Canon Finance Australia Limited v Reliance Medical Practice Pty Ltd & Ors

ex tempore Judgment - revised

1. I am dealing with an application by the cross‑claimants to amend the cross‑claim to add additional averments relating to their case that the cross‑defendants have contravened s 18 of Schedule 2 of the Competition and Consumer Act 2010 (Cth) ("the Act").
2. This application to amend arises out of my ruling earlier today that the further amended statement of cross‑claim, as it stood at the commencement of the trial, did not support the allegations sought to be raised.
3. In making that ruling I referred at some length to factual matters, particularly relating to how the allegation arose, what notice of it may have been given to the responding parties and the events that occurred during Mr Moore's opening of the case on Monday, 27 August 2018. I will not repeat those matters and these reasons will assume some familiarity with those reasons from earlier today.
4. It is also necessary to say, by way of introduction, that I am dealing with the application in the absence of a proposed amended pleading. That is because after I made my earlier ruling Mr Moore sought an adjournment of the proceedings today to enable him to formulate the amendments he wished to make. Each of the other counsel ‑ Mr Morris QC, Mr Fernon and Ms Chan ‑ opposed me granting the adjournment. It seemed to me, when I considered the matter during the usual morning adjournment, that rather than adjourning the matter to allow the amendment to be formulated and then brought forward, only to have to deal with what I anticipated, from what I have been told already, would be the opposition of the responding parties, it was more sensible to approach the matter by, as it were, dealing with the substantive issue, that is to say, whether the cross‑claimants should be permitted to amend.
5. For that reason I acknowledge that Mr Moore was perhaps a little disadvantaged in that he did not have a polished document to speak to, and I will make every allowance for the disadvantage that I have imposed upon him. Essentially, the allegation that he wishes to raise, which affects the first, third and sixth cross‑defendants relates to the rental payment agreement of 25 November 2015. As I recounted in my earlier judgment, it is the cross‑claimant's case, or a case that they wish to propound, that that agreement: 1. is the only binding agreement; and 2. covers only a lesser part of what the first cross‑defendant, Voice Print & Data Australia Pty Ltd ("VPD"), said it would provide in what Mr Moore would characterise as pre‑contractual negotiations.
6. I have recounted this a number of times during the course of the trial, but the case is that, by reference to the rental payment agreement, VPD promised only to supply what has been referred to as the Mitel telephony system. To make things clear, it is said that by reference to that document it had resiled from any intention it ever had to supply the necessary software, hardware and services to establish what has been referred to as a LiveOffice WAN for the cross‑claimant's medical practice. As Mr Moore made clear during the dialogue between the bench and the bar table about the proposed amendments, it is an essential factual component of the case that he seeks to present now that the first cross-defendant resiling from what had previously been proposed and discussed could only have been dishonest. I stress actual dishonesty may not be an essential element of his statutory cause of action, but it does seem to be an essential factual component.
7. The broad outline only of the facts is that in a particular meeting of 30 September 2015 a presentation was made to the cross‑claimants by Mr Edwards, the third cross‑defendant, on behalf of VPD, which detailed the suite of full services and equipment that I have already referred to. Following that meeting, after some further contact by email and telephone, two quotes were provided on 13 October 2015: the first, showing separate monthly payments for the components and services necessary for the Mitel system; and the second, showing the necessary hardware, software and services for the LiveOffice network.
8. As Mr Moore points out, the email from Mr Edwards, the third cross-defendant, forwarding the quotes to the representative of the cross‑claimants described them in the subject field of the email as quotations. They were signed on 15 October 2015 by the duly authorised agent of the cross-claimants and returned to VPD. Mr Moore says that all that was to be provided was the Mitel system, notwithstanding the quotes, notwithstanding the signature, and notwithstanding the previous conduct, including representations made about the full suite, as I have put it, of equipment, software and services. He describes that as being deceptive conduct.
9. No further amendment is proposed against the second cross‑defendant. So far as the sixth cross‑defendant is concerned, the financier, initially, with respect, Mr Moore said that the case against it would be that it was involved in the contravention by the first cross‑defendant in accordance with the new allegations because it relied upon documents prepared by the first cross‑defendant, and received a benefit by arranging finance which assisted the first cross‑defendant to provide less than had been proposed. The sixth cross-defendant was a party to the rental payment agreement. That case was amplified in reply when Mr Moore said that the sixth cross-defendant was liable as a principal for a contravention of s 18 of the Act because it failed to advise the cross‑claimants of the change in what was proposed to be supplied.
10. In considering whether at this stage of the proceedings such an amendment should be permitted, a number of factors are relevant. They include what might be referred to as general discretionary considerations arising out of the efficiency provisions of the Civil Liability Act 2005 (NSW) ("Civil Liability Act"), and in particular s 56; the High Court's pronouncements in relation to such provisions arising from its decision in Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175; [2009] HCA 27 ("Aon v ANU"); and, given the advanced stage that these proceedings have reached, whether it can be said that the evidence actually led at the trial, which has been full‑ranging, fairly supports the case that the cross‑claimants now seek to make.
11. So far as the general discretionary considerations are concerned, I do repeat what I said in my earlier judgment that this new case had been to some extent telegraphed to the responding parties prior to the commencement of the trial. Mr Moore informed me from the bar table, and I accept what learned counsel says, that the first time that the cross‑claimants, through Dr Beckwith, received any documents which may have alerted them to this issue was when they received some documents provided by the plaintiff's solicitors in October 2016. The plaintiff had been seeking recovery under the terms of the rental payment agreement, and they have judgment in their favour, entered by consent. I observe in passing that the new case, based as it is upon the evidence of Mr Goodwin and Mr Benson, is that even the rental payment agreement itself limited its subject matter to hardware, software and services referable only to the Mitel system.
12. As I recounted this morning, Dr Beckwith's evidence was that these facts crystallised when he received advice based upon the evidence of Mr Goodwin and Mr Benson just prior to a mediation in July 2108. However, it stands to reason that, given that those reports were sought, there must have been a question arising out of the October 2016 documents that the cross-claimants' legal advisers thought it prudent to investigate. In any event, as I said this morning, the joint statement of issues and the written opening statement of Mr Moore can be seen and understood as having identified the new case as an issue. Nonetheless, it was not formally raised. It was not included in the further amended cross‑claim, learned counsel having taken the view no doubt that the language of that pleading was sufficiently wide to cover these matters. I have dealt with a submission to that effect in my earlier judgment and rejected it.
13. As I said this morning, objection was promptly taken when the matter was opened on. I allowed the matter to proceed until a convenient time when it could be argued in full as to whether: 1. the statement of cross-claim covered it; and implicitly 2. whether, if not, an amendment should be allowed.
14. Looking at general discretionary considerations, it must be said that in a commercial case that has been set down for trial for some time, however one looks at it, the issue was raised late and when it was raised it was not frankly alluded to as a matter which required amendment. Indeed, it is perhaps telling that the experienced counsel engaged for the responding parties missed the significance of the matter in a lengthy joint statement of issues, and also in Mr Moore's more succinct written opening. The matter was always one which would be controversial and should have been raised at the first available opportunity, and the cross‑claimants should have accepted the inevitability of the requirement of amending the pleading. Moreover, the issue was raised in the way I have described, which it may be apt to call "obliquely", at a time when all of the evidence on the existing pleadings had already been exchanged. That is to say, where by and large the substantial body of evidence upon which each party intended to rely had been prepared and served, although supplementary affidavits drifted in as often happens.
15. With respect, no satisfactory or full explanation has been provided as to why the matter was not looked at earlier and why there was a delay in coming forward to flag that the case had to be substantially recast to accommodate this new proposed allegation. This is a not-insignificant factor. It was inevitable that given the colour of dishonesty inherent in the allegation, as Mr Moore acknowledges, that the first and third cross‑defendants would need to review their evidence and undoubtedly recast it. It is difficult to over‑estimate the significance of that consideration. Given the lateness of the matter being raised, an adjournment application to recast the evidence was a likely outcome. And, of course, as the High Court recorded in Aon v ANU, adjournments cannot only be measured in terms of wasted costs, they also affect witnesses and litigants in non‑financial ways, which is especially significant, as Mr Morris QC pointed out, in the case of an allegation of dishonesty against a person engaged in business, or in sales, trading upon his or her good name.
16. Moreover, adjournments inevitably displace other litigants. I already mentioned in the course of the argument today, the pressures on this Court and on this Division, which are not unusual in superior courts throughout Australia. But the need for the proceedings to be prolonged or adjourned necessarily would displace the position in the list of other litigants who have a legitimate expectation that their cases will proceed and be listed in their turn.
17. All of those considerations are significant pointers, it must be said, against the exercise of my discretion to permit the amendment in this case. However, powerful as they are, one might hesitate to deny a litigant, even in the 21st Century, another opportunity to plead the case which the litigant really seeks to make. After all, it has been pointed out by the High Court that in the end the requirements of s 56 and the other efficiency provisions in the Civil Liability Act are concerned with achieving justice between the parties to civil litigation. The considerations referred to in the earlier decision of Queensland v JL Holdings Pty Limited (1997)189 CLR 146; [1997] HCA 1 are not entirely irrelevant, although they are not entitled to a central position in the exercise of the court's discretion to allow amendments, particularly at a late stage.
18. I have anxiously reviewed the evidence in relation to the case that Mr Moore seeks to advance. It seems to me that given the general discretionary factors which, as I have said, tend to weigh against exercising my discretion to allow the amendment, it is not irrelevant for me to consider the comparative strength of the case that is sought to be advanced. Mr Morris has argued that the case is one that has no prospects of success. It seems to me that I could not express such a strong opinion myself, given that the cross‑claimants have yet to close their case and there are a number of responding parties. I bear in mind the rule discussed by the Court of Appeal in Wickstead v Browne (1992) 30 NSWLR 1 concerning the inability of a court to non‑suit a plaintiff at the close of the plaintiff's case where there is more than one responding party. However, I do not think I need to go that far. It seems to me that it is sufficient if I, in weighing up the evidence, make a decision about whether the case is really fairly arguable in any palpable sense.
19. I am of the view that it is not. I have, having anxiously considered all the material that was referred to me by Mr Moore during his address over the luncheon adjournment, concluded that the case does not rise to a level where I could be satisfied it is fairly arguable in a way that, after all the evidence is in, would be capable of carrying the day. And it should be borne in mind when I refer to all of the evidence, that I have had the opportunity of reading the evidence that has been included in the court book on behalf of the responding parties in anticipation of witnesses being called.
20. I think a sufficient starting point is that the portion of transcript that Mr Morris referred me to during the cross‑examination of Dr Beckwith on Monday. I will set out the evidence (45.15-40T): "Q. So beyond what you have been told by the IT guys, if we can call them that, you have no personal knowledge as to whether the equipment supplied in December 2015 was limited to the telephone system or extended to the WAN system? A. I'd like to say yes with a comment that the WAN system, the WAN links could never have been installed because we never allowed access to the rest of our system to do so." I emphasise "we never allowed access to the rest of our system to do so." "Q. Yes, we understand that. You prevented any installation of the WAN system? A. I did. Q. Yes, now that was your decision? A. Mine. Q. No‑one from VPD suggested that they weren't willing to go ahead and install the WAN system? A. That's correct. Q. Indeed, they offered to go ahead and install the WAN system? A. That's correct. Q. But you refused? A. I did. Q. But you still maintain a belief that the rental agreement you signed was limited to the telephone agreement? A. I do maintain that belief." Leaving aside that last question and answer, about which I make no comment, these statements from Dr Beckwith are very amply supported by the contemporaneous documents which are contained in the court book.
21. It must be said that although when Mr Edwards sent the subscriber agreements so styled, dated 13 October 2015, he described them as quotations, they were signed and accepted by the authorised officer of the cross‑claimants Mr Phil Dimond on 15 October 2015. Those documents may have started life as quotes, but once signed, they on their face became agreements. Above the signature of Mr Dimond, under the heading, "Subscriber acknowledgement, important declaration," are the following words ‑ I do not quote them in full ‑ "By signing this agreement, you agree to be bound by this agreement, including the schedule and the terms of service attached to the schedule ... this is a contract 'for services'." That last phrase is delineated and rendered in bold type in the original.
22. The first subscriber agreement, GE5641, relates to the Mitel telephony system. The second subscriber agreement, GE5691, relates to the LiveOffice network. Now, Mr Moore placed quite some emphasis upon the affidavit, which is read in the proceedings proper, of the first cross‑defendant's principal, Mr Luke Briggs. In particular he relied upon what appears at para 67 and following. I will not set out that material in full. It is sufficient for me to say two things. The first is, acknowledging that this is not a claim based on contract but one based upon the statutory cause of action, to the extent to which identifying the contract is relevant, the objective theory of the law of contract applies. What parties to the contract say subjectively about what they intended, or what was intended, is entirely irrelevant and does not in any way govern or even inform the interpretation of the contract.
23. I accept the submission that all that Mr Briggs was saying was that until VPD had been paid in accordance with the terms of the agreement, no services would actually have been provided. But even that, with respect to Mr Briggs, is probably overstating it, as I will explain in a moment. The evidence, uncontradicted as it is, is that it was within the contemplation of the parties to this contract, to the knowledge of Dr Beckwith, that the contract would be financed by way of an arrangement with a third party provider. Mr Dimond was responsible primarily for putting together the necessary financial information for the financier's assessment of whether to advance the moneys. Dr Beckwith also had some limited role in that in providing his own personal information.
24. But even if one looked at those agreements as being in some way "subject to finance", finance was forthcoming in the total amount agreed in respect of the whole suite of equipment, software and services, and one need look no further than the document at page 831 of the Court Book upon which so much reliance is placed and which forms part of Ex E for the purpose of these applications. The subscriber agreements were not the only documents of a contractual nature between the cross‑claimants and the first cross‑defendant. There is a document entitled, "Project scope document," which refers to "quote ID GE5691" ‑ I interpolate, the quote that related to the provision of the LiveOffice network.
25. That document sets out in some detail the range of equipment, software and services to be provided. It relates not only to the LiveOffice but also refers to the telephony component. That document was also signed by Mr Dimond on behalf of the cross‑claimants, as it happens, on 27 November 2015, two days after the rental payment agreement was signed by Dr Beckwith. I do not propose to go through every single relevant document in the matter for the purpose of this interlocutory judgment. I do, however, wish to say that the documents which have been tendered bear out the cross‑examination of Dr Beckwith which I have referred to; that is to say, that the first cross‑defendant offered to go ahead and install the LiveOffice WAN system, but that the cross‑claimants refused to allow that to happen.
26. There were two officers of the first cross‑defendant who seem to be involved in this contract. One was Mr Edwards, the third cross‑defendant, and the other was Ms Zoe Pitchers (who is not a party to these proceedings). Between at least mid‑December 2015, after the finance had been arranged and advanced, Mr Edwards and Ms Pitchers contacted officers of the cross‑claimants on several occasions in order to implement not only the installation of the Mitel telephony system, but also the LiveOffice WAN system. Indeed, I will allow myself to quote from an email of Mr Edwards of 16 December 2015 where he said this: "As we move through the different silos of the project (WAN, network, telephony, desktop environment) we will add the project lead and team member (ie Mitel engineer; transitional engineer for DaaS, et cetera) to the chain and remove, once the project for that particular product is finalised and handed over to [the cross‑claimants]." From then on there are several emails from either Ms Pitchers or Mr Edwards, either arranging for persons to attend the cross‑claimant's premises to implement the contracts, or to attempt to make those arrangements. It seems to me that the documents which appear at pages 835 and 839 of the Court Book are of some significance, because they are draft authorities enabling the first cross‑defendant to, as it were, take over the conduct and control of the cross-claimants' existing systems as the new provider of IT services for the cross‑claimants. There is no limitation of the authority sought to installers of telephony services.
27. It perhaps behoves me to say that signs of trouble emanated really from the cross‑claimant unilaterally. The early marker in that regard might well be an email on 5 January 2016 from Mr James Beckwith, who was the assistant administrative manager at the relevant time (at CB 837) which, amongst other things, asks for a copy of the service agreement, information about what is included, the dates the agreements were signed "and what the cooling off period was." Mr Edwards wrote back from his holiday overseas providing the information required, but pointing out that there was no cooling off period.
28. On 6 January 2016 there was an internal management meeting of the cross‑claimants' officers where the financial position of the organisation was discussed. A minute was recorded of concerns in relation to the contract with VPD and a resolution passed to attempt to vary the payments in relation to it.
29. On 14 January 2016 at 8.43 am the new finance and administration manager wrote to Ms Pitchers and Mr Edwards by email in these terms: "I have been provided with instruction from the director of Reliance Medical to inform you that we wish to halt any further installation of the IT and telecommunications and to cease any future payments including this month's expected payment." What is relevant about that for present purposes is the reference to the "installation of the IT and telecommunications". On the same day at 1.37 pm, Dr Beckwith himself wrote to Mr Edwards pointing out that the cross‑claimant "is reconsidering this contract" and explaining why that was so. For present purposes it is not necessary to go into all the additional details, but there was no mention in that email that the cross‑claimants said that they were not receiving everything they had bargained for.
30. I accept that the case is not quite closed, and I also accept that the cross‑claimant potentially could obtain dividends from the evidence introduced in the case of the responding parties. However, looking at that evidence of Dr Beckwith, which of course I have absolutely no reason to doubt, and considering the actual contemporaneous documents, I am not satisfied that the case sought to be propounded, based upon the deficiencies in the rental payment agreement, is fairly arguable. Whatever the explanation for the deficiencies in that written agreement, it seems to me that it cannot be fairly argued that the total arrangement between the cross‑claimants and the first cross‑defendant did not extend to everything that had been promised in the scope of the project document and in the subscriber agreements, of 27 November 2015 and 15 October 2015 respectively.
31. Assessing the strength of the proposed case through the prism of the general discretionary factors to which I have referred, I am not satisfied that leave should be granted to the cross‑claimant to amend the further amended statement of cross‑claim to propound the new case.
32. I should say this, that it could be argued that the case against the sixth cross‑defendant is a little different because of the particulars that were given in August of this year in relation to the matter where the deficiencies of the rental payment agreement are mentioned. However, reading that letter as a whole, I am not satisfied that that was a complaint that was then raised against the sixth cross‑defendant. If one looks at the whole of that letter, where it must be said the cross‑claimant's case is set out in much detail, the deficiencies in the rental payment agreement are not actually said to be part of the case against the sixth cross‑defendant. (That matter is set out at para 26 of the letter on page 4 at 1216 of the Court Book.) The case against the sixth cross‑defendant seems to be based on what is said at paras 21 and 22. And what is alleged is that it is implicated in the contravention of s 18 by the conduct of Mr Edwards and Mr Altenburg.
33. On those paragraphs the case in a nutshell seems to be that if the sixth cross‑defendant had not been involved, then the finance would not have been secured and the contract would not have proceeded. There are also allegations relating to the closeness of the commercial relationship between the sixth cross‑defendant and the first cross‑defendant, however nowhere, with respect, is it said that the sixth cross‑defendant was in any way privy ‑ and I do not use that expression in any technical way ‑ to the representations made on 30 September 2015 or that the representations made in relation to the subscriber agreements or the scope of works agreement. Rather, on all of the evidence, notwithstanding it having a relationship to facilitate finance for contracts in which the first cross‑defendant was involved, its role was that of securing the finance to enable the contract to be completed. It seems to me that there is no evidence to suggest that it did other than assess an application for finance in a business‑like way.
34. The evidence, including the evidence in Ex E, that Mr Moore relies upon, suggests that so far as there is an attribution or apportionment of the whole of the contract price, into what might be regarded as the Mitel networking equipment, that apportionment or attribution emanated on the facts I am asked to assume in favour of Mr Moore's argument, with the first cross‑defendant and not the sixth cross‑defendant.
35. I have looked at the contract between the first and sixth cross‑defendants for the facilitation by the sixth cross‑defendant of finance for contracts or transactions in which the first cross‑defendant was engaged. It is certainly the case that there were provisions for sharing profits generated. However the material at pages 729 and 730 of the Court Book under the heading "Compensation," which Mr Moore relied upon specifically, seemed to suggest that the attribution of the whole of the purchase price to hardware was to the first cross‑defendant's commercial disadvantage given that profit on finance for hardware was split equally between the first cross‑defendant and the sixth cross‑defendant, but that the first cross‑defendant was entitled to the whole of the profit in respect of "LiveOffice/cloud services" inertia income received in respect of a transaction (CB 730 at para 3.4).
36. For these reasons I refuse the application for leave to amend the further amended statement of cross‑claim.

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