Air Great Lakes Pty Ltd v K S Easter - [1997] FCA 558 - FCA 1997 case summary — Zoe

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Air Great Lakes Pty Ltd v K S Easter

[1997] FCA 558

Federal Court of Australia|1997-07-01|Before: Einfeld JJ, Hill JJ, O'Connor J

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Court

Federal Court of Australia

Decision date

1997-07-01

Before

Einfeld JJ, Hill JJ, O'Connor J

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Original judgment source is linked above.

Judgment (4 paragraphs)

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CATCHWORDS TENDER PROCESS - Government Agency - Applicant the unsuccessful bidder in an invited tender for the installation of a national air traffic control system - claims raised in contract, trade practices, estoppel and tort that selection of tenderer not in accordance with requirement that process be fair and according to defined procedures - whether respondent bound by a 'tender process' contract - whether respondent engaged in misleading conduct in relation to and following selection of the successful tenderer. CONTRACT - Tender Process Contract - whether invitation to tender merely invitation to treat - importance of specific factual matrix - intention to contract - consideration - whether applicant's agreement to participate in the circumstances sufficient - subsequent Request for Tender issued - whether RFT constituted a second tender process contract. Air Great Lakes Pty Ltd v K S Easter (Holdings) Pty Ltd (1985) 2 NSWLR 309 Blackpool and Fylde Aero Club Ltd v Blackpool Borough Council [1990]1 WLR 1195 Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337 Fairclough Building Ltd v Borough Council of Port Talbot (1992) 62 BLR 82 Gregory v Rangitikei District Council [1995] 2 NZLR 208 Pratt Contractors Ltd v Palmerston North City Council [1995] 1 NZLR 469 Queen in Right of Ontario v Ron Engineering and Construction Eastern Ltd (1981) 119 DLR (3d) 267 Spencer v Harding (1870) LR 5 CP 561 Streamline Travel Service Pty Ltd v Sydney City Council (1981) 46 LGRA 168 Eisenberg M A, "Relational Contracts", in Beatson and Friedmann (eds), Good Faith and Fault in Contract Law, (Clarendon Press, Oxford, 1995) Fridman G H L, "Tendering Problems", (1987) 66 Can Bar Rev 582 Seddon N, Government Contracts, (Federation Press, Sydney, 1995) CONTRACT - Implication of Terms - pleaded term of fairness to be implied ad hoc - whether reasonable, necessary etc to imply 'fairness' - whether fair dealing also implied as a legal incident of a particular class of contract - significance of GBE as a party to contract - obligation to deal fairly in tender process contract where public body a party - whether Australian law recognises a duty of good faith and fair dealing. Attorney-General for the United Kingdom v Heinemann Publishers Australia Pty Ltd (1987) 10 NSWLR 86 B P Refinery (Westernport) Pty Ltd v Shire of Hastings Council (1977) 180 CLR 267 Bill Acceptance Corporation Ltd v GWA Ltd (1983) 50 ALR 242 Futuretronics International Pty Ltd v Gadzhis [1992] 2 VR 217 Butt v McDonald (1896) 7 QLJ 68 Byrne v Australian Airlines Ltd (1995) 185 CLR 410 Castlemaine Tooheys Ltd v Carlton & United Breweries Ltd (1987) 10 NSWLR 468 Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337 Con-Stan Industries of Australia Pty Ltd v Norwich Winterthur Insurance (Australia) Ltd (1986) 160 CLR 226 Conoco v Inman Oil Co 774 F2d 895 (1985) Greiner v ICAC (1992) 28 NSWLR 125 Hawkins v Clayton (1988) 164 CLR 539 Hide & Skin Trading Pty Ltd v Oceanic Meat Traders Ltd (1990) 20 NSWLR 310 Hospital Products Ltd v USSC (1984) 156 CLR 41 Jones v Swansea City Council [1990] 1 WLR 54 Keco Industries Inc v US 492F 2d 1200 (1974) Lister v Romford Ice and Cold Storage Co Ltd [1957] AC 555 Liverpool City Council v Irwin [1977] AC 239 Livingstone v Roskilly [1992] 3 NZLR 230 Logue v Shoalhaven Shire Council [1979] 1 NSWLR 537 Melbourne Steamship Co Ltd v Moorehead (1912) 15 CLR 333 News Ltd v ARFL (1996) 139 ALR 193 Pratt Contractors Ltd v Palmerston North City Council [1995] 1 NZLR 469 Renard Constructions (ME) Pty Ltd v Minister for Public Works (1992) 26 NSWLR 234 Scally v Southern Health and Social Services Board [1992] 1 AC 294 SCI Operations Pty Ltd v Commonwealth of Australia, (unreported, FC FCA, per Beaumont and Einfeld JJ, 28 August 1996) Simonius Vischer & Co v Holt & Thompson [1979] 2 NSWLR 322 Thompson and Morgan (United Kingdom) Ltd v Erica Vale Australia Pty Ltd, (unreported, FC FCA, per Gummow and Hill JJ, 19 April 1995) Webster v Auckland Harbour Board [1983] NZLR 646 Farnsworth E A, "Good Faith in Contract Performance" in Beatson and Friedmann (eds) Good Faith and Fault in Contract Law, (Clarendon Press, Oxford, 1995) Farnsworth on Contracts, (Little, Brown & Co, Boston 1990) Glanville Williams, "Language and the Law", (1945) 61 LQR 71 Lücke H K, "Good Faith and Contractual Performance" in Finn (ed), Essays on Contract, (Law Book Co, Sydney, 1987) Massengale E W, Fundamentals of Federal Contract Law, (Quorum Books, NY, 1991) O'Connor J F, Good Faith in English Law, Dartmouth, 1990 Renard I, "Fair Dealing and Good Faith", in Saunders (ed), Courts of Final Jurisdiction, (Federation Press, Sydney, 1996) Rose D, "The Government and Contract", in Finn (ed), Essays on Contract, (Law Book Co, Sydney, 1987) Sir Anthony Mason, "Contract and its Relationship with Equitable Standards and the Doctrine of Good Faith", The Cambridge Lectures, 1993 (8 July 1993) Skapinker D and Carter J W, "Breach of Contract and Misleading or Deceptive Conduct", (1997) 113 LQR 294 Rt Hon Lord Justice Staughton, "Good Faith and Fairness in Commercial Contract Law" (1994) 7 Jo Contract Law 193 Unidroit, Principles of International Commercial Contracts, International Institute for the Unification of Private Law, Rome, 1994 TRADE PRACTICES - Misleading and deceptive Conduct - claim that representations made by respondent as to conduct of tender process were later falsified - representations of a continuing nature - whether applicant reasonably entitled to expect that respondent would disclose its failure to comply with representations - noncompliance with representations a matter peculiarly within respondent's knowledge - representations relied upon also terms of contract pleaded. Trade Practices Act (Cth) 1974, S52 Demagogue Pty Ltd v Ramensky (1992) 39 FCR 31 Henjo Investments Pty Ltd v Collins Marrickville Pty Ltd (1988) 79 ALR 83 Kimberley NZI Finance Ltd v Torero Pty Ltd (1989) 11 ATPR 46-054 Nagy v Masters Dairy Ltd (1997) 19 ATPR 46-164 Spedley Securities Ltd (in liq) v Bank of New Zealand (1991) 13 ATPR 41-143 Trade Practices Commission v Optus Communications Pty Ltd (1996) 18 ATPR 41-478 Cheshire and Fifoot, Law of Contract, (7th Aust ed, Butterworths, Sydney, 1997) STATUTORY CORPORATIONS - Constitutional Status - relationship between executive, parliament and government business enterprise - during selection process respondent received a letter from minister responsible for respondent - right of responsible minister to communicate with GBEs - provision in statute for minister to give express direction - no direction given - whether communication amounted to indirect direction - second letter received by board during selection consideration from non-portfolio minister encouraging 'every consideration' to be given to priority 4 - propriety of communications - whether respondent improperly took account of communications. Air India v The Commonwealth [1977] 1 NSWLR 449 Ansett Transport Industries (Operations) Pty Ltd v Commonwealth (1977) 139 CLR 54 Horta v The Commonwealth of Australia (1994) 181 CLR 183 L'Huillier v State of Victoria [1996] 2 VR 465 Martselos Services Ltd v Arctic College (1994) 111 DLR (4th) 65 Mercury Energy Ltd v Electricity Corporation of New Zealand Ltd [1994] 2 NZLR 385 R v East Berkshire Health Authority, Ex parte Walsh [1985] 1 QB 152 Service Station Association Ltd v Berg Bennett & Associates Pty Ltd (1993) 45 FCR 84 Tickner v Chapman (1995) 57 FCR 451 Administrative Review Council, Government Business Enterprises and Commonwealth Administrative Law: Report No 38, (1995) Aronson M, "Ministerial Directions: The Battle of the Prerogatives", (1995) 6 Public Law Rev, 86-88 Bottomley S, "Regulating Government-Owned Corporations: A Review of the Issues", (1994) 53 Aust Jo of Pub Admin 521 Hale, De Portibus Maris, 77, (c.1660) McLean J, "Contracting in the Corporatised and Privatised Environment", (1996) 7 Public Law Rev 223 Senate Standing Committee on Finance and Government Operations, Statutory Authorities of the Commonwealth, Fifth Report, Ch 6, 1982 Taggart M, "Corporatisation, Contracting and the Courts", [1994] Public Law 351 Taggart M, "Corporatisation, Privatisation and Public Law", (1991) 2 Public Law Rev 77 Zines L, The High Court and the Constitution, (4th ed Butterworths, Sydney, 1997) STATUTORY CORPORATION - Construction of Statute - governance - role of board - fiduciary obligations - role of chief executive officer - disclosure of interest provisions - purpose of disclosure provisions. Civil Aviation Act 1988 (Cth), s8; s9; s12; s32B; s45; s47(2)(b); s48; s84A STATUTORY CORPORATION - Breach of Confidence - obligation on respondent to ensure strict confidentiality of tender information - applicant's claim that CEO disclosed price information to responsible minister - consideration of minister's powers of access to information of GBEs - whether CEO had authority to make disclosure - further claim that respondent improperly disclosed price information to employee of consultant (DITRD) - whether necessary for consultant to know price information to perform consultancy. Public Service Act 1992 (Cth) s25(2) Associated Provincial Picture Houses Ltd v Wednesbury Corporation [1948] 1 KB 223 Camelot Resources Ltd v MacDonald (1994) 14 ACSR 437 Commonwealth of Australia v John Fairfax & Sons Ltd (1980) 147 CLR 39 Elders Trustee & Executor Co Ltd v E G Reeves Pty Ltd (1987) 78 ALR 193 Esso Australia Resources Ltd v Plowman (1995) 183 CLR 10 North and South Trust Co v Berkeley [1971] 1 WLR 470 R v Birmingham City Council; Ex parte O [1983] 1 AC 578 Re Quintex Ltd (No 2) (1990) 2 ACSR 479 Slater v Bissett (1986) 69 ACTR 25 Smith Kline & French Laboratories (Australia) Ltd v Secretary to the Department of Community Services (1991) 28 FCR 291 Spedley Securities Ltd (in liq) v Greater Pacific Investments Pty Ltd (in liq) (1992) 7 ACSR 155 Commission on Government, Report No 3, (1996, WA) Reid G S and Forrest M, Australia's Commonwealth Parliament 1901-1988, (MUP, Melbourne, 1989) Report of the Royal Commission into Commercial Activities of Government and Other Matters, Part II, (1992, WA) EQUITY - Fiduciary - parties not in a fiduciary relationship - applicant claim that neither respondent nor its agents would have affiliations which created a conflict of interest etc or which influenced decision without applicant's consent - term pleaded a fiduciary hybrid - nature of fiduciary obligations as against obligations of good faith and fair dealing. Bennetts v Board of Fire Commissioners of New South Wales (1967) 87 WN (Pt 1)(NSW) 307 Boulting v Association of Cinematograph, Television and Allied Technicians [1963] 2 QB 606 Bowes v City of Toronto (1858) 11 Moo PC 463 Commonwealth of Australia v O'Donohue [1979] VR 441 Government Insurance Office of New South Wales v Deputy Commissioner of Taxation (1992) 106 ALR 715 Hodgkinson v Simms (1995) 117 DLR (4th) 161 Molomby v Whitehead (1985) 7 FCR 541 CONFLICT OF INTEREST OR DUTY - Implied Terms - claim that tender process prohibited affiliations which engendered a conflict of interest or duty or which influenced respondent or board members - construction of 'affiliation' - consideration of 'influenced'. City of London Electric Lighting Co v London Corporation (1903) 72 LJ Ch 737 R v Justices of Sunderland [1901] 2 KB 357 State Bank of SA v Marcus Clark (1996) 19 ACSR 606 Transvaal Lands Co v New Belgium (Transvaal) Land and Development Co [1914] 2 Ch 488 US v Mississippi Valley Generating Co 364 US 520 (1961) Morgan P M, "The Appearance of Propriety: Ethics Reform and Blifil Paradoxes", (1992) 44 Stanford L Rev 593 Public Duty and Private Interest: Report of the Committee of Inquiry, AGPS, 1979 HUGHES AIRCRAFT SYSTEMS INTERNATIONAL (Applicant) v AIRSERVICES AUSTRALIA (Respondent) No ACT G86 of 1995 FINN J CANBERRA 30 JUNE 1997

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TABLE OF CONTENTS PART I: INTRODUCTORY SECTION...........................

ACRONYMS AND ABBREVIATIONS..........................
PRINCIPAL ACTORS....................................
GENERAL CHRONOLOGY................................. Outline of Events................................. PART II: THE CAA AND ITS STATUTE...................... PART III: THE CASE AS PLEADED AND PLEADING ISSUES......
The Four Bases of Hughes' Principal Claim..........
The Seven Complaints............................... THE SPLITTING OF THE APPLICATION...................... ISSUES NOT PLEADED.................................... PART IV: GENERAL CONTRACT ISSUES......................
THE PROCESS CONTRACTS.............................. Additional Chronological Material..................... Conclusions........................................... (i) The 9 March Letter............................ (ii) The RFT Contract.............................. (iii) The Relationship of the Contracts.............
THE IMPLICATION OF TERMS GENERALLY.................
THE IMPLIED TERM OF "FAIR DEALING"................. (i) Express term.................................. (ii) Implication ad hoc............................ (iii) Implication in law............................ (a) Good faith and fair dealing................ (b) As a legal incident of a particular class of contract...............................................
GENERAL TRADE PRACTICES ACT ISSUES................. (i) The nature and basis of the claim............. (ii) The interrelationship of the claims.......... PART V: EVALUATION/SELECTION PROCEDURE FAILURES...... (i) The Role of the CAA Board in Selecting the TAAATS Contractor........................................... The disenfranchisement argument............... The "fetter" argument......................... (ii) The CAA's Obligation in relation to AII and its Compass..................................................... A. Criteria Related Complaints........................ (i) Evaluation in Accordance with the Methodology and Priorities........................................... Additional Factual Material.......................... (ii) The Construction of the RFT Priority Ranking and Evaluation Methodology............................... (iii) The Board's Decision........................... (iv) Conclusions.................................... (v) The Prospect of a Government Subsidy........... B. DITRD Related Complaints........................... (i) Permitting DITRD's Role to Change.............. (a) Allowing DITRD to deal with the Board...... (b) Accepting submissions from DITRD on the price/AII balance................................................. (ii) Reliance on DITRD.............................. (iii) Warranting DITRD's Evaluation.................. PART VI: POLITICAL INTERFERENCE...................... (i) The Propriety of the Communications............ (a) Minister Collins.......................... (b) Minister Griffiths........................ (ii) The Board's Treatment of the Communications.... PART VII: AUDIT FAILURE..............................
The Construction Question......................... PART VIII: IMPROPER INTERESTS AND AFFILIATIONS.......
Mr Yates..........................................
The CAA...........................................
DITRD............................................. PART IX: BREACH OF CONFIDENCE........................ The Pleadings........................................ The Four Claims Made.................................
The Disclosure to Senator Collins................. (a) Factual Matters.............................. (b) Legal Issues and Submissions.................
The TEC's Disclosure of the Price Bids to Ms Clarke (i) Additional Factual Material.................. Submissions and Conclusion:...........................
The Disclosure of Price Information by Ms Clarke to Other DITRD Officers and to the Secretary: the Disclosure to Minister Griffiths............................................ Additional Factual Matters........................... Conclusions..........................................
The "Leaks" to Thomson............................ PART X: PRICE REDUCTION/AII VARIATION................
The Price Reduction...............................
The AII Variations................................ PART XI: FAIR DEALING................................. A. THE ALLEGATIONS OF UNFAIR DEALING: CONTRACT CLAIMS
Mr Yates.......................................... (i) Permitting an Interested Member to Participate in the Board Decision..................................... (ii) Being Influenced by The Preston Group Ltd Affiliation........................................ (iii) Dealing with and Giving Advice to Thomson.... Additional Factual Material.......................... (a) The TPG Directorship......................... (b) Dealings with the Tenderers.................. (c) Alleged Advocacy for Thomson................. The Alleged Unfair Dealing...........................
DITRD.............................................
The Attorney-General's Department................. B. THE TRADE PRACTICES ACT CLAIMS.................... PART XII: THE CONSEQUENTIAL TRADE PRACTICES ACT CLAIM The Price Difference................................. PART XIII: PRINCIPAL FINDINGS AND CONCLUSIONS........ Hughes Aircraft Systems International ("Hughes"), a Californian company, was the unsuccessful tenderer in a two party bid for the award by the Civil Aviation Authority (the "CAA") of the Australian Advanced Air Traffic System Acquisition contract, or TAAATS II as it was referred to at the time and in these proceedings. The successful tenderer was Thomson Radar Australia Corporation Ltd ("Thomson"). It is a subsidiary of a French company, Thomson-CSF ("TCSF"). Air Services Australia, a statutory corporation of the Commonwealth, is for present purposes the successor body to the CAA. It is admitted to be the appropriate respondent in this proceeding. Put compendiously, the core of Hughes' application is the claim that the CAA by contract, representation or promise obliged itself to conduct the tender process leading to the award of the TAAATS II contract fairly and in accordance with defined procedures and criteria. It is alleged that in a significant number of respects it failed to satisfy this obligation. Accordingly, damages have been claimed against the respondent (i) for a variety of breaches of contract; (ii) for misleading and deceptive conduct (Trade Practices Act 1974 (Cth), S52); (iii) for negligence in the administration of the tender process; and (iv) on the basis of equitable estoppel. It will be necessary to refer to the pleadings in this matter in some detail. The proceeding itself raises a range of issues, legal and factual, of no little complexity. My reasons, inevitably, will reflect that complexity. To assist understanding I have considered it appropriate to preface these reasons with an Introductory Section. This will begin with a Glossary of Abbreviations and Acronyms. It will be followed by a description of the principal actors in the events with which this application is concerned. A General Chronology will then be provided. PART I: INTRODUCTORY SECTION
ACRONYMS AND ABBREVIATIONS Though the full and correct name or title of the person or thing referred to below will be set out where it first appears in these reasons, the following list is provided as a convenient reference source. AIA Airport Industries Australia. This unincorporated association, which appears to have been formed in March 1993, had the purpose of acting as a network of representatives from industry, government business enterprises and Commonwealth departments to enhance the prospects of Australian companies winning air traffic management business particularly overseas. AII Australian Industry Involvement. This was designated as the fourth major selection criteria in the award of the TAAATS II contract. BAFO Best and Final Offer. The Request for Tender issued to Hughes and Thomson required the lodgment of a BAFO with the CAA. It was to be irrevocable for a period of 6 months from the BAFO closing date. DITAC Department of Industry, Technology and Commerce. This department and its successor (DITRD) were responsible for conducting the evaluation of the tenderers' AII proposals and for advising the Tender Evaluation Committee on AII matters. DITRD Department of Industry, Technology and Regional Development. DITAC mutated into DITRD during the tender process period. Dubs Notes Records of Board meetings prepared by Dr Rosalind Dubs who, at the relevant times, was Corporate Secretary of the CAA. GBE Government business enterprise. The CAA for relevant purposes was a GBE. Macphee Report A Report entitled "Independent Review of the Civil Aviation Authority's Tender Evaluation Process for the Australian Advanced Air Traffic System". The Review, which reported in December 1992 was chaired by the Hon I Macphee AO and was set up by the relevant Minister under s12 of the Civil Aviation Act 1988 (Cth) to inquire (inter alia) into the soundness and fairness of the processes leading to the selection of Thomson as the preferred tenderer for the TAAATS I contract. The Report led to the rebid known as TAAATS II. RADREP Radar Display Replacement Project. This project, in which Hughes and Thomson were competitors, was abandoned by the CAA in March 1991 in favour of the TAAATS concept. The CAA's conduct of this was subject to strong criticism in the Macphee Report, para 3.4.2. RASPP Radar Sensor Procurement Project. This was a contract being performed by Thomson for the CAA during the currency of the TAAATS II tender process. It was unrelated to TAAATS II. RFT Request for Tender. This was issued to Hughes and Thomson under cover of a letter dated 19 July 1993. It is Hughes' case (inter alia) that on lodgment of the BAFO there was a contract between Hughes and the CAA upon the terms and conditions of the RFT and that that contract carried forward the contract alleged to be recorded in the 9 March 1993 letter (see below). RFT CONTRACT See RFT. SDP Specification Development Phase. This was the first phase in the TAAATS II procurement, the second being the TAAATS Acquisition Phase. Only the latter is of significance in this proceeding. TAAATS The Australian Advanced Air Traffic System. The objective of the TAAATS concept was to establish a single, integrated, Australia wide air traffic services system based on two centres, Brisbane and Melbourne. This was to replace the multi-generational systems located at some number of centres around Australia. Against a setting of detailed functional specification, the TAAATS contract was to be for a "turn-key" solution. TEC Tender Evaluation Committee. This was a committee of senior managers of the CAA constituted for the purposes of the TAAATS II tender. Its function (inter alia) was to make a recommendation to the CAA board of the preferred contractor. It recommended Hughes. Tender Process Contract See 9 March letter below. TPG The Preston Group Pty Limited, a company that was part of the Thomson "team" for the purposes of Thomson's AII bid. One of its directors, Mr Ronald Yates, was a member of the Board of the CAA. 9 March Letter This letter, sent separately to, and later signed by, both Hughes and Thomson, detailed procedures and criteria for the award of the TAAATS II contract. It is Hughes' case that the letter gave rise to what has been called the Tender Process Contract on Hughes' agreeing to participate in the new tender process on the terms of the letter. 9 March Contract See 9 March letter.
PRINCIPAL ACTORS Attorney-General's Department - John Butler (solicitor with the Australian Government Solicitor engaged by CAA to advise on TAAATS II) - Dennis Rose QC (Chief General Counsel) CAA (1) Board Members - Leslie Fenton Ayres * - Richard Lawrence Baillieu * (Until 31 December 1993) - Henry Bosch * - Peter Courtney Gration * (Chairman) - Russell Ingersoll * - John Hayward Mant * - Douglas Roser * (Chief Executive Officer from July 1993 until December 1994) - Michael Thomas Terrell * - Ronald John Yates * (2) Officers - Dr Rosalind Vivienne Dubs * (Corporate Secretary) - Peter William Hider * (TAAATS Project Manager and TEC member) - David Williams (in-house legal adviser) (3) Consultants/agents for TAAATS - John Michael Moten * (TAAATS independent auditor) DITAC/DITRD - Beverley Anne Clarke * (public servant and DITRD officer in AII evaluation team for TAAATS contract) - Neville Robert Stevens * (Secretary of DITRD until December 1993) - Lorraine Tomlins * (public servant, Director, Aerospace Section) Hughes - Peter Arthur Funge * (TAAATS program manager) - Robert Henry Kramp * (Group Vice-President and Manager, Command and Control Systems Division) - Gary Wayne Osborn * (Air Traffic Control Unit) Ministers - Senator The Hon Bob Collins (Minister for Transport and Communications) - The Hon Allan Griffiths (Minister for Industry, Technology and Regional Development)
- All persons marked with an asterisk gave evidence, oral and/or affidavit, in this proceeding.
GENERAL CHRONOLOGY Outline of Events Many of the particular allegations raised by the applicant require an examination of specific events. That examination will take place as and when each such allegation is considered. The purpose of this general chronology is to provide an overview, albeit lengthy, of the course of events with which this matter is concerned and a context for the more specific events that I will consider. (1) In 1989, following the CAA's release of a request for tender, Hughes, Thomson-CSF and a third company were selected to participate in the project definition of the Radar Display Replacement Project (RADREP). That Project, as its name partially suggested, was a piecemeal response to obsolescence in display systems in Sydney, Brisbane and Canberra. Its scope swelled dramatically over the next year. In March 1991 it was cancelled in favour of the TAAATS concept. I note in passing that while management had by then selected Hughes as the preferred RADREP contractor, that recommendation was never put to the CAA board. (2) The TAAATS I procurement process began with the issue of a request for Registration Of Interest ("ROI") dated 30 May 1991 to six selected tenderers, two of whom were Hughes and Thomson. Over time the tenderers were reduced to Hughes and Thomson. The tender process itself underwent significant periodic modification. On 18 December 1991 the CAA management recommended to the Board that Hughes be selected as the preferred tenderer. The CAA board deferred making a decision for reasons related to perceived "risk" (a technical term) if Hughes were selected. The resultant re-examination of the bids in relation to price and risk led to the recommendation of Thomson as the preferred contractor - a recommendation adopted by the CAA board on 13 March 1992. (3) On 10 July 1992, Senator Peter Cook, the then Minister for Shipping and Aviation Support, initiated the Macphee Review pursuant to a statutory direction given under s12 of the Civil Aviation Act 1988 (Cth). The Report of the Independent Review of the Civil Aviation Authority's Tender Evaluation Process for the Australian Advanced Air Traffic System ("Macphee Report") of 11 December 1992 (to which piecemeal reference will be made), in concluding that the TAAATS I process was in significant respects unsound and unfair, made a variety of recommendations relating to the proposed TAAATS procurement. Adoption of the Report led to the TAAATS II tender. In particular the Report recommended that that tender be limited to Hughes and Thomson, each of which should be invited to participate in it. The Report contributed directly both to the criteria and to the processes adopted for the TAAATS II tender. While the CAA board officially accepted the Macphee recommendations, it is clear that some members at least were hostile to the inquiry and to some of its criticisms. (4) In January 1993 the CAA invited Thomson and Hughes to participate in a further competition for the TAAATS contract. A formal meeting ("the Restart Meeting") was held on 19 January 1993. A transcript of it was kept. Its objectives were to provide reassurance to the two companies as to the processes to be followed and to secure their concurrence in those processes. (5) On 5 February 1993 the CAA wrote to Hughes and Thomson outlining its proposals for, and seeking acceptance of, its "general approach to the selection of a contractor for the TAAATS Project". The matters particularised in this letter were later superseded by more detailed proposals but I would note that the letter particularised that: (a) Australian Industry Involvement ("AII") was to be an element in the tender evaluation and that the evaluation of AII would be undertaken by DITAC which would be a consultant to the Tender Evaluation Committee ("TEC"); (b) the parties Best and Final Offers ("BAFOs") would be evaluated in accordance with specified major and minor criteria (a priority order being given the major criteria), and that the evaluation would be in accordance with a defined evaluation methodology; (c) an independent auditor, responsible to the Board, would be contracted to audit the conduct of the evaluation process; and (d) strict confidentiality would be maintained. (6) On 17 February, Mr Roser, then Acting Chief Executive of the CAA, wrote to Mr Stevens, Secretary of DITAC in terms (inter alia): "The CAA has established a Tender Evaluation Committee, comprising myself and three General Managers, to oversight the evaluation process and to make recommendations to the CAA Board regarding the preferred tenderer for this project. I would like to invite your Department to participate in the selection and evaluation process as a Consultant to this Committee. I would also like to invite your Department to undertake the evaluation of the AII aspects of the proposals from Hughes and Thomson." By letter of 2 March 1993, Mr Stevens accepted the CAA's invitation and nominated Ms Clarke to represent his department as the TEC's consultant. (7) Negotiations between the companies and the CAA during this period occasioned further revisions to the tender process. On 3 March the CAA sent to each the draft of a letter specifying the selection criteria and tender process for the TAAATS acquisition. Comments on it were invited as the letter itself was to be "proposed for each Company's agreement at signature of the SDP Contract". It will be necessary to refer later to the Specification Development Phase ("SDP") contract. It is of no present significance. The draft letter became the letter of 9 March. It is Hughes' case that the terms of this letter had contractual force. Before referring to some of those terms it is necessary to backtrack slightly. (8) On 8 March 1993, Ms Clarke for DITAC wrote to Hughes and to Thomson confirming "the details of the evaluation criteria and approach that [DITAC] will adopt in its evaluation of [AII] for TAAATS". These were (inter alia) as follows: "As DITAC and the CAA have already emphasised assessment of AII proposals should be regarded as a competitive process, and as such should not be regarded as simply a hurdle to be cleared. DITAC is seeking to maximise the strategic opportunities for competitive Australian based firms. DITAC does not expect AII proposals to have a negative impact on the installation timetable or the cost of TAAATS to the CAA. Proposals should be internationally competitive and make good business sense to the TAAATS contractor and its local partners. . . . The evaluation criteria for the TAAATS AII proposals, in ascending order of importance, are as follows:
The level of local content:

civil works
training
hardware
software 2. Development of support and maintenance capability in-country:
hardware
software - the involvement of Australian based firms in future software maintenance and enhancement will be highly regarded. 3. Enhancement of skills and capability of Australian based subcontractors as a result of TAAATS: - technology transfer from prime contractor to subcontractors - extent of involvement of subcontractors in software development, systems integration and project management - access to intellectual property by local subcontractors.

Exports: - Australian based companies having responsibility for software maintenance and enhancements of systems installed in the region by the contractor - teaming arrangements for TAAATS subcontractors into regional and other markets - other ATC products and services

developing country markets
developed country markets 5. Collaborative arrangements with Australian based firms and institutions, for the research into and the development of future ATC products and services. 6. A long term commitment to establish a capability and a presence in Australia including the designation of Australia as the maintenance centre for systems installed in the region, and a strategic centre for the manufacture and development of ATC products and services for the international market. The contractor should note that the scope of its AII proposal should be limited to Air Traffic Control products and services. DITAC will make an assessment of the contractor's AII proposal against the above criteria taking into account:- - the contractor's past performance in Australia on AII in ATC related areas - strength of longer term commitment to Australian subcontractors to TAAATS - the extent of Australian value - added in individual AII proposals - the likelihood of individual proposals coming to fruition. Wherever possible the contractor should provide documentation to support its commitment to individual proposals." As with the 9 March letter, this was signed by both companies. (9) The 9 March letter needs to be set out at some length. Insofar as it related to the TAAATS acquisition contract - it dealt with SDP matters as well - the following provisions are of note. "2.1General . . . The CAA reserves the right to modify the strategy at any time after consultation with each Company. Both Companies will be notified in writing of any such modifications. . . . 2.3 Australian Industry Involvement Companies are to develop Australian Industry Involvement Proposals which will be considered in the evaluation of their offers. The Department of Industry, Technology and Commerce (DITAC) has stated that it has given to the Companies a letter dated 8 March, 1993 providing the same guidance to both on the matters to be addressed in the proposals, possible avenues for the Companies involving Australian Industry, and the relative merits of involvement strategies. Companies should note that the CAA requires an in country Australian based software support capability to be established for the more important subsystems, such as radar and flight data processing and display. DITAC will evaluate the offers and will provide copies of the proposals and DITAC's evaluation report to the CAA. Companies will provide DITAC with such information as DITAC may require and agree that the CAA can provide information held in the offers submitted to the CAA as would be required by DITAC in the evaluation of their proposals. Companies will be required to enter into a Deed of Agreement with DITAC covering the implementation of the proposed Australian Industry Involvement Plans with DITAC. A draft Deed of Agreement will be circulated with the draft terms and conditions of the TAAATS Acquisition Contract. It is expected that the terms of both documents will be settled as part of the same process of negotiation of terms prior to the submission of Best and Final Offers. It is expected that the Deed of Agreement will be signed at the same time as the TAAATS Acquisition Contract. 2.4 Best and Final Offers The CAA will by letter request Companies to submit their Best and Final Offers for the TAAATS Acquisition Contract at the date indicated in Attachment C to the SDP Contract. This will be the final opportunity for submission of material describing their offers and the price and other conditions applying. This information will be used in the evaluation of the offers for the selection of the Contractor for TAAATS. The price component of the Best and Final Offers is to be delivered by hand in paper form and on magnetic media in a separate sealed envelope directly to the Project Manager, TAAATS Systems Acquisition Project. 2.5 Evaluation of TAAATS Best and Final Offers 2.5.1 Criteria The CAA will evaluate the best and final offers for the TAAATS Acquisition submitted by the Companies during the Specification Development Phase with reference to the following criteria: Major Criteria Criteria Priority

FINALISATION OF CONTRACT 6.1 Prepare Report for Tender Evaluation Committee The results of the evaluation are prepared for presentation [sic] the Tender Evaluation Committee. 6.2 Executive and Board Approval The evaluation is presented to the Tender Evaluation Committee in written form. Presentations to the Tender Committee are made by project manager and evaluators. The Tender Committee recommends a tender to the Board. The board considers the Tender Evaluation Committee recommendation and selects the TAAATS contractor." (10)Consistent with the representations made in the letters of 5 February and 9 March, the CAA on 2 April 1993 entered into an agreement with a Mr John Moten who, as Independent Auditor, was required: "to monitor the AAATS evaluation and selection process, for the purpose of ensuring that the process is appropriate and that it is conducted in as fair and unbiased a manner as is practicable." A schedule to the agreement specified in some detail the audit services to be provided. Mr Moten was to be available to attend and report to meetings both of the CAA board and of the TEC. (11)By letter dated 7 April 1993, Senator Collins (who was minister with "[r]esponsibility for oversighting the CAA") wrote to the CAA requesting that it "operate in accordance with Government procurement and industry development policies [for GBEs]". Those policies apparently had first been published in their then operative form on 17 December 1992 in association with a press release by Senators Button and Bolkus. The object of those policies, as the press release indicated, was to: "ensure agencies give local companies the maximum opportunity to compete for Government business consistent with the commercial objectives of GBEs and the need to obtain value for money." (12)Under cover of a letter dated 19 July 1993 the CAA issued a Request for Tender ("RFT") to both Hughes and Thomson. It is Hughes' case that the terms and conditions of the RFT had contractual force as and from the time Hughes submitted its BAFO on 5 October. Again it is necessary to set out some at least of the terms of the RFT. I preface this by noting that, while the terms of the RFT are substantially similar to those of the 9 March letter to the extent they cover common territory, differences in expression exist between the two. This has been a cause of difficulties. The RFT required that tenders be lodged on or before 5 October 1993. Separate provision was made for lodging the price component: it was by the same date to be delivered directly to the Project Manager, TAAATS Acquisition Project. The RFT further provided (inter alia): "5.3The CAA normally makes public the arrangement of contracts, including the contract price and intends to make public the arrangement of any contract flowing from this RFT, including the contract price after contract signature. . . . 7.1Neither the lowest tender, nor any tender, will necessarily be accepted by the CAA. Acceptance of tender will be effected by the execution of a discrete Contract between the CAA and the Tenderer in the terms of the draft Contract. 7.2The CAA reserves the right to reject any offer which does not comply fully with the Clauses contained in the RFT and its Attachments. . . . 7.4During the evaluation of the tenders pursuant to this tender process the CAA reserves the right to seek clarification in relation to any ambiguity or uncertainty from any or all of the Companies in relation to their offer to provide the Supplies. The CAA will not enter into any discussion or negotiation whatsoever concerning the price component of the Tenders during the evaluation of the offers and while the tender process is on foot. . . . 7.5... Alterations will not be allowed after a Tender has been submitted. . . . 16. Evaluation Criteria 16.1Criteria 16.1.1 The CAA will evaluate the best and final offers submitted by the Companies with reference to the following criteria: 16.1.1.1 Major criteria Criteria Priority 1. Operational and Technical Performance, logistics support and schedule 1 2. Price and other Financial Issues 2 3. Risk 3 4. Australian Industry Involvement 4 16.1.1.2 Minor criteria . . . 16.1.2 The CAA will not be disclosing any further information regarding the level of importance or relative weightings of the criteria and the evaluation methodology. 16.2 Methodology 16.2.1 The evaluation of proposals will be undertaken in accordance with a defined evaluation methodology. The methodology and CAA's conformance with that methodology will be independently audited. 16.2.2 A qualitative assessment technique will be used for evaluation. 16.2.3 The proposals will be first evaluated against all of the above criteria except for Australian Industry Involvement and price/financial considerations. If one proposal does not have substantial advantages over the other, they will be considered equivalent and the recommendation will be made on the basis of price and financial considerations and then Australian Industry Involvement." (emphasis added) I would interpolate at this point that the sentence emphasised differs from that used in the 9 March letter which provided that, where the proposals were considered equivalent "the recommendation will be made on the basis of Australian industry participation and price/financial considerations." This difference was pointed out to the Project Manager, Mr Hider by Mr Moten, the Independent Auditor, on 16 July while the RFT was in draft. Mr Moten described the change as one of "emphasis". Returning to the RFT: "16.2.4 If one proposal does have substantial advantages over the other, the recommendation will be made on the value for money basis taking into account the identified advantages, the price and financial considerations and then Australian Industry Involvement (AII). 16.2.5 The CAA has established a Tender Evaluation Committee of senior CAA managers. A representative from the Department of Industry, Technology and Regional Development (DITRD) will provide advice on AII matters directly to the Tender Evaluation Committee. 16.2.6 An independent auditor has been contracted to verify that the evaluation procedures were followed, the evaluation was conducted fairly and the offers received due consideration. The auditor will report to the Evaluation Committee prior to the final recommendation and be responsible to the CAA Board. 16.2.7 The CAA reserves the right to make available to advisers and third parties (such as representatives of the Civil Air Operations Association of Australia) a copy of the Tenderer's proposals or part of the proposals for evaluation purposes only. Measures designed to achieve the strict confidentiality of the information contained in the proposals will be implemented and maintained. 16.2.8 The CAA will ensure that any adviser or third party involved in the evaluation process will not have any affiliation with any of the Tenderers for the TAAATS project. 16.2.9 CAA's evaluation of the Tenders (including the Pricing Schedule and the offer to provide the Supplies) shall be in the absolute and unfettered control and discretion of CAA. . . . 19. Confidentiality 19.1 [T]he CAA undertakes to maintain the confidentiality of information received in response to this request and will not release it to any competitor or potential competitor without written authority of the Company. . . . 21. Australian Industry Involvement 21.1 The entry into a contract pursuant to Clause 7.1 shall be subject to, and conditional upon, the Contractor executing a Deed of Agreement with the Commonwealth acting through the Department of Industry, Technology and Regional Development (DITRD) in relation to the Contractor's Australian Industry Involvement obligations. 21.2 Tenderers shall submit as part of the Tender proposal their; a) proposed Deeds of Agreement they are prepared to execute on Contract award; b) proposed Australian Industry Involvement Plan; and c) other information supporting an evaluation of their proposals. . . . 34. Amendment of RFT 34.1 The CAA reserves to itself absolutely the right to vary or amend the terms and conditions of this Request for Tender upon giving the Companies timely and concurrent written notice of such variation or amendment." (13)On 19 July Ms Clarke of DITRD wrote to Hughes and Thomson outlining DITRD's "base-line AII requirements for TAAATS". These were related to the Government's industry development and procurement policies for GBEs which, as noted in (11) above, were announced in December 1992. On 2 August, Ms Clarke again wrote to both companies reaffirming that the scope of the AII proposals was to be as in the 8 March 1993 letter: DITRD, apparently, had created some uncertainty in this matter. Then on 12 August she wrote what was intended to be a consolidation of the advice given to them on AII evaluation criteria and baseline requirements. The letter, which indicated that it was to supercede "all previous communication", contained a draft of the deed of arrangement for AII that was to be negotiated with DITRD. I would also note that the letter reiterated the view of 8 March that: "DITRD does not expect AII proposals to have a negative impact on the installation timetable or the cost of TAAATS to the CAA. Proposals should be internationally competitive and make good business sense to the TAAATS contractor and its local partners." (14)Hughes submitted its BAFO on 5 October 1993. It alleges that on and from this date it and the CAA were bound to a tender process contract on the terms of the RFT. This contract is said to be cumulative upon that created by acceptance of the letter of 9 March. (15)The TEC met on a number of occasions between 15 and 18 November 1993 to determine the preferred tenderer. In the event the TEC's recommendation was Hughes. This was formally reported to the Board by the TEC Report of 26 November 1993. Ms Clarke was present at the TEC meetings and she was at least by this time aware there was an expected contract price difference between the two BAFOs. It favoured Hughes and was in the order of $37 million. At the 18 November meeting Ms Clarke indicated that Thomson's AII proposals afforded wider community benefits than Hughes' and that if Thomson was to be accepted because of this, there probably would need to be a subsidy of some form from the Federal Government to the CAA. This view was put directly to the Board by DITRD at its meeting on 6-7 December. (16)Between the 18 November TEC decision and the CAA board meeting of 6-7 December, Mr Roser, by then the CAA Chief Executive, briefed Senator Collins on the recommendation. A like briefing would seem to have been given to Minister Griffiths by DITRD officers. Legal advice was sought severally by Mr Hider and Mr Moten of John Butler of the Attorney-General's Department concerning AII and the application of the evaluation criteria. By letters of 2 December to General Gration (Chairman of the CAA board) and Mr Roser, Minister Griffiths raised directly the importance of AII in the award of the TAAATS contract and concluded: "One of the Government's key objectives in encouraging the growth of our manufacturing and services sector, particularly in technology intensive activities, is to achieve our broader economic and social objectives. In this context, I would encourage the CAA to give every consideration to AII in reaching its final decision on the preferred tenderer." On 3 December, Senator Collins wrote to General Gration in the following terms: "I take this opportunity to confirm as I have advised the Board previously the Government's two major concerns regarding the TAAATS project. The first priority is that we get an air traffic control system which is technically advanced and delivers safe and efficient radar services. The other priority was to maximise opportunities for Australian industry involvement. The Government recognises that the CAA has in place evaluation criteria to address these matters and formal advice to the Government in response to the findings of the Macphee Inquiry. This advice was well set out in the former Chairman's letter to Senator Cook on 30 December 1992. The Government appreciates the role the CAA has given to the Department of Industry, Technology and Regional Development in providing advice on the issue of Australian industry participation. I understand that the Minister for Industry, Technology and Regional Development has also written to you in this regard. Of course the decision is clearly a matter for the CAA Board using all the evaluation criteria established for the tender process." Both letters were tabled at the CAA board meeting on 6 December. (17)In a letter of 3 December to Senator Collins, Minister Griffiths raised the prospect of submitting to Federal Cabinet for its consideration the issue of the wider community benefit of the AII proposals for TAAATS. That letter (which I infer betrayed a knowledge of the substance of the differences between the two bids in price and on AII) was written with the object of procuring Cabinet's view on whether Thomson should be preferred for "wider AII" reasons. There is no evidence that Minister Griffith's request was acted upon in any way. The Board was informed during its meeting of 6 December (via Mr Roser) that Senator Collins, having obtained legal advice from Mr Dennis Rose QC of the Attorney-General's Department, was apparently of the view that for the Government to interfere in the contract allocation would be an "extremely high risk proposal". (18)At the 6-7 December board meeting the TEC recommendation was not accepted. A majority of the Board expressed a preference for Thomson based upon the risk associated with the purported lack of provenness of Hughes' Flight Data Processing solution. In the event, as recorded in the Board minutes, the Board resolved to: "(i) request the TEC, through the Chief Executive, to reconsider its advice to the Board in the light of: (a) the Board's belief that the TEC was interpreting the Authority's position on the AII issue too narrowly; and (b) the advice of the Independent Auditor that the Authority was obliged to take the broader view given the process that had been laid out in the documentation sent to the companies; and (ii) bearing in mind the advice given to the companies on 9 March 1993, the request for tender in July, the DITRD letter to the companies on 12 August, and legal advice subsequently taken, request from the Chief Executive advice on whether the broader assessment of the AII criterion favoured by the Board was consistent with members' fiduciary duties under the Civil Aviation Act (R241/93)." (19)On 14 December Thomson submitted a price reduction of $19.4 million to Mr Hider of the TEC. It was considered that $16.7 million of this was an inadmissible price variation. Mr Hider informed General Gration (and probably Mr Roser) of the letter. At the Board meeting of 23 December the Board was informed that one tenderer (unnamed) had submitted an impermissible variation that could not be taken into account. (20)Again on 14 December Thomson sent to Ms Clarke a letter in response to her letter of 10 December, which upgraded Thomson's export commitment by a sum in the order of $155 million. That upgrade was noted in DITRD's subsequent report to the CAA board. (21)On 15 December the TEC reconvened. Its recommendation remained unchanged. Its conclusions on the question of AII as reported to the Board were (inter alia) that: "(3)The TEC notes the advice from DITRD that "In DITRD's view the substantial benefits offered by the Thomson proposal to the wider community, and to the CAA itself outweigh the price disadvantage of the companies tender". (4) The TEC acknowledges that there are some direct benefits to the CAA in the extra commitment to research & development and exports associated with the Thomson offer, but considers that the benefits to the CAA are not nearly commensurate with the additional costs involved. (5) The TEC notes also that the realisation of the extra benefits to the broader community postulated by DITRD to be associated with the Thomson offer are necessarily speculative, based on expectations of the size of markets and Thomson's success in penetrating the markets. (6) Accordingly, the TEC concluded that the extra costs to the CAA could not be justified in the context of the uncertainty associated with the realisation of the extra benefits to the broader community." (22)On 16 December 1993, Mr Dennis Rose QC provided legal advice to Mr Roser on AII. The question he answered is conveniently captured in the opening paragraphs of Mr Rose QC's letter: "2. You ask whether the Board, in evaluating the tenders, would be acting in a manner inconsistent with its duties under the Civil Aviation Act 1986 ("the CAA Act") if it were to give weight to Australian Industry Involvement (AII) factors that would not be likely to benefit the CAA. 3. In my opinion, the answer is 'No'. Indeed, not only may the CAA take such factors into account but it is legally obliged to do so." The emphasis in para 3 is in the original. (23)The CAA board at its 23 December meeting again rejected the TEC recommendation and selected Thomson as the TAAATS contractor. The board minutes of that meeting indicate that (a) General Gration, at the outset, reminded members of Mr Rose QC's advice; and (b) Mr Ron Yates declared a potential conflict of interest in that he was deputy chairman of The Preston Group Pty Ltd ("TPG"), a company involved in Thomson's AII proposals. The minutes record (inter alia) that: "The Board was reminded that in relation to assessment of AII, the RFT had specified that DITRD would provide advice to the Tender Evaluation Committee. Theirs was the most expert source of advice on AII available to the Board and more so than that of the TEC whose technical expertise lay elsewhere. The views of the TEC on the wider implications and benefits of AII should therefore be viewed accordingly. . . . The Board agreed with the TEC that there were no risk issues in relation to either company or the Authority's project management of such magnitude that the project should not proceed. The Board also accepted the judgment of the TEC that the risks associated with both offers were essentially the same. Having previously endorsed the TEC assessment that both companies were substantially equal also on the operational/technical performance criterion, and noting the views expressed by members of the Board, the Board agreed that in accordance with the RFT procedures, it should proceed to consideration of the tenders on the basis of the remaining two criteria of price and AII. The Board noted Government policy on Australian industry involvement and its considerable importance to Australian industry, and agreed that Thomson offered a significant advantage in this area. The Board further noted the net present values of total project cost for Hughes of $190.3M compared with $207.0M for Thomson. Following discussion, and having regard to DITRD's advice and the advice of Mr Dennis Rose QC, the Board decided that the substantial benefits offered by the Thomson AII proposal to the wider Australian community, and to the Authority itself, outweighed the price disadvantage of the company's tender." (24)By letter of 24 December to Thomson, Mr Hider indicated that the "clarifications" (ie the price reduction) contained in the letter of 14 December would be accepted in calculating the contract price and this in fact occurred. (25)On 12 January 1994 the CAA conducted a debriefing meeting for Hughes. At it Hughes' officers were told that the Board's decision was based on AII and that, while Thomson's contract price would not then be disclosed, when it was later published they would see that, as to the price difference: "at NPV levels, taking into account contract price, total Project costs and life cycle costs, there really was not a great deal in it. The variance was only a few percentage points. The difference between the prices at that level, NPV, was a few percentage points." The NPV reference is to net present value. (26)Thomson's signing of the TAAATS contract with the CAA and the AII Deed of Agreement with the Commonwealth, occurred at a signing ceremony on 7 February 1994. (27)Hughes filed its application for preliminary discovery in this Court on 22 December 1994. PART II: THE CAA AND ITS STATUTE The CAA was constituted a statutory corporation by the Civil Aviation Act 1988 (Cth), s8 ("the Act"). Previously its functions had been discharged in a ministerial department. The general functions of the CAA as delineated in s9 included: "(b)to provide air route and airway facilities; (c)to provide air traffic control services, and flight service services, for, in either case, surface traffic of aircraft and vehicles on the manoeuvring area of aerodromes; . . . (m)any functions incidental to any of the foregoing functions." Additionally, sub-section (4) of s9 provided that: "Subject to section 12, the functions to provide services and facilities may be performed at the discretion of the Authority." The CAA's powers were conferred by s13. They include a power to enter into contracts. Significantly, a 1990 amendment to the Act repealed s13(3). That sub-section had precluded the CAA from entering into a contract involving the payment of more than $6 million without the approval of the minister. The CAA was required, in the performance of its functions and the exercise of its powers, to consult where appropriate "with government, commercial, industrial, consumer and other relevant bodies": s16. The 1990 amending statute to which I have referred also created a more explicit governance structure within the CAA. A new s32A created a board of the CAA. Section 33(1) constituted the board of: "(a)a Chairperson; (b)a Deputy Chairperson; (c)the Chief Executive Officer; and (d)6 other members." And s32B prescribed the "Purposes of the Board". That section warrants quotation in full. "32B. (1) The purposes of the Board are: (a) to decide the objectives, strategies and policies to be followed by the Authority; and (b) to ensure that the Authority performs its functions in a proper, efficient and economical manner. (2) Anything done in the name of, or on behalf of, the Authority by the Board is to be taken to have been done by the Authority." I would note in passing that s40 of the Act imposed a relatively standard disclosure obligation on board members having a direct or indirect pecuniary interest in any matter considered by the board. It will be necessary later to consider the terms of this section. One of the board members was to be the Chief Executive Officer ("the CEO") of the CAA. That official's position was created by the Act, s84. The CEO was to be appointed by the minister after recommendation from the board and held office during the board's pleasure: ss84(1), 89. The duties of the CEO's office as prescribed by s84A were as follows: "84A. (1) The Chief Executive Officer is, under the Board, to manage the Authority. (2) Anything done in the name of, or on behalf of, the Authority by the Chief Executive Officer is to be taken to have been done by the Authority." To the extent that the Act gave formal expression to the relationship that was to exist between the CAA and the minister administering the Act as a result of Administrative Arrangements Orders, this was to be found, for purposes of present relevance: (a) in the minister's powers to appoint board members including the CEO: ss33(4), 84; and to remove board members (other than the CEO) on specified grounds: s42, cf s89; (b) in the power to give written directions to the CAA: s12; and (c) in the powers to direct the board in relation to the CAA's financial plan: see generally ss43-48; and to approve or vary the board's recommendation of the dividend (if any) to be paid to the Commonwealth: s56. Here it is necessary to venture in a little detail into some of the powers mentioned. First, the general power to direct contained in s12. It provides: "12.(1) The Minister may give the Authority written directions as to the performance of its functions or the exercise of its powers. (2) Directions as to the performance of the regulatory functions shall be only of a general nature. (3) Particulars of any directions given in a financial year shall be included in the annual report of the Authority for that year. (4) The Authority must comply with a direction given under subsection (1)." Secondly, directions and the CAA's financial plan. In parallel with its s43 obligation to create a corporate plan, the board had the s44 obligation to develop a financial plan. When preparing that financial plan, the board was required by s45 to consider (inter alia): "(b)the objectives and policies of the Commonwealth Government known to the Board; (c)any directions given by the Minister under section 12; . . . (g)the need to earn a reasonable rate of return on the Authority's assets (other than assets wholly or principally used in the performance of regulatory functions or the provision of search and rescue services); (h)the expectation of the Commonwealth that the Authority will pay a reasonable dividend; and (j)any other commercial considerations the Board thinks appropriate." By virtue of s47 of the Act the minister was empowered to direct the board to vary its financial plan in a variety of respects. Significantly, the CAA was entitled to reimbursement for complying with a s12 direction but not a s47 one, the latter being expressly excluded from the reimbursement regime created by s48. Insofar as presently relevant s48 provided: "48.(1) Where the Authority satisfies the Minister that it has suffered financial detriment as a result of complying with a direction given by the Minister under this Act, the Authority is entitled to be reimbursed by the Commonwealth the amount that the Minister determines, in writing, to be the amount of that financial detriment. (2) The reference in subsection (1) to suffering financial detriment includes a reference to: (a) incurring costs that are greater than would otherwise have been incurred; or (b) forgoing revenue that would otherwise have been received." Finally, the minister's powers in relation to dividends. The Act, s56 required the board each year to notify the minister in writing of the dividend (if any) it recommended that the CAA pay the Commonwealth. In making its recommendation the board was obliged to have regard to the matters specified in s45 - those of present relevance are set out above. The minister was then empowered to approve or vary the recommendation and in so doing had to have regard to (inter alia): "the objectives and policies of the Commonwealth Government:" s47(2)(b) As will be seen, as the AII issue crystallised in the deliberations of the TEC and the Board in November - December 1993, the issue of a s12 direction and s48 reimbursement or of a s56 dividend reduction emerged as muddying influences in the evaluation of the rival bids. PART III:THE CASE AS PLEADED AND PLEADING ISSUES To appreciate both the shifts that have occurred in the pleading of this case and the significance the pleadings have assumed, it is appropriate to refer at the outset to its history in this Court. Preliminary discovery having been ordered on 28 June 1995, Hughes filed its application and statement of claim on 22 December 1995. At the first directions hearing on 9 February 1996 the parties agreed to a timetable for the preparation of the matter with a view to a projected hearing in August 1996. There was inevitable movement in the dates fixed for particular steps. Nonetheless, the matter came on for hearing as projected on 5 August. That day began, as did many during the 25day hearing, with the calling on of subpoenas. This growing accretion of material led, inevitably, to the emergence of new issues. Mr Macfarlan QC, who appeared with Dr Griffiths for the CAA, made abundantly clear that the respondent intended to meet the case as pleaded; that the issues had been narrowed by extensive particulars; and that there would be no acquiescing in de facto alteration of the case as pleaded. He persisted in this stance, as he was quite entitled to, throughout the hearing. Its consequence, as was acknowledged by Mr Gyles QC who appeared with Mr Speakman for the applicant, was to precipitate periodic applications to amend the pleadings - the last (and unsuccessful) such application being made during the respondent's address. That the applicant's ultimate pleading was the Fifth Further Amended Statement of Claim conveys some indication of this regular process of amendment. I adopted a generous approach to amendment, while proposing such steps (including adjournment) as seemed fair and reasonable to offset any apprehended prejudice to the respondent. It appeared to me desirable to facilitate in so far as was reasonably practical the fair ventilation of the issues that the applicant wished to raise against the respondent. Nonetheless, and perhaps because any variation to the case as originally pleaded was required to be expressed in an amendment, the pleadings themselves have assumed no little importance in this matter. There is one matter relating to amendment to which I am obliged to refer. On 4 September, over the respondent's objection, I allowed the applicant to further amend a paragraph of its then statement of claim (para 13A) dealing with an allegedly impermissible variation Thomson made to its AII proposals. That variation related to changes in commitment in the deed that would implement its AII plans: see on this Part x: Price Reduction/AII Variation. I indicated at the time that I would provide brief reasons for allowing the amendment in these reasons. Notwithstanding the respondent's submissions, I concluded that, though the course to the amendment was unusual (it was essentially the product of cross-examination of Ms Clarke) it nonetheless concerned what were matters of construction of documents already in evidence and that to allow the amendment would occasion no real prejudice to the respondent. I would note that both parties provided extensive written submissions on the subject matter of the amendment. Before turning specifically to particular pleading issues, it is desirable to outline at least in synoptic form the case pleaded by Hughes against the CAA.

Hughes: $167.4 million
Thomson: $201.8 million
Variance:$34.3 million in Hughes' favour. ... . The 'Net Present Values' (NPV's) of the expected Contract Price (10% p.a.), having regard to the payment schedules proposed by each of the contenders and taking account of savings from financing arrangements, amount to:
Hughes: $138.6 million
Thomson: $159.5 million
Variance:$20.9 million in Hughes' favour. . The Net Present Values (NPV's) of the Total Project Cost (10% p.a.), having regard to the payment schedules proposed by each of the contenders and taking account of savings from financing arrangements, amount to:
Hughes: $190.3 million
Thomson: $207.0 million
Variance:$16.7 million in Hughes' favour ... . NPV's of Comparative LCC's [Life Cycle Costs] are:
Hughes: $164.5 million
Thomson: $186.0 million
Variance:$21.5 million in Hughes' favour." I should add that these figures took account of the "admissible" $2.7 million, but not the "inadmissible" $16.7 million, price reductions made by Thomson on 14 December. Additionally I should make reference to Mr Roser's evidence on this matter. In cross-examination, having been taken to the various ways in which the price difference could be expressed, he was asked: "Q. [Mr Gyles QC]: ... The bids were never a few percentage points apart, whichever way you manipulated the figures, were they? A. That's right, yes. Q. Why did you say that to them? A. The comparison we were using obviously for public purposes was the contracted price that we would have with Thomson. Q. And, Mr Roser, you knew that that was not the bid price, didn't you? A. That Thomson - you're quite right, yes, I did, yes. Q. So that the way you did it, I don't mean only you, but the way you did it at the debrief, meant that Hughes were not told what the price difference in the bids were? A. No, they were not. Q. Why not? A. That isn't normal to tell companies that, Mr Gyles. And I don't think there was any obligation on us to tell them that. ... Q. Furthermore, the request for tender made clear that the contract price would be made public; is that right? A. I can't recall, but it is normal to make the contract price public, yes. Q. That's right. Contract price was to be made public; correct? A. Yes. Q. And this procedure, I suggest to you, which you devised, was very clear that there could be no, repeat 'no', negotiation on price after best and final offer, didn't you? That was the procedure? A. Yes. Q. Therefore, it could be safely assumed that in this contract the contract price would be the best and final offer, save for a permissible option? A. Yes. Q. The device which was adopted here of Thomson revising their bid and having that taken into account meant that that assumption which Hughes must make was falsified, wasn't it? A. Not by the CAA. Q. I beg your pardon? Who else was running this organisation, sir? I thought the CAA were the contracting party? A. If Thomson reduced their price in that process, why shouldn't we have taken account of it, if the decision was made their way? Q. Mr Roser, your procedures simply did not permit of people to rebid, did it? A. No, you're quite right. Q. It should have been tossed out the window back at them, shouldn't it? A. Yes, I suppose so. Q. Yes, it should have been. And then there might have been an honest disclosure of the difference in price then, mightn't there - difference in bids, I mean? A. Yes. Q. Let me suggest that the strategy which was adopted was to 'ensure' that the truth did not emerge before the contract was signed with Thomson in order to prevent Hughes stopping it; that is the truth, isn't it? A. It was never a conscious decision, Mr Gyles." The reference in that evidence to the RFT requiring disclosure of the contract price was to para 5.3 which indicated that the CAA intended to make the contract price public after signature. This is a clear case of conduct that was misleading and deceptive. While the respondent has contended that the representations made at the debrief were to a comparison of proposed contract prices (rather than bid prices) and no more, I can only conclude that, in the context of a debriefing as to the outcome of a tender process involving the application of defined criteria and methodology, any reasonable tenderer in Hughes' position would properly and incorrectly assume from the representations in the circumstances that (i) the difference referred to reasonably reflected the differences with which the CAA was working when it took its decision - and this even though the final contract price might later be augmented by the addition of "options": see RFT para 22; (ii) that difference was not 8 per cent or more - and this was the lowest percentage difference of the various measures used; and (iii) the contract price when later revealed would not embody a post-BAFO price reduction which would make the actual contract price look much closer by comparison than would otherwise have been the case - and as was the case when the Board decision was taken. My conclusion that the representation as to a "few percentage points" had a retrospective as well as a prospective character becomes the more inescapable when it is noted that Mr Roser used the past tense when referring to it in the second of the excerpts set out above. Indeed movement between tenses is a feature of the discussion of the difference in those excerpts. I cannot in consequence accept the respondent's submission on this matter. Neither can I accept that 8 per cent is a "few" in the context of the explicit 'much more towards the 2 than the 10' comment made by Mr Roser. I should add that I regard the unrevealed inclusion of Thomson's post-BAFO price reduction in the contract price as constituting an element in the conduct that was misleading and deceptive in the circumstances: see Demagogue Pty Ltd v Ramensky (1992) 39 FCR 31. Though acknowledging that a guilty intent is not a necessary element in a s52 contravention, the applicant has invited me to find that such was there in this case. Given my finding, I decline to express a view on this matter other than to say that, whatever the rationalisation resorted to by the CAA, the representations themselves suggest a certain deviousness on the CAA's part. They perpetuated the concealment of irregularities in, and breaches of, the TAAATS process. Hughes has pleaded, and Mr Kramp and Mr Funge have given evidence of, its reliance on the CAA's contravening conduct. It did not take steps to prevent the CAA's failure to evaluate, or to compel the CAA to evaluate, the tenders as required by the RFT contract. It did not take steps to prevent the execution of the TAAATS contract with Thomson. Without expressing any views on those steps and their likely result, I find that Hughes did rely on the CAA's conduct and in so doing failed then to challenge the actions of the CAA. PART XIII: PRINCIPAL FINDINGS AND CONCLUSIONS My observations here will be generalised, brief and highly selective. First, I have found that the processes leading to the award of the TAAATS contract were governed by a process contract, the principal terms of which were contained in the RFT. I also have found it to be an implied term of that contract that (inter alia) the CAA would conduct its tender evaluation fairly. I have determined as well that a term should be implied as a matter of law into a tender process contract with a public body (such as this was) that that body will deal fairly with a tenderer in the performance of its contract. Accordingly I have made such an implication into the RFT. In this contractual setting, I have concluded that the CAA acted in breach of its contract with Hughes in that - (i) it failed to evaluate the tenders in accordance with the priorities and methodology prescribed in the RFT (paras 16.1 and 16.2); (ii)it failed to ensure that measures designed to achieve strict confidentiality of information contained in tenderers' proposals, were maintained (RFT para 16.2.7); and (iii) it accepted an out of time change to Thomson's proposed deed of AII commitment. While there was evidence enough to warrant Hughes' allegation of a breach of the fair evaluation/fair dealing terms, I have not found it necessary to reach a conclusion on these given the breaches of contract that already have been made out. Secondly, I have found that the CAA made, and (by its subsequent decisions and actions) falsified, certain representations as to the processes and methodology to be followed in the selection of the TAAATS contractor. These occurred in circumstances where Hughes was reasonably entitled to expect the CAA to disclose to it that the CAA did not intend to, and did not, adhere to what it had previously represented it would do. In these circumstances I have concluded that the CAA engaged in conduct in contravention of s52 of the Trade Practices Act 1974, that conduct relating substantially, though not precisely, to the same matters in respect of which I have found breaches of contract to have occurred. Additionally I have found that the CAA engaged in conduct in contravention of s52 in the representations it made to Hughes when de-briefing it on the basis of the CAA board's selection of Thomson as the TAAATS contractor. In each such instance of contravening conduct, I have found that Hughes relied upon that conduct. Thirdly, I have not found it necessary to make any findings on the applicant's claims in negligence and equitable estoppel. While the negligence claim in particular may have required examination of matters not expressly canvassed in these reasons, the claim itself achieved little prominence at the hearing and even less in submissions. Given the failures and failings of the CAA I have identified in my findings, little practical purpose would have been served by inviting further and detailed submissions on this claim and by engaging in a protracted examination of it. Finally, bearing in mind the "splitting" of this proceeding, the orders I propose to make are that the parties file agreed short minutes of orders to reflect these reasons and if short minutes are not agreed, (i) the applicant to file and serve proposed minutes of orders along with written contentions supporting the orders, and (ii) the respondent to file and serve its written objections thereto. I certify that this and the preceding 339 pages are a true copy of the Reasons for Judgment herein of the Honourable Justice Finn. Associate Dated: 26 June 1997 Counsel for the applicant : R V Gyles QC Solicitors for the applicant: M R Speakman Mallesons Stephen Jaques Counsel for the respondent : R Macfarlan QC Solicitors for the respondent : Dr J E Griffiths Freehill Hollingdale & Page Dates of hearing : 5-8; 12-16; 19-23; 27-30 August 1996; 3-5, 9, 10, 16, 17 September 1996 Date of final written submission : 31 January 1997 Supplementary questions : 11 March 1997 Date of final submission to supplementary questions : 29 April 1997 Date of judgment : 30 June 1997

Operational and Technical 1 Performance, logistics support and schedule
Price and other Financial Issues 2
Risk to Performance, Cost, and Schedule 3
Australian Industry Involvement 4 Minor criteria . Acceptability of Technical/Operational specification of the Interim Radar Display System, . Cost, delivery schedule of the Interim Radar Display System, . Company and Sub-contractor credentials and claims as to ability to undertake a project of this magnitude . Proposed project management procedures . Proposed systems integration management procedures . Reliability, maintainability and availability failure modes and backup modes including disaster recovery capabilities . Potential for enhancement of the offered system . Proposed installation, training, testing, and transition programs . Performance in the demonstration of the proposed Interim Radar Display System The CAA will not be disclosing any further information regarding the level of importance or relative weightings of the criteria. 2.5.2 Methodology The evaluation of proposals will be undertaken in accordance with a defined evaluation methodology. The methodology and CAA's conformance with that methodology will be independently audited. A qualitative assessment technique will be use [sic] for evaluation. The proposals will be first evaluated against all of the above criteria except for Australian Industry Involvement and price/financial considerations. If one proposal does not have substantial advantages over the other, they will be considered equivalent and the recommendation will be made on the basis of Australian industry participation and price/financial considerations. If one proposal does have substantial advantages over the other, the recommendation will be made on a value for money basis taking into account the identified advantages, the Australian industry participation and the price/financial considerations. The CAA will establish a Tender Evaluation Committee of senior CAA managers. A DITAC representative will provide advice on AII matters directly to the Tender Evaluation Committee. An independent auditor will be contracted to verify that the evaluation procedures were followed, the evaluation was been [sic] conducted fairly and the offers received due consideration. The auditor will report to the Evaluation Committee prior to the final recommendation and be responsible to the CAA Board. The CAA reserves the right to make available to a CAA selected third party a copy of the Companies' proposals for evaluation purposes only. Strict confidentiality of the information contained in the proposals will be maintained. The CAA will ensure that any third party involved in the evaluation process will not have any affiliation with any of the Tenderers for the TAAATS project. CAA's evaluation of the Response and the Pricing Schedule and the offer to supply the deliverables shall be in the absolute and unfettered control and discretion of CAA." Additionally, the 9 March letter indicated that the proposed acquisition "strategy" was outlined in detail in Attachment A. For its part that Attachment in dealing with the post-BAFO period stipulated: "5. CAA E VALUATION CAA evaluates the two offers strictly following the Evaluation plan referred to in the covering letter. The detailed evaluation will be completed in 4 weeks. The remaining 4 weeks comprise high level consideration of the results of the various evaluations.

The Seven Complaints

The CAA failed to evaluate the tenders in accordance with the methodology and priorities set out in the 9 March letter or the RFT and this particularly by DITRD and in relation to AII: ("Evaluation and Selection Failures");
The CAA took account of the communications made by or on behalf of Minister Griffiths and Minister Collins or else treated those communications as directions to the Board: ("Political Interference");
The CAA failed to contract an independent auditor to verify, and failed to ensure that the auditor verified, that the tender process procedures were followed and that the evaluation was conducted fairly: ("Audit Failure");
The CAA allowed a board member (Mr Yates), itself and DITRD to have improper interests in, or affiliations with, Thomson or the Thomson bid: ("Improper Interests and Affiliations");
The CAA did not ensure strict confidentiality was maintained in respect of the tenders and permitted disclosure both of Hughes' tender information to Thomson, and of Hughes' and Thomson's tender information to DITRD, Minister Griffiths and Minister Collins: ("Breach of Confidence");
The CAA took account of the Thomson price reduction and AII variation submitted after the final submission of tender materials: ("Price Reduction/AII Variation");
The CAA failed to conduct the tender evaluation fairly and in a manner that would ensure equal opportunity to Hughes and Thomson. For practical purposes the conduct relied upon to make this out is all of the particular actions and events that found the previous six complaints: ("Fair Dealing"). When considered along with the extensive particulars provided of the various specific acts and omissions pleaded, there could not be any misapprehension of the actual conduct of the CAA with which Hughes took issue. First, the contract claims. It was alleged that the 9 March letter and then the RFT on lodgement of the BAFOs constituted sequential and cumulative (to the extent the former was not inconsistent) contracts governing the tender process and the selection of a contractor. The conduct complained of was then alleged to constitute breaches of specified express and/or implied terms of those contracts. Secondly, the Trade Practices Act claim. This was that the CAA, having made representations as to the tender process and as to steps to ensure its integrity and fairness, later acted inconsistently with those representations but did not disclose to Hughes that it proposed so to act and/or that it did so act. For its part Hughes claimed it had acted on the initial representations and, because it was unaware that the CAA had not implemented them, it did not take any steps to prevent the CAA's actions or to compel it to adhere to the representations made. It had suffered loss and damage as a result. I would note that the representations said to have been made were relatively similar in purport to the contractual terms pleaded. Thirdly, the negligence claim. This asserted that the CAA owed a duty of care to Hughes to administer the tender process of the 9 March letter and the RFT with reasonable care, but because of the same conduct complained of in the contract and Trade Practices Act claims, it breached that duty with resultant loss to Hughes. Fourthly, equitable estoppel. The pleaded case was that, believing the CAA would conduct itself during the new tender process in the manner in which it represented or promised it would - and the representations and promises alleged are those relied on in the Trade Practices Act and contract claims - Hughes relied on those representations and promises. The CAA knew or ought to have known that Hughes would suffer loss if Hughes' beliefs and expectations in this were not fulfilled. Yet, in the conduct complained of, the CAA did not fulfil those beliefs and expectations. While not abandoning the negligence and estoppel claims Mr Gyles QC in his oral submissions indicated that if his client failed on the contract and Trade Practices Act claims it would be unlikely to succeed on these two. For this reason, but also because the submissions (oral and written) of both parties focussed almost exclusively on the first two claims, negligence and estoppel will receive only passing treatment in these reasons. They are, for practical purposes, superfluous claims. THE SPLITTING OF THE APPLICATION At the first directions hearing on 9 February 1996 it was ordered by consent that liability be tried and determined separately and in advance of any hearing on, and determination of, damages. While this order has had the effect of shortening considerably the length of the initial hearing, it has given some aura of artificiality to particularly the Trade Practices Act claims insofar as they are predicated upon the loss of opportunities to Hughes - opportunities (real or remote) with which, because of the course taken, I do not have to concern myself. ISSUES NOT PLEADED This case sits unhappily on two rather significant fissures in Australian jurisprudence. The one concerns the constitutional status and standing in our system of government of statutory corporations that by statute are subject to prescribed (hence, presumably, correspondingly limited) powers of ministerial direction. Do they fall within the Executive? Or are they a fourth arm of government? The other raises the extent to which the manner of scrutiny of the formally "non-governmental" action of a statutory corporation (ie entering into a "commercial" contract) can or should be affected by the considerations that it nonetheless is a public body that is so acting and that in so doing it is exercising a public function. I raised both of these matters with Mr Gyles QC. As to the first I inquired whether any issue would be taken as to the constitutionality or otherwise of a body such as the CAA because of the provisions of the Constitution, s61. Given the paucity of the legal literature on this matter I reluctantly refer to the Senate Standing Committee on Finance and Government Operations, Statutory Authorities of the Commonwealth: Fifth Report, Appendix 4, P D Finn and G J Lindell, "The Accountability of Statutory Authorities"; see also L Zines, The High Court and the Constitution, 268 (4th ed, Butterworths, Sydney, 1997); and Horta v The Commonwealth of Australia (1994) 181 CLR 183 at 197. For understandable reasons Mr Gyles QC disclaimed any wish to burden his case with constitutional considerations. I would have to say, though, that the absence of authoritative guidance on the place of statutory corporations in our system of government - and, importantly, on their proper relationship both with Parliament and the Executive - is an abiding difficulty in divining the proper resolution of cases of this variety. I have not been able to avoid venturing some conclusions on these issues. As to what I might call the "public law/private law" issue, I again put to Mr Gyles QC whether he was making the case that the actions of the CAA in the tender process were, through the medium of express and implied contractual terms, to be subjected to scrutiny on traditional grounds of judicial review of administrative action. He disclaimed that such was the case being put. I would have to say that those grounds were nonetheless a constant undertone in much of the case as argued. I have not in these reasons been able to avoid having regard to the public function being performed by the CAA in the TAAATS tender or to its status as a public body. To use an old description, it is not possible to say that when the CAA contracted it was a matter of "juris privati only"; cf Hale, De Portibus Maris, 77, (c.1660); see also J McLean, "Contracting in the Corporatised and Privatised Environment", (1996) 7 Public Law Rev 223; M Taggart, "Corporatisation, Privatisation and Public Law", (1991) 2 Public Law Rev 77; S Bottomley, "Regulating Government-Owned Corporations: A Review of the Issues", (1994) 53 Aust Jo of Pub Admin 521. PART IV: GENERAL CONTRACT ISSUES Two contractual matters are of such pervasive significance in Hughes' application that it is appropriate to consider these separately at the outset. This will avoid a deal of repetition and/or assumption when Hughes' various causes of complaint and their legal significance are considered in turn. The first is whether either or both the 9 March letter and the RFT on the lodging of Hughes' BAFO, gave rise to what I will inexactly call "process contracts" between Hughes and the CAA. The second (assuming a contract or contracts was or were there) relates to the bases on which terms can and are to be implied (if at all) in this case. An aspect of this, again putting the matter somewhat inexactly, is whether it is open to me to find some form of contractual duty of "fairness" or, more broadly, of "good faith and fair dealing" and if so of what provenance.

THE PROCESS CONTRACTS As already noted, it is Hughes' case that the 9 March letter (on its signing by Hughes) and the RFT (on Hughes' lodging of its BAFO) gave rise to sequential and cumulative tender process contracts with the CAA on at least the terms and conditions of those documents respectively, with the latter overriding the former to the extent of any inconsistency between them. For convenience I will refer to the alleged agreements as the "9 March contract" and the "RFT contract". The essence of Hughes' submission is that the conclusion whether or not contractual obligations arise in consequence of arrangements made in connection with an intended procurement is simply a matter of construction. A party calling for tenders may do no more than issue an invitation to treat: eg Spencer v Harding (1870) LR 5 CP 561. But equally the steps taken by it may result in the making of contractual commitments in relation to the whole or parts of the tendering process: eg Blackpool and Fylde Aero Club Ltd v Blackpool Borough Council [1990]1 WLR 1195; Queen in Right of Ontario v Ron Engineering and Construction Eastern Ltd (1981) 119 DLR (3d) 267; Fairclough Building Ltd v Borough Council of Port Talbot (1992) 62 BLR 82. The growing body of case law in which pre-award contracts have been alleged merely demonstrates that each case turns on its own facts: see Pratt Contractors Ltd v Palmerston North City Council [1995] 1 NZLR 469 at 478-479. It is Hughes' assertion that it is difficult to conceive of a factual matrix as strong as those here to support contract. The respondent for its part denied that either the 9 March letter or the RFT acquired contractual effect. It is said that, in the circumstances, no contractual intent was manifested by the parties; that the procedures laid down in the letter and the RFT to govern the tender process were in the nature of administrative arrangements and not contractual terms; and that there was no consideration in any event for the alleged 9 March contract. Emphasis, understandably, was placed upon case law where courts have been unprepared to find any, or any relevant, pre-award contract: eg Streamline Travel Service Pty Ltd v Sydney City Council (1981) 46 LGRA 168 at 176-177; Gregory v Rangitikei District Council [1995] 2 NZLR 208; see also G H L Fridman, "Tendering Problems", (1987) 66 Can Bar Rev 582. Additional Chronological Material Before considering the substance of these submissions it is necessary to provide further detail of the circumstances leading to the 9 March letter and the RFT. I have already indicated that Hughes and Thomson were competitors in both RADREP and TAAATS I and that, in the wake of the Macphee Report, the TAAATS process was restarted with both companies invited to participate. That Report contrived much in the subsequent conduct of the TAAATS II procurement. It highlighted and criticised the departures made from the selection process envisaged by the TAAATS I Registration of Interest documentation and the unfairness this occasioned. In making its recommendations the Macphee Review indicated its: "principal desire now is to see TAAATS proceed on the basis best suited to the needs of the CAA, the general public and the aviation industry. An essential ingredient in that approach is that the process must be restored to one of fairness between the tenderers:"the Macphee Report, para 12.1. (emphasis added) The Report, in particular, recommended that the recommenced competition between Hughes and Thomson be conducted with designated evaluation criteria. I should add that the CAA board on 21 December 1992 endorsed the general thrust of the Macphee Report's specific recommendations. It authorised Mr Roser to proceed with restarting the process. In his evidence Mr Roser accepted, not surprisingly, that it was very important to the CAA that each of the two companies agree to take part in that process. At the "Restart Meeting" of 19 January 1993 Mr Roser, then Acting Chief Executive of the CAA, made an opening presentation to Hughes and Thomson and presented them with a series of slides. Both his opening observations and the slides took up the fairness theme of the Macphee Report. I refer here only to initial comments made in his oral presentation: "... I feel it is important that I share my aims and the Board's aims for TAAATS with you and that you understand what I, and the Board, wish to achieve with the CAA in the TAAATS project. My aim is to restart TAAATS in a manner which accords with the recommendations of the Independent Review which have been fully endorsed by the Board. That's our first aim. We had to get the process restarted. Secondly in a process that is fair to both Companies, and gives both Companies an equal opportunity to be the successful contractor. If I cannot achieve this it is my intention to report accordingly to the Board and recommend an alternative strategy. Of course I will require both Companies to endorse the way ahead as being fair. Until I achieve that situation, we won't restart it. . . . Given the background of what happens the next requirement is that we will include an independent audit in the process." After this meeting the CAA held intensive discussions with the companies. On 5 February it wrote to both outlining its strategy in relation to the TAAATS project. In relation to the tender process, that letter (as also a later iteration of 24 February) prefigured that of 9 March. It indicated that the project would be split into two phases - the Specification Development Phase and the TAAATS Acquisition Phase. The former of these is of present significance in that on 9 March (the same date as the letter) a formal SDP contract as well was executed by the CAA and Hughes. On 3 March 1993, the CAA again wrote to both companies enclosing a draft of the 9 March letter. As it was intended for each company's "agreement at signature of the SDP Contract", comments on its acceptability were sought. I emphasise this. As I have indicated in the General Chronology, each company received and signed copies of the 9 March letter. The Hughes' signing apparently occurred at a meeting of Hughes' executives with CAA management. I have in the General Chronology set out in some detail excerpts from that letter and its attachment. I will not repeat these though I will note that the letter itself in its second paragraph stated that: "The purpose of this letter is to describe the new requirements and revised process for the Specification Development Phase, and seek your concurrence with these." I would add that the letters of 5 and 24 February made plain why the material relating to the TAAATS tender was included in the letter. It was, as the letter of the 24th said, to ensure the letter was "complete as a 'stand alone' document" dealing (inter alia) with contractor selection. Turning briefly to the RFT, I would only note here, in addition to what I have said in the General Chronology, that the covering letter of 19 July 1993 from Mr Hider of the CAA said in its opening paragraphs: "I refer to earlier correspondence in relation to the TAAATS Acquisition Process: in particular to the letter dated 9 March, 1993, from the Acting Chief Executive Officer, and to the TAAATS Specification Development Phase Contract. I am writing to you in relation to the way ahead for the completion of the TAAATS Acquisition Process and the submission by you of a Best and Final Offer for the provision of TAAATS Air Traffic Services Centres (ATSCs), Terminal Control Units (TCUs) and associated systems. As previously notified, a Best and Final Offer (BAFO) is to be submitted in the context of a tender, as distinguished from a negotiated price. I am attaching the conditions and procedures for this process in the form of the Request for Tender (RFT), number C93/44. The RFT incorporates proposed draft General Conditions of Contract based on earlier drafts but modified following receipt of comments from and discussions with both tenderers." I should mention one final evidentiary matter at this point. Mr Kramp, apparently the most senior Hughes executive to participate directly in the TAAATS procurement, gave evidence that, having read the Macphee Report within weeks of its release and being satisfied with its recommendations, he then resolved that Hughes should participate in negotiations to establish a satisfactory tendering process with the CAA. He attended the Restart Meeting and having heard Mr Roser's assurances as to the Macphee recommendations and that there would be a fair competition with defined criteria and evaluation process, he continued his earlier decision. It was he who authorised acceptance of the 9 March letter. It was, he said, his belief that because of what was said at the Restart Meeting and in the 5 February and 9 March letters, that "the TAAATS II selection process would be as stated" in those documents. He relied on the 19 January statements and the letters in deciding that Hughes should participate in TAAATS II. Conclusions (i) The 9 March Letter Having regard to the history ("to the objective framework of facts") which shaped the 9 March letter: cf Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337 at 352 - the process miscarriages of TAAATS I; the criticisms and process recommendations of the Macphee Report; the CAA Board's adoption of the Macphee recommendations and the consequential need to ensure the participation of the two companies in a future competition; the aims stated by the CAA at the Restart Meeting; and the subsequent correspondence (eg the 3 March letter) and discussions concerning the tender process and the terms of the letter itself - I consider the conclusion inescapable that the letter was, on its signing, to constitute a binding statement of the procedures to be followed and the criteria to be applied, in the award of the TAAATS Acquisition Contract subject only to their possible modification in accordance with the procedure for modifying the "strategy" stipulated in para 2.1 of the letter. To characterise the letter merely as a description of the administrative arrangements and processes that the tenderers were asked to concur in, but as not binding the CAA (as the respondent has submitted), is to ignore the object of the activity the CAA had been engaged in up to that point. That, on the evidence, was to produce a fair, defined and auditable tender process - "bullet-proof" as Mr Roser accepted. It was this that was being held out to the two prospective tenderers for their concurrence as providing the bases and conditions of their further participation in the phases leading to the award (if at all) of the TAAATS Acquisition Contract. The general circumstances were ones in which the CAA needed (i) to ensure Hughes' further participation in the TAAATS process if the CAA was to proceed as envisaged in the Macphee Report; and (ii) to reassure particularly Hughes of the integrity and fairness of the procedures to be followed. The steps it took were such as would convey to a reasonable person in Hughes' position (when being asked to make a significant commercial commitment) that the CAA was intending to bind itself to comply with the procedures proposed. While acknowledging it not to be of assistance in determining whether the 9 March letter should be construed to be a contract - see Air Great Lakes Pty Ltd v K S Easter (Holdings) Pty Ltd (1985) 2 NSWLR 309 - I do not regard it as at all surprising that Mr Kramp of Hughes gave the evidence he did, both of his initial caution and of the significance he attributed to the negotiations on process from the Restart Meeting to the 9 March letter. It is equally not surprising that he was of the view that the processes agreed were to be the ones on which the TAAATS acquisition was to be conducted. Objectively viewed the circumstances were redolent of a contractual intent on the part of the parties concerned. I cannot accept that a mere invitation to treat was being proffered by the CAA. It was taking positive steps to procure the participation of the tenderers in a competitive TAAATS II. Integral to that was the prescription of a tender process acceptable to them. While I need not necessarily go so far as to suggest of tender procedures generally that "the integrity of the bidding system must be protected where under the law of contract it is possible so to do" - cf The Queen in Right of Ontario v Ron Engineering and Construction Eastern Ltd, above, 273 - the circumstances here were ones in which it properly can be said the parties, by agreement, had used contract to protect "the integrity of the bidding system". I should add that, notwithstanding a submission to the contrary to which I will later refer, I consider the mandatory language in which the letter expounds the procedures and criteria to be used as being consistent with the imposition of binding obligations. While it was the CAA's declared "objective" to place the TAAATS contract with one or other of the two companies, it is not necessary for me to determine whether, under the letter, it obliged itself to do so. It is clear by comparison that under the RFT (para 7.1) such was not the case. What I hold in any event is that whether or not the CAA was so obliged, the terms of the letter were such that, if the CAA selected a tenderer, that selection was required to be after following the procedures, and in accordance with the criteria, specified. In the usual case where a pre-award contract is alleged no issue is raised as to whether consideration was furnished by the tenderer and this for the reason that the lodging of the tender is the usual event said to occasion the formation of the contract. Here, though, the pre-award contract propounded pre-dates the tender. The applicant alleges that the consideration it furnished was its agreement to participate in the procurement. Of this the respondent asked rhetorically in its submissions: would Hughes have been liable for breach of contract if it did not so participate? The reasonable inference to draw from the circumstances (and it is reflected in the evidence of both Mr Kramp and Mr Roser) is that Hughes made, and it was hoped it would make, a decision to participate in the process because of the stipulated procedures and criteria - itself a clear benefit to the CAA. Viewed objectively, that participation constituted good consideration for the pre-award contract. To this extent I agree with the applicant's submission. I do not, though, need to go on to consider the respondent's rhetorical question. For consideration purposes, Hughes' participation would equally have been enough even if it could be said to have reserved the right to withdraw at any time, or in specified circumstances, or whenever. On the evidence it probably would be correct to infer that the parties gave no real thought to the limits (if any) of the participation that could properly be expected of Hughes. It is unnecessary for me to speculate in these proceedings as to what, if any, limits could properly be implied. I have been taken by counsel to case law both in this country and in other common law jurisdictions where courts, variously, have found and rejected pre-award contracts in tender cases. They are helpfully collected and analysed in N Seddon, Government Contracts, 206 ff (Federation Press, Sydney, 1995). I do not consider it necessary to add further to that analysis. The general issue in these cases, and for me, was put squarely by Gallen J in Pratt Contractors Ltd v Palmerston North City Council, above, at 478-479: "Authority makes it clear that the starting point is that a simple uncomplicated request for bids will generally be no more than an invitation to treat, not giving rise to contractual obligations, although it may give rise to obligations to act fairly. On the other hand, it is obviously open to persons to enter into a preliminary contract with the expectation that it will lead in defined circumstances to a second or principal contract ... Whether or not the particular case falls into one category or the other will depend upon a consideration of the circumstances and the obligations expressly or impliedly accepted." (Emphasis added) For the reasons I have given, I have concluded that in the distinctive circumstances that obtained in this case - and I here agree with Hughes' submission as to the strength of the "factual matrix" - contractual obligations were accepted. In reaching this conclusion I have dealt in substance (with or without explicit recognition) with some number of the respondent's detailed submissions. There are several others to which I should respond directly. It was submitted that the stated purpose of the 9 March letter (set out in the "General Chronology" above) reflected the focus of the parties at the time: it was with the SDP phase and its translation into binding contractual obligations. The SDP Contract was formally executed on 9 March. It should be taken, so it was said, as exhaustively stating the material contractual obligations of the parties at the time. If the TAAATS II Acquisition Contract tender process was equally intended to be made contractual at this stage, it was to be expected that (as with the SDP contract) a formal agreement would have been adopted. It was not. Relatedly it was submitted that, insofar as the projected TAAATS acquisition phase was concerned, all that the CAA was seeking was to obtain "concurrence" (9 March letter) in its proposed administrative procedures, not an "agreement" (5 February letter) as to them. To reinforce this suggested "concurrence/agreement" dichotomy, contrasts were drawn between the differences in language and specific terms of the 5 February letter (which, it was suggested, possessed a distinct contractual flavour) and the 9 March letter (which it was said did not, if only because of the changes made). I would have to say that I have not found the close analysis made of the difference in language and terms between the 5 February and 9 March letters to be of real assistance in resolving the contract question. The definitional process was, in this period, clearly contemplated to be an evolving one. What in my view was important was the object of that definitional process as it crystallised first on 9 March at the beginning of the SDP phase, and then later in the RFT. I have already indicated in relation to the 9 March letter why I have concluded that that object was to produce a tender process to which the parties could, and would, bind themselves. It would be quite artificial because of separate forms of documentation and separate signings to isolate the SDP contract and to suggest that it alone was all that the parties would intend to be legally binding at this stage. It may have been appropriate to split the procurement into two phases - and hence two separate principal contracts - SDP and TAAATS Acquisition. But for the purpose of the procedures to be followed in the procurement, it is not apparent to me why the parties would still not reasonably regard the procurement as all of one piece. The Macphee Report, in its criticism of the deviations from the process set out in the ROI in TAAATS I, suggests why a contractor in Hughes' position would reasonably be expected to require that, at 9 March, the process be set for the TAAATS Acquisition phase - the more so as it was then committing itself by contract to the SDP part of the procurement. (ii)The RFT Contract My conclusions here can be stated more briefly. The consideration question apart (it does not arise with the RFT), the respondent's submissions as to why (for reasons internal to the RFT document itself) the RFT is not a contractual document reflect essentially those raised against the 9 March letter. Here I would simply note that the terms and conditions relied upon by the respondent to this end in the RFT, and the various rights, powers and discretions these confer - see RFT paras 7.1, 7.2, 7.3, 13.1, 13.2, 16.2.9, 34.1 (not all of which are set out in these reasons) - are not inconsistent with the RFT having contractual effect to the extent that it specifies the processes to be followed and the criteria to be applied (subject to the power of modification: para 34.1) in evaluating compliant bids and in selecting (if at all) a contractor. Against the background of what had transpired since TAAATS I, it seems to me wholly unreasonable to construe the RFT as not embodying a contractual intent. It carried forward the 9 March letter and its Attachment A: see General Chronology para 9. Its specificity, its coverage, its relationship to those matters (a) in Macphee, (b) the Restart Meeting and (c) the 9 March letter which particularised procedures and criteria to be followed and indeed its language are consistent with its being ascribed a contractual character. I would add that, with the independent auditor having been appointed months beforehand, it does seem a little odd that, if appointed to audit a mere invitation to treat, he would have his appointment held out to the tenderers as an inducement to their participation in the process as was done at the Restart Meeting. Finally, I would have to say I can find nothing in the language of the letter sent to each of the companies attaching the RFT which would lead me to a contrary conclusion. To the extent that that letter refers to actions to be taken/changes to be made in the future, it is in my view of the first importance to recognise that the TAAATS procurement involved "relational contracts"; cf M A Eisenberg, "Relational Contracts", in J Beatson and D Friedmann (eds), Good Faith and Fault in Contract Law, (Clarendon Press, Oxford, 1995). Evolutionary change was to be expected as was future action. I conclude that, on Hughes' lodging of its BAFO on 5 October 1993, the terms and conditions of the RFT acquired contractual force as between it and the CAA. I should add that, by virtue of para 9.1 of, and Attachment A to, the RFT, DITRD's letter of 12 August acquired contractual recognition in the RFT contract - albeit as successor to those actually nominated in Attachment A. I should indicate, furthermore, that my findings of sequential pre-award contracts in this case has been ordained by the distinctive circumstances of this procurement and by the parties' responses to these. It has been suggested that there are sound reasons of public policy which should induce pause in the finding of such contracts in tender/procurement contexts. I designedly do not enter on that. Here, it is plain that the parties have found it necessary to take explicit steps to protect "the integrity of the bidding system". (iii) The Relationship of the Contracts The applicant's case in this is one of simple assertion. It is that the contracts are cumulative, with the latter prevailing to the extent of any inconsistency. The respondent for its part submits that the RFT superseded the 9 March letter, as was envisaged in the letters of 19 July 1993 sending the RFT to the two companies. The relevant paragraphs of that letter are set out in the "Additional Chronological Material" above. As the letter indicates, the RFT prescribes "the conditions and procedures" for the submission of a BAFO. It likewise deals explicitly with almost all of the process matters dealt with in the 9 March contract - though not necessarily in identical language. What it omits are the four procedural steps to be taken by the evaluators, then the TEC, then the Board, leading to the selection of a contractor. These are contained in paras 4, 5 and 6 of Attachment A to the 9 March letter: see above General Chronology, para 9. I find it difficult to accept, not only in the face of this letter (which is concerned with "the way forward"), but also with the purpose and specificity of the RFT, to conclude that it was not intended to cover the field so far as concerned the procedures and criteria that were to govern the procurement process from acceptance by the lodging of a BAFO. Apart from the one matter I have noted, there is marked similarity between the 9 March letter and the RFT. Because of the contractual character of the 9 March letter the parties probably would have been entitled to insist that any procedure/criteria contained in it, but not the RFT, be added to the RFT. This was not done. I regard that as significant. My conclusions are that (i) whatever differences there may have been between the RFT and the 9 March letter, the parties by lodging their BAFOs should be taken as having agreed they were not of such consequence as justified the retention of the 9 March version; and (ii) the RFT was to provide such explicit, written version of the pre-award contract as was to govern the procurement post-BAFO. These conclusions are consistent with what I consider to be the evolving character of the relationship between the parties. Theirs were "relational contracts" as I have previously noted. I do not consider that prudent commercial parties would have wished to retain the earlier document on foot, so exposing themselves to the prospect of having to deal with inconsistencies between the two contracts. Having reached this conclusion I would have to say that my rejection of the continuation of the 9 March contract would seem to have little bearing in any event on the actual resolution of the contract claims in this case - the more so because of the view I take as to the implication of terms.

THE IMPLICATION OF TERMS GENERALLY The rules to be applied in determining whether a term should be implied ad hoc into a contract were not the subject of disagreement between the parties. Nor could they be given the weight of binding authority in this matter: B P Refinery (Westernport) Pty Ltd v Shire of Hastings Council (1977) 180 CLR 267; Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337; Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41. As Priestley JA noted in Renard Constructions (ME) Pty Ltd v Minister for Public Works (1992) 26 NSWLR 234 at 256: "Those rules are that the implied term must be reasonable and equitable; necessary to give business efficacy to the contract, so that no term will be implied if the contract is effective without it; so obvious that 'it goes without saying'; capable of clear expression; and must not contradict any express term of the contract." Some number of the terms that Hughes alleged were breached by the CAA in the RFT contract (and on its case the 9 March contract) have been advanced as terms implied ad hoc. I will consider whether any or all of these should be so implied as and when the conduct alleged to constitute the breach is discussed. Here I do no more than indicate the uncontested rules for implication I am to apply. Only one term of the RFT contract is put forward as implied by law - the applicant provided a schedule of the terms and their alleged provenance - and this only as an alternative to its being an express term or one implied ad hoc. That term was that: "the [CAA] would conduct its evaluation fairly and in a manner that would ensure equal opportunity to Hughes and Thomson." While para 9 of the Fifth Further Amended Statement of Claim dealing with the RFT contract does not refer explicitly to the above term - unlike para 5 which dealt with the 9 March contract - the case has been conducted on the basis that such a term was being advanced. It was the subject of written submission by both parties. And while the respondent objected to the applicant's reliance upon "a nebulous concept of generic fairness", it did not take explicit issue with the failure to plead the above term as part of the RFT contract. Despite the tightly constraining force the pleadings have acquired in this case, this is one instance in which it can be said that an unpleaded matter was allowed to, and did, become an issue between the parties: cf Cummings v Lewis (1993) 41 FCR 559 at 577ff.

THE IMPLIED TERM OF "FAIR DEALING" As already noted, the term propounded is that: "the [CAA] would conduct its evaluation fairly and in a manner that would ensure equal opportunity to Hughes and Thomson." The particular language in which the term is couched partially reflects that in the RFT para 16.2.6 dealing with the independent auditor: "An independent auditor has been contracted to verify that the evaluation procedures were followed, the evaluation was conducted fairly and the offers received due consideration." Hughes places no little emphasis on that paragraph. The idea of a "fair process" had significant antecedents in the TAAATS II procurement. It informed the specific recommendations of the Macphee Report (para 12.1): "An essential ingredient in [the future of the procurement] is that the process must be restored to one of fairness between the tenderers ... Our recommendations apply to that part of the process in which fairness ceased." At the Restart Meeting the slide both shown to, and given, the companies concerning the "Objectives" of the TAAATS Evaluation Strategy stated (omitting the title): " . Conduct a fair and equitable evaluation - will allow the Tender Committee to make recommendation on contract to the Board . Respect and protect proprietary and confidential information . Conduct the evaluation in a manner which is auditable and defensible . Provide a basis for debriefing Companies" I would note in passing the conjunction in this of the first and third dot points. At the same meeting in his oral opening, Mr Roser referred directly to instating: "a process that is fair to both Companies, and gives both Companies an equal opportunity to be the successful contractor. ... Of course I will require both Companies to endorse the way ahead as being fair. Until I achieve that situation, we won't restart it." The letter of 5 February which, after some iterations became the 9 March letter, first began the use of the "fair evaluation" formula used in the independent auditor provision of the RFT noted above. The applicant propounds the term on three bases. First that the term is an express one; secondly, that it should be implied ad hoc; and thirdly, it should be implied in law in its own right or as a manifestation of a general implied term of good faith and fair dealing. (i) Express term The applicant's submission here, as I understand it, is based on the construction that should be given the independent auditor provision (para 16.2.6) of the RFT in light of the surrounding circumstances. It is that, if the independent auditor was contracted to verify (inter alia) that "the evaluation was conducted fairly and the offers received due consideration", the provision itself both presupposed, and contained an acknowledgment of, the obligation of the CAA to conduct the evaluation fairly. It is suggested that a construction that did not recognise this obligation would make a commercial nonsense of the paragraph: cf Hide & Skin Trading Pty Ltd v Oceanic Meat Traders Ltd (1990) 20 NSWLR 310 at 313-314. The respondent, in contrast, submits that the provision had a clear and intelligible purpose and meaning: it dealt with the retainer of an independent auditor to verify that the evaluation was conducted fairly. I am invited to conclude that the provisions went no further than did their literal terms. In my view the respondent's construction of para 16.2.6 is to be preferred. While para 16.2.6 might provide one of a range of circumstances of which account might be taken when considering whether the proposed duty should be implied ad hoc, it is not of itself a sufficient indication of the existence of such a duty as to justify construing it as a recognition of that duty. The paragraph might well suggest inquiry as to the obligation(s) assumed by the CAA in the evaluation. It does not of itself so certainly describe them as to provide their express source. It may well be the case that, from the totality of the circumstances, it would be possible to infer that the parties actually intended there to be such a term. It is unnecessary, though, for me to further explore this matter given (a) the very clear view I have arrived at that the term should be implied ad hoc, and (b) that the applicant's Submissions in Reply tend to merge inference and implication ad hoc in any event: cf Thompson and Morgan (United Kingdom) Ltd v Erica Vale Australia Pty Ltd, (unreported, FC FCA, per Gummow and Hill JJ, 19 April 1995). This, perhaps, is one of those cases where it is unnecessary to distinguish the two for practical purposes: cf Hawkins v Clayton (1988) 164 CLR 539 at 570. (ii)Implication ad hoc The applicant relies upon a composite of factors to justify this implication. They are (i) the independent auditor provision in the RFT and the expectation of fair evaluation it anticipates; (ii) the presence of other terms in the RFT that are specific manifestations of fairness and equal opportunity - reference was made to the RFT paras 16.1 (criteria), 16.2.1 (evaluation), 4 (the particularised manner in which tenders were to be submitted), 16.2.7 (confidentiality) and 16.2.8 (prohibitions on certain affiliations with tenderers); and (iii) the previous history including the cancellation of RADREP, the cancellation of TAAATS I because of perceived unfairness to Hughes, the Macphee Report, the parties' alleged contemplation that Hughes would not participate in TAAATS II unless the process was fair, and the repeated assurances of fairness given to Hughes (eg at the Restart Meeting). This, it was said, was no ordinary tendering process. The participation of the parties in it was predicated upon it being conducted fairly. In the very distinctive circumstances here, it is suggested, it clearly satisfied the implication rules. The respondent for its part submits to the contrary: it is not reasonable or equitable to impose so "uncertain and nebulous" an obligation on a public body; it is unnecessary, because there are express terms dealing with specific aspects of fairness and these ought to be regarded as exhaustive: cf Hospital Products Ltd v United States Surgical Corporation, above; it is not obvious because of those other terms; it is not capable of clear and precise expression; and the history relied upon to support it is equally consistent with the parties proceeding on the basis that fairness would be dealt with by specific terms. I would have to say I regard the case for this implication as overwhelming. Fairness in process and dealing was the a priori of this business relationship. I need not repeat the history here: Mr Roser's comments at the Restart Meeting were emblematic of what all parties were reasonably entitled to expect for the future. And their expectations were to be given the guarantee of an independent audit of compliance and fairness. Without the assurance of fairness, there would have been no contract. Such was Hughes' evidence. Despite the criticism mounted by the respondent of the term's "nebulous" language, it was the actual language of the parties: it was intended to convey meaning and to be relied upon. It was, relevantly, definite and capable of precise expression. And, in my view, it was "so obvious that [the parties] would clearly have agreed to its inclusion in the contract ... had they directed their mind to it at the time": Con-Stan Industries of Australia Pty Ltd v Norwich Winterthur Insurance (Australia) Ltd (1986) 160 CLR 226 at 241. I am unable to accept the submission of the respondent that the specific "fairness" obligations identified in the RFT exhausted the obligation of "fairness" assumed by the CAA. The CAA clearly had a far more pervasive conception of the fairness it intended to have exhibited in the TAAATS evaluation - as witness the responsibilities of the independent auditor contained in Schedule I to its agreement with Mr Moten. More importantly, though, fairness in evaluation was, from the Macphee Report onwards, clearly perceived by the parties to be of encompassing importance. It would not be reasonable to conclude that they expected it to be limited to, and be measured by compliance with, a relatively small number of specific obligations in the RFT. It was intended to be an obligation in its own right. It is important to recognise that, in the pre-award phase, the parties were engaged in a close working relationship over a significant period of time. Not one of them could have been unaware of the vulnerability to which Hughes and Thomson exposed themselves by agreeing to enter into that relationship. Unlike cases where parties are and remain at arm's length in the pre-award phase, the relationship here in its setting was one which renders unsurprising the making of the implication sought. It is one I am prepared to make. (iii) Implication in law My previous conclusion makes it strictly unnecessary to consider this basis of implication. Nonetheless I consider it appropriate to do so should my previous conclusion be incorrect. (a) Good faith and fair dealing The applicant's submission is that the proposed term is a manifestation of a general implied duty of good faith and fair dealing. I have, in consequence, been invited to embrace the conclusion of Priestley JA in Renard Constructions (ME) Pty Ltd v Minister for Public Works, above, at 268 that: "people generally, including judges and other lawyers, from all strands of the community, have grown used to the courts applying standards of fairness to contract which are wholly consistent with the existence in all contracts of a duty upon the parties of good faith and fair dealing in its performance. In my view this is in these days the expected standard, and anything less is contrary to prevailing community expectations." The primary basis upon which I was asked to make this implication was unrelated specifically to pre-award contracts in procurement cases. Rather as suggested in the Restatement of Contracts, Second, Art 205, the implied duty existed in "every contract". I make this particular observation because, as later discussed, a duty to act fairly in some form appears to have been accepted in other Commonwealth jurisdictions in pre-award contract contexts: see Pratt Contractors Ltd v Palmerston North City Council, above, at 478, 483; Martselos Services Ltd v Arctic College (1994) 111 DLR (4th) 65; and see generally N Seddon, Government Contracts, 235ff. The respondent in contrast has pressed upon me the judgment of Gummow J, then of this Court, in Service Station Association Ltd v Berg Bennett & Associates Pty Ltd (1993) 45 FCR 84. After considering North American jurisprudence's acceptance of an implied duty of good faith and fair dealing, his Honour observed, at 96: "Anglo-Australian contract law as to the implication of terms has heretofore developed differently, with greater emphasis upon specifics, rather than the identification of a genus expressed in wide terms. Equity has intervened in matters of contractual formation by the remedy of rescission, upon the grounds mentioned earlier. It has restrained freedom of contract by inventing and protecting the equity of redemption, and by relieving against forfeitures and penalties. To some extent equity has regulated the quality of contractual performance by the various defences available to suits for specific performance and for injunctive relief. In some, but not all, of this, notions of good conscience play a part. But it requires a leap of faith to translate these well-established doctrines and remedies into a new term as to the quality of contractual performance, implied by law": (emphasis added) Needless to say I have been asked to remain in Gummow J's company and not take that leap. Other Australian authority on this duty is indecisive. Notably, in the Full Court of this Court in News Ltd v Australian Rugby Football League Ltd (1996) 139 ALR 193 at 285, it was found unnecessary to consider whether such a duty should be implied in that case. The Court did not enter upon the question of whether our law recognised such an implication as a matter of law. If the matter stood merely as one of choice between two conflicting views, I would, as a matter of comity, adhere to that of Gummow J: see Bank of Western Australia Ltd v Commissioner of Taxation (1994) 55 FCR 233 at 255 on "comity" and the cases referred to therein. This is an arena in which opinions, judicial and scholarly, differ often sharply: see eg I Renard, "Fair Dealing and Good Faith", in Saunders (ed), Courts of Final Jurisdiction, (Federation Press, Sydney, 1996). And it is difficult to disagree with Gummow J's characterisation both of the methodology of Australian contract law while it remained subject to direct English control and of the role assumed by equity in regulating contract formation and performance. Having said this, it is also appropriate to indicate that my own view inclines to that of Priestley JA. Of that inclination I would say only this. Fair dealing is a major (if not openly articulated) organising idea in Australian law. It is unnecessary to enlarge upon that here. More germane to the present question, the implied duty is, as is well known, an accepted idea in the contract law of the United States and, probably, of Canada: see E A Farnsworth, "Good Faith in Contract Performance" in J Beatson and D Friedmann (eds) Good Faith and Fault in Contract Law, (Clarendon Press, Oxford, 1995); for a convenient collection of some of the voluminous literature in the US debating the meaning of the implied duty see Farnsworth on Contracts, Vol 2, para 7.17a (Little, Brown & Co, Boston 1990); for an English view see eg Rt Hon Lord Justice Staughton, "Good Faith and Fairness in Commercial Contract Law" (1994) 7 Jo Contract Law 193; and see Livingstone v Roskilly [1992] 3 NZLR 230 at 237-238. Its status in civil law is well recognised: see eg H K Lücke, "Good Faith and Contractual Performance" in P D Finn (ed), Essays on Contract, (Law Book Co, Sydney, 1987); J F O'Connor, Good Faith in English Law, Ch 8 (Dartmouth, 1990). It has been propounded as a fundamental principle to be honoured in international commercial contracts: see eg Unidroit, Principles of International Commercial Contracts, Article 1.7 (International Institute for the Unification of Private Law, Rome, 1994). Its more open recognition in our own contract law is now warranted: cf Sir Anthony Mason, "Contract and its Relationship with Equitable Standards and the Doctrine of Good Faith", The Cambridge Lectures, 1993 (8 July 1993); notwithstanding the significant adjustments this would occasion to some of contract law's apparent orthodoxies: see eg Lücke, above, 177ff. I should add that, unlike Gummow J, I consider a virtue of the implied duty to be that it expresses in a generalisation of universal application, the standard of conduct to which all contracting parties are to be expected to adhere throughout the lives of their contracts. It may well be that, on analysis, that standard would be found to advance little the standard that presently may be exacted from contracting parties by other means: cf the standard applied in Conoco v Inman Oil Co 774 F2d 895 at 908 (1985). But setting the appropriate standard of fair dealing is, in my view, another matter altogether from acceptance of the duty itself. However, the matter of a term implied by law does not rest here. I raised directly with the parties the question whether the type of contract and/or the relationship of the parties (one of which was a State agency) may require the implication as a matter of law. Submissions were sought on this issue. (b) As a legal incident of a particular class of contract Given my earlier finding my conclusions here can be stated relatively shortly. I mean no disrespect to the detailed and helpful written submissions of the parties in adopting this course. As is now well accepted, quite apart from that form of implication which is necessary to give business efficacy to a particular contract, a term may be implied as a matter of law as a legal incident of a particular class of contract: on this distinction see Castlemaine Tooheys Ltd v Carlton & United Breweries Ltd (1987) 10 NSWLR 468 at 486ff. Notwithstanding the differences between the two forms of implication, there is justification for the conclusion of Priestley JA in Renard Constructions (ME) Pty Ltd v Minister for Public Works, above, at 260 that for particular contracts in particular settings "there may be a good deal of overlap between the two categories." This case exemplifies this overlap. It is one in which I am prepared to find that, as a matter of law, a duty to deal fairly in the performance of the contracts I have found should be implied into those contracts. Irrespective of what should be taken to have been the intentions of the parties, both the type (or class) of contract and the relationship of the parties were such as gave the tenderers the right to expect, and the CAA the obligation to exhibit, fair dealing in the performance of the contracts. There has been enduring uncertainty, if not controversy, as to the test to be applied - if there be a single test - in making an implication of law. For the more recent provenance of this form of implication it is unnecessary for present purposes to look beyond the House of Lords' decisions in Lister v Romford Ice and Cold Storage Co Ltd [1957] AC 555 and Liverpool City Council v Irwin [1977] AC 239. These, along with Scally v Southern Health and Social Services Board [1992] 1 AC 294, have been accepted as authoritative in this country: see Byrne v Australian Airlines Ltd (1995) 185 CLR 410 per McHugh and Gummow JJ; Codelfa Construction Pty Ltd v State Rail Authority of New South Wales, above, per Mason J. As the respondent emphasised in its submission, the central criterion manifest in those decisions for so implying a term is the requirement of "necessity". Explanation of this was in turn given by McHugh and Gummow JJ in Byrnes' case, above, at 450 where their Honours noted that: "Many of the terms now said to be implied by law in various categories of case reflect the concern of the courts that, unless such a term be implied, the enjoyment of the rights conferred by the contract would or could be rendered nugatory, worthless, or, perhaps, be seriously undermined. Hence, the reference in the decisions to "necessity" ... This notion of "necessity" has been crucial in the modern cases in which the courts have implied for the first time a new term as a matter of law." The respondent, understandably, emphasises this and has submitted, in the language of McHugh and Gummow JJ in Byrnes' case, at 453, that the alleged process contracts would be "workable and effective" without the introduction into them of the implied term the applicant propounds. It is strictly unnecessary to express a concluded view on that submission given the view I take of the "necessity test". Nonetheless I would indicate that the "workability and effectiveness" suggested could well be said only to exist in competitive contracts of this type if they contained the binding reassurance of fair dealing in their performance - the more so where the contract to be let involves the expenditure of "publicly owned" funds: US authority would seem to acknowledge this in the government procurement context, see eg Keco Industries Inc v US 492F 2d 1200 at 1205 (1974); see also E W Massengale, Fundamentals of Federal Contract Law, 211 (Quorum Books, NY, 1991). It is not at all surprising that, even absent the finding of a contract, courts have assumed that "obligations to act fairly" in the treatment of tenderers can still arise: see Pratt Contractors Ltd v Palmerston North City Council [1995] 1 NZLR 469 at 478; and see more generally N Seddon, Government Contracts, 235 ff. If the purpose of a tender process contract is to be accomplished, if contractor-tenderers are to be given an effective opportunity to enjoy the fruits of the bid and not to have that opportunity destroyed by the unfair dealing of the other party to the contract, a duty such as I have described would appear to me to be a presupposition of such a contract. In the tender process context such a duty seems little more than an appropriate adaptation of the duty to cooperate recognised in Butt v McDonald (1896) 7 QLJ 68 at 70-71. I need explore that analogy no further here. It doubtless is the case that the "necessity test" - and its preoccupation with whether, absent the implication, the enjoyment of contractual rights could be rendered nugatory, worthless or be seriously undermined - addresses the broad range of instances where the issue of such an implication ordinarily arises: see eg the extended list of examples given in Glanville Williams, "Language and the Law", (1945) 61 LQR 71 at 403. Having acknowledged this, I do not understand that test, at least so narrowly conceived, to provide a complete account of the reasons for which an implication of law can be made. In Simonius Vischer & Co v Holt & Thompson [1979] 2 NSWLR 322 at 348 Samuels JA suggested that the implication is founded in policy. Whether or not this be accepted unreservedly as a generalisation, it clearly is the case that considerations of public policy can and do have an overt part to play in some instances in determining whether it is necessary that an obligation should be implied as a matter of law in a contract. The contractual obligation of secrecy imposed on professionals in virtue of their relationship with their clients and its varying scope from profession to profession are, I consider, illustrations of this: see eg Tournier v National Provincial & Union Bank of England [1924] 1 KB 461 at 474; Parry-Jones v Law Society [1969] 1 Ch 1 at 7, 9. Perhaps the most significant illustration of the role considerations of public policy can have in the matter is to be found in Viscount Simonds' speech in Lister v Romford Ice and Cold Storage Ltd [1957] AC 555. In a passage often quoted from in this country when distinguishing implications of law from those necessary to give business efficacy to a contract, his Lordship observed (at 576): "[T]he real question becomes, not what terms can be implied in a contract between two individuals who are assumed to be making a bargain in regard to a particular transaction or course of business; we have to take a wider view, for we are concerned with a general question, which, if not correctly described as a question of status, yet can only be answered by considering the relation in which the drivers of motor-vehicles and their employers generally stand to each other. Just as the duty of care, rightly regarded as a contractual obligation, is imposed on the servant, or the duty not to disclose confidential information ..., or the duty not to betray secret processes ..., just as the duty is imposed on the master not to require his servant to do any illegal act, just so the question must be asked and answered whether in the world in which we live today it is a necessary condition of the relation of master and man that the master should, to use a broad colloquialism, look after the whole matter of insurance. If I were to try to apply the familiar tests where the question is whether a term should be implied in a particular contract in order to give it what is called business efficacy, I should lose myself in the attempt to formulate it with the necessary precision. The necessarily vague evidence given by the parties and the fact that the action is brought without the assent of the employers shows at least ex post facto how they regarded the position. But this is not conclusive; for, as I have said, the solution of the problem does not rest on the implication of a term in a particular contract of service but upon more general considerations": (emphasis added) In rejecting the implication sought in that case, Viscount Simonds then went on to consider among "the more general considerations" (inter alia) both the consequences within the employment relationship and the "social consequences" (at 579) that could or would flow from the implication sought. Though his Lordship avoided tying the implication directly to the status of the parties, it probably is the case that the need to have recourse to "more general considerations" and not merely to "necessity" narrowly conceived is most apt to occur where the alleged implication is based upon the status or function of one or both of the contracting parties. And that this need does arise perhaps explains why on occasion the courts characterise the implied term "as a necessary incident of a definable category of contractual relationship": Scally v Southern Health and Social Services Board [1992] 1 AC 294 at 307 (emphasis added). I have laboured this matter for this reason. Not only is the contract of a type in which, as I have indicated above, the tenderers could properly expect the other contracting party to act fairly in its performance, that other contracting party is an agency of government and as such can properly be expected to act fairly with those with whom it deals in such contracts. It is to this latter feature of the contractual relationship that I wish to draw attention. It has not been pleaded or argued that, because the CAA is a public body, its contract with Hughes is for that reason amenable to challenge on what for convenience I might call "public law" rather than on conventional contractual (ie "private law") grounds: cf R v East Berkshire Health Authority, Ex parte Walsh [1985] 1 QB 152; see also eg Mercury Energy Ltd v Electricity Corporation of New Zealand Ltd [1994] 2 NZLR 385; see Taggart "Corporatisation, Contracting and the Courts", [1994] Public Law 351; cf L Pearson (ed), Administrative Law: Setting the Pace or Being Left Behind, "Contracting Out", 420ff, 433ff, (AIAL, Sydney, 1997). What, relevantly, is in issue is the propriety of the CAA's conduct in a commercial contract in which the "relevant relationship" between the parties is that of contracting parties: see eg Air India v The Commonwealth [1977] 1 NSWLR 449 on the "relevant relationship". To say the matter is one of contract does not, though, exhaust the appropriate characterisation of the parties to this contract. The CAA, as I have noted is a public body - a body whose owners are, ultimately, the Australian community whom the authority serves under and in accordance with its statutory mandate. As with any agency of government - and I do not mean by this that it is thereby within "the shield of the Crown" - it has no private or self-interest of its own separate from the public interest it is constitutionally bound to serve: cf Attorney-General for the United Kingdom v Heinemann Publishers Australia Pty Ltd (1987) 10 NSWLR 86 at 191; see also Mercury Energy Ltd v Electricity Corporation of New Zealand, above, at 388; Webster v Auckland Harbour Board [1983] NZLR 646 at 649-650; Jones v Swansea City Council [1990] 1 WLR 54 at 71, 85. That public interest in the case of a body such as the CAA is to be determined from what is express or implied in the CAA Act itself. That Act of Parliament indicated the end of the CAA's service. There is, I consider much to be said for the view that, having no legitimate private interest in the performance of its functions, a public body (including a state owned company) should be required as of course to act fairly towards those with whom it deals at least insofar as this is consistent with its obligation to serve the public interest (or interests) for which it has been created. I have no need here, though, to rely upon such a broad notion. That the law entertains expectations of fair dealing of government and of public bodies is manifest in some number of spheres. First and most obviously, there is the general application of the requirements of procedural fairness to "governmental executive decision-making": Haoucher v Minister of State for Immigration and Ethnic Affairs (1990) 169 CLR 648 at 653; see also Annetts v McCann (1990) 170 CLR 596 - though it needs to be acknowledged that these requirements can in limited circumstances extend to the decision making (characteristically to decisions to expel or to discipline members) of non-governmental bodies and associations: see Aronson and Dyer, Judicial Review of Administrative Action, 493-495, (LBC, Sydney, 1996). Secondly, there is what Griffith CJ referred to in Melbourne Steamship Co Ltd v Moorehead (1912) 15 CLR 333 at 342 as: "the old-fashioned traditional, and almost instinctive, standard of fair play to be observed by the Crown in dealing with subjects, which I learned a very long time ago to regard as elementary ... ." This proposition has received significant, recent judicial endorsement in this country most notably in the Full Court of this Court in SCI Operations Pty Ltd v Commonwealth of Australia, (unreported, FC FCA, per Beaumont and Einfeld JJ, 28 August 1996); see also Greiner v Independent Commission Against Corruption (1992) 28 NSWLR 125. I note in this particularly the observations of Mahoney J in his dissenting judgment (on grounds not presently relevant) in Logue v Shoalhaven Shire Council [1979] 1 NSWLR 537 at 558-559 in applying the proposition to a local authority - to "a corporation constituted by statute, and discharging public functions": "It is well settled that there is expected of the Crown the highest standards in dealing with its subjects: see Melbourne Steamship Co Ltd v Moorehead ..., per Griffith C.J. What might be accepted from others would not be seen as in full accord with the principles of equity and good conscience to be expected in the case of the Crown: see P. & C. Cantarella Pty. Ltd. v. Egg Marketing Board (N.S.W.) [[1973] 2 NSWLR 366 at 383-384]. In my opinion, a standard of conduct not significantly different should be expected of a statutory corporation of the present kind ... ." This fair play principle has its most common manifestation in the "model litigant" standards exacted from the Crown in legal proceedings: see eg Director of Public Prosecutions for the Commonwealth v Saxon (1992) 28 NSWLR 263. Thirdly, and again litigation related, the rule in Ex parte James; Re Condon (1874) LR 9 Ch App 609 has been applied to public bodies (eg local authorities: R v Tower Hamlets London Borough Council; Ex parte Chetnik Developments Ltd [1988] AC 858) so as to ensure "high principled" action when mistaken payments have been received by them; see also SCI Operations Pty Ltd v Commonwealth of Australia, above. In differing ways these instances reflect policies in the law, albeit in specific contexts, (a) of protecting the reasonable expectations of those dealing with public bodies; (b) of ensuring that the powers possessed by a public body, "whether conferred by statute or by contract", are exercised "for the public good": cf Jones v Swansea City Council [1990] 1 WLR 54 at 71; and (c) of requiring such bodies to act as 'moral exemplars': government and its agencies should lead by example: Olmstead v United States 277 US 438 at 485 (1928); Joint Committee of Public Accounts, Social Responsibilities of Commonwealth Statutory Authorities and Government Business Enterprises, Report 315, esp para 2.21ff, (AGPS, Canberra, 1992). These policies I consider to be important in the present matter. I should add for the sake of completeness that I do not regard the decision of the Full Court of this Court in General Newspapers Pty Ltd v Telstra Corporation (1993) 45 FCR 164 as having present bearing on the significance to be attributed these policies. Given the view I earlier expressed that fair dealing is, in effect, a proper presupposition of a competitive tender process contract (especially one involving the disposition of public funds), and given that a public body is the contracting party whose performance of the contract is being relied upon, a necessary incident of such a contract with a public body is, I am prepared to conclude, that it will deal fairly with the tenderers in the performance of its tender process contracts with them. Before leaving this subject, it is appropriate to note, the following. First, a ground advanced by the respondent for not implying a general duty to deal fairly was that the RFT had itself specified particular obligations of fairness and that these should be taken to be exhaustive of the matter. Those obligations in my view should properly be seen as no more than particular manifestations of the general duty I have found to be implied. I see no inconsistency between the two nor between the implied term and the common intention of the parties as manifest in the contract. Secondly, and I emphasise this, the term I have found to be implied by law (which differs little, if at all in the circumstances, from that found to be implied ad hoc) relates to the CAA's performance of the RFT contract. That term is as I will indicate in Part XI of these reasons, distinctive in the obligation it imposes. Importantly it does not as such impose on the CAA under the guise of contract law, the obligation to avoid making its decision or otherwise conducting itself in ways which would render it amenable to judicial review of administrative action. Indeed I understood the applicant to disavow such a claim on its part, while insisting nonetheless that conduct which independently might found judicial review could be of such actual character in the circumstances as to constitute a breach of the implied term.

GENERAL TRADE PRACTICES ACT ISSUES Here I need examine the nature and basis of the Trade Practices Act claim that parallels that in contract, and indicate the interrelationship of the two types of claims given my finding of a pre-award contract. (i) The nature and basis of the claim The applicant's pleading is that from the period of the Restart Meeting until just before the 23 December board meeting, the CAA made representations to Hughes which in their totality were largely similar in content or substance to those said to constitute express or implied terms of the two pre-award contracts pleaded. Indeed the 9 March letter and the RFT were the principal sources of many of the representations alleged. As with the pleaded contractual terms, the representations all related to the future conduct of the CAA itself, of DITRD, or of the independent auditor. While the pleading acknowledged that the representations related to "future matters" within the meaning of s51A of the Trade Practices Act, I did not understand the applicant's case to be that the CAA had no reasonable grounds for making any of those representations. This was disclaimed expressly save in relation to four representations dealing with what I have compendiously called "Improper Interests and Affiliations": see Part VIII. The actual claim advanced in respect of the balance of the pleaded representations was based on s52 alone. Though perhaps not spelled out quite in these terms in the pleadings it was this. (i) The representations made related to the future conduct of the CAA in its implementation of the tender process. (ii) These representations were of a continuing nature. (iii) At or before the Board meeting of 23 December at which Thomson was selected as the preferred tenderer, the CAA conducted itself in ways that falsified the representations made. (iv) The CAA did not disclose to Hughes that notwithstanding its representations it proposed to, and/or did, act contrary to them. (v) This combination of (a) the representations and their continuing character, (b) their falsification and (c) the failure to disclose, amounted to "conduct" which was misleading or deceptive for s52 purposes. (vi) Hughes, having no way of knowing to the contrary, continued to rely on the assumption up to and beyond February 1994 (when the CAA and Thomson formally executed the TAAATS contract), that the representations made were to be, and had been, put into effect. (vii) In so doing it suffered loss and damage. The principal authority upon which the applicant relies in so framing its claim is the decision of the Full Court of this Court in Demagogue Pty Ltd v Ramensky (1992) 39 FCR 31. The claim itself raises a variety of issues and matters that can conveniently be dealt with here. First, I should indicate by way of preface that, with the principal attention of the parties in their oral and written submissions being directed to the contract claim, relatively few of the some hundreds of pages of submissions were devoted to this claim. While its practical significance is in fact diminished given my findings relating to the RFT contract, it nonetheless retains importance both as a parallel claim to that in contract and as the primary claim of the applicant should the contract finding be incorrect. For this reason the contentions it raises require consideration. Secondly, as I have noted, the initial representations alleged to have been made and relied upon by the applicant related to future matters. Importantly, notwithstanding the reference in the pleadings to s51A of the Trade Practices Act, Hughes' claim is not one concerned merely with whether the representations themselves were misleading or deceptive. Rather the crux of the complaint made is that the CAA did not disclose (remained silent after) it intended to act and/or had acted inconsistently with the representation made. It was this failure in combination with what had previously transpired that is alleged to have rendered the CAA's conduct misleading or deceptive. It is trite to say that the question whether conduct in a given instance is of the s52 proscribed character is to be determined having regard to all the relevant circumstances. And as Black CJ observed in his concurring judgment in Demagogue Pty Ltd v Ramensky, above, (at 32): "Silence is to be assessed as a circumstance like any other. To say this is certainly not to impose any general duty of disclosure; the question is simply whether, having regard to all the relevant circumstances, there has been conduct that is misleading or deceptive or that is likely to mislead or deceive. To speak of 'mere silence' or of a duty of disclosure can divert attention from that primary question. Although 'mere silence' is a convenient way of describing some fact situations, there is in truth no such thing as 'mere silence' because the significance of silence always falls to be considered in the context in which it occurs. That context may or may not include facts giving rise to a reasonable expectation, in the circumstances of the case, that if particular matters exist they will be disclosed." Likewise, in the principal judgment in that case, Gummow J indicated that with alleged contraventions of s52 (at 41): "the question is whether in the light of all relevant circumstances constituted by acts, omissions, statements or silence, there has been conduct which is or is likely to be misleading or deceptive. Conduct answering that description may not always involve misrepresentation ..." His Honour then went on to agree with the observation of French J in Kimberley NZI Finance Ltd v Torero Pty Ltd (1989) 11 ATPR para 46-054 at 53, 195 that: "The cases in which silence may be so characterised [as contravening s52] are no doubt many and various and it would be dangerous to essay any principle by which they might be exhaustively defined ... unless the circumstances are such as to give rise to the reasonable expectation that if some relevant fact exists it would be disclosed, it is difficult to see how mere silence could support the inference that that fact does not exist." The critical question is whether Hughes was in the circumstances reasonably entitled to expect the disclosures, the absence of which it complains? In answering this question, I will for present purposes assume (as I later find) that some of the alleged representations were in fact made and falsified, as also that those representations in the main acquired contractual force as terms of the process contracts. Before indicating why I conclude that disclosure was properly to be expected in the distinctive circumstances of this case, I should draw attention to two relatively unusual features of the claim. (i) In the usual case where complaint is made of silence/non-disclosure, the matter not disclosed is factual material known to the representor at the time the representation affected by the non-disclosure is made and relied upon: see eg Henjo Investments Pty Ltd v Collins Marrickville Pty Ltd (1988) 79 ALR 83. Moreover the representation itself is characteristically one of fact. Here not only were the actual representations made ones as to future matters, the "duties to disclose" only arose at later times and in respect, initially at least, of intentions to act otherwise than in accordance with the representations - though their subject matter was subsequently translated into facts as those intentions were acted upon. I should add in passing that I have not understood the respondent to make any point of the changing subject matter of the alleged duties to disclose. I should add also that I cast the matter in the plural as the representations were several and equally there was a variety of differing occurrences that individually gave rise to duties to disclose - and to disclose as from different times. The way in which the applicant seeks to have the representations and the non-disclosures treated as composite parts of "conduct" is by submitting - correctly in my opinion - that the representations were continuing ones. They were continuing not only because they continued to induce reliance but also because they performed an ongoing binding and foundational function in an evolving commercial relationship. I will in the next section of this Part indicate my findings as to which of the principal representations propounded by the applicant (a) remained operative at the time that the duties to disclose arose, or (b) were by then spent or had merged into later representations. (ii)Later in these reasons, while I make a number of findings that the CAA in fact acted otherwise than as it had represented it would, I have not concluded that it acted in the conscious knowledge that it was so doing. Whether through ignorance, incompetence or otherwise, it did what it did. Its actions were, nonetheless, intentional not accidental. In the usual case of silence/non-disclosure the party at fault has conscious knowledge of, and of the possible significance of, the facts that ought to be but, whether deliberately or inadvertently, are not disclosed: on inadvertence see Trade Practices Commission v Optus Communications Pty Ltd (1996) 18 ATPR 41-478; Nagy v Masters Dairy Ltd (1997) 19 ATPR 46-164; on knowledge see eg Spedley Securities Ltd (in liq) v Bank of New Zealand (1991) 13 ATPR 41-143; and see generally on silence and some of its controversies, Cheshire and Fifoot, Law of Contract, para 11.115 (7th Aust ed, Butterworths, Sydney, 1997). In this case, while the CAA (through its appropriate officers) knew of the actions, etc that falsified representations made, it did not appreciate the significance of those actions. But this notwithstanding, in circumstances such as the present where the matter requiring disclosure is the intention or the actions of the representor, the fact that the representor does not appreciate that there is a need to make disclosure does not of itself relieve that person of the consequences of non-disclosure. The reason for this is that what is important is not whether the representor properly apprehends the significance of (and therefore the need to disclose) the facts, but is whether the representee is reasonably entitled to expect disclosure of them if they are known to the representor. Turning now to the reasons why Hughes was so entitled. The representations advanced for the purpose of the Trade Practices Act claim differed little in their content from those alleged to constitute terms (express or implied) of the 9 March and RFT contracts. They were concerned with the tender evaluation process and with the steps to be taken to maintain its fairness and integrity. I need not repeat here the importance the parties attributed to that process and to its fairness and integrity, nor the reasons for this. They have been canvassed sufficiently earlier in this Part. I merely reiterate my earlier conclusion that fairness in process and dealing was the a priori of this business relationship. Given the history of the TAAATS procurement and the distinctive circumstances of this tender process, that a priori would of itself be sufficient properly to found the expectation of disclosure - the more so because para 34.1 of the RFT itself contained an amendment procedure requiring notice to be given to the tenderers: see General Chronology, para 12. There are, though, additional circumstances here upon which I rely for this conclusion. (a) To the extent that the representations related to matters of process, such significance was attributed to what was agreed to be done that it was to be subjected to contemporaneous compliance audit. Compliance not covert change was what was to be expected. (b) The relative positions occupied by the parties in the tender evaluation process were such that, behind a screen of secrecy, the CAA and the auditor alone would know whether or not the agreed processes had been adhered to and the evaluation conducted fairly. Even after the making of a selection and the execution of the TAAATS contract neither tenderer would have available to it reasonable alternative means of ascertaining whether the process actually had been adhered to, etc. They depended for their knowledge of this on the CAA. It was, relevantly, the information monopolist. Unless Hughes was alerted to the contrary it would reasonably continue to assume, as it in fact did, that the CAA had acted as it represented it would act. Such disparity of position in these circumstances is itself consistent with a disclosure expectation. Thirdly, it needs to be emphasised that the Trade Practices Act claim is not that a failure to perform a contractual promise or to fulfil a representation of intention (but cf s51A) is of itself misleading or deceptive as of course: see eg Bill Acceptance Corporation Ltd v GWA Ltd (1983) 50 ALR 242; see also Futuretronics International Pty Ltd v Gadzhis [1992] 2 VR 217; Cheshire and Fifoot, above, para 11.118; and see the cases referred to in D Skapinker and J W Carter, "Breach of Contract and Misleading or Deceptive Conduct", (1997) 113 LQR 294. And while it is the case that the disclosure required to be made here was, as I later find, of circumstances that in fact constituted or gave rise to a breach of contract or a failure to fulfil a representation of intention, the obligation to disclose was not itself premised upon the proposition that a contract breaker etc is obliged as of course and for that reason to disclose his or her wrong, etc. It was the distinctive circumstances of the CAA-Hughes relationship that ordained that disclosure in this case. Fourthly, while the issue of loss and damage does not arise for determination given the "splitting" of this action, it is appropriate for me here to make findings on the issue of reliance by Hughes on the CAA's conduct. I do so in a relatively omnibus way. The applicant has pleaded that it acted upon the representations made to it, most significantly by (a) entering into the 9 March contract; (b) participating in the specification development phase; (c) in submitting its BAFO; and (d) in formulating it in light of the priority ranking in the RFT. It likewise is pleaded that in light of the CAA's non disclosure, the applicant did not take steps to prevent the CAA from evaluating the tenders otherwise than in accordance with the 9 March letter and the RFT or to compel it so to evaluate the tenders. Both Mr Kramp and Mr Funge gave evidence that if the CAA had engaged in the conduct alleged - and I subsequently find that it did in a number of material ways - they were unaware of it before the execution of the TAAATS contract with Thomson in February. Each, given his relative position in Hughes, indicated the steps he would have taken (or in Mr Funge's case would have advised Mr Kramp to take) to challenge and to have revoked, the CAA's decision. I do not need to consider at this stage what would have happened but for the CAA's conduct nor its likely result(s). The case is a clear one of reliance by Hughes on the conduct of the CAA - reliance which secured its participation in the tender process but which also resulted in its failure to object to the actions of the CAA because, in the absence of disclosure, it was unaware of the need to object. (ii)The interrelationship of the claims In the same way that the applicant has submitted that the pre-award contracts were cumulative, so also has it submitted that the representations made from the Restart Meeting onwards across 1993 remained operative up and until the Board decision of 23 December. The principal instances in which representations were said to have been made were (a) at the Restart Meeting; (b) in the letters of 5 February, 24 February and 9 March; (c) in the RFT; and (d) in a specific conversation (not elaborated on in these reasons) relating to AII of 11 August. There were others that it is unnecessary now to recount. Here all I need say is that, consistent with my reasons for finding only one continuing pre-award contract, I conclude (i) that any representation made prior to the RFT but later subsumed in it (expressly or impliedly) should be treated as having been overtaken for practical purposes by the later representations themselves; and (ii) any representation made in the 9 March letter but not replicated in the RFT should likewise be regarded as having ceased to have operative effect as a representation from the time of the RFT. The practical effect of these conclusions is that the contract claims and the Trade Practices Act claims are in very large measure coextensive both in the approximation of the contractual terms agreed with the representations made, and in the conduct relied upon as constituting the breaches of the contractual terms or the falsifications of the representations. As a matter of convenience where an alleged representation and an alleged contractual term are similar in substance, I will only set out the contract term and/or the conduct alleged to constitute its breach. The final comments I should make at this point are these. If I am incorrect in finding that there was a binding pre-award contract on the terms of the RFT (including implied terms), then the Trade Practices Act claim will carry the principal burden of the applicant's case. For this reason where I later make particular findings as to the operative terms of the RFT contract it will be necessary to make a parallel finding as to whether a representation in similar terms was made. I have already found that a duty of fair evaluation/fair dealing is to be implied into the RFT contract both ad hoc and as a matter of law. I should here indicate that, notwithstanding that I have not inferred a term to this effect, I am nonetheless prepared to find that for the purposes of the Trade Practices Act claim the CAA made representations to Hughes to like effect and that these remained operative throughout. Set against the background of the Macphee Report, the most specific manifestations of these were in Mr Roser's comments at the Restart Meeting, and in the subsequent pattern of representation in the letters of 5 and 24 February and of 9 March. The RFT, far from negating Mr Roser's comments, provided their reaffirmation. Because of what I have said earlier when dealing with the implication ad hoc, I do not consider that any useful purpose would be served in further traversing the factual material already outlined in these reasons to demonstrate that this relationship was redolent with this representation. PART V: EVALUATION/SELECTION PROCEDURE FAILURES Save for two matters which require separate consideration (see Part VI: Political Interference and Part X: Price Reduction and AII Variations), the issues raised here fall into two general clusters of complaints. Both raise a series of allegations said to give rise individually to breaches of the contractual terms contained in, and the falsification of the representations evidenced by, paras 16.1 ("evaluation criteria") and 16.2 ("evaluation methodology") of the RFT. In addition there is a specific complaint which can appropriately be dealt with in this Part relating to the breach of an alleged express or implied promise or representation concerning the evaluation of the likelihood of AII proposals coming to fruition. To oversimplify somewhat, what differentiates the first cluster of complaints from the remaining ones to be considered, is that the former is concerned directly with the meaning and application of the selection criteria, whereas the latter relate to acts and omissions of the CAA in its dealings with DITRD. Simply for purposes of exposition I will use the designations "Criteria Related Complaints" and "DITRD Related Complaints" to differentiate the two. Before either of these can be considered it is necessary to reach conclusions on a number of preliminary matters. These are: (i) the role of the CAA board in selecting the TAAATS contractor; and (ii)the obligation of the Board in relation to AII and its compass. (i) The Role of the CAA Board in Selecting the TAAATS Contractor The applicant has submitted that for either of two reasons the Board had no significant function in the actual selection of the TAAATS contractor beyond endorsing the TEC's recommendation. These reasons were (i) the statutory scheme of the Act so divided and delineated the responsibilities of the Board and the CEO that, save for the Board's pursuing its strategic and tutelary purposes (s32B) in a given matter, individual contracting decisions were a responsibility of management: (the "disenfranchisement argument"); and (ii) irrespective of (i), the Board had committed itself to a tender process contract the terms of which designedly so circumscribed the Board's role in the selection as to leave it little if any room for independent discretion: (the "fetter argument"). I will consider these in turn noting that I do not set out the respondent's submissions at any length. I consider the constructions the applicant invites me to place, first on the Act and then on the RFT contract, are untenable. The disenfranchisement argument The provisions of s32B and s84A have been set out in full in Part II: The CAA and its Statute. I will not repeat them here. The essence of the statutory construction argument advanced is that, in prescribing the purposes of the Board, s32B limited the roles of the Board in the CAA to strategic and supervisory ones. Because the management of the CAA was vested in the CEO, albeit "under the Board" (s84A(1)), contracting decisions were ones for management save to the extent that they raised strategic or supervisory issues for the Board. I have been asked to abjure any possible analogy with a registered company and its managing director in characterising the Board-CEO relationship created by the Act. It is the case that, unlike a company with Articles of Association in the form of Table A (see Art 66), the Act does not in express terms vest the management of the CAA's business in its board. But what it does not do directly, it does, indirectly and impliedly - recognising though that, save for the CEO and possibly the Chairperson, the Board members hold part-time appointments: the Act, s33(2) and (3). Section 84A(1) expressly indicates that the CEO is to manage "under the Board". It would be surprising that that officer was intended to be so circumstanced if the Board itself could only properly have involved itself in any consideration of the affairs of the CAA to the extent that these fell within the strategic/tutelary purposes of s32B. The anomaly of such a construction becomes the more apparent when regard is had to the "package" of amendments made to the Act in 1990, of which s32B and s84A were part. The general "philosophy" of those provisions which created the Board - this was an innovation in the Amending Act - and which gave it purposes (s32B) and functions (eg s48A, s54A, s84(1), s89, s91) was indicated in the Minister's Second Reading Speech introducing the amendments: "In line with the philosophy of moving from [government] oversight of day to day operations to an emphasis on results and Board accountability, the Bill removes a range of day to day controls exercised by government, including controls over the terms and conditions of individual borrowings, the approval of individual contracts, the purchase of shares and the establishment of subsidiaries and partnerships. These are now appropriately the responsibility of the Board" (emphasis added). (Hansard Vol H of R 171 p 611) I cannot find that the Minister's intention was not in fact realised in the amending statute the Parliament enacted. And I note in passing that Minister Collins for one subsequently was to act on the assumption that the Board was "responsible for ... handling day to day management": letter to Mr Butcher of 7 April 1993. I do not consider the reference in s32B to the Board's "purposes" as in any way curtailing or channelling its powers in respect of the managing of the CAA other than to indicate how and to what ends the CAA was to be managed. I would comment additionally that, given the uniqueness and the dimensions of the TAAATS procurement for the CAA, a significant involvement of the Board in it would be quite consistent with the pursuit of its purpose of ensuring that the CAA "performs its functions in a proper, efficient and economical manner": s32B(1)(b). I reject the disenfranchisement submission. The "fetter" argument The issue here is more complex. As I understand the applicant's submission it is this. Against the background of the failures of TAAATS I and of the Macphee Report, the Board, in order to secure Hughes' participation in the procurement, agreed contractually to a process in which the TEC was to evaluate the tenderers' proposals and to make a recommendation to the Board. That process contemplated "absent some extraordinary circumstance, that the Board would act on the TEC's recommendation": Submissions in Reply. It was submitted that, in allowing itself the briefings it did and in considering the specific matters it did - and particularly risk and provenness - the Board went beyond the "little if any room for discretion" it was intended to have. Save for the qualification I note below, I consider it was permissible for the CAA, by contract, to bind itself as to the procedures that were to be followed leading to possible selection of the TAAATS contractor. First the 9 March letter and then the RFT had this as one of their objects - though, as I have earlier found, the RFT contract was the operative one after the BAFOs were lodged and in consequence the procedural steps outlined in paras 4-6 of Attachment A to the 9 March letter thereafter ceased to have any force or effect, contractual or otherwise. The qualification I mention is this. The RFT did not oblige the CAA to accept any tender: RFT para 7.1. If it had, a very real question may well have arisen as to whether, in the case of a procurement of this kind (given its significance and complexity), the CAA could validly have bound itself in advance to award the TAAATS contract to one or other of the bidders adopting a procedure which left the Board with "little, if any room, for discretion". I refer to what is often called, inexactly, the "fetter" rule, the modern provenance of which in relation to public bodies seems to be Ayr Habour Trustees Pty Ltd v Oswald (1883) 8 App Cas 623: on this "rule" see City of Camberwell v Camberwell Shipping Centre Pty Ltd [1994] 1 VR 163 and L'Huillier v State of Victoria [1996] 2 VR 465 and the cases referred to therein; see also Dennis Rose, "The Government and Contract", in P D Finn (ed), Essays on Contract, p242ff (Law Book Co, Sydney, 1987). No need to consider this rule arises in this case. As I will indicate, I do not consider that the Board's discretion was as circumscribed as the applicant contends. In any event the respondent has not challenged the validity of the RFT contract on "fetter" grounds. Neither could it properly do so given the discretions and judgments retained by the Board quite apart from that of RFT para 7.1. While the RFT contract bound the CAA (hence the Board) to a particular process it did not purport to bind it to a particular result. There was, then, no question of the Board exercising its discretion in the TAAATS contract other than at "the proper time": cf Thorby v Goldberg (1964) 112 CLR 597 at 605; see also The Power Co Ltd v Gore District Council [1997] 1 NZLR 537 at 547-548. The construction question that remains is what was the role the RFT envisaged for/allowed to the Board in the selection of one or other of the tenderers after both had lodged what were accepted as conforming tenders? The contract clearly required the evaluation of the proposals in accordance with a defined evaluation methodology and against designated major and minor criteria. That procedure was impliedly to be put into effect, at least in the first instance, by the TEC. But the RFT did not contemplate that the TEC's decision would of itself without more constitute the CAA's decision. The contract was silent on the question of where within the CAA the decision to select the TAAATS contractor was to be taken. What it was not silent on, as I have noted, was the evaluative and judgmental process to be followed in the making of that selection. This bound the Board and TEC alike. There is nothing in the RFT contract which would preclude the Board, which was in the circumstances an appropriate organ to make the selection, from in fact making it. What constrained the Board in that selection was the prescribed evaluative and judgmental process to be followed. The parties were reasonably entitled to expect that the RFT process would lead to a TEC recommendation being made to the Board - a recommendation, moreover, based on the considered professional judgments of the TEC's members. This said it was entirely proper and appropriate and not inconsistent with the RFT contract that: (i) the Board allowed itself to be briefed by the TEC (and its evaluators etc as necessary) concerning the various judgments made and their bases leading to the TEC's application of the evaluative criteria and to its recommendation; and (ii)that board members could probe, question and if necessary dissent from, those judgments and the recommendation- provided that, in putting their own judgments into effect, the Board members did not depart from the evaluation criteria and methodology. While one would expect due deference to have been given the views of experts, to deny the Board the power to act as I have described where the RFT contract did not preclude it (if it validly could have done so), would involve a perverse implication into the contract itself. I will later indicate whether the Board acted consistently with the proviso I have emphasised above. Here I do no more than reject the construction of the RFT for which the applicant contends. (ii)The CAA's Obligation in relation to AII and its Compass For reasons which I need not detail, this matter occupied what in the end was a disproportionate place in the parties' submissions. I need only say that issues which may appear to have been raised, subsequently were disavowed expressly or else were rendered insignificant. Here I merely note what I understand to be the respective positions of the parties and their consequences. A matter to which it will be necessary to refer with some regularity in these reasons is the distinction between what has been called narrow and broad AII. Put crudely "narrow AII" refers to an AII proposal the benefits of which would accrue directly or indirectly to the CAA. "Broad AII", in contrast, refers to a proposal (to the extent that it went beyond benefits to the CAA) which would nonetheless benefit the Australian community by, for example, fostering the development or capacity of the Australian air traffic control/management industry. Neither party now seems to be submitting that it was beyond the statutory objects (hence the corporate capacity) of the CAA to enter into a tender process contract which (inter alia) allowed or obliged it to take broad AII considerations into account when assessing the tenderers' proposals. Though the applicant has submitted that the respondent was not obliged by Government policy to take broad AII into account, the complaint it now makes in its Final Submissions concerning the manner in which the Board dealt with AII in making its selection is not predicated upon that particular submission. It is nonetheless necessary that I reach a conclusion on whether, by the RFT contract, the CAA obliged itself to take a broad view of AII. It is important to distinguish between the CAA's statutory objects (or corporate capacity) on the one hand, and the obligations binding it when acting in a particular matter within the scope of its objects. In his advice of 16 December 1993, Mr Rose QC, advised the CAA that it was within the capacity of the CAA to take Government policy on broad AII into account when contracting for a procurement such as TAAATS. I should interpolate that the then operative policy guidelines admitted of broad AII. Whatever the criticism the applicant may have made of this conclusion - and I express no views on that - it likewise has submitted that giving weight to broad AII was not "strictly ultra vires" the CAA. I agree with this as I do with Mr Rose QC's conclusion on this. The sole remaining issue is, then, what the RFT contract on its proper construction authorised the parties to propose, and the CAA (via DITRD) to evaluate, for AII purposes. I have already found that the RFT contract gave recognition to the terms of DITRD's 12 August 1993 letter to each of the tenderers. Here I would merely note my conclusion that, considered in the context of the Restart Meeting and the Macphee Report recommendations on AII (Ibid, Ch 12) and given the admitted familiarity the Hughes executives had with these - cf Codelfa Construction Pty Ltd v State Rail Authority of New South Wales, above, at 352 per Mason J - the conclusion is irresistible that the evaluation criteria on their proper construction allowed tenderers to incorporate broad AII in their proposals and required the CAA to assess those proposals when applying the evaluation criteria laid down in the 12 August letter. I should emphasise that I am here concerned only with the AII proposals themselves and their proper assessment. Considerations of cost to the CAA flowing either from the AII proposals themselves or from favouring a tender because of those proposals, raise a quite distinct issue in the TAAATS procurement. "Price and Other Financial Issues" was a separate major criterion. Its importance will be considered below. Because this conclusion would not seem now to be a controversial one, I refrain from further burdening these reasons with the detail of the actual documentation and other evidence to which I have referred above. I should also add that it relieves me of the need to enter upon the admittedly controversial question as to whether statutory bodies acting under legislation such as did the CAA, are required to take account of relevant government policy in taking decisions absent either an express or implied legislative requirement so to do or a statutorily backed ministerial direction: cf Report of the Auditor-General of South Australia, Part A: Audit Overview, 140, (Govt Printer, 1996). I refrain from comment on this important matter other than to say that the issue here is exacerbated by our lack of authoritative guidance on the place of statutory authorities in our constitutional system. Additionally, I would tentatively venture that Australia's long governmental practice in the use of boards/trusts/corporations may well be found not to yield adequate conventions upon which alone rules of law governing this matter could safely be premised. I merely note that the seeds of our dilemma would appear to have been sown at the creation by Governor Darling of New South Wales' first significant (albeit non-statutory) board in 1826: "Darling ... recognized that while preserving a controlling influence he could best exercise power by delegating responsibility and one of his earliest actions was to create a Land Board. Such an institution already existed in Canada. Its establishment in New South Wales was recommended by James Stephen, who sought to free governors from the accusations of partiality that were likely if they continued to act alone": B H Fletcher, Ralph Darling, p90, OUP, Melbourne, 1984. A. Criteria Related Complaints The three allegations to be considered here are that in resolving to award the TAAATS contract to Thomson, the CAA: "(a)evaluated the tenders of Hughes or Thomson contrary to and without proper regard to the methodology and priorities set out in the Tender Process Contract or the Request for Tender; ... (i) took into account benefits which were not related to the statutory functions of the Civil Aviation Authority; (j) took into account the prospect of a government subsidy in respect of any price difference between Hughes' and Thomson's tenders;" For the purposes of both the contract and the Trade Practices Act claim, this conduct is said to breach the contractual terms, or falsify the representations, contained in paras 16.1 and 16.2 of the RFT. (i) Evaluation in Accordance with the Methodology and Priorities The allegations made above in (a) and (i) as developed in the applicant's submissions would, subject to a qualification noted below, seem to amount to the same thing. This is that the CAA's board, but not the TEC, failed properly to apply major criteria 2 ("Price and Other Financial Issues") and 4 ("Australian Industry Involvement") and did so because it disregarded the priority ranking and treated the two as having merely to be balanced one against the other. I would emphasise that despite the language in which it is couched allegation (i) is so explained in the applicant's Submissions in Reply and Final Submissions. The qualification I foreshadowed is this. The applicant's alternative submission on (a) is that the Board decision based ostensibly on AII was colourable in that a majority in fact decided on the basis of risk by which was meant provenness of the system proposed. A gross deception, so it was submitted, was thus practised on Hughes and the public. It will be unnecessary for me to consider this submission given the view I take on the priority question. I now turn to that question. It both raises a question of construction of the RFT and requires an analysis of the Board's decision. To put each of these in context it will be necessary to begin with an outline of additional factual material. Additional Factual Material On 17 December 1992, through a Joint Press Release: "The Minister for Industry, Technology and Commerce, Senator Button, and the Minister for Administrative Services, Senator Bolkus, announced today that GBE's will be requested to operate in accordance with the Government's industry development and procurement policies. This should ensure agencies give local companies the maximum opportunity to compete for Government business consistent with the commercial objectives of GBEs and the need to obtain value for money:" (emphasis added) This press release, and its associated documentation, was brought to the attention of the parties at the Restart Meeting on 19 January 1993. One overhead slide there used by DITRD indicated that under the Australian and New Zealand (ANZ) Procurement Policy, Commonwealth buyers should "[b]uy supplies on the basis of value for money." While mention was made at that meeting of what would be the "most important" of the proposed "Selection Criteria", those criteria only assumed definitive form at the time of the 5 February letter and first acquired contractual force with acceptance of the 9 March letter. The criteria, major and minor, are set out in the General Chronology, para 9. I would note in passing that at its meeting on 26 February 1993 the Board amended the project objectives of TAAATS to require it to meet "as far as practicable" Government guidelines for industry development. Importantly, the 9 March letter incorporated by reference DITRD's letter of 8 March to Hughes and Thomson outlining "the details of the evaluation criteria and approach [it] will adopt in its evaluation of [AII] for TAAATS". The relevant provisions of that letter are set out in the General Chronology, para 8. It is appropriate to repeat two sentences of it here: "DITAC does not expect AII proposals to have a negative impact on the installation timetable or the cost of TAAATS to the CAA. Proposals should be internationally competitive and make good business sense to the TAAATS contractor and its local partners." These sentences were reiterated by DITRD to the tenderers on a number of subsequent occasions, most notably in its letter of 12 August 1993: see General Chronology, para 13. The terms of that letter in turn were recognised in the RFT contract. The next matter of note was that on 7 April 1993 Minister Collins wrote to the CAA requesting it operate in accordance with Government procurement and industry development policies for GBEs: see General Chronology, para 11. When the RFT was despatched to the two companies on 19 July 1993 it retained in para 16.1.1.1 the same major criteria with the same priority ordering as in the 9 March letter (though criteria 3 is somewhat differently expressed). Because of its present importance it is appropriate to reiterate these: "16.1.1.1Major criteria Criteria Priority

Australian Industry Involvement 4" I would note as well para 16.1.2. It indicated that: "The CAA will not be disclosing any further information regarding the level of importance or relative weightings of the criteria and the evaluation methodology": (emphasis added) A notable departure from the language of the 9 March letter was in the evaluation provision para 16.2.3. Its importance requires its repetition here: "16.2.3 The proposals will be first evaluated against all of the above criteria except for Australian Industry Involvement and price/financial considerations. If one proposal does not have substantial advantages over the other, they will be considered equivalent and the recommendation will be made on the basis of price and financial considerations and then Australian Industry Involvement": (emphasis added) As indicated in the General Chronology, para 12, the language difference between the 9 March letter and the RFT in the evaluation provision was pointed out to the Project Manager, Mr Hider by the Independent Auditor Mr Moten on 16 July while the RFT was in draft. Mr Moten's minuted observation of that date was that: "16.2 Methodology Change of emphasis in 16.2.3 and 16.2.4 has occurred. Letter of March 1993 to Companies spoke of ' ... recommendation will be made on the basis of Australian Industry participation and price/financial considerations.' The wording is now ' ... recommendation will be made on the basis of price and financial consideration and then Australian Industry Involvement.'" Neither Mr Hider nor Mr Moten apparently saw fit to pursue this matter further. Though it relates to a contingency which did not occur in the TAAATS procurement, I note in passing para 16.2.4 of the RFT especially for the basis of the judgment it required: "16.2.4 If one proposal does have substantial advantages over the other, the recommendation will be made on the value for money basis taking into account the identified advantages, the price and financial considerations and then Australian Industry Involvement (AII)": (emphasis added) At the 18 November TEC meeting (at which the decision was taken to recommend Hughes) a division emerged between DITRD and the CAA members over AII. Mr Roser's contemporary notes, which I accept as sufficiently accurate for present purposes, suggest that both he and Mr Hider expressed the view that, given the price difference in favour of Hughes, Thomson's AII proposals did not outweigh the cost to the CAA of preferring Thomson over Hughes. Ms Clarke raised the issue of broad AII and its national benefit, and questioned whether the Government might be prepared to pay for it. Mr Roser apparently said there would be no problem with this if payment was made in consequence of a s12 direction. It then became apparent that both Mr Roser and Ms Clarke would be taking this matter up with their respective ministers. That gave rise to a series of actions which are considered separately in Part VI: Political Interference. In its 26 November report to the Board for its 6 December meeting, the TEC expressed its conclusions on price and on AII in the following way: "11.2 ... - There are clear and substantial price advantages in favour of Hughes over Thomson amounting to: $37.1 million (expected contract price), $18.7 million (NPV Total Project Cost) or $23.2 million (NPV Life Cycle Cost). ... (ii)- The Thomson proposal is strongly preferred by DITRD on the basis of substantially greater prospects for export orders, Research & Development investments and other benefits derived from strategic relationships which Thomson proposes to form with key Australian industries involved in Air Traffic Control activities. - While acknowledging the substantially greater AII prospects, the Committee did not conclude that the benefits to the CAA would be commensurate with the extra cost associated with Thomson offer." Mr Roser, in his CEO's comments appended to the TEC report indicated: "The Project Team and the Tender Evaluation Committee were ... unable to see that the benefits to the CAA or the aviation industry which ultimately pay for the CAA's services (except the Government's share of Safety Regulations), of the potential for future exports offered by Thomson outweighed the lower price of Hughes." For its part the DITRD Evaluation Report of 26 November - also sent to the Board - in its executive summary, after noting (inter alia) a key aim of the evaluation criteria for AII was that AII proposals were not to have a negative impact on the cost of TAAATS to the CAA, concluded: "After assessing both proposals, and holding detailed discussions with the relevant Australian companies, DITRD concludes that Thomson's proposal offers significantly greater benefits to Australia. The cost of accepting the wider community benefits which DITRD believes are inherent in the Thomson proposal is therefore one which should be borne by Government should it so desire. It is DITRD's view that the greater industry benefits accruing from Thomson's proposal justify the Government accepting this cost": (emphasis added) Borrowing a multiplier adopted from the arena of investment in industrial research, DITRD suggested by way of quantification of the benefits likely to accrue in exports from Government expenditure, every $10 million so expended would produce a rate of return in increased exports of $100-120 million. It then expressed the view that: "... Thomson's proposal (based on projected exports of $650.5 million) is more than an acceptable investment of $20m by Government." Between the TEC's making of its recommendation and the Board meeting of 6 December resort was had to legal advice. I note here only that of present relevance. On 19 November, Mr Moten sought the advice of Mr Butler of the Attorney-General's Department. As detailed in their signed record of conversation, Mr Moten indicated that while one bid was well ahead on AII, the other was on price. He indicated a difficult judgment would need to be made against the two selection criteria and made the more so by the "CAA's need for an interpretation of its Act" - a reference apparently to the question of broad AII. Mr Butler is then recorded as saying that: "9. In following the evaluation criteria and methodology ... it would be important for the CAA to proceed with guidance as to what factors should, or should not be taken into account in making a qualitative assessment and recommendation on the basis of Australian Industry participation and price/financial considerations (refer letter CAA to tenderers dated 9 March 1993, paragraph 2.5 and Request for Tender dated 19 July 1993)." Copies of this record were provided to Mr Roser, Ms Clarke and Mr Rose QC. Consequent upon discussions with Mr Butler on the application of especially the AII criteria, Mr Hider was provided with the written legal advice of Mr Butler on 25 November. That advice acknowledged the need "on closer scrutiny" to consider the meaning of para 16.2.3 of the RFT (the evaluation provision that in its language differed from the 9 March letter). Focussing of the use of the word "then" in the methodology in the event that Operation and Technical Performance etc and Risk were equivalent, the advice postulated two interpretative possibilities. "13.The question arises whether the use of the word "then" may operate to preclude the inclusion of AII in the Evaluation Process unless, after considering the price/financial considerations, one proposal still does not have substantial advantages over the other. This argument would proceed on the basis that if proposal "A" does have substantial advantages after the price/financial considerations (without the AII considerations) it should be preferred on the basis of price and financial considerations alone and it would not be open to proceed further and evaluate the AII proposals notwithstanding that proposal "B" may have an AII value that is assessed as outweighing the price and financial advantages of proposal "A". 14. The alternative interpretation is that the word "then" is intended to implement the priority ranking, namely that price and other financial issues will be considered ahead of AII and this consistent with the priority accorded Major Criteria under 16.1.1.1. 15. In my opinion, the latter interpretation is to be preferred. To preclude the evaluation of AII in circumstances referred to in paragraph 13 could, in my opinion, give rise to a valid complaint that the evaluation had not proceeded with fairness." On 3 December, Mr Roser was provided with the following advice by Mr Williams, the CAA's in-house lawyer: "In respect of the AII issue, I do not agree that AII must be given paramountcy. If such were, it would cause us considerable problems as far as the terms of the RFT are concerned. Without taking it to a legal analysis, I simply reject the argument put forward and advise that the AII component of the Tenders must be considered in the way outlined in the RFT and not otherwise. There is no obligation under the Act regarding giving them paramountcy." At the Board meeting of 6-7 December, as noted in the General Chronology, para 18, the Board requested the TEC to reconsider its advice in light of: "(a)the Board's belief that the TEC was interpreting the Authority's position on the AII issue too narrowly; and (b)the advice of the Independent Auditor that the Authority was obliged to take the broader view given the process that had been laid out in the documentation sent to the companies;" Mr Roser was also requested to advise on whether a consideration of broad AII "was consistent with members' fiduciary duties under [the Act]". I note in passing, though, that the major preoccupation of a majority of board members at that time was with risk not AII. The Board's concern on this matter, likewise, was to be communicated to the TEC. And as I will indicate in Part VI: Political Interference, a distinct and notable dimension of this meeting was its consideration of the letters and advice of Ministers Griffiths and Collins. On 13 December Mr Roser sought advice from Mr Butler. He asked Mr Butler to assume for the purpose of the instructions given, that: "the Board proposes to adopt the alternative interpretation detailed in your advice of 25 November, namely that the Board will consider both criteria of price and AII." I mention this, not to suggest that it evidences any view of board members on how para 16.2.3 of the RFT should be applied, but rather to indicate that the legal advice to be given was unrelated to any consideration of priority as between price and AII. The actual advice sought was whether the Board's proposed approach of assessing AII more broadly than the benefit to the CAA would be consistent with the fiduciary duties "of board members under [the Act]". The advice was in fact rendered by Mr Rose QC on 16 December. The question was recast so as to refer simply to the Board's duties under the Act and not to its fiduciary duty. The advice given related in consequence to questions (a) of statutory power and (b) of the CAA's obligation in virtue of the RFT. The fiduciary question was never addressed. Construing the RFT in the context of the earlier documentation, Mr Rose QC concluded that its reference to AII encompassed broad AII and that if the RFT was: "within the powers of the CAA under the CAA Act, the CAA is obliged to act in accordance with it and so must take into account the broader AII matters. The question is whether the issue of the RFT in these terms was within the CAA's powers." (emphasis in original) As I earlier indicated, he concluded it was within power. This advice was made available to board members at the 23 December meeting. Also on 16 December Ms Clarke by letter provided additional briefing material to the Board. The executive summary of an attached report contained the following: "The AII proposals offered by the two tenderers were prepared with the understanding that they were not to impose additional cost on the CAA: - any price differential between the two offers is therefore due to other factors; - Thomson has stated explicitly in its tender documentation that its price does not contain any cost associated with AII": (emphasis added) The report itself offered this conclusion: "In DITRD's view the substantial benefits offered by the Thomson AII proposal to the wider community, and to the CAA itself, outweigh the price disadvantage of the company's tender." To back track slightly, at its reconsideration meeting on 15 December, having noted DITRD's view (reflected in the conclusion above), the TEC confirmed its original recommendation. Its conclusions as recorded were (inter alia): "4. The TEC acknowledges that there are some direct benefits to the CAA in the extra commitment to research & development and exports associated with the Thomson offer, but considers that the benefits to the CAA are not nearly commensurate with the additional costs involved. 5. The TEC notes also that the realisation of the extra benefits to the broader community postulated by DITRD to be associated with the Thomson offer are necessarily speculative, based on expectations of the size of markets and Thomson's success in penetrating the markets. 6. Accordingly, the TEC concluded that the extra costs to the CAA could not be justified in the context of the uncertainty associated with the realisation of the extra benefits to the broader community." At the 23 December board meeting, the TEC's recommendation was reversed. According to its minutes, the Board noted (i) DITRD's expertise over the TEC on AII and particularly on its wider benefits and implications; (ii) Government policy on AII and Thomson's considerable advantage; and (iii) Hughes' price advantage of $16.7 million at net present value of total project cost. Those minutes then recorded: "Following discussion, and having regard to DITRD's advice and the advice of Mr Dennis Rose QC, the Board decided that the substantial benefits offered by the Thomson AII proposal to the wider Australian community, and to the Authority itself, outweighed the price disadvantage of the company's tender." The minutes referred to here are set out more fully in the General Chronology, para 23. I would note in passing that to the extent that the minutes suggest the Board's decision was based without exception on the above reasoning, those minutes are incorrect. Both Mr Bosch and Mr Baillieu based their pro-Thomson decision on risk. Mr Baillieu had ceased to be a board member when the minutes were confirmed and bears no responsibility for such misleading impression as the minutes might convey. Mr Bosch in cross-examination said he regretted the sentence in the minutes on the equivalence of risk but "no director can hope to get everything that he wants in every minute of every board meeting". Before turning to such evidence as the individual board members gave of their understanding of the selection criteria and evaluation methodology and on their application of these, I should first indicate my conclusions on the proper construction of the relevant provisions of the RFT contract. (ii)The Construction of the RFT Priority Ranking and Evaluation Methodology First, it is not open to serious question that the major criteria of para 16.1.1.1 were, and were intended to be, listed in an agreed order of priority. I do not understand the respondent to suggest to the contrary. The parties, in consequence, were being invited to make their choices in the development of their proposals by reference to criteria to which differing 'importance and relative weighting' were to be attributed. Para 16.1.2 inferentially confirms this. If a tenderer treated them otherwise than in the priority listed, it did so at its peril. The proposals were to be evaluated, as para 16.1.1. stipulated, "with reference to the ... criteria", and as listed with their priority ranking. Secondly, that evaluation and the stipulated ranking inform the interpretation to be given to para 16.2.3. Before turning directly to how that paragraph should be applied where, as here, criteria 1 and 3 were found to be equivalent, it is necessary to emphasise that the two criteria remaining (possibly) to be considered - ie price etc and AII - had quite different rankings, ie 2 and 4. I do not suggest that for this reason the two were wholly incommensurable. Both were major criteria. It is not necessary for me to express an opinion, for example, on the view Mr Bosch took that a "very great distance" separated even criteria 3 and 4. Nonetheless it is appropriate to comment that managing the cost to the CAA of the TAAATS procurement was a matter in which the Board had a particular responsibility. This responsibility it had because of (i) the ranking contractually given price etc in the RFT (and see also RFT para 16.2.4); (ii) the policy documents on AII given to the parties at the Restart Meeting that acknowledged, in the language of the Joint Press Release, the "need to obtain value for money" (and see again RFT para 16.2.4 and DITRD's representation at the Restart Meeting); and (iii) DITRD's repeated representation that AII was not to have a "negative impact on ... the costs of TAAATS to the CAA". In their own way, each of the matters referred to above reflected in the RFT contract and its setting the explicit purpose given the Board in s32B(1)(b) of the Act of ensuring economy in the performance of the CAA's function. The TAAATS procurement was a quintessential example of a function attracting this purpose. If the Government wished the Board to act otherwise in this particular matter, it had available to it (in the sections 12 (direction) and 48 (reimbursement) mechanism), the means to secure its pleasure. The Minister, deliberately, chose not to utilise these. I would add that some number of the Board members seemed to have been quite sensitive to the need for economy until, as will be seen, they were deflected from this by the view they apparently mistakenly took of Mr Rose QC's advice. For reasons statutory and contractual, then, "price and other financial issues" necessarily was to be accorded a significantly greater weight than AII. In light of this conclusion, it is appropriate to make this additional comment. The Parliament did not draw as sharp a divide in the Act between commercial objectives and "community service obligations" as may be found, for example, in the State Owned Corporations legislation of some States: see eg State Owned Corporations Act 1989 (NSW), ss 20E and 20N; State Owned Enterprises Act 1992 (Vic), ss 18 and 45; and see M Aronson, "Ministerial Directions: The Battle of the Prerogatives", (1995) 6 Public Law Rev, 86-88. Nonetheless there are sufficient indications in the Act itself (see eg s45(g), (h) and (j)) that, in the conduct of its "commercial" as opposed to "regulatory" activities - on this distinction see Administrative Review Council, Government Business Enterprises and Commonwealth Administrative Law: Report No 38, para 2.20ff (1995) - the CAA should have had explicit regard to commercial considerations and objectives, notwithstanding that the framework for even commercial activities could well include "community service obligations" endorsed or ordained by the minister: cf ss12 and 47. In emphasising the place of commercial considerations and objectives, I am not thereby suggesting that the public interest was to be sacrificed to the private or self-interest of the CAA. Rather, a means the Parliament indicated the CAA was to adopt in serving the public interest was by its having regard to commercial considerations and objectives in the conduct of its commercial activities. Turning now to para 16.2.3, I have referred to Mr Butler's advice to Mr Hider of 25 November that suggested two possible interpretations of the paragraph in light of the use of the word "then" in the sentence "the recommendation will be made on the basis of price and financial considerations and then Australian Industry Involvement". The first, which is the preferred construction of the applicant, was that AII was only to be invoked as a "tie-breaker" in the event of the bids being substantially equivalent in price. The second interpretation, supported both by the respondent and by the applicant as its fall-back position, was that the word "then" simply gave effect to the priority ranking in an evaluation process in which both price and AII had to be considered. The applicant's preferred construction (ie AII as tie-breaker) is said to be supported by the twin considerations (i) that the concept of a category 4 criterion outweighing a category 2 one in a straight run off was a difficult, if not impossible, one; and (ii) that the evaluation methodology in para 16.2.3 had to be interpreted consistently with the requirement contained (inter alia) in DITRD's 12 August letter that DITRD did "not expect AII proposals to have a negative impact on ... the cost of TAAATS to the CAA". I should add, the construction the applicant sought to have placed on the DITRD requirement was this: if one tenderer was preferred for its AII proposals (though the other's had the price advantage), then accepting the former's for that reason would thereby result in AII having the "negative impact" referred to in the letter. Finally, it was submitted that the "tie-breaker" construction did not rob AII of real practical significance: it had an independent role to play in the event of price equivalence and, as the tender process was itself competitive, it would necessarily be a matter the parties would take seriously. The respondent's submission was that, as a major criterion, AII no less than price was intended to come into play (albeit with its particular ranking) once equivalence between the bids was found applying criteria 1 and 3. This clearly was what was contemplated in the 9 March letter and the RFT was not intended to effect a radical change to the evaluation criteria and methodology. In consequence there was to be a balancing of price and of AII which acknowledged their priority difference but which could produce the result of a substantial AII advantage outweighing a less significant price differential. Subject to some qualification and elaboration I generally agree with the respondent's submission. Considered in the context of the February-March letters, I conclude that para 16.2.3 required that, in the events which happened, account would be taken of both price and AII. This conclusion makes it unnecessary for me to enter on whether (if at all) it would be permissible to rely upon the conduct of Hughes both prior and subsequent to the RFT contract for the purpose of interpreting para 16.2.3: as to prior conduct manifesting intention, see Codelfa Construction Pty Ltd v State Rail Authority of NSW, above, at 352; as to subsequent conduct, see Hide & Skin Trading Pty Ltd v Oceanic Meat Traders Ltd (1990) 20 NSWLR 310 esp at 315-316, 326-330; Cheshire and Fifoot, above, para 10.14. What, though, needs be said is that for the purposes of the Trade Practices Act claim, there is evidence of such conduct which suggests that Hughes interpreted the representation made as allowing for a priority weighted balancing of price and AII. I refer in particular to the facsimile from Mr Funge to Mr Kramp of 2 August 1993 and to the Hughes slides of 20 September 1993. It is unnecessary to set these out here. I find, then, that the representation relied on was similar in its burden to para 16.2.3 of the RFT on its proper construction. The matters of qualification and elaboration to which I earlier referred are these. For reasons statutory and contractual that I noted above, criterion 2 necessarily was to be accorded a significantly greater level of importance and relative weighting than criterion 4. For this reason I would qualify the respondent's submission that a substantial AII advantage could outweigh a less significant price differential by the word "could conceivably outweigh". Be that as it may, to apply the criteria as required by para 16.2.3 the Board had of necessity to address directly the level of importance and the relative weighting of those criteria. Until that was done - until the factors and reasons informing their importance and weighting were comprehended - the proper "balancing" of the two criteria could not be undertaken. Whether in the end AII could be found to outweigh price in a given instance, would doubtless be a matter of judgment. But to be an unimpeachable one, it would need to be informed by a proper understanding of, and to involve a proper application of, the criteria and methodology of the RFT. The issue of relative weighting, necessarily, would be central to this. I emphasise this. Though not directly involving the question of construction, there is an additional matter to which I should refer given its significance in the Board's application of the RFT. It relates to Mr Rose QC's advice. I have indicated already that in the advice of 16 December, Mr Rose QC concluded that the Board was legally obliged to take "the broader AII factors ... into account". For my own part I have arrived at the same conclusion albeit because the RFT contract's evaluation criteria on their proper construction allowed tenderers to incorporate broad AII into their proposals and required the CAA to assess those proposals when applying the criteria laid down in the 12 August letter. I did not understand Mr Rose QC's advice to be based upon a contractual analysis of the RFT and it may well be that when it referred to the CAA being obliged to take broad AII into account it was considering the matter from the standpoint of administrative law: cf Minister for Aboriginal Affairs v Peko-Wallsend Ltd (1986) 162 CLR 24 at 40-42. Be this as it may, the advice did not indicate how account was to be taken of broad AII in the assessment made of the AII proposals, let alone the relative weight to be given it in the para 16.2.3 balancing. As will be seen when I consider the Board's decision, some number of the directors apparently assumed that it addressed those matters as well. The particularly important consequence of this was that the commercial considerations and objectives to which I earlier referred were regarded by these board members as having no place to that extent in the application of para 16.2.3. It was consistent with its responsibility to take broad AII into account, that the Board consider the extent to which the benefits of the AII proposals accrued directly or indirectly to the CAA. And the less they did, the more commercially significant, in all probability, would have been the price differential - and the "cost to the CAA" - in the balancing process. On the evidence it would seem that the TEC alone had some understanding of this. It goes without saying that fiduciary considerations would lead to a like conclusion. (iii) The Board's Decision I should preface my consideration of the evidence of the individual board members with this observation. In Part IX: Breach of Confidence, I have held that the disclosure to Ms Clarke of the price details of the Hughes and Thomson bids was improper and in breach of the RFT. In "DITRD Related Complaints", below, I have held that it was no part of DITRD's role to be engaged in, or to advise on, the actual application of the RFT para 16.2.3 evaluation methodology to the two tenders. It nonetheless presumed to provide that advice and favourably to Thomson: see above Additional Factual Material. It could only do this because of the breach of confidence. I do not comment on the competence or otherwise of DITRD to make such a judgment. What I draw attention to is the lack of evidence revealing DITRD's understanding of the level of importance and relative weighting of criteria 2 and 4 or of the Board's awareness of that understanding. First General Gration. I should state at the outset that in his oral evidence generally his recall was imperfect and he engaged on occasion in reconstruction of events though lacking present recall of them. The latter, I consider, was evident in his explanation of how he applied the priority ranking of the selection criteria. I do not accept that explanation which is outlined below. I should add I derived no real assistance in this particular matter from his witness statement. He explained that at the 23 December meeting he saw no need to draw to the Board's attention the RFT para 16.2.3 methodology or that the selection criteria were priority ranked. It was his own understanding that the process the Board was engaged in was "balancing AII against price" and that the priority given to price "would have been part of my qualitative judgment that had to be exercised". He seemed not to accept that Thomson's AII proposal occasioned extra cost to the CAA. It was due to other factors. In this he adopted a like interpretation of "cost to the CAA" to that advanced by DITRD in its report of 16 December (noted in Additional Factual Material above). He admitted that he did not attempt to distinguish between that part of Thomson's AII which was of benefit to the CAA and that which was of benefit to the wider community and that he did not have to do so because of Mr Rose QC's advice. Likewise, because of Mr Rose QC's advice, "value for money" meant value for money not only for the CAA but also for the "Australian ATM related industry" as well. He concluded that the "substantial difference in the AII components properly outweighed the price differential between the two bids", and that to have disagreed with DITRD's assessment on this would have required "strong grounds". Surprisingly, he could not recall whether he "actually saw the July RFT". He later said he believed he probably had read para 16 of the RFT. Equally he admitted he did not seek or receive any briefing as to the role DITRD was to play in the tender process. He "regarded [Ms] Clarke as a member of the TEC." Mr Ayres. I have not found his evidence particularly helpful on the issues I will mention, largely because his attempts to be of assistance in clarifying matters were not necessarily successful in their purpose. His evidence as expressed in his witness statement was that in evaluating the tenders he sought to pay due regard to each of the major criterion taking note of the priorities assigned to them; that that evaluation and the ultimate decision was a judgment exercise; that he relied on the experts, and on AII this was DITRD. In cross-examination he suggested that broad AII was envisaged from 8 March onwards and Mr Rose QC's advice accorded with his own view; that he had regard to and was influenced by DITRD's view that the Thomson's AII benefits to the community outweighed the price disadvantage; that Thomson's AII did not of itself occasion extra cost to the CAA ("the DITRD 16 December view"); and that it was for the TEC to judge what recommendation to make in the light of all evaluations including AII. Despite lengthy questioning, he was unable clearly to explain his view of DITRD's role vis-a-vis the TEC other than that it "worked cooperatively with the TEC, but also advised the Board". Equally, given his acceptance at the 6 December meeting that the criteria were set to take account of AII but with no increase to costs, he could give no adequate explanation of his later acceptance of the DITRD view. He likewise said there was to be a balance of AII and price but I was left uncertain of his understanding of how the priorities affected that balance. He appeared, though, to have accepted that AII was a tie breaker where there was not a "substantial difference" in price. Mr Bosch. His decision, as I have indicated, was taken on the basis of risk. His evidence of price and AII is in consequence of no real significance. Nonetheless I would note verbatim his view of the priorities: "I would like to say that I didn't take this AII stuff very seriously. It was the fourth of the criteria. Nobody said in any formal document what the distance was between number 3 and number 4. To me, it was a very great distance indeed. I placed minimal emphasis on [number 4]." Mr Baillieu, I am prepared to infer, decided against Hughes on grounds of risk. I need here make no further reference to his evidence other than to note the following exchange in cross-examination. "[Mr Gyles QC]Q. The way in which your own mind was made up on 23 December meant, I think, that you yourself never had to reach the question of weighting or what weight to be given to Australian industry involvement; is that not right? A. There is no doubt that I was very strongly for Thomson. Q. Pro-Thomson on forms and risk? A. Yes, on risk. Q. And you didn't really come to consider Australian industry involvement? A. Yes, I did and I felt that the - when we get to Australian industry involvement, we are talking national interest and I'd have to say I was delighted to see Thomson make the proposal that they made. Q. Delighted because you were for them anyway? A. I was for them anyway. There was never any secret or doubt about that. Q. And the gist of it, if I may put it to you, was that your view about the advantages of a proven system were well developed views; is that right? A. Yes. Q. And in the period you were surveying the competition, Hughes were not able to meet that criteria of yours? A. That's correct. If I could just add one thing there, I would very, very much, your Honour, rather have seen this project done in English and in Los Angeles. If I have a prejudice, it's not pro-French, but I have a responsibility as a director of the Civil Aviation Authority and had carefully come to the conclusion that we should not go with the unproven system." It is not surprising that Mr Baillieu observed that in his view, Hughes was "kicking into a ten-goal-breeze". Mr Ingersoll. He indicated that his starting position - the "fiduciary duty" - was that GBEs were to run on a commercial basis and if there was to be a cost incurred to secure wider community benefits this should be paid for by Government from consolidated revenue. Though his concern at the time was with risk, such was his attitude at the 6 December meeting. When asked what changed his mind at the 23 December meeting, he responded: "A. Essentially the advice from the Attorney-General, from Mr Rose, that confirmed that the Board was obliged to take into account the national interest consideration as well as the consideration of return to the CAA and the firm and unequivocal advice from the department of the significant benefits, quantified, to Australia and to the CAA in the Thomson bid over the Hughes bid. And that was the difference ..." When then asked whether anybody at any of the meetings said "Hang on, we are comparing a priority 2 with a priority 4" he said: "A. I think that the discussion moved after there was acceptance by the Board of the equalisation of risk as between the two companies. There was recognition of what the price difference was. Then came the advice from Mr Rose, and that coupled with the advice from the department, which was unambiguous, and the department, through its officer, took full and complete responsibility for that advice, for the substance of it, for the methodology that they used to come up with that advice, that was all theirs to make - to put not too fine a point on it - and that is how the decision proceeded." He went on to indicate that: "The issue of third party benefit and its effect on fiduciary duty was resolved for me by the advice from Mr Rose." Finally he suggested that the price difference for this type of contract was, comparatively, "very small" in relation to overseas contracts: it was not of a huge amount. Mr Roser. As then acting CEO he participated in formulating the criteria and their ranking. In evidence he indicated his view that criterion 2 ranked well ahead of 4 and that a sensible reason for price's priority was because so far as air traffic management was concerned the CAA was a user-pays organisation so that it needed to purchase at the most competitive prices. He accepted that the $37 million expected contract price difference was a substantial discriminator between the bids "no matter which way you looked at it"; his view on 23 December was still that Hughes should have been awarded the contract on the basis of the price and the criteria, but that if the Board wished to take a decision on AII he was able to accept it. He did not "lecture" the Board on the price and AII criteria. The Board had every right to rely on the independent auditor and on legal advice obtained for it. Mr Yates. From the Dubs Notes he appeared to make little by way of positive contribution at the 23 December meeting. His oral evidence was that DITRD's advice that price outweighed AII was fundamental to his thinking and that but for it he would have chosen on the basis of price. He later said that for this purpose DITRD's recommendation was the Government's. Equally it had not occurred to him at the time that AII should not cost the organisation money. Nonetheless, he did say in the context of a discussion about risk (apparently his principal preoccupation) that it was fundamental that criteria 2 and 3 - price and risk - were far more important than AII. Mr Terrell. When he joined the CAA board in August 1993 the TAAATS II process was well under way. Nonetheless he did not take adequate steps to familiarise himself with the matter. Notably he did not read the Macphee Report, the 8 and 9March letters or the RFT. Somewhat similar to Mr Ingersoll, he said his starting principle was that the CAA should not be paying for benefits others might secure. He departed from that principle because of Mr Rose QC's advice: "we had very little or no choice". He accepted that at the 23 December meeting no one appeared to have referred to the relative ranking of price and AII. Though his evidence on this may well be reconstruction, he said the way the criteria worked was one of logical steps: if performance and risk were equal you measured price and AII and he 'simply accepted the advice of DITRD' on this: "they were the experts. There was very little other way we could judge that." Mr Mant. He saw that a judgment had to be made between price and AII, the balance not being a strictly quantifiable one. In that judgment there was "quite a strong element of one's view about the future, the role of aviation, the role of the CAA, the place of Australia in the world aviation context". It was not simply a matter of looking at figures. He then preferred a strategic alliance with France. He favoured Thomson purely on the basis of AII. And he relied on DITRD not so much on price as on their assessment of the relative merits of the AII bid. While there was a price margin in favour of Hughes, he did not accept the description of it as a "significant margin". As to the priority ranking he was asked whether anybody on 23 December referred to the fact that price was 2 and AII, 4. His response: "A. No, I'm not sure that we accepted that those criteria were weighted in the sense that the numbers would have suggested ... . . . There was going to be a system that worked, delivered on time, and then the issue was price and the other benefits to be weighed up, because there was no point accepting a cheap version that wasn't going to work. So that, although price was number 2, it just didn't make sense. So I didn't read 1,2,3,4 as being first most important, second next important, et cetera. I saw 1,2,3,4 and logic pointed out the priority. Q. In other words, you saw them as being just a numerical listing rather than a priority ranking? A. That's right." Finally, I should note Mr Moten's views on the ranking of the criteria and of the evaluation methodology. It is his evidence that he conveyed his views to the Board; and that he regarded it as his role that the Board stay within his understanding of these matters. It equally is the case that some number of the directors relied upon Mr Moten, if not necessarily for direct advice, then for the correction of misapprehensions. Mr Moten attended the relevant board meetings. In his view the operative document throughout was the 9 March letter. He did not have a view on the RFT. Notwithstanding the priorities in the criteria, he considered the evaluation methodology explained their working: 1 and 3 and 2 and 4 were bracketed. Once 1 and 3 were equalised you had to weigh 2 and 4: the methodology eliminated the ranking. This was the view he "conveyed and reminded the Board of". I should also add that while Mr Hider obtained legal advice from Mr Butler on the possible interpretations of para 16.2.3 of the RFT, there is no evidence to suggest that that advice was provided to the Board. (iv)Conclusions Notwithstanding the respondent's submission to the contrary, the conclusion is inescapable that a clear majority of the Board did not take any or proper account of the levels of importance to be given the priority rankings of price and AII or of the relative weightings to be given them, in selecting Thomson as the TAAATS contractor. I need not concern myself here with the decisions of Messrs Bosch, Baillieu and Roser - the first two because they did not decide on this basis (whether their resultant decisions, presumably taken under para 16.2.4, were unimpeachable is not in issue) and Mr Roser, whose decision mirrored that of the TEC but who abided the Board decision. Of the remaining board members, given that I do not accept General Gration's account of how he applied the priority ranking, and given the uncertainty generated by Mr Ayres, I have concluded as follows. (i) General Gration, Mr Ingersoll and Mr Terrell reached their decision in reliance upon the advice of Mr Rose QC on broad AII and the advice of DITRD that Thomson's AII outweighed Hughes price advantage. In so doing they effectively surrendered their decision on the proper application of the para 16.2.3 criteria to DITRD and did so, in part at least, because they mistakenly regarded Mr Rose QC's advice as indicating not only that they were obliged to take account of broad AII but also how they were, or were not, to take account of it. Howsoever DITRD weighted the criteria (if it did at all), howsoever DITRD actually applied para 16.2.3 (if it did at all) - and there is no acceptable evidence on these matters - so too did these three board members. And I reiterate DITRD should never have been in the position to express a view on the matter at all. It was only a breach of confidence by the CAA that allowed it to do so. The evidence does not at all suggest that (a) these three board members engaged with the criteria of para 16.1.1.1 and the methodology of para 16.2.3 - that they "involve[d] [themselves in] an active intellectual process directed at [the criteria and methodology]": cf Tickner v Chapman (1995) 57 FCR 451 at 462 (on the formula "give due consideration to"); and (b) in light of what these demanded, they then applied them as the CAA in its contract promised it would. In saying this I am not finding that these board members exercised no discretion in the matter. Rather such actual discretion as they exercised was not the one that they were contractually obliged to exercise. (ii)Mr Yates and Mr Ayres probably acted in no materially different way from General Gration. Each conceded that DITRD's advice influenced their decision, in Mr Yates' case decisively. And though Mr Ayres' witness statement suggests the contrary, I nonetheless conclude that the evidence does not provide a satisfactory basis for suggesting either of the two actively engaged with the criteria and the methodology and with what these required of them. Even less does it suggest their application of these to the material before them. (iii) Mr Mant decided on idiosyncratic grounds. He appears to have had his own "geo-political" reasons for preferring Thomson on AII grounds. On his own admission he did not see the criteria as having a priority ranking let alone one he was bound to apply strictly and in accordance with para 16.2.3. One might register some surprise that the Board was not given explicit advice on how, consistent with the requirements of paras 16.1 and 16.2 of the RFT, it was to approach its decision making in the circumstances. That surprise, though, would be mitigated by the appreciation that such approach as they adverted to - if they adverted to any - was that being thrust on the Board by Mr Moten. It is clear that some number of the Board members relied upon Mr Moten to correct misapprehensions, he being the process auditor. It is equally clear that Mr Moten did not understand that there was a weighted priority ranking to be applied in taking account of price and AII. If, as seems very likely, he was a positive cause of mistake, one might recall he did not appreciate that the operative document for the Board was the RFT. I refrain from comment on the evidence revealing the unfamiliarity of some board members with the provisions of para 16 of the RFT. All that needs be said is that no matter how honest the decision making of the Board, a majority (at the least) failed to appreciate that their decision was being taken in discharge of a contractual obligation to each of the tenderers. The manner of their decision-making ensured the CAA would be in breach of that contract. The board members (save for Mr Roser) who decided on AII grounds, simply did not decide in the manner required of them by the RFT. Lest there by any doubt in my conclusion, I am not taking issue with a business judgment made by the Board. What I am concluding is that the methodology and criteria of the RFT were not applied as contractually required. Having reached this conclusion it is unnecessary for me to enter upon the question of how substantial was the price difference and of whether it was proper to measure it in terms of "Net Present Value of Total Project Costs". It is clear that the prices were not regarded as substantially equivalent whatever the measure used. The case in consequence was not one of AII's use as a tiebreaker. As I indicated at the beginning of this section, this conclusion also relieves me of the need to deal with the alternative claim that the decision based on AII was colourable in any event and that risk provided the real basis of the decision. I should, though, say that the preoccupation a majority of the board had with risk (that favoured Thomson) and the vigorous response this evoked in Mr Roser at the 6 December meeting - a response not recounted in these reasons - may well have contributed to the less than considered approach taken by some to the para 16.2.3 "balancing" on 23 December. DITRD's view may have allowed for a different basis of decision. It did not alter the outcome. I find then that the CAA, in acting as it did in its decision to select Thomson, breached paras 16.1 and 16.2 of the RFT contract. I make a corresponding finding in the Trade Practices Act claim. (v) The Prospect of a Government Subsidy This matter can be dealt with relatively briefly. As will be indicated in Part IX: Breach of Confidence, when the difference between the TEC and DITRD over Thomson's AII emerged sharply at the 18 November TEC meeting, the question was then raised by Ms Clarke as to whether the Government would be prepared to pay the CAA the additional cost of its preferring Thomson over Hughes on AII grounds. This led, variously, to consideration (i) of direct Government interference in the decision - interference which, though considered by Minister Griffiths and by Minister Collins at the former's instigation, was ultimately discountenanced (it was an "extremely high risk proposal") and this was communicated to the Board during the 6-7 December meeting; and (ii) of an indirect subsidy in the form of a dividend reduction to Government to compensate the CAA for the additional cost. Both possibilities were referred to at the 18 November TEC meeting (according to Mr Roser's contemporary notes); were mentioned at the 6 December board meeting; and were raised at a meeting between Mr Roser, Mr Hider and Mr Stevens and Ms Clarke on 2 December. All of the Board members have given evidence in which they rejected that the prospect of some form of government subsidy was an element in their respective decisions. That prospect was "unrealistic" or "impractical". I accept this evidence which accords in any event with the conclusions I earlier reached as to the decision-making of the individual directors. In these circumstances I do not find this allegation to have been made out. B DITRD Related Complaints Three allegations are made here. The first two again alleged breaches of paras 16.1 and 16.2 of the RFT in that the CAA: "16(f) instead of arranging that a representative from the Department of Industry, Technology and Regional Development provide advice on Australian Industry Involvement matters directly to the tender evaluation committee: (i) permitted that representative and the secretary of the Department to deal directly with and make representations directly to the Board; and (ii)accepted submissions from that representative and the secretary of the Department as to the relative weights to be given to the AII and price components of the Hughes and Thomson tenders; (iii) acted on the representations of that representative and the secretary of the Department in so far as Australian Industry Involvement was concerned; ["Permitting DITRD's Role to Change"]; ... (l) failed to evaluate or to give due consideration to the Australian industry proposals of Hughes and Thomson but instead merely accepted the report of the Department of Industry, Technology and Regional Development or its representative; ["Reliance on DITRD"]." The third was that: "10D. It was a term of the RFT Contract that the Civil Aviation Authority would cause the Department of Industry, Technology and Regional Development to evaluate critically each tenderer's proposal for Australian industry involvement and in particular the likelihood of that proposal coming to fruition;" ["Warranting DITRD's Evaluation"]- and that it failed so to ensure. This alleged term in the RFT contract could at best only be partly expressed and partly implied. I will deal with these in order noting that parallel Trade Practices Act claims are made in respect of the first and third of the above. (i) Permitting DITRD's Role to Change Of the three particular complaints made, only the first two - ie (a) allowing DITRD to deal directly with the Board; and (b) accepting submissions from DITRD on the balance of price and AII - need be considered here. The third - acting on DITRD's submissions - requires no further consideration given my earlier findings on the Board's decision. Before examining the two complaints, there are some preliminary matters to which I need make reference. The first is that in Part IX: Breach of Confidence I have found that DITRD's engagement by the CAA was both as an evaluator and as a consultant to the TEC and that both roles were limited to "AII matters": see eg RFT para 16.2.5. I have further found that it was a breach of confidence by the CAA to disclose to Ms Clarke the price details of the two tenders. These findings provide necessary background to what I have to say here. The second relates more generally to DITRD's role. I have previously found that the RFT contract required the Board in applying para 16.2.3 to balance price and AII having regard to their respective priority weightings. Notwithstanding the respondent's apparent submission to the contrary, it was not part of DITRD's role to form an opinion on this matter. Doubtless, DITRD properly could express a view to the TEC - and, as I will indicate, to the Board - as to how the AII benefits could be quantified (not necessarily exclusively in dollar terms) for the purposes of their weighted balance with price. What it could not properly do was, under the guise of its consultant/evaluator role, to engage in the type of priority ranked balancing I have found to be required by the RFT. It is unnecessary to labour DITRD's lack of familiarity with - I hesitate to say competence in - those matters of economy and of commercial judgment that were central to the CAA's responsibility in making its decision. I merely reiterate that to engage in the para 16.2.3 balancing was not DITRD's function: such was not envisaged for it by the RFT contract; such was not the basis of its engagement by the CAA; and, as I will indicate below, the Board did not retain it at its two December meetings to perform this particular function as its expert advisor. Yet its advice to the Board (contained in its report of 16 December) presumed to conclude: "In DITRD's view the substantial benefits offered by the Thomson AII proposal to the wider community, and to the CAA itself, outweigh the price disadvantage of the company's tender." DITRD never should have known what that price disadvantage was. I would add that Mr Moten, the independent auditor did not suggest to the Board that in venturing this view, DITRD was trespassing on matters of no concern to it. But then Mr Moten, no less than DITRD, seems not to have understood that such was the case. The final introductory comment I should make is this. In cross-examination Ms Clarke conceded that after the 18 November TEC meeting she was engaged in a "bureaucratic struggle" with the TEC over having the CAA accept broad AII. In this situation she "pursued [her] argument with vigour". I have referred and will refer on a number of occasions to her post-18 November actions. The courses she took may well have been acceptable and appropriate in resolving the policy clashes of government departments. Their acceptability and appropriateness in the face of the CAA's contractual obligations to the tenderers was altogether another matter. I need not labour the importance of appreciating the distinctive position in which the RFT contract placed the CAA. (a) Allowing DITRD to deal with the Board The applicant's submission on this matter is the bald one that DITRD's role was to advise the TEC, and the TEC's role was to advise the Board. There was no room in that process for DITRD to advise the Board directly: "Hughes was entitled to believe that DITRD would be restricted to the role laid down for it in the process and not intervene otherwise and certainly not under cover of the process". Specific objection was taken (i) to the appending of DITRD's reports of 26 November and of 16 December to the TEC reports which went to the Board meetings of 6-7 December and 23 December; and (ii) to Ms Clarke and Mr Stevens making direct recommendations to the Board (via the 16 December DITRD documentation) and to Ms Clarke's presence at the 6-7 December meeting. In part, but only in part, this submission presupposes (contrary to my finding) that the procedures specified in the annexure to the 9 March letter retained contractual force notwithstanding the later RFT contract. The respondent's submissions, with which I am in broad agreement, are (i) the Board was not merely a rubber stamp for the TEC and had properly to inform itself on the matters subject to its consideration; (ii) it was appropriate for those who advised and assisted the TEC to be made available to and/or to provide advice to the Board - that the RFT para 16.2.5 indicated that DITRD would advise the TEC "directly" was not inconsistent with this; and (iii) the Board could have (though it had not) invited DITRD representatives to its meetings to inform or advise it "on any matter" - cf the Act s39A(4) - and this statutory right itself supports the view that the RFT should not be construed so as to preclude it from obtaining such advice or information. The essence of the applicant's submission is that the RFT contract so defined the process to be followed that simply allowing this unprovided for advice to be given directly to the Board was itself a breach of the process. I cannot agree with this. I have previously held that, though constrained by the selection criteria and evaluation methodology, the Board was the appropriate organ in the CAA to make the judgment as to which tender would be selected. Consistent with that function, it was entitled to obtain information and advice at least from those (including DITRD) who had participated in the processes leading to its consideration of the TEC's recommendation. I need not comment further on who properly could be turned to for advice. The real constraint on the Board did not relate to its possible sources of advice/information. It was, rather, the requirement that in making its decision it apply the RFT contract and, in particular, para 16.2.3. As I have found, it failed to do that. I reject this ground of complaint. (b) Accepting submissions from DITRD on the price/AII balance This complaint can be dealt with cursorily. It raises only a process issue: ie ought the Board to have accepted submissions emanating from DITRD regarding the weights to be given price and AII? Given the view I take, it is unnecessary to particularise the alleged submissions made. I have found that it was not part of DITRD's function as evaluator/consultant to the TEC to provide such advice to the CAA. I later find that it could only have been given as a result of a breach of confidence in supplying Ms Clarke with the price details. And I have found above that the Board was entitled to obtain information or advice from those (including DITRD) who had participated in the TAAATS process leading to the Board's decision. Given these findings the issue was not whether as a matter of process the Board was entitled to receive the submissions, but rather it related to how the Board should have dealt with them. I have found that it relied upon and adopted DITRD's view and in so doing failed to discharge the CAA's contractual obligation under the RFT to apply para 16.2.3 to the selection. The only additional comments I would wish to make here are (i) that the Board did not itself engage DITRD to advise it at either of the December meetings as an expert on the proper application of para 16.2.3 - and it would have been astonishing if it had; and (ii) that some number of the Board members had no informed understanding of the role(s) DITRD had been engaged to discharge in the TAAATS procurement - though they nonetheless accorded DITRD an ambient and uncontested expertise. I illustrate the later by reference to General Gration's evidence that he regarded DITRD, "for practical purposes", as "a member of the TEC". (ii)Reliance on DITRD The complaint here is that the Board acted on DITRD's representations concerning the weights to be given price and AII. Given the findings I have already made concerning the account taken of DITRD's advice, it is unnecessary to consider this complaint as a specific one justifying a breach of contract finding. (iii) Warranting DITRD's Evaluation As I have indicated, but will repeat here, it has been pleaded as a separate term of the RFT that the CAA would cause DITRD to "evaluate critically" the tenderers' AII proposals and in particular the likelihood of these coming to fruition. I would say at the outset that I have some difficulty with the term propounded. While the RFT contract gave recognition to the terms of DITRD's 12 August letter, the contract was with the CAA alone. The tenderers were aware of, and consented to, the CAA's use of DITRD to evaluate their AII proposals. Nonetheless, when one has regard to the terms of the RFT itself, the relevant promises such as they were relating to evaluation were the promises of the CAA itself: see paras 16.1.1, 16.2.1, 16.2.3, 16.2.5 and 16.2.9. Howsoever it wished to arrange for the evaluation to be conducted - here by DITRD - the CAA seemingly was imposing on itself the obligation to evaluate the tenders in the ways prescribed. And if they were not so evaluated, the CAA itself would be in breach of the RFT contract. If such is the proper construction of the RFT contract - and the applicant at a number of places in its Supplementary Submissions (eg paras 6.56 and 6.61) proposes it is - then it is difficult to see any reason, or basis, for the implication of the term of the type proposed. The moreso is this, given I have found that a duty to evaluate fairly was to be implied into the RFT contract. I would note as well that the conduct pleaded as constituting a breach of the alleged term was not also claimed to breach the express para 16.2.1 term requiring (inter alia) evaluation "in accordance with a defined evaluation methodology". I would equally note that the respondent's defence has been of the term as alleged. The applicant has made multiple complaints of inadequacies and failures on DITRD's part in conducting its evaluation. While these could well be taken as leading to a claim that the AII proposals were not evaluated "in accordance with the Australian Industry Involvement Evaluation Methodology dated 29 September 1993", hence in breach of para 16.2.1, their direction seemed as well towards the different claim that DITRD's evaluation was in the end uncritical and lacked objectivity, these last suggesting an ulterior purpose was being put into effect. And so the emphasis in the term proposed that DITRD evaluate "critically". I would note in passing that reliance was placed on the decision of Hannam v Bradford Corporation [1970] 1 WLR 937. The manifest purpose of the term propounded is to provide a basis for attributing responsibility to the CAA for DITRD's alleged sins. It probably is the case that the nature of these was such that the propounded term would be unnecessary for this purpose in any event. Para 16.2.1, the duty to evaluate fairly and, for that matter, the claim in negligence provide bases enough to test the adequacy and propriety of the conduct of DITRD, hence the CAA - DITRD being the CAA's chosen instrument to effect its evaluation. As to the duty to evaluate fairly, the applicant's Submissions in Reply seem to acknowledge as much (para Q2.11) when it is claimed that "the CAA cannot escape the complaint that it breached its obligation to procure a fair and unbiased evaluation of the AII proposals of the two tenderers". I can see no proper basis at all for implying the proposed term. There is no need for it. To the extent that DITRD's conduct of the evaluation was inadequate for whatever reason, there were other ways of bringing responsibility for this home to the CAA. Likewise, for Trade Practices Act purposes, I find no representation in the terms alleged. PART VI: POLITICAL INTERFERENCE Though merely one of the group of complaints of alleged non-compliance with the tender evaluation methodology and criteria, that considered here, as foreshadowed in Part V, raises discrete issues requiring separate treatment. The complaint is that, though not provided for in the RFT nor in the defined evaluation methodology, the Board of the CAA (i) took into account communications made to it by or on behalf of Minister Griffiths and Minister Collins; or (ii) treated those communications as directions to the Board to award the TAAATS contract to Thomson because of its AII proposal. There are both contract and Trade Practices Act claims to this effect. Beyond any question of the account the CAA could or should have taken of government policy on AII in GBE procurement, this complaint raises in direct form what is permissible by way of ministerial influence upon the decision-making of a GBE acting under legislation such as that of the CAA. The principal manifestations of the conduct by, or on behalf of, the two ministers to which objection is taken are (i) the letters of Minister Griffiths of 2 December 1993 to General Gration and Mr Roser and of Minister Collins of 3 December 1993 to General Gration (set out below), these having been tabled at the CAA board meeting of 6 December; (ii) a communication, said to have been made by Minister Collins to Mr Roser during the 6 December meeting, that the Government was not going to interfere in the contract allocation (see General Chronology, para 17); and (iii) a letter in support of Thomson's AII from Mr Stevens to the 23 December board meeting and Ms Clarke's submissions to the Board meetings of 6-7 December and 23 December. Only the first two of these require extended consideration. The two letters need again to be set out in full. First, Minister Griffiths' letter of 2 December (omitting formal parts): "I understand that the Civil Aviation Authority (CAA) is currently evaluating tenders for the supply of The Australian Advanced Air Traffic System (TAAATS). I also understand that, in recognition of the industry development opportunities inherent in TAAATS, Australian Industry Involvement (AII) is one of the four major criteria against which the tenders are being evaluated. In my view, the TAAATS project represents a major opportunity to enhance the capabilities of local companies providing air traffic management (ATM) equipment and services. If Australian industry is able to capture the industry development opportunities inherent in TAAATS it should be well placed, in conjunction with the successful prime contractor, to play a major role in supplying air traffic management systems into the region. The Government's decision of 17 December last year to request Government Business Enterprises to operate in accordance with the Government's purchasing and industry policies acknowledged the vital role that government procurement activities can play in fostering the growth of competitive Australian industries. I would hope that the framework developed by the CAA and my Department for the TAAATS Acquisition can provide a model for capturing the industry development potential of major technology purchases by government agencies in the future. One of the Government's key objectives in encouraging the growth of our manufacturing and services sector, particularly in technology intensive activities, is to achieve our broader economic and social objectives. In this context, I would encourage the CAA to give every consideration to AII in reaching its final decision on the preferred tenderer. I have written in similar terms to Mr Doug Roser." Senator Collins' letter of 3 December (again omitting formal parts): "I take this opportunity to confirm as I have advised the Board previously the Government's two major concerns regarding the TAAATS project. The first priority is that we get an air traffic control system which is technically advanced and delivers safe and efficient radar services. The other priority was to maximise opportunities for Australian industry involvement. The Government recognises that the CAA has in place evaluation criteria to address these matters and formal advice to the Government in response to the findings of the Macphee Inquiry. This advice was well set out in the former Chairman's letter to Senator Cook on 30 December 1992. The Government appreciates the role the CAA has given to the Department of Industry, Technology and Regional Development in providing advice on the issue of Australian industry participation. I understand that the Minister for Industry, Technology and Regional Development has also written to you in this regard. Of course the decision is clearly a matter for the CAA Board using all the evaluation criteria established for the tender process." The essence of the complaint against Minister Collins is that, by his letter (reinforced in his 6 December communication, below), he was attempting to do indirectly what he was unprepared for reasons legal and political to do directly by s12 direction to the Board. Or to put the matter more bluntly, like Macbeth, he 'would not play false, and yet wouldst wrongly win'. He was, it is said, seeking to contrive a particular outcome without being prepared formally to require it. The complaint against Minister Griffiths is that he was seeking to subvert the TAAATS decision-making process by influencing the decision and that he was assisted in this by the CAA in its tabling of his letter. The vital matter, though, is whether the Board itself took such account of these "intimations" from the Ministers as to cause the proposals to be evaluated by it otherwise than in accordance with paras 16.1 and 16.2 of the RFT. There are two questions to be answered here. First, was there anything improper or impermissible in some or all of the ministerial communications? If there was, was the Board decision itself improperly affected (or infected) by them? (i) The Propriety of the Communications (a) Minister Collins The two communications of concern were the letter of 3 December and that reported by Mr Roser during the 6 December board meeting. Both of these need to be considered (i) in light of their timing, ie, after the TEC had made its recommendation and before the Board decision; and (ii) in the context of the relationship that existed between Senator Collins and the CAA in consequence of his being the minister administering the CAA's Act. First, the timing. It is Mr Roser's evidence which I accept (see post Part IX: Breach of Confidence: "The Disclosure to Senator Collins"), that on 19 November 1993 he disclosed to Senator Collins both the TEC's recommendation and the price differential. I also have inferred that he disclosed that there was an AII issue arising out of the TEC's recommendation. When the Senator wrote to General Gration he was, as his letter indicates, aware that Minister Griffiths had written to General Gration as well on the TAAATS selection and AII. Whether or not he also then knew that Minister Griffith proposed taking the matter to cabinet is not clear on the evidence. What is clear is that a letter was sent to him by Minister Griffiths on 3 December proposing that course. Though there is some conflict of evidence on the point, the Dubs Notes of 6 December commence, formalities apart, with the following being attributed to General Gration: "Overriding element is AII, is arguing dividend should be reduced. Collins says there are a lot of legal+ ethicalproblems involved, but agree that we can't reach a final decision before Cabinet. He will consult with the A-G + will come back. Ministers are both being very correct in not giving a direction (eg Collins letter last para)." Though General Gration said in cross-examination that he did not believe he so commented, I accept that the Dubs Notes here reflect the tenor of what was said at the time. Later events in the meeting seem to confirm this. At some time during the meeting Mr Roser left; apparently telephoned the Minister; and, on returning, commented to the effect, as summarised in the Dubs Notes, that: "Minister says: Has sought legal advice from A-G, Rose, + internal DOTAC. For the Govt to interfere would be an extremely high risk proposal. Same legal advice tells him the Board is well + truly able to make a decision for either given the criteria + the price difference." Mr Baillieu's contemporary note, insofar as it goes, is to like effect. Second, the board-minister relationship. Consistent both with his responsibility (albeit attenuated: see Senate Standing Committee on Finance and Government Operations, Statutory Authorities of the Commonwealth, Fifth Report, Ch 6, (AGPS 1982); see also M Aronson, "The Battle of the Prerogatives", (1995) 6 PLR 77) to account to the Parliament for the actions of the CAA, and as I later hold, his right in virtue of his s12 direction power to have access to any and all information of the authority concerning its affairs, Minister Collins had the prima facie right to communicate with the Board on any matter concerning the affairs of the CAA including, I would add specifically, the TAAATS procurement. There is nothing in the Act which is inconsistent with that right. On the contrary. Bearing in mind that responsible government is a premise of our system of government, the statutory arrangements created by the Act presuppose such a right. The issue then is not with whether the Minister could communicate with the Board but, rather, with the propriety of the particular communication made. It is the applicant's case that the letter constituted a de facto direction to the Board to regard the major evaluation criteria as (1) technical/risk and (2) AII and that this direction was given in an environment where political pressure was being exerted. An allied submission made was that the "enabling legislation" made no provision for ministerial intervention in the process so that it was improper on this ground. The respondent's case is that the matters referred to in his letter were of legitimate interest to the Government. He was entitled to draw the matters again to the Board's attention, and particularly AII. And he expressly indicated that "the decision [was] clearly a matter for the CAA Board using all the evaluation criteria established for the tender process". This letter must be seen in the context of the Minister's s12 power to give the CAA written directions "as to the performance of its functions and the exercise of its powers". Despite the applicant's submissions to the contrary, it is difficult to see why this statutory power could not be invoked by the Minister to direct the selection of the TAAATS contractor. Such a direction may have given rise to political difficulties for the Government of some magnitude. It may have exposed the CAA to the prospect of significant liabilities: see Ansett Transport Industries (Operations) Pty Ltd v Commonwealth (1977) 139 CLR 54 at 76; cf L'Huillier v State of Victoria [1996] 2 VR 465 at 481. Nonetheless the power was there. It was not formally exercised in the way s12 contemplated. But the s12 power is not for that reason irrelevant to the present matter. There is a significant literature in this country concerning the covert influence ministers may be able to exert under the shadow of their power to direct, on the apparently independent decision-making of statutory bodies: see eg. Senate Standing Committee on Finance and Government Operations, Statutory Authorities of the Commonwealth, Fifth Report, above; Report of the Royal Commission into Commercial Activities of Government and Other Matters, esp Pt II, paras 3.14.11ff (WA). Where a ministerial communication could, because of its tenor or context, reasonably be interpreted by those to whom it is made either as being akin to a direction (whether or not it formally disclaims such an intent) or as manifesting an intent to contrive a decision to be taken, it properly can be regarded as offending the purposes (constitutional and statutory) which inform the legislative creation of bodies whose decisions are intended by Parliament to be freed from ministerial control save where the minister, as contemplated by the statute in question, assumes responsibility for a particular decision in the manner envisaged by that statute. In the present instance the applicant submits that Senator Collins has strayed into this territory. The respondent, in contrast, submits that he was merely re-emphasising government policy of which the CAA was obliged to take account. Because of the particular finding I make below on the attitude taken by the Board in this matter, it is strictly unnecessary for me to express a concluded opinion on the propriety of the letter. Nonetheless, it is appropriate to make this observation. Given his prior knowledge of the TEC recommendation and of the AII issue, and given its tenor and timing, this letter can at best only be described as highly imprudent. Its message as to the Government's priorities in the TAAATS procurement is unequivocal. Those priorities were, as the Minister ought to have been aware if he wished to involve himself in this question, different from those contained in the RFT. I refrain from comment on the prudence or otherwise of the communication the Minister reportedly made through Mr Roser to the 6 December meeting. I do so because it is by no means clear that the manner in which that communication was made (as recounted) may not have been a consequence, in part at least, of Mr Roser's prior dealing with him on 19 November. (b) Minister Griffiths I do not here have to consider (i) whether, in the usual case, the only member of a ministry who ought communicate directly with a statutory body concerning its affairs is the minister who is given portfolio responsibility for that body; and (ii) as a corollary whether, in the usual case, other ministers should communicate with that body concerning its affairs through its responsible minister. Though I raised this matter during the hearing, I refrain from expressing any view on it. This was not the usual case. As the respondent's submissions indicate, the Minister's letter was written in the context of DITRD's dual roles in the TAAATS procurement - roles assumed at the CAA's request. It was in consequence permissible for Minister Griffiths to communicate with the Board concerning matters related to those roles for the discharge of which he was the responsible minister. The applicant's case is that the letter did not relate merely to DITRD's role and to AII. It was designed to influence the decision itself. The respondent's submission is that it fell within the arena of what was permissible to the Minister - the more so as his department had responsibility for administering in general terms the Government's December 1992 policy on AII in GBE procurement. I agree with the applicant's submission. The letter's purpose was palpable and colourable. It should never have been written. It is not at all surprising that Mr Bosch in cross-examination described it "as an impertinence". (ii)The Board's Treatment of the Communications Individual board members took differing views as to the propriety and appropriateness of Mr Griffiths' letter. None objected to Senator Collins', though none interpreted it (or for that matter Minister Griffiths') as a direction. To the extent that views positively were expressed about the Senator's letter, these varied from it was "unnecessary" (Mr Ingersoll), to it was "proper" for his view to be expressed (Mr Mant), to it could be taken into account as "appropriate" (Mr Ayres). I have already made findings as to the basis of the Board's decision in preferring Thomson as the TAAATS contractor. This preference accorded with the seeming designs of the ministerial communications. Nonetheless, I am not prepared to hold that the Board members individually took such account (if any) of the letters as properly could lead to the conclusion that the Board, or a majority of it, for that reason failed to evaluate the proposals in accordance with paras 16.1 and 16.2 of the RFT. The evidence on this was that (i) General Gration took account of the letters in forming his view when weighing price and AII but did not indicate such effect as they may have had on that weighing; (ii) Mr Ayres considered that the Government as sole shareholder was requiring its policies to be considered, that the letters could be taken account of as appropriate, but that he did not believe Senator Collins indicated his own view; (iii) Mr Bosch and Mr Baillieu, while accepting that account should be taken of Senator Collins' view, made their decisions (as I have earlier found) for reasons unrelated to AII; (iv) Mr Ingersoll considered Senator Collins' letter unnecessary, the Rose QC advice on AII being what he regarded as important; (v) for Mr Roser the Griffiths' letter was to be expected given Ms Clarke's view on AII, but, importantly, he considered from his dealings with Senator Collins that the Minister did not favour one or other of the tenderers; (vi) Mr Yates said that neither letter influenced him; (vii) Mr Terrell and Mr Mant regarded the letters as relevant to the issue of AII but not conclusive of it. It should be emphasised that the issue here is not one of judicial review of the Board's decision. It is whether the Board acted in breach of paras 16.1 and 16.2 of the RFT. In the absence of evidence that any particular account of the letters was taken that was causative in the decision of any individual director let alone of a majority, I am unable to conclude that such attempted ministerial interference as there was had any operative effect in the Board's decision. At best, and set against the background of TAAATS I and its aftermath, the Ministers' letters well could have comforted the Board in its decision: no adverse reaction from the Government would be expected if it selected Thomson. But to reach a decision expected to be favourably received by the Government is not, of itself, a breach of contract. The effect of the decision should not be confused with its cause. PART VII: AUDIT FAILURE This claim relates to the appointment and conduct in office of the independent auditor, Mr Moten. At the Restart Meeting of 19 January 1993 it was held out to Hughes and Thomson that an independent audit would be included in the TAAATS II process. What was represented and promised by the CAA - and what was relied upon in the pleadings as embodying the CAA's representations and promises - remained constant (save for changes in tense) across the 5 February, 24 February and 9 March letters and the RFT. In the language of the RFT para 16.2.6, the CAA promised that: "An independent auditor has been contracted to verify that the evaluation procedures were followed, the evaluation was conducted fairly and the offers received due consideration." The RFT continued: "The auditor will report to the Evaluation Committee prior to the final recommendation and be responsible to the CAA Board." While the applicant alleges a variety of respects in which this provision was breached (or falsified), its case in significant measure was based upon the construction it said should properly be given the provision. It is appropriate to deal with this issue at the outset. I will, for convenience, examine only the contractual provision though an identical issue is raised in the Trade Practices Act claim.

The Construction Question It is claimed that as a matter of construction the provision required the CAA to ensure that the independent auditor did what he was to be contracted to do and, as I understood it, so to ensure by reference to a standard that was appropriate in the circumstances. I should emphasise that the applicant has disclaimed reliance upon any implied term to this effect. The basis of this construction, as submitted, was that (i) the CAA's obligation was not exhausted when it retained an independent auditor; (ii) that retainer was the means by which the CAA would verify that the evaluation procedures were followed; hence (iii) the obligation assumed extended beyond appointment to ensuring (as it was put in Submissions in Reply) "that the auditor's activities were appropriate to assess whether the requirement of fairness was being observed in the procurement". The respondent's submission, with which I agree, is that nothing in the language of para 16.2.6 of the RFT - or for that matter the three letters - created a contractual obligation on the CAA's part to ensure that Mr Moten carried out the terms of his retainer to a particular standard. It did not promise it would "audit the audit". Before indicating briefly why I agree with the respondent's construction I should indicate that the applicant's case did not raise independently for consideration (ie apart from the construction question) what (if any) might have been the consequential obligations of the CAA to the tenderers if, having contracted the independent auditor, it later ascertained (or had reason to know) that he was not performing the services for which the CAA represented/promised he was contracted. Mr Gyles QC at the end of his oral address sought to put the applicant's s52 case on some such basis. I would have to say, though, that that was not the case pleaded or defended. This becomes quite apparent, moreover, when regard is had to the conduct of the CAA that, as pleaded, is alleged to constitute both the breach of contract and the falsification of the CAA's representations. It is appropriate to set it out in full, and in so doing I draw attention to the four paragraphs ((aa)-(dd)) that particularise the "failures" of the CAA. It is claimed that the CAA: "(e)failed to contract an independent auditor to verify, and failed to ensure that an independent auditor verified, that: (i) the evaluation procedures were followed, (ii)the evaluation was being conducted fairly, and (iii) the offers received due consideration, in that: (aa)Mr John Moten, the person designated as independent auditor, was not contracted to provide the verification specified in subparagraphs (i),(ii) and (iii) of this paragraph, (bb)Mr John Moten was not independent of the Civil Aviation Authority, but represented its interests, (cc)Mr John Moten did not merely verify evaluation procedures and conduct but participated in those procedures in a manner which was outside the ambit of the function specified for the independent auditor in the Tender Process Contract and the Request for Tender and in so doing assisted Thomson to the detriment of Hughes, and (dd)Mr John Moten did not prevent the matters referred to elsewhere in this paragraph 16 [and 24] and did not report to Hughes that those matters had occurred;" Little needs be said on the construction question. I have already found that the terms of the RFT contract included provisions obliging the CAA (i) to evaluate the proposals in accordance with a defined evaluation methodology (RFT paras 16.2.1-16.2.4); and (ii) to conduct its evaluation fairly and in a manner that would ensure equal opportunity to Hughes and Thomson (an implied term). Para 16.2.6 needs to be construed in this setting. Given the express and implied terms of the RFT referred to in the preceding paragraph, reassurance as to the CAA's compliance with those obligations was being promised in para 16.2.6 through the appointment of an independent auditor to verify compliance. Having itself assumed the primary obligations that it would act in a particular way, the CAA was not, in my view, promising as well that it would audit the audit of its actions. Accordingly I reject the applicant's proposed construction of para 16.2.6. The consequence of this conclusion is that howsoever imperfectly Mr Moten conducted his audit, it simply was not a matter for which the CAA could be held responsible under para 16.2.6. Nor could it be said to falsify the CAA's representations in this matter. This only leaves for consideration those allegations which relate to whether, in the terms of para 16.2.6, the CAA did contract an independent auditor to verify etc. The complaints here are twofold. The first is that Mr Moten was not contracted to provide the verification specified. On 2 April 1993 the CAA contracted with Mr Moten for the provision of specified "Audit Services". That contract was put in evidence. Neither in oral or written submissions did the applicant attempt to particularise in what respects the services so contracted for departed in any, or any significant, way from those promised in the RFT. In these circumstances I consider it unnecessary to set out in detail the provisions of the 2 April contract. They were analysed in the respondent's written Submissions. Here I merely note my agreement with the submission made there that while the services contracted for in the agreement with Mr Moten were not expressed in language precisely the same as in the RFT, the substance was the same. I would note in passing that on 6 May 1993 Mr Moten provided Hughes with a document describing his role and responsibility. It mirrored closely, though not exactly, his agreement with the CAA. Hughes made no complaint at the time of any deficiency in Mr Moten's responsibilities. I reject this particular allegation. The second complaint is that Mr Moten was not independent of the CAA, but represented its interests. The question here is not whether, after contract, Mr Moten so conducted himself, but whether his contract with the CAA created a relationship with the CAA inconsistent with that promised in para 16.2.6 of the RFT. I emphasise this distinction because the principal focus of the applicant's attack was on post-contract conduct. As para 16.2.6 makes plain Mr Moten was to "be responsible to the CAA Board". Neither his agreement with the CAA nor his 6 May note to Hughes, in outlining his duties and responsibilities, suggest that his actual function was to act positively as a partisan of the CAA as distinct from a monitor of its activities who reported to the Board and who was paid by the CAA for his services. The applicant did not in submission indicate why the contrary was the case. Again I reject this particular allegation. I should add that, for like reasons to those given above in relation to the contract claim, I do not find that the CAA falsified the para 16.2.6 representation it made in relation to the contracting of an independent auditor. Accordingly I reject this particular Trade Practices Act claim. PART VIII: IMPROPER INTERESTS AND AFFILIATIONS A series of allegations have been made in which, variously, a board member (Mr Yates), the CAA itself and DITRD are said to have breached one or other of four specific terms of the RFT contract. Only one of these was an express term (RFT para 16.2.8), the others being claimed to be implied ad hoc. Additionally these same allegations (plus one other in Mr Yates' case) are said to constitute discrete breaches of the implied duty to evaluate fairly. For convenience in exposition I will deal with the various allegations by reference to the person or organisation against whom they were made. I would also note that I defer to a later part of these reasons any consideration of possible breaches of the duty to evaluate fairly.

Mr Yates It is pleaded that: "10B. It was a term of the RFT Contract that the Civil Aviation Authority would ensure that none of its board members who participated in the TAAATS tender process: (a) would have any affiliation which created a conflict of interest or duty in that participation; or (b) would be influenced in that participation by such an affiliation; unless Hughes gave its informed consent." This term is said to be implied ad hoc. A like representation by the CAA is pleaded for the purposes of the Trade Practices Act claim. As well it is pleaded that the CAA represented it would act in conformity with the provisions of the Act, s40 relating to the disclosure of pecuniary interests by board members. The matter of complaint was that Mr Yates was allowed to participate in the Board decision though he was a director of The Preston Group Ltd ("TPG"). That company, which was one of the Australian companies in Thomson's AII "team", stood (as accepted by DITRD) to benefit in the sum of $11 million by the year 2000 from Thomson's export proposals. For the purposes of the Trade Practices Act claim it is then alleged that the CAA did not comply with the provisions of s40 of the Act when allowing Mr Yates to participate in the decision notwithstanding his alleged interest. It is unnecessary to set out here the terms of that section. I would have to say at the outset that I regard the contract and the parallel Trade Practices Act claims as misconceived in their thrust. Before indicating why this is so, I should make two preliminary remarks about the implied term propounded. First, it has a particular focus: that is with third party affiliations which could give rise to "a conflict of interest or duty" or which could "influence" decision-making. The obvious progenitor of this preoccupation with affiliations was para 16.2.8 of the RFT: "The CAA will ensure that any adviser or third party involved in the evaluation process will not have any affiliation with any of the Tenderers for the TAAATS project." The applicant, of course, seeks to make analogical use of this in support of the implication sought. The matter I wish to emphasise, though, is that the applicant does not seek qualifiedly to proscribe all forms of conflict of interest (conflicts of duty necessarily involve third party affiliations) or causes of influence. But neither, and unlike para 16.2.8, does the applicant seek to limit those forms or causes to an affiliation with "any of the tenderers". There is no apparent reason for the pleaded term having the precise form it has. Secondly, within the confines of "affiliations", the term propounded embodies a curious fiduciary law hybrid. Insofar as it relates to conflicts of interest or duty, the term seems to be one designed to give a third party (ie Hughes) the benefit of a significant part of the fiduciary duty Mr Yates undoubtedly owed to the CAA: on fiduciary duty and statutory corporations see eg Molomby v Whitehead (1985) 7 FCR 541; Bennetts v Board of Fire Commissioners of New South Wales (1967) 87 WN (Pt 1)(NSW) 307; Bowes v City of Toronto (1858) 11 Moo PC 463 - a seminal decision; see also "Accountability and Ministerial Oversight Arrangements for Commonwealth Government Business Enterprises", para 12, (Guidelines agreed by the Government in May 1993); and this through the alleged veto power of Hughes contained in the informed consent proviso. This curiosity of itself gives reason for pause. As is well known, the ordinary rule is that it is only the party to whom a fiduciary duty is owed who can relieve the fiduciary of the full rigours of that duty, and who can complain of its breach: Boulting v Association of Cinematograph, Television and Allied Technicians [1963] 2 QB 606, esp at 637. Turning now to the misconception which I consider infects the term as proposed. The standards imposed on a fiduciary in relation to (inter alia) conflicts of interest or duty are set at a level which embodies what I might call the "morality of aspiration": if a fiduciary is one expected to act in another's interest in a particular matter, that person is (informed consent apart) precluded from having a personal interest or a duty to a third party which conflicts with his or her duty to that other in that matter - irrespective of whether that interest or duty actually deflects the fiduciary from the loyal performance of that duty. And so it can be said "[a] man of integrity can be a defaulting fiduciary without ceasing to be honest": J Glover, Commercial Equity: Fiduciary Relationships, para 5.24, (Butterworths, Sydney, 1995). There are discernible public policy reasons for imposing such a standard, not the least of which is the need to maintain public confidence in the integrity and utility of a range of socially important relationships in which loyal service is properly to be expected: cf Hodgkinson v Simms (1995) 117 DLR (4th) 161 at 184ff per La Forest J (Can). That standard is significantly more exacting than that characteristically captured in the phrase "good faith and fair dealing". It is not a standard that should be imported into non-fiduciary commercial relationships where the parties interests (and the expectations they reasonably can entertain of each other) are differently aligned. The Hughes-CAA relationship was clearly not a fiduciary one for present purposes: see News Ltd v Australian Rugby Football League Ltd (1996) 139 ALR 193 at 310ff. Fairness, as I have already held, is properly to be expected of the CAA under the RFT contract. Loyalty is not. And it is, in effect, a loyalty standard (albeit of a hybrid variety as I have noted) that I am being asked to imply ad hoc, at least in relation to conflict of interest or duty. This is neither reasonable nor equitable. And it would produce the objectionable consequence of giving Hughes a veto over the discretion given the Board in s40 of the Act to allow a "pecuniarily interested" member nonetheless to participate in the decision in question. Insofar as the term propounded relates to a member being "influenced" by an "affiliation", I am left in doubt how (proscription apart), the Board could "ensure" that such did not occur. Moreover, I do not consider such a responsibility to be a necessary imposition on the Board for the purposes of the RFT contract given, as I have held, the CAA was contractually obliged to evaluate fairly. Accordingly I do not find there was a specific implied term such as advanced by the applicant. I have not referred explicitly to the submissions made by the applicant to support the implication sought. These, in my view, bear on the issue of fair evaluation. But that is all they do. They will be considered in that context, as will the significance of Mr Yates' "affiliation". Turning to the Trade Practices Act claim I merely note my conclusion that I can find no evidence to support a representation similar in its content to the implied term I have rejected. I will defer consideration of the alleged representation relating to the Act, s40 until I deal with alleged breaches of the duty to evaluate fairly in Part XI.

DITRD As already noted, the RFT para 16.2.8 obliged the CAA to ensure that "any adviser or third party involved in the evaluation process will not have any affiliation with any of the tenderers for the TAAATS project". Both Thomson and five of its AII team, and DITRD were members of the AIA. And so it is alleged the CAA was in breach of the RFT because it failed to ensure DITRD did not have this affiliation. Additionally it is pleaded as an implied term of the RFT that: "the Civil Aviation Authority would ensure that no third party involved in the evaluation process would be influenced in that third party's contribution to the evaluation process by any affiliation of that third party, unless Hughes gave its informed consent." The less difficult of these two claims - there are parallel Trade Practices Act claims - is the second. As I have indicated in relation to the distinct claim involving Mr Yates' affiliation, the implied "influence" term is not, relevantly, a necessary one given that I have found there to be an implied duty to evaluate fairly. Whether or not DITRD was influenced by its alleged "affiliation" with Thomson is a matter that bears on the discharge of that duty. No point has been taken in this proceeding as to whether or not DITRD can properly be treated, independently of the Commonwealth, as a legal person for the various purposes of the TAAATS procurement. The parties and the RFT contract clearly attributed sufficient distinctive identity and function to the Department as to make it unnecessary for me to do otherwise than assume that it is, relevantly, a third party for the purposes of para 16.2.8: cf eg Commonwealth of Australia v O'Donohue [1979] VR 441 at 455 ff; Government Insurance Office of New South Wales v Deputy Commissioner of Taxation (1992) 106 ALR 715 at 718-719; see also RFT para 21.1. The issue is whether DITRD's involvement in the AIA was such as to constitute an "affiliation" for the purposes of para 16.2.8, given the AIA membership of Thomson and five companies from its AII team. The proper meaning of the term in its setting is not altogether free from difficulty. The applicant's submit that, while "affiliation" does not refer to "all connections of whatsoever kind", any reasonable use of it appropriately captures the connection that existed here. To this end the applicant focuses on DITRD's evaluation role in TAAATS; its co-membership of the AIA with Thomson and some of its team members; and the evidence - not set out here - that DITRD officers were active in the association and its executive. I note below a further submission made by the applicant on the subject of bias which also bears on this. The respondent's submission is that in its setting the term refers to a connection with Thomson which it would be inappropriate for an adviser or third party involved in the evaluation to have. What it suggests as inappropriate in this context, and therefore as proscribed, is a link giving rise to some conflict of interest or duty were DITRD then to participate in the TAAATS tender process. I accept the premise of both parties' submissions that there is some ambiguity in the provision. Nonetheless I am unable to accept the substance of either's submission - although the respondent's approach more nearly approximates to what I consider is the correct construction to be adopted. Para 16.2.8 was clearly intended as a preventive measure and one, moreover, concerned with securing the integrity and fairness of the procurement process. Having regard to "the objective framework of facts within which the contract came into existence": Codelfa's case, above, 352; the presupposition of the provision was that the parties were properly entitled to expect that any adviser or third party (ie non-CAA officer) involved in the evaluation process would act honestly and fairly as between the tenderers in or in consequence of that involvement. As I have earlier indicated ensuring fairness was fundamental to the tender process. The provision was intended to carry that presupposition into effect. And in so doing it did not proscribe any connection whatsoever between DITRD and Thomson. Put generally, it only proscribed connections which could in some way put the fairness and integrity of the tender process at risk, or could be perceived to do so. Considered in this way I would construe the affiliation proscribed by the provision as being a connection or relationship with one or other of the tenderers of such a character as could reasonably be considered to provide an incentive to act favourably to that tenderer - or, to put it conversely, to act dishonestly or unfairly to the other. An employment, agency, or significant consultancy with a tenderer provides an obvious illustration of such a connection. The matter to be emphasised is that it is the character of the connection or relationship that is important. To use a remote example to illustrate this, the participation of DITRD in a group that included Thomson which jointly sponsored an educational activity would not prima facie qualify as a proscribed "affiliation" because it would not, as such, have the character I have emphasised. The reason I do not accept the particular interpretation advanced by the respondent is that I do not consider that the parties would have had an adviser's/third party's fiduciary responsibilities to the CAA in mind when agreeing to a provision designed in the end to provide reassurance to the tenderers. I reject the applicant's "any reasonable use of the English language" submission for the reason that it pays insufficient regard to the setting and apparent purpose of the provision. Furthermore it is not enough to say that "affiliation" involves "some form of continuing association" and to assert that any further and more discriminating definition is "well beyond the role of a Court". In the end, though, the applicant may well have taken a position not significantly different from that which I have found to be the proper construction of the paragraph. In further written submissions on the subject of bias it was contended that the formula "reasonable apprehension of bias" provided in shorthand form the vice in the DITRD-Thomson relationship. The remaining question is whether DITRD's relationship with Thomson through their common membership of the AIA was a para 16.2.8 affiliation. There is a short answer to this. Even if it be assumed that DITRD had an incentive to act favourably to Thomson - I here make no finding to that effect - that incentive could not reasonably be attributed in any way to their common membership of the AIA, notwithstanding DITRD's manifest interest in promoting the AIA network. Such incentive as DITRD may have had sprung from the nature of Thomson's AII proposals themselves. As was, or at least as should have been, clear to all parties, DITRD was the Government's chosen instrument for administering its AII policies and for promoting the export opportunities/activities of Australian companies. Thomson's proposals on their face involved Australian companies to a far greater extent than Hughes. I was taken at length through evidence of the genesis of the AIA; of DITRD's involvement in that including involvement by Ms Clarke at meetings; of Thomson's occasional reference to the AIA in communications concerning its AII proposals; and of views put by Thomson team members of the importance of Thomson's bid to the development of an air traffic management network under the auspices of the AIA. For all of this, I would have to say that the adventitious circumstance of Thomson's membership of the AII - hence its relationship with DITRD - could not reasonably be regarded as being likely to be of any particular moment to DITRD. That Thomson team members belonged to the AIA may have been another matter. But para 16.2.8 was not concerned with DITRD's relationship with them. I would, though, add that there was nothing in the documentation to which I was taken concerning the goals and objectives of the AIA which suggested that the purpose of the association was to benefit its members to the exclusion of other Australian companies. On the contrary. I have not considered it necessary here to detail the evidence of such steps as DITRD took to bring Australian companies to the tenderers' attention or of Hughes' knowledge of assistance schemes etc available to encourage Australian companies. I do not consider that evidence of present relevance. What I should add, though not itself a matter of submissions, is that DITRD's action in promoting the AIA was not inconsistent with the implementation of the governmental responsibility of its minister. The tenderers, having contractually agreed to DITRD's agency, could well be taken to have accepted that DITRD had implemented, and would continue to implement, the policies and purposes of the Government and if this had or would lead to its promotion and membership of the AIA, that also was accepted: for a private sector analogue cf Kelly v Cooper [1993] AC 205. I express no concluded view on this. My conclusion, then, is that the CAA was not in breach of para 16.2.8 of the RFT. Nor did it here engage in conduct in contravention of the Trade Practices Act, S52. PART IX: BREACH OF CONFIDENCE The Pleadings It is necessary to commence with a pleading matter. Both the 9 March letter and the RFT addressed the issue of confidentiality. The former provided (inter alia) that "[s]trict confidentiality of the information contained in the [tenderer's] proposals will be maintained"; the latter (a), in para 16.2.7, that "[m]easures designed to achieve the strict confidentiality of the information contained in the proposals will be implemented and maintained"; and (b), in para 19.1, that: "the CAA undertakes to maintain the confidentiality of information received in response to this request and will not release it to any competitor or potential competitor without written authority of the Company." In the RFT contract claim - which on my findings is the operative contractual one - the only term pleaded and alleged to have been breached, was para 16.2.7. In contrast the Trade Practices Act claim pleaded by way of representation made that "[the CAA] would maintain strict confidentiality of the information contained in the proposals of Hughes and Thomson". As particularised in the pleading, this representation was alleged to have been made both in the 9 March letter and in the RFT. As to the latter, para 19.1 clearly conveys the burden of the representation pleaded. Both the breach of contract pleaded, and the conduct pleaded as rendering the representation misleading or deceptive for Trade Practices Act purposes were, save for the word in parentheses, identical and as follows: the CAA - "did not ensure that strict confidentiality was maintained in respect of the tenders and permitted the evaluation process to be conducted in such a way that confidential details of Hughes' tender were disclosed to Thomson and of Hughes' and Thomson's tender were disclosed to the Department of Industry, Technology and Regional Development, [the] Minister for Industry, Technology and Regional Development, the Minister for Transport and/or Cabinet." During the hearing (on 27 August) I raised directly my concern with the manner in which breach of confidence had been pleaded in relation to the RFT contract. I drew attention in particular to the difference between the 9 March contract term, and para 16.2.7 of the RFT. I referred to the matter again during the applicant's submissions on 10 September when the respondent drew attention directly to para 19.1 of the RFT. It was only during the respondent's oral address that leave to amend the RFT contract claim was sought to include para 19.1 as a term of the contract alleged to have been breached. This was refused: it was, against the background I have mentioned, simply too late. That refusal does leave an apparent pleading anomaly as between the RFT contract claim and the Trade Practices Act claim. In terms they are directed towards different matters - the one towards the taking of "measures" to achieve confidentiality; the other, the maintenance of confidentiality itself. The view I take of the allegations has made that difference, as will be seen, of no particular consequence. The Four Claims Made The claims relate to (i) Mr Roser's disclosure to Senator Collins on or about 19 November 1993 of the TEC's recommendation and of a price differential between the tenders; (ii) the TEC's disclosure to Ms Clarke of the bid prices of the tenders; (iii) Ms Clarke's disclosure of price information and the TEC's recommendation of Hughes, to Minister Griffiths and to Mr Stevens, DITRD's then Secretary; and (iv) the "leaking" of the Hughes' price information to Thomson. As these raise quite distinct issues of fact and law, it will be necessary to consider each separately. Before turning to them I should make the finding formally - and the contrary has not been suggested - that the information the subject of the various alleged disclosures falls within the terms of paras 16.2.7 and 19.1 of the RFT.

The Disclosure to Senator Collins (a) Factual Matters The relevant circumstances can be stated briefly. As already indicated, the TEC decided at its 18 November 1993 meeting to recommend Hughes as the preferred contractor. At that meeting (according to Mr Roser's contemporary notes the accuracy of which I accept for this purpose), Ms Clarke raised the issue whether, notwithstanding the price differential in favour of Hughes, the wider AII benefits to Australia of Thomson's bid might be something the government might be prepared to pay for if Thomson was recommended. As I have indicated elsewhere in these reasons there was a significant difference between Ms Clarke (and DITRD) and the TEC on AII and the importance to be attributed to it. Suffice it to say here that, on Ms Clarke's raising the question whether the Government would pay the price difference if Thomson was preferred, Mr Roser then suggested this would require a direction under s12 of the Act. I will call this the AII issue. He indicated he was seeing the Minister the following day and, so I infer, would brief the Minister on the AII issue. Cross-examined by Mr Gyles QC about that meeting with the Minister, Mr Roser had this to say: "Q. That [briefing of the Minister] was in the knowledge that Bev Clarke had either consulted her minister or was proposing to do so? A. Yes. Q. Can you recall whether, in briefing Senator Collins, you informed him of the result or the recommendation which would be going forward to the Board from the TEC? A. Yes, I certainly did inform him of that. Q. Did you inform him of the price differential that existed between the parties? A. Yes, I did. Q. And in terms of the prices bid? A. I can't recall what specific prices I would have referred him to. Q. Did you consult with your chairman before briefing the minister in that way? A. I can't specifically recall, but I was not in the habit of seeing the minister without the chairman knowing about it. It was normally the chairman's role to see the minister, and I'm sure if Peter [Gration] had been available, he would have seen the minister. Q. Did you seek any counsel from anybody as to whether you should brief the minister after the TEC and prior to the Board meeting, get any legal advice, for example? A. No, I didn't. Q. Because I think you'll agree that the procedures which were laid down in the request for tender contemplate that the TEC recommendation goes to the Board and there is no step intervening, there is no provision for consultation with the minister, is there, in the published - A. No, and I didn't take it as consultation. I was just - I can't recall whether - why the request came from me to brief the minister. It wasn't something that I volunteered, from my recollection. I seem to recall that I'm pretty sure the original letter from Minister Cook indicated that I should keep the minister informed of the TAAATS process. It was a pretty significant milestone, that we'd made a recommendation. Q. Yes, perhaps so, I could follow that. But to actually tell the minister of what the recommendation was to be before it was made and to inform him of the details of the bids, was a significant step, was it not? A. Yes." I should interpolate that the letter from Minister Cook to which reference was made was written by the Senator as the CAA's then minister to the then chairman of the CAA (Mr Butcher) on 16 December 1992, on the tabling of the Macphee Report. It said (inter alia): "I would also seek your assurance that you will keep me fully informed of actions taken by the Board in putting its proposals [ie for TAAATS II] into effect." That assurance was given on behalf of the Board by Mr Butcher by letter of 30 December. During his oral evidence I asked the following of Mr Roser: "HIS HONOUR: Q. Could I just clarify a matter. You said earlier on that it was normally the chairman's role to see the minister. Is that a practice? A. The normal practice, your Honour, was that most of the dealings with the minister were via the chairman and I was involved, if the chairman agreed; but the relationship was that the chairman normally dealt with the minister. Q. Was communication with you from the minister's office through the chairman or direct? A. I really can't recall, your Honour. But I just can't believe that Peter Gration didn't know that I was briefing the minister." In cross-examination General Gration indicated that he had been informed by Mr Roser that he was going to brief Senator Collins about a question which had arisen at the TEC. He said he could not recall the substance of what was said. He did indicate, though, that what Mr Roser was proposing was not a matter of surprise or concern to him: "I thought it was the proper thing to do". Before turning to the parties' submissions I should indicate that I find that Mr Roser did disclose to Senator Collins (a) the TEC recommendation and (b) at least the price differential between the bids. I am prepared to infer from both the context of the briefing and from his own notes of the 18 November meeting that he raised the AII issue with the Senator. I also find that General Gration was aware that a briefing was to occur and that it related to a TEC matter. I further find that Mr Roser well understood that Ms Clarke intended to consult her Minister on the AII issue if she had not already done so. (b) Legal Issues and Submissions The applicant's submission on this matter, as put in its Submissions in Reply, is that at the time when Mr Roser made his disclosure to the Minister, the management of the authority had neither the duty nor the power to disclose confidential information as to the details of a particular bidding process which was represented to the bidders as being strictly confidential. This conclusion is said to be a consequence of the nature of the relationship the Act created between the minister and the CAA and of the representations made to, and contractual obligations assumed towards, Hughes. The respondents for their part submit that when viewed in the context (a) of the Act; (b) of the Macphee Report and Senator Cook's letter; (c) of the AII issue; and (d) Ms Clarke's intention to involve her Minister in the matter, Mr Roser was not only entitled, but was obliged, to brief Senator Collins in the terms that he did. No less so than with the question of ministerial influence considered earlier in these reasons, these submissions raise a basic issue: consistent with the statutory relationship existing between the CAA and its minister, how and subject to what conditions (if any), can and/or should it provide information to the minister? I should emphasise three matters at the outset. The first is that the particular disclosure was made by the CEO and not by the Board. Secondly, the disclosure did not result from a request from the minister. Thirdly, the Act gave the minister no express power to require the Authority to disclose to him such information (confidential or otherwise) as it possessed. Turning now to the statutory setting and to such light as it throws on the matter. In various ways the Act authorises or requires the CAA generally, or the board specifically, to make information (or particular information) available to the minister: the CAA is required "where appropriate" to consult with government (s16); the board must provide the minister with its corporate and financial plans and its annual estimates (ss44, 46); and the board must notify the minister of matters which, in its opinion, may prevent or significantly affect achievement of the CAA's corporate objectives or financial targets (s48A). It has not been suggested that any of these provisions as such required the particular disclosure Mr Roser made. More significant than the above is s12 of the Act. It authorises the minister to give the CAA written directions as to the performance of its functions or the exercise of its powers. While the respondent submits that the corollary of this power, if it is to be effective, must be that the minister was entitled to have information provided to enable him to consider whether to exercise the power, the applicant contends that the mere existence of the power did not provide any basis for voluntarily disclosing confidential information relating to the bids and the TEC recommendation. Both submissions are correct but do not resolve the matter. Though it is not strictly necessary for me to do so, I am prepared to accept that the s12 power carries with it the presupposition that the minister, by request to the CAA, has the right to be provided with any and all information regarded as necessary for the purpose of considering whether to exercise the s12 power. But the exercise of that right, and the manner in which the CAA should respond in specific instances, are altogether other matters as I will indicate below. Even if the view I am prepared to take of the s12 power is incorrect there is another, and more telling, basis entitling the minister to information (confidential or otherwise) held by the CAA. The CAA, no less than the minister, operated in the constitutional environment of responsible government. This necessarily entails that it was accountable in some measure to the public: see Esso Australia Resources Ltd v Plowman (1995) 183 CLR 10 at 37-38 per Brennan J; cf generally Report of the Royal Commission into Commercial Activities of Government and Other Matters, Part II, ch 3 (1992, WA); Commission on Government, Report No 3, chs 2, 3 (1996, WA). One manifestation of that accountability was the CAA's subjection to audit by the Auditor-General under the Audit Act 1901 (Cth). Another which I need not explore here was to Parliament and particularly its relevant committees (eg the Joint Parliamentary Committee on Public Works): see Joint Committee of Public Accounts, Report 336: Public Business in the Public Interest, 169-171, April 1995, (Cth). But central to the public accountability of statutory corporations so circumstanced under their legislation as was the CAA, was - and is - their accountability first to the Executive Government through their respective minister, and then to Parliament via that minister. It is the minister to whom questions in Parliament are directed; it is the minister who, within the Government, is given portfolio responsibility for the corporation and its legislation; it is the minister who, in the CAA Act itself, is given both specific oversight powers and a general and specific direction powers. In such a setting - statutory and constitutional - the minister should be taken as having a general right to obtain information from the CAA in virtue both of his relationship to Parliament and to the authority, and of its accountability to government, the Parliament and the public via the minister. I should add that in the absence of legislative indication to the contrary (whether in the Act or in another statute), I do not consider that any distinction can properly be drawn between particular forms or classes of information that can or cannot be sought by the minister. In other words, the minister in the present case was entitled to obtain, if he so required, the details of the two tenderers' proposals. I should add that I do not consider the provisions of the RFT contract to be inconsistent with that right. Parties who contract with government agencies must, in matters of confidentiality, be taken to have done so subject to such lawful rights of access to information in the agency's hands as our laws and system of government confer on others. It is not necessary for me to consider here the efficacy (if any) of an attempt by contract to exclude, for example, such a minister's right, and hence to exclude some part of the machinery of an agency's accountability: cf the views of Brennan J in Esso Australia Resources Ltd v Plowman, above. It is the case that the Minister could have given the CAA a s12 direction in relation to the TAAATS contract and, on the view I have taken, have antecedently required the disclosure of both bids to him. He did not do so. There is no evidence before me that he solicited any of the particular information disclosed to him by Mr Roser. I infer that it was volunteered. The sole question is whether this was a proper action on Mr Roser's part. I consider it was not, for either or both of two reasons. The first is that the disclosure was of a subject matter which, in the circumstances, Mr Roser as CEO of the CAA had no authority to make. The second is that even though the Minister was entitled to the information by way of request, the CAA in volunteering it was required to consider whether it was then appropriate to furnish that information to the Minister. First, Mr Roser's authority. This matter was the subject of further written submissions. I have earlier indicated that the CAA's CEO was appointed to office by the minister after a recommendation from the Board (the Act, s84(1)); that office was held at the Board's pleasure (the Act, s89); and that the CEO's statutory duty was "under the Board, to manage the Authority": s84A(1). It is not necessary here to determine the extent to which a CEO so circumstanced can appropriately be considered to be in a position analogous to the managing director of a registered corporation to whom a board has entrusted the management of the corporation: as to managing directors and their authority, see Ford's Principles of Corporations Law, para 13.070 (Butterworths, Sydney). This said, it is clear in relation to managing directors that there is a range of decisions and actions which are so "critical", "strategic" or "significant" in character that they fall beyond the implied actual authority of such an officer: see eg Re Quintex Ltd (No 2) (1990) 2 ACSR 479; Spedley Securities Ltd (in liq) v Greater Pacific Investments Pty Ltd (in liq) (1992) 7 ACSR 155 at 165; Camelot Resources Ltd v MacDonald (1994) 14 ACSR 437; and see generally AWA Ltd v Daniels (1992) 7 ACSR 759. I am of the view that a like limitation existed in relation to the actual authority of the CAA's CEO. As s84A indicates, management is not the CEO's exclusive prerogative. The Board, beyond its strategic purposes (the Act, s32B(1)(a)), has the purpose of ensuring "that the Authority performs its functions in a proper, efficient and economical manner": s32B(1)(b). In the present case it is my view (a) that the subject matter of Mr Roser's disclosure was so fundamental at the time it was made both to the integrity and efficacy of the tender process and possibly to the ultimate selection of the preferred contractor; and (b) that the TAAATS contract itself (the letting of which could be affected by the disclosure) was of such importance in size and character to the CAA, that if the information in question was to be volunteered to the minister at the time it was, it was for the Board and the Board alone to decide that such should happen. This conclusion is reinforced in this instance by the preoccupation which the CAA had to ensure, in light of what had gone before, that the tender would be fairly conducted according to certain and defined criteria - a preoccupation it conveyed to the tenderers. In reaching this conclusion I also take account of (i) the "normal practice" described by Mr Roser which was that it was the chairman who dealt with the minister; and (ii) Mr Roser's acceptance in cross-examination that the actual disclosure he made was "a significant step". I do not consider that the letter written by the previous chairman of the Board to Minister Collins' predecessor indicating that the Board and management would keep the minister informed as the TAAATS project progressed, has any useful bearing on the matter. Being a generalisation, that "undertaking" by no means precludes a quite specific exception of the type I have found. Equally I do not regard s84A(2) of the Act (which is concerned with the question whether the authority was bound by the actions of the CEO) as being inconsistent with a finding that the CEO did not have actual authority in a matter in which the CAA could, nonetheless, be bound by force of the section. Finally I should state that no established convention relating to the conduct of the affairs of GBEs has been drawn to my attention - and I am not aware of such a convention - as would require a contrary conclusion to that at which I have arrived. The issue of the authority of a managing director, or as here of a CEO, characteristically arises in the context of whether a contract entered into by the managing director acting as such bound his or her corporation. It is, though, similarly relevant where the issue is whether the person entrusted with the management of the CAA maintained the strict confidentiality of the information in question (the Trade Practices Act claim) or maintained measures designed to achieve confidentiality (the RFT contract claim). I consider that, in volunteering the information in circumstances where he had no authority so to do, Mr Roser - hence the CAA - (a) failed to maintain strict confidentiality; and (b) caused a breach of the RFT contract. As to the latter of these conclusions I would note that on 2 April 1993, apparently for the purposes of the TAAATS project, Mr Roser and other members of CAA senior management each signed what was described as an "Undertaking to Protect Official Information - TAAATS Project". That Undertaking referred (inter alia) in para a.7 to the confidentiality: "required in contracts endorsed by the Authority with Hughes Aircraft Systems International and Thomson Radar Australia Corporation Pty Ltd." It concluded with the following acknowledgments: "c. I ACKNOWLEDGE to, and agree with CAA, to maintain the confidentiality of Hughes and THOMSON information as outlined in paragraph 1(7) [sic] above. d. I ACKNOWLEDGE to, and agree with CAA, that I have a personal duty not to disclose or communicate or publish any official information in any form to any unauthorised person or organisation, either during or after my employment with the CAA without its prior written approval." The above agreement was, in terms of the RFT para 16.2.7, a measure "designed to achieve the strict confidentiality of the information contained in the [tenderer's] proposals". In my view, again in the terms of para 16.2.7, Mr Roser's action constituted a failure by the CAA to maintain that measure. He, as CEO, was (under the Board) responsible for managing the CAA including in matters relating to this measure. He was aware of, and participated in, the implementation of the above "confidentiality measure". The maintenance of its efficacy was a management matter. As such he had a responsibility in this. Yet by his own action, he failed to maintain the efficacy of a measure adopted to achieve strict confidentiality. That failure, because of Mr Roser's position and responsibility as CEO, constituted a failure by the CAA to maintain this particular measure. In reaching this conclusion I am not suggesting that the breach of a confidentiality agreement by any CAA officer would, of itself, constitute a breach of para 16.2.7 of the RFT contract. What I am concluding is that a breach by a person with Mr Roser's position and responsibility could and did occasion a breach of the RFT provision. Secondly, the Board's responsibility in information provision to the minister. While I have been prepared to hold that the Minister would have been entitled to request the information in fact provided to him by Mr Roser, it by no means follows that the Board was free as of course and unreflectively to volunteer any and all confidential information possessed by the authority at any time. Consistent both with the contractual obligation the CAA undertook to the tenderers in para 16.2.7 (and, if presently relevant, para 19.1), and with the undoubted duty of board members to have proper regard (inter alia) to the interests of the CAA, it would properly be expected of the Board in the usual case when considering whether to make a voluntary disclosure at such a time in the tender process as when Mr Roser did, to weigh the need to maintain confidentiality and the purposes then served by this against such reasons as may be advanced to require or justify disclosure. In a case such as the present those reasons would, I consider, need to be exceptional before a decision to disclose was made. I emphasise the matter of timing. What might be considered a wholly inappropriate voluntary disclosure immediately before the Board made its selection of the TAAATS contractor might equally be appropriate after that selection was made but before it was made public. What I have said about the Board's responsibility in considering voluntary disclosure of information of exceptional character (such as was the case here), may well have applied in modified form where a ministerial request was made for that information - at least to the extent of ensuring that the minister was fully appraised of the possible implications for the CAA etc of complying with the request. This, though, is not a matter I need consider further. Even if this information could, properly, have been given to the minister by the Board, it would have required a deliberate decision to that effect - and one moreover in which account was taken of the obviously relevant consideration of maintaining confidentiality. Such did not occur. The matter was not brought by Mr Roser to the Board. Neither was any authorisation in the event given to him by the Board. I would add that it was, for present purposes, of no consequence that General Gration was aware of the briefing. Absent a Board decision, the disclosure actually made falsified the representation as to the maintenance of "strict confidentiality". My conclusion is that Mr Roser's disclosure was in breach of the RFT contract. Equally it created the need for correction of the prior representation of the CAA absent which its conduct was rendered misleading or deceptive.

The TEC's Disclosure of the Price Bids to Ms Clarke It is not disputed that Ms Clarke was told the details of the two price bids and that this occurred at TEC meetings in which she participated as a consultant. It is unnecessary to determine when precisely this occurred. It suffices to say it happened after the BAFOs were lodged. To put in context the contending submissions as to the propriety and/or effect of this disclosure, it is again necessary to refer to additional factual material. (i) Additional Factual Material I have indicated in the General Chronology that DITRD was invited both to evaluate the tenderers' AII proposals and "to participate in the selection and evaluation process as a Consultant to [the TEC]" and that Ms Clarke was the person appointed to represent DITRD as the TEC consultant. She also was heavily involved in the AII evaluation. The CAA's 9 March letter to the two companies indicated that: "DITAC [DITRD's earlier incarnation] will evaluate the [AII] offers and will provide copies of the proposals and DITAC's evaluation report to the CAA. Companies will provide DITAC with such information as DITAC may require and agree that the CAA can provide information held in the offers submitted to the CAA as would be required by DITAC in the evaluation of their proposals": (emphasis added) In referring to the establishment of the TEC, the same letter indicated that: "A DITAC representative will provide advice on AII matters directly to the [TEC]": (emphasis added) The RFT for its part differentiated expressly between the "price component of the Tenders" and the remainder of the Tenders. These were to be lodged separately, and in the case of the former but not the latter, were to be delivered directly to the TAAATS Project Manager. Further, the RFT restated the advisory role of DITRD on AII matters in terms paralleling those used in the 9 March letter: see para 16.2.5. And as already noted, para 16.2.7 gave the CAA the right to make copies of the tenderers' proposals or parts thereof available to third parties "for evaluation purposes only". In evidence (i) Ms Clarke stated she believed she needed to know the price difference between the bids to enable her to fulfil DITRD's role; (ii) General Gration thought it appropriate that she be told so that she could make her judgments in giving an informed opinion of AII; and (iii) Mr Hider indicated that as a matter of practice Ms Clarke attended TEC meetings; that no steps were taken to have her attendance confined to when AII matters were under consideration; and that in his view such confinement would have been inappropriate. For his part Mr Roser, in January and February 1993, indicated first to DITAC and then to the Board that DITAC's consultancy to the TEC was, as he said in his Progress Report to the Board meeting of 2 February, "to ensure AII issues are given due consideration". In cross-examination he said this both of Ms Clarke's knowing the price bids and of the consultancy: "[Mr Gyles QC]Q. What I suggest to you is that there was no need for her to know about the prices in order to, first of all, evaluate AII; you'd agree with that? A. Correct. Q. As far as her role on the TEC was concerned, it was simply to ensure that the TEC understand [sic] properly that evaluation; is that not right? A. Yes. Q. I think you'd agree with me it was not necessary that she know the prices in order to carry out her role? A. Yes." Finally, I should note verbatim Mr Hider's view given in cross-examination of the reason for disclosing the price information to Ms Clarke. "[Mr Gyles QC]Q. Let me explore with you why it was necessary for her to know the price component. If her role was to have AII evaluated and to ensure that the TEC understood what DITRD wished to say about AII, why did she need to know the price difference? A. Because in the final analysis, if those are the two issues that are being traded one to the other, then the tender evaluation committee and ultimately the Board needed to reach some kind of a judgment on the worth of an AII program over the worth of a difference in price. Q. But that was for the TEC to judge, wasn't it? A. In the first instance, yes. Q. You could receive all the advice that you wished from DITRD about that without them knowing the price. They could explain the ins and outs and the consequences and the effects of the AII proposals to their heart's content, could not they? A. They could have. Q. And they did? A. And they did. Q. But they didn't need to know what the price difference was in order to explain the AII consequences, did they? A. I believe that they did need to be involved in the discussion of the price difference in order to help the TEC reach a view on the relative values of AII programs in the context of the relative difference in price." Submissions and Conclusion: The applicant's submission is the simple one that, given (a) the RFT para 16.2.7 right in the CAA to make tender information available to advisers and third parties "for evaluation purposes only"; and (b) that DITRD's roles as evaluator and consultant (see para 16.2.5) were limited to AII matters only, then the disclosure to DITRD of the prices, in going beyond AII, (i) was unauthorised - and hence falsified the CAA's strict confidentiality representation; and (ii) constituted a breach of para 16.2.7 in that knowing of this disclosure and (as will later be seen) of Ms Clarke's intended use of the information in her Department, the CAA failed to take steps to enforce the confidentiality commitments made to the tenderers. The respondent's submission is twofold. First, as the TEC was required in the circumstances to have regard to price and AII and as Ms Clarke was the consultant on AII matters, it was not unreasonable that she should know of the price difference between the tenderers to assist in her expressing a view as to the quantification of the AII difference. Secondly, in consequence of the 9 March letter, DITRD was entitled to obtain such information as it required; DITRD through Ms Clarke was of the view that the price information was needed to enable her to discharge DITRD's role; and that view could not be said to be arbitrary or capricious. In other words, the Court should only interfere if satisfied on Wednesbury grounds that no reasonable person could have come to the view reached by DITRD that the price information was needed:see Associated Provincial Picture Houses Ltd v Wednesbury Corporation [1948] 1 KB 223. It needs to be said at the outset that the issue is not whether the disclosure to Ms Clarke was, in the circumstances, efficient, expedient or desirable but whether it was permissible consistent (i) with the contractual obligations undertaken by, and the rights conferred on, the CAA in the RFT; and (ii) with the representations made as to confidentiality. It is clear both from the terms of the RFT contract (esp. paras 16.2.5 and 16.2.7) and from antecedent representations made to the tenderers, that DITRD's role whether as evaluator or consultant related only to AII matters. It is equally clear that the para 16.2.7 right to disclose proposals to advisers and third parties was limited to disclosure "for evaluation purposes only". It is unnecessary for present purposes to differentiate between DITRD's two roles of consultant and evaluator, although it probably is the case that the information that could properly be disclosed to DITRD so that it could advise on "AII matters" (para 16.2.5) would not necessarily be coextensive with, or limited to that, permissible to be disclosed to it under para 16.2.7. In other words para 16.2.7 did not totally exhaust the contractual authority of the CAA to make third party disclosures to DITRD. It is clear on the evidence that the disclosure to Ms Clarke was made to her when acting as DITRD's adviser to the TEC and not as an evaluator reporting to it. The resultant question whether it was permissible for the TEC to make this disclosure to her is, I consider, to be answered in the following way. Subject to a caveat I note below, if it was reasonably necessary for the TEC to make the price information available to Ms Clarke for the purpose of enabling her to provide advice on AII matters, then its disclosure would be impliedly authorised by para 16.2.5 of the RFT contract. If that provision of the contract was to have any efficacy at all in relation to DITRD's expressly provided for advisory function, I consider the above implication needed to be made: see Part IV: General Contract Issues, "The Implication of Terms Generally". While the applicant's submissions did not deal specifically with this implication, the respondent's did insofar as it proposed that the disclosure in the circumstances was not unreasonable. Given the respondent's submission and the general thrust of the allegation made by the applicant, I did not consider it necessary to seek further submissions on this matter. The caveat I foreshadowed is this. The implied authorisation needs to be seen in its contractual setting - and that was one in which (a) strict confidentiality was offered; (b) deliberate steps were taken to keep the price bids separate from the rest of the tenders; and (c) it was the TEC in the first instance that was to apply the defined methodology concerning price and AII in making its recommendation. These matters bear on the latitude one might otherwise have been prepared to give to the TEC in determining whether the TEC, reasonably, needed to disclose price information for the purpose of obtaining advice on AII matters. Those matters bespoke a context in which it should have been apparent to anyone who considered the matter that "the utmost care must be taken to prevent the unnecessary dissemination" beyond TEC members of tender information: cf R v Birmingham City Council; Ex parte O [1983] 1 AC 578 at 594. In approaching this matter from the standpoint of what is authorised to the TEC, I am rejecting the respondent's second submission relating to the information DITRD allegedly required. The propriety of the disclosure is to be determined not by asking what DITRD considered it should, or required, to know but by what the TEC considered DITRD reasonably needed to know: cf Ex parte O, above, at 594. I should also add that I do not regard the question of reasonableness in this commercial contract setting as raising in any relevant way those considerations associated with Wednesbury unreasonableness. They belong to a field of discourse different to that of the construction of a commercial tender process contract: for a critical recent examination of Wednesbury see the judgment of Thomas J in Waitakere City Council v Lovelock, (unreported, Court of Appeal of New Zealand, 12 June 1997). Turning to the evidence I am not satisfied on the material before me that the TEC had any particular purpose in mind in allowing Ms Clarke access to the price information, let alone the obtaining of advice. And if a purpose was there, it may have been that suggested by Mr Hider. That related, not to AII matters as such, but to the judgment to be made on price and AII. More probably, Ms Clarke was allowed to learn the price information because, as a consultant to the TEC on AII, she was permitted to attend TEC meetings without apparent restriction whatever the matters discussed and disclosed at those meetings. I cannot in consequence conclude that the price disclosure was made for the purpose of obtaining advice on AII matters. Unless it had this purpose it was without contractual authorisation in the circumstances. Even if I am wrong in the above conclusion, I am not satisfied in any event that the disclosure was reasonably necessary to obtain advice from DITRD on AII matters - or, if it be necessary so to decide, for the purposes of the AII evaluation. As I have noted, both Mr Roser and Mr Hider gave evidence that the disclosure was not strictly necessary for the purpose of DITRD discharging its role for the TEC in evaluating and advising on AII. I accept this evidence. Nor do I overlook Mr Hider's reason justifying the disclosure. And when one has regard to the matters I referred to above by way of caveat to the TEC's disclosing information for the purposes of obtaining advice, I am unable to conclude that the disclosure to Ms Clarke was reasonably necessary for that purpose. It should not have been done. For the purposes of the Trade Practices Act claim I would thus conclude that in this matter as well, the CAA engaged in conduct which was misleading and deceptive. Given the disclosure to Ms Clarke, its prior representation required correction. No correction was made. Because my conclusion on the propriety of the disclosure provides only one element in the applicant's contract claim I will defer further consideration of that claim until I have dealt with the next of the applicant's allegations. 3. The Disclosure of Price Information by Ms Clarke to Other DITRD Officers and to the Secretary: the Disclosure to Minister Griffiths It is not disputed that Ms Clarke passed on the price information (i) to colleagues in DITRD who were involved in the evaluation process, (ii) to the Secretary, Mr Stevens, and (iii) to the Minister via his staff. I have already concluded that that information was improperly given to her. She could not in consequence have claimed that she lawfully obtained it for DITRD in virtue of the consultancy with the TEC. Likewise there would seem to be no obvious defence available to her had the CAA (or for that matter Hughes had it been aware of the TEC's action) taken proceedings to prevent her own disclosure of the information - cf Wheatley v Bell [1982] 2 NSWLR 544. Further, even if the distinctive test now applied to protect governmental information would have been the applicable one in such circumstances - I express no view on this: but cf Smith Kline & French Laboratories (Australia) Ltd v Secretary to the Department of Community Services and Health (1991) 28 FCR 291 - it is unlikely that would have availed Ms Clarke if such proceedings had been instituted: cf Commonwealth of Australia v John Fairfax & Sons Ltd (1980) 147 CLR 39 on that test. In these circumstances I can state my conclusions on the applicant's allegations relatively briefly, though it is necessary, first, to refer to additional factual matters. Additional Factual Matters (1) On 6 May 1993, Ms Clarke executed a Deed of Confidentiality in favour of the CAA. Its definition of "Confidential Information" encompassed the price information. The Deed contained (inter alia) the following provisions: "3. The Confidant shall not disclose the Confidential Information to any person without the prior written consent of CAA, and shall comply with any conditions which CAA may impose with any consent given, except in circumstances governed by Clause 4. 4. The Confidant retains the right to disclose information free of constraint and penalty, where necessary, to the holder of the positions identified in paragraph 4.1, without first seeking the prior written consent of CAA. 4.1 The positions covered by this provision are: (a) Minister for Industry, Technology and Regional Development; . . . (c) Senior Adviser to the Minister for Industry, Technology and Regional Development; . . . (e) Secretary, Department of Industry, Technology and Regional Development; . . . 6. The Confidant shall use the Confidential Information only for the purpose of the Confidant's dealings with CAA (whether directly or indirectly) in relation to the TAAATS Acquisition Process." (2) Without traversing the evidence here - it has been referred to in various ways in a number of places in these reasons - I infer that the CAA, through Mr Roser, had reason to know (a) that when Ms Clarke raised the AII issue with Minister Griffiths she would, in all likelihood, disclose the price information to him; and (b) that the disclosure itself would be in the context of bringing to his attention what I earlier called the "AII issue". Conclusions (1) If the price information had properly been provided to Ms Clarke then it could lawfully have been disclosed at least (a) to other officers of DITRD to the extent this was reasonably necessary to enable her to discharge DITRD's advisory role; (b) to the Secretary who, by virtue of s25(2) of the Public Service Act 1992 (Cth) was, under the Minister, responsible for all the business of the Department; and (c) to Minister Griffiths whose Department was performing the consultancy and for whose performance therein he was responsible to the Parliament in accordance with Australian understanding and practice of the principle of individual ministerial responsibility: see eg G S Reid and M Forrest, Australia's Commonwealth Parliament 1901-1988, Ch 7 (MUP, Melbourne, 1989); Senate Select Committee on Matters Arising from Pay Television Tendering Processes, First Report, Ch 2, September 1993. In the case of the Secretary and the Minister, disclosure to them would be justified by their "right" to know: cf the position of directors referred to by Beaumont J in Molombey v Whitehead (1985) 7 FCR 541 at 551-552. In the case of the other departmental officers, by the "need to know" principle: R v Birmingham City Council; Ex parte O, above, at 594. There is one qualification I should place upon this. If Ms Clarke, though properly in possession of the price information, nonetheless disclosed it to the Secretary or the Minister for the purpose of procuring their unauthorised use of it and that use occurred (as was probably the case here in any event), then Ms Clarke may well have been both an accessory to that wrongdoing - cf Elders Trustee & Executor Co Ltd v E G Reeves Pty Ltd (1987) 78 ALR 193 at 238-239 - and unjustified in making the disclosure in the first place. I would add that there is no need in the present case to consider the circumstances, if any, in which a public servant is entitled to refuse to disclose information to a minister because of obligations arising from the manner and circumstance of its acquisition: cf Slater v Bissett (1986) 69 ACTR 25. In the present instance Ms Clarke's Deed of Confidentiality contemplated the disclosure of information lawfully acquired in performing DITRD's role in TAAATS II. Finally I should note that the difference in the views I have taken in these reasons as to the disclosure by a public servant to his or her minister and by a GBE to its minister, is a direct consequence both of the nature of the relationship between the parties in each instance and the differing bases of the minister's right to know. (2) As Ms Clarke was not properly in possession of the price information, and as she could in all likelihood have been restrained at the time from making any further disclosure of it, she had no lawful justification for passing it on to other departmental officers. There was no lawful purpose for which they could have had a "need to know". And if she nonetheless still remained obliged to/permitted to disclose it to the Secretary or the Minister because of their respective right to know - I express no concluded opinion on that - this probably would not have absolved her of possible wrongdoing in making that disclosure. She may well have been in a position where she was subject to conflicting duties of confidentiality and disclosure: cf North and South Trust Co v Berkeley [1971] 1 WLR 470. While the Deed of Confidentiality itself permitted disclosure to the minister of information of which Ms Clarke became aware in the course of performing the DITRD consultancy, that deed would not legitimate the disclosure of this information. It was not information to which she was entitled to have access. It was disclosed to her improperly. It did not relate to the subject matter of the consultancy undertaken by DITRD - it was, thus, unrelated to DITRD's "business" (cf Public Service Act 1922, s25(2) and the Deed of Confidentiality cl 6). Its disclosure to the Minister could not, in consequence, be said to be "necessary" as required by cl 4 of the Deed. In any event, the Deed should itself be construed as applying only to information properly obtained in the course of the consultancy. (3) For the purposes of the applicant's contract claim, the important matter is, as I earlier found, that Mr Roser had reason to know by 19 November 1993 (after the TEC meeting) that Ms Clarke would be likely to disclose price information to her Minister in bringing to his attention the AII issue. The applicant's case is that the CAA, having this knowledge, took no steps to enforce the Deed of Confidentiality or to maintain its own contractual commitments to Hughes. I have indicated that the disclosure, on my findings, was not authorised by the Deed. And as the Deed was a 'measure' taken to 'achieve strict confidentiality' (RFT para 16.2.7), the failure to enforce it when this was required constituted a failure to 'maintain' the efficacy of the measure. That failure was not deliberate in the sense that the TEC members seem to have had no appreciation that they had acted improperly in allowing the disclosure to occur. Nonetheless, the CAA failed to take care to match its actions to the commitments it had undertaken to Hughes in the RFT contract: cf Hawkins v Clayton (1988) 164 CLR 539. Accordingly, I find that, as a result of this sequence of events, the CAA's inaction constituted a breach of para 16.2.7 of the RFT contract. Given my finding in the Trade Practices Act claim in relation to the disclosure to Ms Clarke, there is no need here to make any additional finding for s52 purposes relating to the further dissemination of the price information.

The "Leaks" to Thomson This matter can be disposed of briefly. On 14 December Thomson submitted both a significant price reduction and a substantial improvement of its AII proposal. Essentially from the circumstance of this after the Board meeting of 6-7 December, I am asked to infer that Thomson was aware of the price and AII differences between the tenderers when it acted as it did. General Gration gave evidence that it occurred to him that Thomson might then have known of Hughes' significant price advantage. He nonetheless did nothing despite his concern. There is also Mr Roser's diary note made, apparently, sometime before the 23 December board meeting which he accepted said, albeit in shorthand form, that the TEC's recommendation and DITRD's position were known by Thomson. Mr Roser, in cross-examination, indicated he could not recall the source of this information nor whether he raised his concern with the Board. There is no evidence to suggest he did the latter. While Thomson's actions may well be said to be such as should have put the CAA on inquiry as to the possibility of a security leak, and while the inactivity of General Gration and Mr Roser is itself cause for comment given their apprehensions, there is not the evidence here from which I safely could infer not only that a breach or breaches of confidence occurred resulting in the disclosure of Hughes' price details to Thomson, but also that this was able to occur as a result of a failure by the CAA properly to take measures to maintain the confidentiality of this information. There, doubtless, is matter here for suspicion and speculation. But that is all. I reject this particular allegation. Before I conclude consideration of the various breach of confidence claims, and lest it be thought I have overlooked the matter, I merely note that the CAA took a range of measures designed to maintain information security in the TAAATS procurement. These have been enumerated in the respondent's written Submissions, at 71-72. It is unnecessary to list them. Mr Roser's undertaking and Ms Clarke's Deed of Confidentiality illustrate one form of measure taken. All I need say here is that the taking of these measures could not be relied upon to relieve the CAA of the consequences of the failings I have found. PART X: PRICE REDUCTION/AII VARIATION Para 7.4 of the RFT provided: "During the evaluation of the tenders pursuant to this tender process the CAA reserves the right to seek clarification in relation to any ambiguity or uncertainty from any or all of the Companies in relation to their offer to provide the Supplies. The CAA will not enter into any discussion or negotiation whatsoever concerning the price component of the Tenders during the evaluation of the offers and while the tender process is on foot." After the 6-7 December meeting but before that of the 23rd, Thomson wrote (i) to Mr Hider on 14 December (a) announcing a price reduction of $16.7 million and (b) "clarifying" its proposals for buildings which resulted, effectively, in a further $2.7 million price reduction; and (ii) to Ms Clarke by letter dated 13 December in response to her letter of 10 December (a) indicating an upgrade in the export benefits of its AII proposals of about $155 million; and (b) committing itself in the proposed AII deed to implement its AII plan. As to this last I would note that para 21 of the RFT required the successful tenderer to enter into a Deed of Agreement with the Commonwealth relating to its AII obligations, and obliged both to submit as part of their BAFOs (inter alia): "a) proposed Deeds of Agreement they are prepared to execute on Contract award; b) proposed Australian Industry Involvement Plan;" Both letters were, to say the least, arresting. Thomson, not being a party to this proceeding, has not had the opportunity to explain them. They invite suspicion. It is the manner in which these letters were dealt with by Mr Hider and Ms Clarke that gave rise to the applicant's complaints. Those complaints both for contract and Trade Practices Act purposes were that, in breach of para 7.4 of the RFT, the CAA in its selection of tenderer: (i) "took into account the Thomson price reduction"; and (ii)"took into account the Thomson AII variation".

The Price Reduction Recognising the letter he received as prima facie amounting to "an attempt to change the BAFO prices", Mr Hider sought the opinions of Mr Moten and Mr Butler and, by memorandum, he brought his proposed course of action to Mr Roser's attention for his approval. That course was that: ". if AGS and the independent auditor confirm my initial opinion that the letter would constitute an inadmissible late amended tender, I should hold the letter in camera, without allowing any further consideration of it to influence the outcome of the evaluation.

In that case, if the contender wins, and . if the letter has the effect of increasing the BAFO price we would argue that the BAFO price submitted under seal would hold without variation, or . if the letter has the effect of reducing the BAFO price, we would expect to take advantage of the reduction in the subsequent contract negotiations. . if AGS and the independent auditor confirm that the letter does not constitute an inadmissible change, then we would proceed quickly to assess the effect of the changes on the evaluation and arrange for the TEC and the Board to be appropriately informed." I would note in passing that the memorandum to Mr Roser (which neither identified Thomson nor the amount or direction of the price variation) was in the papers sent to all board members for the 23 December meeting. The proposed course was in fact put into effect in the following ways: (i) the $16.7 million variation was held to be an inadmissible variation; (ii) the $2.7 million buildings related reduction was an admissible clarification; and (iii) Thomson was to be, and subsequently was, held to both reductions in the TAAATS contract. General Gration's evidence is that he was aware before the 23 December meeting that Thomson was the party that had submitted the variation. He also was aware of, and acquiesced in, the course proposed by Mr Hider. He considered the letter a breach, but not a serious breach, of the RFT arrangements. At the 23 December meeting the Board was informed expressly that an "inadmissible" variation had been made but was not told by whom, in what amount and whether it was upwards or downwards. With the exception of General Gration and probably Mr Roser, all board members questioned denied knowing at the time the identity of the party submitting the inadmissible variation. All, including General Gration and Mr Roser, denied that they took such a variation into account. I am unprepared to reject this evidence. Save for the need to refer to one additional matter, accepting this evidence would of itself result in rejection of the applicant's complaint. The additional matter is this. It is alleged that the $2.7 million buildings variation was in fact inadmissible and should have been rejected. As it was incorporated into the price comparison used by the Board, account necessarily was taken of it. Hence, so it was said, there was a breach of the RFT in that regard. While I regard this particular matter as relatively minor when set against the others of which complaint has been made in this proceeding, it requires examination. It is necessary, though, to outline further factual material before indicating why I reject the applicant's submission. On 27 October 1993, as part of the question and answer process engaged in by the CAA with the tenderers after they lodged their BAFOs, the CAA pointed out to Thomson that its building and civil works specifications did not meet the CAA's baseline requirements. It then asked whether Thomson's BAFO price included meeting the CAA's specifications. The letter of 14 December was, in effect, an answer to this question - although that question seemingly had been addressed differently in an answer of 17 November. The figure of $2.7 million was one adopted by the CAA as the cost of bringing Thomson's proposals up to specifications. It was added to the contract price. With Thomson accepting on 14 December that it would meet the CAA's specifications from within its BAFO price, the $2.7 million "loading" was removed - hence the price reduction. By Question of 11 November 1993, the CAA asked both companies whether they would be prepared to accept that gaps, conflicts, uncertainties or ambiguities in their BAFOs would be dealt with by a provision in the TAAAT'S contract that, in effect, obliged the successful contractor to ensure the CAA's Specifications were met. In its 14 December letter Thomson agreed as well to this procedure - as Hughes had earlier done. On 3 December a Question was sent to each company which, insofar as presently relevant, said: "This is expected to be the final formal question in the processes of clarification following submission of your Best and Final Offers on 5 October 1993. The same question has been addressed verbatim to both TAAATS contenders. Would you please ensure that answers to any remaining unanswered questions are provided before 17:00 today, Friday 3 December 1993, Canberra time if at all possible. If you need more time to address any particular question, please explain the circumstances and your expectations in respect of such questions before that time. . . . Thank you for your patience and cooperation throughout the question and answer clarification process: [emphasis added]." The Question itself was written in contemplation of the 6 December board meeting. In this state of affairs the applicant submits first, that if the $2.7 million reduction resulted from a permissible clarification of an "ambiguity or uncertainty" under para 7.4 of the RFT, the period of clarification was closed on 3 December by the Question of that day; and, secondly, that the reduction, in any event, did not result from a "clarification". The respondent's submissions are to the contrary on each matter. It raises as well a defence of estoppel in that Hughes agreed to the 11 November procedure for dealing with failures to meet the CAA's specifications. I am unable to accept either of the applicant's submissions. The 3 December deadline set in the Question of that date was designed to accommodate the 6 December board meeting. It was contemplated a decision on the TAAATS contractor could well be made then. I would merely note that the full question addressed to the parties on 3 December (not reproduced here) envisaged that contingency. The deadline was, in other words, an administrative requirement and should be seen in that light. With the adjournment of the decision and, importantly, with issues later being raised by the CAA with both contractors, it is neither necessary nor reasonable to regard the deadline as precluding the making of a later clarification - if such it was. I would add the opening words of the question ("this is expected to be") are themselves less than absolute in character. As to the variation itself, it can, I consider, properly be characterised as clarifying an "ambiguity or uncertainty" as envisaged by para 7.4 of the RFT. The questions raised in relation to the buildings clearly were seen as being part of the clarification process. Notwithstanding that Thomson's earlier answers to the question appeared to clarify its position - albeit it did not accord with the CAA's vimw of its own baseline requirement, hence the $2.7 million loading - any later intimation by Thomson that it would meet that requirement out of its own BAFO price could properly be regarded as a para 7.4 clarification in that it eliminated any question as to whether Thomson would do what was required of it within its current BAFO price. Whatever Thomson's motivation for this change of heart at this late stage, the CAA cannot be faulted because it treated this part of the letter as a clarification. Accordingly, I reject this particular allegation both for contract and Trade Practices Act purposes.

The AII Variations These, as noted, were (a) an increase in export commitments of $155 million; and (b) a commitment that Thomson would in its proposed AII deed implement its AII plan - a commitment not previously made to such an extent in the draft deed submitted with its BAFO as required by para 21.2 of the RFT. It is clear that DITRD took account of both variations insofar as it included the export figures as "upgrades" in its 16 December report to the Board and in the final Thomson AII deed. In my view DITRD acted quite improperly both in using the upgrades and in securing the new commitment from Thomson. Not for the first time it betrayed its enthusiastic misunderstanding of the process in which it was involved. Because of the particular view I take of the significance of these actions, I can deal with each relatively briefly. The "upgrades" had little if any significance in DITRD's decision to champion Thomson. I accept Ms Clarke's evidence that her knowledge of them made no difference to her views as to the relative merits of the AII proposals of the two companies. And it is the case that, while referred to, they did not constitute part of the total export figure used in the 16 December report. Given this state of affairs little purpose is to be served in further pursuing whether, if at all, the Board can in any way be said to have taken into account this variation vicariously. I say vicariously because no board member seems to have been aware of the upgrade though a majority, as I have earlier noted, relied upon DITRD's assessment. Insofar as the inclusion of the figures in the 16 December report has legal significance, this lies in whether in the circumstances it contributed to the possible breach of the CAA's duty to deal fairly. That duty is considered in Part XI. As to DITRD's securing the AII deed "commitment", this was clearly inconsistent with the requirements of the RFT contract. Both parties have provided extensive written submissions on whether at the time of the BAFO a final AII commitment was required to be made. The RFT contract makes plain this was so. To the extent that there may be some suggested uncertainty on this in the 12 August letter: see General Chronology, para 13 - and I make reference to the sentence indicating that the proposal would provide the basis of the deed "to be negotiated with DITRD" - the RFT itself leaves no room for doubt because of the aggregate effect of paras 7.4, 21.2 and 9.4 of the RFT (the first two of which are set out in full in the General Chronology, para 12). The last of these indicated that the BAFO was "the final opportunity for submission of material describing offers and the price and other conditions applying". I cannot accept that the commitment, nonetheless, can be condoned as a para 7.4 clarification of an "ambiguity or uncertainty": Thomson was being asked by DITRD to make, not to clarify, a commitment. I should say finally that the misconceptions under which DITRD laboured in relation to what was to be expected of Thomson's BAFO in this regard can in no way rescue the situation. I merely note that at all times it escaped DITRD that it was dealing with matters of contract. Accordingly I conclude a breach of the RFT tender process was occasioned by DITRD. For practical purposes, though, I do not regard this breach as such as being of particular significance. I should add that a parallel Trade Practices claim was made relating to the non-disclosure of Thomson's alteration to the AII commitments in its proposed deed. I make the corresponding finding in it that the CAA engaged in conduct that was misleading or deceptive. PART XI: FAIR DEALING I have found that it was an implied term of the RFT contract that the CAA would conduct its evaluation of the tenders fairly and in a manner that would ensure equal opportunity to Hughes and Thomson. I also have found that, as a matter of law, a term would be implied into the RFT in any event that obliged the CAA to deal fairly with the tenderers in its performance of the RFT contracts. Though formulated in somewhat different terms there would seem to be no operative difference between the two, at least as they relate to the matters to be considered in this Part. For ease in exposition, I will deal with the two compendiously as each imposes a duty on the CAA to deal fairly with the tenderers in its performance of its RFT contracts. I should add that there are as well Trade Practices Act claims raising fair dealing issues. In this instance I will consider these separately from the contract claim. Before turning to the various allegations made that are said to constitute breaches of this duty, it is necessary to make some comment on the content of the duty itself. First, obviously, it prescribed a standard of conduct to be adhered to by the CAA in relation to the RFT and that standard was an objective one. Secondly the duty would only have been breached where, to state the matter negatively, the CAA was shown actually to have dealt unfairly with a tenderer in the manner of its putting the RFT contract into effect. It is this second matter that requires elaboration. In Part IV: General Contract Issues, I indicated that the applicant has not attempted under the guise of the implied term to give contractual force or effect to the grounds of judicial review of administrative action generally or to the requirement of procedural fairness as it relates to bias in particular. It was open to the contractors so to contract. Such did not occur and no such contract has been pleaded. Nonetheless, what the applicant has submitted is that the bias rules of procedural fairness provide a guide to the content of the contractual duty. In this I am invited to accept that a decision would involve unfair dealing if it was one in which a contractor-decision maker was so circumstanced as to give rise in the mind of the other contractor, to a reasonable apprehension of bias on the part of the decision maker. Analogical support for this was sought in Minister for Immigration, Local Government and Ethnic Affairs v Mok (1995) 55 FCR 375. The respondent for its part has submitted that the applicant is seeking to do indirectly (ie via the implied duty of fair dealing) what it has not done directly (ie via an alleged term concerned with the rules of procedural fairness). There is substance in this objection though it does not provide the answer to the submission. That answer is this. It is only conduct which is shown actually to constitute unfair dealing by the CAA with a tenderer in the performance of the RFT contract that can amount to a breach of the implied term. Conduct etc that merely gives rise to an apprehension (howsoever reasonable) that such might occur is not enough. Furthermore, whether or not even some level of demonstrated partial conduct will constitute a breach will depend on whether, in the circumstances, it occasions unfair dealing with a tenderer - although proof of such conduct would itself arouse real suspicion that such had occurred. A. THE ALLEGATIONS OF UNFAIR DEALING: CONTRACT CLAIMS All of the conduct particularised in the pleadings as constituting breaches of express and implied terms of the RFT are also relied upon as providing instances occasioning breaches of the fair dealing term. Additionally it is alleged that the manner in which the Attorney-General's Department provided legal advice to the CAA, Mr Moten and DITRD occasioned a breach of the term. Given the findings I have already made, there are only three specific allegations to which it is necessary to refer here. These relate (i) to various allegations concerning Mr Yates; (ii) to DITRD's conduct in its AII evaluation/consultancy; and (iii) to the Attorney-General's Department's discharge of its legal advisory function. While the claim made concerning the CAA's alleged responsibility for Mr Moten's actions as independent auditor (see Part VII: Audit Failure) was advanced as an instance of unfair dealing, I do not regard it as necessary to examine that claim. Whatever the complaint the CAA might have in respect of the manner in which Mr Moten actually performed his audit function, given the nature of his function his conduct could only lead to unfair dealing by the CAA with Hughes if he so acted as to cause the CAA to deal unfairly with Hughes. There are grounds for concluding, as I have earlier indicated, that he was a cause of the Board's failure properly to apply the evaluation criteria and methodology. That failure occasioned a breach of an express term of the RFT. And that, in my view, exhausts the practical significance of his conduct in this matter. Before considering individually the three allegations noted above, I should refer to an omnibus submission made by the applicant. It is that while a significant number of individual instances of wrongdoing have been alleged, I should not treat these in isolation but should be prepared to evaluate them and the evidence supporting them in a "cumulative" way. As I understand this, its object seems to be that I should be prepared to find in the whole, if not necessarily in the parts, that an actionable wrong has been committed. I presume, if such is the intent of the submission, the wrong I am invited to find (given the pleadings) is that the duty of fair dealing has so been breached. The respondent invited me firmly to resist taking any such course. While I would not wish to cast doubt on the view that unfair dealing in a given instance may be the product of the cumulative effect of specific actions which individually are not themselves unfair, this is not a case in which it is necessary to have resort to such an approach to establish actionable wrongdoing by the respondent. I already have found significant breaches of the RFT contract. It is inappropriate in my view to attempt to repackage the conduct constituting those breaches for the purpose of saying that, as far as it goes, it evidences as well a breach of the fair dealing duty.

Mr Yates The breaches particularised against the CAA are that it: "(h)permitted a member or members of the Board of the Civil Aviation Authority with a pecuniary interest or pecuniary interests in the award of the TAAATS Acquisition Contract to take part in the deliberation by and the decision of the Board in respect of the award of the TAAATS Acquisition Contract; ... (k) permitted a member or members of the Board of the Civil Aviation Authority to have direct dealings with Thomson and to provide it with private advice as to how it could improve its prospects of having a successful tender; ... (o) permitted Mr Yates to participate in the TAAATS tender process notwithstanding that Mr Yates had an affiliation which created a conflict of interest or duty in that participation and notwithstanding that in that participation Mr Yates was influenced by that affiliation, in each case Hughes not having given any consent informed or otherwise;" As the first of these raises issues quite distinct from the other two it is convenient to deal with it separately at the outset. (i) Permitting an Interested Member to Participate in the Board Decision Section 40 of the Act provides the framework for this allegation of unfair dealing. It provides: "Disclosure of interests 40. (1) A member who has a direct or indirect pecuniary interest in a matter being considered by the Board shall, as soon as possible after the relevant facts have come to the member's knowledge, disclose the nature of the interest at a meeting of the Board. (2) A disclosure shall be recorded in the minutes of the meeting and the member shall not, unless the Minister or the Board otherwise determines: (a) be present during any deliberation of the Board with respect to that matter; or (b) take part in any decision of the Board with respect to that matter. (3) For the purpose of making such a determination by the Board in relation to a member who has made a disclosure, a member who has a direct or indirect pecuniary interest in the matter to which the disclosure relates shall not: (a) be present during any deliberation of the Board for the purpose of making the determination; or (b) take part in making the determination." As I noted in Part VIII: Improper Interests and Affiliations, and will enlarge upon later in these reasons, Mr Yates was at the time of the two December board meetings, a director of The Preston Group Ltd ("TPG"). That company was one of the Australian companies in Thomson's AII team and stood (as accepted by DITRD) to benefit to around $11 million by the year 2000 from Thomson's export proposals. It is Mr Yates' directorship in such circumstances which is alleged to constitute a "direct or indirect pecuniary interest" for s40 purposes. I am prepared to assume for present purposes - though I make no finding to this effect - that Mr Yates had a s40 interest. While he disclosed his directorship to the Board at the meeting of 23 December, it is clear that the Board did not then act as required by s40(2) and (3) - if, as I am assuming, the circumstances were such as to oblige it so to act. If there had thus been a breach of s40, how of itself would this constitute a breach of the duty to deal fairly? As I understand the applicant's submission it relies upon the "simple proposition that fairness required the CAA to act conformably with its statute". The respondent's contrary submission is that such a contractual liability so founded would in effect make public bodies liable for damages in contract for any ultra vires conduct on their part. It is unnecessary to enlarge upon the respondent's submission because I consider the applicant's to be quite misconceived. It misapprehends the nature and purpose both of statutory disclosure of pecuniary interest provisions such as s40 and of the implied duty to deal fairly. The s40 type of provisional disqualification is merely one of a trio of disclosure provisions employed of recent times in Commonwealth legislation to deal with the phenomenon of a member of a statutory board or corporation having a "direct or indirect pecuniary interest" in a matter before the board or corporation. The other two are absolute disqualification from participation: see eg Australian Film Commission Act 1975 (Cth), s22; and simple disclosure: see eg Australian Wool Research and Promotion Organisation Act 1993 (Cth), s30; for an historical account of the evolution of such regulation in one governmental arena, see G Kelly, Bias in Local Government, Ch 3, (Butterworths, Sydney, 1995). In common with the other of the six principal devices identified in the 1979 Public Duty and Private Interest: Report of the Committee of Inquiry, 37ff, (AGPS, 1979) (chaired by Sir Nigel Bowen) ("the Bowen Report"), the types of provision I have noted (including s40) have as one of their principal modern rationales the maintenance of public confidence in the integrity of public officials and authorities: see eg the Bowen Report, para 3.7. For this reason a similar orientation in the manner of regulation of conflict of interest in the public sector has been pursued as in the private: "The evil [of conflict of interest] is risk of impairment of impartial judgment, a risk which arises whenever there is temptation to serve personal interests. The quality of specific results is immaterial. In this sense, conflict-of-interest regulation is true to the fiduciary principle. Like other fiduciaries ... the public trustee has a duty to avoid private interests which cause even a risk that he will not be motivated solely by the interests of the beneficiaries of his trust. Properly conceived, conflict-of-interest regulation does not condemn bad actions so much as it erects a system designed to protect a decision making process ... Its aim is not detection and punishment of evil, but providing safeguards which lessen the risk of undesirable action": The Association of the Bar of the City of New York, Special Committee on Congressional Ethics, Congress and the Public Trust, 39 (1970). The consequence of this emphasis on the risk of wrongdoing rather than on its actual realisation is that morally inoffensive conduct that has no adverse consequences in fact may be caught as a result of legislative proscription. So, for example, in City of London Electric Lighting Co v London Corporation (1903) 72 LJ Ch 737 the House of Lords was compelled to declare local government contracts invalid under a conflict of interest provision notwithstanding, as the Earl of Halsbury noted (at 739), that "the contracts were fairly and properly made with a due regard to the public interest"; to like effect see the comments in U.S. v Mississippi Valley Generating Co 364 US 520 at 549 (1961) on the standard imposed by 18 USC s208; on the presumption of bias that can arise from possessing a pecuniary interest see eg R v Justices of Sunderland [1901] 2 KB 357 at 371; and for a critical examination of such reliance on "appearance ethics" in the regulation of public officials and authorities, see P M Morgan, "The Appearance of Propriety: Ethics Reform and Blifil Paradoxes", (1992) 44 Stanford L Rev 593. Section 40 is such an appearance based, risk avoidance provision. Its violation requires no proof that the "interested" member was in fact deflected from the duty of his or her office, or that the public interest was in any way actually sacrificed in the decision taken in the matter tainted by the conflict. However, when one turns to the duty to deal fairly a quite different requirement of proof obtains. Unfair dealing in a contractual setting - with its consequential exposure to potentially significant damages - is a matter of proof not of presumption. On the assumption I have made, even if s40 had been breached, even if there was a palpable risk that Hughes might be dealt with unfairly, that of itself would be insufficient to establish liability. Proof of unfair dealing in fact is what is required. Accordingly I reject this particular allegation. I should, though, emphasise that my reasons here are limited to a claim for breach of contract. I express no view on the situation that might obtain if the matter were one of judicial review of the Board's decision and a s40 breach was established. (ii) Being Influenced by the Preston Group Ltd Affiliation; and (iii) Dealing with and Giving Advice to Thomson These two allegations, though raising discrete issues, interrelate sufficiently to warrant their being considered together. Before outlining the various strands of evidence that are relied upon by the applicant, I should first give my own impressions of Mr Yates. It is alleged that he was not a truthful witness. I should say by way of background that some of his actions at the time were quite foolish. He presented himself as a witness probably apprehensive he was to be made an example of. In any event he was quite defensive in cross examination attempting on occasion to anticipate the future direction of questioning and to answer accordingly, with the result that he appeared often to be evasive, or obstructive, or simply obfuscating. And there were occasional inconsistencies in his evidence, his cross examination extending over two days. He had a significant estimation of his own abilities. He had a corresponding insensitivity to the appearances that could be created by his own actions. For all of this, though, I did not find him to be an untruthful witness. Additional Factual Material (a) The TPG Directorship (1) I have noted already that Mr Yates was a director of TPG and that DITRD accepted it stood to benefit in the order of $11 million by 2000 if Thomson won the TAAATS contract. The company itself had, at the relevant time, an annual turnover of about $3 million. Another director of TPG, Sir James Rowland, was on the board of Thomson. (2) TPG had previous dealings with the CAA and had been involved in, and finally took over, a company through which it conducted a joint venture with the CAA. (3) On several occasions prior to early 1992, Mr Yates disclosed his position with TPG and absented himself from meetings at which matters involving CAA-TPG dealings were discussed. No such disclosure was made at the 6-7 December 1993 board meeting. It was his evidence that he was remiss in not raising it then. He was of the view that "they all knew of my involvement" - an involvement of which General Gration at least was unaware. (4) At the meeting of 23 December he disclosed (apparently after prompting from another board member) that he was a director of TPG and also that TPG and Thomson shared a common board member. While the dollar value of the potential benefit to TPG was disclosed there is no evidence that Mr Yates disclosed any information about TPG that would have given the Board any appreciation of the possible financial significance to TPG of its teaming arrangement with Thomson. None of the Board objected to Mr Yates' further participation in the matter. No question was raised as to the possible application of s40 of the Act to Mr Yates' "interest". (b) Dealings with the Tenderers (1) Mr Yates had arranged to attend a meeting of the International Federation of Airworthiness in Paris in June 1993. According to minutes of a board meeting of 28 April 1993 and of an ad hoc meeting with Mr Roser of 21 April 1993, he suggested that when he went to Paris he should meet with Thomson to express the CAA's dissatisfaction with Thomson's performance of the RASPP contract (a dealing with the CAA quite separate from TAAATS). His own evidence is that the idea originated in discussions with Mr Roser, though Mr Roser had no actual recall of that. (2) Some aspects of the trip to Paris and of the contacts to be made were arranged by Sir James Rowland. (3) Mr Yates was briefed by CAA management prior to the Paris trip. He was provided with briefing documents which (inter alia) indicated major problems encountered with Thomson in the matter. (4) In Paris he met with several Thomson executives and dined with one. He gave to the Executive Vice President of Thomson-CSF a list of "action topics" the CAA required Thomson to address. According to his subsequent report to Mr Roser (of 1 July 1993) he said he told that official that: "[Thomson's] performance on this project could well influence CAA's attitude to their latest bid for TAAATS. Obviously, if they were not supporting RASPP to their best of their ability, it must influence a Board view on whether to accept them for another major project." (5) Mr Yates had no direct executive responsibility for the administration of the RASPP contract. There is no evidence that the Board gave prior approval to the visit to Thomson. It may well have been aware of it. (6) In cross examination Mr Yates indicated he felt no inhibition in talking to Thomson about a program unrelated to TAAATS; he could see no risk associated with his having contact alone with Thomson officials at that time; but he conceded "in retrospect, I suppose", it was undesirable. (7) On his return to Australia he was given a direct briefing by both tenderers concerning 'their TAAATS proposals'. Though his own evidence is that these resulted from the two companies' requests, the meetings were arranged for him notwithstanding that the Board as such had declined being given such briefings. In his affidavit Mr Yates attributed his attending the meetings to his "technical background". (8) In 1993 Mr Yates was appointed director of another company, Tower Technology Pty Ltd ("Tower"). Shortly thereafter, as a result of inquiries made of Mr Hider, he contacted and later wrote to Mr Funge of Hughes in his capacity as chairman of Tower. He was seeking information concerning a project "within the Hughes organisation" of interest to Tower in its business (which was unrelated to aircraft industries). Hughes ultimately responded to Mr Yates that it was unable to find out any information on the project. (c) Alleged Advocacy for Thomson Here I merely note that there were a series of interventions by Mr Yates at meetings at which, and a letter to General Gration (of 2 December 1993) in which, he is said to have made judgments unfavourable to Hughes or favourable to Thomson. In significant degree these related to the concern he expressed up to and including the 23 December board meeting that there was greater risk associated with Hughes' proposal than with Thomson's. The Alleged Unfair Dealing As I have indicated on a number of occasions already, for the CAA to be found in breach of the fair dealing term, it must be shown that Mr Yates conducted himself in such a fashion as resulted in the CAA actually dealing unfairly with Hughes. Considering first the unfairness alleged to arise from his participation in the TAAATS decision while a director of TPG, the applicant's first alternative case is that, being in a position of conflicting duties to the CAA and TPG, Mr Yates was in a position where there was a real likelihood of bias and that it was in consequence unfair to Hughes that he participate in such circumstances. This submission is similar in substance to the breach of s40 claim that I have rejected. Even if I were to find that Mr Yates acted in circumstances where there was a conflict of duty and interest: cf State Bank of South Australia v Marcus Clark (1996) 19 ACSR 606; or, more obviously, a conflict of duties: cf Transvaal Lands Co v New Belgium (Transvaal) Land and Development Co [1914] 2 Ch 488; this, for present purposes, would amount to no more than a finding that he had been guilty of a breach of a fiduciary duty which inured to the benefit of the CAA (and through it to the Australian community) - a duty moreover which was concerned with risk avoidance and sanctioning the appearance of wrongdoing and not with actual unfair dealing as such. Accordingly I reject this submission. In the alternative it is claimed that Mr Yates actually was influenced by his TPG connection in his decision to favour Thomson. As I will indicate, he undoubtedly favoured Thomson from early in the process for reasons related to his assessment of risk. But as I have found in Part V, it was DITRD's advice that price outweighed AII that was fundamental to his ultimate decision. The evidence does not warrant the inference that the TPG connection had a role to play in that decision let alone a decisive one. Mr Yates denied that the connection was at all an influence upon him. I accept his denial. Finally, and distinctly, it has been submitted that Mr Yates was throughout an advocate for Thomson and that this was the cause of unfair dealing. Reliance in this was placed upon (i) the matters of advocacy referred to above and their alleged lack of "rational basis"; (ii) Mr Yates' lack of sense of propriety as manifest in his dealings with the tenderers during 1993 and especially the Paris visit and the approach made to Hughes on behalf of Tower; and (iii) the prospective benefit to TPG from a Thomson win and his failure to disclose his interest until 23 December. I have already rejected the TPG connection as having been an influence upon Mr Yates' decision in favour of Thomson. It is, though, not open to question that Mr Yates had, and expressed, a preference for Thomson on grounds of risk from a relatively early date. Whether or not as a matter of judgment that preference was well or ill-founded is not, as such, an issue. The question is not one as to Mr Yates' competence but as to his alleged partiality. There is no doubt that he considered himself to have relevant technical knowledge and he was apparently accorded some deference by his co-board members on that score. The appropriate conclusion to draw is that his acts of apparent advocacy of Thomson during the tender process were referable to a technical judgment he had made as to risk and that this, of itself, was not a cause of unfair dealing to Hughes - the more so because in the end Mr Yates, unlike Mr Bosch and Mr Baillieu, did not decide the matter on the ground of risk. It needs also to be said that Mr Yates' dealings with the tenderers betrayed an insensitivity to issues of process. His actions were not improper in any operative legal way. Nonetheless they were foolish. But, as I noted at the outset, they do not provide reason for disbelieving his evidence. I conclude, then, that the conduct of Mr Yates did not occasion a breach of the fair dealing term. There is, though, one additional matter to which I should refer. Even if I had found that in voting for Thomson he had conducted himself in an improperly partisan fashion that was unfair to Hughes as a tenderer, the question would have remained whether that without more would have rendered the CAA liable for breach of the fair dealing term. Or would it be necessary to show that his "improper" vote was decisive in the decision to select Thomson? The respondent has submitted the latter relying upon the local government decision of Attorney-General for Victoria v Knox [1979] VR 513. As it is unnecessary for me to express a view on this matter I decline to do so.

The Attorney-General's Department In particularising this allegation of unfair dealing on the CAA's part, the applicant claims that: "The Civil Aviation Authority acted upon legal advice of the Attorney-General's Department in circumstances where the Attorney-General's Department gave legal advice to the Civil Aviation Authority (the "CAA"), to Mr Moten and to DITRD, so that legal advice was relied on in circumstances where there was conflict between the duties to which the Attorney-General's Department owed to each of the CAA, Mr Moten and DITRD and in circumstances where there [sic] legal advice given favoured DITRD's views in relation to Australian industry involvement." In its submissions the applicant has added Senator Collins and the Attorney-General to those advised by the Attorney-General's Department ("the Department") in TAAATS related matters. In submissions I have, in effect, been invited to pass upon how, if at all, the ordinary rules relating to client conflicts and a lawyer's duty of undivided loyalty (on which see eg G E Dal Pont, Lawyers' Professional Responsibility, Ch 8, (LBC, Sydney, 1996)) apply to the Australian Government Solicitor ("the AGS") - especially in light of the provisions of the Judiciary Act 1903 (Cth), s55E(9A). Those rules serve to protect the interests of a lawyer's client from sacrifice where the lawyer places himself or herself in the position of "serving two masters". If, then, (i) those rules actually apply to the AGS in relation to non-litigious matters; (ii) the AGS, in addition to advising the CAA in a matter, also advised another legal entity with an adverse interest in that matter; and (iii) the CAA (a) was unaware of the second retainer, or (b) was aware of it but still an actual conflict of duties occurred within the scope of the CAA's own retainer - the CAA would have ground for complaint against the AGS and this because its interests would have been imperilled ((a)) or sacrificed ((b)). The substantial difficulty the applicant faces in this matter lies in demonstrating how rules designed for the protection of a lawyer's client (here the CAA) can be turned against such a client for the benefit of a stranger to that lawyer-client relationship (ie Hughes). The advice given the client in a situation of client conflict might well explain the client's subsequent actions. And deficiencies in the advice may in this sense be a cause of the client acting improperly towards a third party (eg in breach of contract). But the complaint the third party has in such circumstances is not with the client conflict as such nor even with the advice given. It is with the subsequent action taken by the client. In the present case the applicant nonetheless submits that the CAA breached the duty to deal fairly "by knowingly allowing AGS to continue to advise" in circumstances involving the AGS having conflicting duties to the CAA and to DITRD at least. Consistent with what I have said above, even if there was such a conflict and the CAA had the knowledge alleged, I am unable to see how of itself this involves the CAA in any actual unfair dealing with Hughes. At best it would bespeak a situation where it had failed adequately to protect its own interests. Hughes may well have suffered in the Board's decision-making in consequence of the inadequacy of advice sought by the CAA. But that is another matter altogether. I reject this alleged breach of the duty of fair dealing. B. THE TRADE PRACTICES ACT CLAIMS The matters relied upon as giving rise to misleading and deceptive conduct parallel those referred to above in relation to the contract claim. I here rely upon the Additional Chronological Material referred to there. The twin allegations involving Mr Yates are that, contrary to representations made and not later corrected, (a) he was influenced by his position with TPG and (b) he had dealings with Thomson involving private advice as to how it could improve its prospects in the TAAATS tender. I reject both allegations. In the case of (a), I have found that the directorship of TPG was not an influence upon Mr Yates. In the case of (b) there is no discrete representation pleaded that was falsified by this conduct. In any event I have found that Mr Yates meeting with Thomson was not improper nor inconsistent with any express obligation assumed by the CAA. Insofar as he indicated to Thomson in Paris that its performance with RASPP could well influence the CAA's attitude to Thomson's TAAATS bid, he was making a statement of what was "blindingly obvious" as the respondent put it. I reject the allegation that this could, in any acceptable sense, be characterised as "advice" to Thomson as to how it could improve its prospects. Accordingly I am unable to accept either of these claims. Insofar as further claims are made against the CAA on account of DITRD's actions in addition to those claims already dealt with in previous Parts of these reasons, I consider it unnecessary to reach any decision on them for the same reason as I refrained from determining the parallel contract claims above. The final claim to which I should refer expressly is based on an alleged representation by the CAA that: "... in conducting the tender process the Civil Aviation Authority would act in conformity with the provisions of the Civil Aviation Act 1988 (Cth) and in particular the provisions of section 40 of that Act which relates to the disclosure by directors of pecuniary interests;" No such representation was made expressly. I am unprepared to find an implied representation was made concerning s40 of the Act. Whatever the assumptions one may entertain as to how statutory bodies properly will conduct themselves, those assumptions cannot be transformed into representations merely because one would wish a statutory body so to conduct itself. PART XII: THE CONSEQUENTIAL TRADE PRACTICES ACT CLAIM The conduct complained of here relates to the actions of the CAA from 23 December 1993 until on or about 7 February 1994 when it entered into the TAAATS contract with Thomson. It is alleged, first, that the CAA: "(a)represented to Hughes that the decision by the Board of the Civil Aviation Authority to award the TAAATS acquisition contract to Thomson had been taken on the basis of differences in Australian industry involvement; (b)represented to Hughes that the difference in price between the Thomson and Hughes bids was only a few percentage points; (c)failed to disclose to Hughes; (i) that the Board of the Civil Aviation Authority had rejected the recommendation of the tender evaluation committee; (ii)the Thomson price reduction; (iii) the Thomson AII variation; (iv)that the Civil Aviation Authority proposed to accept the Thomson price reduction and the Thomson AII variation;" secondly, that representation (a) was wholly or partially false and that representation (b) was false; and thirdly, that Hughes relied to its loss and damage on the representations and the non-disclosure. Various of the findings I have already made reduce this particular series of claims to a relatively narrow compass - the more so because, in consequence of the "splitting" of this application itself, my sole concern here is with whether a contravention (or contraventions) of s52 occurred. Of the two representations challenged, only the second (relating to price difference) retains significance. The other (relating to the basis of the Board decision) must fall in light of the finding that a majority of the Board reached their decision on the basis of AII. Notwithstanding the apparent claim to the contrary in the pleadings, the applicant's written submissions acknowledge that the representations made as to the basis of the decision would only be misleading or deceptive if a majority had decided on grounds other than AII. As to the four matters raised by way of non-disclosure, only the last (acceptance of Thomson's price reduction and AII variation) requires consideration. Of the other three matters referred to, I need only say that the one relating to rejecting the TEC's recommendation seems premised upon the applicant's view of what the tender process required of the CAA board when dealing with the TEC's recommendation. That view I have rejected. I would merely add I can see no basis upon which this alleged non-disclosure could be said to be misleading or deceptive in the circumstances. As the two matters that retain significance both bear generally on the same issue, it is convenient to deal with them in a composite way. The Price Difference I preface what I have to say here by indicating that at no time after the 23 December meeting and before the signing of the TAAATS contract, was Hughes informed either of Thomson's price reduction or of the CAA's intent to hold Thomson to it (as it in fact did) in the contract. The representation giving rise to the present complaint was made at a debriefing meeting provided by the CAA to Hughes on 12 January 1994. The meeting was recorded and a transcript of it was put in evidence. I will set out in a little detail three excerpts from the transcript that embody the principal references made to price and price difference. By way of explanation of names "Peter" or "PH" refers to Mr Hider, "Doug" to Mr Roser, "Bob" to Mr Kramp and "Hughes" to a Hughes representative. Excerpt 1 "PH [outlining the TEC's report to the 23 December board meeting]: ... Price and financial issues: differences between the terms of the two proposed contracts are minor. The expected contract price for Hughes is $167.2 million, and for Thomson is $x million, a difference of $x million. We won't tell you what those x's are. We can make some comment on the magnitude of the difference if you wish. I'm simply quoting these numbers so that you know what we did with the Hughes numbers, and we'd be happy to explain how we came to those numbers, the trail from the BAFO goes through the clarifications, and so on, but it is obvious, we're not going to tell you yet what the Thomson numbers are. You are going to have to wait until we see a contract number published. Hopefully, within a few weeks time. The estimated total Project cost: that is, the contract price plus CAA costs associated with the Hughes offer, is $190.3 million (NPV 10% per annum). That means that the net present value of the Project . . uh .. of the contract price, plus our costs, deflated at 10% per annum, and there's a similar quote associated with the total Project cost, associated with the Thomson offer, and, again, that's $x million, that we won't tell you about." Excerpt 2 "DOUG: Bob, we've already indicated that .. um .. certainly, you'd be aware of the .. um .. contract price when we publish it, but Peter ... foreshadowed earlier that if you wish us to make a comment on the .. uh .. price difference, the fact is that, at NPV levels, taking into account contract price, total Project costs and life cycle costs, there really was not a great deal in it. The variance was only a few percentage points. The difference between the prices at that level, NPV, was a few percentage points. (PAUSE) HUGHES: A few is, like, more than 2 and less than 10? (LAUGHTER) DOUG: I would say .. I would say .. it ... that's adequate, but it tends much more towards the 2 than the 10. "A few" has a particular concept to me, and it certainly isn't 10. HUGHES: All right. (LAUGHTER) PH: The .. the important point at this stage, of course, is, when we sign a contract, we'll make those figures public, and you'll obviously have access to them through that process, and make your own calculations. Uh ... We thought it was fair to give you at least some feeling for the expectation that it's not a 20% price cut or a 40% price cut, it's only percentage points. BOB: I'm just .. uh .. understanding. If the numbers involved - are large, and coverage of these areas such as life cycle costs and what-have-you, you could have a more significant difference in ... let me just take one element, contract price. The percentage could be bigger, but then, if they're equal in other areas, and basically increase the base of the number that you're dividing by, you could reduce .. uh .. the .. uh .. as you say, it could be just a few percent difference overall, even if there were much more significant contract precedents. (INDISTINGUISHABLE ASIDE) PH: The comment that Doug made ... we've got the words written down, so we must be very careful about what we say ... that the level of the expected contract price, the total Project cost, and comparative life cycle cost at each of those levels, the difference is no more than a few percentage points. BOB: At each of those three levels? PH: At each of those three, and, as I said earlier, when we've signed our contract with your competitor, we'll publish the contract price. I'm not sure what we'll do with the total Project cost, but I imagine there'll be sufficient public interest in that that would force us to make that public as well, and given that we've told you what our assessments of your contract ... expected contract price .. are and your total contract price and NPV 10%, you'll see the numbers when they're published, and I'm telling you to expect it to be within a few percentage points. DOUG: I must make one comment, and I suppose it's just really come to me, is the information we've just given you, it is absolutely vital that it doesn't go outside this room. And if you think about that, you'll understand why. BOB: I would just like to paraphrase what I think you've said, just so that I'm sure of the communications. Uh ... I'll take them one at a time, so, at the contract level, at present I ... the difference would be a few percent. PH: Yep. BOB: At the life cycle cost package level, at present value, the difference between the two would be a few percent? PH: Yes. BOB: At the total Project cost, likewise, at present that is ... the total Project cost would be a few percent? PH: Yes. BOB: Okay. Thank you." Excerpt 3 "BOB: Uh .. all right. Uh ... Now we'll go to the last couple of questions. Um ... the ... uh ... wanted to back up on .. uh .. one. There was a statement made .. uh .. that the percentage differences of the contract price and other things were relatively small. Uh .. I just want to understand the definition of contract price. Uh ... does that include ... uh .. and let me just give the example, then you can comment. Let's say we had a bigger advantage in contract price, but a disadvantage in the financing package. Would the two of those be added together to arrive at the statement that ... uh .. there wasn't much difference in the contract price? PH: Given the effect of the financing package in .. in present value terms, the difference and .. differences in the financing packages becomes evident when you calculate the net present value, that the two alternate cash ...... BOB: So, again, just for definition purposes, then, the statement that ... uh .. contract price ... would .. would it include both aspects of it? PH: Uh .. contract price that we've quoted to you today ... BOB: Yes. PH: .. takes no account of your financing package, because it's not a net present value contract price. DOUG: .. we've given it to you? Down that list? Doesn't take any account of the financing package. PH: And, similarly, the contract price that we will publish, for your competitor, will be the contract price, that's the dollars at the bottom line. BOB: Are you saying that that level will be ... (TALKING OVER ONE ANOTHER) PH: ... that level there within a few percent of each other, and when you take all of the other .. uh .... the other point of comparison that we've offered in essence theres a ... the total Project cost level net present value ... uh .. that does take into account ... BOB: The financing package went into the Project costs? PH: No, the financing package comes in when we ... when we refer to net present values. Can we just go back .. (NOISE & COUGHING) ... let me just correct myself on one point. BOB: Oh, okay. PH: The .. the quote that we gave to you at net present value levels - contract price, total Project costs and life cycle costs - varied by only a few percent (NOISES .. PAUSE) Contract price net present value, 2%. I was actually incorrect in saying to you that the contract price to contract price, before you take the .. uh ... financing package into account, is still within that ... I'm .. I'm not going to tell you what the difference is. BOB: No, I understand. PH: But I'm not saying to you it's .. it's .. BOB: Well, that ... PH: It's necessarily ... (TALKING OVER EACH OTHER) BOB: .. the net present value level .. does it include the differences in finance? PH: Whenever we say "net present value", we certainly intend to include the effect of the financing packages. BOB: Okay. As .. as well as attendance string?? As well as the .....? BOB: I just want to back up to paraphrase it once more, to be sure I understand .. um .. so, are the ... the statement that ... uh ... the contract prices are at the net present value or within a few percent of each other, would indeed include the impact or effect of the financing package? PH: Yes. BOB: As well as the actual .. uh .. bid on the .. uh ... PH: Yes. BOB: Scope and options? PH: Yes." The CAA's own price calculations, as evidenced in an annexure to a supplementary agenda to the 23 December board meeting, were relevantly as follows (omitting contemporary deletions from the document itself): ". Expected Contract Prices, made up of the BAFO prices and the additions above, are:

Air Great Lakes Pty Ltd v K S Easter

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