Public Transport Ticketing Corporation v Integrated Transit Solutions Limited [2010] NSWSC 120 | Case summary

2008/290313 PUBLIC TRANSPORT TICKETING CORPORATION v INTEGRATED TRANSIT SOLUTIONS LIMITED JUDGMENT 1 HIS HONOUR: These proceedings arise out of Sydney's so far unsuccessful attempts to obtain an integrated ticketing system for public transport. 2 In brief, the case for the plaintiff (PTTC) is that there was a contract between it and the first defendant (ITSL) for ITSL to design, build and install what is called an "integrated smart card-based ticketing and fare payment system for public transport in the greater Sydney area". 3 PTTC's case is that the obligations of ITSL were guaranteed by its parent, the second defendant (ERG, although that company has since changed its name). PTTC claims to have terminated, for cause, the contract between it and ITSL. ITSL disputes this. 4 The question for today is whether ITSL should have leave to file a third cross-claim summons and list statement. That application is opposed by all the proposed cross-defendants. The proposed cross-defendants are PTTC, the State of New South Wales, and a company known as Hawker Britton Group Pty Ltd (Hawker Britton). The proposed cross-claim 5 As against PTTC and the State, ITSL wishes to allege a case based on misleading or deceptive conduct arising out of representations said to have been made by unidentified persons on behalf of "the NSW government" (I shall return to the definition and connotations of that term) to ITSL through Hawker Britton. It is said that those representations were, in context, misleading or deceptive; that ITSL relied on them to its detriment; and that it has suffered substantial loss as a result. ITSL says also that those matters give rise to estoppels against the State and PTTC in relation to the assertion by PTTC of its contractual rights (or alleged rights) and to a case against the State for knowing involvement in what is said to be a breach of fiduciary duty on the part of Hawker Britton. 6 To some extent, the case against Hawker Britton is asserted in the alternative to the case against "the NSW government". ITSL wishes to say that if the NSW government did not make the representations relied upon, then Hawker Britton itself was guilty of misleading or deceptive conduct because, in that alternative universe, it itself made, and did not merely pass on, the representations to ITSL. In addition, ITSL wishes to assert that Hawker Britton owed it contractual and fiduciary obligations and that it breached those obligations, when it terminated the contract between itself and ITSL for the reasons that, ITSL says, Hawker Britton gave. The issues 7 All proposed cross-defendants raise as an issue the "pleading" of causation. (The parties' submissions were put in the language of "pleading". That term is, strictly speaking, inaccurate because these proceedings are entered in the Commercial List, and the statements of the parties cases are governed by the requirements of Practice Note SC Eq 3 and not by the relevant requirements of UCPR rule 14. It is, however, convenient to use the inaccurate term "pleading" and its cognate forms.) Causation 8 To understand the issue in relation to causation, it is necessary to know a little bit about the way ITSL wishes to propound its case. In September 2007, PTTC gave what it said were default notices under the contract to ITSL. ITSL says that it approached Hawker Britton for advice and representation in dealing with the NSW government in relation to the contract. ITSL says that Hawker Britton's business includes that of providing advice and lobbying services in dealings with government. 9 ITSL says that it retained Hawker Britton to assist it, and that Hawker Britton made a number of representations as to how it could assist. Thereafter, in substance, ITSL says that Hawker Britton passed on what it said were a number of representations made on behalf of the NSW government as to how ITSL should act to avoid termination of the contract. According to ITSL, the required actions include that it "wear a hair shirt" and "do a mea culpa": i.e., as I understand it, that ITSL should accept responsibility for what the NSW government perceived as the unsatisfactory state of affairs, make grovelling apologies, and provide a realistic timetable for completion of the project. 10 ITSL says that it relied on those representations to act as it did. The steps that it took included writing what is called "the Chairman's letter" of 22 October 2007. That was a letter written by the Chairman of ERG, apparently pursuant to a decision taken by the board of ERG, to PTTC on behalf of ITSL. ITSL says that the letter was written in the form that it was in reliance on the representations made. The reference to "form" includes both what was said in the letter - including admissions of fault - and what was not said - said to be valid points available to ITSL as to why there was no default on its part. 11 On 5 November 2007, PTTC gave notice of intention to terminate 20 business days later. ITSL responded to that letter by providing a "remedial program" which was supplemented on two occasions. Nonetheless, on 23 January 2008, PTTC terminated the contract. 12 Against that background, the case on causation - the relationship between the misleading or deceptive conduct, or breach of contract or of fiduciary duty alleged and the damage suffered - is put in substance as being that PTTC "in these proceedings ... relies on the Chairman's letter and the statements therein as justifying its termination of the contract". Reference is made to various paragraphs of PTTC's further amended commercial list statement (FACLS), amended reply and amended cross-claim response. Since those paragraphs allege what PTTC says were alternative rights to terminate available to it, of which it did not know, but on which, had it known, it could have relied, it is convenient to call those the "Shepherd" paragraphs (Shepherd v Felt and Textiles of Australia Limited (1931) 45 CLR 359). 13 The proposed cross-defendants say that this does not plead any causal link between the alleged wrongdoings and the alleged loses. Specifically, they say, it misunderstands the Shepherd paragraphs. Loss of opportunity 14 An alternative way in which ITSL seeks to put its case on causation is that, by reason of the representations alleged and its reliance on them, it lost the opportunity to make an effective response, and to have the benefit of effective lobbying activities in the face of PTTC's dissatisfaction with progress under the contract. That case is asserted both against PTTC and the State (para 103 of the draft list statement) and against Hawker Britton (paras 140, dealing with misleading or deceptive conduct - and 141, dealing with breach of contract or fiduciary duty). 15 In the manner in which those paragraphs are set out, the loss of opportunity case is not separately pleaded but is alleged as "particulars" to generalised allegations of loss and damage. The proposed cross-defendants say that if such a case is to be put, it should be properly and fully pleaded, and not merely alleged by way of particulars to a generalised claim for damage. In any event, they say, there are many more things that need to be shown, because of paragraph 75 of the draft list statement (to which I shall turn in a moment) and the alleged misunderstanding of the Shepherd paragraphs. Paragraph 75 16 Paragraph 75 of the list statement is alleged in terms against the State and PTTC. It asserts that the NSW government did not have reasonable grounds for making the representations alleged because:

(1) it had given approval to PTTC to terminate the contract if ITSL's response to the default notices were unsatisfactory; but (2) it would not accept a satisfactory remedial program proposed by ITSL, if that happened; and (3) it wished to terminate the contract in any event, and in effect sought to induce admissions by ITSL, and action by ITSL, which would justify it in doing so. 17 As at one stage ITSL put this aspect of its case in submissions, it says that the NSW government sought to "set it up". 18 Although as I have said the case against Hawker Britton is a case in the alternative, and therefore in many respects assumes a state of affairs inconsistent with the case alleged against PTTC and the State, the pleading against Hawker Britton contains no allegation of an alternative factual situation to that alleged in paragraph 75. In the words of Mr Sullivan of Queen's Counsel, who appeared with Mr Goodman of counsel for Hawker Britton, it does not allege any counterfactual situation to paragraph 75. 19 In those circumstances, the proposed cross-defendants say, on the ruling assumption that the pleaded facts should be taken to be correct, the fixed intention alleged in paragraph 75 negates both the causal case as pleaded and the loss of opportunity case. That is because, on the basis of paragraph 75, termination and whatever flowed from it was always going to happen, and would not have been averted (nor could it have been) by whatever other actions ITSL might have taken. Other pleading issues 20 There are a number of specific pleading and other issues. Thus, the State attacks the way in which the case against it is sought to be pleaded, in particular through the use of the defined term "the NSW government". By paragraph 6 of the contentions, that is said to mean "the Crown in right of the State of New South Wales". However, in paragraph 15, it is said that the NSW government "includes and acts through" Ministers of the Crown in right of New South Wales and their advisers, the various departments and agencies of the New South Wales Public Service, and employees of the New South Wales government, and "statutory corporations representing the Crown in right of New South Wales, including PTTC". 21 It is said that this use of the expression "the NSW government" is apt to create confusion, particularly in circumstances where elsewhere in the proposed list statement the expression is said to be aligned not so much with either the Crown in right of the State or even the entities referred to in paragraph 15 but, rather, with the government of the day. 22 Further, the State attacks the way in which the list statement seeks to assert that, by reason of various specified matters, the NSW government carries on business through PTTC. This is an example of the confusion caused by the expansion of the defined term. The relevant pleading assumes that the NSW government and PTTC are separate, but nonetheless in paragraph 15 it is said that the NSW government includes PTTC. 23 There are other complaints, as to the lack of specificity in relation to the alleged representations and what was called the "lack of credibility" of the case sought to be propounded. 24 PTTC identifies what it says are irrelevant and confusing and embarrassing allegations, and attacks in particular the estoppel alleged against it (as, although for somewhat different reasons, the State had also done). It raised a number of other complaints in relation to the list statement as it was propounded. 25 Hawker Britton submitted that there were a number of paragraphs that were irrelevant and embarrassing, and that asserted matters of evidence rather than material facts. It also attacked the pleading of the contractual and fiduciary duty cases in relation to specific matters. First and third issues: causation, paragraph 75 26 In my view, paragraphs 99 and 138 of the draft list statement do misunderstand the Shepherd paragraphs to which they refer. Those Shepherd paragraphs assert in substance that ITSL conducted a review of the project and became aware of a number of very serious problems with it. PTTC refers to those as "the fundamental quality problems" and it is convenient to use that designation. 27 PTTC says that ITSL had been obliged to disclose those fundamental quality problems in monthly status reports, but failed to do so; and that it was required to give written notice of them, but failed to do so. 28 Thus, PTTC says that the reports that ITSL did make through the Chairman's letter and the remedial program were defective because they said nothing whatsoever about the fundamental quality problems. 29 In those circumstances, PTTC says, there were sufficient breaches of the contract to entitle it to terminate at general law, but that it was not aware of those breaches up until after it acted to terminate the contract. 30 When one looks at the paragraphs in question, and reads them with a moderate degree of care, it is apparent that they do not allege that PTTC relied on what was said in the Chairman's letter to justify, on Shepherd grounds, termination. Instead, PTTC relies on the failure of that letter (and, to the extent that it is relevant of the remedial program and its supplements) to disclose the fundamental quality problems: that failure being considered in conjunction with the antecedent failures alleged to which I have referred. 31 The significance of this is that the actions that ITSL says that it could and would have taken but for the misleading or deceptive conduct alleged do not include disclosure of, nor do they address in any way, the fundamental quality problems. 32 In those circumstances, it seems to me, the case on causation and the Shepherd case are ships passing in the night. I do not think that the pleading of the causation case offers any demonstrable link, or legally valid link, between the misleading or deceptive conduct alleged and the loss of the contract which is one of the heads of damage claimed. 33 To the extent that reliance is placed on the breach of contract or fiduciary case (Hawker Britton) or the knowing involvement in breach of fiduciary case (against the State) the same comments apply with appropriate modifications. There is simply no demonstration of a causal connection. 34 The same conclusion follows from paragraph 75 of the list statement. As I have noted, that paragraph asserts as a fact that the NSW Government (including as I have said, both the State and PTTC) had a fixed determination to terminate the contract and was not prepared to accept any satisfactory remedial programme that was propounded. It follows from this, in the case against PTTC and the State, that whatever was done could not achieve anything. On the basis of paragraph 75, the loss of the benefit of the contract followed not from the failure of PTTC to afford ITSL the opportunity to make an effective response but from the fixed determination of the State and PTTC to ignore any satisfactory response that might be provided. 35 In this context, it should be noted that if (as ITSL asserts) ITSL did propound a satisfactory response to the default notices and show cause notices, so that (as a matter of law) PTTC acting reasonably could not have concluded that there were grounds for termination, then the termination would have been wrongful, and the consequent loss of the benefit of a contract would have followed in any event from that hypothetical wrongful action. If, however, the responses were inadequate, then in any event the essential causal link would be missing. Second issue: loss of opportunity 36 In my view, the specific submissions as to the inadequacies of the form of pleading of loss of opportunity are justified. ITSL said that if that were the only problem it could be dealt with and that leave could be granted on that basis. I do not agree. Even if the formal inadequacy were the only defect, I would not give leave to file a cross-claim in a vacuum. It should be given in respect of a specific document on which the proposed cross-defendants have had an opportunity to be heard. 37 In any event, the proposed pleading would need to go well beyond the scanty matters outlined in what at present are particulars, and there is no indication of how that might be done. 38 Finally, it is very hard to see how any case of loss of opportunity could stand, in a causal sense, consistent with paragraph 75. 39 Although paragraph 75 is alleged specifically against the State and PTTC, there is not, as I have indicated, any counterfactual allegation made in the case against Hawker Britton. It follows that what I have said so far applies equally to the causation case that ITSL seeks to make against Hawker Britton, and that this is so both in respect of the case of misleading or deceptive conduct and in respect of the case based on alleged breach of contract for fiduciary duty. Specific complaints 40 In general, having regard to what I have just said and what I am about to say in relation to estoppel, I do not propose to deal with specific complaints. If this matter should go further, they are adequately outlined in the parties' written submissions, and have been dealt with in oral submissions which I hope have been taken down and may be transcribed. 41 I do, however, wish to mention the particular complaints of irrelevant and embarrassing material put forward by Hawker Britton. They relate specifically to paragraphs 39, 40 and 44 to 47 of the proposed list statement. Although the submissions refer to other paragraphs (107, 108 and 109 and 52 and 53), it is not necessary to deal with them. 42 Paragraphs 39 and 40 assert that Hawker Britton was founded by a Mr Bruce Hawker in 1999 and that he had been chief of staff to the former Premier of this State, Mr Bob Carr. 43 Paragraphs 44 to 47 allege matters relating to Hawker Britton's business strategy and objective and the way that it provides services. In substance (and this is a very incomplete summary) those paragraphs assert that Hawker Britton deliberately seeks to employ or retain people who have worked in government and who have networks of contacts within government, including in particular people who were members of the Australian Labor Party and had held ministerial office, and employees of or for such persons. They allege, further, that Hawker Britton has other close contacts with the Australian Labor Party. No doubt, those matters are seen as being of some significance when the Government of this State is and at all material times was formed from the ranks of the Parliamentary Labor Party in this State. 44 It is very difficult to see what material facts those paragraphs might go to. Mr Muddle of Senior Counsel, who appeared with Mr Arnott of counsel for ITSL, relied on them as being in effect corroborative of paragraph 109. That is a paragraph which alleges that a Mr Di Lollo of Hawker Britton made representations to ITSL as to the ability of Hawker Britton, having made enquiries of the NSW Government, to offer assistance to ITSL, and as to the reasons why Hawker Britton would be able to do that. Mr Muddle submitted, in essence, that the matters alleged in the impugned paragraphs could be seen to bear on the likelihood of those representations having been made. 45 In a sense, given that paragraph 109 is also said to be irrelevant, that is something of a bootstraps argument. But the more important objection seems to me to be that the justification advanced to paragraphs 39, 40 and 44 to 47 is that in effect they are allegations of evidentiary matters that support, or if proved would support, the material facts (as for the request I assume them to be) alleged in paragraph 109. On that basis, it seems to me, a pleading (or equivalent) should not be allowed which included paragraphs in the form of 49, 40 and 44 to 47; and this would be so even if, contrary to what I have said so far, the third cross-claim list statement should be allowed to go forward. The estoppel case 46 I have great difficulty in seeing what possible relevance the estoppel case against the State has, in circumstances where the State was not a party to the contract. Mr Arnott submitted for ITSL that if PTTC's action in terminating the contract had been taken at the direction of a minister of State, then the estoppel case could affect the minister. I do not accept that proposition. The act of termination is the act of PTTC regardless of whether it was taken by PTTC on its own initiative or at the direction (statutorily legitimate, in certain circumstances) of the relevant minister. The estoppel asserted is an estoppel against reliance on contractual rights. I do not see how that can be relevant against someone who is not a party to the contract under which those rights are said to arise. For those reasons, I do not think that the estoppel case against the State should be allowed to go forward in any event. 47 As to PTTC, there are a number of problems. One is that, as Mr Arnott accepted, the estoppel relied upon could be asserted in defence to the claim brought by PTTC, to the extent that that case asserts that PTTC had available to it, and lawfully exercised, contractual rights. Since PTTC has filed the FACLS, and may wish to file yet a further version of that, ITSL has an unfettered opportunity to allege the estoppel (if it is sustainable) in any event. There is no need to buttress the estoppel by claiming a declaration and in this respect a cross-claim seeking a declaration as to estoppel would achieve nothing more than a successful defence based on the same matters. 48 However, PTTC submitted that the allegations of estoppel were unsustainable in any event. Mr Durack of Senior Counsel, for PTTC, pointed to the fact that the fundamental representation alleged included two elements: first, that ITSL should "do the mea culpa"; and second, that ITSL should provide a realistic timetable for completion (see paragraph 70(b) of the draft list statement). However, Mr Durack submitted, the response that ITSL would have propounded, whilst it might have been a satisfactory remedial programme for the reasons ITSL asserted, did not, because of those very reasons, include any element of mea culpa. It follows, Mr Durack submitted, that as the estoppel case is structured, no allegation of reliance necessary to make the estoppel attach had been alleged. 49 In my view that submission should be accepted. ITSL does not allege, against PTTC, that it had any intention of acting in accordance with the twofold requirements of the representation to which I have referred. 50 Mr Arnott submitted, correctly, that the particular representation should not be read in isolation, but should be considered in conjunction with the antecedent representations. However, none of those antecedent representations, if they were made, did anything to qualify the twofold nature of the requirement in the particular representation that I have identified. 51 Further, if the response that ITSL says it did put was in law a good response, then, as I have said already, that means in effect that the termination was wrongful and ITSL has no need to rely on any estoppel. 52 I should note that ITSL also relies on what it calls "the media release representations," said to arise out of a media release issued by the then Minister for Transport on 9 November 2007. That release stated in substance that PTTC had given the notice of intention to terminate and that, if ITSL did not do what was contractually required, then PTTC would consider exercising its contractual right to terminate. As Mr Durack submitted, that representation does no more than summarise, in brief but sufficiently accurate language, the essential thrust of the relevant contractual provisions. If ITSL relied on that in giving the responses that it did, and if those responses were sufficient, then the termination was, as I have said more than once already, unlawful. If those responses were not sufficient then the termination may have been lawful, but no case of estoppel could arise. 53 For those reasons, were it necessary to do so, I would conclude also that the estoppel case against PTTC, as it is sought to be alleged, is not good in law.

Public Transport Ticketing Corporation v Integrated Transit Solutions Limited

At a glance

Court

Decision date

Before

Source

Judgment (14 paragraphs)

Parties

Cases Cited (1)

Cited By (1)