Bevanere Pty Ltd v Lubidineuse [1997] FCA 619 | Case summary

REASONS FOR JUDGMENT The Australian Government Publishing Service ("AGPS") is the primary publisher, printer and distributor of Commonwealth Parliamentary and Government information. AGPS is a business unit within the Department of Administrative Services of the Commonwealth. By Request for Tender dated 7 April 1997 ("the Request for Tender"), the Commonwealth, through the Department of Administrative Services ("the DAS"), invited tenders for the purchase of five separate packages comprising aspects of the activities of AGPS. The applicants comprise a consortium formed to respond to the Request for Tender. I shall refer to the applicants together as "McMillan". McMillan submitted a tender in response to the Request for Tender under cover of a letter of 23 April 1997 ("the McMillan Tender"). By letter dated 14 May 1997, McMillan was informed that it had not been short listed for the packages for which it tendered. McMillan claims that the Commonwealth, in connection with the tender process, acted in contravention of s 52 of the Trade Practices Act 1974 (Cth). McMillan therefore claims an order under s 87 of the Trade Practices Act requiring the Commonwealth to short list McMillan or alternatively an order that the tender process be declared void or inoperative. While McMillan's statement of claim makes a number of additional allegations, in the course of the hearing, the claim by McMillan was limited to two discrete and separate instances of alleged misleading conduct. First, it is said that representations were made, on behalf of the Commonwealth before tenders closed on 24 April 1997, that McMillan would be short listed. Secondly, it is said that McMillan had a reasonable expectation that it would be informed that if it failed to accept certain conditions contained in the Request for Tender it would not be short listed and the Commonwealth failed so to inform McMillan. McMillan contends that, by that conduct, it has suffered damage in that it failed to give unconditional confirmation that the relevant conditions were accepted by McMillan and, thereby, lost the opportunity of being short listed. The Commonwealth denies that any conduct on its part was misleading. The Commonwealth also says that any decision by McMillan not to give unconditional confirmation that the relevant conditions were accepted by it was not induced by any conduct of the Commonwealth but was a business decision consciously made by McMillan. The Commonwealth also says that, in any event, the Trade Practices Act does not apply to the Commonwealth in relation to the conduct in question. BACKGROUND The Request for Tender was the culmination of a long process. The first major step was a request for information by the DAS which was advertised in September 1996. That was followed by a request for proposal stage which was advertised in October 1996, requiring submissions by 12 November 1996. The request for proposal stage was to enable the Commonwealth to assess whether the commercial printing industry in Australia could meet the printing needs which, until that time, had been satisfied by AGPS. McMillan participated in the request for proposal stage. In connection with the request for proposal stage, an evaluation team, chaired by Ms Jan Mills, reported to Mr Brendan Godfrey, Deputy Secretary, Business Development of the DAS that the companies which appear to have capability to carry out what is described as "core work" included McMillan. I shall deal with "Core Work" below. The evaluation team subsequently received reports from Mr W.H. Matthes of Enisand Pty Ltd, a provider of services in relation to the printing industry. Mr Matthes reported that the McMillan consortium comprised two of the biggest printing firms in Canberra and one of the largest printing firms in Australia all with very high reputations. Mr Matthes saw no reason why McMillan and the others mentioned by the evaluation team should not be elevated to the Request for Offer stage apparently intending to refer to the Request for Tender stage. It appears to be against that background that McMillan received the Request for Tender. The Request for Tender was announced by advertisements which contained, inter alia, the following: "Following a market testing process, the Department of Administrative Services is now calling for Tenders for the purchase of assets and commercial operations of AGPS. AGPS is the primary publisher, printer and distributor of Commonwealth, Parliamentary and Government information. Five Packages detailed in the Request for Tender are as follows: Package 1 AGPS Assets Package 2 Passport Production Package 3 Core Parliamentary and Government Printing, general Government Printing, Graphic Design and Editorial Services Package 4 Instant Print and Copy Centres Package 5 Information Management Strategic Alliance Tenders will have the option to purchase one or more of the Packages... The sale of this business is being managed by the Commonwealth Department of Administrative Services..." McMillan's Tender relevantly relates only to Packages 1, 3 and 5. While the McMillan Tender included a proposal for Package 4, that proposal did not involve the whole consortium and no complaint was made at the hearing in respect of the conduct of the Commonwealth in relation to Package 4. The complaint was limited specifically to the approach which the Commonwealth, through its officers, took to a specific aspect of Package 3. Package 1 consists of physical assets, being assets of AGPS applicable to the operations which are the subject of the other packages. Not all assets in Package 1 would necessarily be sold to only one tenderer. That is to say, the intention appears to be that plant and equipment applicable to passport production would be sold to the successful tenderer for Package 2 and plant and equipment applicable to core work, general printing, graphic design and editorial services would be sold to the successful tenderer for Package 3. No assets relevant to instant print and copying centres were offered for sale under Package 1. Package 3 is described in the Request for Tender as covering the following elements: "(1) Core Work comprising: · Government Printing Office · Kingston IPCC · Dispatch and distribution services; (2) General printing; (3) Graphic Design services; and (4) Editorial services." The Request for Tender states that the successful tenderer of Package 3 will have the right to bid for work offered by Commonwealth departments in relation to: "(1) Core Work unless otherwise stated in this [Request for Tender]; (2) General Printing, Editorial and Graphic Design services in competition with the marketplace." The Request for Tender also contained the following which is relevant to the motivation of McMillan for submitting its tender: "Brokerage Services 3.1 AGPS through the Information Solutions Group currently provides an independent brokerage and publishing services to Client Departments. Last financial year (95/96) $47m of printing was brokered. The source of this work (the client list) is available as a database associated with the TrackMax software... 3.2 After completion of the sale agreement, AGPS will no longer provide these services." Apparently the opportunity to take over the brokerage services is perceived to be significant to tenderers generally and certainly to McMillan in particular. The Request for Tender also states that it is the intention of the Commonwealth to enter into a strategic alliance in accordance with Package 5 and that the purpose of the alliance is "to develop innovative solutions for printing and distribution in order to achieve cost savings for Government clients". Package 5 is somewhat amorphous. The description of Package 5 in the Request for Tender contains, inter alia, the following: "1. Introduction 1.1 The Commonwealth is seeking expressions of interest from companies or consortia interested in entering into a strategic alliance with the Commonwealth to investigate alternative approaches to the production and distribution of Government information. 1.2 In particular, the Commonwealth is keen to explore innovative uses of technology to achieve whole of Government solutions that will provide overall financial benefits in addition to improved outcomes. ................... 2. Business Direction 2.1 The overall objective is the more effective delivery of Government services by enabling more convenient and efficient access to and use of Government information. .................. 5. Co-operation with the Package 3 provider 5.1 The successful tenderer of Package 5 will need to work closely with the successful tenderer of Package 3 as the latter will be the principal producer of core government printing. 5.2 There may be some advantage in the tenderer for Package 5 exploring options for a joint venture or other relationship with tenderers for Package 3. ............... 9. Commonwealth Contribution 9.1 The Commonwealth is committed to a successful outcome from the strategic alliance and to that end will contribute a level of resources appropriate to the scope of the proposal from the successful tenderer. In addition, the Commonwealth will contribute its knowledge and understanding of current information production and management in context of present and future Government needs." CORE WORK The Request for Tender deals separately with "Core Work". It contains the following in relation to Core Work under the heading "Contractual Position". "10.1 The Evaluation Committee has been involved in negotiations with representatives of departmental clients for Core Work with a view to AGPS and those Client Departments entering into a Memorandum of Understanding (MOU) for the provision of Core Work for the period from sale completion until 30 June 1998. 10.2 A summary of the status of these negotiations as at 7 April 1997 is contained in annexure 1. 10.3 The Department of the Senate, Department of the House of Representatives and the Office of Parliamentary Counsel have written to the Evaluation Committee confirming that they will enter such an MOU subject to certain outstanding issues being resolved... 10.4 ....... 10.5 Once an MOU has been executed by AGPS and the Core Work clients it will be converted, by the sale agreement, into a binding contract between the purchaser of Package 3 and the Core Work client for the period from the date of completion of the sale to 30 June 1998. 10.6 ....... 10.7 Where an MOU has not been entered into with Core Work clients at the time of completion of the sale of Package 3, the successful tenderer of Package 3 must, for a period not exceeding 3 months from the completion of the sale agreement, offer Core Work services to Client Departments on no less favourable terms (including price) than currently provided by AGPS. The terms under which AGPS provides current services are available in the Data Room. 10.8 If a Client Department has not entered into an MOU with AGPS prior to the sale of Package 3 it may obtain Core Work services from the marketplace. 10.9 The successful tenderer of Package 3 is not guaranteed any volume of work, whether or not the Client Department has signed an MOU with AGPS prior to completion of the sale of Package 3. ................" From the time of receipt of the Request for Tender, McMillan was concerned that there was insufficient information provided to the tenderers to enable a judgment to be formed as to the likely cost of complying with clauses 10.5 and 10.7. The Request for Tender specifies the procedures for access to the data room in which further information was to be made available. While further information was made available in the data room to parties who entered into a confidentiality deed, McMillan did not consider that there was sufficient information for a proper assessment to be made of the cost of satisfying the commitment which would arise under clauses 10.5 and 10.7. The Request for Tender also makes clear that further information was to be made available to short listed tenderers. Thus, the Request for Tender states that the process envisaged would involve, inter alia, the following: "(5) selection of short list of tenderers; (6) release of additional information to short listed tenderers; (7) receipt of best and final offer; (8) government approval to select the successful tenderer(s);..." Under the heading "Tender Requirements" the Request for Tender also contains the following statement: "A tenderer who is short listed will be requested to put in a best and final offer after it has had an opportunity to review other additional information made available by the Commonwealth." There was an issue between the parties as to the adequacy of the information which was made available in the data room. Two folders of documents were in evidence which comprised the material made available to prospective tenderers. Those folders contain considerable detail as to product specification for the core work which is the subject of clauses 10.5 and 10.7. While Mr R.I. McMillan, the managing director of J.S. McMillan Pty Limited ("JSM"), the principal member of the McMillan consortium, considered that the product specifications were adequate to determine the printing work involved in core work, he claimed that the product specification was inadequate to enable a determination of the cost. For example, one of the product specifications was for "Issue Bills (Under Embargo) (First reading print) (NB printed as run-on to supply stock)." The range of numbers of pages was shown as "2 to 1500 and the range of numbers of copies as shown as 970 to 2000". It was also said that the information did not disclose the price actually charged by AGPS to the relevant client departments. Clause 10.5 required a commitment to provide services under MOU's which were not yet in existence and clause 10.7 required a commitment to provide core work on no less favourable terms (including price). It might be considered somewhat unusual, therefore, that the Commonwealth would not disclose full details of the arrangements with client departments. Counsel for the Commonwealth justified such an approach on the basis that tenderers would adjust their tender price accordingly because of the uncertainty. No doubt the effect would be that all tenderers would reduce their prospective tender price because of the unknown factor involved in tendering for the performance of work for a fixed price which is not disclosed. In circumstances where the object of the tender process at least in relation to Packages 2 and 3, as stated in a document approved by the DAS and entitled "Assessment Criteria and Tender Evaluation Process", is to "achieve an optimal return for the Commonwealth through a combination of the price tendered and the Evaluation Committee's assessment of the capability of the purchaser(s) to deliver services", that strikes me as a somewhat unusual approach. In the light of the assessment made of the McMillan Consortium for the evaluation team at the request for proposal stage and the indication given in open court that McMillan Consortium is prepared to accept the terms and conditions of clauses 10.5 and 10.7, it seems unfortunate if the Commonwealth is not to have the opportunity of receiving a best and final offer from the McMillan consortium to assess against the other short listed tenderers. However, that is a matter for the Commonwealth. Nevertheless, it is not my function to pass judgment on the Commonwealth's approach to the sale of its assets. It may, however, be relevant to the approach which a tenderer might take to the significance of clauses 10.5 and 10.7, in circumstances where the Request for Tender represents that further information would be given to short listed tenderers who would then have the opportunity of submitting "best and final offers". A tenderer could be excused for assuming that, in those circumstances, it was not fundamental to acceptance of a tender that there be an unconditional acceptance of clauses 10.5 and 10.7. THE ALLEGED REPRESENTATIONS On 9 April 1997 Mr McMillan visited the data room, at a location in Canberra where, pursuant to the Request for Tender, information was made available to intending tenderers who had entered into a confidentiality deed with the Commonwealth. Mr McMillan was accompanied by Mr R.N. Gibson, the managing director of another member of the consortium, Mr M.P. Smith, the managing director of the third member of the consortium and Mr S.G. Murphy, the Canberra manager of JSM. The McMillan representatives there met Mr Brian Lee-Archer, the chair of the AGPS Evaluation Committee appointed by DAS to prepare the Request for Tender, evaluate tenders, recommend to the government preferred tenders and negotiate sale packages on behalf of the Commonwealth government. The discussions which occurred centred on the availability of additional information. In particular there was discussion concerning the adequacy of information necessary to enable an assessment of the cost of providing Core Work and the charges made by AGPS for Core Work. It is now common ground that a further meeting took place on the afternoon of 9 April 1997 although the McMillan representatives initially deposed to the second meeting having taken place on the afternoon of 10 April 1997. Nothing turns on precisely when the conversation took place although the confusion among the McMillan representatives has a bearing on the reliability of their evidence. Each of them had an adjusted recollection after reading Mr Lee-Archer's affidavit in which he said that the second meeting took place on the afternoon of 9 April 1997. There is a dispute and to what was said in the course of the discussions on 9 April 1997. Mr McMillan deposed to Mr Lee-Archer saying in the morning "You'll be given more information when you are short listed" (my emphasis). Mr R.N. Gibson, deposed to Mr Lee-Archer having said "We don't want to show this material to everybody. Don't worry, you'll get it when you're short listed" (my emphasis). Mr S.G. Murphy, deposed to Mr Lee-Archer saying, "We do not want just any companies looking at the AGPS business, so additional information such as you are seeking will be available to short listed parties. Don't worry, you'll be short listed." In his affidavit, Mr Lee-Archer denied that he used language to that effect, although he conceded that he said words to the effect "It may be that when we have a short list we will be disclosing more information". Mr Lee-Archer was not prepared to acknowledge that he may have said that information would be given to short listed tenderers. He was only prepared to accept that he may have said further information might be given to short listed tenderers. That appears to me to be somewhat curious, having regard to the express references in the Request for Tender to which I have referred, indicating that additional information would be given to short listed tenderers. Mr Lee-Archer gave evidence in a manner which suggested he was assiduous, probably to a fault, not to commit himself in any way in dealings with tenderers. I shall deal with that aspect of his evidence below. In the witness box, Mr Lee-Archer exhibited a most ungiving attitude. I have formed the view that, in dealing with tenderers, and in particular with McMillan, Mr Lee-Archer most probably adopted a similar attitude and would have been assiduous to ensure that he gave away nothing, irrespective of whether that might, in the overall scheme of things, be unfair. Mr Lee-Archer created the impression of being rigid and inflexible. For that reason, I consider that it is highly unlikely that he would have used the words attributed to him by the McMillan representatives concerning McMillan being short listed. In addition, in two contemporaneous documents for which Mr McMillan accepts responsibility, the expression "if" McMillan is shortlisted rather than "when" McMillan is shortlisted was used. That may not be decisive because Mr McMillan asserted, that while he accepted responsibility for the documents, he was not their author. Nevertheless, when added to the other matters, they lead me to the conclusion that Mr Lee-Archer did not say, before tenders closed, that McMillan would be short listed. It follows from that finding that I would reject McMillan's claim in so far as it is based on representations said to have been made by the Commonwealth to McMillan that the McMillan Consortium would be short listed. McMILLAN'S EXPECTATION The McMillan Tender specifically addresses each clause of the section of the Request for Tender dealing with Package 3. In most cases, including clauses 10.5 and 10.7, the response was simply "Understood and Agreed". There were several instances where there was a short narrative, but only in the case of three or four paragraphs. However, in another part of the McMillan Tender, under the heading "Overview", there were remarks which, the Commonwealth contends, qualify the unequivocal response given specifically to clauses 10.5 and 10.7. The following, inter alia, appears under that heading: "Whilst the information contained in the Data Room is helpful we need a lot more detail to fully understand the extent of the total requirement. We have evaluated core work requirements from the information gathered during this whole process... The Commonwealth in seeking to dispose of the AGPS needs to be aware that AGPS under past operating strategy has not been commercially viable. Whether AGPS continued to provide printing as listed in Package 3 or whether this aspect of requirement is disposed of to a commercial organisation, future product prices will need to be adjusted upwards to commercially viable levels or the Commonwealth may need to continue subsidising the cost its printing requirements by CSO funding. Upon evaluating the information on pricing in the Data Room we have concluded the pricing of core work needs to be expanded to more reflect the task. The pricing is very limited - as reflected in our pricing structure included in this presentation - and does not cover many other aspects of the pricing that we believe needs to be quoted giving inaccurate pricing of the task. We also believe the pricing is not a fair reflection leaving many loose ends untied and is a sort of swings and roundabouts method. You lose on some and make excessive charges on others - it would be clearly better all round to have a pricing matrix that reflects the task correctly and encompasses the entire situation rather than a quote because this ultimately becomes a quote without purpose as you are doing the task anyway. We have over the last 2 months worked together with our consortium members... to create a pricing matrix to cover most aspects of the core work. Taking this matrix and then taking your limited pricing from the Data Room and combining this with the charges you appear to use for charging out high speed copying through your IPCC's we have done a full analysis. This has led us to the conclusion along with the Arthur Andersen report that the core work pricing needs to be put on a more commercial basis. If we are shortlisted we will open up all our ideas regarding this pricing and the way to the future as it is very complex and there are issues that need to be concluded. There is quite a loss in the production of the core work and to take this project on contract without carrying out this study and analysis would be something neither party should be prepared to do. We have allocated a lot of resources arriving at this model and believe it needs to be finished off in consultation with the client and AGPS to conclude the process. We believe a suitable resolve can be reached to put the project on a commercially sound basis with the Federal Government not in fact paying any more than they currently do..." After tenders closed on 24 April 1997, Mr Brian Lee-Archer, the chair of the evaluation committee, wrote to all of the tenderers, including McMillan. McMillan was not aware of the contents of the letters to other tenderers. They are different in some respects which may be significant. The letter to McMillan was in the following terms: "The AGPS Evaluation Committee is in receipt of your response to RFT 97/0097. To further assist the Committee in evaluating your proposal, would you please provide the following information so as to clarify your tender response. 1. On the assumption that the Committee may not accept all of your critical assumptions (if any have been made) and without limiting your requirement to comply with all other conditions of the RFT, would you please confirm that you understand and accept the following specific terms and conditions of the RFT: · Section 1.2 page 23 · Section 10.5 page 29 · Section 10.7 page 29 · Section 10.9 page 29 2. Please clarify how your offer would be affected if you were unsuccessfully in one or more of the packages for which you have tendered. Your reply should be faxed to me... by cob Tuesday, 6 May 1997. Should you have any queries regarding this request please call me..." On the receipt of that communication, Mr McMillan telephoned Mr Lee-Archer. There is a dispute as to the precise terms of the conversation which then ensued. Mr Lee-Archer's version is as follows: "McMillan: I've got your letter and we are about to put in a response. I just wanted to clarify exactly what it is that you are asking. Lee-Archer: We put the same questions in writing to all tenderers and asked all tenderers to respond in writing. McMillan: We've put a lot of information into our response and I was just seeking some clarification. Lee-Archer: We've asked the same question of all tenderers and you're[sic] response is entirely a matter for you. McMillan I understand that and our reply will be coming to you this afternoon: In fact, while the same questions had been asked of all tenderers, additional questions were asked of some tenderers. In particular, some tenderers were asked to provide financial information in accordance with a provision of the Request for Tender which required that each tenderer must provide details of relevant financial data concerning the tenderer and related entities, including a number of specified details. McMillan had satisfied that requirement but the Committee apparently considered that at least two of the tenderers had not. That may be significant in relation to the reaction which McMillan was entitled to have to the letter of 5 May 1997. Mr McMillan's version of the telephone conversation with Mr Lee-Archer on 6 May was as follows: "McMillan: We are having trouble understanding your request. What do you need? Lee-Archer: We're just trying to clarify your tender. McMillan: What about the MOU's? Lee-Archer: There are no MOU's signed yet and there will be none signed before short listing. Just simply answer the questions. McMillan: Is the timetable for this running to schedule? Is the timetable of leaving the building still 3 months from completion? Lee-Archer: This is correct. The time table may be 7-10 days late. Just simply answer the questions." Mr Lee-Archer did not dispute that version significantly although he denied that there was any reference to "leaving the building" and also denied that he said "Just simply answer the questions". The precise terms of the conversation are not significant since there appears to be consensus as to the thrust of the conversation. The complaint by McMillan is that nothing was said to warn Mr McMillan that failure to give an unequivocal acceptance of clauses 10.5, 10.7 and 10.9 could result in McMillan not being short listed. That is not disputed. When asked whether he could have told every tenderer what it was that was concerning the Evaluation Committee, Mr Lee-Archer said that was "potentially an option" but that it was never actually considered. He acknowledged that Mr McMillan was expressing a concern in the telephone conversation they had on 6 May but said that he did not explain the Committee's decision to Mr McMillan because "we believe in writing that we had made, we had explained in sufficient enough detail and which - what was appropriate at that part of the tender process". He said that the Committee believed that it would not be fair dealing in relation to all other tenderers for any one tenderer, such as McMillan, to be told what the committee's concern with any particular tender was. When asked why he did not tell Mr McMillan that the McMillan tender was not clear, he said he would put himself "at risk of being accused by another tenderer of unfairly assisting one of their competitors." In the light of the differential treatment reserved for some non complying tenders, that evidence is somewhat ingenuous. McMillan responded to the letter of 5 May 1997 in a qualified fashion as follows: "Thank you for your letter of 5 May, 1997 requesting clarification and further information in respect to our response to the above RFT in order to assist the Committee in their assessments. It is understood that the Committee are seeking more detailed information on our response. We point out that adequate information, necessary for the preparation of a more comprehensive offer has not been available nor was it contained in the Data Room. The pricing in our bid has been based on our assumptions of the requirements and on the analysis of AGPS's trading position as provided by Arthur Andersen. Without the input of additional relevant quality information on the requirement, we currently have no basis on which to vary our existing offer. We point out that it should not be assumed that our Pricing Matrix would deliver a more expensive product to the MOU. Our analysis as reflected in the attached graphs, when studied in conjunction with our detailed Pricing Matrix and an analysis of the task concerned, shows AGPS pricing to be more expensive than ours in many instances. Our reading of Sections 5.1 (3 to 6) appearing on pages 6 and 7 of the RFT and our understanding of the Tender Process stated, is that we are currently at step 5.1 (5) of the process, which is the Short Listing of Tenderers, this step being required by 7 May. Following Short Listing and under 5.1 (6) of the Tender Process we understand that "additional information will be released to short listed Tenderers". If Short Listed we would expect at this stage, in the light of the new additional information, to have the opportunity to quantify our offer. At this time and to the prevailing circumstances we have no option but to respond to the questions raised as follows. RESPONSE TO ITEM-1: Section 1.2 page 23. The successful Tenderer of Package 3 will have the right to bid for work offered by Commonwealth Departments in relation to (1) Core Work unless otherwise stated in the RFT 97/0097. (2) General Printing, Editorial and Graphic Design services in competition with the marketplace. J.S. McMillan Pty Ltd accept these specific terms and conditions. Section 10.5 page 29. J.S. McMillan Pty Ltd are unable to accept the specific terms and conditions of this section but will agree to providing the services required under the MOU until 30 June, 1998 at the pricing and conditions offered in our Response with any additional pricing developed for our last and final offer. Section 10.7 page 29. J.S. McMillan Pty Ltd are unable to accept the specific terms and conditions of this section but will agree to providing the Core Work services required until 30 June 1998 at the pricing and conditions offered in our Response with any additional pricing developed for our last and final offer. Section 10.9 page 29. J.S. McMillan Pty Ltd if successful with Package 3, understand and accept that they are not guaranteed any volume of work, whether or not the Client department has signed an MOU with AGPS prior to completion of the sale of Package 3. We will, however, have an expectation that after making provision for supply of services under this RFT 97/0097, that any intention not to utilise our services be advised to us in sufficient and adequate time for the services to be withdrawn. RESPONSE TO ITEM-2: J.S. McMillan Pty Ltd have bid for Packages 1, 3, 4 and 5 in the RFT. Our bid for Package 1, is conditional and dependent on being awarded Package 3. Bids 1 and 3 are integrated but independent of our bid for Package 4 or 5. Bids 1 and 3 would stand in the event that our bid for Package 4 or 5 was unsuccessful. We trust the above satisfies the requirement of the Evaluation Committee. We will be pleased to be advise of the Committees decision regarding "short listing" in due course." The reference to "the pricing and conditions offered in our response" was accepted as being a reference to the material contained on pages 4, 5, 6 and 7 of the overview to which I have referred briefly above, coupled with the pricing matrix which was an integral part of the McMillan tender. The pricing matrix is a detailed calculation of costs of producing various of the products shown in the product specifications with variations according to the number of pages in a document and the number of copies of that document produced. Thus, it is clear enough that McMillan was saying, in response to the letter of 5 May 1997, that they were only prepared to provide Core Work referred to in clauses 10.5 and 10.7 at the prices specified in the pricing matrix. On 14 May 1997, the Evaluation Committee, comprising Mr Lee-Archer and Messrs Colin Hollingsworth, Alan Cox and Len Withers, recommended to Mr Godfrey the organisations to be invited to participate in "the best and final offer round" for Packages 2, 3, 4 and 5 as described in the Request for Tenders. The Committee observed that tenders for Package 1 could only be considered after the finalisation of negotiations for Packages 2 and 3. In the recommendation there was discussion in relation to each of the tenderers for Package 3. In relation to McMillan the report contained the following: "JS McMillan has remained non-compliant in that they confirmed their inability to accept the specific terms and conditions of section 10.5 at page 29 of the RFT. This matter is considered a fundamental term and condition that underpins the philosophy and strategy of the RFT i.e. to deliver services at the same terms and conditions including prices in accordance with the MOUs. While JS McMillan has made the claim that it should not be assumed that their failure to agree to these terms will result in higher prices, the Committee did not ask for pricing structures that would return lower or higher prices. The Committee considers the JS McMillan bid to be non-compliant and as such can not be considered further." There are two comments which can be made in relation to that observation. The first, and most important, is that there is nowhere to be found in the Request for Tender a statement that the terms and conditions of section 10.5 are a fundamental term and condition that underpins the philosophy and strategy of the Request for Tender. The second is that the Committee's view that, because the bid is non-compliant, it "can not be considered further" does not appear to be reflected in the Request for Tender. For example, included in the Request for Tender is a section entitled "Tender Evaluation Criteria" which is, relevantly, in the following terms: "1.1 In assessing tenders (including the best and final offers from the short-listed tenders), the Evaluation Committee will consider such other criteria it considers to be in the best interest of the Commonwealth. In assessing the tender the criteria that will be used will include the following: (1) prices tendered; (2) capability of tenderers to successfully operate the business described in each Package... (3) any potential for creating a conflict of interest with other commercial activities of the tenderer; (4) the views of Client Departments; (5) the extent to which the tenderers meet the requirements of this Request For Tender; (6) developing and implementing innovative information solutions... 1.2 The above criteria are not necessarily in order of priority or of equal weight." [My emphasis] Thus, a tenderer may be excused for assuming that non-compliance with the Request for Tender in some respects would not necessarily be fatal to being short listed. Whether or not Mr McMillan would have given an unequivocal assurance of acceptance of clauses 10.5 and 10.7 is a matter in issue and I shall deal with it below. However, in so far as the decision to short list was made on the basis that acceptance of the specific terms and conditions of section 10.5 was a fundamental term and condition that underpins the philosophy and strategy of the Request to Tender and on the basis that non acceptance of those specific terms and conditions rendered a tender non-compliant such that it could not be considered further, the Request for Tender did not fairly reflect the manner in which tenderers would be dealt with. As I have said above, tenderers could be excused for assuming that it was not fundamental to acceptance of a tender that there be an unconditional acceptance of clauses 10.5 and 10.7. To that extent I consider that the conduct of the Commonwealth has been misleading. It is necessary, therefore, to consider the two other issues which are raised by the Commonwealth, namely whether Mr McMillan would have acted differently if he had been told of those two matters and whether the Trade Practices Act applies to the conduct in question in any event. DID McMILLAN SUFFER LOSS OR DAMAGE BY THE COMMONWEALTH'S CONDUCT? McMillan in substance seeks relief under s 87 of the Trade Practices Act. Section 87 relevantly provides that where, in a proceeding instituted under Part VI, the Court finds that a person who is a party to the proceeding has suffered or is likely to suffer loss or damage by conduct that was engaged in in contravention of a provision of Part V (which includes s 52), the Court may make such order or orders as it thinks appropriate against the person who engaged in the conduct if the Court considers that the order concerned will compensate the first mentioned person for the loss or damage or will prevent or reduce the loss or damage. The Commonwealth contends that, even if the Trade Practices Act applies to the Commonwealth and there was conduct in contravention of Part V, there has been no loss or damage suffered by McMillan by that conduct. It was not suggested that McMillan had not suffered loss or damage by reason of not being short listed. Rather, it is said that there is no causal connection between that loss and damage and the relevant misleading conduct on the part of the Commonwealth. The Commonwealth contends that McMillan had made a commercial judgment that it was impossible to give an unqualified commitment to comply with paras 10.5 and 10.7 in the absence of comprehensive information referable to the precise basis for the prices charged and to be charged by AGPS for the Core Work as referred to in those clauses. The Commonwealth asserts that McMillan has fundamentally changed its case from the inception of the proceedings and that, as a consequence, adverse inferences should be drawn against McMillan on this question. The essence of the case as it is now articulated is relatively simple. It is said that the only credible answer to the question as to why such a case was not mounted from the beginning is that such a case does not fully reflect what happened and is rather an ex-post facto reconstruction of certain events which did not happen in the manner in which McMillan now contends. It is said that McMillan is now seeking to undo the effect of a commercial judgment which it chose to make and which it now regrets. It has always been the complaint of McMillan that the tendering process was conducted upon a basis that made it impossible for it to comply responsibly with the requirements of clauses 10.5 and 10.7 prior to the short listing stage because the information required to make a rational commercial judgment whether to commit to those requirements was not provided. It is said by the Commonwealth that, once McMillan realised that such a case, at best, was merely a damages case and could not lead to an order that they be short listed, a new case was mounted which the Commonwealth contends is a false one. It is said that the current case, that the Commonwealth's conduct misled McMillan into not complying with conditions with which they would otherwise have complied had they known that was necessary or important, is fundamentally inconsistent with the original case. That circumstance, it is said, should weigh heavily against acceptance of Mr McMillan's evidence. Mr McMillan said in an affidavit that, if he had been informed that the failure to make an unconditional commitment in response to the letter of 5 May 1997 would lead to the McMillan consortium not being short listed, he would not have responded in the terms set out in his letter of 6 May. Rather, he would, after taking legal advice, if necessary, have furnished unconditional assurances on the subjects raised by the letter of 5 May notwithstanding the prospective commercial disadvantages. The Commonwealth contended that I should not believe Mr McMillan in that assertion. It was said that that evidence was uncorroborated by any other witness, was uncorroborated by any contemporaneous document and depends upon Mr McMillan being accepted as a reliable witness. Attention was drawn by the Commonwealth to a number of aspects of Mr McMillan's evidence which might be regarded as unsatisfactory. There were some inconsistencies in his evidence and, in the course of cross-examination, he, on occasion, added details which were not contained in his affidavit. One significant area where Mr McMillan's evidence might be regarded as unsatisfactory concerned his answers to questions concerning the terms of his letter of 6 May 1997. When he was asked whether he specifically declined to commit himself to clauses 10.5 and 10.7, his response was that he did not believe that was the truth. He said that he believed he was complying with what was set out in clauses 10.5 and 10.7, notwithstanding the terms of that letter. His explanation was that, while they were committed to clauses 10.5 and 10.7, they wanted to get the other information and put in their best and final offer. That, of course, is inconsistent with a literal interpretation of those clauses. They called for the successful tenderer to commit to providing services to the Commonwealth on the same terms and conditions including price, whether or not the successful tenderer would be prepared to do it at a lower price. I consider that it is clear that McMillan was saying in the letter of 6 May 1997 that it would not accept the specific terms and conditions of these sections. Mr McMillan sought to explain the stance which he took in the letter of 6 May 1997 in a letter which he wrote to the Minister for Administrative Services on 5 June 1997. In that letter, he wrote, inter alia, as follows: "JSM responded honestly and in a business like manner when asked to commit to supplying Core Work in conditions, the details of which were not made known to tenderers. Others may have said "yes" to get short listed. We felt this would be misleading and deceptive and therefore qualified our response but pointed out that our price appeared to be less than that charged AGPS. To be clear, it was not that we did not understand or that we would not accept the specific terms and conditions of the RFT. It was simply that, in all honesty, we did not have all the necessary information to be unequivocal, but clearly expected that on being short listed we would receive all the necessary information and would then be in a position to make a firm best and final offer which would be contractually binding." Another area where Mr McMillan's evidence was said to be unsatisfactory was the question of whether he understood that the effect of the McMillan Tender was an irrevocable offer that could be accepted by the Commonwealth. In one of his affidavits, he said that he was aware that accepting the Request for Tender without condition would leave McMillan open to having the Government accept the tender and leaving McMillan where they would have a binding contract. On the other hand, in cross-examination, he said that he did not think that the McMillan Tender would be a contract without further negotiation. While there is inconsistency in that evidence at one level, I am disposed to accept Mr McMillan's explanation. He says that he was always mindful that there was to be a stage where "best and final offers" would be made by the short listed tenderers. The basic stance of Mr McMillan was that, as a practical matter, the contract which would ultimately be entered into would be one which resulted from the best and final offer stage, not from acceptance of a tender. He believed that that outcome was all the more likely in circumstances where the Commonwealth was not prepared to disclose the precise terms on which the successful tenderer was expected to perform the Core Work referred to in clauses 10.5 and 10.7. For the reasons advanced by the Commonwealth, I regard Mr McMillan's evidence as unreliable in some respects. Nevertheless, I do not consider, having regard to the impression which I gained from observing him in the witness box, that he was being deliberately untruthful. I do not regard him as a dishonest witness. McMillan made clear before me, through their counsel, that they are indeed prepared to accept the terms and conditions of clauses 10.5 and 10.7. It may be, therefore, that the stance taken in the letter of 6 May 1997 and the letter to the Minister of 5 June 1997 were posturing. It may not necessarily reflect favourably on Mr McMillan's credit that he was prepared to posture in that way, although the apparent lack of openness on the part of the Commonwealth may have justified such an approach from a commercial aspect. However that may be, I do not consider that I should disbelieve him when he says that he would have responded unequivocally rather than be excluded from the short list. Although, I have found that Mr Lee-Archer did not make a representation that McMillan would be shortlisted, nevertheless, I consider that, whatever the source of the belief, Mr McMillan did in fact believe that the McMillan consortium would be short listed. Indeed, in the light of the observations made by the evaluation team at the request for proposal stage, that was not an unreasonable assumption, although Mr McMillan would not have been aware of the report received from Mr Matthes. Mr McMillan was, however, aware of the standing of the McMillan consortium. He gave unchallenged evidence that JSM is the largest privately owned sheet fed printing company in Australia and has been performing significant printing work for Commonwealth Government departments, including the Department of Education, Employment, Training and Youth Affairs, the Department of Immigration and Multicultural Affairs, the Australian Taxation Office and the Australian Electoral Office. He also said that the consortium is by far the largest supplier of print, encompassing highly technical areas, to the Commonwealth Government. He said further that JSM has also being performing significant contracts for the New South Wales Government including the printing of the Government Gazette, Acts of Parliament, electoral material, the higher school certificate papers and other security documentation, together with innumerable other varieties of routine printing work. Knowledge of that background, coupled with the process of which the Request for Tender was the culmination, was a basis for a reasonable assumption that the McMillan consortium would be very likely to be short listed. In the absence of any indication that there was an aspect of the McMillan Tender which would disqualify the McMillan consortium from being short listed, I consider that Mr McMillan believed, on reasonable grounds, that McMillan Consortium would be short listed. That belief undoubtedly drove Mr McMillan's response to the Commonwealth's request for acceptance of clauses 10.5 and 10.7. Mr McMillan made a commercial judgment that, even if he did not unequivocally accept clauses 10.5 and 10.7, the Commonwealth would not reject the McMillan Tender from the short listing stage. Mr McMillan took the attitude that it would have been unreasonable for the Commonwealth to insist on an unequivocal commitment in circumstances where full information as to the terms and conditions on which core work was performed by AGPS, including price, was not available. That was not an unreasonable attitude from a commercial point of view. However, it does not follow that because that attitude was adopted in dealing with the Commonwealth, a different attitude might not have been taken if the Commonwealth had made clear that unequivocal acceptance of clauses 10.5 and 10.7 was fundamental to Package 3. Accordingly, while I accept that the case originally mounted by McMillan was different from that which was argued at the final hearing, I do not consider that that rendered Mr McMillan's critical evidence as to what he would have done unbelievable. Indeed, the lengths to which McMillan appears to have gone in the preparation of their tender indicates that they would have been prepared to reconsider the stance taken in the letter of 6 May 1997 if that stance was shown to be fatal to their being shortlisted. Accordingly, I conclude that, if Mr McMillan had been told of the consequence of non acceptance of the terms and conditions of clauses 10.5 and 10.7, he would have given a different response. Whether the response would have been completely unqualified is a matter for speculation at this stage. However, the response is more likely than not to have been one which satisfied the Evaluation Committee. It follows that the Commonwealth, in relation to the publication of the Request for Tender and subsequent dealings with the McMillan Consortium, engaged in conduct by which McMillan suffered loss or damage. That loss or damage was the loss of the opportunity to be short listed. It is almost impossible to quantify that loss or damage. By the Request for Tender, the Commonwealth reserved the right to short list additional tenderers. Further, by the Request for Tender, the Commonwealth made clear that it was not obliged to accept the highest or any of the tenders. There was no evidence to suggest that addition of the McMillan consortium to the short list of tenderers at this stage was inappropriate relief. Accordingly, I would, if s 2A makes the Trade Practices Act applicable to the conduct in question, make an order under s 87 of the Trade Practices Act requiring the Commonwealth to short list the McMillan Consortium pursuant to clause 1.8 on page 48 of the Request for Tender, to furnish to the McMillan consortium the information made available to short listed tenderers hitherto and to give the McMillan consortium the same opportunity to lodge a best and final bid as has been given to the other short listed tenderers. THE APPLICATION OF TRADE PRACTICES ACT McMillan accepts that the Commonwealth would be entitled to Crown immunity in respect of the conduct complained of except to the extent that s 2A of the Trade Practices Act has the effect of removing that immunity. It is necessary, therefore, to consider the effect of s 2A. Section 2A relevantly provides as follows: "(1) Subject to this section..., this Act binds the Crown in right of the Commonwealth in so far as the Crown in right of the Commonwealth carries on a business, either directly or by an authority of the Commonwealth. (2) ... this Act applies as if- (a) the Commonwealth, in so far as it carries on a business otherwise than by an authority of the Commonwealth; and (b) each authority of the Commonwealth ... in so far as it carries on a business. were a corporation." Two issues arise in relation to the effect of s 2A, namely: · Whether the Commonwealth carries on a business in relation to AGPS. · If so, whether s 2A applies in circumstances where the conduct in question is not engaged in in the carrying on of that business but rather in connection with the cessation of that business. If s 2A of the Trade Practices Act applies in the present circumstances, a further question would arise as to whether the conduct complained of was engaged in in trade or commerce, in order to attract s 52 of the Trade Practices Act. As I understand it, it was not seriously contended by the Commonwealth that, if s 2A is applicable, the conduct complained of was not in trade or commerce. Whereas the sale of a business or the assets of a business may not be the carrying on of business, it may nevertheless constitute activity in trade or commerce (see, for example, Bevanere Pty Ltd v Lubidineuse (1985) 7 FCR 325 at 330 and Morton v Black (1988) 83 ALR 182). I consider that the conduct in question was in trade or commerce. The critical question, therefore, is the proper effect of s 2A in the present circumstances. The term "business" is defined in s 4 as including a business not carried on for profit. Nevertheless, it is still necessary to find an activity which can be characterised as carrying on a business. Words such as "business" have "about them a chameleon-like hue, readily adapting themselves to their surroundings, different though they may be" (per Mason J in Federal Commissioner of Taxation v Whitfords Beach Pty Ltd (1982) 150 CLR 355 at 378-379). "The expression 'carry on business', in its ordinary meaning, signifies a course of conduct involving the performance of a succession of acts and not simply the effecting of one solitary transaction" (per Gibbs J in Smith v Capewell (1979) 142 CLR 509 at 517). However, mere repetitiveness is not sufficient to constitute carrying on of a business. System and regularity are involved in the carrying on of the business but it does not necessarily follow that one who has transactions of the same kind systematically or regularly is carrying on a business in those transactions. The example of regular deposits to a bank account is sufficient to explain that proposition. Absence of a system and regularity might deny that a business is being carried on but the presence does not necessarily establish that it is (see per Barwick CJ in Hungier v Grace (1972) 127 CLR 210 at 217).

Bevanere Pty Ltd v Lubidineuse

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