied, ““I wasn’t expecting you to completed firmware alteration before heading to Melbourne … ”. On 22 February 2019, Mr Chou reported that, having taken a lot of time to debug the controller board, “I found that the Pi board you bought was version 2 not version 3. … I’ll go to Jaycar looking [in the] morning.” It is apparent that both Mr Martin and Mr Chou were involved in developing the Raspberry Pi software.

3. [282]

   On 26 February 2019, Mr Park, Mr Corbett, Mr Chou and Mr Martin responded to further issues being experienced on the MineCo site. It appears that all minds at Metstech and Challenge were brought to bear to try and resolve the significant technical issues being experienced on site. Mr Gasseling offered to work with Mr Martin on debugging. On 27 February 2019, Mr Park emailed Mr Gasseling with details of an update to the Raspberry Pi software that Mr Martin was working on. Challenge hired an electronics engineer, Mr Manuel, to work on the installation, testing and commissioning of underground LTE networks, including attending site to install and test the leaky feeder system and troubleshooting.

4. [283]

   On 1 March 2019, Mr Lardner reported on a call with MineCo. Mr Lardner considered that a significant and unresolved problem was power level degradation after more than a few BDAs in a circuit, “It seems to me … we really have no idea about this. This is what will keep … me ... awake at night!!!!! … my BIG concern is that we have a fundamental design flaw here.” Mr Lardner suggested that Mr Chou focus his efforts on this problem.

5. [284]

   On 1 March 2019, Mr Chou emailed Mr Gasseling to advise that a power injector and two controllers had shipped to Australia; he was building two or three bi-directional power injectors with power balancing circuit, which he would bring to Sydney on 5 March 2019. On 2 March 2019, Mr Chou explained to Mr Manuel that the DC-DC converter module was a special industrial grade design and all PCBs had four layers with a large 1oz thick copper ground plane acting as a thermal heatsink. On 8 March 2019, Mr Chou provided Mr Jefferson, Mr Corbett and Mr Park with “the hardware configure programming note that you ask.” The notes included schematics for the BDA controller CPU, BDA radio board CPU and headend controller CPU.

6. [285]

   In cross-examination Mr Chou said that he did not design the schematics but the ODM was nonetheless happy to hand these over to Metstech as, if Mr Jefferson wanted to design the firmware, then the ODM would not be responsible. I suppose this is possible but, when considered with other emails from Mr Chou at the time, where he stated that he was attending to changes in the software himself, it seems unlikely. Nor was there any suggestion that Mr Jefferson wished to design the firmware.

7. [286]

   On 10 March 2019, Mr Chou reported to Mr Martin, Mr Park, Mr Jefferson and Mr Corbett, “The firmware of BDA and controller is working well now.” This was short lived, however, and further emails ensued between Mr Chou and Mr Martin to resolve further software issues, with Mr Chou advising, “I’ll check my code …”

8. [287]

   On 12 March 2019, Mr Chou also provided test results for the leaky cable, “Finally, finish the insertion loss measure. Mr Chou also provided installation instructions for the N-type connectors to the yellow leaky feeder cables. The footer of the document said “COPYRIGHT 2019 METSTECH PTY LTD / ALL RIGHTS RESERVED”.

9. [288]

   On 16 March 2019, Mr Martin provided Mr Chou with installation instructions for a new version of Pi software. Mr Martin advised: (Emphasis added.)

10. [289]

    Mr Martin said he did not know who was actually going to do the work; “it could have been Jason, it may not have been, I don’t actually know.” Nor did Mr Martin ever ask Mr Chou. Mr Martin said, “I have no idea who wrote the software and I have no idea … who was doing the design. I just know I was speaking to Jason and he represented whatever was going on behind.” Mr Martin understood that more than one person was working with Mr Chou “because one person doesn’t do it all” but did not know whether, on this particular project, there was only one person. Mr Martin’s contemporaneous statement reflected an understanding that it was Mr Chou who was developing the firmware. I attach greater weight to the document.

11. [290]

    On 19 March 2019, Mr Chou informed Mr Martin that the firmware for the BDA and the controller was working well, but he was still having an issue with the GUI (graphical user interface) for the Raspberry Pi. After a further exchange, this issue appears to have been mostly resolved. Mr Corbett recalls that he was then at the offices of Challenge with Mr Chou, discussing the attenuation component of the BDA. Mr Corbett saw Mr Chou pull up a CAD drawing of the attenuation component on his laptop screen. Mr Corbett saw Mr Chou making alterations to the CAD drawing. Mr Corbett said that at no time during his attendances with Mr Chou at Challenge did Mr Chou ever say that he needed to speak with or consult with any other person or company in relation to the LTE BDAs or any of the components.

12. [291]

    On 21 March 2019, SA Distributor contacted Mr Corbett again asking whether Metstech would be interested in working with SA Distributor to propose an LTE solution for a mine in West Africa. On 26 March 2019, SA Distributor also enquired of Mr Corbett whether it was interested in participating in a presentation for a customer in the Middle East. On 1 April 2019, another mining company contacted Frank Nugent of Challenge making similar enquiries. SA Distributor pressed for ‘next steps’ to become Metstech’s official partner in Africa. On 3 May 2019, SA Distributor invited Metstech to visit its potential customers in a two week tour with a view to becoming Metstech’s preferred partner.

13. [292]

    On 3 April 2019, Challenge prepared a report on test results at MineCo’s Western Australian mine. Challenge and Metstech prepared a joint PowerPoint presentation “Issues & Solutions”, identifying issues to be resolved and proposed solutions. The problems identified appear substantial. The report noted that the BDAs were running firmware version 1.1, which apparently included an update in the way the BDAs reported to the controller.

14. [293]

    Cashflow appears to have become tighter. On 8 April 2019, the directors of Metstech met, apparently prompted by cashflow concerns. The minutes record: (Emphasis added.)

15. [294]

    According to the minutes, Mr Chou had invested in equipment for which he had not been reimbursed. The fact that the company proposed to recognise this investment as a loan to the company is consistent with ensuring that Mr Chou was reimbursed for this expenditure in due course, if not immediately. The directors also discussed progressing R&D grants, updating forecasts, improving procedures for paying invoices and getting accounts up to date. Of the topics to be carried over to the next meeting, “Patents” was one.

16. [295]

    On 5 April 2019, Mr Gasseling emailed Mr Chou and others with test results generated by Challenge, trying to replicate the issues thought to be happening at MineCo. Mr Chou was asked “if you have an idea what the problem is that we are seeing as we suspect this might be one of the problems we see …” Extensive emails passed between Mr Lardner, Mr Martin, Mr Chou, Mr Gasseling and Mr Manuel trying to identify the problem and fix it. Mr Martin responded that he had spoken to Chou who was “in it”. Mr Chou was performing various tests himself: “I am working out this interesting issue now. … Let me study the code and I’ll let you know what’s up asap.” Mr Chou advised that he had not configured the BDAs using the Bluetooth dongle, but rather had directly configured them by connecting a UART [universal asynchronous receiver-transmitter] to the PCB.

17. [296]

    On 8 April 2019, Mr Chou sent version 1.2 of the BDA firmware to Challenge, “I had done the test with this new software whole weekend and look all PDA is happy response to the controller.” Challenge was also conducting a large amount of testing in its own laboratory. On 10 April 2019, Mr Martin emailed Mr Chou, reporting on his conversations with Mr Gasseling about test results, suggesting where the problem might lie and seeking Mr Chou’s assistance to debug. Mr Chou was centrally involved in the development of the firmware.

18. [297]

    On 10 April 2019, Auxilia Investments deposited a further $17,000 to Metstech’s bank account, with which Mr Chou and Mr Park’s wages were paid. Cashflow remained tight, with salaries being paid in more than one instalment.

19. [298]

    On 11 April 2019, emails continued apace between Mr Gasseling, Mr Martin and Mr Chou, endeavouring to resolve problems with the BDA whilst a meeting took place between Challenge and Metstech to discuss the issue. Mr Chou reported that he was undertaking this work. Some 50 minutes later, Mr Martin advised that he had just spoken to Mr Chou, “He is doing the following …”, being alterations to the firmware. After the meeting, Mr Park emailed Mr Chou regarding a new function which Mr Chou had proposed for the firmware and a proposal to supply a maths box to MineCo.

20. [299]

    On 11 April 2019, MineCo2 issued a purchase order to Challenge for its mine in Western Australia for $401,610, being largely for Metstech products, including BDAs with LTE Band 3 and VHF, splitters, end-of-line terminators, power injectors and headend units.

Offer from Challenge

1. [300]

   On 11 April 2019, Challenge made an offer to purchase 20% of Metstech’s shares for $500,000, “In addition may do advance payment for material to assist with METStech cashflow.” In return, Challenge requested exclusivity for Australia, limited exclusivity outside Australia and a position on the board. Mr Corbett responded with a counter offer of $750,000, with Challenge’s shareholding said to significantly benefit both companies, “METStech as an OEM does not have any desire to be a SI, we see [Challenge] has our preferred global SI”. Presumably, Mr Corbett meant that Metstech would develop the products whilst Challenge would install Metstech’s leaky feeder system. Mr Corbett’s description of Metstech as an “OEM” is curious, perhaps consistent with developing products based on components provided by third parties, rather than designing its products. What Mr Corbett understood to be an OEM is not in evidence.

2. [301]

   Challenge accepted Mr Corbett’s counter-offer, issuing a proposal on 27 April 2019. Payment was to be made over three months, with the schedule “reworked to reflect investment being separated from support”. In short, Challenge would render an invoice each month to reflect its efforts, and the invoiced amount would be deducted from the purchase price. In addition, Challenge would make monthly payments over the next year. Mr Park agreed that this effectively valued the equity of Metstech and Metstech IP at some $3.75 million, a considerable part of which included the intellectual property associated with Metstech’s leaky feeder system.

3. [302]

   Curiously, Challenge’s proposal recorded that Mr Martin then held 5% equity, when he did not. The fact that Challenge understood this to be the case may support the plaintiffs’ contention that Mr Martin agreed to accept shares in return for the intellectual property in the Raspberry Pi software: see [319]. More likely, it recorded an item of ‘unfinished business’ from Metstech’s perspective, which needed to be resolved before completion of the share sale to Challenge.

4. [303]

   Mr Lardner was provided with Metstech’s profit and loss statement for April 2019, which he described as “a mess”. The fact that there were no line items in respect of intellectual property did not concern Mr Lardner as this was consistent with intellectual property being developed in-house rather than being acquired from a third party. From 1 July 2019, Challenge’s accountant and bookkeeper began to keep the accounts for Metstech. Mr Lardner explained that this was an attempt to assist Metstech to become “a little more … organised”.

Working on firmware

1. [304]

   On 12 April 2019, efforts continued to fix the problem with the BDAs, with Mr Martin liaising with Mr Chou. Mr Martin advised that he had just spoken with Mr Chou, who had extended the new function and was “just setting up to test it now”. Mr Martin advised that this was just a temporary solution, but “The debugging that Jason is adding to the firmware will help pinpoint the problem.

2. [305]

   On 15 April 2019, Mr Chou reported, “I had discussing with MCU [microcontrollers] FAE [field applications engineers] and Radio modem manufacture’s FAE last Friday” and provided their feedback: the radio modems may be going into power saving mode. Mr Chou advised that he had added a “1hour timeout” routine to force the radio modem to wake up; testing over the weekend indicated that this seemed to resolve the issue, and he would send the firmware image file later on. Mr Smyth asked Mr Chou, “are you putting together a firmware update for the controller and BDA?” and Mr Chou replied, “Yes, I had put it in BDA and controller both and testing now.”

3. [306]

   Further emails were exchanged between Mr Martin and Mr Chou regarding changes to the firmware for the controllers and the BDAs to address this issue. Mr Chou said he would find out the optimum delay time for the toggle on the controller. Mr Martin said he would adjust the polling time in the Raspberry Pi software to 30 seconds. Mr Smyth asked for an update on the progress of version 1.3 of the firmware and Mr Chou advised, “I’ll send you the new firmware image later”. On 16 April 2019, Mr Manuel sent an email to Mr Chou identifying that there was a solder bridge between two pins in the MCU in the headend controller, which was causing them to short-circuit. Mr Chou responded by explaining that two pins were for the analogue to digital converter input, and he had solder bridged them so that he would read the voltage through the converted value of both pins rather than one pin.

4. [307]

   On 17 April 2019, Mr Chou emailed new firmware for the controller and BDA baseboard, being version 1.3 of the BDA firmware and version 1.2 of the headend controller firmware. Mr Chou explained the changes made. An hour later, Mr Martin sent an updated version (1.1.6) of the Raspberry Pi software. Challenge began to test it in the lab. These emails indicate that Mr Chou was actively involved in writing, changing and testing the firmware. Whilst Mr Chou was speaking with the manufacturer’s engineers for their feedback and suggestions, Mr Chou undertook the ongoing design of the firmware.

Share issue to Martin

1. [308]

   On 3 May 2019, Mr Jefferson and Mr Park met with Mr Mankelow to discuss how shares would be issued to Challenge. First, Mr Mankelow considered a transfer of Mr Park and Mr Chou’s shares to new entities, which discussion proceeded on the basis that the market value of Metstech was then some $2 million. Second, Mr Mankelow circulated points for discussion in respect of Mr Martin’s shares:

2. [309]

   In parallel, Mr Manuel and Mr Chou continued to work on operational problems with the BDA. Mr Chou visited Challenge’s laboratory to work on a problem with LTE power readings. Mr Manuel described the work undertaken by Mr Chou, including using software on his laptop to edit the firmware on the BDA and the GUI for the Bluetooth dongle, taking further readings and further editing the code until the correct result was achieved. Mr Manuel observed Mr Chou to use three software programs: CCS C Compiler, Altium Designer and RAD Studio. Mr Chou referred, on occasion, to the schematic for the BDA LTE card stored on his laptop on Altium Designer. Mr Manuel said, “I know [a] little about the algorithm he was using to calculate the power, because he explained it to me.”

3. [310]

   Mr Gasseling described working with Mr Chou in the laboratory, where Mr Chou drew various diagrams on the whiteboard to explain the issue which he had discovered. Mr Gasseling observed Mr Chou write various lines of code on his laptop and edit the code, after which Mr Chou said that he had updated the firmware which they could proceed to test. The observations of both Mr Manuel and Mr Gasseling are consistent with Mr Chou’s contemporaneous emails, which displayed intimate familiarity with the firmware and proficiency with the software required to edit it.

4. [311]

   On 29 May 2019, Mr Chou provided code, being “draft 1.1 version image for LTE radio BDA” to Mr Manuel and Mr Gasseling adding, “I’ll try to build that pc software send to you ASAP.” Mr Chou provided instructions for installing the updated firmware, then sent a further email, “Sorry, I found 1 mistake in the code. Please use the new image to replace previous.” Attached to the email was an updated version (1.1.2) of the BDA LTE radio firmware image file. Notwithstanding the words of his email, Mr Chou said that he used an ODM to build the software; he did not state this in his email, “In that moment I just wrote quick”. Mr Chou’s evidence was possible but, having regard to other contemporaneous evidence, unlikely.

5. [312]

   On 24 June 2019, Mr Park gave instructions to Mr Mankelow, copied to Mr Jefferson, Mr Chou, Mr Corbett and Mr Martin: (emphasis added)

6. [313]

   Importantly, Mr Martin was copied on this email. As I read it, of the two options identified by Mr Mankelow on 3 May 2019, Option 2 was preferred, where shares in Metstech and Metstech IP would be issued to Mr Martin for $50,000 in respect of each company, apparently in return for the intellectual property rights in the software which he had developed. On 2 July 2019, Mr Park followed up Mr Mankelow, copied to Mr Martin, “Any headsup when we can expect the paperwork for Chris’s shares?”

Martin employed by Metstech

1. [314]

   On about 1 July 2019, Mr Martin started working for Metstech for payment. After Mr Martin became employed by Metstech, he said that Mr Chou referred to someone else developing the software. There were two ongoing issues which needed to be fixed for Challenge, which were “simply not getting done in a timely manner and it was apparent to me then that somebody else was obviously doing the work because if Jason was doing it … the changes were often trivial and they would have been done same day and yet it took weeks. In fact, in fact, they were never done.” This evidence was non-specific and involved an element of conjecture on Mr Martin’s part. It is not irrelevant, but nor is it of great weight.

2. [315]

   On 25 June 2019, Altium rendered an invoice to Welldesign to renew the subscription to its design software, for $2,145. Ms Chen attended to payment of the invoice. Why reimbursement was not sought from Metstech, as it had been previously, is not clear. On 3 July 2019, Welldesign rendered four invoices to Metstech totalling $35,935.90 for the PCB, SMT, and Electronic Parts for VHF boards.

3. [316]

   On 8 July 2019, MineCo2 issued a second Purchase Order to Challenge for $878,306 for installation of a Metstech leaky feeder system. This included the purchase of end-of-line terminators, splitters and BDAs with LTE Band 3 and VHF.

Trademark application

1. [317]

   On 11 July 2019, Metstech IP submitted an application to register the Metstech trademark. Payment of the application fee was made by Mr Park from Metstech’s bank account. On 19 February 2020, Metstech IP’s application for the Metstech trademark was successfully registered.

Martin gets shares in return for software?

1. [318]

   On 18 July 2019, Mr Martin’s company, CSM Family Investments Pty Ltd, was incorporated. Eight shares in each of Metstech and Metstech IP were issued to Mr Martin’s company such that he held 5% of the shares. Mr Martin said he was not provided with a copy of the shareholders agreement for either company, nor informed that the agreements existed.

2. [319]

   It is necessary to determine at this juncture whether Metstech or Metstech IP acquired the intellectual property in the software in return for the shares. The plaintiffs submitted that, where the 5% interest in the companies was then valued at $100,000, it was highly unlikely that the other shareholders in Metstech would have agreed to issue the shares to Mr Martin without something in return.

3. [320]

   As for many aspects of Metstech’s business arrangements, any acquisition of the intellectual property rights was not documented. It would thus be ineffective by reason of section 196(1) of the Copyright Act 1968 (Cth). The plaintiffs’ evidentiary difficulties on this topic were obvious. Mr Jefferson was told by Mr Park that he had negotiated with Mr Martin to become an employee of Metstech and “We will issue shares to his family trust to pay him for his past work”. That is, Mr Jefferson was dependent on what he was told by Mr Park. At trial, Mr Park would say whatever that he thought would damage the plaintiffs’ case, whether true or not, and so he was of no assistance in corroborating what his contemporaneous emails suggested.

4. [321]

   It had been consistently proposed that Metstech would compensate Mr Martin for the software development by either equity or payment. The course ultimately adopted was the allocation of equity. I have no doubt that Mr Park and Mr Jefferson understood that Metstech was thereby entitled to the intellectual property in the software. The question is whether Mr Martin shared Mr Park and Mr Jefferson’s understanding.

5. [322]

   Mr Martin said that neither Mr Jefferson nor Mr Park described the 5% shareholding as payment for past software development work done for Metstech. Nor was it clear to Mr Martin that the 5% shares were in return for the estimated value of the work which he had done, being $100,000, “That was never, ever conveyed to me and I never agreed to it and when Chad made the offer for me to come and work, I explicitly told him that he has the licence and I expect the shares for $0 as per the original offer.” Nor did Mr Martin understand that, on taking the shares, he would transfer his intellectual property rights to Metstech. Mr Martin said, “I stood very firm on the fact that I wasn’t transferring the IP with the shares.”

6. [323]

   The high point of the documentary record is Mr Park’s email of 24 June 2019: see [312]. The only other significant documentary record is Mr Jefferson’s email of 12 March 2018 (at [219]), which Mr Martin denies having read at the time. Mr Park was keen to have Mr Martin involved in Metstech from the outset. Mr Martin had proved his worth over time. Mr Park and Mr Jefferson held Mr Martin in high regard. The allotment of shares to Mr Martin is also consistent with Mr Park’s wish to secure Mr Martin’s ongoing involvement with Metstech and its products.

7. [324]

   The onus of proof on this matter rests on the plaintiffs. The evidence in support of a factual finding that Mr Martin agreed to exchange his intellectual property rights in the software for his shares is not of sufficient cogency such that I feel an actual persuasion of this fact. Consequently, Mr Martin continued to own the copyright in the software subject to an unlimited and exclusive licence to Metstech, as opposed to Metstech IP: see [233].

8. [325]

   On 27 July 2019, Mr Gasseling reported on the performance of the BDAs at MineCo2’s mine, noting that the BDAs were “pretty good … however, we do see an issue that they go down now and then.” Mr Gasseling and Mr Manuel proposed to do some testing to find out why this was happening, “Apart from that the system works well … .” Mr Manuel, Mr Chou and Mr Martin continued to progress these issues. On 29 July 2019, Mr Martin advised “I have the ideal solution but it requires a firmware change”. Mr Gasseling suggested that this be added to firmware version 2.0.

Amy Cheng

1. [326]

   On 2 August 2019, Mr Corbett updated Mr Gasseling, Mr Lardner, Mr Park, Mr Martin on his call with Mr Chou:

2. [327]

   The production engineer referred to was Amy Cheng. Mr Gasseling recalls attending a meeting with Mr Corbett, who explained that Metstech was bringing on Ms Cheng as a production engineer in Taiwan. Ms Cheng was a relative of Mr Chou’s and her role would be to look after the manufacturing of the BDAs “at the assembly house we are using, so that Jason does not need to be in Taiwan while production is happening, and he can rely on someone else there for production. This will free Jason up to concentrate on engineering and coming up with new products. At the moment all of the BDAs need to be manually calibrated by Jason personally. Jason is in the process of developing an automated system so that he does not have to do this with each one.”

3. [328]

   Mr Martin agreed that the plan was for Ms Cheng to take over production so that Mr Chou could focus on design. Mr Martin’s evidence is consistent with the contemporaneous documents, which indicate that Mr Chou’s key function was design whilst, in more recent times, he had been heavily involved in supervising the manufacture of the products so designed.

4. [329]

   ChampWin charged a service fee to Metstech in respect of Ms Cheng’s services. On 7, 10, 13 and 22 August 2019, ChampWin rendered four invoices to Metstech totalling US$117,282.

Disharmony among directors

1. [330]

   In about June 2019, a dispute arose between Mr Jefferson and the other directors of Metstech. Mr Park and Mr Corbett sought additional payment for their period of employment with Metstech. Mr Jefferson believed that Metstech did not need two sales staff, nor did they deserve to be paid what they were asking in addition to their salary, where their substantial shareholding in the business was ample compensation for their effort to that point.

2. [331]

   On 8 August 2019, Mr Park provided his fellow directors with an update on the transaction with Challenge noting, “IP repository, Chris [Martin] is working on this.” Further:

3. [332]

   In the first record of tension between the directors, Mr Jefferson replied on 12 August 2019: (emphasis added)

4. [333]

   On 13 August 2019, Mr Corbett updated Challenge on production and technical issues being addressed by Mr Chou and Mr Martin. In relation to splitters and terminators, Mr Chou would provide a production schedule by 16 August 2019. In relation to the BDAs, a full production run was due to commence on 16 September 2019, but US$48,000 was required for components for 1,500 BDAs. Mr Corbett advised that 30 BDAs would be manually calibrated and shipped every fortnight until an automatic calibration/test jig was available. In relation to firmware, Mr Chou would check the firmware and report back by 16 August. Mr Corbett also advised that Ms Cheng was being trained to take control of the production process, to free up Mr Chou to concentrate on engineering current and new products. Finally, a “Patent Mathbox” was described as high priority, with Mr Park, Mr Martin and Mr Chou working on this item.

5. [334]

   On 16 August 2019, Mr Chou sent an email saying he had just had time to check the code, and that he had set the new function to restart after 10 minutes instead of one minute, because the one minute interval was too short and was interfering with the production line setting and testing. Mr Chou sent the firmware image file for version 1.6 of the BDA base board firmware to Mr Gasseling for testing. Mr Park, Mr Martin and Mr Chou also exchanged emails working on a “patent block diagram”. On 19 August 2019, Mr Manuel emailed Mr Chou saying that he had run the version 1.6 firmware and there was a problem. Mr Chou responded, saying that he had changed the toggle action with fast input/output in version 1.6 but changed it back to standard in version 1.7, which was the same as versions 1.3 and 1.4. Attached to the email was version 1.7 of the firmware image file. Mr Chou’s central involvement in firmware development is apparent.

6. [335]

   Tensions between directors continue to simmer. The R&D grant had not been sought for the 2018 financial year. On 20 August 2019, Mr Jefferson suggested that, on advice from Mr Mankelow, there remained a possibility that R&D expenses for the 2018 year might be able to be claimed in the 2019 year through a loan adjustment:

7. [336]

   On 23 and 24 August 2019, Mr Jefferson exchanged emails with his fellow directors, as the financial statements for the 2018 year were ready for signing. Mr Jefferson repeated, “To be clear, I had not requested to move the loan to [Metstech] IP. This is John’s wording and I have explained to him several times that it is the only mechanism the accountants have for paying the development fees between Metstech and Metstech IP.

G Suite account

1. [337]

   On 22 August 2019, Mr Martin established a G Suite account for metstech.com.au with Google. Mr Martin created an account for each of the directors and himself. He imported the email and calendar data for each of them to the G Suite service; he did not import file storage. Monthly fees were paid using Metstech’s corporate credit card. Mr Martin was the only administrator for the G Suite account.

2. [338]

   On 26 August 2019, Metstech issued its first invoice to Telco, for $7,804.50. On 28 September 2019, Metstech issued a quote to Telco for $60,688.10, for maths boxes and Band 1 LTE and VHF BDAs. The quote was accepted and Telco issued a purchase order on 30 September 2019. Metstech continued to render further invoices to Telco.

3. [339]

   On 6 September 2019, Mr Martin advised Mr Chou that he desperately needed the list of production runs to give to Challenge, “so that they can see that what we are manufacturing will cover their orders.” Mr Chou replied that he was expecting to receive the 10 new splitter boards that afternoon and, if they were all good, he would start to publish the other 190 boards. He was checking the bill of materials status for the BDA base boards and headend controller boards and would organise a production date when the material was ready for 600 pieces. Further, he would publish a pilot of 10 samples of the new power injector boards after the production of 200 end-of-line boards had been completed. Mr Corbett recalls speaking to Mr Chou, who was upset that Challenge was demanding daily updates in relation to production. (I note, however, that a bill of materials was then in existence for various components in Metstech’s products.)

4. [340]

   On 7 September 2019, Mr Corbett travelled to South Africa to meet with SA Distributor and its customers. In October 2019, SA Distributor worked with Mr Corbett to make a proposal to install Metstech products at a mine in Bulgaria.

A trip to Taiwan

1. [341]

   On 16 September 2019, Mr Manuel travelled to Taiwan to meet with Mr Chou. As Michael Koldun of Challenge explained, “Within this visit we would like to focus only on Metstech deliverables, to make sure we have all the [hardware] ready on time.”

2. [342]

   Mr Manuel said he went to Mr Chou’s apartment in Taiwan most days. Mr Chou’s apartment had a room with a workbench next to the dining room. Metstech components were on the workbench and the dining table. Whilst Mr Manuel was in Taiwan, Mr Chou worked on his workbench and Mr Manuel worked on the dining room table. Mr Manuel saw Mr Chou made alterations to the firmware to deal with the technical issues then being experienced, using CCS C Compiler on his laptop.

3. [343]

   Mr Manuel loaded firmware onto BDA base boards. He also did some soldering and assembly of splitters, end-of-line terminators and BDAs. Mr Chou showed Mr Manuel photographs of earlier prototypes of the BDA and previous test results. Mr Manuel saw Mr Chou refer to his laptop to read data sheets provided for some of the components. That is, Mr Chou had a collection of documentation and data at his disposal in relation to the development and manufacture of Metstech’s products. This would hardly be surprising where Mr Chou was involved in the design and, until recently, supervision of manufacture of these products.

4. [344]

   Mr Chou said that the ODM told him that they did not want to have with a person from overseas within their company so the ODM sent the product to Mr Chou’s apartment for him to assemble there. The assembly done by Mr Manuel “actually should be finished in the ODM the factory.” The ODM told Mr Chou that he needed to take care of Mr Manuel himself if he wanted the product shipped out on time. It is also consistent with Mr Chou endeavouring to keep the identity of the manufacturer to himself so that he could continue to invoice Challenge for the manufactured products at a mark-up through ChampWin.

5. [345]

   Tempers were also fraying in Taiwan. On 20 September 2019, Mr Martin forwarded a list of questions to Mr Chou which had been raised by Challenge in their last meeting, including whether Mr Chou could explain a delay in the splitter production run, whether the power injector production could be moved up the line and whether they could urgently schedule a small BDA production run to get 50 BDAs to Challenge. Mr Martin offered to call and discuss “so you don’t have to provide a written response”. Mr Chou simply replied to his fellow directors, “I am quit this company now. And please ask one to hand over all the product immediately.” A more fulsome response from Mr Chou followed: he was organising a mass production run in Taiwan; the manufacturing line had been organised based on the arrival of materials. Production was generally on track apart from some components:

6. [346]

   An exchange of emails between Mr Gasseling and Mr Manuel on 24 September 2019 indicates that Mr Manuel was continuing to work on firmware issues with the BDA. Mr Manuel told Mr Chou the problem and observed Mr Chou updating the firmware to fix it. Mr Manual also reported that Mr Chou was connecting the silicon to the power supply heat sink in the BDA base boards and allowing the silicon to dry in his apartment. On 6 October 2019, Mr Manuel arrived back in Australia, by which time he said that the BDA leaky feeder system was ready to be sold.

7. [347]

   On 25 September 2019, ChampWin rendered seven invoices to Metstech totalling US$81,374, including for a sample of splitter PCBs with product code “168-000004-R5”, PCBs with product code “168-00014-R1”, and the description “Metstech EOL PCB” and “RF Switch test jig board PCB” with product code “168-000020-R0”. Presumably, this was the test jig referred to by Mr Corbett the previous month: see [333]. Welldesign also rendered an invoice to Challenge for $17,380.

Jefferson removed from bank accounts

1. [348]

   On 3 October 2019, Mr Jefferson was contacted by the software developers in Pakistan, who had not been paid. Mr Jefferson was then also dealing with a family medical emergency. He emailed an accountant at Challenge for assistance, but the accountant did not have access to Metstech’s bank account and inquired, “Are you not talking to John/Graeme?”. Mr Jefferson replied that he could not get a straight answer out of Mr Park; Mr Park had been talking to the bank without talking to him and had messed up Mr Jefferson’s access, “I just needed a direct answer so I could decide to pay it or not”. Mr Jefferson arranged for Centurion Survey to pay the software developers so that they did not walk off the job.

2. [349]

   Mr Park said that in October 2019 he went to a Commonwealth Bank branch to change Metstech’s online banking. Mr Park said he was informed by a bank employee that, as Metstech’s account was also registered for CommBiz under Centurion Civil, anyone with online access to Centurion Civil’s bank accounts could also transact money from Metstech’s accounts. Mr Park instructed the bank to immediately stop this access and link between Centurion Civil and Metstech and to independently register Metstech for CommBiz. It appears that Mr Park omitted to inform Mr Jefferson of this development, which might be thought curious where – until recently – Mr Jefferson had provided the working capital for the business and paid the bills. In addition, Mr Park’s explanation of how this came about is inconsistent with the bank’s explanation, and I prefer the latter: see [357].

3. [350]

   On 8 October 2019, ChampWin rendered invoices to Metstech totalling US$25,468 for splitter PCBs with product code “168-000001-R5”, PCBs with product code “168-000013-R0” LTE B3 unbalance filters and the “Components + Soldering working” for the PCBs. On 28 October 2019, ChampWin rendered an invoice to Metstech for A$1,700 for Band 1 BDAs and Band 28 BDAs.

Jefferson removed as managing director

1. [351]

   A meeting of directors of Metstech was scheduled for 21 October 2019. Mr Park told Mr Corbett that he wished to take the position of managing director of Metstech instead of Mr Jefferson, but could not put himself forward as he would be compromised personally as Mr Jefferson was part of his family. Mr Corbett agreed to put Mr Park forward.

2. [352]

   In advance of the meeting, Mr Chou circulated proposed questions including:

3. [353]

   The minutes of the meeting on 21 October 2019 indicate that trouble was afoot. Mr Martin prepared the minutes. Although the minutes do not refer to the company, Mr Martin said that all board meetings were for Metstech, “There was no business for Metstech IP until we hit the DOCA. Prior to that it was all Metstech.” According to the minutes, Mr Corbett called for nominations for a new managing director and secretary, that is, to replace Mr Jefferson. Mr Park nominated himself for the position, seconded by Mr Corbett. Mr Jefferson objected and raised a number of issues, including:

4. [354]

   A vote was held. All except Mr Jefferson voted in favour of Mr Park taking over as managing director. This was, in truth, the beginning of the end. A discussion of Metstech’s financial position followed, noting that the company had considerable outstanding debts. Mr Park “raised the issue of salary sacrifices (catch ups) not being accrued on the books, and that this has been an ongoing issue that has been ignored. … Chad brought it to everyone’s attention that a maximum value of $180K had been agreed to in the past.” (Whether this actually recorded Mr Jefferson’s agreement was in dispute). Mr Park suggested that agreement needed to be reached on when these amounts would be paid, having regard to Mr Jefferson’s loans and “Jason’s Loans”, which I take to be a reference to loans recorded as owing to Mr Chou by reason of his investment in equipment. Mr Park also requested that it be noted “that Chad had threatened to call in his loans and dissolve the IP company.”

5. [355]

   The minutes then record:

6. [356]

   Mr Park proceeded to explain the problems which had occurred with Metstech’s bank account before discussion moved to production. Mr Chou was said to be on target, with Challenge expected to assist with cashflow issues affecting the payment of invoices.

7. [357]

   By 4 November 2019, Mr Jefferson’s access to Metstech’s bank account had not been restored. He complained to the bank. On 5 November 2019, the bank advised Mr Jefferson that a couple of weeks ago, a new authority form was completed and signed by two directors of Metstech. The bank’s account manager had been advised that Mr Jefferson did not need to be a signatory anymore as a bookkeeper would now be doing most transactions. This must have been extremely galling to Mr Jefferson who, until then, had been funding Metstech’s operations. To now be removed from access to Metstech’s bank account, without consultation, must also have been disturbing, where the bank’s explanation departed significantly from Mr Park had said in the recent directors’ meeting.

8. [358]

   On 6 November 2019, Challenge issued a revised purchase proposal with changes to the payment schedule. On 11 November 2019, a directors meeting was held, where the directors resolved to accept Challenge’s proposal: “It is agreed that we have every intention of proceeding and honouring the agreement.” The directors again discussed salary “catchup”. The history of the issue is recorded in the minutes: “All directors agreed that there was an agreement that there was to be some “CatchUp”. It is only the amount that is now in dispute.” Consensus was urgently required on all “catchup” amounts to be reflected in the balance sheet, so that the investment by Challenge could be finalised. It was also noted that Mr Chou had “purchased a considerable amount of equipment that also needs to be reflected in the balance sheet. Some of this has already been accumulated but nothing prior to March 2018 …”.

9. [359]

   On 12 November 2019, Mr Chou emailed his fellow directors, encouraging them to act in unity to enjoy the fruits of their efforts. Mr Chou recalled that Mr Clifton had invited him to join Metstech at the end of 2014 “so I start design after daytime job work.” After beginning to work for Metstech full time, “I did not get pay in that moment and still use my money to develop the things.” After trying to resign at Christmas in 2015, the company agreed to pay him a salary, “Then I keep design product … but I still used my money to development the products.” He recalled working on the products and then flying with Mr Park to demonstrate the products to Motorola in 2016 and, in March 2017, Mr Park asked him to demonstrate the capability of the LTE BDA to a customer, “So I handmade 3 B28 BDA and went with [Mr Park] to that customer’s office. And show them … The most development cost of hardware and software all from me and not charged to Metstech. And most travel costs too.” Mr Chou’s email is a strong, contemporaneous statement of his role in designing Metstech’s products. Mr Chou made no mention of an ODM.

10. [360]

    On 13 November 2019, Mr Jefferson emailed his fellow directors, expressing his disquiet, including that he was receiving little notice of matters to be dealt with at board meetings. It is apparent that Mr Jefferson’s relations with Mr Park were in a poor state; “I see him making a grab at additional payments at a level and timeframe that were never agreed to and do not reflect equity between the stakeholders.” Mr Jefferson observed that Mr Park’s proposal for salary ‘catchup’ “considered everyone but him. “How can this be considered fair … It is plain to me that [Mr Park] is constantly trying to antagonise me and force me to break out of sheer frustration. … It should be noted that John wrote the shareholders agreement and had every opportunity to formalise the details that he is claiming. … I have been isolated from the business … I have a written statement from the bank that it was under [Mr Park’s] instruction that I was removed from the [bank] account. … I have been ignored for years and now pushed out of the business. … The position I have been put in is not right and does not reflect my wishes for everyone’s success.”

11. [361]

    A directors meeting for Metstech was held on 14 November 2019. Three versions of the minutes are in evidence: minutes without mark-up; minutes with amendments; and a screenshot of the marked-up minutes with comments from Mr Corbett and Mr Jefferson. It is apparent that the discussion on salary “catchup” was a hotly disputed subject, with Mr Jefferson on the one side and his fellow directors on the other. The minutes record that repayment of Mr Jefferson’s loans and “Jason’s equipment and living away from home allocations” were considered high priority loans whilst “catchup” payments to directors were low priority loans. Mr Martin agreed that this was the first meeting at which a “catchup” payment was discussed not only for directors but for himself, “Chad brought it up for … the work I’d done”. The minutes record that it was agreed that Mr Jefferson and Mr Martin’s time would also be recognised on a part-time basis of $50,000 each prior to March 2018 and one day a week after March 2018. In total, Mr Martin was to receive a “catchup” amount of $122,000.

12. [362]

    By then, Metstech IP had submitted an R&D tax incentive application for the 2019 financial year. Nil expenditure was said to have been incurred on R&D activities that year, which may suggest that the research and development stage had been completed. Metstech IP did, however, report a loss. On 13 December 2019 and 11 January 2020, Metstech IP received a refund from the Australian Taxation Office of $240,432.72, which was, by and large, transferred to Metstech.

13. [363]

    On 24 December 2019, ChampWin rendered seven invoices to Metstech totalling US$136,158 for power injector PCBs with product code “168-000009-R2”, BDA base board PCBs with product code “168-000004-R4”, headend controller PCBs with product code “168-000005-R4”, VHF radio PCBs with product code “168-000010-R2”, Band 3 LTE BDA radio PCBs with product code “168-000011-R2-B3” and the “DIP+SMT+PCB stencil” and “Electronics Components” for the PCBs. After receipt of Metstech IP’s R&D refund for 2019, together with $70,000 paid by Challenge on 8 January 2020, payments were made to ChampWin and various other US dollar accounts. It is apparent from Metstech’s bank statements that the company was finally making money and in funds.

14. [364]

    On 4 November 2019, SA Distributor contacted Challenge regarding a potential Metstech trial in Colombia. On 4 February 2020, Metstech signed a letter of intent with SA Distributor in respect of non-exclusive distribution rights globally, excluding Australia, Canada, China, the US and Mexico.

US Co

1. [365]

   On 5 March 2020, representatives of US Co met with Mr Park at Challenge’s offices in Melbourne. Mr Park reported to Mr Jefferson that US Co wanted to be a distributor of Metstech’s products in the US and were interested in forming an American company to undertake distribution. On 10 March 2020, Mr Martin communicated with US Co, outlining Metstech’s manufacturing system.

2. [366]

   Mr Chou continued to work with Challenge, in particular, with Mr Manuel on technical issues. On 16 April 2020, Mr Manuel and Mr Chou exchanged Skype messages in relation to the filters on the BDA base boards. These issues were further discussed with Mr Lardner on 24 April 2020, including in relation to Mr Chou building a bandpass filter to be inserted “on end of string antennas”.

Disclosure of ODM?

1. [367]

   On 24 April 2020, Mr Lardner circulated notes to Mr Park, Mr Martin and Mr Corbett on progress on technical issues including: (emphasis added)

2. [368]

   Mr Lardner said that Challenge was concerned that, if Mr Chou was unable to deal with the manufacturers, this would create a supply problem. Further, he was becoming increasingly frustrated with the number of excuses being offered by Mr Chou as to why the design documentation could not be supplied.

3. [369]

   Mr Park said he told Mr Lardner at this meeting that detailed design documentation would have to be obtained from the manufacturers in Taiwan. Further, $1 million would need to be paid in order to get the rights to the PCBs held by the ODMs. Mr Park said he got the figure of $1 million from Mr Chou as an estimated figure but agreed that there was no document recording this figure, “There was no exact figure because they were still in developments and costs associated with it. But we had a rough estimate of basically they would charge us a certain amount to vary the million dollars as a rough estimate.”

4. [370]

   Mr Lardner denied that he was ever told this. At no time did Mr Park state that the intellectual property for the Metstech BDA leaky feeder system was owned by anyone other than Metstech or Metstech IP or that $1 million had to be paid to acquire those rights, nor was there a need to purchase $1 million of stock or make any other payment to secure the release of the intellectual property. Nor did Mr Park ever state that the intellectual property in the Metstech BDA leaky feeder system was being obtained over time. Mr Lardner explained:

5. [371]

   I prefer Mr Lardner’s evidence to that of Mr Park. Not only was Mr Lardner a more credible witness but, had Mr Park told Mr Lardner that the design documentation was held by Taiwanese manufacturers and would only be released on payment of $1 million, it is highly likely that Mr Lardner would have recorded this critical piece of information in his contemporaneous note of the meeting. In addition, one would expect that Mr Lardner would have reported this information to Mr Smyth, as it would have had implications for Challenge’s acquisition of shares in Metstech and Metstech IP, in particular, the price which Challenge may have been prepared to pay. The absence of any contemporaneous record of the information said to have been imparted by Mr Park tells strongly against acceptance of his evidence.

Potential buy-out of Jefferson

1. [372]

   Mr Park had, on 30 March 2020, obtained a draft Waiver Settlement & Release Deed from a solicitor, who enquired whether Mr Park was “not too disrupted by all the turmoil.” The document was circulated to Mr Corbett and Mr Martin. On 8 May 2020, Mr Corbett forwarded the document to Mr Chou, noting, “Alan has again expressed a solid interest in buying out Chad’s shares which would fix a whole lot of issues so would you be happy with that, Alan buying in in place of Chad?” “Alan” was from US Co.

2. [373]

   On 19 May 2020, Mr Corbett emailed Mr Jefferson, saying he had been approached by a potential overseas investor who was interested in buying Mr Jefferson’s shares in Metstech and Metstech IP for “very high 6 figures, or even touching 7 figures.” Payment was to include Mr Jefferson debt, with the other directors prepared to forgive the “catch-up”. Mr Jefferson was given the draft Waiver Settlement & Release Deed dated 19 May 2020.

3. [374]

   It appears that Mr Jefferson was open to selling his shares, as he sought further details from Mr Corbett. On 27 May 2020, Mr Corbett passed on the details of the interested purchasers, being US Co. Mr Jefferson emailed them on 6 June 2020. On 13 June 2020, Mr Jefferson tallied up Auxilia Investments’ outstanding loans to Metstech, to which interest was added. The balance was some $737,000. Mr Jefferson advised the proposed purchasers that Auxilia Investments was owed some $700,000, which would need to be paid as part of the purchase. US Co replied that, as it had no financials, “We do not know enough to make an offer” and sought further details of the terms of the loans made by Mr Jefferson’s companies to Metstech. It is clear that US Co needed a significant amount of information about Metstech before progressing the purchase in any meaningful way.

4. [375]

   Challenge and Mr Martin continued to deal with technical problems with the BDAs, with Mr Martin liaising with Mr Chou and Ms Cheng. On 10 June 2020, Mr Martin emailed Metstech and Challenge personnel in relation to a calibration issue with UHF cards on BDAs supplied to MineCo2, “Jason is writing a program to correct the calibration value.” Mr Martin agreed that, “In this particular case I actually did … think Jason was writing it. I’d had a few discussions with him and he was telling me that in order to get it done quickly he was going to do it himself. … I know two pieces of software that Jason actually wrote himself.” Again, I am reluctant to place too much weight on Mr Martin’s evidence in this regard where Mr Martin appears to have drawn conclusions from a range of non-specific pieces of information and where Mr Chou was in Taiwan. I am more inclined to place greater weight on Mr Chou’s contemporaneous emails, which consistently indicate that he was making modifications to the software himself.

5. [376]

   On 12 June 2020, Altium rendered an invoice to Welldesign for renewal of its designer software, which was paid by Ms Chen. Again, it is unclear why Welldesign did not seek reimbursement of the software expense from Metstech, as it had done previously. On 18 June 2020, Welldesign rendered an invoice to Metstech for $8,580.

6. [377]

   On 15 June 2020, Mr Corbett emailed Mr Chou, “please remember that document we spoke about on Friday to get reviewed by John/Chris and the small part me.” Presumably, this was a reference to the draft Waiver Settlement & Release Deed. Mr Chou replied, “I will, I am working on new pc software to work with the new BLE firmware.”

7. [378]

   Mr Jefferson had requested a confidentiality agreement from US Co. US Co advised that a different version of the document would be sent to Mr Jefferson for his consideration “and in terms of our talks we only talk to you and share info with you”. Perhaps at odds with this, on 19 June 2020, US Co emailed Mr Corbett and Mr Park:

8. [379]

   Plan B was to buy out Challenge’s shares while Plan C was to form a new company with “you 4 and possibly Jack”, with US Co being the majority shareholder. Most likely, the reference to “Jack” was to Mr Smyth of Challenge. Further, “New company will not be responsible for any of Metstech or Metstech IP previous loans debit, profits basically anything. This is start of what I think [J]ohn was good with but you can tell me.” That is, Mr Park was then interested in setting up a new company free from the obligations owed to Mr Jefferson and, perhaps, Challenge.

Calling in a ‘fixer’

1. [380]

   On 20 June 2020, Mr Corbett received a telephone call from Mr Smyth, who said he was not going to spend any more money or waste any more time on Metstech. Mr Corbett described this as “the final trigger”. Mr Smyth also said that he wanted Mr Park gone as managing director, because he wasn’t running the company properly. Mr Corbett telephoned Mr Park immediately.

2. [381]

   Mr Jefferson also recalled that, in June 2020, Mr Smyth said to him, “John is running the business into the ground. He is out of his depth. I find it very difficult to work with him. In April 2020, I stopped attending meetings that John was going to be part of as they were proving to be non-productive. He continues to ignore our pleadings to fix problems with the BDA.”

3. [382]

   Some years earlier, Heath Smith of 10Telco Pty Ltd had provided coaxial cable to Metstech. Mr Smith had attended the Tritton mine to help Metstech with problems at the site. 10Telco rendered an invoice for this work, but was not paid. Mr Smith rang Mr Park a number of times requesting payment and, in February 2018, 10Telco wrote off the debt of $5,922.10. Despite this, Mr Heath and Mr Park became business acquaintances and, from time to time, exchanged text messages and had coffee.

4. [383]

   On 29 June 2020, Mr Park and Mr Smith had coffee. Mr Park said he was having some business problems. Mr Smith suggested that Mr Poisson was probably a good bloke to have a chat to, as Mr Poisson had helped Mr Smith in the past. Mr Smith provided Mr Park’s contact details to Mr Poisson, who arranged to see Mr Park and thanked Mr Smith “for the referral.”

5. [384]

   Mr Park reported to Mr Corbett that he had been introduced to Mr Poisson and said, “We need to look at what steps we can take to protect the company”. Further, Mr Poisson “can give us advice on putting the company into administration. He works for an administrator and gets paid a finder’s fee.”

6. [385]

   On 30 June 2020, Mr Poisson spoke with Mr Park and Mr Corbett. Mr Poisson’s notes indicate that he was generally informed of the company structure of Metstech and Challenge’s impending acquisition of shares and appointment of a director to the board. Mr Poisson’s notes make no reference to financial difficulties. He recorded that Metstech had spent four years “developing technology” and there was “BLUE SKY”. Mr Corbett recalls that Mr Poisson suggested that they needed to set up a new company, put the Metstech companies into administration “and then the new company can start again clean”.

7. [386]

   On 1 July 2020, Mr Poisson forwarded a proposed letter of engagement to Mr Park, describing their meeting as a discussion of opportunities for asset protection and restructure, including investor participation to advance Metstech’s niche products. The initial activities proposed by Mr Poisson included “Meet board members to discuss potential re-structuring of company and investor involvement to drive growth and performance”. Mr Park forwarded the proposed engagement letter to Mr Corbett. Mr Poisson’s initial engagement fee was paid from Metstech’s bank account. No one told Mr Jefferson.

8. [387]

   According to Mr Poisson’s initial notes and letter of engagement, the impetus for external administration was not financial difficulties. Rather, the motivation was to exploit Metstech’s products without the difficulties posed by Mr Jefferson or Challenge’s partially completed acquisition of equity.

9. [388]

   On 3 July 2020, Mr Park sent an email to Mr Chou regarding “US Co” payment as follows:

Challenge loses patience

1. [389]

   On 20 July 2020, Mr Smyth sent a letter to the directors of Metstech and Metstech IP, demanding that the agreement for Challenge to acquire 20% of the shares be honoured. The letter indicated significant frustration on Challenge’s part, reciting its contribution to the development of Metstech’s leaky feeder system for two years, including payments of more than $1 million in cash and over eight man-years of professional services including sending Mr Manuel to work in Taiwan, laboratory facilities and equipment, engineering, administration, bookkeeping and accountancy support. Further:

2. [390]

   Mr Smyth stated that Challenge would only extend credit on the condition that the agreement to acquire 20% of the shares was honoured, based on Metstech’s cash and Challenge’s in-kind investment to date, with the transaction completed and a Challenge director nominated by 23 July 2020. Failing this, Challenge sought immediate repayment of its cash for equity of $477,741 and payment for the professional services provided to date.

3. [391]

   Mr Poisson saw Challenge’s letter as “a potential blackmail letter”. A more informed description may have been that the letter reflected Challenge’s understandable exasperation in the face of its longstanding investment in Metstech in return for equity, which was nowhere in sight.

4. [392]

   Unfortunately for Challenge, the letter gave Mr Park a basis to advance the plan he had already discussed with Mr Poisson, being to put Metstech into administration and start a new company, without the existing debts and problems, in particular, without Mr Jefferson and Challenge or the debts owed to either. The palpable ingratitude of Mr Park is difficult to overlook: Metstech had been funded – and he had been paid a salary – for three years by Mr Jefferson and, more recently, by Challenge. When the hard graft of design and development was largely behind them, with “BLUE SKY” ahead, Mr Park had no qualms in ‘ditching’ those who had made that possible.

5. [393]

   On 21 July 2020, Mr Park emailed Mr Poisson, copied to Mr Corbett, reporting on recent events, including a call from Mr Smyth to Mr Corbett advising that he had emailed SA Distributor, “advising them that we are insolvent and not to trade with us. He has advised them that for our system to work we need a complete redesign. His engineer knows what is wrong and they will not tell us.” It was apparent from Mr Park’s email that he was in no mind to accede to Challenge’s demands.

6. [394]

   Mr Corbett recalls that, on about 22 July 2020, he, Mr Park, Mr Martin and Mr Chou had a telephone meeting with Mr Poisson, who suggested that Metstech should be placed into voluntary administration, “We can then set up a new company to buy back Metstech’s assets”. Mr Park agreed that they should place Metstech into voluntary administration. Mr Corbett said that this meeting did not involve Mr Jefferson, “We just needed the majority of the board to go ahead with it. We didn’t include Chad in that meeting”.

7. [395]

   Also on 22 July 2020, Mr Park emailed his fellow directors, advising that he no longer considered that it was in the best interests of shareholders to have Challenge as an equity partner. Mr Park suggested that the companies were “under siege” from Challenge, which was “forcing us” to transfer 20% equity in Metstech and Metstech IP, including by “defaming our company [and] its IP” to customers, “stating that we are trading insolvent and our BDA is not fit for purpose and fundamentally flawed.” Mr Park described this as “scare tactics (ie insolvent trading, not fit for purpose product etc) … This may be a ploy to have equity at a heavy discount … I believe they are after control of the intellectual property.” Noteworthy, Mr Park did not suggest that Metstech and Metstech IP did not have any intellectual property. If the intellectual property was owned by an ODM in Taiwan, this would have been a good opportunity to say so.

8. [396]

   Further, Mr Park advised that he had engaged an independent accounting firm, Haddad Baker Pty Ltd in Nelson Bay, to retrieve the accounting function for the companies, and to also invoice Challenge for the time spent by Mr Chou and Mr Martin at MineCo2. Mr Park requested that all board members refer future correspondence through him “so we have one version of the truth and remain united as a board.”

9. [397]

   On 23 July 2020, the directors of Metstech and Metstech IP had an informal discussion. As Mr Jefferson recalled the discussion, Mr Park suggested that the offer contained in the letter of demand from Challenge should be rejected, whilst Mr Jefferson said they needed to consider the situation they were in and negotiate a solution with Challenge as it had the ability to make the company insolvent. Mr Park said he was talking to someone to see what their options were and believed that they could fight this. Mr Jefferson asked who Mr Park was talking to; Mr Park said he was seeing someone in Nelson Bay, “we are not trading insolvent and Challenge owe us money”. Mr Jefferson was not told that Metstech had engaged Mr Poisson. After the meeting, Mr Corbett confirmed by email that all contact with Challenge was to be through Mr Park, who was getting advice to respond to Challenge’s letter “and will present this advice to the board and secretary before any action is taken.”

10. [398]

    Later on 23 July 2020, Mr Chou expressed his views on Challenge appointing a director to the companies, advising that he would “walk away and resign from Metstech”. Further, “If [Mr Smyth] believed that their software engineer can design better leaky system then me, I think I don’t have any reason stay in Mestech when [Mr Smyth] play as shares holder and director in Metstech”. In cross-examination, Mr Chou said that when referring to design, he was referring to the concept design work, which he did.

A false invoice and security interest

1. [399]

   Mr Poisson said, “They told me that Jason is the key man in the whole situation”. He understood that Welldesign owed money to a factory in Taiwan and that Welldesign had not been paid. He was asked by Mr Park to go and speak with Ms Chen, as she was very concerned. Mr Poisson arranged to meet with her at the Westfield Shopping Centre in Hornsby.

2. [400]

   On 23 July 2020, Welldesign invoiced Metstech for $245,950, including $40,000 “overseas accommodation charge” for 2016 to 2019, together with various components including RF controllers, end-of-line terminators, RF splitters, power injectors, $80,000 for “rebanding” UHF/B3 BDAs and VHF-B3 BDAs and BDAs. The charge of $80,000 for rebanding seems extraordinary where the rebanding cost for each BDA exceeded the cost of a BDA. The figure was also nicely rounded, as were other figures in the invoice.

3. [401]

   Mr Chou agreed that the invoices were not organised by him, “I think should be ask my wife … my wife told me that John have asked her, ok, because Challenge no pay [for] the goods”. Mr Chou said “rebanding” was done by the ODM in their factory. As to whether Mr Chou had any documents from an ODM to Welldesign claiming $80,000 in relation to rebanding, Mr Chou said “They may have that in the ODM, the invoice … that include … rebanding … I need [to] check”.

4. [402]

   Ms Chen agreed that Welldesign was not then owed any monies by Challenge. Rather, she rendered this invoice at the suggestion of Mr Park, who also told her which goods he wanted to issue the invoice for. Ms Chen agreed that Welldesign had not previously invoiced Metstech for an overseas accommodation charge. Ms Chen was aware that her husband received a salary from Metstech and any accommodation allowance would be payable by Metstech to him in relation to his employment rather than by reason of any agreement between Metstech and Welldesign.

5. [403]

   Mr Poisson then arranged for Welldesign to register a security interest over Metstech’s products now held at Challenge’s premises. Mr Poisson did not, however, consider that the debts were secured debts, “I’m too smart for that.” Mr Chou agreed that Metstech had not given Welldesign any security to support a security interest but denied any knowledge of the registered interest before Metstech went into voluntary administration, after which his wife told him. He then took no steps to remove the registered interest “because I’m in … Taiwan”.

6. [404]

   According to Mr Park’s later email to Ms Chen, the security interest would be used to force Mr Jefferson and Challenge to negotiate, failing which Welldesign could “call in our secure debts and wind [Metstech] up – this frees us from our Director and most importantly shareholder restrictions”: see [428].

A ‘snap’ voluntary administration

1. [405]

   At 10.13 am on 24 July 2020, at Mr Park’s request, Mr Martin sent a meeting invitation to the directors, “Sorry for the late notice”. The meeting was called for 11.00 am, to “Discuss company financials and actions”. Metstech’s shareholders agreement required any notice of meeting to be served on all directors at least three business days prior to the meeting, and to include details of all matters of business and all proposed resolutions. These requirements were not complied with, and for no obvious reason.

2. [406]

   At 10.29 am, Mr Jefferson replied, “Who is the advice coming from. Can all advice be forwarded now so I have time to review”. Mr Jefferson did not receive a response, other than Mr Corbett suggesting that he address his request to Mr Park.

3. [407]

   Mr Park was then speaking with Stephen Hathway and Bob Pfaff of Helm Advisory, Recovery and Insolvency Accountants, enquiring about the appointment of a voluntary administrator. As I read the Helm Advisory’s file note, the genesis of Mr Park’s interest was Challenge’s demand to 20% equity. Mr Park gave instructions on the assets and liabilities of the companies and said “there was no possibility of repaying the $477k, ATO was on a repayment plan and there was no material business in the pipeline.” (Given Metstech’s dealing with Telco, MineCo, US Co and SA Distributor, the latter was a serious misstatement of the position.) On this basis, the accountants advised that Metstech would be insolvent and, if three of the four directors resolved to appoint a voluntary administrator, the firm would accept the appointment. It would appear more pressing than any concern Mr Park had as to Metstech’s financial situation was his wish to defeat Challenge’s claim to equity in the company.

4. [408]

   At 11.00 am, a meeting took place with the directors of Metstech and Mr Pfaff of Helm Advisory. Mr Jefferson attended. He had never met Mr Pfaff before, nor been informed that Mr Pfaff would be there. A transcript of the meeting is in evidence but obviously incomplete. In any event, Mr Park said Metstech was trading whilst insolvent and it was best that the company go into voluntary administration. Mr Pfaff agreed. The transcript continues:

5. [409]

   Mr Jefferson said the meeting lasted for ten minutes. Mr Corbett recalls that Mr Jefferson disagreed with the resolution and said, “Metstech is not insolvent. Challenge and I are still willing to fund the company” to which Mr Pfaff said, “It’s too late mate, it’s done.” Mr Jefferson then remained ready willing and able to continue to fund Metstech in order to permit it to meet its debts as and when they fell due. The circumstances in which the administrator was appointed suggest that Mr Park, Mr Corbett, Mr Chou and perhaps Mr Martin wished to place Metstech into administration come what may, without consideration of the financial or legal basis for doing so, with a view to setting up a new company free from the obligations owed to Mr Jefferson and Challenge.

6. [410]

   Immediately after Metstech was placed into administration, Mr Corbett discussed with Mr Park, Mr Martin and Mr Chou establishing a new company that would not include Mr Jefferson as a director. Mr Park said, “We need to set up a new company to keep trading in case Metstech and Metstech IP disappear.”

7. [411]

   Also on 24 July 2020, Welldesign rendered a further invoice to Metstech of $49,253.75. This included a fee for US$5,000 per month in respect of Ms Cheng’s services, which Welldesign had not invoiced for the preceding six months.

8. [412]

   At 8.00 am on Saturday, 25 July 2020, Mr Corbett emailed US Co, enquiring “Jason wants to know what you would prefer 1st, UHF or VHF, as he wants to make them. They will not be in any other company but a new one.” This email was admitted as evidence of what Mr Corbett conveyed, not its truth. That said, the contemporaneous documents contain numerous examples of Mr Corbett or Mr Martin communicating on behalf of Mr Chou. It is also apparent from other documents at this time that the directors of Metstech – other than Mr Jefferson – were proposing to continue to manufacture and sell Metstech’s product to US Co but through a new company, notwithstanding having placed Metstech into voluntary administration moments earlier. I read the italicised text as representing how Mr Corbett intended that he, Mr Park, Mr Martin and Mr Chou would proceed.

9. [413]

   On 25 July 2020, Mr Jefferson also emailed his fellow directors, “Please forward all copies of advice as previously requested”. He was not favoured with a reply. On 27 July 2020, Mr Jefferson last accessed Metstech’s G Suite account until he gained administrator access on 21 September 2020: see [529].

Moving data

1. [414]

   Meanwhile, Mr Gasseling and Mr Martin had travelled to Perth at the request of MineCo2. Whilst in hotel quarantine for two weeks, Mr Martin used the time to generate the next version of the Raspberry Pi software, “Not adding new features to it, really just updating it to the new framework.” Mr Martin said he could not save the source code back to “bitbucket” and so created a new repository on “Gitlab” instead, where he stored the updated version.

2. [415]

   Mr Gasseling worked with Mr Martin from the same small office at MineCo2’s site. Mr Gasseling overheard Mr Martin having a telephone conversation with Mr Park, when Mr Martin said, “John, the Google G Suite account is about to expire. We should download all the emails and documents from it. I’m downloading them.” He saw Mr Martin downloading material onto his laptop.

3. [416]

   On 29 July 2020, Mr Corbett emailed US Co, asking him to arrange shipment of an item to the Bulgarian mine for SA Distributor. On 30 July 2020, Mr Corbett followed up his request, noting “our situation with Challenger [SA Distributor’s proof of concept] will not go ahead and that will be very bad for Metstech (as we are currently).” Mr Corbett followed up US Co again later that day, “as [SA Distributor] pretty nervous, as am I”. Obviously, Mr Corbett was trying to source a part for SA Distributor from US Co rather than Challenge, presumably to avoid Challenge becoming aware that he was continuing to work with US Co and SA Distributor, notwithstanding Metstech’s recent entry into external administration.

4. [417]

   On 28 July 2020, Welldesign rendered an invoice to Metstech of $22,000 for delivery expenses and factory assembly service fees. On 30 July 2020, Welldesign rendered invoices to Metstech totalling $97,786.56, being PCBs with product code “168-000007-R2” (likely revision 2 of the Band 28 LTE boards), PCBs with product code “168-000004-R5” (revision 5 of the BDA base boards), PCBs with product code “168-000011-R2” (revision 2 of the Band 3 or Band 12 LTE boards), PCBs with product code “168-000012-R0-U5” (likely revision 0 of the UHF boards) and the “SMD+DIP”, Cable soldering”, “PCB Stencil” and “Electronics components” for the PCBs.

5. [418]

   Mr Park and Mr Corbett sought funding from US Co to pay the costs of manufacture. On 30 July 2020, Mr Park emailed US Co, copied to Mr Corbett and Mr Chou:

6. [419]

   On 31 July 2020, the administrator wrote to each of Mr Park, Mr Martin and Mr Chou, terminating their employment with Metstech. Mr Poisson and Mr Park assisted Mr Martin to incorporate Martin CC Pty Ltd. Mr Martin continued to work for MineCo2 via his new company.

7. [420]

   At 8.33 pm on 31 July 2020, Mr Martin emailed his fellow directors (including Mr Jefferson) and Ms Cheng, encouraging them, “with the mess that Metstech is in” to back up their data. Mr Martin backed up his data and made a back-up of the shared drives. Mr Martin understood that there were two shared drives: one set up by Mr Jefferson, which contained records created prior to using G Suite and “contained a lot of data”, and a second shared drive set up by Mr Park, which “only contained a handful of documents.” Mr Martin said he tried to contact Mr Jefferson to confirm that he still had a copy of data in his shared drive, “but I could not reach him”.

8. [421]

   Mr Martin also got rid of his Bitbucket account, apart from the Metstech source code, “Chad should still have a copy. … I assume Chad has got read access to the repositories under the account that he created. … when I was going to get back to Sydney – yeah, this before I was fired, one of my plans was to sort that issue out.” Mr Martin disagreed that he had sought to deprive Metstech of the source code for its products, “No, I mean they’ve still got access to it. … what they don’t have is just the latest version … of the changes that I made … in June”.

Phoenix activity

1. [422]

   ‘Phoenixing’ is the act of winding up a company to avoid paying liabilities but transferring assets and employees to a new company: Aardwolf Industries LLC v Riad Tayeh [2020] NSWSC 299 at [25] citing Commissioner of Taxation v Iannuzzi (No 2) [2019] FCA 1818 at [114] and [123] (per Stewart J); Ausmart Services Pty Ltd (In Liq) v Zheng [2019] FCA 2162 at [16] (per Anderson J).

2. [423]

   On 1 August 2020, Mr Corbett emailed US Co to confirm a meeting that day, “As Jason is getting up very early … to attend.” Later that morning, Mr Park emailed US Co and Mr Chou’s wife, Ms Chen, using the email signature of Metstech IP. This was the first time Mr Park had done so. Attached to Mr Park’s email were letters from Metstech IP to each of US Co and Ms Chen, giving permission for US Co to purchase directly from Welldesign, given “the current issues with Metstech Pty Ltd going into voluntary administration”.

3. [424]

   Of these letters Mr Park said, “I was trying to make sure there was a future for … Metstech IP.” Mr Park said that Metstech had ceased trading and he was trying to arrange a temporary solution to ensure “we could pay Taiwan”. More accurately, Mr Park sought to solicit funding from a prospective investor in a phoenix company to buy Metstech’s products from its supplier, being the company part-owned by another Metstech director. The fact that Metstech was in administration appears to have been of no moment. It is also apparent that Mr Park was working hard to gain the trust of Mr Chou’s wife in respect of the events then underway.

4. [425]

   Mr Park forwarded a copy of his “Metstech IP” emails to Mr Corbett. Later that evening, Mr Corbett sent an email to SA Distributor, requesting a forecast for the next eleven months “as we need this for manufacturing and for the new company.”

A conspiracy?

1. [426]

   On 4 August 2020, in preparation for the first creditor’s meeting, Mr Park sent a lengthy email to Ms Chen, Mr Chou and Mr Corbett, apparently for the purpose of informing Ms Chen of the history of Metstech’s dealings with Challenge and the suggested way forward. Mr Park’s explanation is not easy to follow, save that Mr Park reported that Mr Martin had gone to MineCo2’s site to “see if we had fundamental issues with the BDA. Unfortunately we do!”. Apparently Mr Chou had “come up with an eloquent method of resolving this issue.” Challenge was said to have seen this as their chance to make a demand for the allocation of shares, apparently without paying monies owed, said to leave the company with “no other choice” than voluntary administration.

2. [427]

   Mr Park proceeded to explain the processes of administration and liquidation. In short, “The administrator first sells the assets (this is why we are able to buy the minimum assets in Metstech).” On liquidation, secured creditors were paid whilst unsecured loans “disappear” and “This frees us to start a new company (no shareholder restrictions)”. Whilst the directors may be exposed to a claim in respect of unpaid superannuation, Mr Park had been advised that it was “very unlikely … that we will be chased”. Further:

3. [428]

   After explaining Mr Park’s views in respect of “catch up”, Mr Park continued: (emphasis in original)

4. [429]

   Mr Park proposed a new corporate structure, with a Newco to be publicly listed and in which Telco and MineCo2 would join as shareholders. Further, “Newco has a licence with Welldesign for use of IP. It will pay Welldesign to protect IP (ie patents and have a licence to use them)”. In addition, Mr Park proposed that a new trading company would be set up, to be transferred to Newco. This is the first suggestion that Welldesign had any intellectual property rights, being a suggestion made by Mr Park in the context of seeking to enlist Mr Chou and Ms Chen’s support with what he proposed.

5. [430]

   By Mr Park’s email of 4 August 2020, he expressed an intention to secure Metstech’s assets and business from the administrators for a new company, to avoid the restrictions in the shareholders agreement which prohibited competition with or the diversion of business from Metstech, protect Mr Chou and Welldesign moving into the future, continue confidential communications through Mr Poisson with Telco about investing in the new company, clean up Metstech IP so that it could not interfere in the new corporate structure, load Metstech IP with debt including “catch up” payments, even though Mr Park, Mr Corbett and Mr Chou were not employees of Metstech IP, and claim security over Metstech IP in respect of such debts even though there was no basis to assert a security interest. Further, Mr Park intended to establish a new public company for Telco and MineCo2 to invest in. The new public company would have a licence from Welldesign (notably, not an “ODM”) to use the intellectual property associated with Metstech’s products and maintain unity between the directors (apart from Mr Jefferson) to implement this strategy. There was clearly a plan to divert Metstech’s business, customers, potential investors and products away from Metstech and Metstech IP and the restraints in the shareholders agreements to the detriment of Metstech, Metstech IP, Mr Jefferson, Challenge and Auxilia Holdings and for the benefit of the defendants.

6. [431]

   On 4 August 2020, Malcolm Jones of Challenge emailed SA Distributor, entitled “Metstech gear”, enquiring “I’m assuming the BDA’s you’ve got are coming from [US Co]? Just curious if Metstech organised this for you or if you … managed to organise it yourselves”. Mr Corbett’s efforts to avoid detection by Challenge appear to have been unsuccessful. Internally, SA Distributor conferred, “As you know, we’re trying not to get caught up in the shit fight between Challenge and Metstech.” SA Distributor sought guidance from Mr Corbett, who replied, “I don’t see how it is any business of theirs … I’d tell them its none of their business and why are they asking? Administration meeting tomorrow so I’ll advise you both the outcome.”

First creditors meeting and Newco

1. [432]

   On 5 August 2020, the first creditors’ meeting was held, attended by 11 creditors with claims totalling $4,019,057.68. A query was raised by the creditors as to the ownership of Metstech intellectual property. Also on 5 August 2020, Mr Poisson incorporated a new company called Metstech (Trading) Pty Ltd. Mr Poisson became the sole director and shareholder. Presumably, this was the new company suggested by Mr Park to Ms Chen the day before.

2. [433]

   On 8 August 2020, SA Distributor provided Mr Corbett with the requested forecast for the next 11 months in respect of Metstech’s products, “you can see that the potential for some big numbers to come is substantial. The average METStech deal size in our portfolio is about $500k … so, considering we have 17 un-scoped deals in the funnel, the potential value is upwards of US$8.5 Mil.” Mr Corbett forwarded the forecast to Mr Park and Mr Poisson. Mr Corbett also asked SA Distributor, “Please only use our private email addresses until further notice and do not discuss anything about Metstech with Challenge.” The fact that Metstech was now in administration appears to have been completely irrelevant to Mr Corbett, Mr Park and Mr Poisson, where they continued to actively seek the business of Metstech’s customer, SA Distributor, but in a new company.

A DOCA proposal

1. [434]

   On 10 August 2020, Challenger proposed a deed of company arrangement for Metstech and Metstech IP, to be funded with between $200,000 and $300,000, depending on the position of the Australian Taxation Office. Helm Advisory provided the proposed DOCA to Mr Poisson, noting “it only works with both companies.” The proposed DOCA include various “Overriding Conditions” as follows:

2. [435]

   Mr Lardner drafted this clause. He referred to it as the “for the avoidance of doubt” clause, as “suddenly people were saying “We don’t own stuff. It’s owned by someone else.” And we said, "Well, okay. Let's just … include everything so that … there's no exit clause that, "Oh, well, actually, you didn't mention someone else and actually it's really over here." It's the same with Champ Win … we had no, we had no belief whatsoever that it was owned by them. … in the normal course of manufacturing things a company like Metstech would give documents to these external parties, and we wanted to make it clear that … that's all owned as part of this over, overriding structure. … This is all coming out … during the period of the DOCA … suddenly people are suggesting that ‘Oh, well, actually we don’t have any of it in our possession’”.

3. [436]

   On 10 August 2020, Mr Poisson met with Mr Jefferson. Mr Poisson said Mr Jefferson did not agree with his proposals, “I’ve tried to talk to Mr Jefferson. I had a three hour meeting with him, described all this. … There’s nothing more I can do”. As Mr Jefferson recalled it, “my feeling from the meeting was he came to sus me out and assess my position … whether there was … a deal to be done, but no deal was offered.” Mr Jefferson also tried to access the link to the development repository where Mr Martin’s software was stored, but was denied access.

4. [437]

   On 10 August 2020, SA Distributor requested an update on plans for a training session. On 11 August 2020, Mr Corbett emailed Mr Park and Mr Martin, “We need to fairly quickly get a Training session together to assist [SA Distributor] in the use of a BDA system. We can do this as a technical advice in general and individually and not from METStech Pty Ltd.” Mr Martin offered to assist and, separately, asked that the administrator to fly him back from Perth, having finished at MineCo2’s mine. Challenge was keen to keep Mr Martin engaged in Metstech’s business and offered to pay Mr Martin’s airfare.

Deleting data

1. [438]

   On 11 August 2020, being the day after Challenge proposed a DOCA, Mr Park and Mr Corbett deleted most of the data associated with their user accounts on Metstech’s G Suite account. Mr Park’s drive storage reduced from 271MB to zero. Mr Park also deleted most of the data associated with his Gmail account, reducing the data from 1673MB to 529MB. Mr Corbett’s drive storage reduced from 2,268 MB to 172 MB. Mr Martin discussed with Mr Park the period of time for which deleted data was retained by Google, following which it could not be retrieved. Mr Martin thought it was one month.

2. [439]

   Mr Park agreed that he did not obtain the permission of Metstech’s administrator, “I mean … I had to sanitise it.” Mr Jefferson later managed to retrieve some emails with US Co, which he attached to his affidavit in support of the summons. Of this, Mr Park emailed Mr Corbett, Mr Chou and Mr Poisson, “Once it was clear the DOCA was likely to happen I permanently deleted this chain.”

3. [440]

   On 12 August 2020, Mr Poisson provided Challenge’s DOCA proposal to solicitor, Steven Brown, copied to Mr Park and Mr Corbett. On 13 or 14 August 2020, Mr Martin migrated his personal bitbucket Git repositories to another online repository. Mr Martin said he did this because he did not like the bitbucket interface. He left the three repositories associated with the Metstech software for the Raspberry Pi.

4. [441]

   On 14 August 2020, Mr Martin provided technical support to SA Distributor for installation of a BDA system at the Bulgarian mine. On 16 August 2020, Mr Martin sent SA Distributor an installation manual and a document explaining the “balancing procedure” for the Metstech BDA. Mr Martin also provided test results. Mr Martin said “I was literally just helping them out.” Mr Martin agreed that he did not have Metstech’s permission to distribute the documents, but said that he had done so on many occasions when he was an employee, albeit he was no longer an employee of Metstech. He agreed he had no authority to distribute the document on behalf of Metstech – “I guess not” – but considered the document to be “a public document that … we need to share with … our customer … or anyone who had … our product … in order to be able to use the product.” Notwithstanding that the manual was labelled “Commercial and in Confidence”, Mr Martin thought that the document had “been mislabelled … If you buy the product … you need this.”

5. [442]

   Mr Martin said he did not accept any remuneration for assisting SA Distributor. That may well be the case, but where SA Distributor was a customer of Metstech, his actions were also consistent with efforts to foster this customer relationship for the benefit of a new corporate venture in which he may be engaged. Having regard to the contemporaneous emails between Mr Corbett, Mr Park and Mr Martin at the time, I do not consider that Mr Martin’s motives were entirely altruistic.

6. [443]

   Challenge invited Mr Chou to participate in its DOCA proposal, offering him shares in the companies. The solicitor for Mr Chou and Welldesign advised that they did not support the DOCA proposal but would support Metstech being wound up as soon as practicable. On 17 August 2020, Mr Lardner sent Challenge’s DOCA proposal to Mr Martin and offered him 10% of the shares in Metstech and Metstech IP. Mr Martin declined. The same day, Mr Martin deleted data associated with his user account on Google Drive, reducing drive storage from 1043MB to 910MB.

Administrator’s views

1. [444]

   On 18 August 2020, Mr Hathway wrote to the directors of Metstech and Metstech IP, reporting on the results of his initial investigations. In particular: (emphasis added)

2. [445]

   Further, the administrator considered that Metstech did not need Metstech IP’s intellectual property in order to trade, nor did it appear that Metstech IP had traded or had any assets other than the registered trademark and perhaps some inter-company loan accounts. Mr Hathway advised that his initial impression of the Challenge DOCA proposal was that it was likely to be in the best interests of the creditors and shareholders and he expected to recommend the proposal to creditors. Finally, Mr Hathway reminded the directors that, while a company is under administration, the company officers cannot exercise their powers without the written approval of the administrator and no officer of Metstech “or indeed anybody else, should use the name ‘Metstech’ in trade or comme[r]ce without my express written authority.”

3. [446]

   On 20 August 2020, Mr Hathway provided his second report to creditors, recommending acceptance of Challenge’s DOCA proposal, as it would likely give creditors a greater return than if the company was placed in liquidation and also allow for the company and its business to continue. After reviewing the company’s financial information for the last three financial years, Mr Hathway expressed the view that the company was not solvent. As to the company’s assets, Mr Hathway advised that, although he had been informed that Metstech IP may be the owner of an intellectual property licence, his initial investigations had identified that Metstech IP did not hold any intellectual property.

4. [447]

   Also on 20 August 2020, SA Distributor sent an email to Mr Martin, copied to Mr Park and Mr Corbett, entitled “Laying leaky feeder cable tomorrow”, thanking Mr Martin “for his time today, it really helped progress our work – especially good that you got some quality time with the project manager”.

Attempt to thwart DOCA proposal

1. [448]

   On 21 August 2020, Mr Martin convened an urgent directors meeting of Metstech IP at 2.30 pm. At 2.53 pm, Mr Martin instructed Mr Brown that the majority of the directors had resolved not to accept Challenge’ DOCA proposal. Mr Jefferson had voted to participate.

2. [449]

   Later that evening, Mr Park circulated a draft DOCA proposal prepared by Mr Brown to US Co, copied to Mr Corbett and Mr Martin. The draft proposal involved Mr Martin becoming the sole director of Metstech and Auxilia Holding forfeiting its shares. Mr Martin was to pay an amount of $200,000 towards the deed fund, to be funded by US Co.

3. [450]

   Notwithstanding that the DOCA proposal was prepared by Mr Brown, who said in the letter to the administrator that he acted for Martin CC Pty Ltd, Mr Martin said that he did not instruct the solicitor to do so. I consider this unlikely where Mr Martin was copied on this email and made no protest. Mr Martin said that he didn’t even read the DOCA proposal, “Often I don’t read all my emails.” I also found this evidence unlikely where, in the events that were then unfolding, an email on this subject would likely have commanded his prompt attention.

4. [451]

   Also provided by Mr Park was a document entitled “Metstech IP strategy & way forward”, in which Mr Park set out at length his views on a range of matters. Mr Park reported that he had been recently advised that the shareholder agreements for Metstech and Metstech IP were invalid, as Mr Martin was not supplied with the agreements when he was allotted shares. Mr Park proposed to invalidate the shareholder agreement in respect of Metstech IP “at Tuesday’s meeting”, leaving the company to be run in accordance with its constitution, that is, by the majority of directors. “This will give [Metstech IP] the ability to appoint a new Distributor and sell its IP (the only IP is the METStech Logo).”

5. [452]

   Mr Park went on to explain why Challenge’s DOCA would pass but ultimately fail, as it depended upon Welldesign handing over all intellectual property and “know how”. Further:

6. [453]

   Turning to Metstech IP, Mr Park stated “This company may hold some of the “know how” of the two companies. It does not hold IP or the production.” Once the shareholders agreement for this company was nullified and control vested in the majority of directors, Mr Park proposed to assign the distribution rights to a new company in which US Co, Mr Chou, Mr Park, Mr Martin, Mr Poisson and Mr Corbett were shareholders. “We will sell the Metstech Trademark to this company.” As to why Mr Jefferson would or should support such a deal, Mr Park stated, “He loses his loans otherwise.”

7. [454]

   Mr Park proposed that Mr Martin’s company would be used to purchase Metstech’s assets and then transfer the assets to the new company, Metstech Trading; “This will need a further $250K of funding. This takes Alan’s total investment to $500K.” A second new company would be formed, Metstech Holdings Ltd, to which would be assigned the global exclusive rights from Welldesign. Mr Park suggested that Telco, MineCo2 and other large companies would invest in this company, to provide funds to Welldesign “so it can apply for IP protection. It will have arrangements with the manufacturers (Jason’s Taiwanese company). …” Mr Park envisaged that between $5 million and $10 million would be raised by this company, either by an initial public offering (IPO) or to “BA ‘Cashbox’ on any relevant stockmarket (UK, US, AUS etc)”.

8. [455]

   On 25 August 2020, Mr Poisson prepared some handwritten notes on a proposed distribution and company structure, with a note that the proposal would be delivered by Mr Martin to Mr Jefferson on 26 August 2020. The structure involved the establishment of a new company, Metstech Holdings, that would enter into distribution agreements with entities in the United States (where US Co was based) and South Africa (where SA Distributor was based). In particular, it was proposed that Metstech Holdings would have an exclusive distribution agreement with “Taiwan Factory/Co & Welldesign”. Whilst the defendants point to this as evidence of the role of Yokao as an ODM, it is not: the diagramme does not refer to Yokao, nor identify “Taiwan Factory/Co” as a design house as opposed to, say, a manufacturer. Metstech Holdings would also register the Metstech trade mark in the United States and South Africa.

9. [456]

   Pursuant to this plan, it appears to have been envisaged that Metstech Trading would engage in business with the existing customer base of Metstech. Mr Poisson was then the sole director and shareholder of Metstech Trading. No doubt the shareholdings would have changed if the new venture proceeded. It does appear, however, that Mr Poisson was embedded in the proposed corporate structure and he hoped to have a continuing role and interest in the new business venture, with resulting financial benefit.

10. [457]

    Mr Park circulated Mr Poisson’s notes to Mr Corbett and Mr Martin. Mr Brown also emailed Mr Park, Mr Corbett, Mr Martin and Mr Poisson, noting “You are not looking at putting up a DOCA proposal”. As I understand it, the draft DOCA proposal where Mr Martin became the sole director, funded by US Co, had been abandoned in favour of a new structure suggested by Mr Poisson. Mr Brown provided a fee estimate for preparing a worldwide distribution agreement, with the retainer “for each of you jointly and severally”.

11. [458]

    As to the notation that Mr Martin was to present Mr Poisson’s proposed new structure to Mr Jefferson, Mr Jefferson said that Mr Martin simply offered him 7% of the R&D grant as a settlement offer. “Chris came to the office and said that Jason will just say that his companies did the work and that’s when I was first aware that that would be a contention.”

12. [459]

    Mr Corbett said he was told by Mr Park that US Co was keen to join the new company but Mr Park could not be seen to be dealing with US Co directly and asked Mr Corbett to do so. Mr Park said, “I am a director of Metstech and will be in a conflict if I do it. … I need you to contact him.” On 25 August 2020, Mr Corbett emailed US Co and requested funding of $70,000 as soon as possible. US Co advised, copied to Mr Park, that this was “not a problem [but] I need contract paperwork please thanks can’t just sent money without contract on my investment”.

13. [460]

    On 26 August 2020, as Mr Park later reported to US Co, the directors of Metstech (other than Mr Jefferson) spent the day travelling to Sydney to see Mr Chou’s intellectual property lawyer and preparing for the board meeting. Later that day, a meeting of directors of Metstech IP was held. It appears from the transcript of the meeting that the directors other than Mr Jefferson had already rehearsed what should happen.

14. [461]

    Mr Park presented a balance sheet for Metstech IP and suggested that the company was solvent. Curiously, the balance sheet reported net assets of some $1.26 million, including $2.6 million goodwill. That is, without goodwill, Metstech IP had negative net assets. The basis for the goodwill figure is unknown. Mr Chou understood from Mr Park and Mr Corbett that, if Metstech went into liquidation, then Metstech IP would “use the Metstech and … have the business”, that is, the goodwill was dependent upon Metstech being liquidated. The figure is, I must say, unexpected. Where, until recently, Mr Park had suggested that Metstech IP did not hold any intellectual property rights, and its only assets were the Metstech trademark and domain name, the figure was a contrivance. Mr Park nonetheless pressed for the directors to accept the balance sheet, which was carried by the majority. Likewise, the majority of directors resolved to send a letter of demand to Challenge.

15. [462]

    Turning to the shareholders agreement, Mr Park asked if Mr Martin was aware of a shareholders agreement when shares were issued to him and, when Mr Martin confirmed that he was not aware of this, Mr Park reported that he had advice from two solicitors that this rendered the shareholder agreements for Metstech and Metstech IP invalid. Mr Corbett moved a motion to declare that the shareholders agreements were invalid, which Mr Chou seconded. Mr Jefferson observed that this was a directors’ meeting for Metstech IP and no motions could be passed in respect of Metstech. Further, “We can pass any motion we like, but that may not invalidate the shareholders agreement. I have had no time to research it.”

16. [463]

    I do not understand the defendants to suggest that the shareholders agreements were thereby ‘invalidated’ such that the contractual obligations as to restraint of trade, trade secrets and confidentiality were removed, at least against the founding shareholders. That concession is appropriate. The meeting was a meeting of the directors of Metstech IP. It was not a shareholders meeting. The meeting does not appear to have been properly convened. Mr Jefferson reserved his rights under the shareholders agreement and constitution where no proper notice had been given. It was not a meeting of either the shareholders or directors of Metstech. So far as those present at the meeting sought to invalidate the Metstech shareholders agreement, that company had been in administration for a month. The administrator had assumed control of Metstech’s affairs; any transaction or dealing affecting property of the company was void unless entered into by or with the consent of the administrator or an order of the Court: section 437A, 437D, Corporations Act.

17. [464]

    Nor do the minutes, prepared by Mr Martin, suggest that the directors resolved to invalidate the shareholders agreements. Rather, Mr Corbett (who was not even a director) moved a motion to declare that the shareholders agreement was invalid. Mr Chou seconded the motion. Mr Jefferson raised issues with the motion, including that he had not had sufficient time to consider the matter. The directors – to the extent that they were directors – did not proceed to vote on the motion. The matter was simply left unresolved.

18. [465]

    Following the directors meeting, at 10.35 pm, Mr Park advised US Co, copied to Mr Poisson, of the tasks then underway and the associated costs. Mr Park asked US Co to get a quote to trademark the Metstech logo and name in the United States and South Africa, anticipating that Challenge would try and do the same thing sooner rather than later. Further:

Second creditors meeting

1. [466]

   On 27 August 2020, the administrators circulated a revised Challenge DOCA proposal, noting that Mr Martin had been removed as one of the proponents, replaced by Auxilia Investments.

2. [467]

   On 28 August 2020, the second meeting of creditors was held. Amongst the topics discussed was the ownership of intellectual property. The minutes record, “The Administrator addressed the difficulties in determining the ownership of the intellectual property due to the contradictory information provided by the Director.” Creditors resolved that the company should execute the Challenge DOCA: eight creditors (with proofs of debt admitting for voting purposes at $3.3 million) voted for the resolution and four creditors (with proofs of debt admitting for voting purposes at $86,032) voted against. In particular, Mr Chou, Welldesign, Mr Corbett and Mr Park voted against the resolution. Mr Martin abstained.

3. [468]

   Following the meeting, Mr Lardner emailed the administrator, requesting that the usernames and passwords be obtained from Mr Martin, so that Metstech’s document storage and emails on the Google cloud platform could be preserved until the purchase of Metstech was complete. Mr Lardner advised:

4. [469]

   Mr Lardner’s concerns were prescient. Mr Martin said he was offered $1,000 by the administrator to transfer the G Suite data to him but declined. Rather, Mr Martin deleted most of the data associated with his user account on Google drive the same day, reducing drive storage used from 910 MB to 266 MB.

5. [470]

   As to why he did this, Mr Martin said he was of the view that the G Suite held proprietary information owned by Metstech IP, which had not agreed to the DOCA. Mr Martin considered that Metstech and the administrator were not entitled to this information. Mr Martin took a full backup of his data on the G Suite and proceeded to remove material which he understood to belong to Metstech IP. How Mr Martin thought he was qualified to decide which of the data and documents belonged to Metstech (and thus material which the administrator was entitled to possess) and which belonged to Metstech IP is entirely unclear. It does also indicate that Mr Martin had now decided whose side he was on, being the coalition of Mr Park, Mr Corbett, Mr Chou, advised by Mr Poisson and potentially partnering with US Co.

‘Warehousing’ the trademark and domain name

1. [471]

   On 4 August 2020, Mr Poisson had obtained searches of the domain name for metstech.com.au and the Metstech trademark, which he provided to Mr Park and Mr Corbett. According to the search, the registrant was Metstech IP. Mr Corbett replied, “So it is available for the taking?”

2. [472]

   According to Mr Corbett, Mr Poisson said, “What we need to do is find a known buyer of the trademark. We can sell it to them and then we buy it back when we are ready. I have done this before.” Mr Poisson later said that he had spoken to Mr Smith and “10Telco will purchase the Metstech trademark. You will have to give him the purchase price but his company will buy it. You will need to put an ad in the paper to make the transaction look legitimate.”

3. [473]

   On 28 August 2020, Mr Corbett placed an advertisement in The Australian Financial Review, seeking expressions of interest in purchasing a logo, with name, for a telecommunications unit specialising in underground units. Mr Corbett’s emails were copied to Mr Park, Mr Martin and Mr Poisson. This action implemented Mr Poisson’s advice as well as Mr Park’s concern expressed to US Co to “stop Challenge from using the name”: see [463].

4. [474]

   Mr Park said he arranged to sell the trademark and domain name as his interest was in Metstech IP surviving and remaining solvent, “I did not consider that it needed the trademark and domain name in order for it to survive.” This explanation is wholly unlikely.

5. [475]

   On 31 August 2020, Mr Park received two emails from Google, advising that there had been a request to create an archive of his Google data, and confirming that a copy had been made. Presumably, Metstech’s administrator had taken the steps suggested by Challenge. Mr Park deleted the balance of his data associated with his Gmail account, reducing his Gmail storage from 655 MB to 48 MB. Mr Poisson also sent Mr Park and Mr Corbett draft subscription agreements for the companies in the proposed new corporate structure, together with an investment proposal for US Co.

6. [476]

   On 1 September 2020, Mr Jefferson emailed his fellow directors, advising that the Metstech email account was being claimed by the administrator as an asset of Metstech. Mr Park replied:

7. [477]

   Mr Jefferson forwarded this email to the administrator, expressing his concern that the company’s former directors “continue to make a mockery of the administration process and refuse to hand over documentation that is clearly the asset of the trading entity. The account has been created and paid for by Metstech Pty Ltd and only used by Metstech Pty Ltd’s employees.” Mr Jefferson expressed concern that the data should remain intact with no records destroyed before the DOCA was executed; he offered to pay the arrears in the G Suite account to ensure there was no potential for data loss. It is apparent from Mr Jefferson’s email that he had not himself recently accessed the Google account and was unaware of the data that had been deleted.

Administrator’s warning

1. [478]

   On 2 September 2020, the administrator wrote to the directors of Metstech and Metstech IP in firm terms, “It is my understanding that certain of the directors of Metstech IP are contacting clients of Metstech and purporting that it is ‘business as usual’ and that effectively Metstech IP is ‘standing in the shoes’ of Metstech.” The administrator advised that he was attempting to gain control of Metstech’s email and website administrator keys but certain directors of Metstech IP were questioning the legitimacy of Metstech’s ownership and were not assisting in the process. Mr Hathway pointed out:

2. [479]

   The administrator also advised that he considered that Metstech IP was insolvent. He sought the consent of shareholders to place the company into liquidation, with the name of the company to be changed to Metstech IP’s Australian Company Number.

3. [480]

   On 2 September 2020, Mr Martin forwarded a search of Metstech’s domain name to Mr Park, Mr Chou, Mr Corbett, Mr Poisson and Mr Brown, entitled “It turns out that ‘Metstech IP’ owns the metstech.com.au domain”. Mr Martin said that he undertook the search of the domain name as he was being told by Mr Park, Mr Corbett and Mr Chou not to hand over the server to the administrator as it contained information belonging to Metstech IP as well as Metstech. He thought he should check who owned the domain name and was surprised to learn that it was Metstech IP. On discovering this fact, “that’s where I’ve decided not to … hand it over.” Nor did he tell the administrator or Mr Jefferson that he had deleted data from his account, “No, I just didn’t think to mention it.”

4. [481]

   The problem with Mr Martin’s explanation is that he deleted the bulk of the data the day before obtaining the results of the domain name search. Whilst, before learning that the domain name was owned by Metstech IP, Mr Martin considered that the information on the G Suite account should be sorted between that which belonged to Metstech and that which belonged to Metstech IP, once he learnt that the domain name was owned by Metstech IP, he decided that all the email and data on the G Suite account was owned by Metstech IP. Mr Martin took this approach notwithstanding that he considered “There wasn’t much information that belonged to Metstech IP on the server. There was … the largest volume … of emails in my account [which] I have absolutely no doubt in believing belonged to Metstech.” Mr Martin’s explanation of his actions became increasingly difficult to understand or accept but he does, overall, appear to have been prepared to act in accordance with the dictates of Mr Park and Mr Corbett, which appear to have been directed to destroying Metstech’s data and, thus, Challenge and Mr Jefferson’s efforts to continue to trade the business.

5. [482]

   The advertisement placed by Mr Corbett appeared on 1 September 2020. Mr Smith received a phone call from Mr Poisson, suggesting that he look at the advertisement. On 3 September 2020, Mr Corbett sent Mr Smith a confidentiality agreement with Metstech IP, copied to Mr Park and Mr Poisson. Mr Smith returned the signed document later that day.

6. [483]

   According to Mr Smith, Mr Poisson spoke to him on 4 September 2020 and said that Metstech wanted $10,000 for its name, website and email. Mr Smith objected to paying this amount when Metstech owed 10Telco money. Instead, Mr Smith offered to effectively use the unpaid invoice for $6,000 to buy the assets. On 4 September 2020, Mr Park emailed Mr Smith on behalf of the directors of Metstech IP, thanking him for his expression of interest letter received on 3 September 2020 by post. (The letter did not then exist.) Mr Park provided copies of Metstech’s logo and name “for your consideration in making Metstech IP Pty Ltd an offer to purchase.”

7. [484]

   Mr Poisson then emailed Mr Corbett and Mr Park a tax invoice from 10Telco to Mr Corbett’s company, Pursuit Electronics Pty Ltd, for $6,000, said to be contractor fees for the installation of communications equipment. 10Telco had never installed communications equipment for Pursuit Electronics. Mr Smith said he prepared the invoice because Mr Poisson asked him to generate it, “At the time I did not care and just wanted to get paid for the work I did for Metstech”. That is, the invoice related to unpaid contractor fees owing to 10Telco in respect of the Tritton mine. As Mr Smith described the deal, “I thought that I was going to get the logo that I could use, get into mining and I could almost get it for free with the cash that was owed to me. That was pretty much my thought on the whole thing.”

8. [485]

   Mr Poisson drafted an expression of interest document for Mr Smith in response to the advertisement. At 12.15 pm on 4 September 2020, Mr Smith emailed Mr Park a letter expressing interest in buying Metstech’s logo, name and domain name for $6,000. Presumably this was the expression of interest letter prophesied by Mr Park’s earlier email.

Getting Chou ‘away’ safely

1. [486]

   At 3.25 pm on 4 September 2020, Mr Corbett emailed his fellow directors, calling an urgent emergency board meeting at 4.00 pm, with an agenda to follow. At 3.48 pm, Mr Corbett emailed again, moving the meeting back to 4.30 pm and attaching an agenda and the minutes of the previous meeting. The agenda is not in evidence. As such, the meeting was not convened in accordance with the requirements of Metstech IP’s shareholders agreement, although I note that the directors (other than Mr Jefferson) had sought to declare the agreement invalid at the meeting on 26 August 2020.

2. [487]

   According to the board minutes, the meeting was held at 4.35 pm for 20 minutes. Mr Martin was not in attendance “having to attend to other urgent matters”. Mr Jefferson did not attend, being then unaware that the meeting had been called. Mr Chou denied that the meeting went ahead in the absence of Mr Jefferson because he knew that Mr Jefferson would oppose many of the items to be discussed at the meeting. I do not accept his evidence.

3. [488]

   Mr Corbett attended to take the minutes but he was not a director. The minutes state that Mr Corbett’s wife was present. Mr Park and Mr Chou said that she was, while Mr Corbett said she was not. Mr Corbett is correct. Mr Corbett’s first draft of the minutes recorded himself attending as a director as proxy for his wife. However, Mr Brown reviewed the draft minutes and advised that Mr Corbett could not attend as a proxy director in the absence of a provision in the company’s constitution permitting this course, “For this reason I would not mention it and say there were only two directors at the meeting”. The next draft of the minutes records Mr Corbett’s wife in attendance as a director. Accordingly, Mr Park and Mr Chou’s evidence that she was in attendance was false. As such, only two directors of the company were present, being Mr Park and Mr Chou.

4. [489]

   The minutes are replete with unkind remarks about Mr Jefferson and reflect poorly on the attendees. In any event, the minutes record that Mr Park discussed “the imminent potential attack by the parties to the DOCA”. Metstech IP was said to be solvent and to own Metstech’s domain name, logo and trademark. Mr Park recommended that these assets be sold to generate income. The motion was carried.

5. [490]

   According to the minutes, Mr Chou also sought to distance himself from Metstech IP, resigning as a director and selling his shares to Mr Martin and Mr Corbett’s companies for a nominal sum. Although, according to the balance sheet of Metstech IP circulated at the meeting, Mr Chou’s shares were worth $300,000, Mr Chou said, “No that is not worth, that is no value for that”. He denied that the sale of his shares in Metstech IP was a sham.

6. [491]

   The directors also resolved to execute a Deed of Release with Welldesign. The Deed of Release was prepared by Mr Chou’s lawyer, Sean Li. The Deed of Release was between Metstech IP, Mr Park, Mr Corbett’s wife, Mr Chou and Welldesign. The deed contained extensive releases of Mr Chou and Welldesign from any obligations under the shareholders agreement and any liability in respect of the Released Subjects: clause 3. This term was defined broadly to include issues arising from the shareholders agreement, Mr Chou or Welldesign’s previous dealings with Metstech IP, its directors “and/or their client/prospective client and/or any other entities related to” Metstech IP, the directors or clients or the operation or the finance of Metstech IP”: clause 1.6. That is, the deed sought to destroy the confidentiality obligations imposed on Mr Chou and Welldesign under both shareholders agreements.

7. [492]

   Mr Chou denied discussing his resignation or the transfer of his shares with his fellow directors before the meeting, or discussing the deed of release, “I think my wife have the … legal advice to do these things. … My wife handle those things.” Mr Chou denied seeking a release in order to protect him from any claims being made in respect of intellectual property arising from the development of the leaky feeder system. I do not accept his evidence.

8. [493]

   Mr Park forwarded the Deed of Release to Mr Brown, copied to Mr Corbett, enquiring “Does this mean the DOCA is dead?”. Presumably, Mr Park considered that execution of the deed had the consequence that the conditions of Challenge’s DOCA could no longer be satisfied. Mr Park agreed that he sought to sell the intellectual property “basically to stop the DOCA”. Mr Martin agreed that these steps were part of “protecting Jason and the product.” More particularly, these steps were taken to divert intellectual property and business opportunities away from Metstech and Metstech IP. As much is made plain by Mr Park’s description of events to US Co: see [500].

9. [494]

   At 4.54 pm, Mr Jefferson responded to Mr Corbett’s emails convening a meeting, asking whether the meeting had been rescheduled as Mr Martin was not available “and I did [not] receive the email until just now. No one checked in with me by phone and made sure I received the notice given it was an urgent meeting. This is not a way to run the business as a team.” Mr Jefferson does not appear to have had the courtesy of a reply.

10. [495]

    I did not understand it to be suggested by Mr Chou that, by the resolutions passed at the meeting of Metstech IP, he and Welldesign were released from the restraints and confidentiality obligations imposed under by shareholders agreements. Again, this concession was properly made. The meeting was not duly convened in accordance with the notice requirements of the shareholders agreement, being three business days: Clause 4.3. Whether the agenda complied with Clause 4.4 is unknown. There was no quorum, being two directors representing shareholders holding not less than 70% of the shares: Clause 4.1. There were two directors present (Mr Park and Mr Chou), holding 50% of the shares. It is unclear whether the Deed of Release was executed; no executed copy is in evidence. Further, as explained by Mr Park in his email of 4 August 2020, the purpose of the Deed of Release was to get “clear” of the shareholders agreements and the restrictions thereby imposed, so that Mr Chou and others could continue to develop and sell Metstech’s products in a NewCo. This was obviously not in the interests of Metstech IP but in the interests of Mr Park, Mr Chou and their colleagues. Voting in favour of such a resolution was in breach of the “no conflict” rule and their obligation to discharge their duties as directors in good faith in the best interests of the company.

11. [496]

    After the meeting, Mr Park emailed Mr Mankelow, copied to his fellow directors and Mr Brown and entitled “Metstech IP new accountant final request”. Mr Park advised that the board meeting had resolved to appoint new accountants for Metstech IP and requested that all financial information be sent, “Hopefully we will get cooperation from you this time without taking further steps to get our financial documents from you and your firm.” To this, Mr Mankelow advised that he required a copy of a resolution of the board authorising this matter, together with the supporting portion of the constitution or shareholders agreement to confirm that the resolution carried authority, “I have no objection to standing down as agent, however given the conflicting responses amongst Directors makes it difficult to get clear instructions.” Mr Mankelow also sought payment of his firm’s outstanding account.

12. [497]

    Mr Smith signed an offer to purchase Metstech’s logo, name and domain name for $6,000. Metstech IP and 10Telco executed a Business Asset Sale Agreement by which Metstech IP sold its logo, name and domain name for $6,000, including GST. Mr Park executed the document on behalf of Metstech IP. At 6.39 pm, Mr Corbett forwarded Mr Smith’s expression of interest letter to Mr Smyth, “Just for starters”. Presumably Mr Corbett was flaunting his ‘success’ in selling Metstech’s trademark and domain name to a third party.

13. [498]

    Also on 4 September 2020, Mr Brown sent a rude letter to Mr Hathway, stating that Metstech IP owned the Metstech trademark and domain name. The licence that Metstech had to use the Metstech trademark and domain name was said to be a licence at will and was revoked. The suggestion that Metstech IP was engaging in ‘phoenix’ behaviour was rejected; Metstech IP was said to have been “carrying on business as it has done for the past six years”. Metstech IP proposed to take all necessary steps to protect the infringement of its intellectual property by Metstech. The fact that this letter was sent moments after Metstech IP had sold the Metstech trademark and domain name to 10Telco is consistent with an understanding on the part of Mr Brown that the purchaser was ‘warehousing’ the trademark and domain name, which would be available to those instructing Mr Brown on request.

Phoenixing continued

1. [499]

   On Saturday morning, 5 September 2020, Mr Poisson circulated discussion points to Mr Park and Mr Corbett for a call with US Co that day. The discussion points reveal that they were keen to obtain funding from US Co “to achieve our roll-out strategy moving forward and staying ahead of the competition including potential competitors such as Challenge etc.” For discussion were “Next steps in the process of achieving traction in maximising the global METS-LTE suite of branded products”. A quote to obtain a patent in the US was to be approved as soon as possible. Amongst these steps, on Monday, 7 September 2020, 10Telco was to transfer Metstech’s domain name from Metstech IP to Metstech Holdings, being a company which Mr Poisson needed to register. Mr Brown would then be placed in funds to develop a global exclusive distribution agreement.

2. [500]

   It appears that the telephone call with US Co did not take place as, on 7 September 2020, Mr Park emailed US Co, copied to Mr Corbett, Mr Chou, Mr Martin and Mr Poisson, setting out the substance of Mr Poisson’s discussion points. Importantly, Mr Park explained, “this is where we are in regard to protecting Jason and the product …”. Mr Park outlined recent events, in particular, Mr Chou’s resignation as a director of Metstech IP, the Metstech IP board meeting which accepted Mr Chou’s resignation, redistributed Welldesign’s shares and executed the Deed of Release “releasing and indemnifying Jason and Welldesign Electronics from any issues present and in the future that may occur”. Mr Park pressed US Co to provide funding in order to “move forward with certainty that any IP developed and patented/his company is not challenged in the future.”

3. [501]

   On Sunday 6 September 2020, Mr Corbett paid 10Telco’s invoice using his personal credit card. Mr Corbett sought guidance from Mr Poisson as to how to invoice the trademark to Mr Smith. At 6.25 pm on 7 September 2020, Mr Poisson emailed Mr Smith, copied to Mr Park and Mr Corbett, attaching an invoice from Metstech IP to 10Telco for $6,000 for the Metstech trademark and domain name. Mr Poisson requested that Mr Smith send through the payment receipt later that evening once the funds had been transferred. Mr Smith transferred the funds within minutes, providing a bank transfer receipt. That is, the funds used to pay Metstech IP’s invoice were the funds paid by Mr Corbett to 10Telco.

4. [502]

   Mr Smith agreed that, once 10Telco had received the funds from Mr Corbett, he then paid the funds back to buy the logo and domain names. Before doing so, Mr Smith did not take the time to look at the Metstech website to see what he was buying. Mr Smith thought Metstech’s domain name included the emails attached to the domain name and he was interested to thereby obtain contact details for Metstech’s clients. He asked Mr Poisson to see if they could get a contact list, so that he could hopefully get some contact numbers. “We only really wanted the … contact list, so I wasn’t overly concerned about the rest. … I really just wanted to get into the mining game. … If you have a name that’s already in there and you can … wiggle in, you just need to get the right person to open the door for you and then you can have a chat to them.”

5. [503]

   On 7 September 2020, Mr Brown sent a letter of demand to Challenge on behalf of Metstech IP. The solicitor claimed that the BDAs and components in Challenge’s possessions were the property of Metstech IP. Metstech IP demanded the return of the goods, failing which legal proceedings would be commenced.

6. [504]

   On 9 September 2020, Mr Poisson registered a security interest against Challenge in favour of Metstech IP, over BDAs and components said to be “on bailment”. Mr Poisson forwarded the PPSR verification statement to Mr Brown, copied to Mr Park and Mr Corbett.

Completion of data deletion

1. [505]

   On 6 September 2020, Mr Jefferson attempted to log in to the Metstech G Suite but could not do so. On 7 September 2020, Mr Jefferson contacted Google Cloud Support, as his Metstech email address was not working. Google Cloud Support advised that his username did not appear in Google’s systems and, if all administrators of Metstech’s domain name were unreachable, proof of ownership of the domain name was needed “to help you gain administrative privileges”. Mr Jefferson maintained his efforts with Google Cloud Support to be made administrator of Metstech’s account, advising that “a disgruntled employee has let the account expire and will not hand back the administration account. I need to add new credit card details and get the account up to date before data is lost.” Mr Jefferson’s explanation was not strictly correct, but was broadly true.

2. [506]

   On 8 September 2020, Mr Martin registered the domain name metstech-ip.com.au, and this became the new domain name associated with the G Suite service.

3. [507]

   On 10 September 2020, Google lifted the account suspension for seven days until the issue could be resolved. On being informed by Google, Mr Jefferson requested, instead, that the account remained suspended “until I have access and can lock out some of them. There has been major changes to business and I don’t want an account active until I have had time to assess the situation for each individual account. My main concern is data preservation at this stage.” Mr Jefferson also informed Google that Mr Martin was responsible for letting the account expire, “As I requested super user access to update the payment method and he has refused. Disgruntled Past Employee.” Mr Jefferson advised that only he remained employed by Metstech.

4. [508]

   On the evening of 10 September 2020, Google Cloud Support advised Mr Jefferson that administrator privileges had been removed from the account and, in order to have the account enabled, proof of ownership for the domain name was required. Mr Jefferson was asked to provide various information. Google Cloud Support sought the same information from “the person doing the actions to the G Suite account as well”. Perhaps this prompted what followed.

5. [509]

   On 10 September 2020, Mr Martin, Mr Chou and Mr Corbett deleted their remaining data. Mr Martin said that he was informed by Mr Park that the G Suite account had been enabled and proceeded to delete all data in his account. On 10 September 2020, the remaining drive storage data of Mr Martin on the Metstech Google Drive was deleted, from 266 MB to zero; his Gmail storage was reduced from 141 MB to 203 MB.

6. [510]

   Mr Park said he deleted data because he believed it was historical and redundant information not then useful to either Metstech or Metstech IP. He believed that some of the information was confidential to third parties whilst other emails consisted of personal emails or general market bulletins. He considered that some of the files were confidential to Challenge, which held the original files in any event. I do not accept his explanation.

7. [511]

   Mr Chou’s Gmail storage was reduced from 1423 MB to 18 MB, although he denied deleting any files. Somebody certainly did, and it was most likely Mr Chou. Mr Martin said that the G Suite administrator could not delete documents from a user's account. Accordingly, only the user could do so. Mr Corbett’s Gmail storage was also reduced from 6,911 MB to 63 MB.

8. [512]

   Mr Park accepted that the G Suite data included data and communications pertaining to Metstech’s trading business and that such communications belonged to Metstech. Metstech was the only trading company who dealt with customers, suppliers, employees and technology. Metstech IP held the trade mark and the domain name. The vast majority (if not all) of the documents most likely belonged to Metstech. Clearly the intention was to deprive Mr Jefferson and Challenge of access to the data and to thereby hamper Metstech’s ability to use its property and data for its ongoing activities as the company continued to trade but without Mr Park, Mr Corbett and Mr Chou.

9. [513]

   On 11 September 2020, Google Cloud Support informed Mr Jefferson that they had provided the verification steps “to the person doing the actions to the G Suite account as well” and would wait for seven days until receiving a response, when Google Cloud Support would conclude their process. Mr Jefferson responded that this timeframe “could create an issue as I suspect the Ex-employees have deleted data … I am extremely worried about data loss of deleted data.” Mr Jefferson was right to be concerned.

10. [514]

    On 14 September 2020, Mr Park informed IP Australia of the sale of Metstech’s logo, trademark and domain name, and informed Mr Poisson, Mr Smith and Mr Corbet that he had done so.

11. [515]

    On 14 September 2020, Mr Brown provided Mr Mankelow with a copy of the minutes of Metstech IP’s board meeting on 4 September 2020, demanding deliver of its books and records to the new accountant. The minutes provided are not in evidence, nor is it apparent whether Mr Brown informed the accountant that only two directors attended the meeting. Mr Mankelow advised that the proposed new accountant, Haddad Baker, had withdrawn their request for Metstech IP’s accounting records and, given the clear conflict between the directors of Metstech IP on this issue, Mr Mankelow said he was unable to forward the information requested.

Deed of Company Arrangement

1. [516]

   On 15 September 2020, the administrator of Metstech executed the DOCA with Challenge, Mr Jefferson, Auxilia Holding and Auxilia Investments. On 16 September 2020, Challenge paid its deed fund contribution of $120,000 to the administrator; Auxilia Holding paid a deed fund contribution of $45,000. Mr Park and Mr Martin signed share transfer forms, transferring their shares in Metstech to Challenge. (Welldesign later executed a share transfer in January 2022. Mr Corbett’s company executed a share transfer in May 2022.)

2. [517]

   On 17 September 2020, the administrators informed creditors that the DOCA had been executed and control of Metstech had been handed back to Mr Jefferson in order to allow the company to continue to trade. Creditors were asked to note that Mr Park, Mr Chou and Mr Corbett’s wife were no longer directors of the company. Mr Lardner became a director of Metstech.

3. [518]

   On the same day that Mr Park and Mr Martin transferred their shares in Metstech, Mr Poisson circulated a discussion paper to Mr Park and Mr Corbett in advance of a conference call with Telco at 10.00 am. According to the document, it was proposed to update Telco on recent events, including that Metstech’s name, logo and domain name “have been sold to a non-related entity [which] is selling the assets to Metstech Holdings Ltd once the public company is registered.” The directors of Metstech were in the process of removing themselves as shareholders of Metstech and, “To avoid further disruption to driving the Metstech LTE initiative forward, we believe it is prudent if we do not have current Metstech IP directors on the [Metstech Holdings] board until Metstech IP is eventually wound up voluntarily.” Moving forward, the discussion paper proposed that Metstech Trading would enter into various agreements with Telco to sell BDAs and provide maintenance and product support. Telco would be invited to invest in Metstech Holdings.

4. [519]

   On 17 September 2020, Mr Chou sought the assistance of Mr Corbett and Mr Martin to provide documents confirming that he had sold his shares in Metstech IP. Mr Chou’s lawyer, Mr Li, had told him that, even though Mr Mankelow had refused to remove Welldesign as a shareholder of Metstech IP “but if we had solid bank transaction record then we finish all shares sale legal procedure. … So if you can transaction the amount money in the invoice from Sean to Welldesign will very appreciate. Will return the money to you.” The invoice referred to by Mr Chou is not in evidence but it appears that he sought payment of the invoice, which he promised to reimburse, in order to provide evidence that Welldesign was no longer a shareholder of the company. Mr Chou said he agreed to reimburse Mr Corbett and Mr Martin for the funds “because I think they do me a favour. For me, that share is of [no?] value and then if they can do me a favour ok purchase those shares, I will really appreciate it.”

5. [520]

   On 17 September 2020, Mr Poisson provided Mr Corbett with a draft cashflow projection for Metstech Holdings for the next nine months, anticipating an investment from Telco of $3 million in October 2020, with revenue generated from sales of “MET-LTE (BDA etc)” from $60,000 in October 2020 increasing to $1.45 million in June 2021. Anticipated expenses included, in November 2020, $100,000 for “IP Protection” and $1.3 million for testing equipment. Monthly expenses included “Cost of BDAs FOB”, which suggests that the BDAs were to be imported. Customers were anticipated to include US Co, SA Distributor, and MineCo2. Sales revenue of $6.06 million was forecast by the proposed trading company, with Metstech Holdings to generate a net operating surplus by June 2021 of some $4.6 million.

6. [521]

   On 17 September 2020, the administrators’ solicitors responded to Mr Brown’s letter of 4 September 2020 (see [497]), requesting advice as to who Mr Brown acted for and the basis of his instructions, noting the administrator’s concern that Metstech IP had no right to operate a business which had been operated by Metstech. Metstech IP’s attempt to operate that business could constitute illegal phoenix activity. To Mr Brown’s suggestion that Metstech IP had been carrying on business for six years, Mr Brown was asked to identify what that business was said to be.

7. [522]

   On 18 September 2020, Mr Park informed Mr Poisson, Mr Corbett and Mr Martin that the transfer of Metstech’s trademark had now been registered, “Now for the domain”. Of this, Mr Smith said “I do not know who organised this, but it was not me.” Further, contrary to the terms of his agreement, the domain name and emails remained in the name of Metstech IP. Although Mr Smith asked Mr Park several times to transfer ownership of the domain name and emails to 10Telco, his requests were ignored.

8. [523]

   On 18 September 2020, Mr Chou provided Mr Corbett with a quote for equipment totalling US$600,000, which Mr Corbett forwarded to Mr Poisson, “going on Jason’s previous form with quotes you should probably double that!”. Mr Poisson sought further details, to which Mr Corbett replied, copied to Mr Park, “but this is the issue we have always had with Jason I’ll see what I can do.”

9. [524]

   On 18 September 2020, Mr Brown pressed Mr Mankelow to hand over Metstech IP’s accounts. Mr Brown also replied to the administrators’ solicitor, suggesting that the DOCA was inoperative as the Overriding Conditions had not been met or would not be met; further, the Metstech IP shareholders agreement was said to be invalid.

10. [525]

    On 18 September 2020, Mr Corbett exchanged emails with Mr Poisson, copied to Mr Park and Mr Martin, regarding concerns expressed by Ms Chen and Mr Li as to “how to protect Jason’s designs” from Telco. Mr Corbett reported, “I told him to tie up watertight legally and discuss that if [Telco] had wanted to copy they could and would have already done so. … we obviously need to get those 2 onside somehow.”

11. [526]

    In reply, Mr Poisson suggested an escrow agreement between Mr Chou and Metstech Holdings such that the blueprints of Mr Chou’s “know-how and/or designs etc are placed in an escrow account with Westpac … There is no risk of Jason’s know-how getting out into the public domain or to any other entity.” Mr Poisson said the key to everything was “the retention of Jason, because everybody was trying to do a little deal with him and get him into different things behind the other directors' back, and he didn't want that, and plus he was owed money. So, it was to make sure that, all parties were party to this, it was wrapped up so that you couldn't have anything challenged and so it wouldn't result in this.”

12. [527]

    Nowhere in the candid emails between the main actors after Metstech went into administration, endeavouring to ensure that Mr Chou’s designs could be exploited outside of Metstech, was there any mention of “Yokao” or an ODM entitled to intellectual property rights.

13. [528]

    Mr Corbett said Mr Chou told him that his wife did not trust Mr Poisson and did not want to deal with him in setting up the new company. On 18 September 2020, Mr Corbett separately emailed Mr Chou, encouraging him to trust Mr Poisson and proceed to establish a trust to use to invest in the new companies. Mr Corbett offered to get Mr Poisson to sign “whatever Sean would like him to sign … we currently have … [Telco] wanting to invest and [SA Distributor] and [US Co] continuing to deal with us. Please also send the verbal quote for the LAB. Also please look at going forward to get that Trust completed as I am doing mine to protect going forward.”

14. [529]

    On 21 September 2020, Mr Jefferson finally became the administrator for Metstech’s G Suite account. Mr Jefferson reported to Google Cloud Support, “As suspected I have suffered significant data loss greater than 25 days.” Mr Jefferson said, “When I gained access, I found that everything had been deleted and at that point, I removed access because obviously, something had happened that shouldn't have happened. … Apart from my account, every other account was empty.” Mr Jefferson was able to restore all of the G Suite data that had been deleted in the 25 days prior to 21 September 2020, that is, since 27 August 2020, but was unable to retrieve any files that had been deleted before then. Google Cloud Support advised it was not possible to retrieve the data “because it doesn’t exist anymore”. Mr Jefferson prepared “User reports” for Metstech’s G Suite account for each day from 9 August 2020 to 21 September 2020, from which the progressive loss of data can be seen.

15. [530]

    Mr Poisson began to prepare a draft investment proposal for Telco on 23 September 2020. On 28 September 2020, Mr Poisson emailed Mr Park and Mr Corbett, “Can you guys ask Jason for a realistic figure per annum for the manufacture of BDAs if his factory in Taiwan runs at full production …”.

16. [531]

    A further draft of Mr Poisson’s investment proposal for Telco, dated 29 September 2020, proposed a management committee structure which “protects the individual partners from being challenged from outside companies regarding their ‘know-how’ as this committee is off the radar and in-house.” The members of the management committee included Mr Park, Mr Chou, Mr Corbett and Mr Martin. Metstech Holdings was said to have entered into an exclusive global distribution licence agreement “with a company who owns the ‘know-how’ and has an interest in a Taiwan Manufacturing company.” As to barriers to entry, it appears to have been anticipated that Metstech Holdings would acquire the registered trademark for Metstech and the Metstech name and logo. Mr Martin said he was not reading the proposals as they were sent through “because I wasn’t too concerned” as the proposals were only going to be put to Telco, to get an investment from Telco, if and when the DOCA failed. I do not accept his evidence.

17. [532]

    On 6 October 2020, Mr Poisson circulated the draft investment proposal for Telco to Mr Park and Mr Corbett. Mr Corbett spoke with Mr Park, who said that they would use the investment proposals to discuss potential investment by Telco and other potential investors in NewCo. Mr Park later told Mr Corbett that Mr Park had provided the investment proposal to Telco and Mr Poisson and Mr Park had had a conference call with them.

18. [533]

    On 2 October 2020, Mr Martin informed Mr Poisson, Mr Park and Mr Corbett that he had applied for Metstech Trading to register “METS-LTE” as a trademark in Australia, the US and the European Union. Mr Martin said that the METS-LTE logo was the Metstech logo “inverted the other way round” and agreed that the logos were similar. Mr Park agreed that the METS-LTE logo was “basically similar” to the logo which his daughter had designed for Metstech. Mr Martin said he was asked to register the trademark for a Telco proposal that would be pursued if the DOCA failed. Mr Martin denied that they would be seeking to sell the same product, rather, “The only sensible approach was to go back and start again and redesign it. … plus, we didn’t have the IP and we didn’t have the designs. So, we were going to start again from scratch.” This seems unlikely evidence, given the effort expended to that point in taking any intellectual property with them.

These proceedings

1. [534]

   On 2 October 2020, Mr Jefferson undertook a business name search for “Metstech”, which revealed the existence of Metstech Holdings and Metstech Trading. On 9 October 2020, these proceedings were commenced. Duty Judge, Rein J, made an ex parte asset preservation order in respect of each of the defendants, together with an order that each of the defendants provide an affidavit disclosing the location and details of their assets worldwide.

2. [535]

   On 12 October 2020, Mr Poisson contacted the plaintiffs’ solicitors and said he would gladly transfer Metstech Trading to Mr Jefferson together with the reserved name “Metstech Holdings Ltd”. I understood from Mr Poisson during the trial that he remained willing to do so.

3. [536]

   On 28 October 2020, the defendants began filing their affidavits of disclosure. Mr Chou denied any knowledge in respect of the location of files required for the manufacture of components, revisions of computer aided design, installation manuals, sales material and presentations and trade secrets or confidential information. Stock inventories were said to be in Melbourne, presumably being a reference to Challenge. Of “technical descriptions” or “product specifications”, Mr Chou said he had one document created prior to the incorporation of Metstech. As to “testing inputs and reports”, Mr Chou said he had produced the documents via a Google link. Ms Chen filed an affidavit on behalf of Welldesign, which gave similar answers. Given what is now known of Mr Chou and Welldesign’s key role in developing Metstech’s products, neither affidavit could be true.

4. [537]

   On 3 December 2020, Mr Martin reported to Mr Corbett, Mr Chou and Mr Park on calls with Telco that day, given problems that they were experiencing with the BDAs. Mr Martin advised, “Because of the court case we can’t create a new one to provide them with. So I have given them the contact details for [the administrator] and Challenge.” On 4 December 2020, Mr Martin reported to Mr Chou and Mr Corbett on assistance which he was providing to SA Distributor in respect of a BDA that had failed.

5. [538]

   On 9 December 2020, emails were exchanged between Mr Corbett, Mr Martin and Mr Park, copied to Mr Chou, as to how they might continue to advance their plans given these proceedings. Mr Corbett advised:

6. [539]

   Mr Martin was not in favour of this plan in the short term, “It’s not worth the risk … remember Metstech will not be able to develop a product within the 2021 year.” Mr Park suggested that they wait two weeks to see whether the plaintiffs had sufficient funding to progress these proceedings, as the defendants had then requested security for costs.

7. [540]

   On 18 December 2020, Mr Corbett communicated with SA Distributor in respect of these proceedings, noting “Jason has agreed to make Mathsbox but won’t be available until mid-January … If the plaintiffs don’t agree to what we have offered then we will just continue business as usual (through a BLIND Trust) and fight them all the way to the end.” Mr Corbett suggested that SA Distributor communicate with him using WhatsApp, presumably so that the communications were secret. Mr Corbett pressed Mr Martin, Mr Chou and Mr Park to arrange a new Mathsbox for SA Distributor as soon as possible. Mr Martin advised that the only Mathsbox he knew of was in the hands of Challenge or Telco, “Can we get a [Telco] one back?”.

8. [541]

   Whilst Metstech continued to work with Telco on the technical problems being experienced with the BDAs, in February 2021, Mr Corbett arranged a meeting with Telco to discuss an alternate vendor for BDAs. Whilst Mr Corbett dropped out of the meeting, he advised Telco, in an email copied to Mr Martin, Mr Chou and Mr Park, that “John, Chris and Jason should be good.” Mr Martin denied participating in the meeting, “no, we had no further discussions with [Telco]”. However, it rather appears that he did. Mr Chou denied that this meeting was about developing the Metstech BDA and said he understood that Telco was going to tell them about Telco’s new product. This is unlikely; following the meeting on 19 February 2021, Telco provided Mr Corbett, Mr Martin, Mr Chou and Mr Park with a list of questions on which information was sought, including “an indication of the timeline to … successfully prototype and prove a BDA design”. The tasks requiring commercial detail were allotted to Mr Park and Mr Corbett whilst technical issues were allotted to Mr Martin and Mr Chou.

9. [542]

   Mr Martin said that he did not action the technical issues allotted to him “because we weren’t going to do anything else until the Court case was finished … which we believed would happen in February, rather naively … so we gave them a timeline … expecting the court case to be finished in two months and then giving us six months to redesign the – a new amplifier … but, again, it was all dependent upon the court case being finished and the DOCA being dissolved”. Mr Martin agreed that, once the court case was finished, he intended to develop an new BDA and sell it to Telco, albeit he said that the product would be “something completely new.” Mr Martin said it was made clear to Telco that they could not consider supplying anything until the DOCA failed and the court proceedings had been sorted out.

10. [543]

    In parallel, Mr Corbett continued to communicate with SA Distributor with a view to forming an Original Technology Manufacturer (OTM) Partnership Agreement with Pacific METS Ltd.

11. [544]

    On 1 March 2021, the plaintiffs’ solicitors served a statement of claim. In March and April 2021, Mr Corbett said that he spoke to Mr Park three times, when Mr Park told him to delete all of his personal emails related to these proceedings prior to 9 October 2021. Mr Park said, “I have deleted all of my private emails prior to 9 October 2021 because after 28 days the emails cannot be recovered.”

12. [545]

    On 15 March 2021, the investment proposal prepared by Mr Poisson for Telco appears to have been substantially redrafted into an investment proposal in Mr Martin’s company, Martin CC. It appears that this was now thought to be the corporate vehicle to pursue the defendants’ new endeavours. Mr Park, Mr Chou, Mr Corbett and Mr Martin were each assigned roles in this company, being generally the same roles they had performed in Metstech. Mr Corbett said that he worked on this document with Mr Park, Mr Chou and Mr Martin following a discussion about setting up NewCo in an overseas entity.

13. [546]

    Mr Chou denied having any involvement in this proposal, “They put my name in there, but I did not involve and I did not edit this … file”. Mr Chou denied being involved in continuing to develop the intellectual property that had been developed for the Metstech leaky feeder system or that he intended to continue to use this into the future. This evidence was unlikely given the efforts taken by Mr Chou, Ms Chen and their solicitor to ensure that Mr Chou was able to continue to exploit his designs formulated whilst an employee of Metstech. I accept that he was not necessarily inclined to continue to exploit these designs with Mr Park, Mr Corbett and Mr Martin, but I have no doubt he intends to do so himself.

14. [547]

    On 15 March 2021, Telco followed up their request for further information from Mr Corbett, who advised, copied to Mr Park, Mr Martin and Mr Chou, that they were “concentrating on the new design BDA and getting the necessary investment … It looks like no new product before August 2021.” Mr Martin explained that this was a Wi-Fi based product which it was proposed to sell to a whole range of companies, including SA Distributor and US Co. Mr Martin insisted that this product would not compete with Metstech’s products but rather compliment these products, “We were very, very careful to … move forward with something that would not conflict with [Metstech]. … the wi-fi product allows you to attach a … Metstech BDA to it and use both simultaneously”. Mr Martin did not agree that, unless restrained by the Court, he would compete with Metstech using its former distributors. Where Mr Martin felt at liberty to deal with Metstech’s customers throughout Metstech’s administration, I am not assured by his evidence.

15. [548]

    In about April 2021, the plaintiffs settled these proceedings against Mr Corbett, his wife and their company.

WHO OWNS THE COPYRIGHT?

1. [549]

   Who designed Metstech’s products and who owns the associated intellectual property? In what follows, I have used the word “Metstech” generally and will consider whether any intellectual property is owned by Metstech or Metstech IP at [604]. I will also consider copyright in respect of the software separately at [607].

Metstech products and documentation

1. [550]

   The plaintiffs seek a declaration that copyright subsists in the “Metstech PCB Assemblies” and any revisions thereof, and that such copyright is held by Metstech or, alternatively Metstech IP. The plaintiffs seek delivery up of Metstech PCB Assemblies in the defendants’ possession, power, custody or control. As described in the Amended Commercial List Statement, “Metstech PCB Assemblies” is a defined term embracing:

2. [551]

   The plaintiffs contended that each Metstech PCB Assembly, including each revision, is an original “artistic work” as defined in section 10 of the Copyright Act. Further, copyright subsists in each work by reason of section 32(1) of the Copyright Act. As Mr Chou was an employee of Metstech, the copyright is owned by Metstech: section 35(6) of the Copyright Act. The plaintiffs contend that these designs have not been “published” within the meaning of section 29(1)(a) of the Copyright Act. Nor has Metstech assigned its copyright to any other entity.

3. [552]

   The plaintiffs also contend that Mr Chou, as an employee of Metstech, designed the following original “literary works” or “artistic works” in which copyright subsists and is owned by Metstech:

4. [553]

   Mr Chou and Welldesign Electronic did not “seek to be heard” on this subject, save to say that Mr Chou did not create or design these products nor prepare the documentation. Whilst consenting to a delivery-up order, Mr Chou and Welldesign apparently did so on the basis that there was nothing to deliver up. Likewise, Mr Park and Mr Martin did not address the plaintiffs’ submissions save to contest that Mr Chou had, in fact, designed Metstech’s products. Nor did Mr Poisson or his company make any submissions concerning the law of copyright and its application to the case at hand.

Principles

1. [554]

   As to this Court’s power to determine copyright issues, jurisdiction to grant remedies under Part V of the Copyright Act is vested in the Federal Court of Australia and concurrently vested in this Court under the cross-vesting regime established by section 39(2) of the Judiciary Act 1903 (Cth): sections 131A(1) and 131C-131D, Copyright Act. As Emmett AJA observed in F45 Training Pty Ltd v Body Fit Training Company Pty Ltd [2020] NSWSC 1879, “the Commonwealth Parliament has conferred on the Supreme Courts of the States and Territories jurisdiction to deal with intellectual property matters”: at [18].

2. [555]

   Part III of the Copyright Act provides for the subsistence of copyright in “work”, including a literary or artistic work, which is “original”. As Burley J explained in University of Sydney v Objectivision Pty Ltd [2019] FCA 1625; (2019) 148 IPR 1, “Original works emanate from authors. The question concerning originality is whether the work originated from the author in the sense that it was not copied by the author”: at [471]. That is, “originality means that the creation … of the work required some independent intellectual effort, but neither literary merit nor novelty or inventiveness are required in patent law”: IceTV Pty Ltd v Nine Network Australia Pty Ltd (2009) 239 CLR 458; [2009] HCA 14 at [33] (per French CJ, Crennan and Kiefel JJ). The question is not the novelty or the worth of the thought which a person injects into their work but whether the expression is original: University of Sydney at [482].

3. [556]

   Section 10 of the Copyright Act defines “artistic work” to include “a … drawing … whether the work is of artistic quality or not”, where “drawing” is defined to include a diagram, map, chart or plan”. It does not include a circuit layout within the meaning of the Circuit Layouts Act 1989 (Cth).

4. [557]

   Section 10 of the Copyright Act defines “literary work” as:

5. [558]

   Text and numerals on a PCB, engineering drawings and installation instructions may constitute an original artistic work and, to the extent that figures are deployed, a literary work in which copyright subsists: Lumen Australia Pty Ltd v Frontline Australasia Pty Ltd [2018] FCA 1807; (2018) 137 IPR 189 at [206]-[209] (per Moshinsky J); Anacon Corp Ltd v Environmental Research Technology Ltd [1994] FSR 659 (per Jacobs J) (circuit diagram).

6. [559]

   The general rule (the rule of “first ownership”) is that copyright vests in the person who created the work in question. Section 35(2) of the Copyright Act provides:

7. [560]

   As the High Court explained in IceTV, the “author” of a literary work and the concept of “authorship” are central to the statutory protection given by the Copyright Act, where key provisions of Part III fix on “the author”: at [22] (per French CJ, Crennan and Kiefel JJ), [97] (per Gummow, Hayne and Heydon JJ). The “author” is the person who brings the copyright work into existence in its material form: IceTV at [98] (per Gummow, Hayne and Heydon JJ). Where a literary work is brought into existence by the efforts of more than one individual, it is a question of fact and degree which one or more of them have expended sufficient effort of a literary nature to be considered an author of the work within the meaning of the Act: IceTV at [99] (per Gummow, Hayne and Heydon JJ).

8. [561]

   Section 35 provides exceptions to the general rule of first authorship. Relevantly, section 35(6) provides:

9. [562]

   Accordingly, a corporation may be the owner of copyright in a literary or artistic work where its employees are the authors and they made the literary work in pursuance of the terms of their employment. The relevant test is stated in IceTV at [96], quoting Dixon J in Victoria Park Racing and Recreation Grounds Co Ltd v Taylor (1937) 58 CLR 479 at 510:

10. [563]

    As David Brennan observes in Copyright Law (2021, Federation Press):

11. [564]

    As Moore J explained in EdSonic v Cassidy (2010) 189 FCR 271; [2010] FCA 1008 at [41]: (emphasis added)

12. [565]

    A company has no entitlement to copyrighted work created by an employee in the course of their extra-curricular activities or that goes beyond the scope of their employment relationship: for example, Redrock Holdings Pty Ltd v Hinkley [2001] VSC 91; (2001) 50 IPR 595 (per Harper J).

13. [566]

    It is thus necessary to identify with sufficient particularity the person or persons who “provided the necessary authorial contribution” to the work: Telstra Corporation Ltd v Phone Directories Company Pty Ltd (2010) 194 FCR 142; [2010] FCAFC 149 at [5]. The plaintiffs contend that the design was undertaken by Mr Chou, save for the Raspberry Pi software, while the defendants contended that “Yokao” undertook the design work.

Consideration

1. [567]

   Mr Chou denied preparing designs for Metstech and said that the designs needed several personnel to work together using software which Metstech and Welldesign did not have. Mr Chou said that from June 2015 to June 2016, Mr Park told Mr Chou that Metstech’s business approach was to use ODMs in Taiwan to design and manufacture a BDA for sale. Mr Park said, “We are happy with your company to engage those Taiwan companies’ BDAs.” Mr Chou said he started to contact ODM companies to design and manufacture BDAs for Metstech and its customers.

2. [568]

   But Mr Chou had no records of communications with the ODM, saying that he communicated orally with the ODM about development of the leaky feeder systems. Even when testing and refining the product in 2020, Mr Chou insisted that all communications with the ODM were verbal. Mr Chou also denied undertaking any “debugging” of issues found in the test process, suggesting that this was done by the ODM remotely controlling his laptop. The contemporaneous records tell strongly against Mr Chou’s evidence: at [160]-[164], [272], [275], [281], [286], [288], [290], [295]-[296], [298], [304]-[307], [309]-[311], [334]-[334], [342], [375], [377].

3. [569]

   Mr Chou said he did not even know what Yokao’s fee was to design the BDA leaky feeder system, “They just verbally … the cost it may be … a few hundred thousand grand” but because Metstech was not happy with the design or further changes needed to be made “all those monies still accumulate.” As the design was not yet finished, Mr Chou said he had not asked what the design fee was. It is wholly unlikely that Mr Chou would not know what the design fee was where monetary matters were of critical importance to him or, at least, to his wife.

4. [570]

   Mr Chou’s failure to adduce a single document recording any communication between himself or Well Electronics or Welldesign and “Yokao” or Yo Kao Technology Co Ltd is extraordinary, where Mr Chou now contends that he dealt with this company over a substantial period of time. It is the combination of the absence of any contemporaneous documents which support Mr Chou’s evidence together with the inconsistency of Mr Chou’s evidence with the contemporaneous document which do exist that has the result that I do not accept his evidence.

5. [571]

   In communications with his fellow directors and Challenge, Mr Chou consistently represented that he was attending to the design of Metstech’s products: at [86]-[89], [89], [104], [111], [114], [116] [129], [134]), [168], [181]-[182], [156]. I do not accept that Mr Chou, when repeatedly referring to himself as doing a particular task was, in fact, referring to an ODM doing that task. Mr Chou did, on various occasions, refer to third parties attending to tasks but never did so in relation to the design of Metstech’s products.

6. [572]

   There is no contemporaneous reference to an ODM or design house undertaking the design work for Metstech’s products. In contrast, there were contemporaneous documents referring to the possible use of an ODM or design house for other products, which did not proceed: at [179]-[180], [191]-[192].

7. [573]

   After “Yokao” first appeared in the contemporaneous documents – in the course of manufacture – Mr Chou continued to provide documents to Metstech which claimed copyright on behalf of Metstech and made no mention of Yokao: at [152]-[153], [206], [287], [352]. Likewise, Mr Chou continued to be at pains to ensure that software licences were in order to avoid “legal trouble when people challenge me what legal tool I used for my design”: at [251]-[251]. If, as Mr Chou now says, “Yokao” designed Metstech’s products, then one would expect to see some change in the documentation which Mr Chou was producing. If, as Mr Chou said, he used “Yokao” so that Metstech did not have to buy the necessary software, then it would have been unnecessary for him to ensure that Metstech’s software licences were in order.

8. [574]

   It is likely that Yokao was engaged to manufacture PCBs: [144]-[151]. Where there can be no doubt that Mr Chou was supervising the manufacture of the PCBs, I infer that he gave the instructions as to what should be printed on the PCBs. The fact that “Metstech” or “Metstech IP” was printed in large font on the PCB board is consistent with Mr Chou’s intention that the intellectual property rights attached to that company and not “Yokao”. His understanding appears to have been shared by Mr Park: see [268]. I do note that Mr Park said, “I did not understand for or intend that this branding would indicate or establish one way or another ownership of the underlying intellectual property: the labelling was to ensure that if third parties disassembled the product, that they would contact a company of our choosing.” I found this evidence difficult to believe, and I do not accept it.

9. [575]

   Consistently with this, the other directors of Metstech also referred to Mr Chou as undertaking the design work and did not refer to a third party. Metstech IP lodged R&D offset applications, largely prepared by Mr Park, which clearly stated that the company was undertaking the design work itself and producing new knowledge. Throughout the design process, Mr Park stated that Metstech was developing the intellectual property in its products, contrary to his evidence at trial that he understood Mr Chou to have engaged an ODM to design Metstech’s products: at [108], [116], [141]-[141], [155], [166]-[167], [210].

10. [576]

    It is noteworthy that the only three entities who invested in development of the product, being Mr Jefferson’s companies, Mr Corbett’s company and Challenge, each believed that Mr Chou was the designer and that Metstech owned the intellectual property.

11. [577]

    Mr Jefferson said that never had any discussions with Mr Chou nor saw any communications from Mr Chou about a design house or design contractor for the Metstech BDA. Mr Jefferson said that he at no time discussed with Mr Park, Mr Chou or Mr Clifton engaging a third party to do the design work for the Metstech BDA. At all times, Mr Jefferson believed that Mr Chou was undertaking the development and design work directly as an employee of Metstech. There was no mention of any entity in Taiwan being involved in product development nor did Mr Jefferson ever have any discussions regarding a design house or ODM being used in connection with the Metstech BDA. At no time was Mr Jefferson aware that Mr Chou was working with a ODM and nor did he have any discussions with Mr Chou in relation to an ODM. Mr Jefferson understood that Mr Chou had designed the Metstech BDA “and that’s what I was investing in”. It was not until early November 2020 that Mr Chou asserted that the design and manufacture had occurred in Taiwan through an ODM.

12. [578]

    Mr Corbett said that at no time was any person or entity other than Mr Chou discussed as undertaking the design and development of the LTE BDA product. At no time did Mr Chou refer to any other person or company, either in Australia or Taiwan, as being involved in the design or development of the LTE BDA product. Mr Chou said he never told Mr Corbett about the existence of an ODM carrying out the design work because “he never asked me about these things.” I consider this to be unlikely, where Mr Chou and Mr Corbett appear to have worked closely together for some years, and appeared to have a close and amicable business relationship.

13. [579]

    In his dealings with Metstech, Mr Lardner always understood that Metstech designed the product whilst the manufacturing may be outsourced to a third party. Further, “we have hundreds of conversations with John Park … there was never any doubt … that it was their designs and therefore, by definition, [they] had all the documentation. … There was never any doubt that that was the case.” Mr Lardner said the first time that there was a suggestion that the intellectual property was owned by a party “was at the start of these proceedings. Up until then, it had been a non-discussion.” When deeds of company arrangement began to be discussed, “there was questions raised about where stuff was, and I think everyone was trying to pull stuff back.”

14. [580]

    The suggestion that the intellectual property was owned by an entity other than Metstech was first made after Metstech was placed in administration, when Mr Park suggested that Welldesign held the intellectual property rights, in an apparent effort to enlist the support of Mr Chou (and Ms Chen) to continue to work with Mr Park, Mr Corbett and their NewCo. Nowhere in the candid emails exchanged between the main actors, when endeavouring to ensure that Mr Chou’s designs could be exploited outside of Metstech, was there any mention of “Yokao” or an ODM entitled to intellectual property rights.

15. [581]

    Overall, I prefer the evidence of the contemporaneous documents, Mr Jefferson, Mr Corbett and Mr Lardner to the evidence of Mr Chou and Mr Park. I also found the evidence of Dr Georgevits to be persuasive. Having regard to the evidence of these witnesses, together with the import of a substantial body of surviving contemporaneous documents, I find that Mr Chou undertook the design work to create Metstech’s products.

16. [582]

    Whilst I have endeavoured to separately detail the design and development of each of Metstech’s products, I consider that the same conclusions can be now expressed collectively. The evidence enables the following findings of fact to be made in respect of the development of Metstech’s products (where the following cross-references are not exhaustive).

17. [583]

    First, Mr Chou had the skills necessary to create each of the works in question. Mr Chou was qualified and experienced. His contemporaries held Mr Chou’s skills in high regard. No (contemporaneous) suggestion was advanced that he could not design Metstech’s products or lacked the technical skills to complete the associated documentation: see [79].

18. [584]

    Second, Mr Chou came up with the idea of each of Metstech’s products. Whether one uses his term of “concept design” or Dr Georgevits’ “functional specifications”, Mr Chou agreed that the ideas were his: see [60], [183], [359], [398].

19. [585]

    Third, each of Metstech’s products originated with the author, Mr Chou, and were not merely copied from other work such that Mr Chou’s independent intellectual contribution was more than trivial but something of substance or significance. The contemporaneous documents contain numerous references to the originality of the designs and the need to secure intellectual property protection: see [60], [74] [84]-[85], [98]-[99], [105], [127], [166]-[167], [172], [178], [200], [202], [206], [247], [256]-[257], [268].

20. [586]

    Fourth, the contemporaneous documents and the observations of Mr Corbett indicate that Mr Chou was intimately involved in and knowledgeable about each of the design steps: at [160]-[163], [254], [290]. Mr Chou spent hours explaining Metstech’s products and design to Mr Corbett: at [177]. Mr Manuel and Mr Gasseling observed Mr Chou to make changes to the design and to explain the algorithm he was using: [309]-[310], [342]. Contemporaneous documents referred to Mr Chou working on design (at [86]-[89], [104], [111], [114], [116] [129], [134]), [168], [181]-[182], [156], PCB layouts (at [84]), building and testing prototypes (at [95], [130], [135], [141], [153], [182], [188], [204]), writing and testing firmware (at [160]-[164], [272], [275], [281], [286], [288], [290], [295]-[296], [298], [304]-[307], [309]-[311], [334]-[334], [342], [375], [377]) and supplying the associated documentation, which he appears to have prepared: at [94], [97], [104], [111], [112], [124], [126], [130], [136], [152]-[153], [158], [176], [206]. Dr Georgevits observed that there were many references in the correspondence which indicate that Mr Chou undertook electrical design and prototyping work, including troubleshooting and making changes to the electrical designs and firmware for the BDAs and probably some of the other devices as well. These tasks were all part of the electrical design and prototype manufacturing processes.

21. [587]

    As such, the principle of first authorship has the consequence that Mr Chou holds, to the extent the components of the system are capable of having copyright subsist in them, copyright over Metstech’s products. There is no dispute that Mr Chou was an employee of Metstech when he created these products. The next question is whether the products were designed in pursuance of Mr Chou’s terms of employment with Metstech. I have no doubt that Mr Chou was employed by Metstech for the purpose of designing new products.

22. [588]

    I do note, however, that Mr Chou did some design work on the splitter whilst he was working part-time for Metstech and had yet to begin receiving a salary. He was then a director of Metstech and, through Welldesign, a shareholder. It seems doubtful that Mr Chou was then an employee. As such, the automatic vesting of copyright in the employer does not apply. The default position is that the author is the owner, subject to contrary agreement within section 35(3) of the Copyright Act. I consider that the circumstances in which Mr Chou did the design, continued to develop the design whilst employed, and permitted Metstech to use the design indicate that Mr Chou conferred a licence on the start-up company to use his copyright work and that he is now estopped from suggesting otherwise (not that he does suggests otherwise). I note also that some design work and documentation was also done by Mr Clifton, although he was then an employee so any copyright in his work also vests in Metstech.

23. [589]

    As I have found that Mr Chou was an employee of Metstech and the products were created during the course of his employment, it follows that the exception to the first ownership principle in section 35(6) is made out. It is unnecessary to determine whether the informal contract of employment required Mr Chou to assign copyright to the company. As Nettle J explained in Victoria University of Technology v Wilson [2004] VSC 33; (2004) 60 IPR 392 at [104]:

24. [590]

    As earlier detailed, the plaintiffs contend that the items created by Mr Chou are items in which copyright can subsist, being “literary, dramatic, musical or artistic work[s]” within the meaning of section 35(2) of the Act. The specific items in which the plaintiffs claim copyright subsists are PCB assemblies, source code, concept designs, PCB schematics and PCB layouts, firmware source code, manufacturing files, bills of materials and test results. The defendants did not dispute that copyright is capable of subsisting in each of these items.

25. [591]

    Somewhat unusually, however, the items over which Metstech claims copyright are not before the Court. Notwithstanding Metstech’s efforts, and court orders requiring the defendants to disclose the whereabouts of these items, by and large, nothing has been produced. Rather, the existence of the PCB Assemblies has been deduced from invoices rendered by Welldesign and ChampWin, the photographs attached to contemporaneous emails from Mr Chou and, presumably, the existence of PCBs in the finished products supplied to Metstech and stored at Challenge’s premises. As to the PCB Schematics, the plaintiffs were unable to identify the schematics with any specificity but believed them to be stored on computers of Mr Chou or Welldesign. As to the Product Manufacture Documentation, the plaintiffs were unable to supply particulars but inferred the existence of these documents as documents of this type are required for the manufacture of electronic devices.

26. [592]

    In this regard, the evidence of Dr Georgevits was, again, important. The steps involved in “Electrical Design and Design Prototyping” and “Production Prototyping” were described by Dr Georgevits at [61]-[68]. After these steps have been completed, being before manufacture, Dr Georgevits said that the entire design then needs to be fully documented including the functional specification, electrical schematic, PCB layout and manufacturing files, firmware code listing and compiled version of the firmware code (if applicable), bill of materials, assembly and testing instructions, troubleshooting guide, service manual, packaging information, data sheets and sales brochures.

27. [593]

    To design and construct to this stage, certain software and tools are required. As for software, Altium Designer software can be used to develop the electrical designs, electrical schematic, PCB design and bill of material. RhinoCAD software can be used to design to use the housings and other mechanical parts that require 3-D modelling. Delphi software and associated modules can be used to write the firmware code for each device together with control software or other software needed for testing or monitoring the devices. Typical associated modules would include C++Builder and RAD Studio.

28. [594]

    At the outset, Mr Chou asked Metstech to buy Altium Designer “for schematic/PCB layout [to] reduce legal issues for the design file” and RhinoCAD: see [86]. In June 2018, Mr Chou arranged to buy Altium Designer software and was reimbursed by Metstech: at [250]-[252]. Mr Manuel observed Mr Chou to use three software programs: CCS C Compiler, Altium Designer and RAD Studio. In 2019 and 2020, Welldesign renewed its subscription for Altium Designer but, for reasons unknown, did not seek reimbursement from Metstech. Mr Chou had the relevant software to complete these design tasks, including the preparation of the associated documentation.

29. [595]

    As to tools, standard laboratory mechanical tools include soldering and de-soldering stations, pliers, screwdrivers, side cutters, work benches and cleaning fluids. Test equipment will be needed, such as multimeters, oscilloscopes, signal generators, level meters, laptops, vector network analysers and test sets for generating and monitoring LTE and other required protocol signals. The contemporaneous emails do not refer to Mr Chou requesting Metstech to buy a particular piece of equipment, which was not forthcoming. In December 2018, Mr Park referred to having “just purchased an isolation chamber (not cheap) for … testing”: at [268]. It is not clear whether this test facility was provided by Metstech or Challenge.

30. [596]

    Metstech recognised a liability in the financial statements to reimburse Mr Chou for any investment in equipment, or the use of his home, for which Metstech had not paid. Mr Chou presented something of a ‘moving target’ in this regard as, whatever he was paid in wages and whatever his family’s companies were paid by invoices, Mr Chou continued to maintain that he was ‘out of pocket’: see [523]. Either way, whether Metstech had paid or agreed to pay for the equipment used by Mr Chou, he had the necessary equipment.

31. [597]

    Based on Dr Georgevits’ evidence, documents fulfilling the description of PCB Schematics and Product Manufacture Documentation should exist, as the documentation is required by the manufacturer. As to the functional specifications, Dr Georgevits considered that each device comprising Metstech’s leaky feeder system would have its own functional specification, as will the system itself. Dr Georgevits considered that, for the design of an item such as a BDA, “normally devices like that a single person would do the design.” Against this, Mr Chou said there was no need to write down a functional specification, “I can easy to talk everyone ok what the functional spec this product should be … because this to me, this is my technology.” Mr Chou said there were no documents recording or comprising concept designs, “I can probably say teaching every people how to design the leaky feeder system without any the document.” Likewise, Mr Park said that Metstech did not develop functional specifications for the components of the products that it sold. I prefer the evidence of Dr Georgevits, particularly where there are a number of documents in evidence which do appear to be functional specifications prepared by Mr Chou: see, for example, at [104], [112], [124], [130], [136], [153]. I am reluctant to accept that ideas for electronic devices are shared orally.

32. [598]

    I note that Dr Georgevits considered that, if Metstech created the functional specifications for the leaky coax system, the value of services offered to Metstech by ODMs was limited to designing and manufacturing the electronics that met Metstech’s functional specifications. This would have involved generating the electrical schematics, PCB layouts, writing firmware code for each device that was processor controlled, manufacturing and testing prototypes. As I understood this evidence, an ODM or “Yokao” could have been involved in generating these documents. However, as far as the evidence reveals, Yokao was involved in the manufacture of Metstech’s products but not the earlier stages in the process. Dr Georgevits observed that Mr Chou certainly used an external company to get the PCBs manufactured and would have needed access to expensive test equipment to ensure that the product performed to specification. It may well be that Mr Chou made use of some of the test equipment at Yokao’s facility, but I do not consider that this detracts from the import of the evidence, being that Mr Chou designed the products and likely prepared the associated schematics and documentation.

33. [599]

    Based on the unfolding design process as described in the contemporaneous documents, I find that Mr Chou completed the design and prototyping stages before providing the manufacturer with the documentation in order to produce Metstech’s products. Mr Chou supplied the associated documentation, which he prepared: at [94], [97], [104], [111], [112], [124], [126], [130], [136], [152]-[153], [158], [176], [206]. To the extent that Mr Chou called upon an ODM to assist in these tasks, there is no documentary trail as to the portion of the design done by an ODM. I conclude that any such task was relatively minor compared to the tasks undertaken by Mr Chou. That is, I am not satisfied that an ODM or “Yokao” expended sufficient effort to be considered an author, or joint author, of the work within the meaning of the Copyright Act: IceTV at [97].

34. [600]

    I understood Mr Chou to submit that PCB Schematics and Product Manufacture Documentation were not in his possession but in the possession of a third party – whether “Yokao” or someone else was not clear – and that the Court should respect privity of contract and the differences between corporate entities and individuals. The contractual and corporate arrangements alluded to, however, were mysterious. Although Mr Park suggested, in December 2015, that Metstech was “willing to discuss allowing your company to have [manufacturing] rights”, there is no evidence that such rights were formally discussed or documented. It was certainly never envisaged that the manufacturer would acquire intellectual property rights. Rather, an informal practice appears to have developed where Mr Chou billed Metstech for manufactured products through Welldesign at a mark-up. Ms Chen said that her husband prepared the invoices, or at least the first draft. The arrangements between Mr Chou and the manufacturer also appear to have been informal. Mr Chou said that Welldesign got an invoice from Yokao for factory assembly services, “Yeah I think so”, although he agreed that he had not produced any invoices from Yokao in the proceedings. Likewise, the arrangements between Mr Chou, ChampWin and the manufacturer appear to have remained informal. There is no evidence that any contracts were entered into, nor any invoices issued by the manufacturer to ChampWin.

35. [601]

    The principles in respect of onus and inferences are described at [38]-[41]. Whilst the plaintiffs bore the onus in proving that Mr Chou designed Metstech’s products and prepared the associated schematics and documentation, it was Mr Chou who had particular knowledge as to these matters, such that it may be sufficient for the plaintiffs to adduce slight evidence on the matter: BCI Finances v Binetter (No 4) at [125]. Further, a party’s failure to produce documents to corroborate their account, where they may be expected to be in possession of such documents, gives rise to a Jones v Dunkel inference.

36. [602]

    I have drawn this inference adversely to Mr Chou and Welldesign, where there are basically no documents to corroborate the suggestion that either engaged an ODM to design products for Metstech. In doing so, I have also borne in mind that the absence of documents may be referable to the defendants’ large scale deletion of Metstech’s emails and data. That said, I am inclined to think that the defendants would have deleted data which reflected poorly on them rather than those which may have assisted their case. There are also no surviving documents which suggest that Mr Chou shared any communications with an ODM or “Yokao” with his fellow directors. If there ever were such communications, he appears to have kept them to himself. Thus, deletion of Metstech’s emails and data is unlikely to have resulted in the deletion of such records. Where it was Mr Chou who is said to have engaged with an ODM, I infer from the absence of documentary evidence supporting the existence of a contractual arrangement with an ODM, such as “Yokao”, that no contract exists.

37. [603]

    Rather, Mr Chou designed Metstech’s products and prepared the associated documentation to enable the products to proceed to manufacture. The disputed works must have been created and insofar as they are original literary or artistic works (or both) and that to the extent that they still exist, the employer owns them. Mr Chou created such works in the course of his employment, with the consequence that copyright in them vests in the employer. Whilst his family companies – Welldesign and ChampWin – earned further income by ‘marking up’ the manufacturing costs charged by “Yokao”, this does not detract from the fact that Mr Chou’s employer has copyright in the designs and associated documentation.

Metstech or Metstech IP

1. [604]

   The common directors of Metstech and Metstech IP intended that intellectual property would ultimately be held by Metstech IP rather than Metstech. However, Mr Chou was an employee of Metstech, not Metstech IP. As such, Metstech is the owner of any copyright subsisting in the work, as Mr Chou’s employer: section 35(6) Copyright Act.

2. [605]

   True it is that Metstech IP made three applications for an R&D grant, which represented that the intellectual property was held by Metstech IP and that the expenses of development had been incurred by Metstech IP. To that end, the financial statements of Metstech and Metstech IP were prepared and signed by the common directors to record that Metstech had charged Metstech IP a fee in respect of the development expenses, which Metstech IP had paid. Although Metstech IP had not, in fact, paid the fee, it does appear that tax rebates received by Metstech IP were largely paid to Metstech and absorbed by that company.

3. [606]

   Section 196(1) of the Copyright Act provides that copyright is personal property that, subject to section 196, is transmissible by assignment, by will and by devolution by operation of law. Subsection 3 provides, “An assignment of copyright (whether total or partial) does not have effect unless it is in writing signed by or on behalf of the assignor.” It cannot be said that, as a consequence of the R&D applications, and associated accounting entries and disbursement of tax rebates, that Metstech assigned copyright to Metstech IP, where there was no assignment in writing signed by or on behalf of Metstech: section 196(3). Any copyright in Metstech’s products and associated documentation remains with Metstech.

Software

1. [607]

   There was no dispute that the Raspberry Pi monitoring software created by Mr Martin is a “computer program” and a “literary work” in which copyright subsists. The issue is whether Metstech acquired the copyright, either in return for equity or by reason of revisions made to the software after Mr Martin became an employee.

2. [608]

   I have earlier concluded that the plaintiffs have not established that Mr Martin’s company was issued shares in Metstech and Metstech IP in consideration for the assignment of intellectual property rights in the software. Thus, it is not necessary for me to whether the assignment was effective, notwithstanding section 196(3) of the Copyright Act, by reason of estoppel or the doctrine against ‘fraud on the statute’.

3. [609]

   I have also earlier concluded that Mr Martin offered “Metstech” an unlimited and exclusive licence to use the monitoring software as it wished. I considered it unlikely that Mr Martin made any reference to Metstech IP. As such, Mr Martin granted Metstech the right to use the copyright work. I note that Mr Martin called Mr Lardner before the second creditors’ meeting and said that, although he did not wish to be part of a DOCA proposed by Challenge and Mr Jefferson, he was willing to licence the software to Challenge and Mr Jefferson under the same arrangement.

4. [610]

   To the extent that Mr Martin revised the Raspberry Pi Software after becoming employed by Metstech, the plaintiffs claimed that copyright in the revised software belonged to Metstech where Mr Martin’s role included development: section 35(6), Copyright Act. Further, Mr Martin gave evidence that when he travelled to Western Australia in June 2020 to attend MineCo2’s mine, he used his two weeks in quarantine in Perth to update the monitoring software. As the June 2020 version of the source code was produced by Martin in the course of his employment with Metstech, the copyright was said to be owned by Metstech. Mr Martin conceded that Metstech would not have access to that version of the source code. Accordingly, the Court should declare the copyright subsisting in the source code to be owned by Metstech, and order Mr Martin to deliver up it up.

5. [611]

   Mr Chou made no submissions on this topic. Mr Martin and Mr Park submitted that Mr Martin made minor changes to the software on becoming an employee and, in June 2020, updated the software to the latest framework. However, Mr Martin’s employment role did not include development. Mr Martin chose to update his software and his personal git repositories while in hotel quarantine as his personal endeavour. He did not undertake that work in the course of his employment. The updates to the Raspberry Pi Software were said to be carried out independently of Metstech, under a contract for services rather than a contract of service. Mr Martin continued to supply all of his own equipment, hardware and software. Whether or not an update or release was made not entirely at Mr Martin’s discretion: Hollis v Vabu Pty Ltd (2001) 207 CLR 21; [2001] HCA 44 at [71]ff.

6. [612]

   Mr Martin and Mr Park submitted that there was no evidence that these revisions satisfied the author, originality and unpublished requirements of the Copyright Act for copyright to subsist in each release. Further, the prominence of open source code used in the Raspberry Pi Software made it hard to draw inferences as to whether the work had been supplied to the public.

7. [613]

   This submission overlooks Mr Martin’s evidence that he gave Metstech an exclusive licence, conferring a right in respect of a copyright work to the exclusion of all others including himself: at [227]. Further, Mr Martin said he did the software as freelance work on a speculative basis, to be “compensated by the company if and when it was successful”. That is, Mr Martin appreciated that the software was being developed for the company and the product of his efforts was not to be shared with the world at large. His ability to be compensated by the company depended on the software remaining exclusive to it: at [161]. I consider the “unpublished” requirement of the Copyright Act is satisfied, particularly where Mr Martin did not suggest that he had published the work, and he was best placed to say if he had.

8. [614]

   Alternatively, Mr Martin and Mr Park submitted that the operation of section 35(6) was varied or modified by terms implied into Mr Martin’s employment agreement: section 35(3), Copyright Act. Those terms were that new releases of the Raspberry Pi Software would be subject to the oral licence already granted to Metstech IP or Metstech: Centrestage Management Pty Ltd v Riedle (2008) 170 FCR 298; [2008] FCA 938 (per Sundberg J). Further, Metstech IP nor Metstech would not acquire copyright ownership to current or future releases of the Raspberry Pi Software without the payment of compensation for the software development work carried out by Mr Martin prior to July 2019. At most, either Metstech or Metstech IP had an informal licence to incorporate and use the software within the leaky feeder system that it sold. If his engagement to supply the Raspberry Pi Software to Metstech (albeit for no reward) carried with it an implied licence for Metstech or Metstech IP to use the program, it was not necessary to imply a term that Mr Martin was or is obliged to delivery up the source code: Centrestage Management. Further, a declaration of ownership to the source code of the Raspberry Pi Software was not an appropriate remedy when the majority of the source code was open source, known to be subject to licences, and it was not established that those licensors will not be affected by any declaratory relief by the Court or that they have been given notice of the ownership, may have an interest in or be affected by declarations of ownership.

9. [615]

   The first question is whether any “work” undertaken by Mr Martin on the software after he became employed by Metstech was work made in the course of his employment or outside the employment relationship and on his own account. Mr Martin said that his role was software development, where Metstech was using several developers in Pakistan through a company called Clicktech. Metstech brought Mr Martin in to, amongst other things, manage these developers. Whilst this no doubt formed part of Mr Martin’s duties, I am satisfied that his responsibilities included making changes, as needed, to the software. Whilst there is little evidence of Mr Martin working with Clicktech, there are emails post-July 2019 in respect of Mr Martin’s continued work with Mr Chou and others on software problems and changes. If the software did not work, then Metstech’s headend did not work, which meant that Metstech’s leaky feeder system would not work. There was no evidence to support Mr Martin’s submission that he continued to supply all of his own equipment, hardware and software to perform revisions.

10. [616]

    The second and more difficult question is whether the changes made to the software after Mr Martin commenced his employment with Metstech were “original” in the requisite sense: see [555]. It is common for computer programs to evolve incrementally over time and for many versions to be produced: William van Caenegem, Intellectual and Industrial Property Law (3rd ed, 2019, LexisNexis) at [18.3]. As the learned authors of Ricketson and Creswell’s Law of Intellectual Property: Copyright, Design and Confidential Information (2001, Thomson Reuters) observe at [7.104]

11. [617]

    The learned authors also observed that these issues have not so far been contentious in Australian law under “our traditional low-level requirements for originality and authorial contribution” but, when issues are raised, “it will become much more of a relevant inquiry to determine in each case precisely what is the work in issue and the degree to which it differs from any predecessor. In the case of a work with a lengthy history of development and refinement, the preferable analysis may be … that each successive draft needs to be considered in overall terms as the application of fresh authorial effort in revising, reviewing and “settling” what has gone before”: at [7.104], citing JR Consulting & Drafting Pty Ltd v Cummings [2016] FCAFC 20; (2016) 329 ALR 625 as an example of the kind of factual investigation required for the purposes of establishing originality.

12. [618]

    In JR Consulting, the Full Court (Bennett, Greenwood and Besanko JJ) summarised the extensive evidence of the author of “QSS” software, Mr Cummings, at [288]-[301]. The Full Court concluded at [303]-[304]: (emphasis added)

13. [619]

    The evidence before this Court is more limited. Mr Martin described developments to the software after June 2019 as “bug-fixes and minor enhancements”. Mr Martin’s “commit logs” and “release notes” indicate that versions 1.1.10, 1.1.12, 1.1.13, 1.1.14, 1.1.16, 20.07.28 were worked on or released after he was employed by Metstech, including changes to the source code. These changes were explained in the “release notes”.

14. [620]

    The plaintiffs submitted that the changes made by Mr Martin were more than trivial, I am in no position to say one way or the other. I note that 21 changes were made from July 2019 to July 2020. Beyond that, I do not know. I am not satisfied that the changes made to the software after Mr Martin commenced his employment with Metstech were “original” in the requisite sense such that copyright in new versions of the software are a new work in which copyright subsists and is held by his employer, Metstech.

15. [621]

    But this is not the end of the matter. I earlier considered the circumstances in which the software licence was granted at [227]-[233]. As there noted, a licence may include the capacity to alter the material to suit the licencee’s purposes: Gruzman v Percy Marks. It will be recalled that, when Mr Martin granted an exclusive licence, Mr Jefferson was endeavouring to obtain the source code if Mr Martin was unwilling to complete software development at the time. Mr Martin provided Mr Park and Mr Jefferson with a link to the source code and files, including test results. Mr Martin provided a link to a private Google site, where the code was stored in “bitbucket” and advised that a bitbucket account would be needed to access the code “if you plan to build the code yourselfs”. After the granting of an exclusive licence, Mr Martin granted Mr Jefferson on-line access to edit the build documentation. Mr Martin transferred the source code to Mr Jefferson and granted him “administrator access”. Mr Martin was obviously prepared to permit Metstech to access the source code and work on the software.

16. [622]

    There is no record of any communication with Mr Martin from April to November 2018, during which time Metstech and Challenge installed a pilot project at MineCos Western Australian mine. As I earlier observed, in the absence of Mr Martin’s involvement, it likely fell to Mr Chou to revise the software to address problems then being experienced: at [272]. Mr Martin does not appear to have re-engaged with the software until February 2019: see [280].

17. [623]

    In the circumstances of this case, I consider that the exclusive licence included the capacity to alter the software to suit Metstech’s purposes. I accept that this is not a standardised term implied by law in contracts for the manufacture of a computer program and nor does such a contract carry with it an implied term to provide the source code: Centrestage Management at [52]-[65]. Here, however, the circumstances of the case indicate that this was a term of the exclusive licence, either expressly or by implication. Mr Martin made the source code available to Metstech in 2018 and allowed Metstech to change the source code as needed. Having recently upgraded the software to a new framework, Mr Martin now appears unwilling to provide the source code. This change is likely referable to his alliance with Mr Park, Mr Corbett and Mr Chou. He is, however, obliged to continue to permit Metstech to access the source code under the terms of the exclusive licence.

TRADE SECRETS AND CONFIDENTIALITY

1. [624]

   The plaintiffs sought relief in the respect of other forms of intellectual property associated with Metstech's products, being confidential information and trade secrets. The plaintiffs contended that the following information in the defendants' possession is the property of Metstech and confidential:

2. [625]

   In addition, Metstech sought technical information which Mr Chou may have in his possession as a result of ordering products or components as an employee of Metstech, being purchase orders and specifications issued to manufacturers, together with bills of lading, invoices and consignment dockets in relation to the purchase of Metstech's products or the components for the products and for the manufacture of products. These documents contained information with respect to the design of Metstech's products, including the particular components used and the suppliers from which those components were sourced, which was said to be confidential information belonging to Metstech.

3. [626]

   Mr Park submitted that the only documents which he may have in his possession were simplistic technical descriptions, widely distributed and used in educational and sales material. In addition, he may have information concerning Metstech’s customers. It was said, however, that the plaintiffs had not satisfied the criteria for confidential information by demonstrating that the information was not publicly known or well known within the industry, for example, the bandwidth used by a customer is publicly available information. Further, Mr Park and Mr Martin submitted that Metstech’s installation manuals had been shared with many parties and not subject to confidentiality agreements.

4. [627]

   Mr Martin and Mr Park submitted that they ought be released form the interlocutory orders restraining them from dealing with or revealing the “Assets”, trade secrets and confidential information of Metstech and Metstech IP, with “Assets” being defined to mean all documentation in relation to the components of the product that was developed and sold by Metstech or Metstech IP. The plaintiffs were said to have failed to demonstrate that the restraints upon the use of confidential information were necessary for the adequate protection of the interests of the plaintiffs, particularly where Mr Martin was not subject to a contractual restraint: Zomojo Pty Ltd v Hurd (No 2) [2012] FCA 1458; (2012) 299 ALR 621 at [179] (per Gordon J).

5. [628]

   Mr Chou opposed the relief sought on the basis that there was no evidence that he had such documents. To the extent that communications with manufacturers were sought, such as purchase orders, any such orders would have been provided by Welldesign and Mr Chou is not a director of that company. Thus, it could not be said that such information was acquired by Mr Chou.

Shareholders agreements

1. [629]

   Clause 12.1 of each shareholders agreement imposed confidentiality obligations on each shareholder, preventing the shareholder from making, publishing or issuing any statement or report concerning, relating to or referring to any Trade Secrets or the Business, or any Confidential Information, or any information, whether Confidential Information or not, that could or might assist a Competitor.

2. [630]

   “Trade Secrets” included all Confidential Information associated with the Business and trading activities of Metstech (or Metstech IP) including information relating to the requirements of the company’s customers or potential customers, contracts, tenders and negotiations with customers or potential customers, all no-how techniques and methods used by the company to fulfill the requirements and obligations which the company had to its customers under any contracts or arrangements existing or past.

3. [631]

   Further, Clause 12.3 provided that no shareholder would cause or allow any Related Entity or Related Body Corporate to dispute the company’s exclusive rights to and ownership of Trade Secrets and Confidential Information.

4. [632]

   “Confidential Information” was defined as:

5. [633]

   Clause 14 provided that the Shareholders Deed of Agreement continued to bind the shareholders until they unanimously agreed to terminate the agreement or the company was wound up or the Business sold or all of the company’s shares were sold: clause 14.1; definition of “Shares” in Clause1.2. None of these events have occurred. Further, where a shareholder ceased to be a shareholder, “that Shareholder will continue to be bound by confidentiality as set out herein and is bound not to use or register any trade marks …” As such, these obligations continue to apply to the corporate entities of Mr Park and Mr Chou. The plaintiffs did not suggest that these obligations applied to Mr Martin’s company.

Equitable obligations

1. [634]

   Aside from the obligations imposed by the shareholders agreements, information will be subject to an obligation of confidence where it has "the necessary quality of confidence" and it is received "in circumstances importing an obligation of confidence": Optus Networks Pty Ltd v Telstra Corporation Ltd [2010] FCAFC 21; 265 ALR 281 at [39]. Some of the recognised indicators that information has the "necessary quality of confidence" include the skill and effort that were expended to acquire the information, the extent to which the information was known both inside and outside the business, the ease or difficulty with which the information could be properly acquired or duplicated by others, the steps taken by the party claiming confidentiality jealously to guard the information, the commercial value of the information and the usages and practices of the industry concerned: Dais Studio Pty Ltd v Bullet Creative Pty Ltd (2007) 165 FCR 92; [2007] FCA 2054 at [65] (per Jessup J).

2. [635]

   Information will have been received "in circumstances importing an obligation of confidence" where a reasonable person in the position of the recipient would have realised that the information was being provided in confidence: Coco v AN Clark (Engineers) Ltd (1968) 1A IPR 587 at 591.28-37 (per Megarry J). A successful plaintiff in a breach of confidence case is generally entitled to delivery up of any documents containing the confidential information: International Furnaces Ltd v Reaves [1970] RPC 605 at 627-8 (per Graham J); AG Australia Holdings Limited v Burton [2002] NSWSC 454; (2002) 58 IPR 327 at [17], [27] (per Campbell J).

3. [636]

   Further, where confidential information is entrusted to an employee for a limited purpose, it can only be used for that purpose and no other: N P Generations Pty Ltd v Feneley (2001) 80 SASR 15; [2001] SASC 185 at [18] (per Debelle J). This has the necessary consequence that a departing employee must return any documents containing such information to the employer: at [20].

Consideration

1. [637]

   I consider that the information sought to be protected by the plaintiffs falls within the definition of Confidential Information and Trade Secrets in the shareholders agreements. The confidentiality of this information is highlighted by its description in the R&D offset applications – where Metstech's activities were said to produce new knowledge – and the extent of expenditure on R&D activities. Metstech determined not to apply for patents because of a concern that this would reveal the technology to competitors and chose instead to preserve the technology as trade secrets. Development of Metstech’s products required several years’ work and the expenditure of hundreds of thousands of dollars.

2. [638]

   Metstech routinely entered into confidentiality agreements with those with whom it proposed to do business, including Mr Corbett, Challenge, US Co, Telco, Mr Putniss and SA Distributor. Test results were marked "In Confidence". Each iteration of Metstech’s manuals, from November 2016 to May 2020, was marked confidential, evolving from “In Confidence” appearing on the cover page to “Commercial and in Confidence” appearing on every page to a detailed “Confidentiality Notice” appearing on the first page and “METStech Pty Ltd RESTRICTED” appearing on every page. The development of Metstech’s customer relationships and commercial opportunities required significant effort over a period of years, including two years to get the first purchase order from Telco.

3. [639]

   This information was acquired by Mr Park, Mr Chou, Mr Martin and Mr Poisson in circumstances importing an obligation of confidence. Mr Park and Mr Chou were party to the two shareholders agreements. Although Mr Martin was not subject to these agreements, he was aware that Metstech required prospective customers and suppliers to sign non-disclosure agreements. Mr Martin appears to have been spared this requirement where he enjoyed the trust of Metstech’s founding directors. Mr Martin was provided with documents such as user manuals in which Metstech expressly claimed confidentiality. A reasonable person in his position would have understood the information provided to him concerning Metstech's products and customers to be confidential.

4. [640]

   The same can be said of Mr Poisson. He was engaged by Metstech, albeit nobody told Mr Jefferson. Mr Poisson became privy to the company’s confidential information, in particular, its customer base. Further, Mr Poisson was clearly aware that Metstech’s products and the associated intellectual property had been developed over several years and had significant market potential. Mr Poisson had the shareholders agreements. He must have been aware of the contractual obligations imposed in respect of trade secrets and confidentiality, given his involvement in the steps taken to try and relieve Mr Park, Mr Chou and others from those restrictions. A reasonable person in his position would have understood that information provided to him concerning Metstech’s products and customers was both valuable and confidential.

5. [641]

   I do not accept Mr Park and Mr Martin’s submissions that the documents they retained were either not confidential or it was no longer necessary to restrain them from revealing this information in order to adequately protect the plaintiffs’ interests. Quite the contrary, I consider that the events which I have sought to describe in this judgment illustrate that the Court’s injunctive relief is appropriate and, indeed, essential to protect the plaintiffs’ confidential information where both gentlemen have acted in disregard of their obligations, either as a director or trusted employee, to protect Metstech’s trade secrets and confidential information. In Mr Park’s case, this conduct was at complete odds with his earlier efforts to protect Metstech’s trade secrets from exploitation by its competitors. I regard his submissions on this subject as disingenuous.

6. [642]

   As for Mr Chou, I understand him to say that no orders should be made against him as any information is in the possession of Welldesign. Whilst Mr Chou is not a director of Welldesign, he is a 50% shareholder in the company and his wife is the sole director. Mr Chou and Ms Chen appear to have acted collaboratively in the operation of Welldesign and, for that reason alone, I consider that Confidential Information and Trade Secrets held by Welldesign are within Mr Chou’s control.

7. [643]

   Welldesign is also a defendant in these proceedings. Welldesign was a shareholder of both Metstech and Metstech IP. Even though Welldesign has ceased to hold shares in Metstech or Metstech IP, it continues to be bound by confidentiality and is bound not to use or register any trademarks: Clause 14.2. Welldesign continues to owe each of the obligations prescribed by the shareholders agreement notwithstanding Mr Chou and Ms Chen’s efforts to extract the company from these arrangements.

8. [644]

   I am satisfied that the information which the plaintiffs seek to protect is confidential and the relief to protect this information should be granted, being permanent injunctions, declaratory relief and orders for delivery up. The plaintiffs also seek orders that an inquiry be conducted into damages and an account be taken so that the plaintiffs can elect their remedy. They are entitled to proceed in this manner if they so wish.

Equitable defence

1. [645]

   Mr Park and Mr Martin submitted that the Court should refuse equitable relief where it was said that the plaintiffs had unclean hands: Black Uhlans Inc v New South Wales Crime Commission [2002] NSWSC 1060 at [157], [162], [164]–[181] (per Campbell J). Mr Jefferson was said to have breached his directors’ duties by joining Challenge in a DOCA proposal, submitting a proof of debt for employee entitlements where he was not an employee, and communicating with Google in respect of the G Suite account in terms that were less than accurate.

2. [646]

   As the plaintiffs submitted, pursuing the DOCA proposal with Challenge cannot be characterised as a breach of Mr Jefferson’s director duties. The alternatives were either for a DOCA proposal to be adopted with respect to Metstech or for Metstech to be liquidated. The administrator estimated that a liquidation scenario would result in a nil return to creditors and contributories. By making the DOCA proposal, Mr Jefferson provided $45,000 so that some of the debts owed by Metstech could be paid. Challenge provided a further $120,000. These funds would not otherwise have been available to the creditors of Metstech or to pay the fees of the administrator, whose appointment Mr Jefferson had voted against. Metstech IP’s was solvent only because Mr Jefferson continued to extend credit to the company. In those circumstances, it was not unreasonable to seek that Metstech IP be wound up as part of the DOCA proposal.

3. [647]

   Mr Jefferson caused Auxilia Investments to lodge a proof of debt, which was accepted by the administrator. It concerned amounts advanced by Auxilia Investments to Metstech. Mr Park, Mr Martin and Mr Jefferson all lodged proofs of debt seeking “catch up” payments. I agree that Mr Jefferson’s proof of debt mis-described himself as an employee and made an ambit claim for amounts to which I expect he did not consider himself to be entitled. The administrator rightly assessed all such proofs at nil value. Whether this was a breach of fiduciary duty, I consider it to be de minimis and not such as ought disentitle Mr Jefferson to the relief sought given the gravity of the defendants’ conduct.

4. [648]

   As for Mr Jefferson’s actions in respect of the G Suite account, Mr Jefferson believed that, notwithstanding the domain was registered to Metstech IP, the domain licence belonged to Metstech because it had been paid for by Metstech. He had legitimate concerns that the other directors of Metstech had been refusing to hand over the company’s records. He was concerned to preserve the data on the G Suite account and had well founded suspicions that the other account holders had been deleting data. Mr Jefferson’s emails to Google describing the precise problem in terms which were not strictly accurate but were broadly true. His efforts were directed to preserving Metstech’s assets, being its data. This defence fails.

CONSPIRACY TO INJURE BY UNLAWFUL MEANS

1. [649]

   The plaintiffs claim that the defendants, other than Metstech IP, were involved in a tortious conspiracy to injure the plaintiffs and Metstech IP by unlawful means. The alleged conspiracy is pleaded at length in the Amended Commercial List Statement, with the concluding contention that, in the circumstances, the defendants should be restrained from taking any further steps to give effect to the conspiracy: at [206]. No damages are alleged or particularised. Consistent with the pleading of the conspiracy in the Amended Commercial List Statement, a permanent injunction is sought restraining the defendants from taking any further steps to effect the conspiracy: prayer 7.

2. [650]

   An immediate problem emerges. As Lord Diplock explained in Lonrho Ltd v Shell Petroleum Co Ltd (No 2) [1982] AC 173, conspiracy is a civil tort, where the gist of the cause of action is damage to the plaintiff: at 188. It is thus necessary for the plaintiff to plead that it has or will suffer pecuniary loss as a result of the conspiracy: Australian Liquor, Hospitality & Miscellaneous Workers Union v Liquorland (Aust) Pty Ltd [2002] FCA 528 at [53]-[54] (per Cooper J); McKellar v Container Terminal Management Services Ltd [1999] FCA 1101 at [134] (per Weinberg J). Failure to allege any relevant damage flowing from the acts of the conspirators, or the inability to prove such damage, may result in the pleading being struck out: Munnings v Australian Government Solicitor (1994) 118 ALR 385 at 389-90; [1993] HCA 66 (per Dawson J).

3. [651]

   The plaintiffs submitted that it was sufficient that it had sought orders that an inquiry be conducted into damages and an account be taken so that the plaintiffs could elect their remedy. Such relief is certainly sought, but not in respect of the tort of conspiracy. After prayer 7, the relief sought in the Further Amended Summons turns to relief in respect of “Trade Secrets” or “Confidential Information”. Orders are sought for permanent injunctions, declaratory relief and delivery up. Declarations are sought that any profits received by the defendants in respect of the Confidential Information or Trade Secrets are held on trust. Orders are sought, at the election of the plaintiffs, for an inquiry be conducted into the damages sustained by the plaintiffs or Metstech IP, or an account be taken of revenue received by the defendants in relation to the Confidential Information and Trade Secrets, and that the defendants be required to deliver up books and records to permit an account to be taken. As I read it, these prayers for relief relate to the claims made in respect of Trade Secrets and Confidential Information rather than in respect of the conspiracy. Prayer 13 seeks an order that, on the election of the plaintiffs, the defendants give an account of profits or damages or equitable compensation. Again, this prayer is directed to the plaintiffs’ claims for equitable relief.

4. [652]

   The plaintiffs’ submission, and their pleadings, confuse their causes of action. As Handley JA explained in Milltec Australia Pty Ltd v Burnes [2006] NSWCA 13 at [13]:

5. [653]

   Whilst it is no longer necessary to bring tortious claims in one division of the Court and claims for equitable relief in another, it is still necessary to establish each claim in accordance with established legal principles. For example, in Fatimi Pty Ltd v Bryant [2004] NSWCA 140, a claim of conspiracy to injure by unlawful means failed where the plaintiff had not proved that it had suffered any damage. As Giles JA summarised the position on appeal, “Since the tort of conspiracy requires proof of pecuniary loss, [the appellant] did not make out the tort”: at [70]; see also [33]-[40] (per Handley JA).

6. [654]

   The plaintiffs relied on the observations of Brooking J in Ansett Transport Industries (Operations) Pty Ltd v Australian Federation of Air Pilots (No 2) [1991] 2 VR 636 at 645: (citations omitted)

7. [655]

   As Mr Park and Mr Martin submitted, his Honour’s observations were made during a hearing as to damages, having separately heard and determined liability: Ansett Transport Industries (Operations) Pty Ltd v Australian Federation of Air Pilots [1991] 1 VR 637. In his judgment as to liability, Brooking J observed the somewhat unusual manner in which the proceedings were being conducted by the agreement of the parties, at 642:

8. [656]

   His Honour proceeded to conclude that he should not infer that the plaintiffs had suffered loss in consequence of some matters, such that the claim for damages failed, but inferred loss in respect of other matters, which then proceeded to the hearing as to damages: at 693.

9. [657]

   In these proceedings, no order was made for the separate determination of liability and damages. Nor did the plaintiffs adduce any evidence of damage. Indeed, the defendants submitted that damage was not obvious where, as a result of the DOCA: unsecured claims against Metstech have been extinguished; Mr Jefferson remains a director of Metstech and Metstech IP; and Auxilia Holdings has increased its shareholding in Metstech for the relatively small DOCA contribution of $45,000. Mr Jefferson and Challenge have taken control of Metstech and its business through the DOCA, to the exclusion of the alleged conspirators, who lost their shareholding for, essentially, nil consideration.

10. [658]

    The plaintiffs submitted that it did not matter that Auxilia Holding secured additional shares in Metstech through the DOCA where Metstech’s primary assets – being its goodwill and technology – were stripped as a consequence of the conspiracy. Metstech remained largely a shell company without assets to commercialise. The shareholding was of questionable, if any, value. The conspiracy was not wholly implemented as a consequence of interlocutory injunctions ordered by the Court on commencement of the proceedings. Nonetheless, Metstech was deprived of the benefit of its intellectual property where control of that intellectual property was retained by the conspirators, either by Mr Chou alone or together with other defendants. The plaintiffs had clearly suffered loss and damage, being the opportunity to commercialise Metstech’s products and further develop its intellectual property. The plaintiffs sought an order for an inquiry to occur into the quantification of such damage or alternatively for an account of any profits, such election to occur upon the granting of final relief in these proceedings.

11. [659]

    Whilst it is permissible to elect between an account and damages in respect of the claims for equitable relief, the same cannot be said for a tortious claim in the absence of orders for separate determination of liability and damages. More importantly, no evidence was adduced of any damage. Nor can I readily infer that damage was suffered where, according to the administrator, Metstech and Metstech IP were insolvent, at least absent the continuing financial support of Mr Jefferson or Challenge. There was no evidence of the value of the intellectual property rights which the defendants sought to exploit outside of Metstech and Metstech IP, although the rights appear to have been valuable given the interest expressed in Metstech’s products and the lengths to which the defendants went to continue to exploit those rights. I accept that, by reason of the defendants’ actions and as a consequence of these proceedings, Metstech’s ability to develop and exploit its intellectual property rights and build its business has been interrupted and potentially harmed, but whether this has caused pecuniary loss is conjecture on my part and not based on evidence. As a consequence, the plaintiffs’ conspiracy claim fails.

12. [660]

    Ordinarily, I would proceed to analyse the parties’ submissions in the event that I am wrong about this. However, given the length of this judgment already, I will not do so. I have endeavoured to make the relevant factual findings in the event that an appellate court needs to determine whether there was a conspiracy in the terms alleged.

OPPRESSION

1. [661]

   The plaintiffs contended that the defendants had conducted the affairs of Metstech IP in a manner that was oppressive, unfairly prejudicial or unfairly discriminatory to the interests of minority shareholder Auxilia Holdings. The conduct included the actions involved in the conspiracy, assigning the trademark and domain name to 10Telco, deleting the G Suite information held for Metstech IP, and establishing a competing METS-LTE business. In addition, where Challenge had funded Metstech IP in recent years, failing to honour the agreement for Challenge to acquire a 20% interest in Metstech and Metstech IP was said to be unreasonable.

2. [662]

   Mr Chou and Mr Poisson did not seek to be heard in respect of the oppression suit. Mr Park and Mr Martin submitted that there was no oppression where Auxilia Holding was impacted no differently than any other shareholder of Metstech IP. Metstech and Metstech IP were not obliged to accede to Challenge’s letter of demand. Metstech IP received valuable consideration for the trademark and domain name. Deletion of redundant emails did not establish detriment to Metstech IP. The METS-LTE business has not acted in competition with Metstech IP. There was no investment from Telco, US Co or SA Distributor, and, in any event, they were not customers of Metstech IP.

Principles

1. [663]

   Section 232 of the Corporations Act provides that the Court may make orders under section 233 if:

2. [664]

   As Brennan J noted in Wayde v New South Wales Rugby League Limited (1985) 180 CLR 459, in respect of the statutory predecessor to section 232, that it is not oppressive for the directors of a company to make a decision which is manifestly prejudicial to and discriminatory against a member. To amount to oppression, it must also be unfair, that is, so unfair that reasonable directors who considered the disability the decision placed on the member would not have thought it fair to impose it: at 471-473. In an oft-cited passage of Morgan v 45 Flers Avenue Pty Ltd (1986) 10 ACLR 692; (1987) 5 ACLC 222, Young J explained the position post-Wayde as follows, at ACLR 704; ACLC 233 (some citations omitted):

3. [665]

   The case law recognises that a closely-held company or “quasi-partnership” has features that form a species of oppression claims. In Re a Company (No 00709 of 1992); O’Neill v Phillips [1999] 2 All ER 961; [1999] UKHL 24, Lord Hoffman, with whom Lords Jauncey of Tullichettle, Clyde, Hutton and Hobhouse of Woodborough agreed, referred to, at 970:

4. [666]

   In Fexuto Pty Ltd v Bosnjak Holdings Pty Ltd [2001] NSWCA 97; (2001) 37 ACSR 672, Spigelman CJ considered that irreconcilable differences in a quasi-partnership company do not of themselves constitute oppression or unfair prejudice but “the destruction of the personal relationship establishes a basis for granting relief in the usual case …” unless the person excluded from participation in management as a consequence of the breakdown was also responsible for it: at [89]–[90], [104]. In Tomanovic v Global Mortgage Equity Corp Pty Ltd [2011] NSWCA 104; (2011) 288 ALR 310, Campbell JA took a similar approach, noting that the emergence of irreconcilable differences may be one of several factors that together lead to a conclusion that oppression is made out: at [199].

Consideration

1. [667]

   I am satisfied that the conduct of Metstech IP’s affairs was contrary to the interests of the members as a whole. By endeavouring to invalidate the shareholders agreement and to release Mr Chou and Welldesign in particular, Mr Park, Mr Corbett and Mr Chou were intent to thwart the DOCA proposal and free themselves from restrictions which prevented them from exploiting Metstech’s intellectual property in a NewCo. Similarly, they endeavoured to ‘warehouse’ Metstech IP’s trademark and domain name for future use by the NewCo.

2. [668]

   In addition, Mr Park, Mr Corbett and Mr Chou endeavoured to make decisions which were unfairly prejudicial to the interests of Mr Jefferson in particular. Having funded Metstech and Metstech IP since inception, Mr Jefferson was excluded from management, as well as access to both companies’ bank accounts. The agreement to sell Metstech IP’s trademark and logo was particularly oppressive to Auxilia Holding as the largest shareholder.

3. [669]

   The conduct fits the description of “unfair”, being so unfair that reasonable directors who considered the disability their decisions placed on the shareholder would not have thought it fair to impose it. This conduct occurred in a closely-held company, where Mr Jefferson was the object of the concerted actions of his fellow directors to destroy the company’s assets and value. Whilst Mr Jefferson had earlier been open to selling his shares to US Co, those plans were abandoned by Mr Park and his colleagues in favour of denuding the company of assets and continuing Metstech’s business in a NewCo, to the exclusion of Mr Jefferson.

Remedy

1. [670]

   Auxilia Holding sought a buy-out order, being an order that the oppressed minority buy out the majority: Slea Pty Ltd v Connective Services Pty Ltd (No 9) [2022] VSC 136 at [1649]-[1808] (per Robson J). Such an order may be appropriate where the majority shareholders had engaged in a deliberate pattern of conduct calculated to strip Metstech IP of its assets and divert its business to other entities. Further, the object of the oppressive conduct was to exclude the plaintiffs from the Metstech business. It was said to be appropriate to relieve the oppression by permitting the plaintiffs to remain in that business to the exclusion of the oppressive majority. As to the value of the defendants’ shares, the Court could use $400, being the valuation at which Welldesign sold its shares in Metstech IP to Mr Corbett and Mr Martin, as approved by Mr Park, Mr Chou and Mr Corbett. Alternatively, the Court could use a valuation of $6,000, being the amount that the defendants determined the trade mark and domain licence to be worth.

2. [671]

   In the event that I found oppression, Mr Park and Mr Martin did not oppose a buy-out by Auxilia Holding for market value without set-off or deduction as independently assessed.

3. [672]

   For the reasons advanced by the plaintiffs, a buy out order is appropriate, where Mr Jefferson buys out Mr Park and Mr Martin. Metstech IP’s only assets of note are its trademark and domain name, these having been retrieved by the plaintiffs following settlement of these proceedings against Mr Smith and 10Telco. Mr Park and Mr Martin were previously content to sell these assets for $6,000 including GST. I accept that they did so in the course of seeking to ‘warehouse’ those assets for later use, and thus the figure may not represent its true value. But nor is the value of the domain name and trademark the same as the value of Metstech IP shares. Metstech IP also has debts. Once the confected goodwill figure of $2.6 million is excluded, Metstech IP has negative net assets of $1.34 million. There is no reason to think that this financial position has improved. On this basis, I consider that the value of Metstech IP’s shares is $1 a share.

COSTS

1. [673]

   The plaintiffs have largely succeeded, albeit not in respect of the tortious claim of conspiracy. Mr Martin has enjoyed partial success in respect of copyright in the software and the existence of an exclusive licence, albeit not to the company he suggested and subject to an obligation to deliver up the source code, which he opposed. I note that Mr Poisson was amenable to some of the plaintiffs’ demands shortly after the commencement of these proceedings.

2. [674]

   Having regard to these matters, I consider it appropriate to order that the plaintiffs costs be paid by Mr Park, Mr Chou and their companies, by Mr Martin and his company but limited to 40% of the plaintiffs’ costs, and by Mr Poisson and his company but limited to 20% of the plaintiffs’ costs.

ORDERS

1. [675]

   The plaintiffs have requested that this judgment be supressed until they have had an opportunity to inspect it and notify the Court of any confidential information or trade secrets that should be removed prior to publication. I consider it appropriate to make a suppression order until the parties have had an opportunity to do so.

2. [676]

   For these reasons I make the following orders:

   1. (1)

      Direct the plaintiffs, within seven days, to:

   2. (2)

      Direct the defendants, within 14 days, to:

   3. (3)

      Restrict publication of this judgment until further order, such order to apply throughout the Commonwealth.

ADDENDUM

1. [677]

   Following the delivery of judgment, the plaintiffs identified parts of the judgment as confidential. The defendants did not seek to be heard. Section 8(1)(a) of the Court Suppression and Non-publication Orders Act 2010 (NSW) provides that the Court may make such an order where ‘the order is necessary to prevent prejudice to the proper administration of justice’. Preventing the disclosure of trade secrets constitutes an exception to the principle of open justice. As Hammerschlag J (as his Honour then was) observed in Wright Prospecting Pty Ltd v Hamersley Iron Pty Ltd (No 3) [2013] NSWSC 1069:

2. [678]

   Further, as White J (as his Honour then was) observed in AB v Curry (No 3) [2015] NSWSC 1677 at [19]: “where litigation is brought to protect trade secrets or confidential information, it is usual to redact parts of a judgment so that the very object of the proceedings, being to protect confidential information or trade secrets, will not be defeated by the reasons themselves”. I have acceded to the plaintiffs’ request and, rather than redact the judgment, have re-written the offending portions in an effort to preserve the sense of the judgment whilst preserving trade secrets and confidentiality. I have also made small edits to the summary to correct grammatical infelicities.