McWilliam's Wines Group Limited v Filchem Australia Pty Limited

B. BACKGROUND FACTS 3Filchem is a distributor of beverage filters. In February 2009 Michael Romer from Filchem met with McWilliams' cellar manager, Peter March, at the McWilliams' bottling facility at Chullora. At that meeting Mr March explained McWilliams' equipment, processes and filter requirements. 4There followed a number of emails in March through to September 2009 from Mr Romer encouraging Mr March to utilize Filchem filters. Mr Romer met again with Mr March at Chullora in September 2009. 5On 16 September 2009 McWilliams ordered five ZTEC-B 45 30P75 0.45 micrometer capsule ("ZTEC-B") filters at a price of $510.85 plus GST per filter. 6Mr Romer telephoned and emailed Mr March on 18 September seeking details of McWilliams filter housings, and on 28 September 2009, Mr Romer supplied Mr March with technical details for the integrity testing of ZTEC-B filter cartridges. A further ten ZTEC-B filters were ordered by McWilliams on 26 October 2009. 7On 28 October McWilliams conducted integrity tests on the ZTEC-B filter cartridges in accordance with the instructions received from Mr Romer. The ZTEC-B filter cartridges passed the integrity tests, and McWilliams began using them along with other filters. In accordance with McWilliams' practice, samples from the bottled wine were collected for testing. 8On 29 October 2009 McWilliams purchased a further ten ZTEC-B filter cartridges and continued to use ZTEC-B filters on that day, and on the following day, 30 October 2009. 9On 2 November 2009 McWilliams staff detected yeast in incubated samples on 28, 29 and 30 October 2009, and replaced ZTEC-B filters with BECO filters which were being and had previously been used by McWilliams. As a result of the yeast, a substantial quantity of wine was found to be unsuitable for sale and worthless. 10In late 2009 and 2010, meetings ensued between McWilliams and Filchem representatives concerning the adequacy of the filters and the damage alleged to be caused by them. McWilliams commenced proceedings in 2011 for loss of $341,923 plus interest and costs. There was no issue about the quantum of the loss resulting from a yeast contamination. 11McWilliams and Filchem prepared an agreed outline of issues, in the following terms: "1 Cause of the contamination (i) Defective filters or excessive flow rates/ pressures/ inadequate upstream filtration/ inadequate sterilisation of bottles 2 Contract claim (a) Express terms - identification of the contract & the relevant contractual terms (SOC [10], [22]; Defence [10], [22]) (i) Credit Application 14 March 2001 (ii) Defendant's Terms & Conditions of Sale July 2000 · The only terms (Defence [22], clause 2(a) T&Cs) (iii) The alleged representations (b) Implied Terms (i) Fitness for purpose & merchantable quality: · Section 19(1), (2), (3) Sale of Goods Act (SOC [24]) · Section 71(1) & (2) Trade Practices Act: whether applies - whether plaintiff a "consumer" within TPA s 4B(1)(a) (i.e., whether filters used up in trade or commerce/ in the course of a process of production or manufacture or of treating other goods) (ii) The alleged representations 3 Misleading & deceptive conduct claim: (a) Were the representations alleged misleading & deceptive in contravention of TPA s. 52? (b) Did the defendant by the alleged representations falsely represent that goods were of a particular standard, quality or grade (TPA s. 53(a)) or falsely represent the goods had performance characteristics, uses or benefits they did not have (TPA 53 (c))? (c) Did the plaintiff rely on the representations? 4 Negligence (a) Did the defendant have (or ought the defendant to have had) knowledge of the matters alleged in SOC [51] and/or [52]? (b) If so, was the defendant negligent in recommending and selling ZTEC-B filters? (SOC [51], [52]) 5 Quantum of Damages 6 Defences (a) Contractual exclusion of liability: (i) clause 6(b)(ii) - exclusion of liability for damage to property, including for consequential loss & loss of profits (Defence [61(a)]) (ii) clause 8 - risk passes to purchase on delivery (iii) clause 10(a), (b), (c) - time bar - no liability where written notice not given within requisite period (Defence [62]) (iv) clause 17 - no liability for advice, recommendation, information & assistance (Defence [62]) (b) Contractual limitation of liability (i) Clause 11 - liability limited to cost of replacing filters (Defence [61(b)]) (c) Contributory negligence (i) whether excessive flow rates/ pressures/ inadequate upstream filtration/ inadequate sterilisation of bottles (Defence [63]) (d) Proportionate liability (i) whether claims are apportionable claims (Part 4 CLA/ Pt VIA TPA) (ii) whether, if apportionable, Graver (the overseas manufacturer) is a concurrent wrongdoer (Defence [64]-[70]) (iii) whether, if Graver is a concurrent wrongdoer, the circumstances of the case warrant apportionment"

1. CAUSE OF THE CONTAMINATION 12Gary Baldwin, a biochemist specialising in wine science, prepared a report evidencing that there were three possible causes of contamination of the affected wine: (a)a failure of the ZTEC-B cartridge, (b)a high upstream yeast load that forced through a greater amount of yeast organisms; and (c)a failure of the downstream cleaning system. 13Mr Baldwin was not required for cross-examination and the plaintiff called no contrary independent expert. 14Some of McWilliams' employees gave evidence in favour of the first possibility as the likely cause, but did not directly contradict the evidence of Mr Baldwin. 15Two of McWilliams' employees - the Laboratory Manager and the Quality Assurance Manager of McWilliams - claimed to have agreed to be bound by the code of conduct for expert witnesses ("the Code"). While the performance of McWilliams' witnesses was generally satisfactory, I have some doubt about whether an employee of a party giving factual evidence of the events in question can fairly exercise an "independent ... judgment" in giving opinions on the matter, in accordance with the Code. That these witnesses gave opinions on matters relevant to their own performance increases my doubt about the weight to be given to their opinions. In these circumstances, I prefer the unchallenged evidence of Mr Baldwin. 16However, this evidence of Mr Baldwin of the possible causes of contamination does not take the matter very far. To say that there are three possible causes does not assist in determining which, if any, is the likely cause of the contamination. Each of the three possible causes must be measured against the evidence to assess the probabilities.

(a) Failure of the ZTEC-B 17Filchem raises a number of reasons why I should not conclude that there was a defect in the ZTEC-B cartridges that caused the failure of the filter, thereby allowing contamination to pass. 18First, an independent expert never tested the cartridges. 19This fact is one to be taken into account but it is hardly conclusive. It simply identifies an area of inquiry that was not pursued. The absence of testing may impact on what inferences I might draw but it is not probative either way as to whether ZTEC-B cartridges were faulty. 20Secondly, Filchem says that as a result of this absence of testing, there was no evidence of faulty pore size, lack of absolute rating or other non-conformity with the Graver product specifications. This assertion is likewise of limited value. Assessing whether the cartridges were faulty depends principally on the evidence before the court, not on the possible evidence that is absent. 21Thirdly, Filchem asserts that the cartridges consistently met integrity tests prior to, during and at the conclusion of the filtration, and "if there had been a defect in the cartridges, the integrity tests would have shown it". 22There is some force in this submission. Mr Baldwin stated that integrity testing "is a procedure that checks the efficacy of the filter" to determine "whether the filter is still operating to the specifications that [the] manufacturer has prescribed". 23Each of the filter housings passed integrity tests. These included tests at the conclusion of the filtration of the product through that housing. If the integrity testing was effective, then the possibility (and of necessity the probability) of failure of the ZTEC-B cartridges is excluded. There was no evidence to establish some defect in the integrity testing by the plaintiff. 24McWilliams submitted that the manufacturer, Graver, subsequently recommended increasing the test pressure by 15 per cent. This does not establish that the ZTEC-B cartridges would have failed integrity testing at the higher recommended pressure, but raised a question about whether the integrity testing is conclusive. 25To my mind, the recommendation by Graver of itself is insufficient to displace the probative value of the filters passing the integrity testing. There was no evidence to establish that the integrity testing of the filters was performed at a lower pressure than that permitted in the normal recommended conditions. Nor is there evidence that any defects would have appeared if integrity testing had been undertaken at a higher pressure. 26Of the 25 cartridges purchased, McWilliams returned five unused cartridges and 17 used cartridges, retaining three used cartridges. The 17 used cartridges were returned to Graver and examined. McWilliams relies upon the fact that of those 17 used cartridges returned to Graver, two were found in a Graver report to manifest a failure compared to the product specification. These two ZTEC-B cartridges, having passed integrity testing on site at McWilliams before, during and after use, failed when tested some months later. The particular failure was identified to be "where the pleat pack penetrates into our end cap". If this failure manifests a defect it may support the suggestion that McWilliams' integrity testing was not conclusive. On the other hand, it may suggest that the filters' integrity may have been compromised in the period between their use in McWilliams' filtration in late October 2009, and the testing by Graver in about February 2010. 27There is no evidence of the handling and treatment of the cartridges in the period between removal of the cartridges in early November 2009, and the time when they arrived at Graver for testing. However, there was some evidence to indicate that transport and handling could adversely impact on the integrity of the filter. Some filters supplied by Filchem to another customer had been returned after having been damaged in transit. 28The Graver report does not indicate that testing at an increased pressure revealed the defect. On the contrary, it states that "diffusive flow integrity test per ZTEC-B test parameters on all seventeen cartridges" (emphasis added). It was in this report that the recommendation for testing under increased pressure first appeared. 29The testing procedure and conclusion in the Graver report were as follows: "Please recognize that all filter cartridges we provided were 100% integrity tested prior to shipment. This integrity testing is performed as noted in our literature and performed on validated and calibrated equipment (as part of our ISO calibration program). We can certify that our filter cartridges were integral and suitable for use at the time of shipment. Upon visual inspection, we noticed that the cartridges appeared to be 'well used' with some pleat deformation from the application. It is our experience that this occurs when the cartridges are exposed to flow rates or pressures in excess of our published performance specification. Because we cannot control how our cartridges are used, what sort of adverse process conditions, cleaning procedures and number of cleanings conducted, testing protocol, etc., our findings are only based on the what is in our span of control. Filter preparation: · In order to test the contaminated ZTEC-B filters in our Lab's D.I. water, the filters were cleaned and sanitized per graver Membrane product regeneration procedure (technical bulletin T8-008). · All seventeen were wetted in the D.I. water test stand. Findings: · Performed diffusive flow integrity test per ZTEC-B test parameters on all seventeen cartridges. · Two filters exhibited high diffusive flows as compared to our specification. Fifteen filters ware within our diffusive flow specification. · Performed smoke test on the filters with high diffusion and discovered the failure point was located at the where the pleat pack penetrates into our end cap. Conclusion: · As part of Graver's ongoing continuous improvement efforts, a cross-functional team was assigned to improve the membrane bonding process, with particular emphasis on the pleat pack penetration into the end caps. The team's recommendations resulted in a number of improvement actions that are being implemented in the manufacturing process: o Improved side seaming techniques. o Tighter control over pleat pack height and compaction. o Implemented a more rigorous in-house integrity test - pressure increased 15%. o Designed an improved end cap for more uniform penetration/thermal bonding. These enhancements will improve our filter cartridges ability to better withstand adverse application conditions our cartridges may be subjected to in the field." 30In the absence of other evidence, the Graver testing indicates a defect in two of the cartridges at the time of that testing. But the Graver report (tendered by the plaintiff) also contains unchallenged evidence that the ZTEC-B filter cartridges were certified "integral and suitable for use" after initial testing by Graver, which supports the results of the integrity testing by McWilliams. 31Mr March of McWilliams performed another integrity test on the three cartridges retained by McWilliams. This was done some five months after filtration on 1 April 2010. He found all three cartridges to fail, but he conceded, without being pressed, that, "those cartridges had been sitting around for six months dry which could well have affected the pass or fail from an integrity test as well", and accepted that his test on 1 April 2010 did not necessarily indicate that the cartridges would have failed an integrity test in October 2009. 32This evidence not only casts doubt on the likelihood of the three cartridges being defective in October 2009, but also suggests that the integrity of a used cartridge can be affected by "sitting around for...months dry". In these circumstances, it seems more likely that the defective cartridges have become defective since the integrity testing of the cartridges by McWilliams at the conclusion of their use in the filtration process. 33Fifthly, there were four filter housings where contamination occurred. Each filter housing contained five filters, and at all times the same brand of filters was used in each housing. Two defective filters alone would leave unexplained the contamination resulting from the other two (or three) filter housings connected with the contamination. If one assumes five defective filters, there is a mathematical possibility that the four filter housings each contained at least one defective filter. Even without a probability calculation, it is apparent that the prospect must be considered unlikely. It is further diminished if there are only four defective filters and impossible if there are less than four. 34Sixthly, the Filter History Data Sheets are equivocal as to why the wines became contaminated. The Data Sheets for Filter Housing 2 and 4 show unaffected wines preceding, and succeeding, affected wines. In my view, this is unsurprising because there is no measure of the state of the product prior to it passing through the filters. The contaminated and uncontaminated products were different wines. It may be that the unaffected wines had a lesser need or no need for a finishing filter compared to the affected wines and thus, a defective filter would not necessarily result in spoilage of the wine. However, the absence of consistency in the results means that the impact of the filters is uncertain, and the results tend neither to confirm nor deny that the ZTEC-B filters were the cause of the contamination. 35Seventhly, Filchem asserts the converse argument: not only did the ZTEC-B filters not always result in contamination, but the alternative BECO filters also sometimes resulted in contamination, including the Harwood Estate Shiraz on 30 October 2009 when BECO filters were used. The microbiology summary for this product shows that while ZTEC-B filters were used (until 5pm) a count of two, three and four yeast were recorded on the hourly records until the filters were replaced with BECO filters at 5pm. Thereafter, the number of yeast recorded climbed to eight at 5.55pm and 20 at 6.55pm, and thereafter decreased to lower counts of one, zero, and finally, an unacceptable count of three at 9.50pm. 36McWilliams asserts that this contamination was caused by residual contamination downstream of the finishing filter left over from the defective ZTEC-B filters. But there was no evidence that allowed this conclusion. There was no evidence that contamination would remain and for what period, and whether increased rates of contamination might be expected in the two hours afterwards. Nor was this downstream contamination evident in other instances: other lines using ZTEC-B filters, and showing contamination, did not manifest contamination in later products using the same line. 37I am not persuaded that the results establish any downline contamination nor am I persuaded that products filtered with BECO filters were contaminated because of residual contamination persisting after the use of ZTEC-B filters. The example given above in respect of Harwood Estate Shiraz, where the yeast counts were greater with the BECO filters than with the ZTEC-B Filters, and where the yeast counts of product filtered through the BECO filters, increased then decreased and then subsequently increased points against such a conclusion. 38Eighthly, Filchem relies on the circumstance that the McWilliams' production line involved a Memtec pre-filter upline of the holding tanks and sometimes a lenticular BECO intermediate filter between the holding tanks and the final filter. It is apparent that these filters did not capture all of the yeast organisms. This suggests that either the contamination source was downline of these filters, or that the yeast was of a size or quantity that it was passing through the Memtec pre-filter (and sometimes BECO intermediate filter) as well as the ZTEC-B filters. The contamination through those filters is not consistent with the cause of the contamination being a defective ZTEC-B filter. 39McWilliams submitted that because the Memtec pre-filter had a smaller filter size, in theory no yeast reached the storage or bottling tank. It also submitted that there was "no evidence...that excessive yeast levels occurred" in the bottling tanks. But the yeast must have been in the product before it reached the final filter. Even a defective filter does not create the yeast. 40The plaintiff sought to rely on evidence of other ZTEC-B filters that had been returned as faulty stock, but of the three examples relied upon, one failed an initial integrity test, one was damaged in transit and a third return was unexplained. In these circumstances, I do not regard these instances as helpful in determining whether the ZTEC-B filters on this occasion were defective. 41Mr Baldwin also indicated that a failure of the ZTEC-B filters allowing for yeast to pass into the final product would be expected to produce a result where some products using the ZTEC-B filters would be yeast free and, then later, that product would produce contaminated wine after a failure in the filter occurred. The results did not indicate this. None of the asserted failures appeared from the McWilliams contemporaneous integrity testing. 42McWilliams relies upon the failure of Filchem to challenge the evidence of McWilliams' Laboratory Manager that the ZTEC-B filters caused the contamination. In truth that manager, Eugen Futterleib, stated that the only way in which the high number of yeast came to be in the test sample wines was through the ZTEC-B filters. That opinion is evidence against a lack of downline sterilization, but it says nothing about whether the contamination was caused by defective filters or excessive yeast in the upline product. As will appear, I accept on the balance of probabilities, that the contamination was not a product of faulty downline sterilization. 43Taking all these matters into account, I am not persuaded that faulty ZTEC-B filters were the cause of the contamination. The two weighty matters against that conclusion are first, that the ZTEC-B filters passed the McWilliams' integrity tests before, during and after their use, and second, that the evidence connecting the ZTEC-B filters with the contamination is lacking consistency and seems to me to be equivocal. The explanations offered by McWilliams about these two matters are unconvincing. But the yeast contamination did occur, and it had a cause. To reach any final view, the other possible causes must be examined.

(b) High level of yeast forced contamination through the filter 44The second possible cause of contamination stated by Mr Baldwin is the high level of yeast contamination upline of the filters. Mr Baldwin stated in his affidavit that: "I further state that I consider the most likely cause of the high viable cell counts in the bottled wine to be a high duty failure of the cartridges, consequent upon the failure of the upstream filter systems to adequately filter yeast through the line. This scenario is supported by the very quick blockage of the first set ZTEC-B Cartridges". 45The first reference to "failure" in this passage was not relied upon by McWilliams as a basis for liability. In any event, the failure was said to be "consequent" on inadequate upstream filters, which are not the responsibility of Filchem. Mr Baldwin's report recognises that a high yeast load may force some yeast through the filter membranes. 46The report stated: "In a normal bottling operation in the wine industry the filtration systems used before the final membrane filter are designed to remove the vast majority of the yeast and bacteria and the final 0.45 micron filter is the 'insurance policy' that is effectively a sieve at the 0.45 micron level allowing nothing of that size or larger through the filter. They are therefore often referred to as 'absolute filters'. However, in practice there is no such thing as an absolute filter and under severe conditions even these filters can allow micro-organisms through and into the product." 47There was some evidence in the Graver brochures that yeast is larger than 0.45 microns in size although the shape of yeast was not the subject of evidence. No evidence excluded the possibility that yeast might fit through an aperture smaller than 0.45 microns depending on the yeast's shape and angle of approach to the aperture and also the pressure. As I have noted, Mr Baldwin was not cross-examined. 48The evidence of Mr Futterleib of McWilliams indicated that yeast cells divide every 20 minutes in ideal conditions. There was no evidence that identified precisely what were "ideal conditions". But if yeast can double every twenty minutes, three times an hour, then in one day one yeast cell could theoretically could produce 272 cells, a phenomenally large number. 49In any event, Mr March conceded that yeast could multiply to the extent of spoilage within three to four days. Although this evidence of Mr March did not appear to be directed to the growth of yeast in the bottling or storage tank prior to the final filtration and bottling, nevertheless, there was evidence of the affected wine spending a number of days, and in the case of one product as long as ten days, in the storage tank. 50This seems to be a period of time sufficient to allow a high level of yeast to be created. The significant number of blockages of the BECO filters as well as the ZTEC-B filters also suggests a high level of yeast. Further, apart from the Harwood Shiraz, there was no evidence of an intermediate pre-filter to remove yeast before final filtration and no explanation of why this was not done (or why it was done for the Harwood Shiraz), notwithstanding the concession by Paul Tyson of McWilliams that the use of an intermediate filter was "good winemaking practice" when the wine is likely to cause blockages in the final filter. Mr Baldwin also reported that this step of final filtration "usually" involves an intermediate filter. 51On 9 November 2009 Mr March of McWilliams forwarded an email giving details of filter performance in late October and early November 2009. This email indicated that blockages were as common with BECO cartridges as ZTEC-B filters, that high yeast counts were sometimes followed by very low counts "even though the filter was not changed", and that the higher level of blocking: "[U]ndoubtedly had some impact on the poor micro [presumably 'microbial'] performance...[W]hether it is possible the blockages created high enough differential pressures to allow microorganisms to pass through or the frequent necessity to break sterility to change filters has had an impact. Inadequate line sterilization is also a possibility"

(c) Inadequate line sterilization 52Mr Baldwin also postulated the possibility that a failure of the sanitation systems downstream of the filter might be a source of contamination. Mr March, as quoted above, alike recognised that "inadequate line sterilization [was] also a possibility". 53However, Mr Baldwin did not favour this as the most likely cause of the contamination, nor did any other witness. In my view, it could raise no higher than a possibility.

(d) Legal principles for assessing causation 54In Sellars v Adelaide Petroleum NL; Poseidon Ltd v Adelaide Petroleum NL [1994] HCA 4, (1994) 179 CLR 332 at pp 367-368, Brennan J made reference to the unexceptional propositions that the plaintiff bears the onus of proving causation, and where there are competing hypotheses, the balance of probabilities is the standard of proof. His Honour referred to a proposition by Gaudron J in Bennett v Minister of Community Welfare (1992) 176 CLR 408 and continued: "Unless it can be predicated of an hypothesis in favour of causation of a loss that it is more probable than competing hypotheses denying causation, it cannot be said that the plaintiff has satisfied the court that the conduct of the defendant caused the loss...the plaintiff must establish both the historical facts and any necessary hypothesis on the balance of probabilities. A constant standard of proof applies to the finding that a loss has been suffered and to the finding that that loss was caused by the defendant's conduct, whether those findings depend on evidence of historical facts or on evidence giving rise to competing hypotheses. In any event, the standard is proof on the balance of probabilities." 55As Allsop P, as he then was, stated in a different context in Condos v Clycut Pty Ltd [2009] NSWCA 200 at [68]: "The evidence had to rise above the level of conjecture, could not be based on possibilities but had to be established as a matter of probability, and had to do more than give rise to conflicting inferences of equal degrees of probability". The asserted cause needed to be: "the more probable inference from the circumstances that sufficiently appear by evidence or admission...By 'more probable' is meant no more than that upon a balance of probabilities such an inference might reasonably be considered to have some greater degree of likelihood" (authorities and citations omitted). 56I do not disregard the significance of the emergence of contamination problems at the time of using the ZTEC-B filters but the concurrence of two events does not, of itself, prove a causal relationship between them. A close examination of the detail is necessary to determine whether that relationship exists. 57In the result, I am left with the three possibilities identified by Mr Baldwin. The first, a defect in the ZTEC-B filters, preferred by the plaintiff and supported in a general sense by the emergence of contamination issues at the time of the utilization of the ZTEC-B filters, but contradicted by other evidence especially by the contemporaneous integrity testing by the plaintiff. 58The second possibility; an overload of yeast resulting in some passing through the filter is preferred by Mr Baldwin as the most likely cause of the high yeast counts. 59And the third possibility, inadequate sterilization, I have rejected as a probable cause. 60To me it seems very likely that the level of yeast prior to final filtration must have been very high because of the evidence of frequent blockages. The number of days the product was kept in a storage tank and the lack of an intermediate filter (generally) explained how the yeast levels became so elevated when they reached the final filter. 61Although the passage of the yeast through the "absolute rated" filter is not fully explained, Mr Baldwin's opinions, and to a lesser extent, Mr March's note of 9 November 2009 suggests that it can occur. When I take into account that the ZTEC-B filters passed all integrity tests during their use, and that the contamination was found to have occurred on lines with BECO filters as well as ZTEC-B filters, I am persuaded that the most likely cause of the contamination was the excessive yeast levels upline of the finishing filter. 62In those circumstances, I am not satisfied that a defect in the ZTEC-B filters caused the contamination. In my view, this first possibility submitted by McWilliams may rise above conjecture, but it remains a mere possibility and does not seem to me to be the more likely cause. It is a conflicting inference of a lesser degree of probability. 63Accordingly, I find that McWilliams has failed to discharge its burden of proof in proving that the contamination was caused by defective ZTEC-B filters.

(a) Contractual terms 64Section 19 of the Sales of Goods Act 1923 operates to imply into contracts for the sale of goods conditions that the goods be fit for purpose, be of merchantable quality, and be in accordance with how they have been described. These conditions can be excluded or varied, including by express agreement. Filchem says that this occurred in this case.

(i) The credit application 65On 14 March 2001 McWilliams completed a credit account application to Filchem. The application listed the addresses, Australian Company Number ("ACN"), Australian Business Number ("ABN") and telephone and fax numbers of McWilliams. It also listed the company contacts, including Doug McWilliams as Company Manager, Paul Sarter as Purchasing Manager, Philip Skinner as Company Secretary and Robert Firj as Accounts Supervisor. 66It recorded three credit references with their telephone numbers and estimates of the monthly purchases. It was dated in handwriting, had McWilliams' company name stamped in the appropriate section and was signed. Although the signature was unclear, other evidence shows that it bears an uncanny resemblance to the signature of P R Skinner, the Company Secretary, appearing on a letter of demand by McWilliams to Filchem on 3 December 2010. 67The document states on page 5 in italicized and bold print above the McWilliams signature, date and stamp: "Filchem Australia Pty Limited's Terms and Conditions of Sale are attached. You are asked to read them before signing this Application. The person signing this Application below states that they are authorised to sign and confirms that the information is true and correct to the best of their knowledge and that they agree to be bound by the Terms and Conditions". 68Paul Tyson from McWilliams in a fax dated 2 December 2010 accepted that the documents constituted a "signed credit application". Further, during Mr Tyson's cross-examination the following exchange occurred: "Q. ...And if you could turn over the page please to page 408. Whose signature is that in the signature clause about two thirds the way down the page, that is, the first of the two signatures one sees on that page? A. So you mean the application made by signature? Q. Yes? A. I, I don't recognise who that signature is." 69Mr Tyson's repeated hesitation in answering that question did not leave me entirely comfortable with the reliability of his answer. 70The documents also contained a signature for Filchem approving a "$50k" credit limit. McWilliams tendered the documents. 71In these circumstances, I would infer on the balance of probabilities, that the document was signed by McWilliams by its Company Secretary, Philip Skinner. If McWilliams wished to challenge the document it would have refrained from tendering it, or it could have led some evidence to dispute the authority or identity of the signatory. The document itself is some evidence of the authority of the signatory, as appears in the passage quoted in bold above. 72In my view, the document records an agreement to grant credit on the terms specified in the document. But the content of those terms remains unclear. The signed document appears, from the facsimile markings, to be pages 2 and 5 of a facsimile of at least five pages. There is no evidence of the contents of pages 1, 3 and 4, or of any pages after page 5 if there were any. The fact that page 2 was sent at a time of 09.13 and page 5 was sent four minutes later at 09.17 also tends to confirm the existence of pages 3 and 4. 73The so-called "Terms and Conditions of Sale" were not "attached" to the signed document, at least on the evidence before me. As I said the document was a faxed document although it is unclear whether the fax markings showing the date, times and page numbers referred to above occurred when (or if) the unsigned document was faxed to McWilliams, or alternatively, occurred when (or if) the signed document was faxed by McWilliams to Filchem. For reasons that appear below, I think the former is more likely. 74McWilliams also tendered an email from Mr Tyson of McWilliams referring to the signed application noting that the terms and conditions were not included, and requested, "Could you please resend with those Terms and Conditions included". The reply email from Mr Wowk of Filchem stated: "Paul Terms are generally not returned to us along with the signed credit application form. The signature indicates the person has read and acknowledged the Terms and Conditions of Sale. What I have done is attached the July 2000 copy of the Terms document. I trust this is satisfactory. Should you have any questions please do not hesitate in calling me." (Emphasis in original). 75The email from Mr Wowk attached a two-page document headed with Filchem's company name, ACN, ABN and then headed "TERMS AND CONDITIONS OF SALE" in large, bold capitals, with "EFFECTIVE 1st JULY 2000" in smaller bold type, as well as a two-page uncompleted faxed credit application form and another terms and conditions document but with an amendment under the title so that it read "EFFECTIVE 1st MARCH 2009". 76There is no suggestion of any substantial difference in those terms of 1 July 2000 and those of 1 March 2009. In that event, I infer that the July 2000 terms and conditions were the applicable terms and conditions utilized by Filchem in March 2001. 77As indicated earlier in this judgment, the credit application immediately above the signature refers clearly, repeatedly and in bold to the terms and conditions document. 78In the absence of other evidence, I would infer that, as at 14 March 2001, the terms referred to in the credit application were those found in the terms and conditions stated to be "EFFECTIVE 1st JULY 2000". The email from Mr Wowk, put in evidence by the plaintiff, explains the general practice that the terms are not returned. If this occurred, the particular copy of the terms and conditions received by McWilliams would be expected to be retained by McWilliams and thus not available to be provided by Filchem in 2010. 79The terms of the credit application itself and the affirming signature above the bold printing, both indicate that the terms and conditions document was provided. There was no contrary evidence. McWilliams did not put on any evidence to dispute the signature nor did it put on evidence to dispute the provision of the terms and conditions in 2001, subject to one matter, which is dealt with below. 80In these circumstances, the fax markings indicating pages 2 and 5 are consistent with a conclusion that the fax markings were created when Filchem sent the document, and that the pages numbered 3 and 4 were the terms and conditions sent by Filchem but not returned by McWilliams. Presumably the page numbered 1 was a coversheet. 81The one piece of contrary evidence is that Mr Tyson gave evidence of an unsuccessful search for the terms and conditions undertaken by Mr Firj and Mr Tyson. Mr Tyson was unable to recall details of the thickness of the file of documents he searched or how far back in time it covered. Mr Firj gave no evidence so I must infer that his evidence would not have assisted the plaintiff. Further, nobody gave evidence of a practice of retaining or photocopying such documents. 82In those circumstances, I find the evidence of the search for the documents unconvincing as proof that the documents were never received. 83In the result, I am persuaded on the balance of probabilities that McWilliams received the two-page Terms and Conditions document as a part of the credit application but did not return it. Nevertheless, McWilliams executed the credit application that manifested an agreement to be bound by the Terms and Conditions. The fact that the two pages of Terms and Conditions were not returned is not crucial. If McWilliams did not wish to affirm its agreement to the two pages of Terms and Conditions, it need only to have redacted or crossed through the reference to those terms. 84McWilliams cannot now be heard to say it did not agree to those terms merely because they were not returned, or even to say (which it does not in terms) that it did not receive them. It is certainly no answer that McWilliams did not read them: Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; (2004) 219 CLR 165 at [45], [47] and [54]. 85Accordingly, I am of the view that the Terms and Conditions document was part of the credit agreement reached by McWilliams and Filchem on 14 March 2001. 86Relevant clauses in the terms and conditions are as follows: "2. GENERAL (a) Notwithstanding anything contained in any order or other document from the Purchaser, these conditions shall be the only terms, conditions or warranties applicable with the exception of any amendments agreed to by the Company in writing." "6. WARRANTIES (a) Nothing contained in this warranty shall be read or applied so as to purport to exclude, restrict or modify or have the effect of excluding, restricting or modifying the application in relation to the supply of the goods of all or any of the provisions of Part V of the Trade Practices Act, 1974 (as amended) or any relevant State or Territory statute which by law cannot be excluded, restricted or modified PROVIDED THAT to the extent that any such statute permits the Company to limit its liabilities to compensate or indemnify any person for breach of a condition or warranty implied thereby, then the respective liabilities of the Company for such breach shall be limited to the replacement of the goods or the supply of equivalent goods. (b)Subject to Clause 6(a) hereof and any legislation to the contrary: - (i) representations and agreements not expressly contained herein shall not be binding upon the Company as conditions, warranties or representations on the part of the Company, whether express or implied, statutory or otherwise, whether collateral or antecedent or otherwise are hereby expressly negatived and excluded; (ii) the Company shall be under no liability to the Purchaser for any loss (including but not limited to loss of profits and consequential loss) or for damage to persons or property or for death or injury caused by any act or omission (including negligent acts or omissions) of the Company or the Company's agents; (iii) the Purchaser shall indemnify the Company against any claims made against the Company by any third party in respect of any such loss, damage, death or injury as is set out in Clause 6(b)(ii) hereof and the Purchaser further agrees to indemnify the Company against all losses and expenses which the Company may suffer or incur due to the failure of the Purchaser fully to observe its obligations under this contract." "10. FAULTY GOODS AND CLAIMS FOR RETURN OR CREDIT (a) The Purchaser shall inspect the goods immediately upon delivery and carry out any tests that a prudent Purchaser would carry out. (b) The Purchaser shall give written notice to the Company of any alleged or irregularity in quantity or description, or any faults or defects within five (5) working days from the delivery. (c) If no notice is given by the Purchaser to the Company in accordance with Clause 10(b) hereof, the Purchaser shall be deemed to have accepted the goods and the Purchaser shall lose any right to reject the goods or claim any remedy whatsoever (including damages) against the Company. (d) All claims for credit for damaged, defective or short delivery goods or for goods to be returned must be notified to the Company immediately. (e) The Company will not accept claims that are not notified in accordance with Clause 10(d) hereof within five (5) working days of delivery. (f) The goods must be returned, at the cost of the Purchaser, to the Company site from where they were purchased. (g) Goods returned for credit and accepted by the Company will be subject to handling charges of an amount equivalent to ten per cent (10%) of the credit claimed. (h) If goods are not returned after fourteen (14) days of notification of the claim to the Company the Purchaser shall not be entitled to any credit. (i) Unless otherwise agreed, no request for credit will be approved until a representative of the Company has inspected the goods on which the credit is claimed. (j) Until the inspection referred to in Clause 10(i), the Purchaser is responsible for maintaining proper care of the goods in question. (k)The Company will not accept claims for damaged or defective goods or for goods returned where the Purchaser has not maintained proper care of the delivered goods. (l) The Purchaser acknowledges and agrees that goods produced/manufactured on the Purchaser's instruction, goods specifically for the Purchaser, goods altered or damaged by the Purchaser are not acceptable for return or credit. "11. LIABILITY OF THE COMPANY Any liability of the Company with respect to the goods shall arise in accordance with the Terms and Conditions only and shall be limited to the replacement of the goods or the payment of the cost of replacing the goods or acquiring equivalent goods, as the Company may elect." "13. SEVERABILITY In the event that any term of provision cannot be given effect for any reason then the term or provision or part which cannot be given effect shall be severed and read down restrictively and the remaining terms and provisions shall remain valid and binding on the parties." "15. LAW AND JURISDICTION All contracts between the Company and the Purchaser shall be governed by and construed in accordance with the laws of New South Wales." "17. ADVICE (a) Subject to Clause 6 hereof, any advice, recommendation, information or assistance provided by the Company in relation to the goods or their use or application (except to the extent that the Company has expressly agreed in writing to provide the same) is given in good faith and is believed by the Company to be appropriate and reliable. (b) Any advice, recommendation, information or assistance is provided without liability or responsibility on the part of the Company." 87McWilliams also submits that the Terms and Conditions did not become part of the contract for purchase of the filters. But the purchases were made by written orders, and the Terms and Conditions purported to apply to orders for the sale of goods (see cl 2(a) above). Plainly, the credit application was expressly intended to apply to orders by McWilliams. 88McWilliams asserted that the filters were ordered eight years after the agreement. Of itself, that does not seem to be of consequence especially when there were other dealings between Filchem and McWilliams in that period. 89Nor is the failure by McWilliams to refer to the Terms and Conditions in the filter order a matter of significance. The Terms and Conditions did refer to orders in cl 2(a). 90Nor is it significant whether the goods were purchased on credit. The contract in 2001 did not limit its application to goods purchased on credit. In any event, the goods were purchased on credit, as the Filchem invoice which states "30 day terms" was issued two days after the order and Mr March of McWilliams conceded that the ZTEC-B filter cartridges were purchased on credit. 91These terms have several effects. Although the Part V provisions of the Trade Practices Act 1974 (Cth) could not be excluded, the Sale of Goods Act 1923 provisions can be, and are, excluded by cls 2 and 6(b). Damages are, in any event, limited to the replacement of the filters by cls 6(a) and 11. 92Clause 6(b)(ii) excludes liability for consequential loss, loss of profits and damage to property. All of the damages claimed by McWilliams fall within the scope of these three types of damage, except for the costs of the 20 ZTEC-B filters not refunded. 93If the plaintiff were otherwise entitled to contractual damages, those damages would be limited to replacement of the filters. Clause 11 has the same effect. Clause 8 provides that the risk in the goods passes on delivery. Thus, the performance of the goods was at McWilliams' risk once the goods were delivered, as are damages resulting therefrom. 94Section 10 imposes strict time limits on any entitlement to claim damages requiring written notice of any defect within five working days of delivery. As the cartridges were delivered by 27 October 2009, this period expired on 3 November 2009, well before the first written notice on 20 November 2009. 95A similar clause was upheld in China Ocean Shipping Co Ltd v PS Chellaram & Co Ltd; sub nom PS Chellaram & Co Ltd v China Ocean Shipping Co (The Zhi Jiang Kou) (LloydsRep) (1990) 28 NSWLR 354. 96Clause 17 provided that Filchem bore no liability for advice, recommendations, information and assistance. It may be that this clause would not of itself protect against a breach of warranty, if the representation (contrary to cl 2) became a term of the contract. But it does protect against negligent advice. 97These exclusion clauses are to be given their natural and ordinary meaning: Darlington Futures Ltd v Delco Australia Pty Ltd (1986) 161 CLR 500. The clauses place the risk of the filters upon McWilliams. It is open to the parties to agree that one party should bear the risk of the transaction, so long as there is a bargain: Davis v Commissioner for Main Roads (1968) 117 CLR 529 at p 537; Lifesavers (Australasia) Ltd v Frigmobile Pty Ltd [1983] 1 NSWLR 431 at p 436. Plainly enough, there was a bargain here, one party received the price for the filters, the other received the filters. 98McWilliams disputed none of these matters. Its answer to these provisions was to assert that they were not terms of the contract because of the absence of proof of the signed credit application. As recorded above, I am not persuaded by that submission.

(ii) The representations as to terms 99McWilliams alleges that the representations made by Filchem's representatives also constituted terms. In all, 19 terms were pleaded as arising from the representations. 100In written submissions, McWilliams reduced the relevant alleged terms to nine, as follows: "8. First, between March and September 2009, Filchem, through Mr Romer, made a number of representations to McWilliams' concerning the features, benefits and capabilities of the ZTEC-B Filters. Those representations, which were express and recorded in writing, were relevantly that the ZTEC-B filters: (a) were equivalent to the 30 inch 0.45μm (Beco) filters that McWilliams was using at that time; (b) were 'a beverage grade cartridge'; (c) were specifically designed for the filtration of beverages including wine; (d) were 'a great finishing filter for wine'; (e) achieved high retention of yeast and other spoilage organisms; (f) achieved 'superior flow rates'; (g) had 'good dirt holding capacity'; (h) had been 'validated for the removal of...spoilage organisms'; and (i) were 'absolute rated'." 101These alleged terms must meet the same fate as the terms implied under the Sales of Good Act 1923. They fail at the outset as not satisfying cl 2(a) of the written agreement as they are not agreed in writing to be terms. Although the representations are, in many cases, in writing, they could become terms only because of implications arising from the circumstances of the representations, and that is insufficient to satisfy cl 2(a). 102I accept that parties in certain circumstances can agree on matters so as to bind themselves notwithstanding that the formalities of an earlier agreement are not satisfied. Variations in some building contract disputes might be a common example. But here, the agreement is not proved by the conduct, but said to be implied. The implication is inconsistent with the written terms and this is a factor that leaves me unpersuaded that the impartial observer would conclude that the represented qualities of the filters were to be taken as promises. 103In addition, there is no evidence that Mr Romer had authority, actual or ostensible, not merely to make representations, but to agree to additional terms inconsistent with the standard conditions. 104The written contract and the fact that the representations were recorded in the manufacturer's literature and brochures, speak against the supplier Filchem, making promises in terms of the representations. 105McWilliams asserts: "[T]he Representations in the emails were directed to matters of importance; related to subject-matter of which McWilliam's was necessarily ignorant; were made with the intention that they be relied upon; were in fact relied upon; were definite and specific; and were not statements of opinion, intention, hope or desire. They were also made repeatedly. The reasonable bystander would readily have inferred that Mr Romer, if asked the question 'Can you promise that?', would have answered in the affirmative for each of the Representations. Consequently, the Representations were in the nature of warranties." 106Several of these matters must be accepted, but I am not convinced that the representations could not, in part, be described as opinion, or were properly to be described as "definite and specific". A "great finishing filter", "high retention", "superior flow rates", "good dirt holding capacity" and "validated", at least, are not at all definite or quantifiable. In many respects these representations more closely approximate puffery because with words like "great", "high", "superior" and "good" it is difficult, if not impossible, to ascertain whether the filters satisfied the representations or not: Pappas and Another v Soulac Pty Ltd and Another (1983) 50 ALR 231 at 238. 107I am also not satisfied that a reasonable bystander would infer a promise. The written agreement is an important matter but overlooked in this submission by McWilliams. It seems to me in the current circumstances it is just as likely that the response to the question, "can you promise", would be the answer, "well, that's what the manufacturer says" or "promises are governed by the terms of our written contract; I would have to see if Filchem would agree".

(iii) Statutory implied terms 108I have already found that the implication of terms under the Sales of Goods Act 1923 would be excluded by the Terms and Conditions of the Credit Application Agreement. That leaves the question of the terms to be implied under s 71 of the Trade Practices Act 1974 as it then was. Section 71 also implied terms of fitness for purpose and merchantable quality. 109Section 68 of the Trade Practices Act 1974 precluded these obligations being excluded, varied or restricted by the contract. However, the obligation on the corporation to supply goods of merchantable quality and goods fit for purpose depended upon the supply being to a "consumer". Filchem contends that McWilliams was not a consumer, defined in s 4B(1) and (3) of the Trade Practices Act 1974 (Cth) as follows: "4B Consumers (1) For the purposes of this Act, unless the contrary intention appears: (a) a person shall be taken to have acquired particular goods as a consumer if, and only if: (i) the price of the goods did not exceed the prescribed amount; or (ii) where that price exceeded the prescribed amount-the goods were of a kind ordinarily acquired for personal, domestic or household use or consumption or the goods consisted of a commercial road vehicle; and the person did not acquire the goods, or hold himself or herself out as acquiring the goods, for the purpose of re-supply or for the purpose of using them up or transforming them, in trade or commerce, in the course of a process of production or manufacture or of repairing or treating other goods or fixtures on land; and (b) a person shall be taken to have acquired particular services as a consumer if, and only if: (i) the price of the services did not exceed the prescribed amount; or (ii) where that price exceeded the prescribed amount-the services were of a kind ordinarily acquired for personal, domestic or household use or consumption. ... (3) Where it is alleged in any proceeding under this Act or in any other proceeding in respect of a matter arising under this Act that a person was a consumer in relation to particular goods or services, it shall be presumed, unless the contrary is established, that the person was a consumer in relation to those goods or services." 110McWilliams accepts that the filters were not goods of a kind ordinarily acquired for personal, domestic or household use or consumption. The price of the goods was well below the prescribed amount of $40,000. The goods were not acquired for the purpose of resupply. 111Therefore, the issue to be decided is whether the filters were acquired: "for the purpose of using them up or transforming them...in the course of a process of production or manufacture or of repairing or treating other goods". 112Because of the proliferation of alternatives and the word "of" in this provision, it admits of more than one possible construction as identified by Rothman J in Laws v GWS Machinery Pty Ltd (2007) 209 FLR 53 at [142]; [2007] NSWSC 316. With respect, I agree with Rothman J (at [143]) that the proper construction of the provision is that the phrase "of repairing or treating other goods" is an alternative to "of a process of production or manufacture" or perhaps also "of production or manufacture", but is not an alternative to "re-supply" or "using them up or transforming them, in trade or commerce". 113Thus, leaving aside the holding out provision, in order to prove that a person acquiring goods priced under the prescribed amount was not a consumer, it must be established relevantly that the person did not acquire the goods for the purpose of using them up in trade or commerce in the course of: (a)a process of production; (b)a process of manufacture; (c)repairing the goods; or (d)treating other goods. 114In the present case, the issue is whether the filters were used up in the course of a process of production or manufacture of wine, or in the course of treating the wine product. In substance, this question is equivalent to whether the filters were used up in the course of the production of the wine. 115In Laws v GWS, the purchase of a tractor tyre was outside the ambit of s 4B(1)(a) because although the tyre was acquired for the purpose of being used up, and also for the purpose of repair, it was not acquired for the purpose of being used up "in the course of that repair" (see [143]). In the Laws v GWS decision, the defendant did "not submit that the tyre was used up as part of the process of production or manufacture" (see [141]). It follows that the specific matters relevant in the instant case were not the subject of decision in Laws v GWS. 116In the present case, McWilliams submits that the filters were not acquired for the purpose of being used up, but were acquired to filter the wine product. This seems to me to be a distinction without a difference. I do not think it answers the question of what is meant by being "used up". McWilliams submits it means consumed, depleted or exhausted in the Oxford English Dictionary, but the first and primary meaning there given is "worn out", which is apt to apply to a used filter. A thing is used up if it is "utilized to maximum capacity or usefulness; reduced or consumed through use". This is what occurs with a filter. 117Therefore, in my view, the filters fall within the terms of the exception in s 4B(1)(a). They were acquired for the purpose of being used up in a process of production, namely in the process of producing wine. It follows that McWilliams did not acquire the filters as a consumer. 118For these reasons, the provisions of s 71 of the Trade Practices Act 1974 (Cth) were not implied into the contract between McWilliams and Filchem and McWilliams claim under this ground must fail. 119If I am wrong on this matter, I note that McWilliams pleaded that the test of whether a filter is of merchantable quality or fit for purpose is whether it allows a maximum of one yeast per 300 ml of wine. This seems to be the standard adopted by McWilliams, perhaps by the wine industry, of whether the wine is satisfactory. I do not think it is necessarily the test of whether a filter is merchantable, irrespective of the product being filtered. 120In any event, McWilliams' submissions do not develop this test, but speak only of allowing the passage of yeast into wine, which is perhaps an even stricter test. 121If the ZTEC-B filters did not provide an equivalent level of protection from yeast contamination as the BECO filters, that would seem to be probative evidence that the ZTEC-B filters were not fit for purpose or of merchantable quality. But as is indicated by my decision in respect of the cause of the contamination, I was not persuaded of this matter.

3. Misleading conduct 122I have earlier identified the misrepresentations asserted by McWilliams. It is not in issue that the representations were made in trade or commerce.

(a) Representations that the ZTEC-B filter was a "great finishing filter for wine" and was specifically designed for the filtration of beverages including wine 123The words "great finishing filter for wine" is found in an email from Michael Romer of Filchem to Peter March of McWilliams. There is no reference in any email or brochure to the ZTEC-B filter being "specifically designed" for filtering beverages including wine. 124The brochure includes an exclusion clause stating that: "it is the user's responsibility to determine the suitability for its own use of the products. Since the actual use by others is beyond our control, no guarantee express or implied is made by Graver...". 125I do not think this exclusion clause has much significance in the present case as it pertains to the position of Graver not Filchem. 126Nevertheless, speaking generally the provision of a brochure clearly produced by a third party manufacturer does not, without more, amount to a representation by Filchem, other than a representation as to what the manufacturer states (see Butcher v Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592 at [38]-[40]). The provision of information by the supply of a brochure is, to my mind, a circumstance making it apparent that Filchem is not the source of the information (see Yorke v Lucas (1985) 158 CLR 661 at p 666). 127On the other hand, the emails by Mr Romer of Filchem, some of which were sent in the absence of any brochure, contain representations. Although there is puffery inherent in the use of the word "great", I am satisfied that in substance, Filchem represented that the ZTEC-B filters were suitable as a finishing filter for wine. 128To disprove the truth of this representation McWilliams relies on brochures supplied by the manufacturer Graver, which establish that: (i)the brochure dated May 2007 for the Z-TEC B filter stated that it was "for final filtration of Wine and Beverages" and that "Wines" was one of a number of beverages listed under "Typical Applications"; (ii)a brochure dated July 2009 omitted any reference to wine; and (iii)a different product, the ZTEC-WB released at some date after mid-2009, was specifically designed for wine. 129McWilliams submitted that: "had Mr March known that the ZTEC-B filters were not designed for the filtration of wine, or that Graver had or would soon have a special filter for the filtration of wine, he would not have purchased the ZTEC-B filters." 130However, neither the later brochure omitting any reference to wine, nor a later product specifically designed for wine, is itself probative in establishing that the ZTEC-B is unsuitable for wine. If the ZTEC-WB filter was specifically developed for wine, it is unsurprising that the later ZTEC-B brochure might not refer to wine, there being in the ZTEC-WB filter a more specific and marketable product. This is not enough to establish unsuitability in the original ZTEC-B product. 131In any event, other brochures of Graver dated at about the same time continue to recommend the ZTEC-B as a filter for wine and spirits. Accordingly, I am not persuaded that the Graver brochures establish that the ZTEC-B filter was unsuitable for wine. In my view (leaving aside any question of time when products were available) the brochures suggest that the ZTEC-WB came to be the preferred filter for wine, but that the ZTEC-B was also suitable. McWilliams' seemed to accept this, asserting, "the ZTEC-WB was a better product than the ZTEC-B for wine". 132Further, that Mr March would not have purchased the ZTEC-B had he known of the characteristics of the ZTEC-WB is not to the point of proving the representations were misleading, whatever it may say about reliance. 133The argument of McWilliams appears to rely upon the assertion that the ZTEC-B filter was represented to be the only or preferred Graver filter for wine. If that was the representation, then the changed brochure and the more specific "WB" product may be some evidence of the representation's falsity. But such a representation was not alleged in the pleadings, was not supported by any evidence, and was not, in terms, the subject of submissions. 134In short, one does not prove one filter is unsuitable by showing another is more suitable or to be preferred. 135McWilliams also relied upon the filters causing contamination as a reason why this representation was misleading but for reasons already identified, I have not accepted that the cause of the contamination was a defect in the filters. 136McWilliams also submitted that "other wineries in Australia which used the ZTEC-B filters also had problems". I have already dealt with this issue above and found that it does not establish the cause of the contamination. It also is insufficient to establish that the ZTEC-B filters were unsuitable for filtering wine.

(b) The ZTEC-B filters achieved "high retention of yeast and other spoilage organisms", had "good dirt holding capacity", had been "validated for the removal of...spoilage organisms" and were "absolute rated" 137These representations are contained in an email from Mr Romer. McWilliams relies upon the cause of the contamination and the return of defective filters by other customers as establishing the falsity of these representations. For the same reasons as given above, these matters do not assist McWilliams. 138Moreover, relying upon representations containing statements such as "validated" and "absolute rated" do not assist McWilliams without some evidence as to what these terms mean. 139Generally, representations of existing facts are shown to be misleading by establishing that the facts asserted are false. In the present case, no attempt was made to establish that the filters were not "validated" or "absolute rated". There was simply no evidence to this effect. The only evidence that the filters did not have "high retention" or did not have a capacity for "good dirt holding" was the evidence as to the cause of the contamination, which I did not accept as establishing any defect in the ZTEC-B filters.

(c) The ZTEC-B filters were equivalent to BECO filters 140In my opinion, this representation is an assertion about the size and aperture of the filter, not about its entire performance characteristics. McWilliams rely upon Mr March's evidence that he took this representation to mean that the ZTEC-B filters "would do the same job as our BECO filters were doing". I do not think this evidence can alter the meaning of the representation. However, I accept that if "doing the same job" means no more than "being as effective in removing yeast and other contaminants" then the proposition is not so controversial. In any event, Mr March gave this "same job" explanation after twice using the word "equivalent" rather than "same", and there is, to my mind, a difference between an "equivalent" filter and one that is the "same". 141McWilliams asserts that BECO filters had a throughput of approximately two million litres before blocking, and "effectively filtered out yeast" as its employee, Mr Futterleib, deposed, whereas ZTEC-B filters were said to have "failed to filter out yeast and blocked quickly". There was no evidence that the ZTEC-B filters failed to filter out yeast as effectively as the BECO filters, other than the cause of contamination evidence with which I have already dealt. 142Further, it appeared that filters block up because of a build-up of yeast and other contaminants. Blocking thus establishes that filters do retain yeast. 143I do not regard a difference in the time a filter takes to become blocked, particularly when filtering different products, as evidence that the filter is not "equivalent" in the sense used in the representations. That the filter became blocked quickly does not establish that it is of a different size or that it has a different sized filtration apertures. A filter may become blocked more quickly because it is more effective in retaining contaminants or it is filtering more contaminated product. 144Moreover, the evidence of a shorter period before blocking is unconvincing. Both BECO and ZTEC-B filters blocked during the relevant period in late October 2010. There was no controlled test to determine the quantity of product filtered before blockages of the various filters. That would involve filtration of identical product and a measure of the quantity filtered. Evidence from employees that on average BECO filters lasted a lot longer before becoming blocked than did ZTEC-B filters on this occasion, leaves open the issue of whether the blockages were caused by the product rather than the filter, especially when BECO filters used on the same product were also reported as having blockages during the relevant period. 145It has not been established that ZTEC-B filters rather than BECO caused the contaminated wines. The evidence about the cause of contamination does not establish whether the ZTEC-B or BECO filters in respect of the wine product filtered during the relevant period were more effective in filtering yeast or were less prone to blockages.

(d) ZTEC-B was a beverage grade cartridge 146McWilliams submits that the filters were pharmaceutical grade rather than beverage grade, and were very "tight", so that they have a "lower throughput". This representation raises the same issues as is raised by the argument about flow rates dealt with below. But there was no evidence to establish that the ZTEC-B filters were not "beverage grade", even if they were also pharmaceutical grade. 147The brochures from the manufacturer describe them as "beverage grade". Even the later brochure marked "6-09" that makes reference to "pharmaceutical" use, also makes repeated reference to beverage use.

(e) The representation that ZTEC-B filters achieved superior flow rate 148McWilliams asserts as the reason why this representation was misleading: "The ZTEC-B filters when used blocked rapidly and far more quickly than other brands of filters". 149Mr March's affidavit at [27] reads: "From my experience in monitoring the wine filtration process at McWilliams for over 7 years, I am aware Beco, Cuno, Sitz and Pall filters had historically achieved a wine throughput of approximately two million litres before blocking." 150In my view, these assertions about filters blocking say nothing about the flow rates of the ZTEC-B filter. In the absence of any other material, a reference to the "flow rates" is a reference to the flow rate when the filter is not blocked. The Graver brochures, provided to McWilliams, showed the flow rate in the form of a graph. The flow rate is the quantity of fluid allowed through the filter per minute. It is not a measure of the quantity allowed through the filter before it becomes blocked. It was not shown that the flow rate was not achieved or was inaccurate in some respect. 151The word "superior" suggests a higher grade or quality. However, I doubt if it suggests a higher grade or quality than a particular competitor, such as BECO, in a context where no reference to BECO is made. In any event, there was no evidence or submission comparing the flow rate of the ZTEC-B filter and a BECO filter. 152Another issue arises out of this allegation. It concerns whether damages are recoverable if the ZTEC-B filters have a reduced flow rate. McWilliams does not submit that a reduced flow rate caused the contamination. Rather, McWilliams submits that the ZTEC-B filter had been represented as "equivalent" that is, according to McWilliams, having an equivalent flow rate to BECO filters and that if it did not have this feature, McWilliams would not have purchased the filters and thus there would have been no contaminated wine. 153As I have not been satisfied either of insufficient flow rates, unacceptable blockages or the cause of contamination, I do not need to determine this question. However, for the reasons that follow, I have some doubt whether a misleading representation about a superior flow rate is legally causative of damage resulting from contamination unconnected to the flow rate. 154In Wallace v Kam [2013] HCA 19, the High Court (at [11]) explained the two aspects involved in adjudicating causation at common law (see also Henville v Walker [2001] HCA 52 at [97]). The common law test of causation generally is applied as the test of causation of damages from misleading conduct, see Henville v Walker [2001] HCA 52 at [18], [61] and [134] cf [96]; (2001) 206 CLR 459 and Wardley Australia Ltd v Western Australia (1992) 175 CLR 514 at [525]. 155As explained in Wallace v Kam, there must not only be factual causation, commonly known as the "but for" test, but also some reason why legal responsibility for the damage should be attributed to the wrongdoer. In Wallace v Kam, it was not enough that the doctor's advice was negligent and that the proper advice would have caused the plaintiff not to undergo the operation and avoid the damage. The risk needed to be of a type not only that the doctor had a duty to warn about, but a type to which the plaintiff would not have consented. 156Here, there is no suggested connection between the flow rate and the contaminated wine, except that it is said that had McWilliams not been mislead about the flow rate it would not have purchased the filters and suffered the damage. Satisfaction of the "but for" test is not sufficient to establish legal causation. However, a connection between the representation of the flow rate and the purchase of the otherwise defective filters may be sufficient to provide a reason for legal responsibility in the representor. 157However, I do not decide this matter as I am not persuaded (for the reasons given above) that any representation about the flow rate of the ZTEC-B filter was misleading.

(f) Conclusion 158I am not satisfied that the representations made by Filchem were misleading. None of the representations were shown to be false. This conclusion also answers the claims under section 53(a) and section 53(c) about representations alleging that the goods were of a particular standard, quality or grade, and had certain performance characteristics.

(g) Reliance 159Mr March gave evidence that he relied upon the representations made by Filchem. This evidence is unsurprising. McWilliams changed filters from BECO to ZTEC-B. I accept that McWilliams did so on the basis of the information from Filchem including the representations. In any event, Filchem did not contest a finding of reliance. 160Accordingly, I find that McWilliams did rely on the representations of Filchem in deciding to buy the filters.

4. Negligence 161McWilliams asserts that Filchem "as a specialist in the commercial filtration of beers and wine for over 20 years" owed a duty "to ensure that any filters which it recommended, sold and supplied" to McWilliams had the qualities represented in the representations. 162I do not think the duty is quite as high as that pleaded. In the first place Filchem was not under a tortious duty "to ensure" the filters possessed those qualities. It was, at best, under a duty of care, a duty to use all reasonable care and skill in recommending and providing suitable filters. 163Secondly, Filchem does not undertake a tortious duty to ensure that the ZTEC-B filters had certain characteristics. Nor could it. These were products manufactured by another. Filchem had no capacity to affect whether the ZTEC-B filter bore a particular quality. 164McWilliams appeared to recognize this in its closing submissions. It made no claim in negligence other than a failure to advise that: (a)the ZTEC-B filter was pharmaceutical grade; (b)the ZTEC-B filter was not designed for filtration of wine; and (c)another filter, the ZTEC-WB, "was or would soon be available" and was designed for the filtration of wine. 165In my view, as indicated, the reference to pharmaceutical grade is of no significance. Alone it says nothing about whether the filters were suitable for beverages, which is the crucial matter. Nor was I persuaded that the ZTEC-B filter was not designed for the filtration of wine. The ZTEC-B brochures state that it was "for final filtration of wine" and recommend its use as a filter for wine. 166McWilliams' claim for a negligent failure to advise appears to depend, initially, on whether Filchem knew or ought to have known of the ZTEC-WB filter. It was not established that Mr Romer of Filchem knew of the ZTEC-WB filter prior to McWilliams' purchase of the ZTEC-B filters in October 2009. 167The particulars in the statement of claim assert that Mr Wowk of Filchem and Mr Tyson of McWilliams had a conversation on 29 October 2010 (not 2009) during which Mr Wowk is said to have recommended the ZTEC-WB filters rather than the ZTEC-B filters. This assertion is not supported by the evidence of Mr Tyson. Both Mr Wowk and Mr Tyson gave evidence of discussions about the WB filters some months earlier (though months after the purchase of the filters) on 24 February 2010. Mr Tyson deposed in his affidavit: "Until the 24 February meeting, neither Mr March nor anyone else from Filchem ever indicated to me (nor to my knowledge anyone else at McWilliams) that there existed a ZTEC-WB cartridge which was available for purchase which was designed for the filtration of beer and wine". 168Accordingly, there is no basis for the allegation in the pleading that Filchem knew of the WB filters in October 2009. That it recommended them in late October 2010 (as pleaded) or on 24 February 2010 (as the evidence establishes) is of no assistance to McWilliams on this point. 169There is evidence from Mr Wowk of Filchem in cross-examination that he became aware of the ZTEC-WB filters in about November 2009. It was not put to him that he was aware earlier than this date, rather it was put to him that he was aware of the ZTEC-WB filters before February 2010. 170McWilliams also pleaded that Filchem "ought to have known" of the WB filters, because of its commercial relationship with Graver. The evidence of the existence of the WB filters at the time comprises what appears to be a brochure, called an "Operating Instruction, Test Procedure and Quality Certificate" and a report called "ZTEC WB Performance Qualification Guide". 171The first document on its final of three pages has recorded "9/09" at the foot of the page. The second has, as at the foot of most pages "Rev 2009-09". This may indicate that the document was created in September 2009, but requires an inference that the product was available for sale in Australia in October 2009. I do not think the possible date notation at the foot of an American document is sufficient to draw that inference. If it is not drawn, if the product was not available in Australia, there could be no duty on Filchem to advise McWilliams that it was. 172Accordingly, I am not persuaded on the balance of probabilities that the ZTEC-WB filters ought to have been mentioned by Filchem prior to the use of the ZTEC-B filters by McWilliams in October 2009. Further, in the absence of proof about the cause of the contamination, or proof that the use of the BECO filters would have avoided the contamination in the wine in October 2009, a failure to refer to the ZTEC-WB filters is of no significance.

5. Quantum of damages 173There was no issue that McWilliams lost the sum of $324,115 as a result of the contamination of the wine.

(a) Contractual exclusion of liability 174I have already dealt with the contractual terms above.

(b) Contributory negligence 175The allegation of contributory negligence by Filchem relies upon the circumstance that in respect of most of the wine, there was no intermediate pre-filter. Mr Baldwin reported that an intermediate filter was usual, and Mr Tyson accepted that it was part of the practice of good winemaking to have an intermediate filter. 176This is of particular importance because of the blocked filters and the yeast contamination. The blockages of both types of filters indicated to me that immediately prior to final filtration the level of contamination in the product, relevantly yeast, was likely to have been high. Further, the circumstance that the product had remained in the bottling tank for many days contrary to what Mr Futterleib said was good winemaking practice, in the absence of tests to ascertain the quantity of yeast, may serve as an explanation for the high level of yeast. 177McWilliams disputes that there was any evidence of "abnormally high loadings of yeast upstream of the filters caused by some failing on the part of McWilliams". This submission does not confront the evidence of blocked ZTEC-B and BECO filters, ignores the common practice of intermediate filters and the lengthy period where product remained in the bottling tanks. If there were abnormally high loadings, it could not be attributed to anyone but McWilliams. 178Filchem also relies on inadequate downline sterilization. As I have not found that the yeast contamination was caused by inadequate downline sterilization, any inadequate sterilization is not causative of loss and cannot amount to contributory negligence. 179The issue of contributory negligence does not arise because I have found no negligence by Filchem. Had I found negligence, the presence or otherwise of contributory negligence would depend upon the nature of the breach by Filchem that caused the loss. In the circumstances, where the breach is not found, I decline to make any final finding about contributory negligence.

7. Proportionate liability 180Filchem says all but one of the representations were made in Graver's literature, and insofar as the filters were faulty, Graver would be liable "in contract, under the TPA and in negligence". If Graver were liable, Filchem asserts that any liability it bears must be reduced to the extent of Graver's responsibility for the damage, under, for example, s 35 of the Civil Liability Act 2002. 181As there was no contractual relationship between McWilliams and Graver, it is difficult to see how Graver would be liable to McWilliams in contract. Also, liability in Graver would not be straightforward because of, among other things, the clause in the brochure seeking to exclude liability. 182However, proportionate liability strictly does not arise because I have found no liability in Filchem. Whether proportionate liability might otherwise arise if Filchem was liable would depend in part upon the basis of that liability. In those circumstances, I do not propose to make any findings in respect of proportionate liability.

8. Orders 183Accordingly, the orders of the Court are: (1)Judgment for the defendant. (2)Plaintiff to pay the defendant's costs.

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