Jontra Holdings Pty Ltd. v. Gas Sensing Tech. Corp., S-20-0072

• Court: United States State Supreme Court of Wyoming
• Writing for the Court: DAVIS, Chief Justice.
• Citation: 2021 WY 17
• Parties: JONTRA HOLDINGS PTY LTD, an Australian registered company; BRISBANE ANGELS NOMINEES PTY LTD, an Australian registered company; and ASSOCIATED CONSTRUCTION EQUIPMENT PTY LTD, an Australian registered company, Appellants (Plaintiffs), v. GAS SENSING TECHNOLOGY CORPORATION, a Wyoming corporation d/b/a WELLDOG, Appellee (Defendant). GAS SENSING TECHNOLOGY CORPORATION, a Wyoming corporation d/b/a WELLDOG, Appellant (Defendant), v. JONTRA HOLDINGS PTY LTD, an Australian registered company; BRISBANE ANGELS NOMINEES PTY LTD, an Australian registered company; and ASSOCIATED CONSTRUCTION EQUIPMENT PTY LTD, an Australian registered company, Appellees (Plaintiffs).
• Decision Date: 29 January 2021
• Docket Number: S-20-0073,S-20-0072

2021 WY 17

JONTRA HOLDINGS PTY LTD, an Australian registered company;
BRISBANE ANGELS NOMINEES PTY LTD, an Australian registered
company; and ASSOCIATED CONSTRUCTION EQUIPMENT
PTY LTD, an Australian registered company, Appellants (Plaintiffs),
v.
GAS SENSING TECHNOLOGY CORPORATION, a Wyoming
corporation d/b/a WELLDOG, Appellee (Defendant).

GAS SENSING TECHNOLOGY CORPORATION, a Wyoming
corporation d/b/a WELLDOG, Appellant (Defendant),
v.
JONTRA HOLDINGS PTY LTD, an Australian registered company;
BRISBANE ANGELS NOMINEES PTY LTD, an Australian registered
company; and ASSOCIATED CONSTRUCTION EQUIPMENT
PTY LTD, an Australian registered company, Appellees (Plaintiffs).

S-20-0072
S-20-0073

SUPREME COURT, STATE OF WYOMING

OCTOBER TERM, A.D. 2020
January 29, 2021

Appeal from the District Court of Albany County
The Honorable Tori R.A. Kricken, Judge

Representing Jontra Holdings Pty Ltd; Brisbane Angels Nominees Pty Ltd; and Associated Construction Equipment Pty Ltd:
George E. Powers, Jr. and Noah S. Grovenstein of Sundahl, Powers, Kapp & Martin, LLC, Cheyenne, Wyoming; Robert D. Comer and Mike Cross of Norton Rose Fulbright US LLP, Denver, Colorado. Argument by Mr. Powers.

Representing Gas Sensing Technology Corporation:
Philip A. Nicholas of Nicholas & Tangeman, LLC, Laramie, Wyoming.

Before DAVIS, C.J., and FOX, KAUTZ, BOOMGAARDEN, and GRAY, JJ.

NOTICE: This opinion is subject to formal revision before publication in Pacific Reporter Third. Readers are requested to notify the Clerk of the Supreme Court, Supreme Court Building, Cheyenne, Wyoming 82002, of any typographical or other formal errors so that correction may be made before final publication in the permanent volume.

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DAVIS, Chief Justice.

[¶1] Plaintiffs Jontra Holdings Pty Ltd (Jontra), Brisbane Angels Nominees Pty Ltd (BAN), and Associated Construction Equipment Pty Ltd (ACE) are Australian investors. They sued Gas Sensing Technology Corporation (GSTC), a Wyoming-based oil and gas service company, for payment of loans they made to finance its operations in Australia. GSTC asserted numerous affirmative defenses and counterclaims, and the district court dismissed the counterclaims on grounds that they unduly complicated the action and were untimely filed. After trial, a jury found that Plaintiffs had breached the implied covenant of good faith and fair dealing and therefore awarded no damages on their breach of contract claims.

[¶2] Plaintiffs appealed the final judgments against them, and GSTC appealed the order dismissing its counterclaims and cross-appealed the final judgments. Plaintiffs claim that numerous errors in the admission of evidence and the jury instructions resulted in an unfair trial, and that the district court erred in denying their motion for a new trial. GSTC claims that the court erred in dismissing its counterclaims and in entering partial summary judgment against it. Because we conclude that the court erred in dismissing GSTC's counterclaims, we reverse and remand and provide guidance regarding the admissibility of certain evidence.

ISSUES

[¶3] Plaintiffs' notice of appeal was docketed in this Court as No. S-20-0072, and GSTC's notice of appeal was docketed as No. S-20-0073. In No. S-20-0072, Plaintiffs state the issues on appeal as follows:

1. Did the Trial Court commit reversible error when it allowed GSTC to present hearsay evidence of statements by a third party in a separate action, in which [Plaintiffs] were not parties and had no opportunity to examine or cross-examine witnesses?

2. Did the Trial Court commit reversible error by denying [Plaintiffs'] motion for a new trial despite GSTC failing to prove its purported defenses for breach of the implied covenant of good faith and fair dealing?

3. Did the Trial Court commit reversible error when it allowed GSTC to present testimony, evidence, and argument in violation of pretrial orders, including the international conspiracy claim that relied upon inadmissible evidence implicating third-parties who were not before the court?

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4. Did the Trial Court fail to instruct the jury properly regarding issues on waiver, material breach and agency?

5. Did the cumulative, unfair prejudice caused by the Trial Court's errors deprive [Plaintiffs] of their right to due process and a fair trial, mandating a new trial?

[¶4] On cross-appeal in No. S-20-0072, GSTC presents two additional issues, which it states as follows:

1. Did the Trial Court commit error when it ruled on partial summary judgment that there was no mutual mistake relating to the terms of the Jontra and ACE Finance Notes #3 regarding the obligation to make payments of principal?

2. Did the Trial Court commit error in refusing to allow testimony of a conspiracy involving [Plaintiffs], John Mactaggart, Graeme Linklater and others?

[¶5] In No. S-20-0073, GSTC states the issues on appeal as follows:

1. Whether the District Court erred in dismissing all of [GSTC's] counterclaims?

2. Whether the Court committed error in its failing to allow [GSTC's] counterclaims timely filed in federal court and filed five days late in state court?

[¶6] Plaintiffs respond in No. S-20-0073 with the following additional issue:

1. Can [GSTC] maintain an appeal from an order dismissing permissive counterclaims without prejudice, or must this Court dismiss the appeal for lack of an appealable order?

FACTS

I. GSTC and the Promissory Notes

[¶7] We recently decided another case in which two other creditors alleged that GSTC defaulted on loans they made to it. See Gas Sensing Tech. Corp. v. New Horizon Ventures

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Pty Ltd, as Trustee of the Linklater Family Trust, 2020 WY 114, 471 P.3d 294 (Wyo. 2020) (GSTC I). In that case, we described GSTC's business as follows:

John Pope founded GSTC in 2007 through an entity known as Blue Sky Group, Inc. GSTC is an oil and gas technical service company based in Laramie, Wyoming. It developed patented chemical sensing systems to provide commercial reservoir analysis services for coal, gas, alternative and conventional resources. GSTC provided equipment and services related to this technology to customers who used it to measure methane and carbon dioxide underground to locate coal bed methane wells. Initially, GSTC operated in the United States and Canada, particularly the Powder River Basin in Wyoming. Around 2010, GSTC decided to enter the Australian market and formed an Australian subsidiary called WellDog Proprietary Limited (WellDog).

GSTC I, ¶ 5, 471 P.3d at 296.

[¶8] To raise capital for the Australian expansion, GSTC and WellDog secured venture equity and debt financing from investors in the United States and Australia. Shell Technology Ventures, a venture capital arm of Shell Oil and Gas Company, was a primary United States investor. The two primary groups of investors from Australia were Plaintiffs Jontra, ACE, and BAN, of which John Mactaggart is a director, and ProX Pty Ltd and Kinabalu Australia Pty Ltd, with which Simon Ashton is associated.

[¶9] In July 2012, ACE loaned WellDog 500,000 Australian dollars to finance inventory and operating expenses. In November 2012, Jontra loaned WellDog 250,000 Australian dollars to finance its continuing growth and need for additional equipment. Both loans were for one-year terms. Although the ACE and Jontra notes were originally issued for one-year terms, they were extended annually until 2015.

[¶10] On July 14, 2014, ProX made three loans to WellDog. Promissory Note 1 was for $2,000,000 and had a maturity date of July 14, 2017. Promissory Note 2 was for $1,000,000 and had a maturity date of July 14, 2016. Promissory Note 3 was also for $1,000,000 and had a maturity date of July 14, 2015, which was at some point extended to July 14, 2016.

[¶11] In 2015, WellDog experienced substantial growth, and because it was a high-growth company, it required larger sums of cash on hand. GSTC therefore approached Mr. Mactaggart and asked that the ACE and Jontra notes be transferred to GSTC to allow WellDog access to other funding opportunities, and he agreed. On August 1, 2015, the outstanding balances on the ACE and Jontra notes were then transferred to GSTC, which

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issued new notes in the amounts of $488,499.46 and $244,249.73, respectively. The maturity date for both notes was July 31, 2016.

[¶12] Also in 2015, GSTC issued two promissory notes to Plaintiff BAN. On October 26, 2015, it issued a promissory note to BAN for $47,500.00. The note commenced on November 12, 2015 and was to mature on November 11, 2016. On April 22, 2016, it issued a second promissory note to BAN, this one for $59,924.00. The second note commenced on May 1, 2016 and was to mature on May 1, 2017.¹

[¶13] In 2015 and into 2016, Mr. Pope worked to secure investors that would provide sufficient capital to allow GSTC to retire its own debt as well as WellDog's debt, including WellDog's debt to ProX. His initial efforts fell through, but in 2016, he remained confident that he could raise the required funds, and he therefore negotiated an extension of ProX Notes 2 and 3, which were due to mature in July 2016, to allow additional time for fundraising. ProX agreed to extend the maturity date of Notes 2 and 3 to October 31, 2016, in exchange for WellDog's agreement to execute a general security agreement that would give ProX a security interest in WellDog.

[¶14] On July 14, 2016, WellDog and ProX signed an agreement, termed a deed of variance, that extended the maturity dates for ProX Notes 2 and 3 to October 31, 2016, subject to execution of the agreed-upon general security agreement. On July 21, 2016, Plaintiffs issued default notices to GSTC for its failure to make interest payments on their notes, which were due on July 1, 2016. For each note, the default notice demanded immediate payment of the unpaid principal and all accrued interest. However, on July 27, 2016, Mr. Mactaggart agreed to extend the maturity date of Plaintiffs' notes to October 31, 2016.

[¶15] On August 1, 2016, WellDog and ProX executed and signed the general security...