Civic Transport Services Pty Ltd v Wacher Pty Ltd [1999] VSC 290

2. Civic Transport Services Pty Ltd (Civic) has carried on business as a transport courier since 1986. Paul Anthony Shannon is the managing director. In its business, Civic seeks to maximise the use of computers and the customisation of software in order to gain a competitive edge over its competitors and to assist in the minimisation of cost.

5. "Carry" is a software package specifically designed for use by courier companies. In 1988 Carry was owned and marketed by Intercept Computers Pty Ltd (Intercept). Carry was described in evidence as follows:

Carry is a special purpose integrated system for courier businesses. Carry automates the booking of jobs, placing orders with drivers, notification to drivers of bookings made as well as preparation of customer invoices and statements. Carry also has extensive reporting features, including a debtors system, which can be used to assist in the efficient management of a courier business. Carry also has built in administrative tools which allow even a novice user to perform required system administration tasks including back-up, archiving and storage of user data, creation of new system users, change of system date, start of day and end of day procedures. The user simply follows the screen prompts displayed by Carry to perform those functions.

9. In June 1988, Civic entered into a licence to use the Carry software. The software was modified or customised in a number of respects to suit Civic's particular requirements. It was Civic's policy that "its computer software should be adapted to its business methods, rather than the other way around". As so customised it was unique and central to the conduct of the business in which speed and accuracy in handling customer orders is vital. The customisations were carried out, in order, by Intercept, Saleven Pty Ltd (Saleven) and Nucleus Business Systems Pty Ltd (Nucleus). Mr. Peter Coy (Coy) controlled both Intercept and Saleven, to which Intercept's business was transferred. Nucleus, which acquired the business of Saleven on 1 May 1991, was controlled by Mr. James Taylor (Taylor) and his family. Coy and Mr. Nicholas Cramey (Cramey) were involved in carrying out the customisations for those companies.

12. In or about December 1991 Nucleus agreed with Civic that it would provide Civic with support services for the Carry software for the period 1 January 1992 to 31 December 1992. This is called the software support agreement (SSA). This agreement replaced an earlier SSA with Nucleus and prior to that with Saleven and Intercept respectively. Under the Nucleus SSA, Civic paid an annual fee of $8,500 for standard support in respect of which the agreement states that:

With standard support users have access to our support team for advice on the use of the application systems listed on the front of this agreement. This advice may be provided by telephone, fax or dial-up connection to your computer. Investigation of program problems and their rectification via software change releases is also provided where the software is still classed as supportable (see Software Support section).

Advice on the use of the Unix Operating System and limited support in identifying hardware problems is also provided. Engineering support including software support for hardware problems and support for applications not covered by this agreement is only available on a time and expenses basis.

17. The agreement went on to state various services and the terms of provision including charging therefor. The agreement provided for four free hours of support per month. Any services provided in excess of this allowance were billed at a specified rate.

20. It should be noted that the Unix Operating System was part of Civic's computer system but it was separate from Carry. Together with the computer's hardware, the Unix Operating System provides an operating environment in which application programs, such as Carry, may be run.

23. At that time, Civic did not employ an "in-house" system administrator and Shannon, who does not have any formal training in computers had the main responsibility for the everyday operation of Civic's computer. Shannon says he relied upon the SSA as providing the support which would allow any problem which arose to be expeditiously dealt with. Most often, Shannon spoke to Cramey about problems with Carry and, from time to time used Unix commands, which were conveyed to him by Cramey, to rectify problems. It was through this that Shannon says he gained some familiarity with Unix commands.

26. In March 1992, Civic's directors decided to form a separate company, First Transport Services (First), to operate independently from Civic but in the same business. As Civic's computer, a Honeywell Superteam computer (the Honeywell computer), had become overloaded with the volume of Civic's work, it was decided that Civic would acquire a more powerful computer and that the Honeywell would be transferred to and used by First.

29. In June 1992, Civic purchased an ICL DRS 4000 (the ICL computer) and on 29 June 1992 entered into an agreement with Nucleus for that company to convert Civic's customised Carry and Civic's data so as to allow it to be used on the ICL computer. This was necessary because the ICL computer used different data formats to those used on the Honeywell computer. Nucleus rendered an invoice for that conversion dated 29 June 1992, the price being $26,700. The invoice specified the software and services as follows:

Conversion programs for file transfer from Superteam to 486

The reference to the Superteam is a reference to the Honeywell computer and the reference to the 486 is a reference to the ICL computer.

40. The ICL computer was delivered to Civic's premises in early August 1992 and made operational by Mr. John Kwan (Kwan), a computer engineer employed by ICL.

43. The installation and testing of the converted program and data on the ICL computer was carried out by Mr. Mark Salisbury (Salisbury), an employee of Nucleus, between 19-21 and 26-29 August 1992. Subsequent to the installation, Civic encountered a number of significant problems with Carry which resulted in correspondence being exchanged between Civic and Nucleus. One of the problems mentioned in this correspondence was with a program called "Civback". Civback was a computer program specifically written for Civic to allow it to make back-up copies of the customised Carry. It was installed by Salisbury on 29 August 1992, the time at which he was at Civic's premises to carry out the installation and testing of Carry on the ICL computer. Civback was subsequently used to make back-up copies of the customised Carry onto 150 megabyte magnetic tapes, the type of tape Shannon says that Salisbury told him to use on the ICL on 21 August 1992.

46. By an agreement dated 9 October 1992 Wacher Pty Ltd (Wacher) purchased the business of Nucleus (the agreement) which, by the agreement, was defined to consist of the goodwill, software, fixed assets, support contracts and work-in-progress. The expression "software" was defined to include the intellectual property rights in Australia in the computer program known as Carry, and the expression "support contracts" to mean and include the interest of Nucleus in the maintenance and support contracts entered into by and between Nucleus and the licensees of the software referred to in the third schedule. Civic was so named in the third schedule and was also named in the second schedule as a duly authorised licensee for use of the software. By cl.17 Wacher agreed that from completion under the agreement the obligations of Nucleus to the various licensees "shall be and become obligations of" Wacher which it agreed "fully and faithfully to carry out and perform" and Wacher released Nucleus from and indemnified it against all claims arising out of the support contracts. The date of completion under the agreement was the date of signing, which was 9 October 1992. By cl. 9 Nucleus promised to discharge all debts and liabilities which it had incurred in respect of the business and not discharged as at 9 October 1992, and to indemnify Wacher in respect of them.

49. Shannon was advised of the purchase on 14 October 1992 at a meeting at Civic's office between Shannon, Taylor and a Mr. Vic Whiteley (Whiteley), who introduced himself as the general manager of Nucleus.

52. Civic now sues Wacher for damages it claims to have suffered "when the system crashed on 5 and 6 November 1992" at which time it was found that "there was no relevant back-up of the customised program", as counsel described the position in opening. The case raises issues of fact and law including technical matters concerning Civic's Carry software and what happened to it, as I refer to below, which allegedly caused Civic loss. A number of questions of a technical nature were previously referred to a special referee, Mr. P. K. MacGregor, who provided reports dated 28 November 1996 and 7 May 1997. Those reports were adopted by the Court by an order I made on 6 June 1997, the adoption of the second report being subject to an amendment noted in an exhibit to an affidavit which is more particularly referred to in my order.

55. In Civic's fourth further amended statement of claim (which I will refer to simply as the statement of claim) a number of causes of action are pleaded. There is a defence but no counterclaim. I tried the case on liability only. During the trial counsel for Civic abandoned a number of the bases of claim alleged in the statement of claim. In summary, the allegations in the pleadings are as follows.

58. Civic alleges that on or about 14 October 1992 it agreed with Nucleus and Wacher that Wacher be substituted for Nucleus as a party to the SSA. That is, that there was a tripartite novation agreement. Wacher denies the alleged agreement. Civic makes an alternative plea that on or about 14 October 1992 it consented to an assignment to Wacher of Nucleus's rights and obligations under the SSA. This alternative plea was denied by Wacher and was not pressed by counsel for Civic in his final address and I take it to have been abandoned. However, counsel for the plaintiff took a further alternative point in final address that was not pleaded; it was that in about late September or on 14 October 1992 an agreement was made between Civic and Wacher whereby Wacher agreed to provide to Civic the services formerly provided by Nucleus under the software support agreement. Counsel for Wacher objected that it was not open to the plaintiff to raise this alternative unpleaded case at such a late stage in the trial. To this objection counsel for the plaintiff submitted that the point was implicit in the statement of claim, and that the question whether an agreement (which he submitted could be implied) was made was merely a conclusion of law to be drawn from the evidence which had been given. If necessary he sought leave to amend.

61. Following the allegation of a novation or an assignment, the statement of claim alleged (in par's 8-11) that Wacher made certain representations and warranties to Civic in trade and commerce and that in reliance thereon Civic entered into the agreements alleged and sought services and advice from Wacher. The allegation of representations and warranties was picked up and relied upon in par's 24 and 25 in which it was alleged that Wacher had acted in contravention of s 52 of the Trade Practices Act. Counsel abandoned all these pleas in his opening address. He also abandoned other claims based on representations, advice and s.52 alleged in par's 21-25, and of an agreement to provide Civic by 31 January 1993 with a replacement customised version of Carry in par's 28 and 29. That left remaining a case in negligence in the provision of software support services including advice in relation to making a back-up copy of the application systems, including Carry, the effectiveness of Civback and matters of modifications to the Civback program. The case in negligence has various aspects and is pleaded in a number of paragraphs, some of which have been abandoned. I defer until later detailing the ways in which the case in negligence is put.

64. In the result counsel confined Civic's case to and relied only upon breach of the SSA by which, it is submitted, Wacher was bound, and negligence.

67. The damages which Civic claims to have suffered as a result of breach of agreement and negligence is particularised in the statement of claim as follows -

Costs of programming and systems support services to recreate Carry

Loss of profits and the opportunity to earn further profits in the period November, 1992 to December, 1996 being an amount between $1,892,492 and $3,760.219, of which the plaintiff claims

Salaries and wages of additional staff required to be employed by reason of the loss of Carry

71. As mentioned above, the trial was had on liability. Damage is of course an element of the cause of action in negligence. Despite this it was convenient to separate the aspect of damages from the other issues. One reason for this is that aspects of the damages claimed, in particular the claim for loss of profits and of the opportunity to earn profits, have seemed to me to be appropriate to refer to a special referee. Without Civic going into proof of its damages, the evidence is sufficient to indicate that it may have suffered some loss, indeed it is clear that it was inconvenienced in its business and had to take remedial steps to re-establish its software system. I make no finding as to whether any loss was suffered in fact by reason of any act or omission of Wacher in breach of agreement or that constituted negligence, or as to the amount of any loss and damage. On this basis, namely, that Civic may have suffered loss and damage, although no such loss and damage is yet found, the trial was conducted. That was a convenient and practical way to proceed in this litigation.

74. Wacher denies liability. It denies that there was a novation or assignment of the software support agreement or that it became bound to Civic thereunder. It denies the claim in negligence. The defence makes some positive allegations as to relevant events. It is not necessary to set them out at this stage. The defence further alleges that Civic "was the author of its own loss" or was guilty of contributory negligence or voluntarily assumed the risk of loss (par. 31). These allegations are supported by 18 paragraphs of particulars relating to Civic's handling of Carry, the matter of back-up and Civback. The defence concludes with a plea (par. 32) of what is known as an Anshun estoppel (see Port of Melbourne Authority v Anshun Pty Ltd [1981] HCA 45; (1981) 147 CLR 589). It is alleged that the claims now made by Civic could and should have been made in a proceeding in the Local Court of New South Wales in which Nucleus was plaintiff and Civic was defendant in which judgment was given on 27 November 1994 following a trial. Civic denies these pleas made in par's 31 and 32. I shall deal with the issues later.

77. At the conclusion of the trial I reserved my decision. A little over a week later, I heard counsel on an application by Civic to re-open its case. The application was based on a submission by Wacher's counsel in final address that Shannon had not relied on Civback on the critical day of 6 November. This, Wacher's counsel had submitted, was to be seen in the fact that Shannon had given the one tape he had used to back-up with Civback to Kwan "to do with as he saw fit", even to the extent of overwriting it. Thus, it was said, even if Civback had worked, "it was sacrificed" because once Kwan had done his overwriting it would not have retained "any copy of the Carry software".

80. Counsel for Civic said that if this submission raised only a point of reliance he did not seek to re-open his case. But he did seek to re-open if, as he apprehended was the case, it went to the issue of causation of the plaintiff's loss and damage. He submitted that the point was not pleaded on the issue of causation, had not been put to Shannon or Civic's witnesses Mr. Donald Harry Greensmith (Greensmith) and Dr. Peter George Thorne (Thorne), or the special referee, and accordingly it should not be considered. But, lest I be of the opinion that Wacher is entitled to rely on the point on the issue of causation Civic sought leave to re-open its case to recall Greensmith and Thorne and lead evidence from them as to why Wacher's argument is wrong in fact. The effect of their proposed evidence is that if the back-up tape had contained a copy of Carry only a limited amount would have been overwritten by Kwan and that it would have been a relatively minor task to recompile or recover the lost Carry programmes. Counsel for Civic said that this evidence had not been lead as they had not perceived the causation point as being an issue in the case.

83. Counsel for Civic suggested as an alternative to the reception of further evidence that I might refer to the special referee the question whether the Civback tape had backed-up Carry and, if it had, whether any and what part of the backed-up Carry would have remained on the tape after Kwan had written material to it. Indeed, it should be noted that the same suggestion was made by Wacher's counsel at the very conclusion of final addresses at the trial. Civic's counsel said that if I referred the point to the special referee he would withdraw the objection that the point had not been pleaded. Otherwise he wanted a ruling on whether Wacher could rely on the point, and if it could, leave to re-open was sought.

86. It is conceded that Wacher's defence denied causation. Civic knew that it had to establish causation of its loss and damage. It had to establish that the failure of Civback (to back-up) caused the loss of Carry. This it set out to do. Further the particulars to par.31 of Wacher's defence contain extensive reference to the matter of back-up and to alleged failures of Civic to act with care in its own interest in that respect; see particulars (g), (m) and (r). These particulars alone and in the context of the case as a whole, should have put Civic on its guard to consider all aspects of its conduct in the matter of back-up and what was on the tape when it was given to Kwan and remained on it after he completed his work.

89. Whether or not the submission of Wacher's counsel contains a point of substance on causation, the point arises in an area of time and fact that was always of crucial importance. Civic put its case as it was advised. The further evidence now to be lead if the case is re-opened was always available in the sense that with reasonable diligence it could have been adduced at the trial. But the evidence is new in the sense that by it the plaintiff seeks to establish an answer on the causation issue. It is an answer that is contrary to the way Civic conducted its case at trial, namely, that Civback did not effect a back-up as it should have. Not only was this avenue of approach (and evidence) available at trial but, similarly, the question referred to above could have been directed to the special referee upon the references to him in 1996 and 1997. Furthermore I accept that counsel for Wacher conducted the case in a way that would have differed if Civic had conducted the case as it now desires to do.

92. I have had the management of this proceeding since the issue of the writ of November 1995. There have been two reports from the special referee. One trial fixture was lost by reason of a late amendment by the plaintiff. It has been a closely fought proceeding with numerous directions hearings. We have now had a trial, conducted with efficiency and competence. Each party has had a fair opportunity to call evidence and make submissions. All, doubtless, at considerable expense.

95. It is important that there be finality in litigation and in the circumstances of this case, considering all that has been said, it is just that there be no further reference to the special referee and that the case not be re-opened. I express this conclusion without having considered whether there is substance in the apprehended point of causation. It is sufficient that in my view Civic was on notice as to the need to establish causation and that the matter of what was or was not on the tape when it was given to Kwan and what remained on it were of evident relevance. The plaintiff chose to run a case that the back-up had not worked. It did not run a case that it had worked and that Kwan had overwritten part only. No alleged failure of Wacher to specifically raise the point in addition to its denial on causation can obliterate that fact. The plaintiff's decision not to go into both matters at the trial, as it would now seek to do, has resulted in the position in which, as a matter of justice in all the circumstances, the court should say that a fair trial has been had, that the case should not be re-opened to lead evidence which with reasonable diligence was available at the time of the trial and the purpose of which is to establish a new point that was available, and that judgment should now be given upon the case thus conducted.

99. Evidence was given on behalf of Civic by Shannon and Mr. David Patrick Finch, a director of Data Express Pty Ltd, a courier company. Expert evidence was given by Greensmith, a computer consultant and a director of J D Software Pty Ltd, and Thorne who is an Associate Professor of Computer Science at the University of Melbourne

102. Evidence was given on behalf of Wacher by Whiteley. Expert evidence was given by Mr. Roy Mark Ferguson, general manager of distribution and financial solutions for, and a director of, Wacher which is now called Sanderson Wacher Pty Ltd. The Sanderson Group PLC, a UK-based public company, acquired Wacher in 1996.

105. Cramey was subpoenaed by Wacher on or about 20 April 1998 to give evidence in this trial. The subpoena was received by him at his address at 91 Darkwood Road, Thora, New South Wales. He wrote to Wacher's solicitors enclosing a letter from a Dr. Ian Hayes, staff specialist psychiatrist at the Mid North Coast Health Service. Cramey said that he is on a disabled pension due to ill health, that he didn't have the money to come to court and that his "mind and feelings are not up to it." The doctor's letter, dated 25 September 1997, advised that Cramey had been known to the Mental Health Services in the Coffs Harbour region since January 1995 during which time he had had three admissions to hospital. He said that Cramey presented with enduring symptoms of post traumatic stress disorder and a mixture of anxiety and depression which are exacerbated by stress. Although dated earlier Dr. Hayes' letter supported Cramey's opinion that attendance at Court would cause him stress and be likely to impair his mental health. On this basis, counsel for Wacher submitted that it was not reasonable that Wacher should call Cramey as a witness.

108. Counsel for Civic submitted that the medical certificate from Dr. Hayes "is light on and simply amounts to Dr. Hayes saying that Mr. Cramey said that he was stressed and that Dr. Hayes accepted that it would be hard for him to give evidence". Further, Counsel relies upon an affidavit sworn by Mr. Mark Worsnop, the solicitor for Civic, in which he deposed that he had spoken to Cramey in relation to the subpoena and that Cramey had said that he was not supplied with any conduct money to attend the Court. Counsel for Civic submits that if Wacher had been genuine in its desire to compel Cramey to give evidence it would have called on the subpoena and then required Cramey to attend to explain his non-attendance. Accordingly, counsel submitted that the rule in Jones v Dunkel [1959] HCA 8; (1959) 101 CLR 298 should be applied so as to draw an adverse inference against Wacher that Cramey's evidence would not have assisted Wacher's case.

111. I note that in the covering letter to the subpoena served on Cramey the solicitors for Wacher undertook to meet the reasonable expenses in complying with the subpoena and I do not think that the issue of conduct money was the reason behind Cramey's refusal to attend. I accept that the reason for Cramey seeking to be excused from attendance is that he is suffering from some sort of psychiatric disorder. In the circumstances I find that it was not reasonable to expect Wacher to call Cramey as a witness or, to put it another way, that it was explicable and a reasonable course that Wacher did not seek to call Cramey. I will not draw the inference against Wacher that Cramey's evidence could not have assisted its case (see Payne v Parker (1976) 1 NSWLR 191 at 202).

114. There are other instances in which counsel for both Civic and Wacher say there has been a failure to call certain witnesses in circumstances where it was natural that the party would call the witness or that it was to be reasonably expected that the witness would be called (Payne v Parker at 201-2). It is submitted that in the circumstances the rule in Jones v Dunkel should be applied. I will deal with these submissions at the relevant time.

117. There are three other matters of evidence that I should mention at this time. The first is the matter of the evidence given in the proceeding in the Local Court of New South Wales, mentioned above in relation to the plea of Anshun estoppel. In his opening, counsel for Civic indicated that the evidence given by various officers of Nucleus and Civic in that proceeding might come into play in this proceeding. Counsel acknowledged that because the evidence in that proceeding was given for Nucleus and not Wacher there may be a limitation on the extent to which Civic can rely upon the evidence. At that point counsel for Wacher indicated that any reliance by Civic on the evidence given by Nucleus as material against Wacher was disputed. The evidence in the New South Wales proceeding was referred to during the trial. In particular, it was used extensively by counsel for Wacher for the purposes of cross-examination. At the conclusion of the trial, counsel for Civic submitted that the whole of the transcript of evidence should be tendered not just the pages which were referred to. Counsel for Wacher, although having no objection to the transcript being retained as a whole in the Court Book, submitted that its inclusion in the Court Book should not be taken as a tender of it as evidence in this proceeding. I allowed the whole of the transcript to remain in the Court Book on the basis that its primary purpose was for the defence of the Anshun estoppel and for the purpose of establishing what was said, as distinct from establishing the truth of what was said before the magistrate.

120. The next matter of evidence is that of Shannon's diary, or typewritten notes of original hand-written notes no longer in existence. Counsel for Civic submitted that the diary was used in cross-examination for the purpose of testing the accuracy of Shannon's recollection and accordingly the whole of the diary is relevant to see the totality of the way in which he recorded the matters for the purpose of testing his recollection rather than as substantive evidence. Counsel for Wacher submitted that as he had cross-examined about one day only of the diary, only that day should be admissible. I admitted the diary of Shannon as to 6 November 1992 only.

123. The last matter of evidence is that of the notebooks of Greensmith. Counsel for Wacher had no objection to the whole of the notebooks going into evidence and accordingly they were admitted as such.

127. As I mentioned above, the relevant events about which Civic sues occurred on 5 and 6 November 1992. I shall now deal in detail with what happened on those days and where relevant, refer to the special referee's opinion.

130. On the morning of 5 November as Shannon was travelling to Civic's office he was advised that there was a problem with the system. When Shannon arrived at the premises he observed that only about half of the computer terminals were working and that those which were working were not operating fully. On examining the computer console, Shannon says that he saw a message which included the words:

Shannon says that he made a note of that message at the time however the note was not in evidence before me. Shannon says that he was then informed by Ms. Michelle Stocks, Civic's then office manager, that she had spoken to Cramey who had advised her that the message indicated a hardware problem and that ICL, the hardware supplier, should be contacted. Shannon says that following that conversation he telephoned Cramey to discuss the matter. During this conversation, Shannon says that Cramey told him that Civic's computer had run out of "inodes" and that the kernel of the UNIX operating system had to be reconfigured to provide more inodes.

135. I should at this point note that the meaning of this error message (or more precisely the error message "NOTICE: s5ialloc - Out of inodes on EAFS dev hdl (1/42)") was explained by the special referee in his first report dated 28 November 1996, as follows:

[The error message] means that the file system /u (which contains the Carry software and data) on the hard disk of Civic's computer has run out of inodes and consequently no new files can be created in that file system on the hard disk. Unless or until the maximum allowable size of the inode list is increased by the system administrator (assuming it is not already at its absolute limit of 65488), or alternatively, some files are deleted from the file system, the message will reappear every time an attempt is made to create a new file in that file system.

The technical cause of the error message was in the opinion of the special referee as follows:

For each file in a Unix file system there is a record on disk called an inode (inode is a contraction of the term "index node"). The inode associated with any given file contains a description of the layout on disk of the data in that file and other information such as the type of the file, the file's owner, and access permissions. When a file is created, the operating system allocates a new inode to that file. When a file is erased, the operating system releases the inode that it allocated to the file when the file was created. The number of inodes available to each file system on a hard disk - and hence the maximum number of files that can reside in that file system - can be specified by the system administrator; otherwise it is set at a default value determined by the number of logical blocks allocated to the file system. When a process attempts to create a new file in a given file system, the operating system kernel tries to allocate an inode to the file being created. If the number of inodes already allocated within that file system is equal to the maximum size of the inode list for that system, the request to create a new file fails and the kernel returns an error code to the requesting process. In the present case, [the error message] indicates that a process (s5ialloc) has issued a request to the operating system kernel to allocate an inode for a new file within an EAFS file system /u (which contains the Carry programs and data), and the kernel, in attempting to satisfy the request, has found that there are no free inodes in the inode list of that file system; that is, the maximum size of the inode list, as currently configured, has already been reached. Since every file within a file system requires an entry in the inode list, the kernel's inability to create a new inode means that no new files can be created in /u.

141. The term "kernel" is defined in the special referee's first report as "the part of an operating system that among other things is responsible for allocating hardware resources to the processes that make up the operating system or to application programs running under the operating system."

144. According to the special referee's first opinion, the appropriate response to the error message was either to remove unnecessary files from the system, or if this was not possible, to recreate the file system with a larger inode list (which is what Cramey advised Shannon to have done) and if the problem persisted to investigate whether there was some application program that was erroneously creating the unnecessary files.

147. Following Cramey's advice, Shannon says that he telephoned Kwan at ICL who agreed to attend Civic's premises that afternoon to carry out the reconfiguration.

150. Kwan attended Civic's office that afternoon and worked there for approximately six hours. When he finished, Shannon says that Kwan told him that the Unix kernel had been reconfigured to provide more inodes. After Kwan left, Shannon says he used Civback to make a back-up copy of Carry.

153. The following day, Friday 6 November at approximately 10.00 am, Shannon says that whilst he was carrying out the "start of day" procedure, the computer "crashed", that is, it stopped working. The computer then initiated an automatic re-boot of Unix, following which Shannon says that he saw a message on the computer console which included the words:

I note that the message was recorded as such in Shannon's written notes of 6 November 1992.

158. Shannon then telephoned Cramey and advised him of the message. After Shannon confirmed that the kernel had been reconfigured the previous day, Shannon says that Cramey told him that "the problem is that Unix is unstable. Call ICL again and get them to rebuild Unix."

161. The meaning of this error message was also explained by the special referee in his first report. I should mention that the actual form of error message put to the special referee in the final form of questions reformulated in my order of 25 October 1996 and that contained in Civic's amended statement of facts, was:

NOTICE: clalloc - Out of space on EAFS dev hdl (1/42)

The special referee noted in his first report that no message signifying an "out of space" condition appears on the printed extracts of the system log which he had been given and nor was he able to find any such message in any documentation of SCO, the manufacturer of the particular version of Unix on Civic's ICL computer. Accordingly, the special referee substituted the following form of error message, as that was the form which he observed when a file system runs out of disk space:

167. The special referee explained the meaning of the message as follows:

[The error message] means that the file system /u on the hard disk of Civic's computer has no more space for the creation of new files or for the allocation of further disk blocks for expansion of existing files. Unless and until some files are deleted from the file system in order to free disk space, the message will reappear every time an attempt is made to write data to the disk within the file system.

171. The technical cause of the error message was explained by the special referee as follows:

...There is also an upper limit to the total disk space that all the files within a file system can occupy. This limit is set by the system administrator when the file system is created, using the mkfs command to specify the number of 512-byte blocks of disk to be allocated to the file system.

The [error message] indicates that a process (clalloc) has issued a request to the operating system kernel to allocate disk space for a new file or for the expansion of an existing file within the EAFS file system /u (which contains the Carry programs and data), and the kernel in attempting to satisfy the request, has found that there are no free blocks of disk space available to meet the request.

176. In the opinion of the special referee in his first report, the appropriate response to the "no space" error message was to remove any unnecessary files; for a longer term solution and if not all of the physical space on the disk was used, to create and mount an additional file system (which is what Cramey advised Shannon to have done), reduce disk fragmentation and if the problem persisted to investigate whether there was some application program erroneously creating unnecessary files.

179. Counsel for Wacher contends that, given the special referee's finding that no "out of space" error message appeared on the computer's system log, Shannon's evidence that such a message appeared is unsatisfactory and should not be accepted. This submission ignores the fact that another question, namely "Does the absence of any "NOTICE: clalloc - No space on EAFS dev hdl (1/42)" message in the DRS4000 SCO Unix system log for the period 29 September 1992 to 6 November 1992 mean that an out of space condition did not exist at that time?" was put to the special referee and answered in his second report dated 7 May 1997 as follows:

Not necessarily. There appears to be at least one rare set of circumstances under which an out-of-disk-space condition on /u file system (1/42) would not be recorded in the log file.

After discussing the circumstances in which this might occur, the special referee states:

Therefore, in my opinion, my tests of November 1996 do not support the contention that an out of disk space condition did not occur in that period. On the other hand, I have seen no evidence that an out of disk space condition did occur in that period.

185. I accept, on balance, that an error message indicating an out of space condition did occur. In coming to this conclusion, I take into account that a "no space" message is recorded in Shannon's notes of 6 November 1992, although I do not take this as being conclusive, the fact that Shannon was not cross-examined on this point, and the fact that I can see no reason for Shannon to fabricate such a message.

188. Shannon says that he then telephoned Kwan and asked him to rebuild Unix. Later that day Kwan telephoned Shannon, and according to Shannon, said that he would arrive at Civic's premises at about 7.00 pm that evening, that a full system back-up should be completed prior to his arrival and that Shannon should contact the application supplier to have this done.

191. Counsel for Wacher cross-examined Shannon on this point, referring to the evidence that Kwan gave in the New South Wales proceeding. In that proceeding, counsel for Civic asked Kwan:

Q Did you have a conversation with Mr Shannon about preparing the system for your arrival?

A. Yes it is our company policy that the customer take a full complete backup of our operating system and of their data and application prior to us even touching their machine.

Shannon denied that that was what Kwan had told him, saying:

..what he said was that I had to ring the applications supplier and instruct them that there was a request to do full system backup prior to his arrival.

Counsel for Wacher submits that no explanation has been given by Civic for not calling Kwan in this proceeding and that the inference should be drawn that his evidence would apparently not have assisted Civic's case.

199. Kwan was called as a witness in the NSW proceeding by Civic, as such he would be expected to be called by Civic in this case rather than Wacher. His evidence would have assisted in clarifying what is an important matter. No explanation has been given by Civic for not calling Kwan in this proceeding and I draw the inference that his evidence would not have assisted Civic's case.

202. In his typewritten notes of 6 November 1992, Shannon recorded that:

I was then told to contact NBS and have them do a full system backup.

Despite this note, I have some hesitation in accepting Shannon's evidence in this regard. I find that Shannon was advised by Kwan to have a back-up done before his arrival and that Shannon, as it was his practice to do, contacted Cramey to assist him in having this done.

207. Shannon says he then contacted Cramey and told him that Kwan was going to rebuild Unix that evening, to which Cramey responded with words to the effect "great, we'll get to the bottom of this. Now maybe we will discover something concrete about the cause of the problems over the last two months." Shannon says that he then told Cramey that Kwan had asked him to call his application supplier to have a full system back-up done before he arrived. I have already found that Kwan did not tell Shannon this. He merely advised Shannon to have a back-up done and Shannon then contacted Cramey of his own volition. Shannon says that Cramey then gave him the following instructions:

1. Place a tape in the tape drive and log-in as root;

find . -print | fgrep -v itc | cpio -ocv | dd of=/dev/tape00

Shannon says that Cramey told him to write down the instructions, which he says he did, and to read back the command line, which he says he did. The hand-written note is in evidence before me. Cramey then told Shannon to telephone him if there were any problems

217. Shannon was also cross-examined on this evidence. Counsel for Wacher referred Shannon to the evidence he gave in the New South Wales proceeding where in relation to the question by his own counsel:

Q. Then what happened in relation to the conversation that you were having with Mr Cramey?

A. As I stated Nick was delighted. I said to Nick, "We've got to get this back up. Nick - we then discussed-"

Counsel for Wacher put it to Shannon that "is indeed what you said to Nick Cramey on that occasion and as you indeed said it to the local court on that occasion?" to which Shannon replied:

Counsel for Wacher then referred Shannon to some further evidence that he gave under cross-examination. It is an important point and I think it is necessary to set out the passage of questioning in this proceeding in full:

Then turn to 999; that is answering questions from your own barrister. If you go to 999 you will see some cross-examination about it and do you see after the objection near the top of the page:

"In your conversations with Cramey, didn't he say words to you that indicated to you that he believed Mr Kwan was going to do the backup?- - - Not at all

So he thought you were going to do the backup?- - - I was doing the backup."

Yes. Now, on your own without assistance, is that correct?

That you were going to do the backup? - - -Mr Cramey knew that, yes.

But that was your intention, too, you were going to do the backup? - - - It was - no, Mr Cramey instructed me to do it. I was following instructions.

No at the time you understood you were doing the backup? - - - No I was doing the backup under instructions from Mr Cramey.

236. After referring to a question that Civic's counsel put to Mr Cramey in the New South Wales proceeding, counsel for Wacher continued:

So when your barrister puts your position in that question that what was happening was that you were obtaining directions from Cramey for you to do the backup, that is wrong is it? - - - Bad choice of words.

Well, is it right or is it wrong? - - -Well, I wasn't obtaining directions, I was following directions.

Yes. You see, if you had wanted Cramey to do the backup, you could have asked him to do it via the modem connection, couldn't you? - - - At the outset I asked Mr Cramey to get a full system backup.

Answer my question, will you? Your understanding at the time was that if you wanted Mr Cramey to do a backup you could have got him to do it using the modem connection? - - - Not at the time,

Yes. Your understanding at the time - I will put it again - is that if you had wanted Mr Cramey to do the backup he could have done it directly through the modem connection. That was your understanding? - - - He could have done that, that is correct, yes.

But instead of getting him to do it, you asked him for directions so that you could do the backup yourself, didn't you? - - - No that is not correct.

Counsel for Wacher submits that there is no explanation for Shannon asking for the Unix commands if he wanted Wacher to do the back-up and that the truth is that Shannon was quite prepared to do the back-up himself, as he had used Unix commands before. Counsel submits further that if Shannon did initially ask for Nucleus to do a full system back-up, he must have changed his mind and instead asked Cramey for the Unix commands to do the back-up himself.

250. Counsel for Civic contends that Shannon's evidence is clear that he requested that Wacher do a complete back-up prior to the attendance of Kwan and that that evidence should be accepted. Counsel relies on a piece of evidence that Shannon gave in addition to his witness statement that when he spoke to Cramey he appeared to be in a hurry and that he told Shannon "I have things to do, I have a train to catch at 5." Counsel submits that an adverse inference should be drawn against Wacher for not calling Cramey. I have already said that in the circumstances I will not draw the inference that Cramey's evidence would not have assisted Wacher's case.

253. I have already found that Shannon looked to Cramey/Nucleus to assist him/Civic in having the back-up which Kwan had requested performed. I have found that Shannon was not told by Kwan to contact Nucleus to have them do it. Having carefully considered Shannon's evidence and having the benefit of observing him in court, I find that Shannon asked Cramey for directions for backing-up the system. He did not ask Cramey to perform the back-up. Shannon was aware that he could have had Cramey do the back-up via the modem if he had wanted that done. I am of the opinion that if Shannon had wanted Cramey to do the back-up he would have insisted that he do it, despite his evidence that Cramey appeared to be in a hurry. Shannon gave evidence that he had used Unix commands before and in the NSW case gave evidence under cross-examination that he had done back-ups before with Cramey's assistance. I find that Shannon intended to do the back-up himself on this occasion and asked Cramey for the Unix commands to enable him to do this.

256. On following the above directions, as I have found them to be, Shannon says that an error message appeared on the computer console, which read as follows:

Shannon telephoned Cramey and told him of the error message. Shannon says that Cramey asked him what size tape drive the ICL computer had. As Shannon did not know, and he says on Cramey's suggestion, although his notes of 6 November do not indicate this, he looked at the documents which had been delivered with the computer and read from a document headed "DRS Peripheral Layout", the words "CMT 320/525" to which he says Cramey responded with words to the effect "that's it, the tape drive is a 525 meg.".

261. Cramey then told Shannon to log-in as "root" again and then enter another command commencing with "df..." which Shannon did not record. Cramey then asked Shannon to read to him what was on the screen. After he did that Shannon says that Cramey asked him "Do you have two blank tapes?", to which Shannon replied "yes". Cramey told him that the first tape was to back-up everything on the ICL computer except ITC, which Shannon understood to mean everything but Carry, and the second tape was to back-up ITC, that is, Carry.

264. Cramey then told Shannon that the command to copy everything other than Carry was the one he had given him previously except without the "obs=512k" on the end, and the command for backing up Carry was:

Shannon crossed out the "obs=512k" from the first command line in his notes and wrote the second command after his previous notes.

269. Shannon says that Cramey explained to him that on keying in the first command and pressing enter, the console would scroll through the information to be written to tape. Cramey said that when the first tape was finished, and that would take some time, the screen would display the # prompt, Shannon should then take out the first tape and put in the second one. The second command was then to be keyed in and the same sequence would then occur. Shannon says that he did as Cramey said, and that the process took between 30-45 minutes for each tape.

272. Each tape was then marked; the first as "Full System Back-up of Everything But ITC As At 6/11/92 and the second as "Full System Back-up of (ITC) Only As At 6/11/92".

275. That evening, Kwan arrived at Civic's offices at approximately 7.00 pm. Shannon gave Kwan the two tapes labelled as above. Shannon then says that Kwan asked him if he had a spare tape onto which he could back-up parts of Unix which were customised, so that they could be restored after he rebuilt Unix. Shannon says that having no other spare tapes and being satisfied that he had just made a full back-up of the system, he gave Kwan the tape onto which he had made a copy of Carry the previous day, using Civback.

278. Kwan then loaded information onto the tape which he verified. He then told Shannon that he had cleared everything off the system and that he would now commence to reload Unix which he said would take a couple of hours to complete.

281. At about 2.00 am the next morning, Shannon asked Kwan if everything was all right. Kwan told Shannon that the system was advising that a version other than the correct one was running but that he didn't think it was a real problem but rather a "bug in the Unix commands". Shannon, being concerned that there be no errors in the rebuild of Unix suggested that they ring the Unix supplier, SCO, in California. Although Kwan did not think that this was necessary, Shannon did call the supplier and eventually spoke to someone in the technical support Division of SCO's London office. After Kwan spoke to that person he advised Shannon that the correct version was running.

284. After that, Shannon says that Kwan attempted to restore the information from the tapes that Shannon had made. After a time, Kwan told Shannon that he could not find the application programs on the tapes. Shannon says that Kwan said "I am trying to restore the system - but there's a problem, it's not all here." Shannon said "That can't be". Shannon says that Kwan rechecked the tapes but eventually confirmed that Carry was not on the tapes.

287. In the opinion of the special referee, the reason for the failure of the Unix commands to backup Carry was the use of a 150 megabyte magnetic tape rather than a 525 megabyte capacity tape (525 megabytes being the size of the magnetic tape cartridge drive). See special referee's first report par.50(c). The special referee's opinion in his second report was that the implementation of the two commands provided to Shannon would have successfully backed-up Civic's system, including Carry, if a 525 megabyte capacity tape had been used, provided in relation to the second command:

(i) the /itc directory and its subdirectories did not contain more than 525 megabytes of data;

(ii) the tape that was used had a capacity of 525 megabytes;

295. Shannon says that Kwan then enquired as to whether he had another back-up of the application programs. Shannon told Kwan that the tape he had given him earlier to make the Unix back-up was the tape that was used to back-up Carry using Civback the previous day. After examining the tape on the computer, Shannon says that Kwan advised him that the tape had always been blank. The reason for this is discussed below. Under cross-examination Shannon stated that he also had Kwan check a number of other tapes which he retrieved from the boot of his car which were Friday back-up tapes, although he conceded he had no reason for believing that these tapes might contain the Carry program.

298. I will not go into any detail as to the events which followed 6 November 1992. It is sufficient to say that the next morning Shannon telephoned Cramey and told him what had happened. Following that conversation, and over the next day, attempts were made to locate a copy of Civic's customised Carry at Nucleus' offices.

301. On Sunday 8 November Shannon was advised by Whiteley that a copy of Civic's version 3.9 of Carry had been located at Nucleus's office and would be sent down from Sydney that day. That copy was installed on Civic's computer on 8 November. Unfortunately, that copy of Carry seemed to cause more problems than it solved and ultimately, Shannon was told that the likelihood of rectifying Civic's version of Carry was not good and it was suggested that the current version of standard Carry, version 4.3, should be looked at.

304. I should mention at this point that on Saturday 7 November 1992, Shannon engaged Greensmith, a Unix specialist, to assist Civic. Greensmith confirmed to Shannon that the Carry programs were not on the computer or the tapes and that the tape which had been used to back-up Carry using Civback was blank apart from the Unix data that Kwan had loaded onto the tape. At that stage, Shannon says that he recalled the tape which he had used to back-up Carry using Civback just after the program was installed, and which he had placed in the safe. Greensmith examined the tape but found it also to be blank. I note that in the proceeding in the Local Court of New South Wales Kwan gave evidence, in response to a question from Civic's counsel, that Shannon gave him the tape from the safe to check after it was discovered that the back-up had not worked.

307. In any event, an arrangement was reached between Shannon and Whiteley whereby version 4.3 was installed onto Civic's computer. Once again, it appears that several problems were encountered in the running of Carry.

310. When on 21 November 1992 it became clear to Shannon in a conversation with Taylor that the problems and the customisations that needed to be made to make version 4.3 comparable to customised Carry could not be fixed or made within three months, Shannon says he advised Taylor that he had no alternative but to find someone else "to help retrieve us from this crisis". He informed Taylor that all further correspondence should be directed through Civic's lawyers. Shannon then disconnected the modem.

313. Later that day Shannon spoke to Coy who had commenced a new company Hub Consulting (Hub) and agreed to engage Hub to reinstall Carry onto its computer. This agreement was confirmed by exchange of correspondence. Greensmith was also engaged to provide Civic with an assessment of the Carry program and to oversee the work to be carried out by Hub.

317. At the outset of his closing address counsel for the plaintiff identified the following four issues as being critical to the case: (1) whether or not Wacher relevantly had any obligation towards Civic from 14 October 1992; (2) what the scope of that obligation was; (3) whether or not the work done or not done which is the subject of the complaint against Wacher, fell within the software support agreement or the undertaking of responsibility by Wacher rather than the June agreement; and (4) the related issue of whether or not there ought to be some kind of Anshun or other estoppel arising out of the New South Wales proceeding. To an extent the matters that arise under these issues are related and run together, in other respects there are additional matters such as causation and contributory negligence. Nevertheless it is a convenient identification of the critical issues.

Did Wacher have a contractual relationship or owe Civic a duty of care from 14 October 1992?

321. As I mentioned above, in or about December 1991, Nucleus agreed with Civic that it would provide Civic with support services for the Carry software for the period 1 January 1992 to 31 December 1992. I should note that the SSA sent to Civic for that period was never formally executed because the agreement specified that the number of users authorised to use the Carry software was eight, whereas Shannon believed that there was no such limit. Shannon says that he spoke to Taylor about this and it was agreed that a new SSA would be sent to Civic which reflected the correct position. Shannon says that he never received one. Despite not signing the original SSA, Shannon says that Nucleus invoiced Civic for the quarterly fee of $2,125 and that he caused Civic to pay those invoices. Copies of three invoices for the period 1 April 1992 - 30 June 1992, 1 July 1992 - 30 September 1992 and 1 October 1992 - 31 December 1992 are in evidence before me. The invoices are marked with numbers which Shannon says is the number of the cheque used to pay the invoice together with the date on which the invoice was paid. The invoice for the last period was paid by Nucleus on 27 September 1992. Shannon's evidence in this respect was not challenged and I find that the parties to the SSA (Civic and Nucleus) acted on the basis that a SSA for that period had been executed, that the invoices were sent and that they were paid.

324. I have also mentioned the agreement for sale of business made between Nucleus and Wacher. In par. 5 of the statement of claim, Civic alleges that on or about 9 October 1992, Wacher purchased the business of Nucleus including Nucleus' rights in respect of the SSA. In the particulars to that paragraph, it is stated that Shannon was advised of this, and the fact that Wacher would thereafter conduct the business under Nucleus' name, at a meeting between Whiteley (for and on behalf of Wacher), Taylor (for and on behalf of Nucleus) and Shannon (for and on behalf of Civic) on or about 14 October 1992. Wacher admits that by an agreement in writing dated 9 October 1992 it purchased the business of Nucleus but otherwise denies the allegations.

327. I have already outlined some of the relevant terms of the agreement. It is convenient here to set out those terms and the other relevant terms in full.

330. "The business" as defined includes the support contracts which are further defined as follows:

the expression "Support Contracts" shall mean and include the interest of the Vendor in the maintenance and support contracts entered into by and between the Vendor or its predecessor with the various licencees of the Software more particularly referred to in the Third Schedule hereto.

As I mentioned above, Civic is referred to in the Third Schedule to the agreement as a software licensee who is a party to a Support Contract.

335. Clause 16 details the respective obligations of Nucleus and Wacher in relation to the Support Contracts:

The Vendor warrants that it will duly perform and discharge its obligations under the Support Contracts up to date of completion whereafter performance and discharge of the obligations thereunder shall be the responsibility of the Purchaser.

By cl.4, the date of completion is the date of signing of the agreement which is 9 October 1992.

340. Clause 11 makes provision in relation to the apportionment of fees paid or payable pursuant to the Support Contracts:

Fees paid or payable by licensees pursuant to Support Contracts which are referable in whole or in part to periods subsequent to the date of completion shall be apportioned between the parties on completion on a daily basis and adjusted accordingly provided that in the event that the effect of such adjustment shall be a debt due by the Vendor to the Purchaser the amount of such debt shall be set off against the unpaid balance of Purchase Price due from the Purchaser to the Vendor in accordance with Clause 3(e) hereof.

In relation to this clause, I note that on 27 September 1992, Civic paid Nucleus' invoice for $2,125, being the support fee for the period 1 October 1992 to 31 December 1992.

The Purchaser acknowledges that it has made its own enquiries in relation to the Support Contracts and has satisfied itself entirely as to the terms and conditions and the validity and enforceability thereof AND subject only to the provisions of Clause 11 and to the warranty of the Vendor in Clause 16 hereof the Purchaser acknowledges and agrees that on and from completion hereof the obligations of the Vendor to the several licensees thereunder shall be and become obligations of the Purchaser which the Purchaser hereby warrants and agrees fully and faithfully to carry out and perform AND subject as aforesaid the Purchaser hereby releases the Vendor from and indemnifies the Vendor against all actions claims and demands whatsoever touching on or arising under or in relation to the Support Contracts.

349. By Clause 23 Nucleus agreed on completion to provide signed notices of assignment in respect of each of the Support Contracts. I should mention that counsel for Civic opened the case on the basis that Civic was given a notice of assignment from Nucleus to Wacher dated 9 October 1992. Under cross-examination Shannon stated that neither he nor Civic had received or seen that document. The following day counsel for Civic withdrew that part of the opening which dealt with the notice, saying:

There will be a question of credit of Mr Shannon involved in that.

There is no question to try to maintain against such a strong tide that such notice was given.

Counsel for Wacher submits that Shannon's instructions to his lawyers to open the case on this footing were simply false and dishonest. I shall deal with this submission below when I come to deal with Shannon's evidence about the alleged novation.

356. "The business" also includes "work-in-progress" as defined. The term is defined, not as one may expect in a sale of business agreement, as "the modifications to the Software...referred to in the Fourth Schedule hereto", that is as intellectual property. In fact no such modifications are listed in the Fourth Schedule.

359. Clause 9 makes provision in relation to outstanding debts and liabilities as at the date of completion as follows:

The Vendor will discharge all debts and liabilities which have been incurred by the Vendor in respect of the Business and which have not been discharged at the time of completion and will keep the Purchaser indemnified in respect thereof.

363. This is an important clause. It obliged Nucleus to meet liabilities incurred by it in respect of the business and not discharged at completion on 9 October 1992. Let us consider what such a liability might have been. An obvious liability is that constituted by a Support Contract such as the SSA with Civic. Clause 16 dealt with that liability by providing that after completion Wacher shall be responsible for performance of the obligations of Nucleus under the Support Contracts. That is to be read with cl.11 under which Support Contract fees were apportioned at the date of completion, Wacher being entitled to a credit for the component of the fees attributable to the period after completion. Liabilities of a different nature might have been incurred by Nucleus and not been discharged at completion. This much is obvious and the parties dealt with that situation in cl. 9 by requiring that Nucleus discharge all such liabilities and indemnify Wacher in respect thereof. This means that in respect of any such liability Nucleus' obligation to the third party involved continued even after completion. The facts of this case provide a ready example of what might constitute such a continuing liability. That example is the agreement made on 29 June 1992 for Nucleus to install Civic's Carry on the new ICL computer. That agreement was separate from the SSA and to the extent, if at all, at the date of completion Nucleus had not discharged its liabilities under that agreement cl.9 meant (at least as between Nucleus and Wacher) that Nucleus remained liable to Civic to do so. Wacher did not assume such a liability under the sale of business agreement.

366. Consistently with this scheme cl.10 provides that:

Subject to the term[s] hereof, the Vendor shall be entitled to payment of all debts owing to the Business at the time of completion and the Purchaser will promptly account to the Vendor for all payments received by it in respect thereof.

The effect of this clause is that Nucleus was entitled to amounts payable to the business at the time of completion and subsequently paid. The amount payable by Civic under the 29 June 1992 agreement is an example of such an entitlement. At completion Civic had made no payment under that agreement. But Nucleus remained entitled to any such payment and thus was able to sue Civic in debt in reliance on the June agreement in the proceeding which it commenced in the Local Court of New South Wales on 3 December 1992.

371. Counsel for Wacher makes a further point concerning cl.9 and the continuing obligation of Nucleus to discharge its liabilities. He said that cl.9 necessarily meant that Nucleus would retain a connection with the former Nucleus staff to complete performance of those obligations. Counsel meant that, as I understood him, as being the common sense of the situation. That seems an obvious enough approach. Apart from anything else, from Wacher's point of view such a manner of proceeding was sensible to protect the goodwill of the business. Similarly, it is understandable that Wacher continued Taylor's involvement in the business.

374. Clause 13 of the agreement deals with the situation of Wacher continuing to carry on the business under the name "Nucleus Business Systems Pty Ltd". The clause requires Nucleus on request by Wacher to do all things and make sign and execute all documents as will assist Wacher in any application for registration of the name "Nucleus Business Systems" under which to carry on the business.

377. In relation to the employees of Nucleus, the agreement provides in cl. 20:

The Vendor shall terminate the employment of all of its employees with effect from the date of completion and pay to each such employee the amount due to him or her for wages and holiday pay as at that date AND so far as the Vendor is concerned the Purchaser shall be at liberty to re-employ all or any of such employees.

381. I should at this point mention the evidence of Whiteley. Whiteley gave evidence that in "October 1992 Wacher purchased that part of the business of Nucleus that was concerned with the development, production, sale and maintenance and support of computer software systems for the transport industry in Australia including the suite of programs known as Carry". He says he was not involved in the negotiations which preceded the purchase of the business or in the drafting of any agreement for the purchase of the business. Under cross-examination, Whiteley said that he has not seen the agreement and has no knowledge at all of the transaction and the conditions of it. Accepting this to be the fact, I find it unusual that in his evidence as to the part of the business purchased by Wacher, Whiteley uses the precise words used in recital (a) to the agreement. I find that Whiteley was not involved in the negotiations in relation to the agreement but that he has subsequently read or been shown a copy of the agreement.

384. Whiteley then gave evidence that for several months after the purchase of the business it continued to operate separately from Wacher, for reasons of goodwill and outstanding commitments of Nucleus to some of its customers. Further, under cross-examination, he said that it was his understanding that Nucleus was a subsidiary of Wacher and that he was to run Nucleus as an arm's length operation. Whiteley said that it wasn't until November 1992 when Wacher decided to incorporate Nucleus into its transport division that he and the other former Nucleus employees became employees of Wacher.

387. This evidence as to when Nucleus employees became employees of Wacher is contradicted in a letter from Mr. Peter Anderson (Anderson), operations director of Wacher to Anderson Rice, the then solicitors for Civic, dated 13 April 1994, in which the dates on which certain operators commenced and ceased employment with Wacher are provided as follows:

The contents of this letter are consistent with the terms of cl. 20 of the agreement and the details in the termination pay advice for Cramey which states his commencement date as 12 October 1992 and termination date as 25 December 1992. Nevertheless, this does not mean that Nucleus was not run as an arm's length operation and using the name of Nucleus, as Whiteley states. Moreover, external indicia such as the continued use of Nucleus letterhead indicate that was the case.

399. Counsel for Civic submits that the evidence of Mr. Colin Hoschke (Hoschke) and Anderson, present directors of Wacher and directors of Wacher in November 1992, was potentially relevant to the issue of whether on and from 9 October 1992 Wacher took over the business of Nucleus and when the relevant employees became employees of Wacher. Counsel submits that both directors are plainly witnesses in Wacher's camp (Parker v Payne at 201) and that the failure to call them leads to the inference that they could not have assisted Wacher in respect to these issues.

402. Counsel for Wacher submits that the potential evidence of Hoschke and Anderson could not have assisted the Court. He submits that neither were parties to the matters referred to in the pleadings and accordingly there is nothing upon which they can give admissible evidence. So far as Hoschke and Anderson could have given evidence in relation to the agreement, counsel submits that the agreement is in evidence and any evidence as to the negotiations prior to the agreement cannot assist the Court in determining whether the dealings between the parties were such as to give rise to a novation or duty of care. Counsel submits that the evidence of Whiteley is sufficient for the Court to determine how the agreement was implemented.

405. I will not draw the inference that Hoschke and Anderson's evidence could not have assisted Wacher's case in relation to the matters mentioned above. The written agreement is in evidence before me. Its terms are clear, they do not require explanation. Further, Whiteley, who was the general manager of Nucleus subsequent to the sale, is in the best position to give evidence as to how the business was run at that time. There is no requirement that a party call cumulative evidence. In relation to the second issue, the date on which Nucleus employees became employees of Wacher, the letter from Anderson to Anderson Rice dated 13 April 1994 is in evidence before me.

408. I find that Wacher purchased the business of Nucleus on 9 October 1992 and continued to carry on the business of Nucleus under the Nucleus name at arm's length from Wacher until sometime in November 1992 when it was incorporated into the Wacher Transport Division. I find that that time was subsequent to the events of 5 and 6 November. I find further that at the time of purchase Whiteley understood that Nucleus was a subsidiary of Wacher and that he and the other employees were employees of Nucleus until November 1992. In coming to this conclusion, I take into account a letter from Whiteley to Civic dated 10 November 1992, written on Nucleus letterhead which states in part :

We have much satisfaction in announcing that Nucleus Business Systems Pty Ltd has become a strategic part of the Wacher Group, Australia's longest established computer software company.

I find in fact that the former Nucleus employees became employees of Wacher from 12 October 1992 and that Whiteley became an employee at some time earlier than this, although the exact date is not clear. I should also record that I found Whiteley, regarding his evidence overall, to be an honest and reliable witness. In particular I preferred his evidence to that given by Shannon where there was conflict.

414. In par. 6 of the statement of claim, Civic alleges that on or about 14 October 1992, Civic agreed with Nucleus and Wacher that Wacher be substituted for Nucleus as a party to the SSA (the novation agreement). The agreement is said to consist of a conversation between Whiteley (for Wacher), Taylor (for Nucleus) and Shannon (for Civic) at the meeting on or about 14 October 1992 and a letter from Hoschke to Shannon dated 16 November 1992. Wacher denies that there was a novation of the SSA.

417. As I have mentioned above, by cl. 16 of the agreement Nucleus and Wacher agreed between themselves that from 9 October 1992, Wacher, as purchaser of the business of Nucleus, was responsible for the performance and discharge of all obligations under the support contracts, of which Civic's was one. By cl.23 notices of assignment in respect of the support contracts were to be provided.

420. It is an accepted legal principal that a contractual obligation cannot be assigned except by way of novation. In Tolhurst v Associated Portland Cement Manufacturer's (1900) Ltd [1902] 2 KB 660 at 668, Collins MR stated:

It is, I think, quite clear that neither at law nor in equity could the burden of a contract be shifted off the shoulders of a contractor on to those of another without the consent of the contractee. A debtor cannot relieve himself of his liability to his creditor by assigning the burden of the obligation to somebody else: this can only be brought about by the consent of all three, and involves release of the original debtor.

As I noted above, counsel for Civic, quite sensibly, abandoned the alternative plea of assignment in his closing address.

425. The common tripartite form of novation was described by Powell J in Scruples Imports Pty Ltd v Crabtree & Evelyn Pty Ltd (1983) 1 IPR 315 at 320 as follows:

Reduced to its simplest form, a novation is merely a contract between three parties, the obligee, the original obligor, and the substituted obligor, the effect of which contract is that in consideration of the obligee releasing the original obligor from his obligation, the substituted obligor promises the obligee that he will assume responsibility for the performance of the obligation. Being, in essence, but a contract - albeit, perhaps, a special type of contract - a novation, to be effective in law, must exhibit the usual phenomena of contract, that is offer and acceptance, the fact of acceptance being communicated to the offeror unless communication has been expressly or impliedly dispensed with.

A purported novation will fail for want of consideration if the intention that the original obligor's obligations are to be extinguished is not made clear ( Lyth v Ault and Wood [1852] EngR 562; (1852) 7 Exch 669; 155 ER 117).

430. Shannon gave evidence that in late September or October 1992, Whiteley and Taylor came to see him at Civic's office at Clayton and that Taylor told him that Wacher had purchased Nucleus' business. Shannon says that Taylor introduced Whiteley to him and that Whiteley told him that Wacher had appointed him general manager of Nucleus.

433. As to the date of the meeting, Whiteley gave evidence that the meeting took place on 14 October 1992 . I should note that in the New South Wales proceeding it was asserted by counsel for Civic that the meeting took place on 23 September 1992. Civic effectively abandoned this position in the statement of claim in this proceeding and Shannon conceded under cross-examination that he was wrong in his recollection of the date of the meeting. I find that the meeting took place at Civic's office on 14 October 1992.

436. Shannon says that during the meeting Whiteley told him that the services that had previously been provided to Civic by Nucleus under the SSA would now be provided by Wacher, which was a large organisation with many experienced personnel who could be made available to assist Civic. Shannon says that he had previously visited Wacher's office and met two of its directors and was aware that they were a large and professional organisation. He says that he told Whiteley that he was agreeable for Wacher to provide the services under the SSA. Shannon says that Whiteley then told him that all of the Nucleus employees that had assisted Civic, including Cramey, would be retained by Wacher; but that the services provided under the SSA would be enhanced and made better by Wacher.

439. Shannon then referred to two letters that he received in November 1992, the first from Whiteley dated 10 November 1992, which I have mentioned above, and the second from Hoschke, managing director of Wacher, dated 16 November 1992. The letter from Whiteley continues:

The Wacher Transport Division will continue to aggressively market the CARRY Transport Solution and, with access to further resources, give an even greater level of support. CARRY will continue to be enhanced to ensure that it meets your current and future requirements. . . All of our key experienced people remain with the company, including James Taylor, who will manage our Sales Operation. We retain our proud reputation of personal support . . . nothing whatsoever will change in that regard!

WACHER PTY LIMITED is delighted to have had the opportunity to acquire Nucleus Business Systems Pty Ltd. The acquisition is a strategic addition to our Transport Division.

The CARRY product will be a significant component of our Transport Division . . . We have appointed Mr. Vic Whiteley as Manager of our Transport Division. All Nucleus staff will be retained. Ongoing support arrangements remain unchanged.

I should note that counsel for Civic submits that insofar as the letters suggest that Wacher has acquired the company "Nucleus Business Systems Pty Ltd" they are misleading and wrong.

448. Whiteley in his evidence denies that the question of the SSA was discussed during the meeting. He says that the meeting was a "general introductory meeting", and that he handed Shannon his business card which was in the name of Nucleus and described him as general manager. He said that he was not aware of any SSA between Nucleus and Civic and that it was not discussed. He says that he had no intention to strike or conclude an agreement at the meeting. Whiteley says that there was some discussion between Taylor and Shannon about the work which was being undertaken by Nucleus for Civic, which I take to mean work under the June agreement, but that he did not participate in this discussion. He said that there was reference to "problems" in that discussion between Taylor and Shannon but he could not remember what was discussed. He was not aware of the ongoing situation. Under cross-examination Whiteley acknowledged that he said during the meeting that Wacher would continue to market Carry and would provide an "even greater level of support" and that Nucleus employees would be retained and that "we would continue to provide the service" which had been provided by Nucleus.

451. Counsel for Civic submits that to the extent of any inconsistency between the evidence of Shannon and Whiteley, the evidence of Shannon should be accepted. Counsel submits that Wacher did not call Taylor, the former proprietor of Nucleus and an employee of Wacher at the relevant time, who it is accepted was present at the meeting and that this should lead to an adverse inference being drawn that Taylor's evidence could not have assisted Wacher's case (Jones v Dunkel). Counsel relies on the fact that Taylor gave evidence for Nucleus in the NSW proceeding and no explanation has been given in this proceeding for not calling Taylor.

454. Counsel for Wacher submits that Taylor is not a witness in Wacher's camp as the interests of Taylor's company, Nucleus, and those of Wacher in relation to Civic's allegations are in "obvious tension". Counsel submits that on the contrary Taylor was a natural witness for Civic to call if his evidence supported its case that there was a novation of the SSA at the 14 October meeting.

457. I will not draw the inference that Taylor's evidence would not have assisted Wacher's case. According to the employment records provided by Anderson which I referred to above, Taylor ceased employment with Wacher on 20 April 1993. Accordingly, Taylor is not, and has not been for a number of years, directly involved with Wacher. Further Wacher is submitting as part of its defence that the work about which Civic complains is work under the June agreement and not the SSA and that in November 1992 Nucleus continued to be responsible to Civic to complete its obligations under the June agreement. Taylor gave evidence for Nucleus in the New South Wales proceeding. In the circumstances I do not think that it can be said that it was natural for Wacher to call Taylor.

460. I find that the SSA between Civic and Nucleus was not specifically raised at the meeting on 14 October 1992. I take into account in coming to this decision that under cross-examination when asked to recall what was discussed at the meeting, Shannon was given three opportunities to add to his recollection before he mentioned the subject of the SSA. It was put to Shannon that he had not mentioned the discussion in relation to the SSA in the New South Wales proceeding and that in fact no such conversation took place, to which he answered "That's categorically wrong". I also take into account what I infer must have been Shannon's false instructions to his lawyers that Civic received a notice of assignment in relation to the SSA. I take account also of my observations of Shannon and Whiteley, the nature of the meeting as I find it to be, and that in my view on this and some other aspects of his evidence (such as the matter of Kwan requesting that the supplier perform a back-up) I regard Shannon's evidence as having been framed to assist his case.

463. Counsel for Civic submits that regardless of whether the Court accepts the evidence of Shannon that at the meeting of 14 October specific reference was made to the SSA, the evidence given by Whiteley makes it clear that there was a novation of the SSA at the meeting. Counsel submits that the evidence of Whiteley was that he told Shannon that Wacher would be continuing the Nucleus business and would be continuing to provide the support services and that Shannon could rely upon the Wacher organisation. In closing, counsel submitted that "These parties surely intended that whoever was owning this division of the business would have been responsible and Mr. Shannon's concern was just to make sure that he got the service."

466. Counsel for Wacher submits that the SSA was not novated. Counsel submits that the meeting, which was an "introductory meeting" was devoid of contractual intent. He points to the evidence of Whiteley that he introduced himself as the "general manager of Nucleus", a point not disputed by Shannon, and to his evidence that he did not go to the meeting to strike an agreement or to make a promise. Counsel submits that it was not put to Whiteley that he had gone to the meeting with such an intent but only that he had made a statement that "Wacher was going to take over all the support services". Counsel submits that the fact that Civic has abandoned those paragraphs of the statement of claim in which it claimed that warranties were given at the meeting, thus conceding that the language of the conversation did not have a promissory character sufficient to support the warranties, tells critically against the alleged novation in the same conversation. Counsel submits that anything said by Whiteley during the meeting was merely representational rather than promissory. J J Savage & Sons Pty Ltd v Blakney [1970] HCA 6; (1970) 119 CLR 435; Gates v City Mutual Life Assurance Society Ltd (1982) 160 CLR 1; Hospital Products Ltd v United States Surgical Corporation [1984] HCA 64; (1984) 156 CLR 41 at 67, 90,116.

469. Counsel then submits that there is no evidence that Civic intended that Nucleus be released from its obligations under the SSA, an essential element of a novation. On the contrary, counsel submits that the evidence makes it unlikely that Civic would have released Nucleus from further support for Carry at that time. Counsel points to the fact that at the time of the meeting Civic was involved in efforts with Nucleus to get Carry operational on the ICL computer and to set up the Honeywell computer for use by First pursuant to the June agreement, and to the fact that only a few weeks before the meeting, on 27 September 1992, Civic had paid the support fee for the period 1 October 1992 to 31 December 1992.

472. Further, counsel submits that all external indicia point towards there having been no agreement on a novation at the meeting on 14 October 1992. First, counsel points to the letters which Shannon referred to in his evidence in support of a novation, that is the letters of 10 and 16 November 1992. The former is on Nucleus letterhead. In relation to the letter of the 16th, which is on Wacher letterhead, counsel submits that the letter makes no reference to Wacher taking over the obligations of Nucleus, but rather states that "Ongoing support arrangements remain unchanged", indicating that Nucleus continues as an operating entity within the structure. Counsel then points to the fact that after the meeting Shannon continued to deal exclusively with Nucleus, and not Wacher as would be expected if the SSA had been novated. Counsel also relies on the evidence given by Shannon in the New South Wales proceeding.

475. I conclude that Civic's plea of a novation agreement fails. To the findings already made I add that I prefer the evidence of Whiteley to that of Shannon. I accept the evidence of Whiteley as the more likely and as a truthful account of the meeting on 14 October 1992. In the statement of claim the plea of novation is based on the conversation at this meeting in which, according to particulars to par. 6 of the statement of claim, it is alleged that Shannon agreed with Whiteley and Taylor that the services previously provided by Nucleus under the SSA would thereafter be provided by Wacher. An essential premise of this allegation is that Whiteley attended the meeting "for and on behalf of Wacher"; see the particulars to par. 5. That is not established. Whiteley attended the meeting in the capacity in which he introduced himself, as general manager of Nucleus and with no intention (let alone authority) to contract on behalf of Wacher as Civic alleges. I find that the discussion on 14 October was not to the effect alleged by Civic in par. 6, either expressly or by necessary implication. That is, that the conversation was not one in which the words used, objectively considered, constituted an agreement whereby the three parties agreed that Wacher be substituted as a party to the SSA in lieu of Nucleus which was thereby released therefrom.

478. I find that the true nature of the meeting was that it was of an introductory, good-will type which enabled Whiteley as an employee of the new owner of the Nucleus business, but engaged as general manager of Nucleus which was conducted at arm's length from Wacher, to meet Shannon. Neither the purpose of the meeting nor its language nor the intention of any of the three men present was to enter into an agreement by which the obligations of Nucleus were novated to Wacher with Nucleus ipso facto ceasing to have any ongoing contractual obligations to Civic.

481. Counsel for Civic relied on both the letter of 10 November and the letter of 16 November 1992, although only the latter is referred to in the particulars to par. 6 of the statement of claim. On its own terms this letter could not constitute a tripartite agreement. Further, the particulars did not allege that the novation agreement was partly in writing. All that was said in the particulars was that the plaintiff "also refers to the letter" of 16 November. Perhaps the letter was meant to provide some sort of evidentiary support for the agreement previously made on 14 October, or at least to give some explanation of or content to things said at that meeting. Whether that is so or not, I repeat that the three parties did not enter into a novation agreement at that meeting, let alone have the intention to do so. There would seem to be an obvious reason why the letter was not relied on as constituting the agreement, at least in part. That is because the letter came into existence subsequent to the date or dates when Civic suffered the loss of its computer. The same may be said of the letter of 10 November.

484. As I have said, in his address counsel for Civic also relied on the letter of 10 November from Nucleus to Civic. Yet the letter is not relied on at all in the particulars to par. 6. In any event, for the above reasons, this letter does not aid Civic in establishing a novation. There either was an agreement of that nature entered into on or about 14 October 1992 as alleged in par. 6 or there was not. In my view there was not. My conclusion in this regard would not differ if the particulars to par. 6 had relied upon the letter of 10 November to establish the novation.

488. In the alternative, Counsel for Civic submits that an agreement was made on 14 October 1992 ("the October agreement") that Wacher would henceforth provide the software support services to Civic as had previously been provided by Nucleus. Counsel submits that the consideration received by Wacher was the apportionment to it of Civic's payment to Nucleus for the period 10 October to 31 December 1992 pursuant to cl.11 of the agreement. As I mentioned above, this alternative point was not pleaded and was raised for the first time in final address and objected to by counsel for Wacher on this basis.

491. Notwithstanding the objection of Wacher's counsel I have considered the submission. I conclude that it must fail. I do not repeat the above discussion on the issue of novation and the findings of fact and conclusion I reached on that point. I am firmly of the view that at the meeting on 14 October 1992 Whiteley did not enter into an agreement with Shannon whereby Wacher would for valuable consideration provide the services formerly provided by Nucleus under the SSA. As I have said I prefer the evidence of Whiteley to that given by Shannon. The nature of the meeting was as I have described it. What was said by Whiteley was, objectively considered, neither promissory in nature nor of sufficient precision and clarity to produce an agreement having the effect contended by Civic. There was not on either side an intention to create legal relations. In particular Whiteley was present as the general manager of Nucleus and was not possessed of authority to contract on behalf of Wacher.

494. The October agreement is the reverse side of the alleged novation agreement. There being no novation agreement it would be a curious result if there were an independent agreement made between Civic and Wacher whereby Wacher would provide the services up to then provided by Nucleus. On this argument Wacher would have assumed a fresh and independent obligation to the same effect as the existing obligation of Nucleus under the SSA. In this situation both Nucleus and Wacher could be called upon by Civic to provide services under the SSA. Even assuming that Whiteley had the necessary authority from Wacher, why would he have bound Wacher to such an agreement? It is one thing for a new owner to offer the comfort of continuing support but another thing altogether to intend to and to enter into a new contractual relationship additional to that already existing. The reason why Wacher would have done that was not explored, probably because the contention arose so late in the case, and no such reason appeared, but I am in any event clear that the agreement alleged was not made. Also not explored was the effect of the supposed agreement on the SSA with Nucleus. One might suppose that the SSA with Nucleus would have been terminated as part of the new arrangement. That would suggest a novation which brings one back to the pleaded case which I have rejected. I reject the alternative plea.

497. In the result the position as between Nucleus and Wacher is that stated in cl. 16 of their agreement, namely that after the date of completion Wacher would be responsible to perform and discharge the obligations of Nucleus under the Support Contracts. Counsel for Wacher described Wacher's position as being like that of a sub-contractor to a principal contractor (Nucleus) who remained liable under its contract (the SSA) with Civic. On that analysis Nucleus remained bound to Civic under the SSA and by their private agreement Wacher agreed with Nucleus to perform the obligations of Nucleus under the SSA. I accept this analysis as correct. See Chesire and Fifoot, Law of Contract, 7th Aust ed., par.8.51.

501. I commence by outlining the allegations in the statement of claim.

504. In par.16 of the statement of claim, Civic pleads that by reason of the matters referred to in par's 14 and/or 15, Wacher was under a duty to take reasonable care in providing software consulting services and/or advice to Civic in relation to Carry. Paragraph 14 of the statement of claim pleads that Wacher held itself out to Civic as possessing special skill and competence in providing computer software consulting services and, in particular, in providing advice in relation to Carry. In particulars it is alleged by reference to par. 8 that Wacher, by the letter of Hoschke dated 16 November and by Whiteley at the meeting of 14 October, represented that its services and advice pursuant to the SSA would be provided competently and by experienced competent staff employed by Wacher; that in performing its obligations under the SSA it would provide enhanced services to Civic; that there would be benefits to Civic from entering into the novation agreement or consenting to the alleged assignment and that Wacher had a wealth of experience in developing successful computer solutions in the transport industry. Paragraph 15 pleads that Wacher well knew, or ought to have known, that Civic would, in conducting its business, rely on the software consulting services and advice provided by Wacher in relation to Carry.

507. Paragraphs 17-19 of the statement of claim plead the events which occurred on 5 and 6 November 1992 concluding (in par.19) with the allegation that Carry had not been backed-up and had been lost. From this point the statement of claim contains further allegations of duty and breach.

510. Paragraph 20 of the statement of claim pleads that in breach of the duty referred to in par. 16 Wacher negligently rendered to Civic software consulting services, including the advice to have the kernel reconfigured, the advice to have Unix rebuilt and the back-up advice. There are a number of particulars of negligence given in the statement of claim, however in closing, counsel for Civic did not rely upon a number of these particulars (including those provided in the further and better particulars dated 11 December 1996) and I take them to have been abandoned. In the result the only particulars of negligence relied upon are those in particulars (f)-(h) as follows:

(f) Cramey failed to take any, or any sufficient, steps to ensure that magnetic tapes used by Shannon to make a back-up copy of Unix and the application systems (including Carry) were of sufficient size to contain a copy of all of Unix and the application systems (including Carry).

(g) Without any, or any sufficient, justification therefor Cramey wrongly assumed that the tapes used by Shannon to make a back-up copy of Unix and the application systems (including Carry) were of sufficient size to contain a copy of all of Unix and the application systems (including Carry).

(h) Cramey failed to advise Shannon properly, or at all, in respect to messages which were, or might be, displayed on Civic's computer during the back-up which would indicate that the magnetic tape was full such that the back-up copy would, or could be, incomplete.

516. Counsel also relies on the duty of care alleged in par. 20D of the statement of claim, namely that Wacher owed Civic a duty to take reasonable care and/or use due care and skill in modifying Civback and to advise Civic of any reason why Civback could not be effectively used to make back-up copies of Carry. The basis of the duty is pleaded in par. 20C to be reliance by Civic on Wacher in relation to the modification and advice which reliance was known to and intended by Wacher.

519. Then par. 20F pleads that on or about 16 October 1992 Wacher, by Cramey, advised Civic that Civback could be used to make back-up copies of Carry. Paragraph 20G pleads that for various reasons that advice was negligently given. By par. 20H Civic pleads that in reliance on that advice Shannon used Civback on 5 November 1992 to attempt to make a back-up of Carry and made no other attempt to make such a back-up copy.

522. Finally, counsel relied on the further allegations of breach in par's 26 and 27 of the statement of claim. These are that Wacher, in breach of the duty of care referred to in par. 16, failed to take adequate steps to ensure that Civic had available to it a back-up copy of Carry and magnetic tapes suitable for making a copy, and to obtain for itself and keep a back-up copy of Carry.

525. I take all other allegations of breach to have been abandoned.

528. I now refer to some matters of fact and undertake a closer analysis of Civic's case.

531. Civic had several years' experience with a computer system, including Carry, in its business prior to upgrading its system in June 1992. Carry was customised to its purposes during that period. Shannon was experienced in the operation of the computer system, and within Civic was the senior person responsible for it. Several other members of staff either assisted him or from time to time performed responsibilities in relation to the computer system. Civic did not call any of those persons to give evidence as to things done in the operation and management of the system, including matters concerning back-up, or as to their or Shannon's knowledge in these areas.

534. Shannon said in evidence that he had no formal training in computers, that he did not read the manuals which the hardware and software suppliers had given him and had not attended any course concerning the computer system. He said that he had retained and looked at but not read a 13 page document headed "Commissioning The 386/486 And Carry Installation" which Salisbury left behind in August 1992. He said that he did not see it as important to understand the material. The tenor of his evidence was that he relied on others for advice, such as Nucleus. Shannon's attitude of reliance was not a satisfactory discharge of his responsibilities, as a computer owner, for the use and management of his computer system, as such an approach carried a significant danger of loss both in terms of the system and Civic's business. I do not accept that the knowledge which he possessed and his competence in the use of Civic's computer system was as minimal as his evidence might seem to indicate. In my view he over-stated his lack of reading or instruction and awareness of proper procedures in the use of the system in an endeavour to convey an image of dependence on others, such as Wacher, for advice, and to avoid the consequences of his own failures in Civic's use and management of its computer system.

537. The purchase of Civic's new computer system was investigated and arranged by Shannon. He said in evidence that he based his decision on information from Coy, but in what actual respect or to what actual extent this was so is not established. In any event, Shannon was responsible for the purchase of the ICL computer and hardware, the order for which, including the SCO Unix operating system (which was provided by Fujitsu Australia Ltd (Fujitsu) ) for a total of $62,339, was sent by Civic on 26 June 1992. The equipment included the tape drive about the capacity of which Cramey enquired on 6 November 1992. Civic, by Shannon, separately engaged Nucleus to convert Carry and its data for use on the new computer; that was by the 29 June 1992 agreement. Civic also dealt with Fujitsu which was involved in readying the computer hardware and the Unix operating system for the purpose of the installation of Carry. Civic entered into a system service agreement with Fujitsu for the ICL computer system.

540. In his first report the special referee noted that each manufacturer's implementation of a Unix operating system is unique in some details, in particular as to the commands and error messages and even in successive product releases by the same manufacturer. He noted that it is necessary for proper use and administration of a computer system to have available manuals relating to the specific product in use.

543. The owner of a computer system needs not merely to take care in using the system but has positive responsibilities to observe. There was reference in the evidence to the functions of a housekeeper or system administrator and the necessity for a computer owner to carry out the functions of such a person. I accept the evidence of Ferguson, who even taking account of his obvious interest I found to be an honest and reliable witness, that the difference between the two is a matter of degree, a system administrator being likely to be involved in more technical issues than a housekeeper would on a day to day basis. I accept his evidence that where in his witness statement he referred to a system administrator and the responsibilities of that position he was referring to a housekeeper and I accept his evidence as to those matters.

546. On a number of occasions in his reports the special referee referred to matters which an owner should attend to, including housekeeping tasks. Counsel for Wacher referred in this respect to the first report par's 14 - 15, 56 - 59, 60 - 62, 72 - 74, 76 - 81, and in the second report to par's 26 - 35 and 59 - 61. I quote only from par's 14 and 15 in the first report:

All business computer systems need regular attention to be given to housekeeping operations such as backingup, removing redundant files, tuning the system for optimum performance, checking the integrity of files, and similar tasks. If no attention is paid to these tasks, then loss of data and an inefficient system, possibly an inoperable one, are inevitable. It is good practice to make one person responsible for performing or supervising these tasks, and such a person is usually designated the `System Administrator'. The fact that the SCO Unix System Administrator's Guide [1] is 744 pages long and the SCO System Administrator's Reference Manual [18] is 706 pages long strongly suggests that system administration is not a trivial task and that it cannot be left to take care of itself. Although most system administration tasks are not especially difficult, they are certainly not intuitive, particularly on a Unix system. There are vast opportunities for making disastrous mistakes. Consequently, a person carrying out a system administrator's tasks, whether or not she or he is formally designated as system administrator, must have adequate up-to-date information relating specifically to the version of Unix in use.

550. Later in the first report the special referee referred to the importance of backing-up the purpose of which is "to allow individual files or a whole system to be reconstructed after damage to a working system" (par. 57). The process of backing-up preserves and does not destroy data on the hard disk, and therefore the process of backing-up can be repeated should it be unsuccessful in the first instance (par. 61). As that implies, a reliable means is needed to check a back-up to ensure it has succeeded (par. 61).

553. The evidence of the witnesses before me gave additional support to the views of the special referee. Shannon was the person at Civic in control of the computer system and was actively involved in its acquisition, arranging its configuration with Fujitsu, and its development including the implementation of the Carry customisations, and overall responsibility in use. In October 1992 he retained Greensmith to create a communication link with First and he retained Kwan in November. Shannon knew that he (or Civic) had the responsibility of properly managing the computer system, including the importance of back-up. It is pertinent, and was understood by Shannon, that the SSA and the Fujitsu service agreement proceeded on the basis that Civic was responsible for the general operation and administration of its computer system. The Fujitsu service agreement expressly provided that it did not "in any way include on-site support or telephone advice and guidance on SCO Unix usage, system administration, or system re-establishment in case of disc replacement".

556. Under cross-examination Shannon acknowledged that Civic was responsible for system administration which included maintaining files on the system, maintaining available space on the system by removing redundant files; and regular attention to housekeeping matters such as backing-up and checking the integrity of the files. With the exception of tuning the system for optimum performance these are the matters which the special referee identified in the first sentence of par. 41 of his first report quoted above. Shannon was well aware from the occurrence of an out-of-space incident in 1991, which Nucleus told him was Civic's responsibility as a system administration function, of the need to ensure there was available space on the hard disk when restoring information from a back-up tape. Shannon said that he regularly backed-up and archived redundant files from the hard disk to tape and vice versa. He was also aware of a risk with tapes that they can vary in quality and wear out. He was also aware that an attempt at removing information off the hard disk to tape could fail because the tape was corrupt, old or not big enough. He agreed that they were obvious things that could go wrong. He further agreed that if he did not maintain an effective system of checking what had been put on tape he could suffer permanent loss when he cleared material off the hard disk. That is because if the back-up to tape had not succeeded and the information had been removed from the hard disk or the relevant information on the hard disk had been over-written, the information would be lost. Such loss would also occur if information on the hard disk was removed to tape and the tape was over-written. I find that Shannon was aware of such risks and of the consequent need to ensure effective back-up and, for the well-being of his business, to retain a copy of the information on the hard disk. In specific answers in cross-examination he indicated awareness of such risk of loss by ineffective back-up in July 1992 and I find that he was so aware at all times relevant to the case against Wacher. I find that he had that awareness before 1992, and the further awareness that he agreed he had in July 1992 that if he did not correctly perform back-ups his business could be at risk of serious monetary loss.

559. Shannon gave evidence of taking back-ups. He said that up to the time when the ICL computer was acquired a back-up was taken every Friday. He said that Carry itself took a back-up of the Carry software and data, that it copied everything on the system software. He also said that at the end of each day in response to a message on the screen he or other employees would insert a tape for back-up and the machine would then perform back-up. He said that about 10 - 20 tapes were used for this purpose in rotation. He said he had no way of knowing whether such back-up had actually been performed, and that it was working for five years. He recognized it was critical that the back-up succeeded but he never checked the contents of the tapes. He was then asked if he ever had any one check the contents of the tapes to which he answered that he knew employees of Intercept and Nucleus checked.

562. Counsel for Wacher submitted that Shannon should not be believed in his evidence that Carry backed-up its own software. Counsel relied on the evidence of Dr Thorne who said that with the addition of Civback Carry could back-up its own software, but not without it. I accept this evidence of Dr Thorne. I might add that counsel for Wacher asserted that what Dr Thorne said was common ground before the special referee. The submission of counsel for Wacher is that Shannon's evidence on this point was a deliberate attempt to cover up the fact that he knew that Carry did not back-up the software and that he had willingly accepted the risk of loss if the customised Carry were lost off the hard disk. Counsel sought support for this submission in the fact that until Shannon said he had done so in cross-examination he had not said in his witness statement or recorded in his contemporaneous note that following the discovery of the loss of Carry on 6 November he had gone to the boot of his car and retrieved the Friday back-up tapes to obtain a copy of the software for Kwan.

565. In assessing this evidence I note that Shannon's evidence as to Carry backing-up the Carry software was given on the first day of the trial. His cross-examination continued on the following day. On this day he said that his evidence on the point was concerned with the period prior to the ICL computer, which he had made clear anyway.

568. He then said however that he did not believe the Friday back-up tapes contained a copy of Carry because Civback had been provided specifically to enable Civic to back-up the Carry software. This meant there was a changed system of backing-up but he agreed that Salisbury did not tell him that Civback altered any of the functions of Carry. He said that when he was advised of the changed system (which would have been on 29 August 1992) he did not continue to believe that the Friday back-ups which had been done to then copied the Carry software. From then it was a matter of using Civback.

571. In part this further evidence clarified and confirmed the evidence he had given on the previous day. I understood his evidence to be that this process of regularly backing-up had continued until the introduction of the ICL computer or Civback at the very latest. Taking the former to be the point in time that Shannon had in mind, although it was not until 29 August that Civback was installed and Shannon was told about it, the fact remains that the regular back-ups of Carry were recording its software, in his view, and it is curious that neither in his thorough witness statement nor in his contemporaneous note did he refer to going to the boot of his car to retrieve the Friday back-up tapes for Kwan to examine. Nor could he recall telling his solicitors he had done so. In part the question is one of credit. I conclude that I do not accept Shannon's evidence that on 6 November 1992 he held the belief that the Friday back-ups had not copied the Carry software and that his adoption of that belief after 29 August 1992 was the reason why he did not refer to getting the tapes from his car. I accept that there is substance in counsel's submission that Shannon's evidence on this matter was motivated by a concern not to be seen as having disregarded or given inadequate attention to the need to back-up the customised Carry software.

574. If Civic had been alert to take and retain a copy of its customised Carry and data Kwan could have re-installed Carry on the system on 6 November 1992. If the customised Carry had been available to be re-installed on 6 November the basis of Civic's claim against Wacher would not exist. Whether the re-installation of the customised Carry on 6 November would have meant that the ICL computer system would have been rendered functional is another matter and one which I do not have to deal with in this judgment.

577. I find that Shannon, aided as he was by other employees, possessed the skill and ability sufficient to perform the necessary housekeeping tasks. To the matters referred to by the special referee in this connection I mention some matters referred to by Dr Thorne in his evidence. I conclude that these are in the self evident category to a reasonably experienced user and certainly were to Shannon or, if they were not, ought to have been with proper thought. If one is to back-up one should first consider whether there is something on the tape which should not be overwritten. One should also know if the tape has enough capacity to take the information to be transferred. Furthermore, Dr Thorne said, and I accept correctly, back-up does not always work for a variety of reasons such as the media on to which one is attempting to copy, malfunction in the software, and error in the command. For this reason it is an important housekeeping function to check that the back-up has succeeded.

580. Dr Thorne gave some further evidence, which again I regard as self evident common sense, that before Kwan re-configured the hard disk on 6 November the integrity of Shannon's back-up of Carry should have been checked. Even if for present purposes it be assumed that without more Shannon was not able to do this, Kwan was a Fujitsu technician and I infer could have assisted Shannon in carrying out a check. It was not acting with reasonable care in the interests of Civic to proceed to remove the software from the hard disk or to overwrite it without undertaking that integrity check. In my view a mere belief that an effective back-up had been achieved by means of Civback was not sufficient to discharge the responsibility on Civic in this regard. Moreover, the attempt at back-up had been effected in a context of ongoing problems with the computer system, including in particular a belief that in fact Civback had not been backing-up and that on Shannon's evidence that failure had been remedied only as recently as about the middle of October 1992, since when Shannon had not verified that Civback was actually working. The error in this respect is emphasised by Kwan's actions: after he had removed the Unix customisations from the hard disk Kwan verified that the removal had been successful before he proceeded to the next step of putting material to the hard disk and thereby ensuring that the material on it, which I find included Carry, was lost.

583. Let this be emphasised: before Kwan did his work the customised Carry was on the hard disk. It could have been taken off to tape. It was not taken off by Kwan and Shannon's effort had not succeeded, as discussed above. When Kwan completed his work the customised Carry was lost as a result of his work on the hard disk.

586. Regarding the evidence overall there is no basis in my view, and I so find, for concluding that Wacher knew or ought to have known that Shannon was not possessed of appropriate skill and competence in the use and management of Civic's computer system including in the performance of housekeeping functions.

589. I shall deal further with the facts when I consider more specifically the way in which the statement of claim pleads the case. In what I have said above and in what I say later I have regard to all of the evidence even though it might not be set out or specifically referred to on the various points.

592. It is convenient at this point to say something about the Local Court proceeding. In that proceeding, which as mentioned was commenced on 3 December 1992, Nucleus sued Civic to recover $26,900 for goods supplied and services rendered between July and August 1992. The amount comprised two items: $26,700 under the invoice dated 29 June 1992, and $200 for a separate item of work. By its written grounds of defence and at the trial of that claim, Civic admitted the agreement but contended that Nucleus had failed to render the computer software operational despite its endeavours to do so between August and November 1992 inclusive, and, in particular, until about 21 November 1992 when Nucleus told Civic it was unable to render the software operational in an expeditious manner and accordingly Civic approached another computer firm to remedy the software. It was alleged in the defence that repeated failures of the software had a substantial adverse effect on the conduct of Civic's business. The defence further alleged that in November 1992 Nucleus advised Civic that its assets and business had been sold to Wacher "which effectively meant that Nucleus was ceasing to trade" and that in the circumstances Nucleus "has failed to fulfil its part of the agreement". In an affidavit attached to the defence Shannon swore that the defence was true in substance and fact. This is the case that was run before the Magistrate. Civic did not counterclaim for damages for breach of the agreement and did not bring Wacher in as a cross-respondent to a claim for damages. The Magistrate rejected the claim for $26,700 and allowed the claim for $200 with $200 costs.

595. At the hearing Civic relied on events up to and following the sale by Nucleus of its business to Wacher. The fact of the sale was established. Civic subpoenaed Wacher to produce documents relating to the sale, viz.: employment records relating to Whiteley, Green, Taylor, Coy, Salisbury, Cramey and Sargeant for the period 1 May 1992 to 30 December 1993, documents relating to the sale of products by Nucleus to Civic between 1 May 1992 and 30 June 1993 and documents relating to disputes between Nucleus and Civic in that period, and the like documents between Wacher and Civic. Documents were produced in response.

598. The defence run by Civic, as is apparent from its written defence in that case and confirmed by Shannon in evidence before me, was that Civic experienced ongoing problems with the software, that Nucleus never rendered the software operational and that Nucleus' failure to render the software operational continued until 21 November 1992 when Taylor advised Shannon that the task would take in excess of three months. I have previously mentioned that in response Shannon said he would have to find someone else for the task, told Taylor that further correspondence should be through Civic's lawyers and disconnected the modem.

601. Civic contended and the Magistrate accepted that in excess of three months was an unreasonably long time and amounted to a renunciation by Nucleus of its obligations under the 29 June 1992 agreement. Let that be emphasised: Civic's complaint, and that upheld by the Magistrate, was that in its endeavours up to 21 November 1992 Nucleus had failed to complete the conversion process so that the system worked properly, pursuant to the 29 June agreement. It was no part of Civic's complaint that Nucleus had acted under or been in breach of the SSA. In explaining the fact that no complaint had been made against Wacher Shannon said, in evidence before me, that "Wacher's didn't come on the scene until November" and that Wacher was not responsible for the matters complained about in the defence. Yet the events of 5 and 6 November 1992 upon which the present case against Wacher concentrates, were the subject of evidence before the Magistrate. Indeed they were put before him as part of the continuum of events which related to and established the failure to perform the 29 June 1992 agreement. Furthermore, as I have said, Civic's case before me not merely concentrates on acts and omissions of Wacher on those days in particular but liability is sought to be imposed on Wacher under the SSA or in negligence.

604. It is useful to take this background of events a little further. Shannon gave evidence before me of problems which he experienced with the computer commencing in the first week of September 1992 (Salisbury having completed his work on 29 August). This had also been the subject of evidence before the Local Court. He referred to pricing errors which affected hundreds of clients and caused a loss of approximately $4,000. Later in September Shannon spoke to Taylor about issues to be resolved by Nucleus and there is correspondence between them on 25 and 29 September. Shannon said in evidence before me that from 29 September (being the date of his letter to Taylor in which he identified issues needing to be resolved) right through October the problems with the computer "got progressively worse". In his evidence at the Local Court Shannon said that the problems had a "huge effect", which he described as "chaotic", on the operation of Civic. Shannon described the system freezing and referred to the system being down or crashing thereby preventing access to the system. He said the system regularly crashed or closed down from late September through October. At times Nucleus would ring and ask for the system to be shut down so they could do something to the system and he said that if something was fixed more problems would be created. He referred to complaints from, and a loss of, customers. Thus the matter continued until November, in particular until and following the occurrence of the events critical to Civic's present case against Wacher. I do not overlook the further evidence of Shannon given before me as to communications with Cramey in September and October 1992. For the moment I am concerned to refer to the background to the issues now raised for determination.

607. I now turn to deal specifically with the way the case is put in the statement of claim, commencing with the duty alleged in par's 14 - 16. The foundation of the duty to take reasonable care in providing computer software consulting services and advice to Civic in relation to Carry is the plea of holding out in par. 14. By particulars the plea is based on the matters alleged and particularised in par. 8. I referred earlier to the plea in par. 8 that Wacher made certain representations and warranties to Civic. Particulars to par. 8 state that the representations and warranties are contained in or are to be implied from Hoschke's letter dated 16 November or were made by Whiteley at the meeting on 14 October. It is also alleged that the representations and warranties were made by Taylor at that meeting, but as he is alleged in the particulars to par. 5 to have attended the meeting for and on behalf of Nucleus and not to have made any representation or warranty additional to any made by Whiteley, Civic's case against Wacher is not advanced by the reference to Taylor.

610. The plea in par. 14 cannot avail Civic for the following reasons. First, the letter dated 16 November came after the occurrence of the relevant events relied upon by Civic as giving rise to its loss and damage and could not therefore constitute any relevant holding out. Secondly, the findings I have made on the contractual issues negate the premise of the plea that Wacher made a promissory statement as to entering into an agreement with Civic or that Wacher had become bound to Civic to perform the obligations of Nucleus under the SSA. Thirdly, I have accepted Whiteley's evidence as to the discussion at the meeting on 14 October. That evidence does not establish that representations or warranties were made as alleged in par. 8. To refer again to what Whiteley said: he introduced himself as general manager of Nucleus, not Wacher; he did not know about the SSA and it was not discussed; he said that Wacher would continue to market Carry and provide an even greater level of support, employees would be retained and the standard of service provided by Nucleus would continue.

613. It follows that the plea of holding out in par. 14 is not established. It also follows that in terms of the pleading par. 14 cannot support the plea of duty in par. 16. These conclusions are not to deny that in what Whiteley said to Shannon there is not to be found a profession of skill in relation to Carry including the provision of services as had been provided by Nucleus, but to acknowledge that is to acknowledge something of a different character from that pleaded in par.14. Likewise, it is not to deny the fact that under the 9 October 1992 agreement Wacher agreed with Nucleus to perform Nucleus' obligations under the SSA, but again, this is not the relationship pleaded in par. 14.

616. Paragraph 15 pleads that Wacher knew or ought to have known that Civic would, in conducting its business, rely on the software consulting services and advice provided by Wacher in relation to Carry. In my view the reference to "consulting services and advice" is a reference to the like services and advice that are referred to in par.14. That in turn takes one to the particulars in par. 8. As I have said, those particulars do not establish the allegations in par. 14. This means that the services and advice referred to in par. 15 do not include, at any relevant time, the undertaking by Wacher under a contract with Civic of the obligations of Nucleus under the SSA whether as a consequence of the novation or the assignment alleged in par's 6 and 7 or the agreement contended for in closing by counsel for Civic. This means that in terms of the pleading par. 15 does not support the plea of duty in par. 16.

619. If the plea in par. 15 can be taken to have any operation independently of par. 14, the "services and advice provided by Wacher in relation to Carry" must be identified as existing apart from the provision by Wacher as a contracting party to Civic of services and advice under the SSA. That is, Wacher not being contractually bound by the SSA to Civic, the identification would be of services and advice not provided by Wacher in that capacity under the SSA. If Wacher provided any services or advice to Civic the capacity in which they were provided is otherwise to be identified and considered in the context of a duty of care. It is to such acts or omissions in the course of providing any services or advice to Civic that the plea of reliance on Wacher in par. 15 and later in the pleading must be considered.

622. The difficulty is not so much in accepting that as a matter of principle Wacher might have owed a duty of care in respect of the provision of services and advice to Civic. The difficulty which confronts Civic is to establish facts and circumstances in which a duty to take care may properly be found and then to identify facts and circumstances which might truly constitute a breach of that duty and be causative of loss. I have already excluded the contractual bases on which Civic founds its claim. The question is whether the circumstances were such as to produce the imposition upon Wacher of a duty to take care in providing services and advice to Civic in relation to Carry. Whether that is so, and whether there was a breach of duty, must depend upon the relevant facts considered by reference to the pleaded case.

625. It is at this point, and after referring to the events of 5 and 6 November, that one arrives at par. 20 of the statement of claim. Paragraph 20 alleges that in breach of the duty referred to in par. 16 Wacher negligently rendered to Civic computer software consulting services including the advice to have the kernel reconfigured, the advice to have Unix rebuilt and the back-up advice, being the advice relied on by Civic as having been given on 5 and 6 November and which I set out above.

628. Paragraph 20 must be read in light of the findings I have made on the contractual aspects of Civic's claim, and the discussion concerning par's 14 - 16 of the statement of claim. For the reasons discussed, when par. 20 refers to "the duty" referred to in par. 16, one must be careful to identify the acts to which that alleged duty or any duty to take care is to attach and the circumstances in which they were performed. When I speak of "the acts" of Wacher, I have in mind the passage in Lord Atkin's speech in Donoghue v Stevenson [1932] AC 562 at 580, where in answering the question as to who is my neighbour his Lordship said:

The answer seems to be - persons who are so closely and directly affected by my act that I ought reasonably to have them in contemplation as being so affected when I am directing my mind to the acts or omissions which are called in question.

Attention has been drawn to the fact that Lord Atkin's definition refers to a person affected "by my act", not my omission; see Sutherland Shire Council v Heyman [1985] HCA 41; [1984-1985] 157 CLR 424 at 477 - 478 per Brennan J, a case in which the High Court emphasised the distinction between causing something to happen and failing to prevent it from happening (see 443 - 446 per Gibbs CJ, 477 - 479 per Brennan J and 502 per Deane J). Deane J described the distinction as fundamental.

633. The position of Wacher in relation to Civic is that it had agreed with Nucleus to perform the obligations of Nucleus under the SSA. Further, at the meeting on 14 October Whiteley offered comfort to Civic by speaking of Wacher's skill and support. I have already discussed the significant responsibilities which Civic bore in relation to its computer system, responsibilities which I hold Civic did not meet and which caused the loss which it complains of in this case. Wacher was never the protector of Civic, enlivened in its delegated performance under the SSA or otherwise with some supervisory role to prevent Civic from causing itself harm due to its own lack of responsibility in relation to the software and its business.

636. I set out earlier the three respects stated in the particulars to par. 20 as constituting a breach of the duty of care alleged in par. 16. These relate to the issue of back-up and in particular the size of the tape used to perform the back-up and the possible display of an error message during back-up. I return to this point below.

639. I should then say something about the pleas in par's 20A - 20H. The first aspect to note is the duty of care alleged in par. 20D. This alleged duty is based on the facts alleged in par's 20A - 20C. The second aspect to note is the plea in par's 20F and 20G as to negligent advice that Civback could be used to make back-up copies of Carry, Civic's case being that it could not be so used. The third aspect is the plea in par. 20H, based on the allegations in pars. 20E - 20G, that in reliance on Wacher's advice that Civback had been modified so that it could be used to make back-up copies of Carry, and on Wacher having failed to advise Civic that in fact Civback could not be so used, in the period 16 October to 5 November 1992 Shannon assumed that Civback could be so used and did use Civback to attempt to make a back-up copy of Carry and made no other attempt to back-up Carry. In particulars to par. 20H it is stated that Shannon so used Civback on 5 November. In other words the use of Civback relied on by Civic to establish the plea in par. 20H is the use constituted by Shannon's attempt to back-up on 5 November. The fact is of course that Shannon also attempted to back-up on 6 November.

642. I turn now to a detailed analysis of these pleas. The duty alleged in par. 20D is founded on the following pleas. Paragraph 20A pleads that pursuant to the SSA Civic sought advice from Wacher in about October 1992 in respect of the effectiveness of Civback which Wacher knew had been used by Civic after September 1992 for the purpose of seeking to make back-up copies of Carry to be used if the copy of Carry on Civic's computer should be lost.

645. The plea is premised on the proposition that Civic sought the advice from Wacher "pursuant to the SSA". If that premise is based on Wacher being contractually bound to Civic by the SSA, the plea must fail because Wacher was not so bound. Even if it be assumed that Wacher was bound to Civic by the SSA (which it was not), it is another question whether the advice referred to in par. 20A was sought "pursuant to the SSA". It by no means follows that it was.

648. In particulars included in the statement of claim the request for advice is stated to have been in writing, oral and implied. The written part is Shannon's letter dated 29 September 1992 to Taylor of Nucleus. The letter listed "details pertaining to our outstanding issues as requested" and then listed six items concerning First followed by a list of 13 items concerning Civic one of which is "CIVBACK (Back-up - does not work)". The oral part is stated to be constituted by a conversation between Shannon and Cramey (allegedly on behalf of Wacher) in about mid October 1992 to the effect alleged. The implication is said to arise from the matters referred to in par. 5 and the sending of the letter dated 29 September. Paragraph 5 contained the allegation that on or about 9 October Wacher purchased the business of Nucleus and in particulars referred to the meeting on 14 October and the letters dated 10 and 16 November 1992.

651. Civic gave further particulars under par. 20A on 11 December 1996. By these particulars Civic relied on further conversations between Shannon and Cramey in 1992 the substance of which is that Cramey stated to Shannon that Civback had been rectified, the last such conversation occurring after 9 October and before 5 November. The basis from which the implication was to be drawn was extended to include those conversations and the fact (as it was stated to be) that Civback was modified by Wacher on 16 October 1992 as recorded by the Civback program.

654. The letter dated 29 September pre-dates Wacher's acquisition of the business of Nucleus. Naturally it was addressed to Nucleus. Wacher was not then on the scene. Further, and fundamentally, the letter did not state that it was a request for advice under the SSA. In my view it was not. In my view it was advice or work to be done by it under the 29 June 1992 agreement.

657. The letter of 29 September does not stand in isolation. It was sent in response to an earlier letter from Nucleus (written by Taylor) dated 25 September 1992. That letter stated that Shannon had discussed some issues relating to Nucleus' work and the question of the software which needed to be resolved, and that Taylor wanted to resolve the issues and have Civic pay money which it owed Nucleus. Taylor concluded his letter by stating that "If there are other issues which for some reason [are] holding up the payment I would appreciate if you could fax a list so these may be addressed if necessary". Shannon sent his letter dated 29 September in response.

660. The payment which Taylor was seeking was of the monies owing to Nucleus under the 29 June 1992 invoice and the further amount of $200, a total of $26,900 which Nucleus sought to recover in the proceeding in the New South Wales Local Court. Wacher had nothing to do with either matter and, as mentioned, was not a party to that litigation.

663. An essential premise in par. 20A is that the advice concerning the effectiveness of Civback was sought from Wacher "pursuant to the SSA". More than one issue arises at the threshold of this plea. One issue is whether the advice was sought pursuant to the SSA or the June agreement or otherwise. Another issue is whether the advice was sought from Wacher or Nucleus. To succeed on the plea Civic must establish that the advice was sought both pursuant to the SSA and from Wacher. My conclusion having regard to the pleaded case and the relevant evidence is that Civic has failed to establish either proposition as the fact.

666. We are here concerned with Civback and an alleged request to Wacher under the SSA whether it was effective to make back-up copies of Carry. Civback was not part of Carry. It was installed by Salisbury on 29 August 1992 when he was installing and testing Carry on the ICL computer. No separate invoice was rendered for installing Civback. Nucleus installed it in the course of carrying out the work covered by its June invoice. It was part of that work. Salisbury told Shannon that Civback was a program specifically written for Civic and loaded on to its computer to be used to make back-up copies of Carry. Salisbury showed Shannon how to use the program, how to log in, and told him to put a tape cartridge in the tape drive and to choose option 2 on the menu on the screen. He did not demonstrate it beyond bringing up the menu. Shannon told Salisbury to immediately make a back-up copy of Carry and as soon as possible after being advised of any changes or modifications to Carry to make a further back-up using Civback. He told Shannon to expect changes after any problems reported had been attended to by Nucleus. As mentioned earlier, Shannon used 150 megabyte magnetic tapes for back-up, being the size tape which he states that Salisbury advised him to use on the ICL computer on 21 August 1992 and which Shannon says he thereafter used for back-up. Shannon said that he used such a tape to back-up Carry after Salisbury left on 29 August.

669. Wacher's counsel submitted that Shannon's evidence on the matter of the installation of Civback suffered from a want of explanation as to why and the circumstances in which Salisbury came to install it. He submitted, in effect, that Shannon must have had some discussions with Salisbury which led to the installation of Civback and that the failure of Shannon to give evidence of those discussions and to explain the reason for the installation of Civback should tell against the acceptance of his evidence. I accept the submission of Wacher's counsel that the installation of Civback was not within the strict terms of the scope of work contemplated by the 29 June 1992 invoice. The work required was to install and test Carry on the ICL computer. I incline to think there is substance in this submission for it is hardly to be thought that Salisbury would have installed Civback out of the blue, as it were. Even so, the fact is that Civback was installed and in the absence of greater clarity on the matter I do not draw an adverse inference against Shannon on account of it. The fact of the matter is that Civback was installed by Nucleus in the course of carrying out its work under the June invoice, and it is to be regarded as having been comprehended within the invoice works. It was never the obligation of Wacher to provide Civback to Civic. It was existing in Civic's system when Wacher acquired the business of Nucleus.

672. The next step in the particulars to par. 20A is the reliance on a conversation between Shannon and Cramey in about mid October to the effect alleged and on further conversations between them the substance of which was that Cramey stated that Civback had been rectified, such conversations occurring after 9 October and before 5 November 1992. Then there is the allegation that Civback was modified on 16 October 1992.

675. Shannon gave evidence of speaking to Cramey on numbers of occasions after 29 August. It is evident that these conversations, whether directed to Carry and ongoing customisations arising out of the conversion to the ICL computer system or to the operation and use of Civback, were all part of the one process of seeking to render the system functional. That was Nucleus' task pursuant to the 29 June 1992 agreement. Specifically as to Civback, soon after first using it Shannon told Cramey that it had taken only a few seconds for the task which Cramey said did not sound right and that he would have it looked into. Shannon followed this up and later in about mid September Cramey said that Civback had been changed. Shannon ran it but found the operation no different. Shannon said there were other problems with Carry and that he identified these in his letter to Taylor dated 29 September 1992. One of the matters identified was Civback which he stated was not working. Shannon's evidence is that in October Nucleus was constantly making changes to Carry "to fix problems that were occurring", and he was asking Cramey about Civback. Shannon said in evidence that in about the middle of October, in a conversation concerning problems that Civic was experiencing with Carry, Cramey said that he had been mailed that Civback had been fixed and that Shannon should run the program. Shannon did so, it ran for several minutes, lines of data flashed on the screen and the screen went back to the menu. He told Cramey who said that that sounded okay. Shannon said that he was satisfied Civback had been fixed. Accordingly he used it to make a back-up copy of Carry and did so on several further occasions up to 5 November 1992. Although it is apparent that the problems with the computer system were not resolved, indeed that problems continued, Shannon did not further refer to a problem with Civback in the period up to 5 November. Unfortunately he never checked whether a back-up had succeeded. A check would have revealed that none of the Civback back-ups had succeeded.

678. It merely remains to say what is really obvious, that when Shannon spoke to Cramey, as he said in his evidence, it was in connection with Nucleus making the system properly operational pursuant to its agreement to do so. It is artificial and contrary to the fact for Civic to select conversations concerning Civback out of one overall context and say that that part concerning Civback was with Cramey for and on behalf of Wacher, and all the rest concerning Carry and rendering the system operational is to be characterised as being with Cramey for and on behalf of Nucleus and presumably under the 29 June 1992 agreement or perhaps the SSA. This process would have one splitting conversations for in some both Carry and Civback were discussed. So, on Civic's case, Cramey would in the one conversation be speaking to Shannon for and on behalf of Nucleus in relation to some matters and for and on behalf of Wacher in relation to others. There is no evidence that Cramey ever distinguished his role in this way. There is no evidence that Shannon ever understood Cramey as acting in such a duel capacity. In fact the external indicators in the evidence point the other way, that Civic did not regard itself as dealing with, or as having a complaint against, Wacher. The truth of the matter is that the plea in par. 20A fails because it is founded on premises that did not exist, namely, that Civic sought advice from Wacher and that such advice was sought pursuant to the SSA. The point was to have Nucleus perform its obligations under the 29 June 1992 agreement. It was not a matter of support under the SSA, it was a matter of rendering the system operational.

681. It is necessary to say something further about the date of 16 October. Civic sought to fix the date of the conversation in which Cramey told Shannon that Civback had been fixed as 16 October by reference to a record in the system log. Civic further relied on evidence of Ferguson that any error as to this being the actual date could only have been a few days at the most.

684. I do not accept that this conversation occurred on 16 October or within a few days of that date. In this and other respects I have concerns about the reliability of Shannon's evidence, including, on this issue its accuracy as to the date on or about which the conversation with Cramey occurred. He has an interest in the date being after 9 October. The reference to the system log does not assist in this regard because as the special referee stated it is not possible to say with certainty that any modification was made to Civback on or about 16 October or that, if a modification was made to Civback on or about 16 October, that any material alteration was thereby made to the program. I appreciate the difference between certainty and the balance of probabilities, and I consider this issue on the latter basis. I am not satisfied on the balance of probabilities that any material alteration was made to the program on 16 October or within a few days thereof. Nor am I so satisfied that any such material change, or the conversation relied upon, occurred subsequent to 9, or even 14, October. I add a finding that there was no other relevant conversation between Shannon and Cramey as alleged in the further particulars.

687. The next step in the pleading is the allegation in par. 20B that due to programming errors contained in it Civback could not make a back-up copy of Carry. In particulars the error is stated to be that Civback was programmed to include a Unix block size argument "obs = 512k", whereas Civic's computer would not accept that argument. This is correct. In the particulars Civic also refers to a memorandum from Cramey to Whiteley dated 11 November 1992. In this memorandum Cramey refers to the fact that Shannon and not Nucleus determined upon the hardware for Civic's new computer system. Unix was installed by Fujitsu. He further states in relation to Civback that the incompatibility of the command was not known to Nucleus or brought to the attention of Nucleus by Shannon or his hardware supplier. As soon as Cramey became aware of the fact that the computer would not accept that Unix block size argument he corrected the command.

690. When Shannon contacted Cramey on 6 November following Kwan's advice to have a back-up done, he asked Cramey for the Unix commands so that he could perform the back-up. Cramey had no interest to provide an incorrect command. I infer that in providing the commands Cramey provided information which he considered was correct in light of his knowledge of the operation of Civic's computer system.

693. It is convenient to add too, that in my view, regarding the matter overall, what was happening from Civic's position was an on-going process of communication with Nucleus, to whom it had not paid one cent under the 29 June invoice, to have the work covered by that invoice performed. I am clearly of the view that the correct characterisation of events is that when Shannon contacted Cramey on 6 November he did so in furtherance of his attempts to have Nucleus perform its obligations under the June agreement and thereby render the system functional.

696. The next step in Civic's pleading is in par. 20BA in which it is alleged that on or about 16 October Wacher attempted to modify Civback so as to make it effective to back-up Carry. I have already dealt with the issue of a modification or an attempted modification to Civback on or about 16 October. An essential part of the plea is that the attempt was made by Wacher. That is not established.

699. It is then alleged in par. 20C that Wacher knew and intended that Civic relied on it to modify Civback so that it could back-up Carry and advise it of any reason why it could not be so used. By particulars Civic relies for this plea on the matters referred to and particularised in par's 20A and 20BA. It follows that for the reasons stated the plea in par. 20C must fail and I so hold. It follows, in turn, that the factual premises for the duty alleged in par. 20D are not established and, that being so, that plea of duty must fail. The dependant allegations of breach in par. 20E thus fall to the ground.

702. The next step in the pleading is the allegation by Civic in par. 20F that on or about 16 October Wacher advised Civic that Civback could be used to make back-up copies of Carry. What I have said above is sufficient to deal with the allegation in this par. 20F. Wacher did not give advice as alleged.

705. I should however refer to par. 20G in which it is alleged that for several reasons the advice referred to in par. 20F was given negligently. It is not established that Wacher attempted any modification.

708. Proceeding on, it is then alleged in par. 20H that Civic relied on Wacher having, as alleged in par's 20E - 20G inclusive, advised that Civback had been modified and could be used to make back-up copies of Carry and failed to advise Civic that in fact it could not be so used, and that between 16 October and 5 November Shannon, assuming that Civback could make a back-up copy of Carry, used Civback to attempt to do so and made no other attempt to back-up Carry. In particulars of this plea it is stated that the use by Shannon was on 5 November. That is the only use particularised and thus relied on by Civic to establish the plea. I have dealt above with Shannon's attempt at back-up in the critical time of 5 and 6 November. There is no need to add to that. It is sufficient to state my conclusion that the plea in par's 20F - 20H fails for the reasons mentioned which include that the advice which is alleged to have been relied on and to have been given negligently was not given by Wacher. It was given by Nucleus in connection with the performance by it of the 29 June 1992 agreement.

711. I should add that, in any event, I conclude, consistently with the opinion of the special referee, that the commands which Cramey ultimately provided to Shannon on 6 November were appropriate for the purpose of backing-up Civic's system including Carry, provided that a 525 megabyte capacity tape had been used. In other words, had Shannon used the appropriate size tape the back-up would have worked. It is this matter of the size of the back-up tapes that is the subject of particulars (f) and (g) and which two particulars are related to the further particular (h) in par. 20 and in par. 26 (b). I now deal with that issue.

714. Unfortunately Shannon used 150 megabyte capacity tapes. Civic's case is that Salisbury told Shannon to use such tapes on 21 August 1992 while engaged for Nucleus in installing Carry on the new ICL computer. I find that what Salisbury was doing was making clear to Shannon that he had to use different size tapes on the ICL to those that he had used on the Honeywell. He gave Shannon a Sony tape and Shannon had his staff purchase a quantity. Salisbury was at Civic's premises until 29 August on about which day, according to evidence given by Shannon, he told Shannon that Civback had been installed. According to Shannon, Salisbury told Shannon how to use it, and demonstrated it as far as bringing up the menu. He told Shannon that to back-up he should put a tape cartridge in the tape drive but he did not attempt to use Civback while Shannon was with him. Salisbury did not explicitly state what size tape should be used for back-up.

717. Civic's case is that Shannon was never advised by Nucleus or Wacher that 525 megabyte capacity tapes should be used for backing-up Carry. This is picked up in par. 26 in which it is alleged that prior to Cramey advising Shannon on 5 November to re-create the file system with a larger inode list Wacher failed to take any or any adequate steps to ensure that Civic had available to it a proper back-up copy of Carry or magnetic tapes suitable for making a back-up copy of Carry. As to par. 26 I refer to the above discussion as to the lack of negligence of Cramey concerning the provision of the Unix commands on 6 November. To that is to be added the fact that, in any event, the subsequent advice of Cramey was effective to achieve a back-up if Shannon had used tapes of the appropriate size.

720. By 5 November Wacher had acquired the business of Nucleus. The relevant prior conversations with Cramey had occurred prior to the acquisition of the business on 9 October, as I conclude on the balance of probabilities. In the intervening period Shannon said that he had backed-up Carry using Civback, but he never checked if the back-up had been successful.

723. Not only did Salisbury bring to Shannon's attention the need to use larger tapes on the ICL computer, but Shannon had already bought a 525 megabyte tape as part of Civic's new system; see Civic's order dated 26 June 1992. The point of the new system was that it had a larger capacity than the Honeywell. Dr Thorne and Greensmith gave evidence as to owners of computer systems having and using different size tapes on their systems for different uses. This evidence was given in support of a contention that care needed to be taken by Cramey to ensure that Shannon used the correct size tape for back-up, particularly in the circumstances on 6 November. That however is too simplistic a position. Owners of systems have different size tapes which they may use for different functions in their use of their system. It is not that such owners indiscriminately pluck any old tape off the shelf; rather, they select the tape that is appropriate for the particular purpose.

726. Back-up is an ordinary incident of the use and management of a computer system. It is part of the responsibility of the computer owner in the prudent and proper management of a system. This responsibility extends, and in the case of Civic extended to, the selection and use of a tape of appropriate capacity for the performance of back-up functions. In this respect Shannon failed. This failure is not met by a reliance on the alleged statement of Salisbury on 21 August, well before the relevant events and subsequent to which Shannon could and should have checked whether he was using the right size tape and whether back-up had been achieved. It is evident that he failed to meet his responsibilities. If he had acted with reasonable care in his own interest he would have ascertained and used the correct tape size and commands and checked that back-up had occurred. Finally, I note that Civic called none of the other of its employees who were involved in back-up functions to give evidence.

729. It was submitted by counsel for Wacher that Shannon knew that he needed tapes up to 525 megabyte capacity to perform a full back-up. Whether he "knew" may be one thing, but, assuming that he did not, he ought to have known and ascertained it. There was no reason for Nucleus, let alone Wacher, to suppose that Shannon was anything other than skilled and competent to perform system administration functions and alert to the need to be, or that he was unaware of the risks in not doing so. He was well experienced in the use of Civic's computer system. I refer without repeating to the number of references in the reports of the special referee to the matter of the responsibilities of the owner for the administration of the computer system.

732. I find it hard to accept that in relation to the important matter of back-up Shannon took no step and made no enquiry to ascertain the capacity tape he should use. He says that he did not. He seeks to elevate Salisbury's statement as to the need to use different magnetic tapes on the new computer together with the provision of a 150 megabyte tape into an advised statement of what was required when performing back-up. The statement itself was general and not directed to any particular function whereas there is no reason to suppose that a 150 capacity tape may not be appropriate to use for some functions. It was not expressly related to back-up which Salisbury discussed subsequently (on 29 August). In my view the evidence of what Salisbury is alleged to have said, both in this trial and in the NSW Local Court is of a generalised and non-specific nature that leaves me unpersuaded that Shannon could reasonably have taken it as definitive advice as to tape size for back-up purposes. If he did so act and rely he was guilty of a significant lack of care in his own regard in my view. The evidence establishes, and I so find, that it is an important part of the responsibility of a computer owner in attempting back-up to ascertain the correct size of tape to use.

735. If Salisbury's statement could properly have been taken as definitive advice as to the size of tape to use for back-up, and I am not satisfied on the balance of probabilities that it could reasonably have been so taken by Shannon, the statement was made by him as an employee of Nucleus and not of Wacher. Neither Wacher nor any employee of it in that capacity ever made any such statement to Civic. In any event, as I have said, the commands which Wacher gave Shannon would have worked to back-up Carry if Shannon had used the correct size tapes. Additionally, if Shannon or Kwan had checked if the back-up had succeeded before taking steps which resulted in the customised Carry being lost from the hard disk they would have realised that the back-up had not succeeded. They would then have ensured that a back-up was taken.

738. I now turn to par's 26 and 27 of the statement of claim. Each founds itself upon the duty referred to in par. 16. The duty in par. 16 cannot avail Civic for it is premised upon Wacher providing computer software services and advice to Civic in relation to Carry under the SSA. But, as already discussed, Wacher did no such thing. The claim that it did, and the duty of care founded upon the premise, is misconceived.

741. While this is so the following may be said concerning par's 26 and 27 in addition to what I have said above. Paragraph 26 alleges that when on 5 November Cramey gave Shannon advice about reconfiguring the kernel he did not take adequate steps to ensure Civic had available to it a proper back-up copy of Carry and magnetic tapes suitable for making a back-up copy of Carry. The response which Cramey gave was appropriate. The reconfiguration was attended to by Kwan for whom Wacher is not responsible.

744. Approaching the matter from the point of view of Wacher being under a duty of care to Civic, I conclude that Cramey did not fail to act with reasonable care and skill in not going further and ensuring that Civic had a back-up copy of Carry or a tape that was suitable for effecting the back-up. Not only did Cramey give an appropriate response to the request made of him, but he was entitled to assume that Shannon was diligent to attend to his tasks in relation to back-up including attending to back-up with an appropriate tape. Thus, even if Wacher were under a duty of care to Civic, I would hold that the claim of negligence fails.

747. Paragraph 27 is likewise founded upon the duty in par. 16. Upon that basis, par. 27 alleges that Wacher failed itself to obtain and keep a back-up copy of Carry. We are not here talking about the piece of software called Carry, we are talking about Civic's customised Carry. I reject Civic's case in this respect. It was not part of any contractual obligation between Wacher and Civic that Wacher take and keep a back-up copy of Carry. Not only was Wacher not a party to the SSA or a like agreement with Civic, but it was not a term of the SSA that Nucleus obtain and keep a back-up copy of Carry. There is no reason to suppose that the SSA was not effective according to its terms, or did not fully state the intentions of the parties to it. It was not submitted by counsel for Civic that the SSA was amenable to the implication of a term that Nucleus obtain and keep a back-up copy of Carry. Aside from contract, Shannon had not raised with Wacher, or Nucleus, that it obtain and keep a back-up copy of Carry. This is not surprising as he knew that back-up was his responsibility.

750. The question then raised by Civic was whether, as it contended, there was an industry practice that a software supplier keep an up-to-date back-up copy of licensed customised software. This pointed to the standard of care which Wacher should have taken in relation to Civic as a licensee and indeed in relation to itself for its own protection. There is no suggestion that Nucleus did not have a copy of the software called Carry, the complaint is that it did not have a copy containing all of the customisations made to date.

753. In my view the evidence was insufficient to establish an industry practise to the effect contended for, and certainly not to the extent of providing a sound basis for a finding of a breach of a duty of care by Wacher in this respect.

756. There was a difference between Dr Thorne and Ferguson on this issue. Dr Thorne's opinion was that Wacher, as a prudent software supplier, should have ensured it had an up-to-date back-up copy of the customised Carry as from the acquisition of the business on 9 October 1992. That opinion was based upon a view of the relationship between Civic and Wacher under which he understood that Wacher was not merely the owner of the copyright in the software but also stood as adviser, maintainer and incremental developer to Civic and its software. He based the latter characterisation of the relationship on his understanding of the dealings between the parties. I think in doing so he mixed what was being done by Nucleus with the perceived role of Wacher. For instance he assumed that Wacher was making alterations to the software whereas Nucleus was doing so in the course of rendering Carry functional on the ICL computer. He also opined to what a prudent software supplier should have done as part of a due diligence investigation in connection with the acquisition of a business. That raises other issues as to business practice on which I could not pass judgment. It may well be that whatever Wacher did by way of due diligence was appropriate in the circumstances.

759. It was important in view of the relatively short time that elapsed between the acquisition of the business and the loss of Carry on 6 November that Dr Thorne was able to find a basis for an opinion that prior to or immediately on the acquisition of the business Wacher should with reasonable prudence have obtained a copy of the customised Carry. He allowed no time, even a few weeks, for Wacher to go about getting a copy of the customised software, and he could hardly have done so because of the circumstances of the case which his evidence was seeking to support. I do not accept his opinion that it was negligence, let alone negligence that was causative of the loss complained of in this case by Civic, that Wacher had not either at the time when it acquired the business or, as it would seem, by 6 November, obtained a completely up-to-date copy of Civic's customised Carry.

762. To be more specific on a contentious point, I do not accept Whiteley's evidence of statements of Cramey (assuming the evidence of them to be admissible) as constituting an admission against Wacher that Wacher had failed to fulfil an obligation upon it or to have acted with a lack of reasonable care towards Civic in not ensuring that Wacher had an up-to-date copy of the customised Carry. The statements were of a general nature and not satisfactorily addressed to the point for which they are relied upon by Civic. Indeed, Whiteley said that it was not necessarily standard procedure to have ensured that Civic had an up-to-date back-up copy of Carry. He said, and I accept, that it would not have been Nucleus' responsibility to ensure that Civic had such a copy. In addition to that, the matter is one of common sense. Civic was at all times aware that it needed to take and retain a back-up copy of its customised Carry. For his part Shannon did not rely on Nucleus or Wacher possessing a back-up copy of the customised Carry. I am not satisfied on the balance of probabilities that it was an industry practice as Civic contended.

765. It remains to add, lest it be thought to have been overlooked, that in my view the particular of negligence (h) in par. 20 is not established. This is directed to the advice which Cramey gave Shannon in the critical time of 5 and 6 November and in particular as to the lack of advice as to the possibility of an error message. In my view Cramey responded to Shannon's requests properly and with due care in the circumstances. Those circumstances include the fact that Shannon was, as Cramey was entitled to assume, experienced in the matter of back-up, and alert to contact Cramey, or speak to others such as Kwan if he needed assistance in carrying out a back-up. Further, Shannon could have asked Cramey to perform back-up via the modem but he did not do so. I reject the attempt of Civic to erode by evidence the finding of the special referee as to the occurrence of an error message. Even if it were to be considered that Cramey should have advised Shannon "in respect to messages which were, or might be, displayed on Civic's" screen during the back-up which would indicate that the tape was full, that failure and any failure of Shannon to see or appreciate any message, was not the cause of the loss of Carry.

768. For these reasons the claim against Wacher based upon a duty of care must fail.

771. There was an issue as to what was on the tape which Kwan used on 6 November to back-up parts of Unix. It will be recalled that Shannon had used this tape the previous day to make a copy of Carry. Counsel for Wacher submitted that there was no evidence that in fact Shannon's attempt at back-up had not been successful at least in part. He further submitted that the loss of Carry was caused by the act of Kwan or Shannon in over-writing the tape when there was no other back-up copy of Carry and without verifying the tape (or any other tape which had been used in back-up) to check there was a back-up or querying the existence of such a copy with Cramey. To this of course is added the fact that Shannon had attempted back-up with an incorrect size tape.

774. Civic relied on evidence of Greensmith that the tape contained Unix files and that nothing else was recorded on the tape following those items. That is, there was unused space on the tape, the inference being that if Carry had ever been on the tape some of it would have been found. Counsel for Civic then went on to submit that the performance of the back-up command did not destroy what is on the disk and that it may be accepted that when Kwan re-installed Unix Carry was removed from the hard disk. Counsel said that as Cramey had advised Shannon to have Unix re-installed with the inevitable consequence of removing Carry, that advice, and not the acts of Kwan, was the cause of Carry being removed and everything that followed. The weakness in this submission is that the impugned advice of Cramey was correct and Carry would have been backed-up if the correct size tape had been used.

777. I take account of Greensmith's evidence and assume for present purposes that no part of Carry had been carried to the tape, but it remains the fact that neither did Shannon, nor Kwan either on his own initiative or at the request of Shannon, perform any verification process prior to using the tape to ensure that a copy of Carry was retained and could be re-installed. Shannon, as a computer owner, was aware of the importance of retaining a copy of Carry and of the risks involved in over-writing the hard disk. His failure to ensure that he had a copy of Carry was fundamental, and was causative of the loss of Carry. Considered in the context of the difficulties with the system, the fact that Civback had apparently only recently been fixed and that since then, following the attempt at back-up using new commands, no check had been made that the back-up had succeeded, the failure of Shannon to check was startlingly careless to the point of constituting reckless disregard. If the correct size tape had been used or a process of verification had been undertaken the loss of Carry would have been avoided.

780. For these reasons I am of the view that Civic's claim must fail. Civic's claim that Wacher was under a contractual obligation to it fails. The relevant acts on which Civic based its case were the acts and alleged omissions of Nucleus in the course of performing its obligations under the 29 June 1992 agreement. Wacher was not a party to that agreement. The agreement subsisted and remained in force notwithstanding the 9 October 1992 agreement. The alternative is that the relevant acts and omissions occurred under the SSA, although in my view that could only have been applicable to the advice on 5 and 6 November 1992. But Wacher was not a party to the SSA, and the correct analysis in my view is that the advice on 5 and 6 November was sought and given in pursuance of Nucleus' obligation to successfully convert the customised Carry to the ICL computer.

783. In these circumstances the question arises as to how a duty to take care in Wacher is to exist at the same time as Nucleus' contract with Civic to install Carry on the ICL computer and make it operational, and at the same time as the SSA which was a contract between Nucleus and Civic. At what point would the duty commence, and how extensive would it be? Would it be co-terminus with Nucleus' obligations under the 29 June 1992 agreement, or the SSA, or would it cover additional ground? What would the parameters be? At what point, and why, should it be taken that Shannon was dealing with Cramey for and on behalf of Wacher or for and on behalf of Nucleus? These issues were not adequately explored by Civic. They were avoided, or perhaps sought to be avoided at least in the first instance, by the case that Wacher became contractually bound to Civic. Failing that the case was put in negligence. At the end of the day, the conclusion is inescapable in my view that the problems with Civback and Carry were being attended to by Nucleus under its contractual obligation. It is artificial in my view, and against reality, that suddenly when Shannon and Cramey spoke on 5 and 6 November 1992 the character of the conversation was that Cramey was speaking for and on behalf of Wacher rather than Nucleus and that Wacher fell under a duty to take care in the respects alleged in the statement of claim. The duty seems to be one that required Wacher to make positive efforts to protect Civic from harming itself, in particular by doing what it was Civic's responsibility to do. I incline to the view that in the particular circumstances Wacher was not under a duty of care as pleaded. I do not consider it necessary to explore that point in terms of the authorities, (indeed counsel for Civic referred to no authorities on the issue and counsel for Wacher referred to a limited range only) for I am of the view that in the circumstances, and having regard to what Wacher was entitled to expect of Civic in the performance by it of its obligations in relation to its computer system, that there was in any event no breach of a duty of care as alleged. The commands which Cramey gave were entirely appropriate. Moreover, in my view Civic's loss, assuming that any has been suffered by it as a result of the loss of the customised Carry, is to be attributed not merely or at all to the alleged negligence of Wacher but to the fundamental failure of Shannon, a failure to the point of recklessness, to check his back-up prior to Kwan's actions in relation to the hard disk, preceded of course by the separate but significant failure to use tapes of the right size.

786. In these circumstances it becomes unnecessary to consider Wacher's plea of contributory negligence or voluntary assumption of risk, or the further plea of an Anshun estoppel.

789. The order is that the claim be dismissed. I will hear counsel on the question of costs.