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[2013] NSWSC 414
Supreme Court of NSW
2013-04-23
Pembroke J
Original judgment source is linked above.
Introduction 1On 29 June 2009 the plaintiff (GE Healthcare) entered into an agreement described as the Technology Services Agreement (TSA) with the first defendant (Medica). Pursuant to the agreement the plaintiff supplied medical, radiology and related IT equipment to Medica. Medica has been in possession of the equipment for a considerable time and is using it in its business but has not paid for it, except for $46,457. It owes at least $16.4 million to the plaintiff representing the face value of the invoices for the equipment issued to it by the plaintiff between 27 September 2011 and 7 March 2012. 2This unsatisfactory state of affairs exists because Medica contends that it is entitled to the benefit of an estoppel that is said to operate as a defence to the plaintiff's claim for the return of the equipment pursuant to a retention of title clause. In fact, the defence goes further. The legal effect of the estoppel is said to be to deny the plaintiff's 'right to demand payment of the purchase price ... and its right to obtain possession of the equipment in the absence of such payment'. 3This far-reaching and unorthodox estoppel is said to have its origin in two alleged 'promises' made by the plaintiff. The first, which has gone through some refinement as this litigation has unfolded, is broadly to the effect that 'a member of the GE Group of companies would offer finance on reasonable commercial terms' to Medica to enable it to pay for the purchase of the equipment. The second, which is conceptually more orthodox, was labelled the 'functionality estoppel'. It is broadly to the effect that the payment of invoices issued by the plaintiff to Medica would not be enforced until such time as the full functionality of the equipment had been achieved. 4During the hearing, I made clear that I regarded the defendants' case as weak. Further reflection and consideration of the parties' written and oral submissions have only served to confirm that view. What follows are my reasons for reaching the conclusion that, as a matter of fact, the alleged promises were not made. Before setting out those reasons, I should say something about the unorthodox nature of the estoppel for which Medica contends, especially that based on the funding promise.
Nature of Promissory Estoppel 5Medica's case does not fit easily into any of the established categories of estoppel: (a)This is not a case of estoppel by deed, which applies to unambiguous statements of fact in the recitals or operative provisions of a deed. Those statements bind the parties and cannot be contradicted in legal proceedings based on the deed: Discount & Finance Ltd v Gehrig's NSW Wines Ltd (1940) 40 SR (NSW) 598 at 602 (Jordan CJ). (b)Nor is this a case of estoppel by representation, which applies where a representor makes an unambiguous representation of existing fact intending that it be relied on by a person, who acts reasonably in reliance on it and changes his position. The effect of an estoppel by representation is to prevent the representor going back on his word by denying the correctness of the representation. It has a substantive effect because it may enable a claim or defence to succeed which would otherwise have failed: Foran v Wight (1989) 168 CLR 385; [1989] HCA 51. (c)Nor is this an estoppel by convention, which comes into existence when parties join in making some fact, or matter of mixed fact and law, the basis of their transaction or relationship. If the parties' assumption as to the relevant matter is communicated and adopted by each of them, it will bind them and prevent a return to the earlier relationship. With this kind of estoppel, the only detriment that need be shown is entry into the relationship or transaction: Thompson v Palmer (1933) 49 CLR 507 at 547; [1933] HCA 61; Grundt v Great Boulder Pty Gold Mines Ltd (1937) 59 CLR 641 at 657, 675-677; [1937] HCA 58; Con-Stan Industries of Australia Pty Ltd v Norwich Winterthur Insurance (Aust) Ltd (1986) 160 CLR 226 at 224; [1986] HCA 14 at [22]. (d)Nor is this a proprietary estoppel - either by encouragement or standing by. The former arises when a person creates or encourages an expectation in another that he will receive a proprietary interest and that person changes his position on the faith of the expectation in such a way that it would be unconscionable for the party estopped to deny the expectation: Dillwyn v Llewellyn (1862) 4 De G F & J 517 (Lord Westbury LC). The latter arises when an owner, who is aware of his rights and that they are being infringed, stands by in silence while a person who is, to the knowledge of the owner, ignorant of his rights, acts to his detriment by building on the land or otherwise improving the property: Ramsden v Dyson (1866) LR 1 HR 129 at 170. (e)Most significantly however, it is not easy to see that the claim based on the funding promise constitutes a promissory estoppel, which is concerned with representations or conduct that induce a person to expect that a legal right will not be exercised against him: DHJPM Pty Ltd v Blackthorn Resources Ltd (2011) 285 ALR 311; [2011] NSWCA 348 at [43]. If proved, the court will restrain the exercise of the legal right. The estoppel is therefore negative and defensive in substance. And it is essentially temporary in its operation, because it does not effect a permanent change in the rights of the parties unless the promisee cannot be restored to his former position. 6Significantly, a promissory estoppel does not provide relief that effectively enforces the promise as if it were a contract: Selah v Romanous 79 NSWLR 453 at [55] and [73]-[74]; [2010] NSWCA 274; Hammond v JP Morgan Trust Australia [2012] NSWCA 295 at [26]. As Justice K R Handley wrote extra-judicially in 'The Three High Court Decisions on Estoppel 1988-1990' in (2006) 80 ALJ 724 at 728: Non-contractual but enforceable promises which confer positive rights in personam are a recent invention without a respectable pedigree. cf. Commonwealth of Australia v Verwayen (1990) 170 CLR 394 at 428-429 (Brennan J); [1990] HCA 39. 7In this case, Medica's submissions effectively contend that the promise of funding should be treated as if it imposed a positive obligation upon GE Healthcare to provide the promised funding. But there was little, if any, focus on whether there was a promise by GE Healthcare to refrain from exercising its legal right to payment. GE Healthcare's legal right to payment, or its legal right to the return of the equipment pursuant to its retention of title clause, is indubitable. The issue is whether there should be some equitable restraint on the exercise of either right. It is neither legally sufficient nor logically sensible for Medica to contend that, simply because a promise of funding was made and relied upon, GE Healthcare should be deprived of its right to payment and prevented from recovering its equipment. Much more is required. 8As I have been at pains to emphasise, promissory estoppel does not create new rights but only operates as an equitable restraint on the enforcement of a specified legal right: Hughes v Metropolitan Railway Company (1877) 2 App Cas 439 at 448; Legione v Hately 152 CLR 406 at 432-433; [1983] HCA 11; Selah v Romanous at [62] and [74]; Hammond v J P Morgan Trust Australia Ltd at [26]; DHJPM Pty Ltd v Blackthorn Resources Ltd at [93]. The primary condition that activates such an estoppel is an unambiguous representation, reasonably relied upon, that the promisor will not exercise the legal right. 9In this case, the only relevant expectation that emerges from Medica's evidence is an assumption that funding for the equipment would be provided by a member of the GE Group. This is not the same as proof that a representation was made and an expectation engendered, that GE Healthcare would refrain from exercising its contractual right to require payment, or its contractual right to require the return of the equipment in the event of non-payment, if funding for the equipment were not provided from a company within the GE Group. There was no evidence to support a promise or expectation to that effect. No doubt this was because the likelihood of such a promise by GE Healthcare, and such an assumption by Medica - which would have been inconsistent with the TSA - is commercially unrealistic in the extreme. 10The circumstances that make it equitable that a party should be restrained from enforcing a legal right are well known. They depend on proof of an assumption, induced by the other party, that a specified legal right will not be exercised in given circumstances. They require reliance and detriment by the promisee. If the estoppel is established, the court will restrain the exercise of the legal right. A promissory estoppel is not however a means by which freestanding promises, unsupported by consideration, may be enforced. The objective of a promissory estoppel is different - namely to restrain the unconscientious exercise of a legal right in circumstances where a party has been reasonably led to believe that that right will not be exercised, and where it has relied to its detriment on that assumption. 11In this case, I have found as a matter of fact that there was no promise of funding and no 'functionality' promise. But more importantly, at least from the perspective of legal principle, there was no promise and no assumption that GE Healthcare would refrain from exercising its legal right to compel payment, or to recover its property in the event of non-payment. Medica's case seemed to assume that it was sufficient to prove a promise and an assumption about the provision of finance and about the functionality of the equipment, rather than, of greater importance, a promise and an assumption about the non-exercise by GE Healthcare of its legal rights. For that reason alone, the estoppel must fail. But I should now turn to the facts.
Technology Services Agreement 12The TSA contains no indication of any 'promise' by the plaintiff of the type that is said to ground the estoppel. It is a detailed commercial agreement between experienced and commercially sophisticated entities. It covers many issues and was clearly drafted in an attempt to deal with all of the foreseeable incidents of the proposed commercial and legal relationship between the parties. It does not address the topic of financing for the acquisition of the equipment by any member of GE Group. Nor does it contain any assurance about the functionality of the equipment. 13The remarks that I have made in previous judgments about the difficulties of establishing an estoppel in the context of a formal legal relationship between arm's length commercial parties are more than usually apposite in this case. As I said in Seven Network (Operations) Ltd v Warburton (No 2) [2011] NSWSC 386 at [46]: As is well understood, the application of the doctrine of estoppel is circumscribed by established legal principles. For sound reasons, caution must be exercised before finding that an estoppel has been established. For if found, the effect of an estoppel will be to suspend or abrogate the valuable legal rights of a party. The quality of the evidence, the commercial reality, the inherent probabilities and the detriment to the party who seeks to set up the estoppel, must indicate that there is a good reason why the other party should be prevented from having the full benefit of the bargain to which it originally agreed: Summer Hill Business Estate v Equititrust [2010] NSWSC 776 at [35]-[40]. In particular, an estoppel may well be difficult to establish in a formal legal relationship between arms length commercial parties, where their rights and obligations are carefully and extensively set out and formally documented: Austotel Pty Ltd v Franklins Selfserve Pty Ltd (1989) 16 NSWLR 582 at 585-6 (Kirby P). It is self-evident that, except for good reason, commercial parties do not usually conduct themselves in such a way as to forfeit their entitlement to exercise valuable legal rights. In such a case, it is necessary to scrutinise carefully the circumstances that are said to lead to the conclusion that it would be inequitable to permit a party to insist on its legal rights. 14To similar effect is the following statement of Meagher JA in DHJPM Pty Ltd v Blackthorn Resources Ltd at [65]: The negotiations and discussions between Mr Hannon and Mr Florey were between experienced businessmen. They should be taken to have expected that any right of occupation, whether by way of sub-lease or licence, would have to be the subject of a binding contract and that they could not safely rely upon a promise as legally binding without taking the necessary contractual steps or at least obtaining an assurance that made clear that the promise was to be regarded as binding notwithstanding that those steps had not been taken: Waltons Stores v Maher at 403; Baird Textiles v Marks & Spencer at [92]. 15Recital B of the TSA states that the agreement sets out the terms and conditions of supply of the hardware and software and the provision of related services. The medical equipment, comprising hardware, software and related systems is compendiously described in the agreement as the 'Technologies'. Clause 3 is headed 'Provision of Technologies'. The closest reference to financing that appears in the TSA, is in Clause 3.1, which provides that if Medica desires a 'Lender to become the purchaser of one or more of the Technologies, it shall notify [the plaintiff] and request that applicable invoices be addressed to the 'Lender''. The word 'Lender' is defined to mean 'the financial institution that provides funds for purchase of the Technologies'. Neither Clause 3.1 nor the definition of 'Lender' suggests that it was contemplated that the plaintiff or one of its related companies in the GE Group was obliged to offer finance to Medica. 16To guard against the possibility of reliance on any assurance outside the terms of the agreement, Clause 20.3 of the TSA contains an entire agreement clause in familiar form. Paragraph (a) states that the TSA 'constitutes the entire agreement between the Parties in connection with its subject matter and supersedes all prior representations, communications, negotiations and understandings concerning the subject matter of this Agreement'. Paragraph (b) provides: Each of the Parties acknowledges that: (i) it does not enter into this Agreement on the basis of and does not rely, and has not relied, upon any statement or representation (whether negligent or innocent) or warranty or other provision (in any case whether oral, written, express or implied) made or agreed to by any person (whether a party to this Agreement or not) except those expressly repeated or referred to in this Agreement ...
Memorandum of Understanding 17Faced with no support for its alleged promises in the TSA, Medica sought support from an earlier agreement dated 23 August 2007. This agreement is described as a 'Memorandum of Understanding' (MOU) and the parties to it are the plaintiff and a related entity of Medica known as Cortez Investments. But it does nothing to assist Medica's case. The MOU does little more than set out aspirational objectives and concepts that represented the hopes and expectations of the parties in 2007 - two years before the TSA. It says nothing about the content of any future agreement for the supply of equipment and explicitly reserves for further consideration the terms of any such agreement. 18Indeed, the MOU is redolent with statements of qualification, contingency and future clarification. For example: (a)Clause 1.1(ii) states that: The schedules to this strategic Alliance umbrella document contain the substantive concepts ... designed to set out the general scope of resources, solutions, support and services which the parties wish to provide, develop and enhance in developing and implementing this strategic alliance. (b)Clause 1.1(iii) states that the parties: ... may from time to time, enter into additional contracts to more specifically define their rights and responsibilities, in seeking to address and achieve the mutual objectives set out above. (c)Addendum A states that: This Memorandum of Understanding is understood to form the initial arrangement in advance of entering into a Managed Equipment Services Contract as a more definitive agreement in due course. (d)Schedule 8 states that: Please note that the following points are to be considered as indicative suggestions in formulating an MES contract, and are not considered binding, as part of this MOU. (emphasis added) 19The TSA was an MES contract of the type contemplated by the MOU. It more specifically defined the rights and responsibilities of the parties in the manner envisaged by the MOU. It is true that the MOU contains an acknowledgement that GE Healthcare and its related bodies corporate are appointed as preferred suppliers to the Cortez group and that supply would be on the basis, among other things, of 'Other GE offerings through partners and associated services, such as GE Financial Services'. But this is only a generalised statement that lacks any relevant specific or enforceable content. 20The only reference to financing in the MOU appears in the following statement in Addendum A: GE Healthcare will provide the following within the proposed framework of a Managed Equipment Services Contract: (g) Access to GE Finance and other products and services within the General Electric Portfolio where relevant. (emphasis added) 21This does not amount to a promise that a company in the GE Group will offer finance on reasonable commercial terms for the purchase of equipment supplied by GE Healthcare. The provision of 'access' to GE Finance does not translate to an offer of finance on reasonable commercial terms in the circumstances that may subsequently pertain to a particular transaction. Not only is it not a positive commitment but it is hedged by the preceding qualifying words 'within the proposed framework of a Managed Equipment Services Contract' and by the subsequent qualifying words that make quite clear that matters such as 'access to GE Finance and other products and services' will be subject to a Managed Equipment Services Contract which, when formulated, will more specifically encompass all aspects of the relationship. 22In fact, Medica does not allege a breach of the MOU. After the TSA was entered into, there was no failure to provide 'access' to GE Finance. Medica's case is qualitatively different, depending on a finding that a 'promise' was made that is broader and more specific than any commitment contained in the MOU or the TSA. 23In seeking to find indirect support for its contention that a promise of the offer of finance from a member of the GE Group was made, Medica pointed to Schedule 8 of the MOU. This schedule set out the goals for a Managed Equipment Services Contract. It does not assist Medica. The concluding section of the schedule was headed 'MES Key Assumptions and Statements'. The following statement then appeared in bold: Please note that the following points are to be considered as indicative suggestions in formulating an MES contract, and are not considered binding, as part of this MOU. (emphasis added) 24A series of points is then set out. None refers to any offer of finance from a member of the GE Group. All of the points are preceded by the further qualification that 'The generic information contained herein is provided by GE Healthcare in the spirit of co-operation and GE Healthcare makes no representations or warranties about its accuracy, completeness, currency or fitness for purpose'. 25Despite this, Medica sought to gain support from the internal GE working papers and modelling that lay behind some of the key assumptions and statements in Schedule 8. The modelling assumed equipment financing at 8% and depreciation over 10 years. But this is too slender a reed on which to base an estoppel claim. This internal modelling does no more than calculate, several years before the TSA came into existence, the projected capital requirements for the medical equipment proposed to be supplied to Medica, based upon a 100% financing assumption over a 15 year period. It does not amount to a representation to Medica in connection with the supply of equipment pursuant to the TSA. Nor does it make it probable that any assurance was given to Medica about the provision of finance in connection with the supply of equipment pursuant to the TSA.
Financing Promise - Objective Circumstances 26There is therefore no documentary support in the MOU and the TSA for Medica's contention that a promise of financing was made to it. I will deal later with the conversations on which Medica relies and my assessment of the credibility of the evidence of Mr Smith and Mr McGrath. Before doing so however, I should summarise some of the proved objective circumstances, in addition to the absence of any supporting language in the TSA and the MOU, that render the making of the alleged financing promise implausible: (a)First, although the TSA was entered into in June 2009, there was no relevant contact between Medica and GE Capital (or any other finance division within the GE Group) until about September 2010 when Medica applied to GE Capital for funding; (b)Second, the alleged funding promise does not seem to be consistent with Medica's formal application for finance to GE Capital in 2010. If there had been an assurance of funding made prior to that time, then a different, and less formal, process might have been expected; (c)Third, the language used in GE Capital's response to Medica's funding application does not seem consistent with there having been an earlier promise of funding. The description 'indicative loan proposal' and the terms of the 'Disclaimer' made it clear that nothing expressed in the document was binding. Had there been a previous assurance of funding, one might have expected a different approach; (d)Fourth, Mr McGrath and Mr Smith sought funding from a variety of other lenders in late 2009 and early 2010 - before they sought funding from GE Capital in September 2010. Had they believed that funding was assured from a company in the GE Group, there would have been no point in seeking funding from any other financiers. 27I do not accept the explanation that Medica sought funding from other lenders solely in order to keep GE Capital honest, by obtaining 'indicative terms'. Those other lenders included ANZ, Westpac, All Leasing, Equititech and CBA. Medica's approach to ANZ involved a broker retained by Medica. His name was 'Coote'. He prepared a memorandum setting out the scope of the finance sought by Medica. A note of a telephone conversation with Mr Coote on 27 September 2010 recorded the following revealing statement: I have been trying to arrange finance for them (Medica) since September 2009. I submitted a proposal to ANZ on their behalf in October 2009. The deal is still alive and I think they all met last week to discuss financing terms. 28Mr Coote's Memorandum and the oral evidence given by Mr McGrath and Mr Smith do not support the 'indicative terms' explanation. Nor is such an explanation consistent with the fact that each of the applications for finance to the other lenders was actually rejected by those lenders after a formal process of submission and consideration. 29Further, I was unimpressed by the fact that neither Mr McGrath nor Mr Smith chose to refer in their evidence in chief to their attempts to obtain finance from other lenders prior to the GE Capital rejection. Their affidavits were misleading insofar as they gave the impression that any applications to other lenders were only made following the rejection by GE Capital in September 2010. Further still, the fact that Medica initially produced no documents relating to those earlier applications for finance reinforced the sense that Medica was holding back - and that Mr McGrath and Mr Smith were dissembling - on the fact and timing of Medica's application for funding to other lenders. 30Finally, and naturally, if it were critical to Medica to obtain an assurance of funding prior to the entry into the TSA, as the affidavit evidence of Mr McGrath and Mr Smith suggested, it is inexplicable, and contrary to the commercial probabilities, that there was no attempt to incorporate this promised funding in the TSA; nor any attempt to reduce the alleged assurance to written form; nor any contemporaneous email that refers to the supposed assurance.
The Conversations 31Against that background, I should now turn to the alleged conversations on which Medica relies. Mr Smith and Mr McGrath both deposed in their affidavits to certain conversations with officers of GE Healthcare concerning the provision of funding. Although there is no documentary support for these conversations, their effect was said to amount to a promise on behalf of GE Healthcare that financing 'would be arranged by a GE company' or that all of the funding for the equipment would be provided 'through a GE company'. 32In submissions, it was contended that the statements attributed to officers of GE Healthcare amounted to a promise that in due course an offer of finance on reasonable commercial terms would be made to Medica. The defendants also submitted that it followed implicitly, if not expressly, that Medica was not obliged to accept any such offer of finance but was at liberty to seek to obtain better terms elsewhere. Given the facts to which I have already referred, there is a high level of implausibility about these contentions. 33This implausibility was exacerbated by the adverse view I formed of the general credibility of the evidence of Mr Smith and Mr McGrath. It may be that their evidence can be explained by reference to the exposition of the common experience of human behaviour set out in Watson v Foxman (1995) 49 NSWLR 315 at 319 (McLelland CJ in Eq). However, there were times in this case when I thought that Mr Smith and Mr McGrath were actually dissembling. As a result, I formed the view that I could have no confidence in their evidence except when, if at all, it was against their interest. I found both of them to be unsatisfactory witnesses whose insistence on the correctness of their recollection detracted from their plausibility. 34In relation to the alleged financing promise in particular, their evidence was characterised by denials of the obvious and assertions of the improbable. The weight of the contradictory evidence far outweighed the reliability of their recollections. Among other relevant matters, Mr McGrath conceded in cross-examination that he did not in fact hold an understanding at the time of entry into the TSA that there was any commitment by GE to finance the equipment. His evidence was unhelpful to Medica's case and was exemplified by the following extracts: Q. But you also understood, didn't you, at that point in time that that depended upon a successful application for finance being made to GE? A. That's correct. Q. And until such time as an application had been made and accepted you had no commitment from GE to finance the acquisition. Do you agree that was your understanding? A. I agree. 35Further: Q. But you understood that at this point in time [entry into the TSA] that whether or not GE Capital or any other company in the GE group, would provide finance depended upon an acceptance of an application for finance yet to be provided? A. That's correct. 36Further still: Q. But you knew you did not have a legally binding commitment? A. To act at that time, that's right. There had been no application made to GE Capital at that point. Q. And you understood the application would have to be made at some point in time in order to obtain that binding commitment to finance; correct? A. Correct. Q. And you understood that in June 2009 when the TSA was entered into, correct? A. Yes I knew in 2009 that an application had not been made and that an application would need to be made to GE Capital for the purposes of presenting the data that we had to support an application. Correct. 37Again: Q. Was it your belief that you were likely to obtain funding? Or was it your belief that you had obtained funding? A. I don't believe I had a belief one way or other at the time. Q. Mr McGrath, at the time of entering into the TSA, you did not have an understanding that you had in place a commitment for funding from any company in the GE group. Do you agree? A. Yes I agree. 38And again: Q. (HIS HONOUR) But you knew you had no legally binding commitment, correct? A. That's right, I don't believe that I had - I had not thought about particularly a legally binding commitment at the time. Q. All right, but if you had thought about it you must have realised that (a) there was no legally binding commitment at that stage and (b) there might have been reasons which you could not predict, [why] there might not be such commitment? A. Yes, that's correct. There are always mights. Things might happen. 39I am quite satisfied that Mr McGrath did not believe that there was a binding commitment on the part of any company in the GE Group to provide finance. He was well aware that whether finance would be provided depended upon a number of uncertainties. For what it is worth, his curious evidence that he had no state of mind one way or the other about whether there was a binding commitment to provide finance is hardly sufficient for Medica's forensic purpose. Such an uncommitted state of mind is not enough to found an estoppel. 40Mr Smith's evidence was little better. During his cross-examination he maintained that at the time of entering into the TSA he understood that Medica had a binding commitment from the GE group that finance would be provided. But he agreed that in his experience, the obtaining of funding is preceded by an application to the lender, accompanied by profitability projections, revenue projections and other supporting material. He conceded that as at June 2009 there had been no identification of the terms of any such funding; nor identification of the appropriate interest rate; nor identification of the required security. He claimed that he was not surprised when, in July 2010, GE Capital sent an 'indicative loan proposal', because he 'assumed that this was all just a matter of process'. I do not accept this evidence. 41Mr Smith is an experienced businessman with considerable experience in financing. He could not possibly have held the belief that there was a binding commitment to provide finance. And of course his alleged belief is inconsistent with the approaches made by Medica to the various other lenders, including ANZ, Westpac and others. Mr Smith's evidence became even more implausible when asked about the reference in the MOU to 'access to GE Finance and other products and services within the General Electric portfolio'. He said he understood the word 'access' in that context to mean part of the total turnkey solution to radiology, and that he understood it to represent a binding commitment that a company within the GE Group would provide finance, whatever happened. This was, I am afraid, unadulterated linguistic nonsense. I formed the view that Mr Smith was putting forward a calculated and clearly practised explanation that he thought would advance Medica's case. I do not accept it. 42The corollary of these findings adverse to Mr McGrath and Mr Smith is that I reject the defendants' criticisms of the plaintiff's principal witnesses, Mr Collingridge and Mr Simeonidis. Both gave oral evidence in which they denied making any of the alleged assurances concerning finance. I prefer their evidence to that of Mr McGrath and Mr Smith. Their evidence was consistent, restrained, plausible and commercially sensible, unlike that of Mr McGrath and Mr Smith. Their accounts of what occurred accord with commonsense and reality. 43The substance of the evidence of Mr Collingridge and Mr Simeonidis, both in their affidavits and in the witness box, was that they informed Mr McGrath and Mr Smith that there was an area within the GE Group known as GE Capital, which may provide funding for the equipment. I accept their evidence. They said that they did not make any statements about whether funding would or would not be available, or whether it would be approved for Medica. Not only did they not do so, but they could not. GE Capital was a separate entity or division of the group. And in fact Mr Collingridge thought that, as far as Medica was concerned, there were more appropriate lenders than GE Capital for equipment financing within Australia.
The Functionality Representation 44I should now turn to the functionality representation. It is not clear what this representation actually means. The TSA imposes an obligation on GE Healthcare to deliver 'Equipment' that conforms to the specifications set out in the TSA. It could not be the case that GE Healthcare represented that the equipment would perform better than those specifications. Furthermore, it is difficult to see how Medica could have ever relied, let alone reasonably relied, on such a representation. And in any event, I am not at all satisfied that it has been established that any item of the equipment is not working in accordance with its specification. 45As to the last matter, the evidence that the equipment performs in accordance with the specifications is as follows: (a)At the time Medica executed the acceptance certificates, it noted any performance issues on those certificates. This happened once in relation to the PET CT but not otherwise. Further, during applications training of Medica staff, it might have been expected that any defect or fault would become apparent, but Medica did not notify GE Healthcare of any such defect or fault during this time; (b)The evidence of the repeated use of the equipment by Medica - in excess of 5,600 uses by the end of January 2013 - is unequivocal and hardly consistent with a failure to perform; (c)The equipment is serviced by GE Healthcare which maintains an electronic record of all service calls and actions in a database known as CARES. CARES records all actions undertaken from the moment a service call is received until the service issue is completed. The CARES records disclose that all service requests have been satisfied. If the equipment was not 'fully functioning' one would expect many repeated service calls that remain 'open' or unsatisfied; (d)The PACS/RIS (IT systems) were tested by trained GE Healthcare personnel, who found that those systems operated in accordance with their specifications. After such testing, the PACS/RIS was configured to each modality. Further evidence that the RIS is working is that it recorded the uses of procedures on each modality; (e)The Web DX aspect of the IT system has been tested by trained GE Healthcare personnel. It is correctly configured and operates in accordance with specifications; (f)There is a requirement in the TSA that there be a 98% or greater target on an aggregate basis in respect of uptime at the site over the relevant contract year. Mr Desai's evidence, which I accept, is that, based on the Uptime Summary Report, the average figure achieved was that the modalities were only down for 0.28% of the time. 46I should also note that at the hearing counsel for the defendants placed significant emphasis on deficiencies in Medica's automated billing system 'PowerHealth'. PowerHealth was not a deliverable under the TSA; it was provided by a third party under the contract between Surgery Centres of Australia Pty Ltd and GE Health Care IT Australia Pty Ltd dated 14 August 2009. The efficiency of the PowerHealth system is irrelevant to these proceedings. 47I am therefore not satisfied that there is a material defect in the functionality of the equipment. In addition, I am not satisfied that there ever was any relevant functionality promise, let alone one that was intended and understood to operate independently of GE Healthcare's contractual obligation. Medica's evidence on this issue was decidedly flaky. According to Mr McGrath, his own unilateral utterances to officers of GE Healthcare from time to time included:
Conclusion 52The plaintiff is entitled to the relief that it seeks, namely an order that the equipment be returned to it. The defendant should pay the plaintiff's costs of these proceedings. The parties should submit to my associate within 7 days an agreed form of order that adequately describes the subject equipment and sets out any appropriate ancillary orders that are required, if necessary. A stay of the proposed order for the return of the equipment is not justified. Medica has been aware for many months of the possibility of this outcome and can be expected to have put in place appropriate arrangements. And the length of time during which Medica has been in possession of the equipment, without paying for it, militates against the exercise of any discretion in its favour. DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 04 June 2013
GE Healthcare Australia Pty Ltd
Medica Radiology & Nuclear Medicine Pty Ltd
(1990) 170 CLR 394
(1986) 160 CLR 226
(2011) 285 ALR 311
(1989) 168 CLR 385
(1999) 196 CLR 101
(1937) 59 CLR 641
(1983) 152 CLR 406
(2010) 79 NSWLR 453
(1933) 49 CLR 507
(1995) 49 NSWLR 315
(1989) 16 NSWLR 582